R v Wright

[1994] QCA 16

IN THE COURT OF APPEAL [1994] QCA 016

SUPREME COURT OF QUEENSLAND	C.A. No. 432 of 1993
Brisbane
BeforeMr Justice Davies Mr Justice Pincus Justice White
[R. v. Wright]

T H E Q U E E N
v.

MARK WRIGHT Respondent

COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS

Appellant

DAVIES J.A. PINCUS J.A.

WHITE J.

_______________________________________________________________
Judgment delivered 02/03/1994
JOINT REASONS FOR JUDGMENT OF DAVIES J.A. AND WHITE J. SEPARATE
CONCURRING REASONS OF PINCUS J.A.
_______________________________________________________________

APPEAL ALLOWED. SET ASIDE SENTENCE OF IMPRISONMENT FOR 12 MONTHS, WHOLLY SUSPENDED, AND SUBSTITUTE A SENTENCE OF 18 MONTHS' IMPRISONMENT, THE RESPONDENT TO BE RELEASED UPON GIVING SECURITY BY RECOGNIZANCE THAT HE WILL BE OF GOOD BEHAVIOUR FOR TWO YEARS AFTER SERVING THREE MONTHS OF TERM.

EXISTING ORDERS FOR FINES REMAIN.
FURTHER ORDER THAT SHERIFF OR NOMINATED OFFICER OF THE SHERIFF'S
OFFICE EXPLAIN TO THE RESPONDENT, IN LANGUAGE LIKELY TO BE
UNDERSTOOD BY HIM, THE PURPOSE AND CONSEQUENCE OF MAKING
RECOGNIZANCE RELEASE ORDER, INCLUDING AN EXPLANATION OF THE
MATTERS REFERRED TO IN S. 16F(2) OF CRIMES ACT.
_______________________________________________________________

CATCHWORDS:CRIMINAL LAW - OFFENCES AGAINST GOVERNMENT - imposition on Commonwealth - false tax returns - scheme of systematic fraud initiated and persisted in - fully suspended custodial sentence and fine - whether custodial sentence warranted - mitigating factors - whether fine in addition to imprisonment

Crimes Act 1914 (Cth), s. 29B
Counsel:R. Hanson Q.C. with him F. Walsh for the Appellant

I.D.F. Callinan Q.C. with him S.G. Durward for the Respondent

Solicitors:Commonwealth Director of Public Prosecutions for the

Appellant

Ruddy Tomlins and Baxter for the Respondent

Date(s) of Hearing:4 February 1994

REASONS FOR JUDGMENT - DAVIES J.A. and WHITE J.

Judgement delivered 02/03/1994

The respondent, on 5 November 1993, pleaded guilty to four offences of imposition upon the Commonwealth contrary to s. 29B of the Crimes Act 1914 (Cth). On the same day the following sentence was imposed on him in respect of each offence: 1.Imprisonment for a period of twelve months to be suspended

forthwith upon his entering into a recognisance in the sum of $500 conditioned that he keep the peace and be of good behaviour for a period of two years; and

2.A fine of $5,000.

The sentences of imprisonment were concurrent. He was allowed a period of six weeks within which to pay the fine. The maximum penalty for an offence against s. 29B is two years' imprisonment.

The appellant, the Commonwealth Director of Public Prosecutions, who appealed against that sentence, submitted that the offences for which the respondent was convicted were serious frauds on the revenue, that there were no substantial mitigating circumstances and that consequently they justified the imposition of a custodial sentence which included a period of imprisonment actually to be served. He relied upon the correctness of a proposition stated by Higgins J. in R. v. Whitnall (1993) 93 A.T.C. 4439 at 4445 in the following terms:

"At least, so far the Courts are concerned, serious frauds on the revenue will result in custodial sentences. In the absence of 'substantial mitigating circumstances', that sentence will include a period actually to be served."

