R v Jafari

1. [1]

   BASTEN JA: In August 2008 the respondent, Mehrdad Jafari, was a senior lawyer employed in the Australian Government Solicitor’s office in Sydney. He and a colleague were jointly responsible for managing a trust established by the Commonwealth, the beneficiary of which was a young man previously employed in the Australian Defence Force, who had been seriously injured in the course of training. At that time, the respondent owed money to a friend, Ms Morcos, who resided in Queensland. On 20 August 2008 the respondent prepared an authority for payment from the trust of an amount of $220,000 in favour of Ms Morcos. He signed the document himself and forged the signature of his colleague.

2. [2]

   The defalcation was not discovered until May 2014. A court attendance notice was issued on 13 January 2016 charging the respondent with one offence of theft, contrary to s 131.1(1) of the Criminal Code 1995 (Cth). The offence carried a maximum penalty of 10 years imprisonment.

3. [3]

   On 10 May 2016 the respondent entered a plea of guilty and was committed for sentence in the District Court. On 30 January 2017 Madgwick ADCJ convicted the respondent and sentenced him to a period of 2 years imprisonment to commence on that date and to be served by way of an intensive correction order.

4. [4]

   On 27 February 2017 the Director of Public Prosecutions filed a notice of appeal alleging that the sentence imposed was manifestly inadequate. On 15 May an amended notice of appeal was filed challenging both the head sentence (2 years imprisonment) and the manner by which it was to be served (the intensive correction order).

5. [5]

   For the reasons set out below, the appeal should be allowed. As the sentencing judge recognised, a significant custodial sentence was required; however, the judge erred in considering that no part of the sentence should be served in prison.

Circumstances of offending and later events

1. [6]

   It is necessary to set out in some detail the circumstances of the offending. The Director alleged that the reasoning of the sentencing judge focused upon the subjective circumstances of the offender and paid inadequate attention to the objective seriousness of the offence. That, it was submitted, may explain why undue leniency was accorded to the respondent. Further, following the hearing, but before delivering final judgment, the sentencing judge delivered an interim judgment, expressing the view that the offender “is … undoubtedly genuinely remorseful.” The present tense was no doubt deliberate; the objective circumstances cast some doubt on when that state may have been achieved.

2. [7]

   The trust fund was established by the Commonwealth on behalf of the Australian Defence Force (in the name of the Australian Government Solicitor) with the New South Wales Trustee and Guardian. On 15 August 2008, an amount of $3.5 million was deposited into the account. Five days later, on 20 August, the respondent forwarded a written authority directing the transfer of the sum of $220,000 by way of a cheque payable to Ms Morcos. As noted above, the direction was signed by the respondent and a signature for his colleague was also enscribed by the respondent without authority. The direction was duly processed and a cheque was despatched to the respondent who deposited it in Ms Morcos’ bank account.

3. [8]

   In a statement dated 20 October 2016, prepared for the sentencing hearing, Ms Morcos stated that she had known the respondent for over 30 years and described him as “a dear and trusted friend”.

4. [9]

   According to evidence given by the respondent at the sentencing hearing, the money being “repaid” was originally provided by Ms Morcos for the respondent to invest on her behalf. In fact it was immediately applied to his “gambling and gambling debts.” [1] One account given by the respondent was contained in a report tendered on his behalf, prepared by a psychiatrist, Dr Olav Nielssen, dated 2 September 2016:

5. [10]

   Over the next five years and eight months, the respondent took no steps to refund the money which he had stolen from the trust fund.

6. [11]

   When the criminal charges were laid, the Commissioner of the Australian Federal Police commenced civil proceedings in the Supreme Court pursuant to the Proceeds of Crime Act 2002 (Cth). The Commissioner sought a pecuniary penalty order against the respondent in order to recover the benefit the respondent obtained from the crime. He also sought and obtained a restraining order over a unit located in Pyrmont owned by the respondent, which the respondent said (in his evidence at his sentencing hearing) was unencumbered and worth $700,000. [2] Senior counsel appearing for the respondent at the sentencing hearing (and the judge) appeared to think that the proceedings might fail because the stolen money did not find its way into the property the subject of the restraining order. However, that is not a condition of a successful application for a pecuniary penalty order.

7. [12]

   The respondent gave evidence that while there was a significant mortgage over the home in which he and his family lived, there was also a significant amount of equity in the home (several times the amount of the stolen money). [3]

8. [13]

   As at the date of the sentencing, no amount had been repaid. However, on the appeal, a copy of a consent order dated 16 March 2017 in the Commissioner’s civil proceedings was tendered revealing that the civil proceedings had been finalised by the payment of $300,000, with no order as to costs. The significance of that payment in the sentencing proceedings will be discussed below.

9. [14]

   There was debate in the course of the sentencing hearing as to why no repayment had in fact been made at that stage. Senior counsel for the respondent explained that there had been negotiations over interest. The Commonwealth had sought $133,000, an amount which, as the respondent himself noted, was calculated on pre-judgment interest rates under the Uniform Civil Procedure Rules 2005 (NSW). The respondent had tendered, as part of his case on the sentencing hearing, correspondence between the solicitor for the Commissioner and his solicitor in relation to the negotiations. A letter dated 20 October 2016 referred to an offer by the Commissioner to settle the claim for a pecuniary penalty order upon payment of $353,082. The respondent had counter-offered $220,000, being the principal amount stolen some eight years before, with no allowance for interest. That counter-offer was rejected by letter dated 20 October 2016.

