District Court New South Wales Medium Neutral Citation: R v Egge [2020] NSWDC 277 Hearing dates: Trial dates: 6 May 2019 – 17 October 2019 - Sentence hearing: 20 December 2019 Date of orders: 05 June 2020 Decision date: 05 June 2020 Jurisdiction: Criminal Before: Sutherland SC DCJ Decision: Convicted. Sentenced to a term of imprisonment of 19 months to be served by way of Intensive Correction Order with 120 hours of community service (light duties). The sum of $25,800.75 be paid by Phillip Mark Egge to the Commonwealth by way of reparation. Catchwords: SENTENCING — Penalties — Intensive correction orders – CRIME — Fraud — Dishonestly obtain financial advantage by deception – Fraud against the revenue – Fact-finding on sentence – Consistency with jury verdicts – inconsistency with jury verdicts – Tax incentive scheme – Research and Development Legislation Cited: Commonwealth Criminal Code Act 1995 Crimes Act 1900 Crimes (Sentencing Procedure) Act 1999 Cases Cited: Cheung v The Queen [2001] HCA 67; (2001) 209 CLR 1 EF v R [2015] NSWCCA 36 Karout v R [2019] NSWCCA 253 Pratten v R [2014] NSWCCA 117 R v De Simoni [1981] HCA 31; (1981) 147 CLR 383 R v Fangaloka [2019] NSWCCA 173 R v McHaffie (unreported 8 April 2011, Queensland District Court) R v Michael (unreported 1 March 2013) R v Neylon (unreported 20 June, 2008 Victorian County Court). R v Olbrich [1999] HCA 54; 199 CLR 270 R v O'Neill [1979] 2 NSWLR 582 R v Van Tung Luu (BC8400397; unreported 7 December 1984, NSWCCA R v Winchester (1992) 58 A Crim R 345 R v Zamagias [2002] NSWCCA 17 Robertson v R [2017] NSWCCA 205 Category: Sentence Parties: Regina (Crown) Phillip Mark Egge (Offender) Representation: Counsel: Mr. B. Eurell (Counsel for the offender) Ms. K. Marinos (Counsel for the Crown) Solicitors: Ms. M. Hull (instructing solicitor for the offender) Ms. A. Macdonald (instructing solicitor for the Crown) File Number(s): 2015/00044784186 Judgment 1. On 6 May 2019, the offender, Phillip Mark Egge, entered pleas of not guilty to an indictment which contained 31 counts. The four principal counts in the indictment, broadly described, alleged defrauding of the Australian Taxation Office (ATO) by the filing of tax returns which claimed rebates for two related companies connected with, or controlled by the offender. The respective tax returns were lodged in two consecutive years, namely 2013 and 2014. Each of the counts alleged an offence contrary to section 134.2 of the Commonwealth Criminal Code Act 1995 of dishonestly obtaining a financial advantage from the Commonwealth. Such an offence carries a maximum penalty of 10 years. 2. A further 27 counts in the indictment related to an alleged intention to defraud the Commonwealth in the following year by reliance upon forged documents which had already been created. Each such document was the subject of a separate substantive count with respect to its creation as a false document contrary to section 253(b)(ii) of the Crimes Act 1900 (NSW). 3. On 17 October 2019, after deliberating for approximately 3 days, the jury returned a single verdict of guilty with respect to count 3 on the indictment. All other counts resulted in verdicts of not guilty. 4. Count 3 was as follows: That Phillip Mark Egge, between about 1 July 2013 and about 8 August 2014 at Newcastle and elsewhere in the State of New South Wales did by deception, being that he falsely represented to the Commissioner of Taxation that Aviation and Logistics Security Solutions Pty Ltd ("ALSS") was entitled to a Research and Development tax offset in its Income Tax Return for the financial year commencing on 1 July 2013 and ending 10 on 30 June 2014 when ALSS had no such entitlement, dishonestly obtain a financial advantage, namely, a tax offset for ALSS from another person, namely, the Commonwealth. 1. The task of sentencing with respect to the single count for which the accused has been found guilty, and determining facts consistent with the jury's verdicts, is by no means an easy one. 2. The trial, which the Court and the jury panel were told had an outer estimate of some 12 weeks duration, ultimately occupied approximately 109 sitting days, in excess of 7000 pages of transcript, 227 exhibits (various of which individually comprised an arch lever binder of documents) and 36 witnesses who were called to give oral evidence as well as recordings of interviews with others who were not called. The closing address by the Crown occupied the better part of six days. The defence closing address proceeded on three days and the summing-up occupied four days. 3. The verdicts of not guilty with respect to 30 out of the 31 counts in the Indictment require careful and detailed consideration in determining the facts upon which sentence is to be passed. 4. I remind myself of the succinct statement of principle by Callinan J in Cheung v The Queen [2001] HCA 67; (2001) 209 CLR 1 at [169]: The principal constraint upon the power and duty of a sentencing judge to find the "sentencing facts" is that the view of the facts taken by the judge cannot be inconsistent with the verdict of the jury. This may mean that the view of the facts which the judge is obliged to take on sentence might be different from the view which the judge would have taken if unconstrained by the verdict. The fact that a judge may not agree with a jury's verdict and may be required to sentence on a basis different from his or her strongly held view of the case simply follows from the division of functions in a trial by jury. 1. I should make it clear that I read his Honour's reference to a jury verdict to apply equally to multiple verdicts. 