The phrase "substantial mitigating circumstances" is taken from the judgment of the Victorian Court of Criminal Appeal in R. v. Morris (1992) 92 A.T.C. 4618.

Subject to one qualification, Mr Callinan Q.C., who appeared with Mr Durward for the respondent, accepted the correctness of this proposition. That qualification was that the seriousness of the fraud must be such that s. 17A of the Crimes Act can be set aside. That section relevantly provides:

"(1) A court shall not pass a sentence of imprisonment on any person for a federal offence ... unless the court, after having considered all other available sentences, is satisfied that no other sentence is appropriate in all the circumstances of the case.
..."
The first two offences relate to untrue representations made in
the partnership income tax return for R.A. Wright & Sons and the
individual income tax return of the respondent respectively for
the financial year ended 30 June 1990; and the third and fourth
offences are in respect of untrue representations made in the
income tax returns of those persons respectively for the
financial year ended 30 June 1991. The untrue representations
in each case arise from the failure to include in those income
tax returns income received by R.A. Wright & Sons in each of
those years in the form of cash. The circumstances giving rise
to those cash receipts are as follows.

R.A. Wright & Sons ("the partnership") was a partnership between the respondent and his brother. It carried on, in a very large way, the business of the production and selling of vegetables and fruit, mainly capsicums and tomatoes. It employed more than 60 employees. For a time, including the relevant financial years, it was the sole supplier of capsicums and tomatoes to the Committee on Direction of Fruit Marketing then relevantly trading as Sunshine Produce. Some time before the commencement of the 1990 financial year the respondent approached the trading manager of Sunshine Produce to ask if it was possible for the partnership to be paid part of its income from the sale of vegetables to Sunshine Produce in cash. In order to accommodate this request, some officers of Sunshine Produce devised a scheme whereby $1.00 on each case of vegetables supplied by the partnership would be described as a handling fee, deducted from the amount paid to the partnership by cheque, paid into a suspense account of Sunshine Produce and then ultimately handed over to the respondent in cash. The scheme was implemented by Sunshine Produce, on five occasions, drawing a cheque payable to itself and having it cashed into $100 notes; and then placing the notes in a bag which was taken to the partnership farm or another pre-arranged location and there handed over to the respondent. In this way $55,962 in cash was handed over on 19 September 1989, $70,300 on 10 November 1989, $3,002 on 16 November 1989, $21,088 on 7 August 1990, and $60,900 on 12 December 1990. The sole purpose of the request and the scheme was to enable the respondent and his brother to avoid tax on those sums. The first three amounts should, of course, have been included in the 1990 income tax returns, and the last two should have been included in the 1991 income tax returns. They were not so included and none of them was accounted for in the partnership books of account.

The respondent's dishonesty was discovered in the following way.
The Queensland Auditor-General conducted a audit on Sunshine
Produce for the financial year ended 30 June 1991. During the
course of that audit he discovered that the cash payments had
been made without receiving any receipt for them. He required
Sunshine Produce to produce a written acknowledgment from the
respondent that he had received those payments. It obtained a
letter from the respondent dated 25 September 1991 acknowledging
receipt of the above payments. Details of those payments were
subsequently published in the Auditor-General's report to
Parliament. The Australian Taxation office commenced its

enquiries into the matter when one of its officers read the

Auditor-General's report.
During the course of an interview between the respondent and
officers of the Australian Taxation Office on 21 July 1992 the
respondent was asked whether he had received large cash payments
at any time and replied, untruthfully, that he had not. He
said, untruthfully, that all of the partnership income had been
paid into the partnership bank account and that there were no
cash receipts.

There is no doubt that this was a very serious fraud. Large sums of money were involved, $129,264 in the 1990 tax year and $81,988 in the 1991 tax year; it involved cash sums in very large amounts being handed over to the respondent on five occasions over the two years; and the scheme pursuant to which the money was paid was initiated by, if not devised by, the respondent solely for the purpose of avoiding tax by defrauding the Commonwealth. Moreover, there is no reason to believe that, had the Auditor-General not published the fact of the cash payments in his report, the fraud would ever have been discovered.