10. [15]

    On 1 November 2016 the respondent’s solicitor indicated that the respondent was in a position to repay the $220,000 and sought instructions as to the party to whom the cheque should be made out. On 4 November 2016, the solicitor for the Commissioner replied expressing willingness to accept a cheque for that amount as a part payment, but not, as apparently proposed by the respondent, in full and final settlement of the matter; the claim for interest was maintained.

11. [16]

    The sentencing hearing, which had commenced on 21 October 2016, was resumed on 9 November 2016. The following exchange took place on that day between senior counsel for the respondent and the Court: [4]

12. [17]

    In fact, the documentation referred to above did not involve refusal of a part payment, but rather acceptance so long as it was understood to be a part payment. Secondly, it was quite misleading to say that the relevant interest rate was 11%. For a little over four months of the eight year period, it was 11.25%, but thereafter it did not rise above 8.75%. In any event, the rate was, as also noted above, prescribed by the rules. Thirdly, the offer to pay $80,000 in interest was not documented in the material tendered at the hearing. The offer involved a payment of interest at an average rate of about 4.25% simple interest.

(a) course of sentencing proceedings

1. [18]

   To explain how the evidence in this matter fell out, it is convenient to refer at the outset to the steps taken in the District Court. The hearing commenced on 21 October 2016, on which occasion both the prosecutor and the respondent tendered bundles of documents. The respondent gave evidence.

2. [19]

   Amongst the material handed up by the prosecutor were a number of cases, the comprehensiveness of which was questioned by the sentencing judge. Submissions for the prosecutor extended over little more than a page of transcript, of which her submissions covered 16 lines, before they were finally cut off by the judge in mid-sentence. Some brief submissions were made by senior counsel for the respondent before lunch and again, but briefly, after lunch.

3. [20]

   The judge then indicated to the prosecutor that if there were to be an actual gaol sentence, he was of the view that quite a low period should actually be served and that, for a short period of imprisonment there would be very considerable disruption of his life and interruption to the on-going therapeutic regime which was then in place. There followed some debate as to the respondent’s status as a senior solicitor with AGS, ending with the prosecutor’s insistence that “a period of custody should be served.” [5] The judge then addressed counsel for the respondent, indicating that the sentence he had in mind would require that he “do six months in gaol actually”. [6] After further discussion as to the nature of the trust arrangement, the judge said that he was not satisfied “that the facts before me support the precise charge which has been laid.” [7] He adjourned the matter for a week to 28 October 2016.

4. [21]

   The matter came back before the Court on 9 November 2016 when further material was submitted in relation to the attempts to make a payment to the Commissioner and there were further submissions with respect to penalty. Nothing further was said about the issue which led to the adjournment.

5. [22]

   At the end of the hearing on that day, following a brief adjournment, the judge delivered interlocutory reasons identifying and addressing two conclusions, namely that a single defalcation of this kind could not result in a head sentence of more than two years, [8] and that the offender “just qualifies to have me consider permitting him to serve his sentence in the community under an Intensive Corrections Order.” [9] The respondent was then referred for assessment of his suitability for such an order and the matter was stood over to 30 January 2017.

6. [23]

   On 24 January 2017 a community corrections officer provided a report which stated that “[a]ccording to an actuarial risk/needs assessment tool …, the offender is assessed as a low risk of re-offending.” The respondent was assessed as suitable for an intensive correction order, noting that he required “continuing treatment for problem gambling”.

7. [24]

   There appears to have been no further hearing on 30 January, the judge proceeding directly to give his judgment on sentence.

(b) legal issues

1. [25]

   There are two legal issues which should be identified before turning to the reasoning of the sentencing judge.

2. [26]

   First, although sentencing by way of an intensive correction order (ICO) is provided for under State law, there was no dispute that the option was available in federal jurisdiction, in sentencing for a federal offence, pursuant to s 20AB(1AA)(a)(ix) of the Crimes Act 1914 (Cth).

3. [27]

   Provision for an ICO is made by s 7 of the Crimes (Sentencing Procedure) Act 1999 (NSW) (“Sentencing Procedure Act”) which relevantly provides:

4. [28]

   Three points may be made with respect to this sentencing option. First, although it provides for the sentence to be served “in the community” it is to be found in Pt 2, Div 2 of the Sentencing Procedure Act, under the heading “Custodial sentences”. Secondly, the option is only available where the court is satisfied that a term of imprisonment should be imposed, but one of not more than two years. This explains the observations made by the judge in the course of the sentencing proceedings, namely that he did not think a sentence in excess of two years was required.

5. [29]

   Thirdly, if the offender were subject to a sentence of imprisonment, not to be served in the community, it would be necessary to set a non-parole period, a step which s 7(2) prohibits with respect to an ICO. One consequence of that would be that a period of the sentence being served by way of parole would likely be subject to less stringent requirements than those applying pursuant to the ICO.