2. The Crown and the offender have urged what I would describe as polar opposite submissions with respect to the sentencing task. The Crown, in its written and oral submissions, seeks to establish that there were technical reasons arising from the directions given to the jury which would explain the findings of not guilty on 30 out of the 31 counts. 3. The Crown's position is that the overall criminality which the Court would find, metaphorically resting upon the shoulders of the offender, is identical to the expansive way in which the Crown opened and conducted its case. That is, that all the offences were committed pursuant to, in effect, an ongoing conspiracy or agreement to claim Research and Development expenditure as a tax refund when no such Research and Development was taking place at all. The Crown contends that the overall moral culpability of the offender should be found to reflect this expansive case, notwithstanding the verdicts of not guilty to the substantive offences which were charged. 4. In my view, such an approach would deprive the accused of the full benefit of the acquittals to which he is entitled as a consequence of the verdicts of not guilty. It would contravene the principles referred to by the High Court in R v De Simoni [1981] HCA 31; (1981) 147 CLR 383. 5. The defence submissions, on the other hand, focused narrowly on the single count in respect of which a finding of guilt has been returned by the jury. As initially articulated, that defence submission was that findings of fact on a narrow basis should be made consistent with the most favourable determination as to the quantum of the defrauding and that the verdicts of not guilty ought not be endeavoured to be understood or explained. In short, the defence said that the question of any possible inconsistency of verdicts is a matter for the Court of Criminal Appeal and not for this sentencing Court. 6. As a matter of basic principle, findings of fact made against an offender by a sentencing judge must be arrived at beyond reasonable doubt. Of course factors in mitigation, the onus of which lies on offender, must be established on the balance of probabilities: see R v Olbrich [1999] HCA 54; 199 CLR 270. There is no general requirement that a sentencing judge must sentence an offender upon the basis of a view of the facts, consistent with the verdict, which is most favourable to the offender: see Cheung v The Queen at [170]; R v O'Neill [1979] 2 NSWLR 582. 7. I am of the view that any findings of fact which I reach must necessarily not only be consistent with the verdict of the jury with respect to the guilty finding, but must also, and particularly because of the overlap of the various counts and the way in which the Crown framed its case, be findings of fact which are not inconsistent with the verdicts of not guilty. 8. That is, as I have already observed, no easy task. 9. In order to come to an appropriate understanding of the jury's verdicts as an essential step to determining relevant facts for the purpose of sentencing, it is necessary to give consideration to an overview of the case. Background 1. The allegations in the Indictment which was presented arose as a collateral outcome of an earlier investigation by NSW Police into a fire at premises occupied by the offender and his businesses. 2. The fire had occurred at commercial premises at Newcastle in July 2014. The commercial premises were occupied by a number of different businesses and the fire which had occurred was established to have started in the premises of a different business than those conducted by the offender. It would appear, however, that the course of the investigation into the suspected possible arson led to police ascertaining that various of the offender's businesses appeared to be struggling financially. The police investigation resulted, in due course, in the obtaining of telephone interception warrants and the monitoring of numerous phone calls to and from Mr Egge. 3. In the course of monitoring those various phone calls there were discussions recorded between the parties which appeared to be about false invoices. NSW Police ultimately determined to ask questions of the bookkeeper, described in various aspects of the trial as the financial controller, who was employed by Mr Egge's businesses. 4. In February 2015, police attended upon the bookkeeper or financial controller, Mr Robert Currie, at his home. Currie told the police of the detail of the creation of a large number of invoices which, according to Currie's confession, were total forgeries. According to Currie's account, the forgeries had been physically created by himself at the direction of the offender, Egge, and had been relied upon to found the basis of claims for tax refunds from the Commonwealth Government. These tax offsets or cash refunds related to a Commonwealth Government Tax Incentive Scheme which was designed to promote Research and Development in Australia. Prior to Currie's confession, the investigating police knew nothing about this tax scheme. 