R v Scott

[2005] NSWCCA 152

CITATION:	Regina v Scott [2005] NSWCCA 152 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	18/04/2005
JUDGMENT DATE:	18 April 2005
JUDGMENT OF:	Grove J at 39; Barr J at 38; Howie J at 1
DECISION:	The Crown appeal against sentence is allowed. The order for service of sentence in the District Court that it be served by periodic detention is quashed, otherwise the sentences are confirmed so that on each count the respondent is sentenced to imprisonment for two years and six months with a non-parole period of 22 months and 15 days, each to commence on 4 February 2005. The non-parole period is to expire on 18 December 2006. The Court orders that the respondent be released to parole on 18 December 2006 and that he surrenders to custody forthwith.

CATCHWORDS:	Criminal Law - Sentencing - Crown appeal - sentence manifestly inadequate by reason of order for periodic detention - order quashed.
LEGISLATION CITED:	Crimes Act 1900 - s 176A Crimes (Sentencing Procedure) Act 1999 - s 3A
CASES CITED:	R v Geddes (1936) SR (NSW) 554 R v Dodd (1991) 57 A Crim R 349 R v Melville (1956) 73 WN (NSW) 579 R v Weldon, R v Carberry [2002] NSWCCA 475 R v Hammoud (2000) 118 A Crim R 66 Pearce v The Queen (1998) 194 CLR 610 R v AEM [2002] NSWCCA 58 R v Blanco [1999] NSWCCA 121 R v Scwabbegger [1998] 4 VR 649
PARTIES:	Regina v Lloyd John Scott
FILE NUMBER(S):	CCA 2005/223 CCAP
COUNSEL:	D. Frearson SC - Crown P. Formosa - Respondent
SOLICITORS:	S. Kavanagh - Crown M. Evans - Respondent

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	04/31/0070
LOWER COURT JUDICIAL OFFICER:	Finnane DCJ

2005/223 CCAP

GROVE J
BARR J
HOWIE J

MONDAY 18 APRIL 2005

REGINA v LLOYD JOHN SCOTT

Judgment

1 HOWIE J: The respondent pleaded guilty before Judge Finnane QC (the Judge) to three offences each alleging that, being a director of a body corporate, he presented a false invoice with intent to defraud. Each offence was a breach of s 176A of the Crimes Act in respect of which the maximum penalty prescribed is imprisonment for 10 years. The Judge sentenced the respondent on each offence to imprisonment for 2 years 6 months with a non-parole period of 22 months and 15 days. The sentences were made concurrent with each other and were to be served by way of periodic detention. The Crown has appealed against the sentences asserting that there were errors in the exercise of the Judge’s discretion and that the sentences are manifestly inadequate.

2 Each of the victims of the three offences was a finance corporation being, in respect of the first and third counts, the National Australia Bank and in the second count, Suncorp Metway Limited (Suncorp). The offences were committed in January 2001 when the respondent operated a business named Lloyd Scott Enterprises Pty Limited (LSE). In each case the respondent falsely pretended to the finance corporations that he had purchased equipment for the purposes of LSE and as a result received payments under agreements whereby the corporations purchased the equipment and leased it back to LSE. In each case the respondent used forged invoices and made false statutory declarations to cause the corporations to believe that the equipment had been purchased by LSE. By this fraudulent conduct the respondent obtained a total sum of $4,700,065.62.

3 The facts before the Judge can be summarised for present purposes as follows. In 1984 LSE commenced operation in the Hunter Region in the business of selling and leasing photocopying equipment. It was the agency in the region for Rank Xerox. At the height of its business the company traded from premises in Hamilton, Armidale and Tamworth and employed about 120 persons. The sole director and shareholder of the company was the respondent, a certified accountant.

4 In the course of its business LSE acquired equipment, such as photocopiers, facsimile machines, printers and other types of office apparatus, directly from a supplier. In order to pay for the equipment LSE entered into an agreement with a finance corporation (the financier) whereby the financier would purchase the equipment from LSE and then lease the equipment back to the company. In order to receive these funds LSE had to provide the financier with an invoice from the supplier as proof of purchase of the equipment. LSE would then rent the equipment to its customers, such as local councils and schools, under a contract for supply and service of the equipment and use the rental payments to repay the finance company. From 1994 one of the financiers used by LSE was Suncorp.