6. [30]

   As s 7(3) recognises, there are particular requirements for ICOs set out in Pt 5 of the Sentencing Procedure Act. The preconditions to an ICO are as follows:

7. [31]

   The “offender’s obligations” are imposed under s 82 of the Crimes (Administration of Sentences) Act 1999 (NSW). The mandatory obligations are set out in Pt 10 of the Crimes (Administration of Sentences) Regulation 2014 (NSW). The relevant conditions are as follows:

8. [32]

   There is no power to vary the mandatory conditions. The additional conditions which may be imposed are specified in cl 187; there are only six conditions and none is relevant for present purposes. However, s 81 of the Act permits the court to impose any additional condition which it “considers necessary or desirable for reducing the likelihood of the offender re-offending.” [10]

9. [33]

   Section 4(3) of the Sentencing Procedure Act states that Pt 3 of that Act applies to the imposition of all penalties imposed by the court, which will include the imposition of an ICO. Part 3 contains s 21A setting out the aggravating and mitigating factors to be taken into account by a court in determining the appropriate sentence for an offence. Further, s 72 of the Sentencing Procedure Act requires that the court ensure that “all reasonable steps are taken to explain to the offender” his or her obligations under the order and the consequences of failure to comply with the obligations.

10. [34]

    With respect to the latter obligation (of explanation) it should be noted that a similar obligation, though more extensively spelled out, arises under the Commonwealth Crimes Act, s 20AB(2). More importantly, s 16A of the Commonwealth Crimes Act provides for the matters which the court must take into account in determining a sentence. The prosecutor advised the sentencing judge (without demur from the respondent’s counsel) that he was required to comply with s 16A of the Commonwealth Crimes Act.

11. [35]

    Because there was much attention paid to the negotiations with respect to the pecuniary penalty proceeding, it is convenient to explain its relevance to the sentencing exercise. It turns, first, upon the operation of s 16A of the Crimes Act 1914 (Cth), which the parties agreed governed all aspects of the sentencing proceedings. The particular factors were those identified in s 16A(2)(e) and (f):

12. [36]

    Where reparation has not occurred prior to sentence the powers of the court include the following:

13. [37]

    As was pointed out by counsel for the Director in the course of the sentencing hearing, it is also necessary to have regard to the somewhat obscure provisions of s 320 of the Proceeds of Crime Act 2002 (Cth), which reads:

14. [38]

    The inter-relationship of these provisions, which is by no means without difficulty, was given careful consideration by McLure P in R v Host: [11]

15. [39]

    That reasoning should be accepted. At the time of sentencing no pecuniary penalty order had been made, nor any payment made. The judge said he would make payment of the amount offered by the respondent (namely $300,000) a term of the ICO. Whether that was appropriate or within power was not debated in this Court or below. However, now the matter is before this Court a pecuniary penalty order has actually been made, and a payment made to the Commissioner on behalf of the Commonwealth which was the victim of the offence. It follows that s 320(d) would not now permit a sentencing court to take the fact of the payment into account, but the fact that the order was made by consent may provide evidence of contrition under s 320(a). Arguably, it was not made entirely consensually, but as a condition of a court-imposed ICO. Further, to the extent the belated settlement of the proceedings was consensual, it was necessary in order to free the Pyrmont property of the restraining order. As explained further below, it provided little evidence of contrition.

16. [40]

    Contrary to an assumption apparently made by those advising the respondent, the restraining order of the Pyrmont property owned by him did not depend upon there being any connection between the property and the proceeds of the offence. Rather, the application for a pecuniary penalty order had been sought under Pt 2-4 of the Proceeds of Crime Act, which depended upon a relevant offence having been committed, pursuant to which the Commonwealth could obtain payment of an amount “based on … the benefits that a person has derived from such an offence”. [12]

(c) reasoning of sentencing judge

1. [41]

   It is necessary to deal with the reasons of the sentencing judge by reference to both the interlocutory judgment and the final judgment.

2. [42]

   The interlocutory judgment commenced with the proposition that a sentence of imprisonment was required and then noted an opinion that the offender “is… undoubtedly genuinely remorseful” and that the offence “arose out of a gambling addiction”. The judge also identified the offer to repay “the entire amount of the money he stole, together with what is clearly a reasonable amount of interest” as evidence of contrition. He referred to the stress that the offender was under at the time of the defalcation “by reason of the difficulties that he and his wife were having in their attempts to have her conceive a child.” He then referred to the lack of any prior record and the plea of guilty. The only factor directly relevant to the seriousness of the offending was the following statement:

3. [43]

   It was in the light of these findings that the judge concluded:

4. [44]

   In the final judgment of 30 January 2017, the background circumstances to the offending were set out in more detail. However, the assessment of the objective gravity of the offending was limited to a repeated reference to the “features of aggravation, namely his duties as an officer of the Court; the high position of trust he occupied and the large degree of trust reposed in him, and the potential for damage to the reputation of the Australian Government Solicitor’s office …”. [13]

5. [45]

   This passage resolved the ambiguity in the qualification to his earlier statement, which might have been read as treating a solicitor who stole from the Commonwealth as engaged in some less venal conduct than one who stole from a private client.

6. [46]

   There was a reiteration of the subjective circumstances favourable to the offender, to which further reference will be made below. The sentence concluded with the imposition of the sentence under appeal.

The Director’s case on appeal

1. [47]

   The Director’s submissions focused broadly on two complaints, the first being directed to the assessment of the objective seriousness of the offending and the second to the failure to deal with the sentencing standards to be derived from the cases to which the sentencing judge had been taken in submissions.

