O’Leary v R (Cth)

HOEBEN CJ at CL:

On 4 June 2020, Hock DCJ imposed a term of imprisonment of 2 years and 3 months with the applicant to be released after serving 16 months on entering into a recognizance in the sum of $500 to be of good behaviour for a period of 11 months. The applicant’s release date is 3 October 2021.

The maximum penalty in respect of the offence is a term of imprisonment of 5 years and/or a fine of 300 penalty units ($54,000).

In order to better understand the offending and the basis for the appeal, it is necessary to describe the legislative scheme of which s 400.3(3) is a part.

Section 400.3 provides three dealing offences where the value of money or other property exceeds $1,000,000. The elements of “dealing” and the property being “proceeds of crime” are common to all offences. The cascading seriousness turns on the fault element of knowledge for a Tier 1 offence (25 year maximum penalty and/or 1500 penalty units), recklessness for a Tier 2 offence (12 year maximum penalty and/or 720 penalty units) and negligence for a Tier 3 offence (5 year maximum penalty and/or 300 penalty units).

The negligently dealing offence does not contain an element of dishonesty. The offender does not know, nor is he aware, there is a substantial risk that the monies are the proceeds of crime. The offender is liable because his conduct falls greatly short of the standard of care that a reasonable person would exercise in the circumstances and involves such a high risk that the monies were proceeds of crime, as to merit criminal punishment.

The offence to which the applicant pleaded guilty was such a Tier 3 offence. It was in the following terms:

Facts were agreed between the parties for the purpose of sentence. In summary, between about 28 July 2016 and 16 May 2017, the applicant dealt with monies derived from a tax fraud conspiracy (the Plutus tax fraud) by receiving and disposing of at least $1,143,505 through bank accounts in the name of Jemz Consulting Pty Ltd (Jemz), a company which he incorporated and controlled for the purpose of the transactions.

The applicant met PA while in custody for unrelated fraud offences. After their release, PA introduced the applicant to Adam Cranston (Cranston), a principal in the Plutus tax fraud. It concerned $107 million in unpaid taxes. This was transferred to companies and individuals associated with the conspirators. Cranston had enquired if PA knew anyone interested in making between 5 – 10 per cent on transactions and who could be trusted. Cranston told PA that he wanted to move money from Plutus Payroll Australia Pty Ltd via Uneek Consulting Pty Ltd (Uneek), a second-tier company involved in the fraud, to purchase a property. PA asked the applicant if he wanted to work for Cranston. The applicant agreed.

On 19 July 2016, the applicant, who had been an accountant prior to his incarceration, completed a company registration application for Jemz. On or about 27 July 2016, the applicant met with Cranston and PA. PA conveyed Cranston’s instructions to open a bank account. The applicant’s partner, EH, opened three accounts. Although the applicant and EH were co-signatories, the accounts were in fact controlled by the applicant. The applicant reduced the access of EH to see what was in the accounts after she inquired about the balance of one. The applicant also set up a website for Jemz.

Between 29 July 2016 and 9 December 2016, by way of 14 emails, the applicant issued 24 invoices to Uneek ranging in value from $38,500 to $159,500. Cranston gave instructions regarding the necessary invoice details via PA.

The applicant received into a Jemz bank account deposits in amounts corresponding to 16 of the invoices, totalling $1,143,505. He performed none of the work described in the invoices (which had descriptions such as financial consulting or accounting strategies). He later said that he considered it possible the invoices represented advance payments for future work. He did not enquire as to why he was being asked to issue invoices for such significant amounts when he had not performed the work.

During the charge period, the applicant also made disbursements from the Jemz accounts on instructions. The disbursements included payments for the purchase of properties by Cranston. The applicant also withdrew $83,881.51 for his own benefit.

On or about 8 February 2017, PA told the applicant to change the addressee on all invoices previously submitted. The invoices were to be addressed to Peter Larcombe (Larcombe). Larcombe was deceased and previously conspired with the Plutus tax conspirators. When the applicant inquired why this change was needed, he was told Larcombe was to be the “fall guy”. The applicant adjusted the invoices which he kept in his files.

