Johnston v R

BATHURST CJ: The applicant, Bruce Alan Johnston, (the applicant) pleaded guilty to a single count of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900 (NSW). The offence carries a maximum penalty of 10 years imprisonment. There is no standard non-parole period.

A sentencing hearing took place on 27 March 2015, but sentencing was deferred under s 11(1)(a) of the Crimes (Sentencing Procedure) Act 1999 (NSW) (Sentencing Procedure Act) for the purpose of assessing the applicant’s prospects of rehabilitation by allowing him to complete an eight week rehabilitation programme in respect of his gambling addiction.

On 5 June 2015 the applicant was sentenced to a total term of 6 years and 6 months imprisonment, with a non-parole period of 4 years. The sentence was arrived at after allowing a discount of 25% for the utilitarian value of his early plea.

The applicant has sought leave to appeal out of time against the sentence. In an affidavit filed in support of the application, the solicitor for the applicant sought to explain the reasons for the delay. It is not necessary to set out these reasons in detail as the Crown accepted in argument that “the result of the appeal … will dictate whether leave is granted or not”.

In Kentwell v The Queen (2014) 252 CLR 601; [2014] HCA 37, the plurality stated that an application to extend time will be determined by what is required in the interests of justice, a concept which the plurality recognised could pull in different directions: Kentwell at [32]. The plurality also stated that the prospects of success, should the extension be granted, is relevant to the determination: Kentwell at [33].

Although I do not regard Kentwell supra as stating that the prospects of success will always be the determinative factor, having regard to the Crown’s position, it is not necessary to go beyond that factor in the present case.

The facts are straightforward. The applicant was employed by Newcrest Mining Limited (Newcrest) as a senior accountant involved in the development of the Cadia East Mine. Between 1 July 2010 and 27 August 2013, the applicant prepared a total of 156 invoices in the name of “Bramph Consulting Services”, a false entity set up by him. The invoices, which purported to be for consultancy services in respect of the Cadia Mine project, were paid by Newcrest and transferred into accounts controlled by the applicant. The total amount paid was $1,257,847.25. It was dissipated in gambling.

The fraud was uncovered when it was revealed no GST was paid on the invoices. On 21 November 2013 the applicant was spoken to by Newcrest management and admitted his deception. He was arrested and charged on 25 July 2014.

Other factors relevant to the sentence are contained in the sentencing judgment which I have summarised below.

The sentencing judge noted that the applicant had no criminal record and that at the time of sentence he was 40 years of age, married, with two children aged 7 and 6.

The primary judge noted that since his graduation from a Bachelor of Business, majoring in Accounting and Finance, he worked in North Sydney until his relocation to Orange. He noted that the applicant was employed by “Cadia Newcrest” as a senior accountant. He noted that following his dismissal the applicant was employed as a labourer, although from 14 September 2014 to 15 February 2015 he was employed as chief financial officer with a large cherry orchard enterprise. The sentencing judge stated that the employer confirmed that the applicant was forthright regarding his offences and that he had had no qualms in offering him employment to manage the company’s finances and administration throughout the harvesting season.

The sentencing judge noted that the applicant was currently midway in post-graduate studies for a Master of Business Administration at Deakin University. He noted that the applicant was not suffering from any mental health issues, although he had been receiving regular psychological counselling.

The sentencing judge noted that the applicant had reached a confidential settlement with Newcrest. The evidence established that this involved him paying the company $250,000 in consideration of a release from further liability. The evidence also established that this effectively enabled him to preserve the family home.

The primary judge referred to the applicant’s evidence concerning his gambling activities. He noted the applicant stated that he had a problem with gambling since he was a teenager but had not admitted to it. His Honour noted the applicant described the offences, the subject of the charge, as opportunistic.

The sentencing judge stated that the applicant fully accepted responsibility for his offences and had made efforts to deal with his addiction by completing the St John of God residential rehabilitation program.

His Honour noted that the applicant’s psychiatrist, Dr Krishnaswamy, had advised Community Corrections that the applicant had only just begun his therapy for an addictive disorder which required long term professional intervention to address it. The sentencing judge noted that the applicant was assessed as being at a low risk of reoffending.