2. [48]

   As the respondent emphasised, the Director did not particularise any specific findings of fact which were challenged; rather, the sole challenge was (in two respects) to the inadequacy of the sentence. In those circumstances, the respondent said that the function of this Court was constrained, in accordance with the following statement derived from Carroll v The Queen. [14]

(a) objective seriousness of offending

1. [49]

   With two possible exceptions, to which reference will be made below, the Director’s submissions as to the seriousness of the offending fell squarely within the exercise of characterisation identified in Carroll. That was unsurprising, in circumstances where the primary facts were, by and large, not in dispute. Only the offender gave oral evidence, and that evidence did not in terms go to the nature of the offending.

2. [50]

   The first step in the exercise of characterisation was undoubtedly to have regard to the elements of the offence. It involved a small number of acts of the respondent over a period of some three days. These encompassed the administrative steps taken by the respondent to prepare a direction to be given to the Trustee and Guardian for payment of the amount in question to Ms Morcos. There was no doubt that this arrangement involved a serious breach of trust, the respondent being well aware that Ms Morcos had no entitlement to funds held in trust for the injured soldier.

3. [51]

   The second step in giving effect to this fraudulent purpose was itself an act of dishonesty, namely the forging of his colleague’s signature on the direction. The third step, which occurred some three days later when the direction had been complied with, was to obtain the cheque and deposit it in Ms Morcos’ personal bank account.

4. [52]

   Fourthly, there were qualitative elements to the offending. First, the amount of money involved was significant, being $220,000. Secondly, the theft was undertaken by the offender in his role as a solicitor. Thirdly, it involved a breach of duty to his employer, being the Commonwealth. Fourthly, it involved a breach of duty to his employer’s client, the Commonwealth. Fifthly, it involved a breach of fiduciary duty to the beneficiary of the fund, namely the permanently incapacitated member of the Defence Force.

5. [53]

   All of these were important factors in considering the seriousness of the offence. However, the Director sought to characterise the offending as “systematic and planned”, [15] which the respondent submitted was language designed to bring the conduct within the scope of s 16A(2)(c) of the Crimes Act, but in the absence of any finding that it was a planned or systematic course of conduct. If the Director’s submission were intended to go so far, that criticism would be well-founded. However, the Director did not describe the offence as “premeditated, systemic or well planned” as suggested by the respondent, nor did she describe the conduct as “sophisticated”. [16]

6. [54]

   There were two other aspects to the offending to which the trial judge made reference, although it is unclear how they affected his assessment of objective seriousness. First, there were the circumstances which gave rise to the offending. These involved his willingness to abuse the trust of his established friendship with Ms Morcos. As the sentencing judge noted in his final judgment: [17]

7. [55]

   The judge later referred to this as “the repeated dishonesty [to] which he confessed in relation to dealing with monies entrusted to him”. [18] Thus, although the theft was not part of a systematic course of conduct of the same kind, it resulted from a course of deceitful conduct with respect to Ms Morcos which might not have been discovered, absent the theft.

8. [56]

   Further, the objective seriousness of the offending was exacerbated by the respondent’s failure, for more than five years, to take any step to make good the fund. The failure to take such a step may, on one view, demonstrate an absence of contrition, if that term is intended to reflect empathy for the victim, rather than self-pity. On the other hand, in circumstances where, as the sentencing judge found, the respondent and his wife “had managed to put together a modestly comfortable portfolio of property”, [19] the failure to reinstate the fund involved continuing conduct which may properly be seen as aggravating the objective seriousness of the offending.

9. [57]

   It is true that the sentencing judge did not so characterise the facts, but that may be seen as an element in the complaint as to how he did characterise the objective seriousness of the offending. In this, as in other respects, the judge recounted the facts without expressly identifying the patent inferences. It will be necessary to have further regard to the appropriate inferences to be derived from the unchallenged facts in considering the finding of “remorse”.

(b) attention to authorities

1. [58]

   There was an issue between the parties as to the extent to which authorities dealing with multiple thefts of smaller amounts could be relied on as providing some standard in the present case.

2. [59]

   Although at points in the course of argument, the judge appeared to accept that the authorities demanded a period spent in custody for offending of this nature, reference to the authorities in the two judgments was quite limited. In the earlier judgment, he stated that he was “in particular influenced by the approach taken by two very senior judges of the Victorian Supreme Court, namely Nettle [JA] and Lasry J”. [20] In the second judgment, he referred to “what might be called comparable cases”, concluding: [21]

3. [60]

   The last negative statement as to a possible qualification has elements of ambivalence which are not easily resolved. The Director submitted that one inference to be drawn from it was that this was not an exceptional case. That may be so. A further inference might be that in the ordinary case, the sentence should involve a period of actual imprisonment. If both inferences are sound, then the judge failed to apply the principle which he himself derived from the cases.