5. Currie provided extensive evidence to the authorities with regard to Mr Egge's business activities and the claims which had been made on the Australian Taxation Office. The false invoices created by Currie had been used to provide support and justification for the amounts of money claimed to have been expended in Research and Development and included in the amounts claimed in the tax returns. I will make reference to the two specific companies that submitted such claims in due course. Ultimately, cash refunds in an amount of approximately $560,000 were paid over a two-year period by the Australian Taxation Office to the companies which were, effectively, controlled by the offender. Additional invoices had also been created by Currie in preparation for claims by the companies in future tax returns. 6. Ultimately, some 70 separate invoices were identified as having been created by Currie at the alleged direction of his employer, Mr Egge. I do not for present purposes distinguish between formal employment of Mr Currie by a corporate entity and, for practical purposes, Mr Egge was his employer. 7. Currie was charged with 70 counts of forging the documents contrary to section 253(b)(ii) of the NSW Crimes Act. On 19 January 2017 he pleaded guilty in the Local Court and was sentenced to an aggregate term of imprisonment of 19 months. This sentence was to be served by way of an Intensive Correction Order. He was also ordered to pay a fine of $77 for each forged invoice, amounting to a total of $5390. He received the benefit of a letter of comfort with respect to his level of cooperation and he agreed to give evidence against Phillip Egge. 8. Robert Currie was fundamental to the Crown case presented against Phillip Egge. Following Currie's disclosures, police interviewed the overwhelming majority of past employees of Mr Egge and his various companies as well as individual persons identified as contractors who, according to the forged invoices, were alleged to have carried out work which was able to be claimed as having been done for the purposes of Research and Development. 9. The Crown case was that the entire process of registering to claim Research and Development expenditure by the companies, and the claimed expenditure itself, was an artifice and a complete and utter sham. According to the Crown's overarching case, no Research and Development at all was being conducted and the claims for refunds made against the ATO were a complete fabrication. The sham alleged by the Commonwealth extended to the creation of false and misleading advertising material and the extensive creation of additional documents which, superficially, gave the appearance of the actual existence of an underlying Research and Development program. 10. The Crown case was that Currie followed directions given to him by his employer, the accused, and created the false invoices and also fraudulent entries in the books of account in order to facilitate what was alleged to be a substantial and ongoing fraud. However, the Crown eschewed any reliance upon principles of joint criminal enterprise or a conspiracy between Currie and Egge. An inchoate offence may well have been understood by the jury. The Crown elected to proceed with substantive offences. The election as to the manner of prosecuting the alleged ongoing criminal fraud, in my view created substantial conceptual difficulties for the jury. It is unnecessary in the present circumstances to go into the detail of them. 11. However, in order to properly comprehend the way in which the Crown conducted the expansive case which it presented, it is necessary to have some understanding of the nature of the claims which were made on the Australian Taxation Office. Research and Development Tax incentive 1. The Commonwealth Government provided tax incentives for industry to undertake Research and Development into the creation of new or improved material, products and devices in Australia. The object of the relevant provisions was to encourage industry to conduct Research and Development where the knowledge gained was likely to benefit the wider Australian economy. 2. The way in which that objective was to be achieved was by providing a tax incentive for industries to conduct experimental activities for the purpose of generating "new" knowledge or information with respect to the identified materials, products, or devices. 3. The Scheme provided, relevantly, a tax offset of 45% with respect to companies that earned less than 20 million dollars, or an attractive tax deduction of 150% for companies that earned in excess of that amount. 4. The nature of the tax offset was such that if a company was engaged in spending money on Research and Development, but the company was not at the time earning sufficient profit to be obliged to pay tax at all, the scheme would actually refund 45% of the monetary expenditure which had been spent or incurred in carrying out the Research and Development. 5. The Scheme of the tax incentive required companies to register for Research and Development activities and to receive approval for the type of Research and Development identified, before being entitled to make a claim. 6. I am not of the view that it is necessary for present purposes to go into the detail of precisely what Research and Development activities were able to be claimed. There was a distinction between core and supporting activities but the essence of the Crown case, as presented throughout the trial, was that none of what was claimed by the offender's companies had actually been occurring. The Crown case, in short, was that the relevant companies carried out no Research and Development whatsoever and the applications for registration were themselves based on fraudulent information. 