The sentencing judge noted that Dr Krishnaswamy expressed the view that once the applicant completed the rehabilitation at St John of God, he should continue his appointments with the gambling counsellor at Lifeline and attend Gambling Anonymous meetings. She stated that “[i]f able to participate in the above programs and with continued support from his family and social networks”, she expected that the prognosis was good. The sentencing judge noted that for the 15 months during which he had stopped gambling, he had been gainfully employed.

The sentencing judge set out in detail a series of references attesting to the applicant’s good character.

His Honour also set out the following 11 factors which he said would affect the appropriate sentence:

The sentencing judge described the offence as involving a substantial breach of trust. He expressed the view that there were differences between a gambling addiction and a drug addiction. He stated gambling does not physically alter a person’s mind or body. He stated a gambler knows what he is doing. He said that the concern in the present case was that, despite knowing his gambling was causing him to steal, he did not do anything until he was confronted by his employer.

In that context the sentencing judge stated that his addiction did not explain why it had taken over 3 years and the theft of one and a quarter million dollars before the applicant sought professional help. He described the applicant’s evidence, “I knew it was a problem but I just couldn’t help myself”, as not sufficient.

The sentencing judge stated that he realised imprisonment would be devastating on the applicant’s wife and family, as the applicant’s wife would be the sole breadwinner and suffered a recurring chronic back condition.

His Honour noted that fraud matters, such as those in question, were relatively easy to commit by a person in a position of trust and quite often very large sums of unrecoverable money were lost. He stated that such cases needed to be publicly denounced to deter others from offending and that the offender needed to be adequately punished.

In those circumstances, the sentencing judge imposed the sentence to which I have referred above.

The applicant relied on the following grounds of appeal:

During the course of argument on Ground 4, the applicant sought and was granted leave to rely on an additional ground of appeal, namely, that the sentence was manifestly excessive. It was common ground that the argument on Ground 4 raised similar issues as the ground of manifest excess. In these circumstances it is convenient to deal with these grounds together. It is also convenient to deal with Grounds 1 and 2 together.

The applicant submitted there was clear evidence he had a gambling addiction which he submitted propelled the offending. He pointed to the fact that expert evidence was led to the effect that at the relevant time, he suffered from a gambling disorder as defined under the Diagnostic and Statistical Manual of Mental Disorders (DSM-V). He pointed to the evidence of rehabilitative steps he had taken including the rehabilitation programme which led to the prolonging of the sentencing proceedings, with the intimation by the sentencing judge that this would result in an adjustment of the non-parole period.

The applicant submitted that there was no evidential basis for the finding made by the sentencing judge that, “[g]ambling does not physically alter a person’s mind”, submitting the fact that it is included in DSM-V evidences that it does. He submitted that it was required to be taken into account in the finding of objective seriousness. In that context he referred to what was said by Wood CJ at CL in R v Henry (1999) 46 NSWLR 346; [1999] NSWCCA 111 at [273], to the effect that the fact that an offence is motivated by a need to support a drug habit may be taken into account, inter alia, so far as it throws light on the state of mind or the capacity of the offender to exercise judgment.

The applicant recognised that in Muldrock v The Queen (2011) 244 CLR 120; [2011] HCA 39, the plurality stated (at [27]) that the objective seriousness of an offence is to be assessed without reference to matters personal to a particular offender. However, he submitted, referring to McLaren v R [2012] NSWCCA 284 at [29], that this did not derogate from the requirement of a sentencing judge to form an assessment as to the moral culpability of the offending, in respect of which the offender’s mental state may be taken into account. The applicant submitted the judge erred in failing to take the gambling addiction into account in that fashion.

Counsel for the applicant submitted, referring to the evidence of Dr Krishnaswamy, that there was a difference between a problem gambler and someone who has a clinical condition. She submitted that the evidence ruled out that it was a crime committed for greed or to support a lavish lifestyle. She submitted that the applicant’s inability to stop gambling, whilst not disabling him from making a determination between right and wrong, impaired his judgment. She also submitted that the inability to stop gambling was inextricably linked to the commission of the offences.