4. [61]

   Having regard to the principal cases referred to by the parties, it is convenient to commence with the reasoning of the Victorian Court of Appeal in Director of Public Prosecutions (Cth) v Gregory. [22] That case involved a solicitor convicted of a conspiracy pursuant to which the Commonwealth was defrauded of tax on an amount of some $400,000 falsely alleged to be an expense and therefore deducted from the full payment of $700,000. The charge laid under s 135.4(5) of the Criminal Code carried a maximum penalty of 10 years imprisonment. The solicitor was sentenced to two years imprisonment and was ordered to be released after 12 months, upon entering into a recognisance in an amount of $5,000 to be of good behaviour for a further 12 months. In the exercise of its residual discretion, the Court did not intervene. However, it expressed in clear terms its view that the sentence was manifestly inadequate.

5. [62]

   Although there was only one offence involved, and although the amount of tax lost was comparable to the present theft, there were factors which arguably rendered it a more serious form of offending. The Court stated: [23]

6. [63]

   In these circumstances, the Court held that a head sentence of 4 to 6 years imprisonment would have been appropriate. [24] Further, in relation to the period before which the offender was eligible for release, the Court stated:

7. [64]

   The Director drew attention to the decision of the Victorian Court of Appeal in Director of Public Prosecutions (Cth) v Page, [29] a case involving a number of offences of dishonesty under both State and Commonwealth law. The federal offences involved the diversion of assets or services paid for by Australia Post to the offender for his personal benefit. There were nine offences, committed over a period of four years. Some involved relatively small amounts, such as wages of $573 and removal of two Sony projector systems. The offender paid a pecuniary penalty order in an amount of $105,000. Eames JA stated:

8. [65]

   Those submissions bore much resemblance to the errors identified in the present case. It may be noted that the offender was sentenced to periods of imprisonment ranging from 1 year to 3 years 6 months, although the total sentence was one of only 4 years imprisonment due to the fact that only one sentence of 6 months was accumulated on the longest sentence. The challenge was brought to the order for release on a recognisance after serving only 4 months. The Court held that the minimum custodial term was manifestly inadequate.

9. [66]

   In Regina v Boland [36] the Court considered an application by a solicitor who had pleaded guilty to a charge of fraudulent misappropriation under the NSW Crimes Act, which carried a maximum penalty of 7 years imprisonment. He was sentenced to 2 years, with a minimum term of 18 months. The amount involved was a little under $50,000. Stein JA stated:

10. [67]

    As it was a matter to which the trial judge referred, albeit somewhat obliquely, it is appropriate to note the judgment in The Queen v Slattery, [38] being a decision of Lasry J sitting in the Criminal Division of the Supreme Court of Victoria. The offender had entered pleas to various counts involving deficiencies and false accounting with respect to trust moneys over a period of some two years. He was sentenced to a period of 18 months imprisonment, to be wholly suspended for a period of two years. Although the actual losses were somewhat lower, the offences included depositing a cheque for some $290,000 into an account from which he was able to withdraw money for his own purposes and the theft of a cheque worth a little under $120,000.

11. [68]

    Lasry J accepted that the offender had suffered from impaired mental functioning which affected his ability to exercise appropriate judgment. [39] He made passing reference to “current sentencing practices”, without identifying what they might be. The degree of leniency involved in wholly suspending the 2 year sentence does not appear to conform to the principles established by intermediate appellate courts. The case therefore provides no assistance in the present matter.

12. [69]

    The other matter referred to by the sentencing judge, again somewhat obliquely, was The Queen v Bernstein, [40] a decision of Nettle JA sitting in the Criminal Division. Mr Bernstein was a solicitor who was charged with six counts of obtaining property by deception, theft and having a deficiency in his trust account. Some of the offences involved minor amounts, but count 3 had some similarity to the present case, as it involved a promise to invest a sum of $100,000 on behalf of a client. The money was used by the solicitor for his own purposes. Count 6 involved an amount of $75,000 withdrawn from a trust account in order to repay a personal debt. The judge summarised the circumstances of the offending in the following passage: [41]

13. [70]

    The maximum penalties for the offence of theft was 10 years imprisonment and for a deficiency in the trust account, 15 years imprisonment. [42] The judge took account of the offender’s age (67 years) which he said meant that he was “likely to suffer more from the effects of prison than the majority of the prison population, and particularly so because of your mental condition.” [43]

14. [71]

    Nettle JA then considered a number of cases in which sentences had been suspended, including Slattery which, despite the offending resulting from “a major depressive episode with traumatic stress symptoms the consequence of one of the prisoner’s clients being murdered by her spouse”, was described by Nettle JA as “in any event … a remarkably merciful sentence.” [44] He continued: [45]

15. [72]

    The judge nevertheless accepted that there were “exceptional circumstances” and concluded: [47]

16. [73]

    If the sentencing judge found some support in this judgment for the course he took, he was misguided. The circumstances of the present case provided no equivalent basis for the degree of leniency accorded in Bernstein. Nor did the clear statements of principle support the course taken in the present case.

17. [74]

    Multiplication of the instances in which theft by solicitors has been dealt with in different courts and in different circumstances will provide little assistance in establishing the principles to be applied. A statistical analysis may suggest that the severity of the language used by judges in such cases is rarely matched by the sentences imposed. However, it is the principles which must guide the sentencing judge in each individual case.

18. [75]

    Subject to the subjective elements to be identified, a sentence which involves no element of actual imprisonment is likely to be manifestly inadequate.