7. I should note, that even when it became apparent that the defence case was that some of the activities which were carried out did qualify as Research and Development, no expert was called to express an opinion to the contrary in the Crown case. 8. For the purposes of the trial of Mr Egge, it became relevant to understand that there were different types of expenditure or costs incurred which were able to be claimed as a tax offset or, relevantly in the case of the offender's companies which were not paying tax, which led to a cash refund. 9. Part of the problem with the presentation of the case by the prosecution was that an entitlement to the rebate or refund could arise with different categories of expenditure or liability for expenditure. The simplistic overview that none of the expenditure whatsoever had occurred led to an examination in detail of the books of account of the various companies going back many years and overly complicated the presentation of the case to the jury. 10. The three relevant categories of expenditure able to be claimed were firstly payments made, or pending, to independent contractors. An independent contractor simply needed to have rendered an invoice for work done in relation to the Research and Development. The amount invoiced could then be claimed from the ATO irrespective of whether payment had actually been made or not. The company would be entitled to claim the amount invoiced by the independent contractor in that financial year, and the amount invoiced would then be required to be actually paid within the following financial year. In effect, the company would receive from the ATO 45% of what was owed to a contractor, up to 12 months in advance of actually expending the money due on an invoice. 11. The second category of expenditure which could be claimed related to payments to "associates". A relationship of this kind would arise if work was done by a separate legal entity or its employees on behalf of the particular company which was claiming the Research and Development payments. Payments made to associates needed to be actually paid in the financial year in which they were claimed. 12. In the context of the trial of Mr Egge there were a number of inter-related companies where, by way of example, wages or other outgoings such as rent and electricity might be incurred by one company but subsequently attributed, whether by book-entry or inter-company loan, to one of the companies said to be conducting Research and Development. A payment made pursuant to such a circumstance would fall within this category of claimable expenditure to an associate. 13. The third category leading to a monetary refund arose from the depreciation of assets used in the course of the Research and Development activities. As with the depreciation of assets used in deriving assessable income, depreciation of items used in research and development was calculated by reference to the capital value of the item so used. 14. It was the Crown case that all three methods of expenditure or liability for expenditure were relied upon by the companies controlled by the offender in the tax returns which were lodged. 15. In the course of the lengthy trial, the Crown vacillated between an "all or nothing" case (see for example TT 6461) and the case which eventually went to the jury in accordance with the law as expressed by the Court of Criminal Appeal in Pratten v R [2014] NSWCCA 117 which permitted a finding of guilt provided that the jury was unanimous as to which part or parts of the categories of expenditure claimed was false. The offender's background and some corporate entities 1. The Crown led an expansive case which established that the offender had a background in insurance investigations and security work. Through a number of corporate entities it was established that in addition to actual investigations, primarily on behalf of insurance companies, the offender had historically been involved in the utilisation of, relevantly, two electronic detection devices. 2. The first such device was called a SmartScan which had originally been developed by a man named Graham Perry in Queensland. The device had been developed in the early 1990's and had been purchased and apparently utilised in the course of investigation-type work carried out by a company called Webster's Investigations. The original Director of that company was one of the offender's sons. The offender would appear to have predominantly carried on his investigation and security business through that company at that time. 3. The SmartScan was utilised in the course of the investigation and security business. Contained in a small metal case, the SmartScan device was used to conduct a "sweep" of an office or other premises, purportedly to be able to detect whether or not any recording or listening devices had been placed in the premises. It was, in effect, an anti-bugging device to enable people to check that their conversations were not being recorded or listened to. 4. One of the relevant companies associated with the offender, Austrace Investigations Australia Group Pty Limited, or "AIAG" lodged tax returns in 2013 and 2014 in which it claimed, pursuant to the Research and Development tax incentive scheme, that it had expended or otherwise incurred costs for work done in Research and Development on the SmartScan device. 