In relation to Ground 2 the applicant submitted that the sentencing judge incorrectly applied a hierarchy of addiction placing gambling below drugs. He submitted that in doing so the sentencing judge distracted himself from the determination of the objective seriousness of the offence, of remorse and of the prospects of rehabilitation. He submitted that each of Spigelman CJ and Wood CJ at CL in R v Henry supra, rejected a hierarchy of motivations to obtain money. He repeated that the approach of the sentencing judge resulted in him failing to turn his mind to the evidence of rehabilitation and his low risk of reoffending.

The Crown pointing to Muldrock supra (at [27]), submitted that the sentencing judge would have been in error had he taken the applicant’s gambling addiction into account in assessing the objective seriousness of the offence, submitting that moral culpability and objective seriousness were not the same.

The Crown submitted that in drawing the distinction between drug addiction and gambling addiction, the sentencing judge was specifically concerned with the physical effects of each addiction. The Crown submitted that in stating, “the gambler knows what he or she is doing”, the sentencing judge was comparing the gambler with someone acting or offending under the chemical influence of a drug. The Crown submitted that there was no evidence that the applicant did not know what he was doing and that when he committed the frauds he was neither under the influence of any substance nor suffering from its withdrawal. It was submitted the applicant not only knew what he was doing but knew that it was a problem yet did not stop until he was caught.

The Crown also submitted that it was not put below that the applicant’s gambling addiction impacted the objective seriousness of the offence or the applicant’s moral culpability. It pointed to the fact that at the sentencing hearing, senior counsel for the applicant described the gambling addiction as properly going to “context”. In those circumstances it was submitted there was no error in failing to consider the matters the subject of this ground.

In relation to Ground 2 the Crown submitted there was nothing in the remarks on sentence to suggest that the sentencing judge placed the applicant in any special category for sentencing purposes. To the extent the ground sought to criticise the weight put by the sentencing judge on the respondent’s gambling addiction as a mitigating factor, it was submitted referring to Hanna v R [2015] NSWCCA 326 at [76], that the question of whether adequate weight was placed on a particular factor does not readily demonstrate House v The King (1936) 55 CLR 499; [1936] HCA 40 error.

This Court has consistently held that the fact that offences were committed to feed a gambling addiction will not generally be a mitigating factor at sentence: R v Molesworth [1999] NSWCCA 43 at [24], [30]; R v Todorovic [2008] NSWCCA 49 at [62]; R v Huang, R v Siu (2007) 174 A Crim R 370; [2007] NSWCCA 259 at [42]; Marks v R [2009] NSWCCA 24 at [29]; Le v R [2006] NSWCCA 136 at [32]; Assi v R [2006] NSWCCA 257. In the latter case Howie J, with whom Tobias JA and Rothman J agreed, stated at [27] that although the gambling habit may explain the fall into serious criminal conduct, it is a rare case where the offender can seek mitigation of penalty based on an addiction to gambling even when it is pathological.

In Ourdi v The Queen (2009) 193 A Crim R 381; [2009] NSWCCA 46, the applicant sought to rely on his gambling habit in mitigation of offences of breaking and entering dwelling houses with intent to steal. In rejecting that submission Kirby J, with whom Grove and Blanch JJ agreed, noted (at [45]) that the crimes were not impulsive but on the contrary involved careful observation and planning. The same may be said of the applicant’s offence in the present case.

Similarly in R v Grossi (2008) 183 A Crim R 15; [2008] VSCA 51, the Victorian Court of Appeal stated that a gambling addiction will generally not reduce moral culpability where the offence is committed over an extended period, as the offender had a degree of choice as to how they would finance their addiction. The Court also explained that the disorder will not often be connected to the commission of the crime but merely provide a motive or explanation for its commission and so is therefore only indirectly responsible for the offending conduct. Redlich JA, with whom Neave and Vincent JJA agreed, stated (at [56]-[57]):

Further it should be noted that the remarks in Grossi supra were made in circumstances where there was psychological evidence that at the time of the offending the applicant would have been diagnosed as having an impulse control disorder in the form of pathological gambling listed in the Diagnostic and Statistical Manual: [2008] VSCA 51 at [47].

The applicant in support of his submission relied on what was said by Wood CJ at CL in R v Henry supra. Each of Spigelman CJ and Wood CJ at CL stated that addiction including an addiction to drugs or gambling is not of itself a mitigating circumstance: (1999) 46 NSWLR 346 at [178]-[203], [273]. Wood CJ at CL in the passage cited in part by the applicant in his submissions, set out the relevant principles in the following terms:

These comments apply equally to cases of fraud to feed a gambling addiction.