5 In December 2000 the respondent contacted Suncorp about a loan of $3,000,000 to fund the purchase of Xerox equipment. To this end a meeting was held in January 2001 between the respondent and representatives of Suncorp. The respondent pretended that he had recently purchased seven items from Fuji Xerox and that it had already been hired out to customers of the company. The respondent provided Suncorp with seven invoices for the purchases. In truth the company had purchased none of the equipment.

6 Suncorp, relying upon the invoices and other information as to the company’s liquidity, entered into agreements with LSE for the purchase of the equipment. As part of these agreements the respondent provided a statutory declaration to the effect that the company owned the equipment. On 10 January 2001 Suncorp advanced $3,300,000 to LSE under seven Asset Purchase Agreements with the company. Payments were made between 11 February and 11 June 2001. These facts relate to the second count on the indictment. As a result of the commission of the offence, Suncorp suffered a loss of $3,381,437.62.

7 At the same time that the respondent was seeking finances from Suncorp, he was also in negotiations with the National Australia Bank (the Bank) for a sale and lease back agreement for two pieces of equipment allegedly purchased by LSE from Fuji Xerox. The respondent supplied the Bank with two forged invoices for the items each showing a purchase price of $422,284.50. As a result the Bank entered into an agreement with LSE to purchase and lease back the equipment. In order to secure the agreement the respondent made a statutory declaration to the effect that LSE was the owner of the equipment. As a result of the agreement, the Bank paid to LSE the sum of $844,569. The company made repayments to the bank totalling $84,275.85, the last payment being made on 15 June 2001. These facts give rise to the first count in the indictment. The loss suffered by the Bank as a result of the offence was $787,708.78.

8 On 24 January 2001 the respondent sent to the Bank three forged invoices to support a request for a purchase and lease back agreement for the purchase by LSE of three items from Fuji Xerox. Two of the invoices were dated 24 January 2001 for a purchase price of $322,000 and one was dated 7 August 2000 for $396,000. On the basis of these documents, the Bank entered into an agreement to purchase and lease back the three items of equipment. To secure that agreement the respondent made a statutory declaration to the effect that LSE owned the property. As a result of the agreement the Bank paid $315,392 to the company. These facts support the third count on the indictment.

9 On 25 June 2001 LSE went into voluntary liquidation with debts totalling over $18 million.

10 On 29 June 2001 the respondent attended Newcastle Police station with a solicitor. He entered into a recorded interview in which he made admissions as to fraudulent activity generally since 1999, and in particular the frauds perpetrated by him in January 2001. During the course of that interview the respondent explained that LSE was in financial difficulties and he became unwell. He learned in December 2000 that a Mareva injunction had been taken out over the company’s bank accounts by a finance company to which LSE was in debt. He came under pressure to repay large sums of money to that company and entered into the agreements with the Bank and Suncorp in order to try to remedy the situation. He explained that there had been a “snowballing effect” with his financial difficulties and that he was “trying to keep a business afloat that supports 120, 130 people”. He told police that he was prepared to help them with details of his financial affairs and to supply an “audit trail”. The interview involved more than 250 questions and finished with the police indicating that they would want to speak to the respondent again. The respondent offered to assist police in the future. He was not charged with any offence on that day.

11 The police never sought to interview the respondent again despite attempts by him to ascertain what was happening with the investigations. He was not charged with the present offences until December 2003. He pleaded guilty in the Local Court on 21 January 2004 and was committed for sentence to the District Court. However, the matter was not dealt with, despite two earlier hearing dates, until it came before Judge Finnane in December 2004. The respondent was indicted for the three offences because of deficiencies in the committal document and pleaded guilty on arraignment. Sentence was imposed on 21 January 2005, four years after the commission of the offences.