It was submitted on the respondent's behalf that in fact his fraud resulted in very little loss to the Commonwealth. This result, which was ultimately accepted by the appellant, came about because, unknown to the respondent, in the 1990 and 1992 tax years the partnership accountant had made errors in favour of the Commissioner. In the 1990 year taxable income was returned at $130,026 and tax paid on that amount; whereas the correct amount, even after inclusion of the cash payments, should have been only $112,758. And in the 1992 year taxable income was returned at $78,742 and tax paid on that amount; whereas the correct amount should have been $18,742. In the 1991 year, in which there was no such accounting error, taxable income was returned at $73,897 and tax paid on that amount; whereas the correct amount, after inclusion of the cash payments and apparently some other amendments, should have been $174,891.

Because the amendments of assessments for the 1990 and 1992 years resulted in tax credits, the amount owing to the Commissioner for tax for those three years was only $3,859.64 even after taking into account penalty tax of $16,872.57 for the 1991 year. That is a factor which we must take into account: see s. 16A(2)(e) of the Crimes Act. But we do not think it an important factor. A better measure of the seriousness of the fraud, in our view, is the amount by which the respondent thought he had understated his income in the 1990 and 1991 tax years.

It is said on the respondent's behalf, as it had been said below, that he was genuinely remorseful. Apart from his counsel's statement to that effect, we can see no evidence of it. He did not voluntarily disclose his fraud. Indeed he sought to conceal it by lies when first interviewed by an officer of the Australian Taxation Office. It is true that he pleaded guilty at an early date, but that is at least equally consistent with a frank recognition of the overwhelming case against him as with any remorse on his part. And his payment of the tax involved, together with penalties, is as consistent with his desire to avoid a term of imprisonment as with any genuine remorse. It would, of course, be surprising if the respondent who was, at least until the charges against him were publicly known, a respected member of the Bowen community, did not genuinely regret the events which led to his public disgrace. But that is not remorse.

That is not to say that we should not take into account in the respondent's favour his early plea of guilty. It saved the Government considerable expense and we propose to give credit for it. But there is no evidence which would justify a conclusion that he was genuinely remorseful for his fraudulent conduct.

There are, in this case, in addition to his early guilty plea and his payment of the tax involved and penalties, other mitigating circumstances. The respondent, who was 39 when he committed the first of the above offences, and who is now 42, has no previous convictions of any kind and, as we have already said, was a respected member of his local community. We propose to take into account this previous good record. It may reasonably be inferred that he is unlikely to re-offend.

The questions in this appeal are whether the sentence of imprisonment for 12 months is too low and, more importantly, whether the learned sentencing judge was wrong in not requiring the respondent to actually serve a term of imprisonment. Before answering those questions, we propose to consider how courts have sentenced for frauds of this kind. There are two main categories of cases; those involving social security fraud and those involving taxation fraud. An analysis of the two categories of sentences shows, in our opinion, that it is difficult to reconcile them. Whereas offenders convicted of social security frauds have generally been required to serve terms of imprisonment, even where the amounts involved have been small, the same cannot be said generally of those convicted of tax frauds, even where the amounts involved have been relatively large. It is convenient to refer first to the social security fraud cases.

The appellant tendered a summary of such cases decided since May 1988 in which the amounts involved exceeded $60,000. That summary is annexed to these reasons. Its correctness was not challenged by the respondent. In fact the amounts involved in those cases range from a little over $60,000 to a little over $160,000. There are eleven cases in all and in all of them, except possibly one, the offender pleaded guilty. In most of them the offender had no previous convictions. In all, sentences of imprisonment were imposed and these ranged from 18 months to five and a half years. More importantly, in all except one the offender was required to serve part of the term imposed. In the one exception (Blanco, 26 February 1993, Healy D.C.J.) the court said that but for his age (70) and his ill health, the offender would have been required to serve part of his sentence.