(c) subjective circumstances

1. [76]

   The finding that the offender “is … undoubtedly genuinely remorseful” was critical to the leniency accorded him. The sentencing judge added that, “because of his disgrace and the loss of his beloved profession, he has suffered a great deal.” In his final judgment he referred to the plea which he regarded “as an indication of contrition.” [48] In a further passage he stated: [49]

2. [77]

   Later in the judgment he referred to “his early plea and his substantial degree of remorse”. [50]

3. [78]

   In referring to repayment of “such a large amount of money” the judge referred to what might have been considered an aggravating factor, namely the amount stolen, although the reference was intended to operate by way of mitigation. The suggestion that repayment of such an amount was “very unusual” might be doubted, but it is of no great consequence. What is more important is that in finding “remorse” the judge made no attempt to identify the time at which that remorse arose. He did, however, record the fact that when the respondent was questioned by an AGS solicitor on 8 May 2014 he denied recalling the payment to Ms Morcos and denied recognising her name. The judge noted that on 30 May 2014 he repeated his denials. These were lies. Accordingly, consistently with the agreed facts and the findings of the sentencing judge, the respondent took no step to acknowledge his wrongdoing, or make repayment, for five and a half years and, when it was being uncovered, he lied. These circumstances are not indicative of remorse at that stage.

4. [79]

   Precisely when he first expressed remorse is unclear. The full extent of the investigation is not revealed. However, the agreed facts included a summary of a statement obtained by the Australian Federal Police from Ms Morcos on 5 February 2015, on which day a search warrant was executed at the respondent’s home. He was offered an interview with police at the conclusion of the search, but declined to participate. In short, there is no evidence of any expression of remorse prior to the commencement of the criminal proceedings in February 2016.

5. [80]

   The first evidence of remorse relied upon by the sentencing judge was the plea of guilty. That date was not recorded by the judge, but it appears to have been in or about May 2016. In the face of an apparently incontrovertible prosecution case, one would not have expected much weight to be given to the plea by itself as an indicator of remorse.

6. [81]

   The second objective circumstance relied upon by the sentencing judge was not the repayment, which had not occurred at the date of sentencing, but his understanding that an agreement had been reached pursuant to which the proceeds of crime proceedings would be settled by the repayment of the amount stolen together with an amount on account of interest. Clearly the delay in repayment did not demonstrate immediate remorse, and the negotiations over interest tended to demonstrate a greater concern about the respondent’s own financial circumstances than those of the beneficiary of the trust. The sentencing judge implicitly addressed that issue in the following terms: [51]

7. [82]

   The date at which he first offered to pay money to the Commonwealth is not recorded. The evidence before the sentencing judge suggested that the relevant date was 17 October 2016, referred to in the letter from the solicitor for the Commissioner dated 20 October 2016. If that is correct, the “offer” was made less than a week before the sentencing hearing.

8. [83]

   Finally, there were statements made by the respondent. The earliest of these is found in the report of Dr Nielssen in which various statements were recorded as having been made by the respondent in a consultation (described by the psychiatrist as an “interview”) on 29 August 2016. Amongst the statements made, as recorded by the psychiatrist, was reference to a period when he was working at ASIC and received the call from the solicitor with AGS “asking if I knew the person to whom the money had been paid … I was frozen with fear … I knew they would find out … I wanted to resign from ASIC to avoid causing embarrassment”. [52]

9. [84]

   Under the heading “Psychiatric history”, Dr Nielssen recorded:

10. [85]

    In the course of giving evidence at the sentencing hearing, the following exchange took place with his counsel: [53]

11. [86]

    The rest of the respondent’s evidence-in-chief was largely devoted to why the amount had not been repaid so far, and some brief evidence as to his attempts to deal with this gambling habit.

12. [87]

    The cross-examination of the respondent did not flow smoothly; almost half of the transcript involves questioning or interjections by the judge. Relevantly, the prosecutor obtained the following concessions: [54]

13. [88]

    He was also questioned about statements made to Dr Nielssen: [55]

14. [89]

    The respondent was then questioned about his response to the authorities: [56]

15. [90]

    The judge stated in the interlocutory judgment: [57]

16. [91]

    In broad terms, there is support for this approach in the authorities. In considering pathological gambling, the Victorian Court of Appeal in R v Grossi [58] identified such a particular mental condition as potentially available to reduce moral culpability and mitigate the propriety of general deterrence. Redlich JA stated:

17. [92]

    This reasoning has recently been adopted by this Court in Johnston v R, [64] where reference was also made to similar statements concerning addiction to drugs, in R v Henry. [65] The Court accepted that the reasoning in Henry applied equally “to cases of fraud to feed a gambling addition”, [66] but continued: [67]

18. [93]

    It is nevertheless clear from the authorities relied upon in Johnston, that moral culpability, as assessed for the purposes of sentencing an offender, may be reduced, in circumstances which fall short of demonstrating a lack of capacity to exercise judgment or demonstration that the act was not voluntary. A better understanding as to the susceptibility of an individual to addictive behaviour and a better understanding of the changes to personality and indeed the physical symptoms which can accompany addictive behaviour may satisfy a court in a particular case that the offence is not one which provides an appropriate vehicle for general deterrence or retribution, to the full extent that such an offence might otherwise call for such a response. In any event, the circumstances set out above indicate that the sentencing judge was correct not to rely on the fact that the offence arose out of a gambling addiction as a basis for leniency.