12 The respondent gave evidence before the Judge to the following effect. LSE was originally set up to sell and service Xerox equipment with a staff of about six persons. It later branched into other ventures including running a cattle property, operating a printing business and managing a horse stud. In the late 1990’s the cattle business began to drain funds from the company and adversely affected its cash flow. That part of the business was sold in 1999 but by then a venture in breeding ponies had begun absorbing capital from the company. In 1996 the respondent began an airline company in Canberra with four aircraft. This business also had a negative impact upon LSE’s capital reserves. LSE had loaned money to other companies operated by the respondent resulting in the writing off of loans in excess of $3 million in 1999. The respondent had also undergone a divorce in 1990 and the accompanying property settlement had placed a strain on the finances of the business.

13 The respondent gave evidence that all but $700 of the money received by him from the offences was paid into his solicitor’s trust account for payment out to the finance company that had obtained the Mareva injunction over the company’s bank accounts or its solicitors. There was a letter in evidence dated 24 March 2004, from the liquidator of LSE indicating that the respondent had been assisting in relation to proceedings for the recovery of the money paid to that company.

14 The respondent had no dealings with LSE after June 2001 and was made bankrupt in August 2001. There had been no payments to his creditors.

15 These were the significant facts and circumstances surrounding the offences for which the respondent was to be sentenced by Judge Finnane. There is a fundamental and immutable principle of sentencing that the sentence imposed must ultimately reflect the objective seriousness of the offence committed and there must be a reasonable proportionality between the sentence passed and the circumstances of the crime committed. This principle arose under the common law: R v Geddes (1936) SR (NSW) 554 and R v Dodd (1991) 57 A Crim R 349. It now finds statutory expression in the acknowledgment in s 3A of the Crimes (Sentencing Procedure) Act that one of the purposes of punishment is “to ensure that an offender is adequately punished”. The section also recognises that a further purpose of punishment is “to denounce the conduct of the offender”.

16 On the face of it, it is difficult, if not impossible, to see how a sentence to be served by way of periodic detention could possibly reflect the objective seriousness of the offences committed by the respondent. The criminal conduct for which the respondent was to be punished involved three separate acts of fraud as part of a planned course of deception utilising forged documents and false statutory declarations for the purpose of obtaining almost $4,500,000. His Honour described what the respondent did as being “carefully planned and carried out”. He also found that “the scheme was clever” and that “it was not something that could be done by a person other than a person very skilled in the financial world”. In light of those findings it is even more remarkable that the Judge could have formed the view that any sentence other than one of full-time custody would adequately punish the respondent or denounce his criminal conduct.

17 True it was that the respondent did not personally receive the proceeds of the frauds and that it went to LSE in an endeavour to repay some of the outstanding debts. It can also be accepted that the respondent was concerned with the staff employed by LSE and that they should not suffer as a result of the company failing. But these are matters that do little to mitigate the seriousness of the respondent’s criminal conduct. It might be the case that the offences would be more serious if they had been committed because of greed on the part of the respondent. But the simple fact is that the respondent set out on a planned and calculated course of criminal conduct to defraud the victims of a very substantial amount of money in a situation where he must have known that realistically there was little or no chance of it being repaid. He was simply buying time at the expense of financial corporations that had developed trust in him because of their previous dealings with the company.

18 The Judge seemed to be astute to these considerations. During the course of his remarks, the Judge acknowledged that the respondent had acted under the personal strain of having to repay money owed by the company in order to stave off its collapse with financial repercussions for the staff. He also found that the genesis of the company’s difficulties was an over-extension of its business interests. His Honour then stated:

That being said and understanding that he went through a great deal of personal anguish and strain and worry, there can be no justification for him involving himself in deliberate and carefully thought out frauds in order to keep a business going. I accept that he suffers from depression and probably has for many years. I do not accept that depression is an excuse for what he did.