5. The Crown case as conducted with respect to the SmartScan was that any work being done by the device's inventor, Mr Graham Perry, to improve it so that it could be utilised for detection of digital devices rather than, as originally devised, analogue devices only, was not "new technology" and that, in any event, Mr Perry held the intellectual property to the device and any expenditure done on it was not claimable in tax returns by AIAG. 6. The two tax returns filed by AIAG and the representations contained in them with respect to claimed expenditure for Research and Development relating to the SmartScan formed the basis for count 2 and count 4 in the Indictment. 7. I have little doubt that a number of factors relating to the SmartScan contributed to the reasonable doubt or doubts which resulted in the jury's verdicts of not guilty. The fact that Mr Perry, who was deceased by the time of the trial, had actually rendered invoices for work done provided a point of distinction with the allegedly forged invoices. There was also a live question as to whether the work which Perry was doing to improve the device for use in detecting digital transmissions might, in fact, have provided a legitimate basis for a claim for Research and Development. Defence contentions in this respect were not met with any expert evidence called on behalf of the Crown. 8. I do not, in light of the factual findings which I need to make with respect to the guilty verdict in count 3 which related to a separate corporate entity, Aviation and Logistics Security Solutions Pty Limited or "ALSS", find it necessary to speculate in more detail as to the jury's reasoning with respect to the not guilty verdicts in counts 2 and 4. 9. Before turning specifically to the second item of electronic equipment, I wish to make some brief observations with regard to the verdicts of not guilty on counts 5-27. These offences related to the creation of forged invoices by Robert Currie which, on the Crown case, were intended to be used in future claims by each of the companies, presumably in their 2015 tax returns. The defence has submitted that these verdicts are only consistent with a complete rejection of Currie's evidence by the jury and that such a finding should lead to a rejection of any invoices included in count 3 which might be found to rely on an acceptance of Mr Currie. 10. I do not accept that submission. Although not argued before the jury, a logical explanation for those verdicts of not guilty, that is those that related to the so-called "future invoices", was that the jury was not satisfied that those documents were "made" by the offender. The jury may well have given consideration to the possibility that Currie prepared those invoices, in accordance with what had happened in previous years, in anticipation of what he expected to be asked to do. 11. The jury were clearly directed, in accordance with customary principles, that they could accept parts of the evidence of a witness whilst rejecting other parts. The verdicts of not guilty on counts 5-27 do not give rise to considerations of inconsistency with the guilty verdict on count 3. 12. The second item of technical electronic equipment that was allegedly the subject of Research and Development by a company associated with the offender, was a piece of equipment called the Gen 2. This device worked by means of what is described as a passive detection system for millimetre waves which are claimed to be aspects of the thermal emissions from a person's body. The machine was designed to detect such emissions when a person walked in front of the scanning machine. 13. Unlike active detection systems such as x-ray machines and the like, which are designed to detect if a person is carrying a concealed weapon or a gun or similar by the transmission of a form of radioactive waves through a person's body, a passive detection system is said to measure waves which are being emitted from a person's body. The principle behind such a machine is that were a person carrying, for example a pistol, inside their jacket pocket, the metal from the pistol would block the emission of the waves from the body and hence the shape of the object concealed beneath their clothing would show up on a viewing screen. 14. The evidence in the trial revealed that a number of such machines had been purchased by companies associated with the offender on a number of separate occasions some many years earlier than the deductions claimed for Research and Development of them. Mr Egge and companies associated with him had obtained the exclusive distribution rights for the Gen 2 machines in the Asia-Pacific region and it was the Crown case that the offender was actively involved, together with various associates of his, in attempts to sell the machines to a number of different airport authorities and companies, broadly speaking, in the Asia-Pacific region. Such attempts would appear, on the evidence, to have largely been unsuccessful. 15. A separate corporate entity controlled by the offender, Aviation and Logistics Security Solutions Pty Limited (ALSS), in due course claimed to be carrying out Research and Development with respect to effecting improvements in the efficiency and efficacy of the Gen 2 machines. 