Mr Callinan submitted correctly that, in most of these cases, the offences occurred over a sustained period (the periods ranged from three to sixteen years, but were generally of six years or more) and false names were used. We agree that the length of time over which offences continue is a relevant factor. So also is the use of false names. But these are only two of many matters which a court must take into account. See generally Crimes Act, s.16A(2). Having regard to all of these matters, it is difficult to see why ten of the eleven offenders should have had to serve terms of imprisonment whilst the respondent should not. We add that the cases cited at pp. 4442- 3 of Whitnall show a pattern similar to that disclosed by the above summary.

We turn to four recent decisions of this Court, all involving substantially lesser sums than that involved in the present case and, in three of them, lesser offences than in this case.

Oag (No. 73 of 1993, 17 June 1993) was convicted on four charges of knowingly obtaining a benefit which was not payable under the Social Security Act. The maximum penalty for that offence was imprisonment for 12 months. The court which originally sentenced him had erroneously imposed a sentence of 18 months. On appeal he was sentenced to nine months' imprisonment but with an order for his immediate release upon a bond and an obligation to perform community service. The amount involved in that case was about $20,000. There were strong personal circumstances favouring his release in that his wife was ill with suspected cancer and pregnant and he had two young children.

In Holdsworth (C.A. No. 94 of 1993, 22 June 1993) the offender had defrauded the Health Insurance Commission, over a nine month period, of a little over $5,000. He had a previous good character, he pleaded guilty at an early stage, he was remorseful, he offered to pay restitution, and imprisonment would have an adverse effect on his family (he had three young children). The sentence imposed on him at first instance did not involve a term of imprisonment. On appeal by the Director of Public Prosecutions he was sentenced to 12 months' imprisonment to serve three months. Holdsworth had been convicted under s. 29D of the Crimes Act (defrauding the Commonwealth) for which the maximum penalty was ten years or $100,000 or both.

Morgan (C.A. No. 315 of 1993, 6 October 1993) was convicted of one offence against s. 239(1)(b) the Social Security Act 1947 and two against s. 1347 of the Social Security Act 1991 consisting of her failure to advise the relevant Department of her de facto relationship, thereby obtaining a sole parent pension to which she was not entitled. The maximum penalty in each case was two years' imprisonment. The amount involved in that case was approximately $33,000. The offender had no previous convictions, was a 23 year old woman with three young children receiving unsatisfactory support from her de facto husband. Although, as was pointed out in that case, women who offend in this way have been more leniently treated by the courts than men, Ms Morgan was sentenced by a magistrate to six months' imprisonment to serve two months. An application by the offender for an extension of time within which to appeal against sentence was refused on the basis that it would have no reasonable prospect of success. The difficulty of detection of such frauds and their prevalence were given as reasons for the imposition of a custodial term.

Fenton (C.A. No. 264 of 1993, 18 October 1993) was convicted of offences under the Social Security Act the most serious being against s. 1347 of knowingly obtaining payment of an allowance of approximately $10,000 which was not payable. In respect of the offences, four in all, he received only a fine at first instance. On appeal to this Court a custodial term of a year was imposed. However, he was ordered to be released forthwith only because he had been released back into the community to continue uninterrupted his domestic and business affairs and, in particular, because his personal circumstances were strongly in his favour.

We do not think that the cases of medi-fraud by doctors, such as Corbett (1991) 52 A.Crim.R. 112 and Coroneos (District Court, 28 January 1994), are of much relevance because they are said to involve an additional element of abuse of a position of trust.

The cases contained in the above summary and the other cases to which we have referred show a general practice of courts in cases of social security or medicare fraud whether charged under s. 29B or 29D of the Crimes Act or under the relevant social security legislation, to require service of a term of imprisonment except where there are strong mitigating circumstances. See also the earlier cases referred to in Morgan; and also Lambert (169 of 1985) and Sellers (165 of 1988). That same pattern does not emerge, or at least does not clearly emerge, from the cases involving taxation fraud.