The applicant conceded that he did not exercise the standard of care a reasonable person would have in the circumstances and agreed that he was negligent as to the fact that the money he dealt with was the proceeds of crime. It was common ground that the applicant had no knowledge or role in the offending from which the moneys were derived.

The sentencing judge found that the following factors were relevant to the objective gravity of the offence:

Her Honour found that the longer the offending went on the more he should have begun to question what was happening. Her Honour remarked that “[i]t is apparent from his profession and employment history, he is hardly naive when it comes to accounting or business matters” (AB 57.3).

Her Honour found that the offending was “just below the mid-level of objective gravity for an offence under this section” (AB 57.5). The fact he committed the offence while on parole (and only four months after his release) was an aggravating factor.

Her Honour found that with multiple prior fraud convictions since 2009, the applicant was not entitled to leniency and specific deterrence assumed particular importance (AB 58). Her Honour noted that in 2015 he had been sentenced to a term of imprisonment for 22 charges of dishonestly obtaining a financial advantage by deception committed between 2013 and 2015. The loss to his employer was over $100,000. His non-parole period expired on 22 March 2016 and the total term expired on 22 January 2017.

In relation to his subjective case, the sentencing judge took into account a diagnosis of depression, hardship to his partner EH (albeit it did not rise to the level of exceptional to justify a substantial reduction) and COVID restrictions on personal visits in prison. Her Honour found that the applicant had reasonable prospects of rehabilitation if he followed the psychiatrist’s advice, although this was difficult to assess given his criminal history. Her Honour allowed a 25 per cent discount for his early plea of guilty.

Her Honour found that parity with PA did not apply due to their different charges and level of involvement in the offending.

The applicant was aged about 54 at the time of the offending. He had worked in accountancy roles in various businesses for about 30 years.

In 2010, aged about 48, he was sentenced to a 100 hour community work order for obtaining a financial advantage from a Commonwealth entity. This concerned Centrelink benefits.

Between 2009 and 2011, he committed offences of “steal property as clerk/servant”. Between about 2013 and 2014, he committed numerous offences related to dishonestly obtaining benefits. These all concerned transfers of amounts of money from his employer’s accounts to his own. There was more than one employer involved. The total amount ranged between $177,000 to $199,000.

For the 2013 and 2014 offences, the applicant was sentenced to 2 years imprisonment, commencing 23 January 2015 and expiring 22 January 2017 with a 14 month non-parole period expiring 22 March 2016.

The applicant was married for about 25 years and had four children aged 15 to 28. There was significant stress and conflict in the marriage in the years preceding its ending in 2014. The applicant suffered untreated depression which contributed to increasing difficulties with alcohol and gambling. This culminated in an attempted suicide in September 2014. He was diagnosed soon after with a major depressive disorder.

Gambling and alcohol use did not factor in this offence. The applicant was estranged from his wife and children upon his release to parole in March 2016. He was living in a boarding house and unable to secure employment. He saw his engagement with PA as an opportunity to improve his lot in life. He also believed Cranston was a successful and reputable businessman.

In 2020, Dr Nielssen diagnosed him as suffering a depressive illness and possible bipolar mood disorder (manic depressive illness). This condition, and his past prison experiences meant future imprisonment would likely be more onerous for him.

At the time of sentencing, the applicant and EH remained together. This was a secure and prosocial relationship. She was dependent on his care owing to severe back pain difficulties which affected her mobility. He was attending sessions with a psychologist (Ms Larose) and was medicated with a high dosage of prescribed anti-depressant (Effexor).

The applicant relied upon two Grounds of Appeal.

When considering the offending conduct, it is necessary to identify the steps that gave rise to it.

Here the applicant’s “dealing” was his:

Accordingly, the applicant’s negligence was his omission to inquire into the origin of the monies received and disbursed by him. A reasonable person would have inquired in the circumstances namely:

The applicant noted that before the sentencing judge the Crown had submitted that the applicant’s conduct amounted to a “planned and premeditated venture sustained over a period of almost ten months”. The applicant did not dispute that proposition but submitted that such conduct was not relevant to the criminal offence to which he pleaded guilty. This was because a person could not “plan to be negligent”. It followed that if that conduct (i.e. the planning) was irrelevant to the offending it could not be used to increase its objective seriousness.