The applicant placed particular reliance on par 273(b)(iii) of the passage from the judgment of Wood CJ at CL cited above. However there was nothing to suggest that over the period in which the frauds were committed the applicant lacked the capacity to exercise judgment, or that the crime was anything other than a willed act. The fact the addiction is included in DSM-V does not indicate to the contrary.

In these circumstances Ground 1 has not been made out.

So far as Ground 2 is concerned it does not seem to me that the sentencing judge postulated a hierarchy of addiction placing gambling below drugs. The remarks complained of (see [20] above) were directed to the proceedings before him. The sentencing judge was simply stating that unlike some cases of drug addiction, the offender did not lack the capacity to exercise judgment, nor was the crime something other than a willed act.

In my opinion this ground has not been made out.

The applicant referred to the following remarks by the sentencing judge:

The applicant submitted that those remarks show that the sentencing judge took the view that only rehabilitative actions occurring early in the addiction were to be taken into account. He submitted that this approach did not accord with authority. He submitted that the absence of an early response to his gambling addiction should be assessed against the background that the gambling difficulties commenced at a young age (17 years) and the fact that gambling, “lawfully infects our daily lives and saturates all sporting mediums” and so, “provides fertile ground for unchecked and unnoticed addiction”. Counsel for the applicant further submitted that it was not appropriate to take the applicant’s rehabilitation into account only by adjusting the non-parole period.

The Crown submitted the applicant misinterpreted the criticised passage. It was submitted the applicant could not complain about being at a disadvantage because the nature of his offending meant he had to be charged by police as a prompt to commence treatment. The Crown submitted the applicant was sentenced in an appropriate fashion, with the serious extent of the fraud and the need for general deterrence properly being given determinative significance.

The Crown further submitted that the applicant’s demonstrated need for continued rehabilitation resulted in a finding of special circumstances and reduction in the non-parole period. The Crown submitted that the applicant’s rehabilitation was acknowledged by the sentencing judge deferring sentence to enable the applicant to complete a rehabilitation programme and in the variation of the statutory non-parole period ratio.

The remarks made by the sentencing judge complained of do not seem to me to go further than to say that having regard to the fact that the offender did nothing about his addiction until he was apprehended meant sentencing options other than a custodial sentence were not appropriate. That is relatively clear from his remarks immediately following the passage of which complaint is made, to the effect that the applicant and his counsel recognised that a custodial sentence must follow and that although imprisonment will be devastating there were no exceptional circumstances justifying the non-imposition of a custodial sentence.

This ground is not made out.

The applicant submitted that he had made significant restitution and it could be inferred that Newcrest, a commercial enterprise, was satisfied no more could be reasonably obtained from him. He submitted that showed significant remorse and warranted significant mitigation, or at least should have had an impact on the appropriate sentence. He submitted the fact of restitution was a statutory mitigating factor in s 21A(3)(i) of the Sentencing Procedure Act. He submitted that it was not clear that the sentencing judge had taken this matter into account.

The applicant also submitted that the “impressive testimonials” tendered by him were not taken into account by the sentencing judge, apparently because he took the view that good character is generally a necessary prerequisite to being in a position of trust to enable fraud to be engaged in. He submitted that this fact should not have stood in the way of some credit being given for good character.

The applicant also submitted that whilst the judge acknowledged the hardship of incarceration on a man without antecedent criminal history, it did not result in any mitigation of penalty.

The applicant submitted that a sentence of 8 years and 8 months pre-discount for an early plea gave little or no weight to the fact the applicant suffered from an addiction and the other relevant factors in his favour. Counsel for the applicant submitted that had they been taken into account, a sentence of 8 years and 8 months could not have been imposed.

Counsel for the applicant submitted that when Parliament laid down a maximum penalty of 10 years it was done in circumstances where Parliament knew that the offences could take place over a number of years and involve separate transactions. However, she accepted that there may be significant differences between the seriousness of one incident and engaging in conduct over 3 years which involved individual and not necessarily connected acts. However, she submitted the present case did not fall within the worst class of case.