In 1986 the Victorian Court of Criminal Appeal imposed a two year term of imprisonment with a non-parole period of 15 months upon a man (Cerullo, 158 of 1986, 27 November 1986) convicted of 21 counts of offences against s. 29B of the Crimes Act involving the avoidance of sales tax in the amount of $135,000.

The sentence was imposed after a trial, no remorse was shown

and no restitution was offered.

In 1991 two barristers, both of whom were convicted on their own pleas of offences against s. 29B involving tax of about $50,000 managed to avoid serving custodial terms. Pannam was sentenced by a magistrate to six months' imprisonment wholly suspended and Salamanca was sentenced by a magistrate to three months' imprisonment wholly suspended. Reinstatement was offered or paid in both cases and, not surprisingly, the conviction was expected to affect the professional standing of the offenders. But in neither case does there appear to have been any substantial mitigating circumstances. We find these sentences impossible to reconcile either with the cases to which we have already referred or with those to which we are about to refer. Accordingly, unless we have not been fully informed of the facts in those cases, we think that the sentences imposed in them were manifestly inadequate.

In Chaplin (A.C.T. Supreme Court No. 67 of 1991, 24 January 1992) the offender was convicted on her own plea of two counts of imposition contrary to s. 29B, one of conspiracy to defraud the Commonwealth and one of conspiracy to pervert the course of justice. She was involved in evasion of tax of over $1 million and in a subsequent scheme to avoid the consequences of that evasion. There can be no doubt of the extreme seriousness of the offences and of the reprehensibility of the conduct involved in their commission. In particular, the conspiracy offences were very much more serious than the offences in the present case. In the absence of substantial mitigating factors that sentence would be much too low. However, the case is a rare example of a confession resulting from genuine remorse and cooperation with the authorities to enable them to prove the conspiracy offences which, without her cooperation, would probably never have been detected. After the commission of the offences Mrs Chaplin became overcome with guilt and concern and made full disclosure of them to the Australian Taxation Office and the police. No promise or immunity was offered or given. Her conduct in this respect was all the more commendable when one has regard to her relationship with her husband who was the moving force in the commission of the offences. She was gullible and trusting; he was domineering. She had protested at the understatement of income but had been, in effect, overborne by her husband. The same was true with respect to the scheme which constituted the conspiracy. Nevertheless she defied her husband in confessing and co-operating and, in consequence, ending their marriage. The learned sentencing judge described her as basically a person of great integrity, sadly led astray by those persons she trusted and was entitled to trust. Had it not been for this conduct his Honour made it clear that he would have required the offender to serve part of the term of imprisonment which he imposed. The same judge (Higgins J.) in Whitnall described this case as a good example of substantial mitigating circumstances. There is certainly no other basis upon which the failure to require the offender to serve part of the term of imprisonment imposed can be justified.

Morris was also a barrister convicted of offences against s. 29B of the Crimes Act involving understatement of his taxable income over a period of nine years, the total understatement being approximately $470,000. When first interviewed by tax auditors he told them he had wanted for some years to clear his taxation problems and provided them with details of his understated income. At first instance he was given a suspended sentence of one years' imprisonment and a fine of $19,200. On appeal by the Director of Public Prosecutions he was sentenced to 18 months' imprisonment and required to serve six months of that term. In the course of giving judgment, the court said that the critical consideration was that taxpayers cannot be permitted to defraud the revenue in the belief that detection can lead to no more than a requirement merely to make financial reparation and to pay a monetary penalty so as to enable the offender to "purchase" immunity from prosecution under the criminal law. We agree. They also remarked on the trend in recent years towards the imposition of custodial sentences even upon first offenders in the absence of substantial mitigating circumstances. The sentence imposed in that case, which we think, with respect, was correctly imposed, illustrates the point which we made earlier that, in the absence of facts not disclosed to us, the sentences in Pannam and Salamanca cannot be justified.