That submission was not accepted by the sentencing judge who found that “the degree of planning” was relevant to objective gravity and remarked “[o]verall there was clearly planning in which the offender used his knowledge of accounting procedures and business affairs” (AB 56.9).

The applicant noted that the sentencing judge also factored into her assessment of the “degree of negligence” his knowledge and experience in accounting. The applicant submitted that this was a separate and distinct factor from the planning factor and should not have been taken into account with it.

The applicant submitted that acts of planning are relevant to the objective gravity of fraud offences, which involve systemic dishonesty. Offences of this kind are accompanied by planning, sophistication and repetition. Such offences are committed deliberately in furtherance of pre-planned dishonesty. The applicant submitted that such offending was quite different to that of which the applicant was convicted.

The applicant submitted that planning in the sense of deliberate fraud is not material to the objective gravity of negligent offending. The applicant submitted that the very essential element of negligent offending is that the offender does not know and is unaware of the substantial risk of dishonesty occurring. The applicant submitted that in such circumstances acts of planning are not done with a dishonest mindset or to facilitate a dishonest outcome.

The applicant submitted that the sentencing judge erred in her assessment of the objective gravity of the offending as regards the “degree of planning”. The applicant submitted that the gravamen of negligent offending was his omission to inquire in the circumstances, about the origin of the monies and the purpose for which they were to be used. The degree of planning involved in setting up and running the company was irrelevant to that offending.

The applicant submitted that actions such as the issuance of false invoices were relevant insofar as they gave rise to a circumstance that should have prompted the applicant to make inquiries about the monies’ origins. The dishonesty in the issuing of false invoices was otherwise irrelevant to the objective gravity of the offending which was based on negligence, i.e. carelessness. The applicant submitted that the same considerations applied to the other dishonesty matters to which reference was made by her Honour.

The applicant submitted that those matters of dishonesty impermissibly informed her Honour’s assessment of the objective gravity of the offending. The applicant submitted that this was consistent with her Honour’s express remarks concerning planning and the use of his accounting expertise. The applicant submitted that as a result, her Honour chose a starting point of three years for the sentence imposed on him, which the applicant submitted was excessive, even allowing for his antecedents and parole status.

The respondent submitted that the sentencing judge’s sole remark in relation to planning was that the “degree of planning” was relevant in that “[o]verall there was clearly planning in which the offender used his knowledge of accounting procedures and business affairs” (AB 56.9). The respondent submitted that there was nothing erroneous about this finding in the context of a money laundering offence involving “white collar” acts preparatory to the dealings that constituted the offence.

The respondent submitted that in context her Honour’s reference to “planning” was clearly a reference to the background facts regarding the applicant’s conduct leading up to the transactions constituting the offence. The respondent submitted that in the context of an assessment of objective seriousness “planning” was a shorthand reference to the acts involved in setting up the company, bank accounts, website and repeated issuing of false invoices. The respondent submitted that her Honour’s statements that the applicant “used his knowledge of accounting procedures and business affairs” made that clear. The respondent submitted that those acts took place before and in furtherance of, the acts constituting the offence, being the receipt and distribution of the funds. The respondent submitted that the applicant’s personal involvement in those tasks was deserving of separate consideration in the assessment of objective seriousness.

The respondent submitted that the reference to “planning” also denoted that the offence was not spontaneous, impulsive or committed “on the spur of the moment” being factors which distinguish the serious incidences of offending.

The respondent submitted that for an offence based on negligence, there was no reason why planning in the sense of the preparatory acts done with a negligent “state of mind” should not also inform the Court’s assessment of objective seriousness. The respondent submitted that such acts were relevant to what the offender actually did and the ability to detect the offence.