19 The reference to the respondent suffering from depression about the time of the offending derives from evidence to that effect given by the respondent and other witnesses called by the defence. A longstanding friend of the respondent, who also happened to be a clinical psychologist, gave evidence to the effect that after Christmas 2000 she thought that the respondent was showing signs of clinical depression including loss of appetite, poor concentration, and sleeping disturbances. She was most concerned with his suicidal thoughts. She suggested to the respondent that he should seek help. As a result the respondent attended for counselling for his depressed state from Adrian Sidonio, a practitioner in Neuro-Linguistic Programming.

20 Mr Sidonio reported that the respondent had in December 2000 experienced a number of panic attacks arising from his concerns about his failing business. The respondent appeared to be in a severely depressed state with suicidal thoughts. Mr Sidonio kept in contact with the respondent throughout January 2001. However, the respondent ceased contact with him between February and July 2001. Thereafter Mr Sidonio recommenced counselling the respondent and supported his endeavour to find employment. In his report of 16 May 2004 Mr Sidonio expressed the opinion that “a custodial sentence could possibly result in further deterioration of his mental status and prospect for recovery”.

21 Since August 2003 the respondent had been treated with anti-depressive medication and counselling through the New England Area Health Service. He was referred by that Service to a psychiatrist at the Mood Disorders Unit of the Prince of Wales Hospital, Associate Professor Greenwood, who found the respondent to be suffering from a “severe melancholic depressive illness” for the last three years and placed him on a course of medication. A report from a psychologist with the Service, Ms Osmond, expressed the opinion that “punative (sic) measures would be extremely detrimental to his recovery and place him at risk of further deterioration”.

22 During the course of his sentencing remarks, the Judge said:

As far as general deterrence is concerned I have to impose a penalty which would be seen by the community to deter others from engaging in similar conduct. However, where a person who engages in misconduct is a person who at the time is a very serious sufferer from depression, I have taken into account that he falls into a slightly different category than someone who is a professional thief such as Mr Alan Bond.

23 It can be accepted that the approach to sentencing a person who is properly regarded as a professional thief will be markedly different to that of a person like the respondent who, with no previous criminal record, engages in an isolated course of criminal conduct under pressure of financial strain and stress. That difference would not be found just in the relevance of, or the weight to be given to, general deterrence. The reference to Alan Bond in this passage was, with respect, completely inappropriate. But it was not the only occasion when the offences committed by that person or his sentencing by a Court in another State intruded into the sentencing of the respondent. During the course of addresses his Honour alluded to the fact that Mr Bond had been sentenced to four years for offences involving $1 billion and that many people “would regard with quite a degree of disdain what the Court did with Mr Bond”. With all respects the sentence imposed upon Mr Bond was a matter of complete irrelevance to the sentencing of the respondent.

24 However, it was open on the evidence before him for the Judge to give less weight to general deterrence than might have been the case had the respondent not been suffering from a severe depressive illness at the time of the commission of the offences. But given the nature of the offending and the criminality involved, any reduction in the sentence on account of the respondent’s mental state at the time could only be moderate.

25 The respondent was aged 51 at the time of sentencing and had no prior criminal record. There was evidence before the Judge that he had been a generous person in his support for community activities such as the NSW All Schools Triathlon Association, the Hunter Medical Research Unit and a number of sporting teams in the Hunter region. In 2003 the respondent found permanent employment with the Department of Education at Moree Secondary College teaching aboriginal studies and geography. He was also involved in teaching children with learning difficulties. The respondent had commenced a relationship with a woman who was pregnant with the respondent’s child at the time of sentencing.

26 The general thrust of the Crown’s appeal was that a sentence of imprisonment to be served by way of periodic detention was manifestly inadequate in that it failed to reflect the objective seriousness of the offence and the need for general deterrence. The Crown relied upon statements from a number of decisions of this Court emphasising the need for general deterrence when sentencing for crimes of this nature and comments to the effect that generally lengthy custodial sentences will be required particularly where the amount fraudulently obtained is large. But the Crown also relies upon particular errors it identified in the sentencing remarks and the approach adopted by the sentencing judge. The Crown submitted that the Judge paid too much regard to the subjective circumstances of the respondent, failed to take into account the fact that the respondent had transferred substantial funds to Mexico prior to committing the offences and had given too much weight to the delay in the respondent coming to be sentenced.