16. The Crown case was that any suggested Research and Development with respect to the Gen 2 machines was a complete sham and that none of the claimed work on Research and Development was legitimate Research and Development. 17. Again, no expert evidence was called with respect to either the operation of these machines nor as to whether any of the claimed work allegedly done on them would, or would not, have provided a legitimate basis for a claim for Research and Development. 18. The Crown case appeared to rest confidently on the proposition that the claims of Research and Development being carried out on the Gen 2 machines was so preposterous that any reliance on expert opinion evidence, whether from a scientific expert or from somebody responsible for approving registration for the tax incentive scheme, was simply unnecessary. 19. Count 1 and Count 3 in the indictment related to the tax returns submitted by ALSS and the representations contained therein with respect to claimed expenditure relating to Research and Development of the Gen 2 machines. In order to be satisfied of the relevant facts upon which to pass sentence with respect to the guilty verdict on count 3, and in order to not reach any finding of fact which is inconsistent with the verdict of not guilty with respect to Count 1, it is necessary to look carefully at what might, at first blush, appear to be inconsistency between those verdicts. Categories of the claim against the Commonwealth and the differing verdicts 1. As I indicated earlier in these Remarks, the Crown's position vacillated between a contention that the entire amount claimed in a given tax return was false, an "all or nothing" approach, and a contention that the Crown was entitled to a guilty verdict if identifiable parts of the amounts claimed were established to be false. 2. The Crown case was ultimately permitted to go to the jury, over strenuous objection, in accordance with the decision of the NSW Court of Criminal Appeal in Pratten. 3. As I have indicated above (at [38]-[41]) there were three identified categories of expenditure which were entitled to be claimed pursuant to the Research and Development tax offset scheme. With respect to the ALSS returns, counts 1 and 3 each claimed amounts paid or incurred for each of the three categories. Different considerations arose with respect to each of them. 4. The original written directions given to the jury (MFI #FD) sought to identify different categories within the amount claimed from the ATO in the respective tax returns. The initial written directions left the payments to associated companies as an homogenous amount, notwithstanding that the accounting records contained multiple subdivisions of different kinds of incurred expenditure. For example, electricity, rent, wages and a variety of other items of actual expenditure. In this respect the accountant's calculation sheet at page 42 in Exhibit 99 should be referred to. 5. The verdict of not guilty with respect to count 1 implicitly carries a finding by the jury that they entertained a reasonable doubt about the Crown case with respect to payments to associates. There was no basis upon which the different types of expenditure claimed was sought to be differentiated by the Crown, nor was any left open to the jury. 6. The only conclusion available is that with respect to this category, that is payments to associates, which was separately identified for the jury's consideration, they entertained a reasonable doubt about the Crown case. 7. The same category was, of course, included in the second ALSS tax return which formed the basis for count 3. The benefit of the doubt which the jury must be found to have had with respect this category in count 1 compels, in my view, a similar finding by me with respect to the same category of alleged payments in count 3. Accordingly, and consistent with the jury's verdict on count 1, I must have a reasonable doubt about that category in count 3. 8. Similarly, the claim for depreciation of two Gen 2 machines identified in count 1, were not the subject of other than an homogenous consideration in the Crown's presentation of its case. However, whether viewed as individual purchases considered separately or as a unified category, the verdict of not guilty on count 1 must have included a reasonable doubt about the Crown's submissions regarding the acquisition by ALSS of those machines. 9. Consistent with such a conclusion, further depreciation of those same two machines formed a component part of the category relating to depreciation in count 3. However, the depreciation category in count 3 also included the acquisition of a third machine. There was, on the evidence and the way in which the case was presented to the jury, no basis upon which the jury could have subdivided the amount claimed under this heading ($54,912). Consistent with the verdict of not guilty on count 1, I am constrained by that verdict to similarly hold a reasonable doubt regarding the same category in count 3. 10. Count 1, in the initial written directions (MFI #FD), separated the invoices from contractors into two sub-categories. 11. The first category (invoices G3–G14 from Baggage Handling Solutions (David Furnival)) were invoices which were actually sent. They were, accordingly, to be distinguished from the forged documents created by Robert Currie. This factor is likely to have provided the jury with a reasonable doubt about that identified sub-category. 