In that context, counsel for the applicant referred to two cases. The first, Power v R [2002] NSWCCA 244, was a decision of a two judge bench of this Court. The applicant pleaded guilty to 39 offences of making a false instrument whilst a bank employee. The instruments in question were fictitious loans to fictitious customers. The amount involved was $5.81 million spent on luxury items. The offences occurred over a period of 4 years. A total sentence of 8 years with a non-parole period of 5 years was imposed. The Court held that the failure to impose a non-parole period in respect of a number of the offences and the non-parole period imposed on others led to the imposition of a sentence which was manifestly excessive. The Court did not vary the head sentences but substituted an effective non-parole period of 4 years.

The other decision, R v McDonald (1994) 71 A Crim R 370, was a decision of the Federal Court on appeal from the Supreme Court of the Australian Capital Territory. The applicant pleaded guilty to eight counts of fraud, the amount involved being some $632,000. Prior to being sentenced for these offences, he was convicted in the NSW District Court of various offences of fraud involving an amount totalling $951,000. He was sentenced to a term of imprisonment for these offences of 5 years with a non-parole period of 2 years.

The applicant was then sentenced for the Australian Capital Territory offences. The effect of the sentence was to increase the total term of imprisonment for all the offences to 8 years and 9 months and the non-parole period from 2 years to 4 years. The Federal Court held that the sentencing judge did not pay proper regard to the principle of totality and varied the sentence to impose a sentence of 7 years imprisonment with a minimum term of 3½ years.

Counsel for the applicant did not suggest that these cases indicated a range but pointed out that in neither of the two cases were the offences described as falling within the worst category.

The Crown noted the sentencing judge referred to the applicant’s restitution, remorse and to his good character. It was submitted that the authorities established that good character will be given less weight when general deterrence is important and the offence is one frequently committed by persons of good character.

The Crown referred to the reference by the sentencing judge to R v Chen [2015] NSWCCA 122, a Commonwealth prosecution involving the submission of 27 fraudulent business activity statements for the purpose of claiming false refunds of Goods and Services Tax. The total amount fraudulently obtained was $1,396,285.76. The applicant was sentenced to a total term of imprisonment for 10 years with a non-parole period of 6 years. Leave to appeal against sentence was refused. R A Hulme J (with whom Bellew and Davies JJ agreed) described the offence as involving repeated fraudulent claims as a part of a scheme to manipulate the self-reporting GST/BAS scheme solely for the applicant’s enrichment.

To the extent that this ground asserts error in placing insufficient weight on the cumulative effect of the applicant’s restitution, good character and the fact that this was the applicant’s first custodial sentence in mitigation, the ground implicitly acknowledges that the judge did take these factors into account. That implicit acknowledgement is correct. The sentencing judge referred to the fact that the applicant had reached a confidential settlement with Newcrest, although presumably because of the claimed confidentiality, he did not refer to the precise amount paid. In relation to good character the sentencing judge referred to the testimonial from the manager of his employer immediately prior to sentence and set out in some detail the character references tendered on his behalf (see [11] and [18] above). He expressly noted the devastating effect that imprisonment would have on his wife and family.

As was pointed out in Bland v The Queen (2014) 241 A Crim R 51; [2014] NSWCCA 82 at [112]-[113] the failure of a sentencing judge to attribute sufficient weight to a particular matter will generally not be a material error and the circumstances in which matters of weight will justify intervention are narrowly confined: see also Hanna v R supra at [76].

In the present case it does not seem to me that the manner in which the matters referred to were taken into account of itself constituted error. The sentencing judge referred to these matters and clearly considered them as part of the process of determining the appropriate sentence. There is no discernible error in his approach. Those factors however are of course relevant factors to be taken into account in determining whether the sentence was manifestly excessive.

The principles on which an appellate court will determine that a sentence is manifestly excessive (or inadequate) are well established. An appellate court is not entitled to interfere with the exercise of the sentencing discretion merely because it would have arrived at a different result: Lowndes v The Queen (1999) 195 CLR 665; [1999] HCA 29 at [15]. For a sentence to be set aside as manifestly excessive it must be unreasonable or plainly unjust: Dinsdale v The Queen (2000) 202 CLR 321; [2000] HCA 54 at [6], [22], after taking all relevant matters into account: see also Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [58]-[60].