(d) conclusions as to manifest inadequacy

1. [94]

   As counsel for the Director submitted, the circumstances set out above support the conclusion that the sentencing judge accorded inadequate weight to the objective seriousness of the offending. Further, the subjective case for the offender warranted limited leniency. Although the trial judge referred to his initial denials to officers investigating the loss of the money, he failed to make any temporal finding as to the date at which the respondent first demonstrated remorse. He also gave no attention in the reasons to the applicant’s concession, which he himself had extracted in the course of the cross-examination of the respondent, namely that he could at any stage have sold the investment property he held in Pyrmont in order to reinstate the fund. Subject to consideration of the residual discretion, the appeal should be upheld and the sentence imposed set aside.

Resentencing

1. [95]

   It is then necessary to consider what should be an appropriate sentence in the circumstances of the case. That exercise requires attention to both of the matters identified on behalf of the Director, namely the head sentence of 2 years imprisonment and the direction that it be served wholly by way of an ICO. There are a number of factors to be taken into account.

(a) Objective seriousness of offence

1. [96]

   Senior counsel for the respondent emphasised that this was a case involving but one offence, which occurred over a relatively short period of about three days. It was, therefore, not in the same class of offending as that revealed in some cases involving multiple offences over months and even years.

2. [97]

   The force of that submission is reduced by the combination of two considerations. The first is that the total amount taken was sizeable, namely $220,000. Some cases involving multiple offences resulted in the theft of a smaller amount, although of course there are cases involving larger amounts. Secondly, the fact was that, as the respondent acknowledged in his evidence, and to Dr Nielssen, he spent several anxious years at least half expecting discovery, but did nothing to resolve the issue himself. That situation may be described as an on-going breach of trust.

3. [98]

   That the respondent committed the breach of trust whilst working as a senior lawyer in the AGS was an important consideration in the assessment of objective seriousness. To the extent that the trial judge sought to diminish the significance of that position by comparing it with a solicitor for private clients, the point of distinction is without substance. [68] Public trust is as important as private trust, as the judge appeared to recognise in his final judgment, although only by reference to the fact that the AGS had to compete with private legal firms for government business. [69]

4. [99]

   The sentencing judge also acknowledged a submission on behalf of the Director that “nothing but a sentence of actual imprisonment would suffice to fulfil the requirements of general and personal deterrence and authoritative denunciation of the offender’s wrongdoing.” That submission should have been accepted and should be accepted by this Court. The sentencing judge treated the destruction of the respondent’s reputation among his friends and associates as a form of “extra-curial punishment.” [70] However, there were broader interests to be acknowledged. First, his initial denials when the investigation commenced led to two of his colleagues being the subject of investigation.

5. [100]

   Secondly, there was the fact, not referred to in the course of either judgment below, that there was an individual beneficiary of the trust who had suffered loss through the false statement that services had been provided on his behalf, and paid for from the trust, in the amount stolen by the respondent.

6. [101]

   Thirdly, there was the broader consequence for the legal profession resulting from disclosure that one of its members had stolen a significant sum of money from a trust which he was expected to administer. As has been noted on many occasions, offences of this kind are often hard to detect, a factor which places great weight on the public interest in an honest and accountable legal profession.

(b) Subjective considerations

1. [102]

   Accepting that the respondent is now remorseful for his misconduct, that remorse took a long time coming. It appears to have arisen only in the face of inevitable conviction for a criminal offence and in the face of a likely prison sentence. Such remorse provides a basis for quite limited leniency.

2. [103]

   That basis is diminished further when other considerations are taken into account. First and foremost, there was no evidence before the Court indicating any remorse for the ultimate victim of the theft, namely the injured soldier who was the beneficiary of the trust. Had the offending not been discovered, it was he who would have lost the benefit of the money. That point appeared to have been lost in the expressions of shame and remorse with respect to the effects of his conduct on family, colleagues and friends.

3. [104]

   Secondly, the history of the proposed restitutionary payment demonstrates that contrition was limited. The fact that the respondent had access to property which could, at any time, have been sold to allow for the funds to be replaced, demonstrated an ongoing unwillingness to recognise the true extent of his offending. The remarks by the sentencing judge as to “excessive zeal” and the attempt to apply “extortionate” interest rates by the Commissioner of Police should not be accepted. To his credit, it was the respondent who volunteered in the course of his examination-in-chief that the calculation had been made “on the basis of the interest rates set out in the civil procedure legislation.” [71] The judge apparently thought it inappropriate to apply such rates because the party seeking to recover the penalty was the Commonwealth and because, in his view, the rate exceeded that which would be available on investment by a private superannuation fund.

4. [105]

   Putting those considerations to one side, the objective fact is that the interest payment made to the Commissioner equated to approximately 4.25% per annum in simple interest for the period the money was outstanding. If the trust fund were to be made good by that amount, it is doubtful that the beneficiary has yet received full compensation. If the amount of the fund were increased further, the deficit would be borne by the Commonwealth. The significant point for present purposes is that there appears to have been no offer of restitution otherwise than in answer to the proceedings under the Proceeds of Crime Act and the initial offer, days before the sentencing hearing, was simply a repayment of the amount stolen eight years earlier. That the respondent, on the eve of his sentencing, still refused to pay any interest, and then continued to negotiate some lower figure for interest than that which, on one view, the Commissioner was entitled to obtain, is a circumstance limiting the leniency which should be accorded on the basis of contrition.