In Whitnall the offender understated income and overstated deductions in personal returns and in the returns of a company controlled by him involving, over a four year period, understatement of income of over $150,000. The offences were pursuant to s. 29D of the Crimes Act. They were described accurately as displaying a calculated and systematic fraud. At first instance he received a suspended sentence of three years and 208 hours of community service. He had already been subjected to administrative penalties of $42,000 and had repaid a substantial part of the amount of tax avoided, the balance being paid, by agreement with the Commissioner, by monthly payments. An appeal by the Director of Public Prosecutions against the failure to require a term in jail was dismissed. A major factor in the court's decision appears to have been the fact that the Commissioner had, in effect, pre-empted the free exercise of the court's sentencing discretion by imposing the penalty of $42,000, it being accepted in that case that that obligation, together with the obligation to repay the tax underpaid, imposed a heavy continuing financial burden upon the offender. Nevertheless we must say that we find that decision difficult to reconcile with the social security fraud cases to which we have referred, Morris and Cufari (Supreme Court of Victoria, Appeal Division No. 192 of 1993, 19 October 1993).

Cufari pleaded guilty to two counts under s. 29D and six under s. 29B involving the avoidance of tax of over $600,000 over a period of six years. The offender was initially sentenced to an effective term of four years with a non-parole period of two years. He was also subjected to a pecuniary penalty order of approximately $300,000. On appeal, that sentence was reduced, by a majority of the court, to one of two and a half years' imprisonment of which the offender was obliged to serve one year.

It has been said of the social security fraud cases that they are prevalent and that they are difficult to detect. That is undoubtedly true and those factors are important considerations in the decisions to impose custodial terms in those cases. But there is no reason to believe that tax fraud is not prevalent or that it is easier to detect. It is true that there have been many more sentences, reported and unreported, in respect of social security fraud in recent years than there have been in respect of tax fraud. However, as pointed out in Whitnall at 4440, 4444, there are a number of other avenues open to the authorities in respect of evasion of tax. The reluctance in the past, in the light of these, to prosecute for tax fraud under the Crimes Act may explain the relative infrequency of tax fraud cases under ss. 29B or 29D. We would also be surprised if tax fraud were easy to detect. The present case is a good example.

There is no reason to believe that it would ever have been detected had not the fact of the cash payments been published in the Auditor-General's report. But even if it is correct that social security fraud is more prevalent and more difficult to detect than tax fraud, and that this is, at least in part, the explanation for the requirement that offenders serve a term of imprisonment even when relatively small sums are involved, we think that where a calculated and systematic tax fraud involves a substantial sum of money the offender should usually be required to serve a term of imprisonment particularly where, as in this case, it is not an isolated act but is persisted in for some time.

The fraud in this case was worse than that in Morris, which lacked any devious or sophisticated scheme. The critical question in the present case is whether, having regard to the matters to which we have referred, there were considerations which, notwithstanding the seriousness of the fraud and the substantial amount involved, justified a wholly suspended sentence. In our view there were not. There was no clear evidence of remorse as there was, for example, in Chaplin, or even voluntary disclosure as there was, for example, in Morris.

And unlike Whitnall the imposition of financial penalties in this case does not appear to have been a substantial burden upon the respondent.

A factor in the respondent's favour in the present case is that referred to by this court in Fenton: that he has been released into the community by the sentencing judge and allowed to continue uninterrupted with his domestic and business affairs. But, given the other circumstances of the case, that cannot be sufficient to prevent this Court from requiring the offender to serve a term of imprisonment. And we do not think there are in this case strong personal circumstances in the respondent's favour. The sole motive for the respondent's conduct appears to have been greed rather than (as appears to have been accepted in Fenton) need. Nevertheless the term of imprisonment which we impose should reflect, in addition to the mitigating factors to which we have referred, the factor that we are requiring a person who has already been released into the community to serve a term of imprisonment.