27 The submissions that the trial Judge erred in giving too much weight to the respondent’s subjective circumstances and to delay are really matters that are encompassed in the submission that the sentence imposed fails to reflect the objective circumstances of the offence. I will deal with that complaint shortly. The submission that his Honour failed to take into account the transfer of funds to Mexico should be rejected. The Crown never pursued the matter in any significant way before his Honour during cross-examination of the respondent or at all in its address. There was never any suggestion that the transfer of funds to Mexico should in some way impact upon the respondent’s criminality in respect of the offences before the court or in the sentences to be imposed. The Crown cannot now rely upon that matter.

28 The Judge approached the determination of the sentences to be imposed upon the respondent in the following manner. First he considered what the sentence would have been before taking into account “the mitigating factors” and next discounted that sentence for the plea of guilty and then reduced it further for the “unexplained and unsatisfactory delays”. So in each case the Judge started with a sentence of 5 years, reduced it to 3 years and 9 months for the plea of guilty, a discount of 25 per cent, and reduced it further to 2 years and 6 months because of the delay. The starting sentence therefore was reduced by 50 per cent. The Judge then considered whether the sentences should be served concurrently or cumulatively and concluded “this is one of those exceptional cases where all the sentences should be served concurrently”. His Honour next noted that “the probation service has said that he is suitable for periodic detention” and, having inquired where the respondent would serve such a sentence, made the order that the sentences be served by periodic detention.

29 Nowhere in his remarks did his Honour indicate how it was that a sentence of periodic detention could reflect the objective seriousness of the offending or what it was about the case that allowed him to find that such a sentence was an appropriate one. In this regard it should be observed that during the course of address by senior counsel appearing for the respondent, the following occurred:

HIS HONOUR: I can’t give him periodic detention for something like this. I can’t give him community service orders. I can’t give him suspended sentences and I can’t give him home detention. I mean theoretically I can but in reality I can’t because the amount of money and sophistication of the schemes are just

ROSSER: Yes, the numbers are too big. We appreciate that.

HIS HONOUR: It’s too complex.

ROSSER: We appreciate that.


This exchange took place on 22 December 2004 and his Honour stood the matter over at the conclusion of addresses until 27 January 2005, the date of the sentence.

30 In light of the statements made by his Honour during the course of addresses to the effect that nothing but a sentence of full-time custody would be appropriate because of the amount involved and the complexity of the frauds and the acceptance by experience defence counsel that this was understood to be the case, it is surprising that his Honour imposed such a sentence and did so without any explanation of why he then thought it was an appropriate one. As has already been noted, the Judge had reduced the otherwise appropriate sentence by 50 percent for the plea and delay. In my view that was a very generous reduction but may be justified by reason of the assistance given and offered by the respondent to the investigating police and the very extensive period of delay that was in no way attributable to the respondent. But if his Honour used those factors again to justify a sentence of periodic detention, there would have been a considerable degree of double counting that was completely unjustified.

31 The Crown submitted that his Honour ought not to have directed that the sentences should be served concurrently because there was nothing justifying that order. The determination of whether sentences should be made concurrent is not made simply on the basis that the offences formed part of a single course of criminal conduct committed within a relatively short period of time. No doubt in many cases that is a consideration that indicates that it would be appropriate to make the sentences for all offences concurrent: R v Melville (1956) 73 WN (NSW) 579; R v Weldon, R v Carberry [2002] NSWCCA 475. On the other hand, there will be cases where general sentencing principles would indicate that the sentences should be made cumulative, for example when some of the offences were committed while on bail. Generally the court has a broad discretion in deciding whether sentences should be served concurrently or cumulatively: R v Hammoud (2000) 118 A Crim R 66.