The respondent submitted that her Honour’s remarks contain no reference to dishonesty. The respondent submitted that her Honour was careful to sentence the applicant on the basis of negligence stating that he “is not to be sentenced for knowingly or recklessly dealing with the proceeds of crime” (AB 57.1). The respondent submitted that her Honour’s observation that “the longer the offending went on, the more he should have begun to question” made that clear. The respondent submitted that none of her Honour’s remarks suggest that she treated the applicant as having had knowledge that the funds were the proceeds of crime. The respondent submitted that the references to planning did not imply a finding of dishonesty or any higher state of mind than negligence.

The respondent submitted that there may be types of offences involving criminal negligence where the word “planning” is not apt (e.g. manslaughter by omission). The respondent submitted that while the applicant sought to characterise his negligence as “his omission to inquire into the origin of the monies received and disbursed by him” his negligence consisted of both acts and omissions. The respondent submitted that in the context of money laundering involving positive acts done in furtherance of the dealings, “planning” was neither irrelevant nor an erroneous description.

The respondent submitted by way of summary that it was open to her Honour to take into account, not only the fact that the applicant displayed a high degree of negligence, having regard to his knowledge and experience as an accountant, but also to find that he took multiple steps preparatory to his receipt and disposal of the funds. That indicated a high level of objective criminality.

I have concluded that the applicant has made out this ground of appeal. As submitted by the applicant, his negligence was his omission to inquire into the origin of the monies received and dispersed by him. While on the facts disclosed, he may have been liable for more serious offending he was charged with an offence contrary to s 400.3(3) of the Criminal Code and pleaded guilty to it. By having regard, as she did, to issues of planning, her Honour took into account an irrelevant consideration when assessing the objective seriousness of the applicant’s offending.

The error on the part of her Honour is apparent when one has regard to two of the factors identified by her Honour as contributing to the objective seriousness of the offending.

On that issue, her Honour said:

As can be seen from the first of the matters set out above, her Honour took into account deliberate actions by way of planning. This implicitly assumes a deliberate intention, i.e. planning with a view to reaching a particular end state.

In contrast, the final factor taken into account by her Honour says nothing about intent, but rather focuses on the knowledge and experience of the applicant as an accountant so as to increase his culpability in circumstances where his carelessness led to him unknowingly receiving and dispersing monies which were the proceeds of crime.

In the first of her Honour’s factors there is a deliberate intent attributed to the applicant whereas in the second, he was unaware of any offending, albeit in circumstances where he should have been. As was submitted by the applicant, a person does not “plan to be negligent”.

It follows that I am satisfied that Ground 1 has been made out.

That being the case, there is no requirement to consider Ground 2, since it will be necessary to re-sentence the applicant.

Apart from the issue identified in Ground 1, which directly impacted on the objective seriousness of the offending, there was little difference in the assessment of the applicant’s objective and subjective case by the parties. The applicant accepted that he was not entitled to leniency, he was on parole at the time of the offending and that the offence comprised a number of transfers over a period of time, rather than a single instance.

It was accepted by the applicant that his omission was particularly glaring, given his knowledge of and experience in accounting. It was accepted by the applicant that the seriousness of his omission (negligence) increased over time.

There were, however, some positive features in the applicant’s favour. The value of the proceeds of crime was at the bottom of the threshold. Although the charged period was in the order of nine months, the substantive offending occurred over a five month period. Her Honour accepted as genuine the applicant’s expressions of contrition and remorse. The applicant’s imprisonment would be more onerous owing to his mental health. Finally, his imprisonment had caused hardship for his partner albeit not rising to the level of “exceptional circumstances”.

Having regard to all of those matters, and in particular the issue of objective seriousness I differ slightly from her Honour’s assessment and assess the seriousness of the applicant’s offending as “below mid level” as distinct from “just below mid level”. There was, of course, no issue that the applicant was entitled to a 25 per cent discount for his plea of guilty.

Taking those matters into account, I would sentence the applicant to imprisonment for 2 years, to date from 4 June 2020 with the applicant to be released after serving 13 months imprisonment, namely on 3 July 2021 on entering a self recognizance in the sum of $500 to be of good behaviour for a period of 10 months expiring on 3 May 2022.

Accordingly, the orders which I propose are:

HAMILL J: I agree with Hoeben CJ at CL.

WILSON J: I agree with Hoeben CJ at CL.