12. The remaining three invoices relied upon in count 1, G15–G17, which purportedly came from Stephen Catsicas, Thai Tech (Tawan Donploypetch) and Jitender Sachdeva were initially identified as a grouped category. 13. On 15 October 2019, in the course of the jury's deliberation, a note seeking clarification regarding the different categories came from the jury. That note (MFI #FE) was relevantly as follows: Your Honour, Just for clarification: Count 1 – 4 are divided into categories, then in sub-categories. Isn't each jurors will make a decision based on the 5 elements, evidence presented in the court (circumstantial & direct evidence), witnesses testimony, (give considerations to) Crown & defence's arguments, and questionnaires – separate categories (to ask ourselves) set out in the document you've given us yesterday? We cannot 'cherry pick' invoice/s that is/are only false and make a decision for the rest of them (count 1 – 4). For instance, count 1 – category: Payment to external or independent contractors G15 Inv., unanimously agreed that there's a doubt & BHS Invs were true and as a result we (the jurors) unanimously agreed that the mentioned category is a "No". Hence, the verdict is "not guilty" due to the fact we were in doubt after careful consideration of the 5 elements, and vice versa of the mentioned example above. […] Can you explain it again please, as we are not in synch. If we are in a choir, we are not in harmony. Everyone is just singing. Everyone has different understanding. […] Note: Scenario mentioned above is just an example. We haven't reached our verdict in relation to any counts at this stage. 1. The above reproduction of the note is verbatim and includes the precise wording and spelling of the note. 2. A supplementary document was provided to the jury in response to this note. Those supplementary directions (MFI #FF) gave the jury a further refinement, based upon Pratten, again over strenuous objection, which would entitle the jury to differentiate between invoices. Those supplementary directions included a direction that: You do not need to be satisfied that each and every identified and disputed amount which was claimed was false. You must, however, be unanimous in your findings as to which of the particular amount or amounts of monies were false. 1. The jury were also told: In the earlier directions to you I identified what appeared to be the relevant categories in respect of which different evidence has been relied upon in the trial. In counts 1 and 4, the obvious categories or sub-categories were between the invoices which were acknowledged to be real and actually sent by David Furnival on the one hand and Graham Perry on the other. These would obviously each need to be considered as a separate category from those amounts where the Crown relies upon a consideration of whether the relevant invoices were forgeries. It may be that in your consideration of the evidence you find differences between invoices within what I have previously identified as separate categories. 1. The jury were specifically told: Each identified category is not an "all or nothing" consideration. If you find reasons based on the evidence to distinguish between the amounts making up the total amount claimed, you are entitled to make a finding with respect to the falsity of the representation provided that you are unanimous with respect to the amount or amounts which you so find. Fact finding 1. In light of that additional direction, the jury's verdict of not guilty on count 1 must implicitly be understood to have involved a rejection of the Crown case with respect to each of the three separate independent contractors whose invoices formed part of the claimed amount. Those three contractors were, as I have earlier observed, Stephen Catsicas, Thai Tech (Tawan Donploypetch) and Jitender Sachdiva. 2. Based on this understanding, which must necessarily flow from the verdict in count 1, I am again obliged to entertain a reasonable doubt with respect to the invoices from those three persons or entities which are also included in the independent contractors in count 3. 3. The effect of this somewhat artificial fact-finding exercise conforms with the observations of the Chief Justice of the High Court, Sir Harry Gibbs, in De Simoni in which, at [15] Gibbs CJ, dealing with the position where a circumstance of aggravation was not alleged in an indictment said: It is not only in cases in which the offence has been accompanied by circumstances of aggravation that a trial judge may be required, in sentencing, to take an artificially restricted view of the facts. This will be so also in cases where the jury's verdict is inconsistent with the view of the facts that the judge himself has formed, for the judge cannot act on a view of the facts which conflicts with the jury's verdict. 1. The consequence of this exercise is that I am satisfied beyond reasonable doubt that the invoices relied upon in count 3 from independent contractors which did not form part of the claim in count 1, were in fact false and that they were so to the knowledge of the offender. Those invoices, from Rebecca Quijano (H8 – H9), amounted to a total claim of $43,560. A further invoice from Stephen Catsicas (H12) in an amount of $13,775 is to be distinguished from the "questionable" invoice G15 which specifically related to count 1. I am satisfied beyond reasonable doubt that the amount claimed with respect to the invoice H12 was similarly false to the knowledge of the offender. 