We are satisfied that no sentence other than one requiring the respondent to serve a term of imprisonment will, in all the circumstances of this case, sufficiently reflect the need for general deterrance. Accordingly we would set aside the term of imprisonment of 12 months which the learned sentencing judge ordered to be wholly suspended and substitute for that a term of 18 months. Because of the other factors to which we have referred, we propose to order that he be released upon his giving security by recognisance that he will be of good behaviour for two years after he has served three months of that term. We have made those orders on the basis that the existing orders for fines remain. For the reasons given in the following paragraphs, we think that they can be imposed in addition to a term of imprisonment.

During the course of argument counsel for the appellant was asked whether a fine could be imposed in addition to a term of imprisonment and he answered in the affirmative. There was no argument on this question or any reason given for or against this view. Section 29B provides simply a maximum term of imprisonment for an offence against that section. Section 29D, by contrast, provides for a fine or imprisonment, or both. It was no doubt this difference in language which caused the Victorian Court of Appeal in Morris at 235 to say that a fine could not be imposed under s. 29B in addition to a term of imprisonment. Section 4B(2) of the Crimes Act provides, in part:

"Where a natural person is convicted of an offence against a law of the Commonwealth punishable by imprisonment only, the Court may, if a contrary intention does not appear and the Court thinks it appropriate in all the circumstances of the case, impose, instead of, or in addition to, a penalty of imprisonment, a pecuniary penalty ..."

The words "in addition to" were inserted by an amending Act in 1989 after the offences in Morris were committed. Notwithstanding the difference in wording between ss. 29B and 29D, we think that, since that amendment, a pecuniary penalty may be imposed under s. 29B, in addition to a term of imprisonment.

This will mean that, for his crime, the respondent has been
required, in addition to paying the tax evaded
-to pay penalty tax of $16,872.57;
-to pay fines totalling $20,000.00;
-and to serve the term of imprisonment referred to above.
We would further order that the Sheriff of this Court or a
nominated officer of the Sheriff's Office explain to the
respondent, in language likely to be understood by him, the
purpose and consequences of making a recognizance release
order, including an explanation of the matters referred to in s.
16F(2) of the Crimes Act.
REASONS FOR JUDGMENT - PINCUS J.A.
Judgment delivered 02/03/94

I have read the reasons of Davies JA and White J and agree with their Honours' conclusions.

The Australian case in which penalties for tax fraud have been most comprehensively discussed appears to be Whitnall (1993) 93 A.T.C. 4,439. It was argued for the appellant before us that a principle mentioned in Whitnall should be applied; that is to be found at 4,445:

"At least, so far as the Courts are concerned, serious frauds on the revenue will result in custodial sentences. In the absence of 'substantial mitigating circumstances', that sentence will include a period actually to be served".

In my view the inclusion of the word "serious" makes the
principle one which is unlikely to be of great practical value;
the Court must consider all the circumstances to determine
whether the offence is serious enough to warrant imprisonment,
as it would do if not using the principle. The Victorian
Sentencing Manual provides examples of the variety of
considerations which bear upon the gravity of taxation offences.
They include the extent of the fraud and the amount avoided,
the potential loss of revenue, the length of time the fraud
continued, the nature of the planning and execution, and whether
professional or technical skills were used to facilitate the
fraud (356,357). Many other matters may bear upon the
seriousness of the offence, such as whether the fraud was due to
desperate financial circumstances and whether there was an
element of carelessness or self-delusion rather than undiluted
dishonesty. The simplest way to compare one tax fraud with
another is to look at the amount of money involved and that will
usually be of central importance; but to adopt, expressly or
implicitly, the practice that tax frauds involving more than a
certain sum bring a custodial sentence might produce an
undesirable lack of attention to the merits or demerits of the
particular case. Frauds involving relatively small amounts of
money might perhaps produce a gaol sentence if committed in
particularly bad circumstances.