5. [106]

   The maximum penalty for the offence under s 131.1 of the Criminal Code was 10 years imprisonment. While the maximum penalty is a matter to be taken into account in identifying an appropriate sentence, it has limited relevance in the present case. The particular offence was committed by a person with no prior criminal convictions, in an amount which, although a sizeable figure in its own terms, did not itself demonstrate the need for a penalty in the high range.

6. [107]

   Neither the respondent’s own evidence, nor the report of Dr Nielssen, suggest that personal deterrence should not be a significant factor in the present assessment. As already noted, general deterrence is also a factor of substantial importance. The breach of trust, by a solicitor, in the course of his employment, indicates the seriousness of the offence. For reasons explained above, the gambling addiction, as disclosed in the conduct of the respondent and the assessment of Dr Nielssen, did not warrant any greater degree of leniency than otherwise would be accorded to a first offender.

7. [108]

   In my view, the appropriate penalty is a sentence of imprisonment of 3 years. Because the respondent has, albeit belatedly, demonstrated a willingness to confront his gambling problem, there are reasonable prospects that he will not offend again. Those prospects are likely to be enhanced by a significant period of conditional release in the community. Because such a sentence exceeds 2 years, he would not be eligible for an intensive correction order.

8. [109]

   Nevertheless, to allow for an extended period of conditional release, it is appropriate to direct that the respondent be released by way of a recognizance release order after 18 months.

9. [110]

   The fact that the respondent has satisfactorily completed a period of community service, and in fact undertaken additional voluntary work for the same organisation, would mean that approximately 5 months of the non-parole period have been served in a custodial setting. Nevertheless, the sentence should be back-dated to commence on the date on which he was originally sentenced, namely 30 January 2017.

Residual discretion

1. [111]

   There remains, as always, on an appeal against sentence by the prosecutor, a live issue as to whether this Court should, having found manifest inadequacy, nevertheless not intervene. It is well understood that the purpose of a prosecution appeal under s 5D of the Criminal Appeal Act 1912 (NSW) is “to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons.” [72] As further explained in Green v The Queen: [73]

2. [112]

   While accepting that the Director bore the burden of establishing the propriety of intervention, beyond demonstrating manifest inadequacy of the sentence, the written submissions, somewhat limply, referred back to the circumstances of the case. In reply, the respondent’s written submissions spent some time setting out the principles derived from the cases, and less time on the reasons why the Court should not intervene. In substance, the respondent relied upon the propositions that: (a) it was not an affront to the administration of justice to let the inadequate sentence stand; (b) the respondent’s strong subjective circumstances warranted non-intervention; (c) there was a question of “delay”, and (d) it was appropriate not to intervene where a non-custodial sentence was imposed at first instance.

3. [113]

   One may put to one side the question of delay; there has been no delay in bringing the appeal forward, nor in its determination. While it is true that the offence was committed many years ago, that is not a factor which works in favour of the respondent.

4. [114]

   The foregoing reasoning as to manifest inadequacy does demonstrate, as the Director submitted, why it is an affront to the administration of the criminal law that a person having been convicted of a serious offence of theft, whilst a solicitor and in a position of trust, should not serve a custodial sentence. As also explained above, on careful analysis the respondent’s subjective circumstances did not warrant a degree of leniency implicit in the sentencing below.

5. [115]

   On the other hand, there are circumstances in which merely to state that a sentence was inadequate, together with the reasons for that conclusion, do not fulfil the function of governance and guidance. If the purpose is to insist that the courts treat seriously criminal breaches of trust by members of the legal profession, the effect of any such statement of principle would be diminished by the failure to correct the manifest error. Similarly, for the Court to repeat statements to the effect that solicitors should generally receive a custodial sentence for such breaches of trust will not restore faith in the manner in which the courts deal with members of the profession if the non-custodial sentence remains on foot.

6. [116]

   It is undoubtedly true, as stated in Green, that “[t]he guidance afforded to sentencing judges by allowing the appeal should not come at too high a cost in terms of justice to the individual”. [74] Unfortunately, “justice to the individual” in the present case demands that a custodial sentence be served. Not to intervene would tend to diminish unacceptably the effect of the proposed guidance.

Orders

1. [117]

   Consistently with the findings set out above, the sentence should be increased to 3 years. However, the importance of ensuring that the respondent addresses his compulsive gambling justifies an unusually long period of conditional release.

2. [118]

   I would make a recognizance release order to take effect at the end of the period of 18 months. As the sentence should be back-dated to commence on 30 January 2017, the respondent will be conditionally released on 29 July 2018. It should be a condition of the recognizance release order that the respondent comply with directions to be given by the officer supervising his recognizance as to appropriate counselling and psychiatric treatment.

3. [119]

   The Court should make the following orders:

   1. (1)

      Allow the appeal against sentence by the Director of Public Prosecutions (Cth).

   2. (2)

      Set aside the sentence imposed by the District Court on 30 January 2017.

   3. (3)

      Resentence the respondent as follows:

4. [120]

   JOHNSON J: I agree with Basten JA.

5. [121]

   DAVIES J: I agree with Basten JA.