32 But very often the decisive factor in deciding whether sentences should be made concurrent, at least since the decision of the High Court in Pearce v The Queen (1998) 194 CLR 610, is whether the sentence for one of the offences can embrace the total criminality involved in all of the offences. If it cannot, then it would be an error in the sentencing discretion to order that the sentences be served concurrently: R v AEM [2002] NSWCCA 58. In the present case, because the three offences were similar in the type of criminal conduct employed, they were part of a single course of conduct and because the Suncorp offence was by far the most serious in that involved almost three quarters of the total amount of the loss occasioned by the offences, there was no error in the Judge determining that the sentence for the second count could embrace the total criminality of the three counts. If there were any error in this regard, it could only be that his Honour thought that 5 years was appropriate for each of the offences despite the considerable difference in the amount of money defrauded.

33 In my opinion it was open for his Honour to determine that a total sentence of 5 years was appropriate, even though it was, I believe, a sentence at the lower end of the available range. I have already expressed the view that the discount of 50 per cent was generous and when applied to a lenient starting sentence, the resulting overall sentence of 2 years and 6 months was itself verging on the inadequate. The order that the sentence be served by way of periodic detention had the effect of converting an extremely lenient sentence into one that was manifestly inadequate. If his Honour had recalled what he had said during submissions in the preceding December or had he attempted to give reasons justifying taking that last step, he would probably have realised that the sentence he was imposing was erroneous.

34 It was submitted on behalf of the respondent that the findings made by the Judge as to the circumstances in which the offences were committed and having regard to the strong subjective circumstances of the respondent permitted his Honour “to regard the case as a wholly exceptional one”. But the Judge did not suggest that he was treating it in that way. He never indicated that he appreciated that a sentence of periodic detention would on the face of it appear to be inadequate to meet the objective seriousness of the offences and so he never attempted to justify it.

35 The respondent in particular relies upon the delay between the commission of the offences and sentencing as justifying the sentence imposed and refers to well known principles in that regard citing cases such as R v Blanco [1999] NSWCCA 121 and R v Scwabbegger [1998] 4 VR 649. His Honour was highly critical of the delay by the police before charging the respondent and to a lesser degree the District Court for not proceeding more expeditiously. But delay either alone or in conjunction with the other subjective features, including the respondent’s rehabilitation in the meantime, could not justify the order that the sentence be served by periodic detention.

36 I take into account the approach this Court should adopt to a Crown appeal and the lively discretion that the Court frequently exercises in refraining from intervening even where error has been shown or the sentence is found to be manifestly inadequate. But in my opinion the sentence is so inadequate that the Court must quash it and resentence the respondent. Because of double jeopardy the Court should impose a sentence that was at the lower end of the range that was available to the sentencing judge. In my opinion that will be achieved by simply quashing the order for periodic detention.

37 I propose that the appeal be allowed to the extent that the order that the sentence be served by periodic detention is quashed. In other respects the sentence imposed by Judge Finnane is confirmed.

38 BARR J: I agree with the judgment of Howie J.

39 GROVE J: The orders of the Court are as follows:

The Crown appeal against sentence is allowed. The order for service of sentence in the District Court that it be served by periodic detention is quashed, otherwise the sentences are confirmed, so that on each count the respondent is sentenced to imprisonment for two years and six months with a non-parole period of 22 months and 15 days, each to commence on 4 February 2005. The non-parole period is therefore to expire on 3 December 2006. The Court orders that the respondent be released to parole on 3 December 2006 and that he surrenders to custody forthwith in order to commence serving the sentence now imposed.

TUESDAY 25 OCTOBER 2005
JUDGMENT

1. THE COURT: Since orders were made in this matter on 18 April 2005 it has come to the Court's notice that there is an error in the date of release on parole. The order should be amended to read:

The Crown appeal against sentence is allowed. The order for service of sentence in the District Court that it be served by periodic detention is quashed, otherwise the sentences are confirmed, so that on each count the respondent is sentenced to imprisonment for two years and siz months with a non-parole period of 22 months and 15 days, each to commence on 4 February 2005. The non-parole period is therefore to expire on 18 December 2006. The Court orders that the respondent be released to parole on 18 December 2006 and that he surrenders to custody forthwith in order to commence serving the sentence now imposed.

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27/10/2005 - Additional paragraph added. - Paragraph(s) 1 - 25 October 2005