In Whitnall, Higgins J points out that the same conduct may be dealt with by the tax and prosecuting authorities in one of a number of ways, each producing a very different maximum penalty (4,444). It would be plainly unjust that two convicted persons should, on this account, be punished quite differently, if the offences are not distinguishable in heinousness. This problem is discussed in another context by White J in Scott v. Cameron (1980) 26 S.A.S.R. 321 at 325, 326, and in Vasin and Scherf (1985) 18 A Crim. R. 209 at 215,216. In the former case, White J said in effect that the court's sentencing discretion should not be fettered by the prosecutor's choice of the section under which the complaint is laid. His Honour suggested that the prosecution before him would more appropriately have been brought under a particular provision of the Social Services Act, "because that section deals specifically with this type of offence and contains the maximum penalty chosen by the legislature therefor". In Morgan (1983) 9 A. Crim. R. 289, Muirhead J discussed what was said by White J in Scott v. Cameron, but declined to apply his Honour's remarks. The present case is a good example of the difficulty to which White J referred: the charge brought was one of imposition under s. 29B of the Crimes Act 1914, not fraud under s. 29D; the former carries a maximum penalty of two years imprisonment and the latter 10 years imprisonment plus 1000 penalty units.

It appears to me to be relevant, and helpful to the respondent's case, that the appellant has been able to refer us to only two authorities in which, in comparable circumstances, custodial sentences have ever been imposed for income tax fraud:

they are referred to in my colleagues' reasons and are Morris and Cufari. Organised tax fraud schemes with many participants are in a different category from the present case, which involves fraudulent evasion by an individual. Again, cases of misuse of moneys withheld to cover group tax liabilities - offences akin to simple theft - are in a rather special class; see Gamble and Moore (1983) 14 A.Crim.R. 179. The reason for there being only two, and very recent, comparable cases is unclear; but it can hardly be that no major tax frauds have been unearthed in the period of nearly 80 years during which the Commonwealth has imposed income taxes. An example of the approach which has been taken in the past is the decision of Olney J. in Turner (1984) ATC 4,161. That involved a prosecution under s. 227 of the Income Tax Assessment Act 1936 which made it an offence to make or deliver a false return. There had been a claim to a deduction of $60,000 in management fees, an amount the taxpayer "well knew had been borrowed for capital purposes" (4,167) and was therefore not deductible. The judge regarded the case as one warranting "a substantial penalty"; the taxpayer was fined $150 and ordered to pay $37,000 by way of penalty. There was no question of a prison sentence because the section did not provide for one.

It is impossible to hold that the respondent cannot be imprisoned because some, perhaps very many, perpetrators of serious individual tax frauds have when discovered only suffered financially and not gone to prison. Nevertheless, it appears to me that a legitimate sense of injustice may be felt if the respondent's sentence is fixed without regard to the apparently lenient treatment of others who have in the past behaved similarly. It is sometimes suggested that taxation frauds of various kinds are very common in the community; whether or not that is so, one must be cautious in imposing penalties where the respondent's having been placed in jeopardy of imprisonment appears to be due in part to a change in administrative practice rather than in the law. But the circumstances of the present case, and in particular the substantial sum involved, are such as to make it impossible to accept that the penalty imposed was an adequate one. The amount of cash in respect to which tax was sought to be avoided was over $200,000, and but for the errors in the tax returns which practically cancelled out the benefit sought to be obtained, the potential revenue loss would have been correspondingly large.

I make two further comments. One is that the cases in Thomas' "Current Sentencing Practice" (Sweet and Maxwell) suggest that in the United Kingdom terms of imprisonment are commonly imposed in comparable circumstances: see p. 24,810 et seq. Secondly, it does not appear to me that the blatant, not to say simplistic, nature of the respondent's fraud should necessarily result in his being more severely punished than if more subtle means had been used. That there has been careful planning and deception may count against the offender: Gamble and Moore (183, 184).