In considering this issue I do not consider the two cases referred to by the applicant, Power v R supra and R v Macdonald supra, to be of particular assistance. The applicant correctly conceded that they did not constitute a range. I have set out the detail of these cases at [57]-[59] above. In Power, adjustment was made to take account of an effective non-parole period said to be manifestly excessive, whilst the adjustment in R v Macdonald was made having regard to the principle of totality. They provide no assistance in demonstrating a range of sentences for matters of this nature. As has been pointed out on a number of occasions, reference to statistics is of limited value in cases of fraud having regard to the variety of objective and subjective circumstances involved: R v Woodman [2001] NSWCCA 310 at [22]-[24]; R v Hawker [2001] NSWCCA 148 at [17]-[18]; R v Martin [2005] NSWCCA 190 at [56]. In each of these cases it was emphasised that greater assistance is derived from general sentencing principles with respect to white collar crime.

In considering the question of manifest excess it is necessary to pay regard to the fact that the plea was to a “rolled up count” involving 156 fictitious transactions. The question of sentencing on such a rolled up count was considered by Garling J in R v Richard [2011] NSWSC 866. The offender pleaded guilty to two offences contrary to s 1041G of the Corporations Act 2001 (Cth). The offences involved diverting $26.6 million of superannuation funds into tax havens over a period of 4 years. Garling J (at [65]) observed that rolled up charges include more than one episode of criminal conduct such that the criminality involved is greater than a charge involving only one episode of such conduct. Garling J (at [105]-[108]) identified two advantages to the offender in the use of rolled up charges. First, restriction of the maximum sentence available and, second, the fact that the sentence imposed represents a complete concurrence of separate sentences which might otherwise have been imposed.

The observations of Garling J were approved by this Court in R v De Leeuw [2015] NSWCCA 183. That case involved three counts of using a carriage service to access child pornography (a Federal offence) and one count of possessing child abuse material (a State offence) involving a multiplicity of pornographic images. Two further offences were also taken into account on a Form 1. Johnson J made the following remarks (at [116]):

The applicant’s submissions principally focused on the head sentence (pre-discount for the guilty plea) of 8 years and 8 months compared with the maximum sentence of 10 years for the offence, submitting that a sentence of that nature was reserved for the worst class of cases. However that does not take into account the fact that this was a “rolled up count” involving a considerable number of transactions over a period of some years. The offences involved the systematic defrauding of the applicant’s employer in circumstances where he was in a position of trust. It has been repeatedly emphasised that in these circumstances general deterrence is of considerable importance: See R v Hawker supra at [23]-[24]; R v Woodman supra at [24]-[28] and the cases therein cited. It is of course necessary to consider the subjective circumstances of the offender. As I indicated I do not consider the fact that the theft took place to feed a gambling addiction to be a mitigating circumstance. Further I do not consider that the prior good character of the applicant in this case is a matter of great significance. It is generally only persons of good character who are placed in positions of trust so as to enable offences such as the present to be committed.

So far as restitution and remorse are concerned, they are plainly matters which need to be taken into account. However when dealing with restitution it must be remembered that of the total amount defrauded, only some $250,000 was repaid in return for a release from further liability. However, it is correct that the offender was remorseful for his conduct.

As the sentencing judge found, the applicant since his arrest has actively pursued courses towards rehabilitation and is well down that path. As the sentencing judge found, there was a low risk of reoffending. It is also correct that imprisonment will undoubtedly cause considerable hardship both to the applicant and to his family.

In considering the question of manifest excess it is also relevant in my opinion that the sentencing judge found special circumstances and adjusted the non-parole period to approximately 61% of the head sentence.

Taking all these factors into account, it seems to me the sentence which on its face appears severe when compared with the maximum penalty, was not in the particular circumstances of the present case unreasonable or plainly unjust. This ground has not been made out.

Having regard to the way the case was argued it seems to me that the appropriate course is to grant the applicant an extension of time within which to seek leave to appeal, grant leave to appeal but dismiss the appeal. Accordingly, I would make the following orders:

JOHNSON J: I agree with the Chief Justice.

FAGAN J: I agree with the Chief Justice.