2. The total of these amounts is $57,335. 45% of that amount, reflecting the actual payment from the ATO is an amount of $25,800.75. 3. In the course of submissions on sentence, counsel for the offender, Mr Eurell, conceded that the invoices from Mr Sachdeva which comprised part of the amounts claimed in count 3 might justifiably be found to be fraudulent, based on the simple proposition that the invoices that went to the Australian Taxation Office claimed for work said to have been done in Australia, which is one of the prerequisites under the Scheme. The unassailable fact was that Sachdeva had never been in Australia based on immigration records and quite independent of his testimony to similar effect. Counsel for the offender said (T14 6/12/19): There might though, be, based on the immigration records concerning Mr Sachdeva, a basis to conclude that those parts of the invoices that relate to count 3 were fraudulent… 1. The difficulty with that concession is that one of the invoices in count 1, which resulted in a not guilty verdict, was also an invoice from Sachdeva alleging work carried out in Australia. I am driven to the conclusion that to be satisfied beyond reasonable doubt of the Sachdeva invoices in count 3 being fraudulent to the knowledge of the offender, however attractive such a conclusion might be, would be inconsistent with the acquittal in count 1. 2. There was a substantial attack on the credit of Sachdeva in the defence case. The jury would have been entitled to return a verdict of guilty on count 1, even if the Sachdeva invoice was the only one that they were satisfied of beyond reasonable doubt. They did not return such a verdict. Accordingly, and notwithstanding the concession in the course of submissions, I cannot be satisfied beyond reasonable doubt with respect to the Sachdeva invoices in count 3. 3. For abundant clarity, I am constrained to entertain a reasonable doubt with respect to amounts other than those I have specifically identified, which were claimed as part of count 3, in order to not come to any conclusion which would be inconsistent with the verdict on count 1. Objective seriousness 1. The objective seriousness of offences against the revenue falls to be determined by reference to the sophistication of any plan, the level of planning, the degree of difficulty in discovering the fraudulent activity, and the quantum of money fraudulently obtained. 2. Quite apart from the detailed planning over an extended period of time which went into the fraudulent claim which underpinned count 3, I am constrained by reference to the substantially reduced amount that I can be satisfied was obtained to find that the objective seriousness of the only offence the subject of a finding of guilt was below an identifiable mid-range. Subjective features 1. Phillip Egge is 69 years of age. The case went to the jury on the basis that he is a person of good character. Positive evidence was led of the lack of any criminal convictions. 2. An issue arose in the course of the sentencing hearing with respect to the circumstances of him having ceased to be a Corrective Services Officer many decades ago. The Crown sought to impugn his good character in that respect. For the reasons which would be clear on a perusal of the transcript of the sentence hearing, I reach no adverse conclusion, and certainly not one beyond reasonable doubt, in that regard. 3. Evidence which was not permitted to go to the jury with respect to his having been a bankrupt and having been disqualified from holding a position as a company Director for periods of years, similarly have no determinative role in an assessment of his criminality in the present matter. 4. It is clear that Mr Egge has been enterprising in a variety of business ventures. 5. He is a man of somewhat diminished health. A certificate from his General Practitioner, Dr Marley, dated 31 October 2019 certifies that he: has multiple medical problems including morbid obesity, generalised anxiety disorder, osteoarthritis multiple joints, hypertension and hyperlipidaemia, heart arrhythmias and recent knee injury leading to a torn meniscus. (sic) 1. I do note, however, that he has been certified as fit for light duties in the event of him being ordered to perform community service. 2. He has evinced no remorse with respect to the matter for which he has been found guilty. 3. In the Sentencing Assessment Report, and through evidence called from his son, he has sought to blame his predicament upon a failure to properly supervise the activities of his bookkeeper, Mr Robert Currie. Egge did not give evidence himself either in the trial or in the sentence proceedings. 4. A substantial number of documents touching upon formal qualifications which he has achieved were tendered. Those educational certificates and achievements extend from a TAFE Certificate for Office Supervision in 1975; a Certificate for a course of instruction in Principles and Techniques of Teaching for Part-Time Technical Teachers in 1980; up to Certificates as a Master of Science in Security, Risk Management and Corporate Crime from a College in Ireland in 2000 and a Doctorate of Education from the same remote learning institution in 2002. A substantial number of certificates of attainment with respect to his extended career in security and private inquiry matters were also tendered. Copies of the various licences held by him in this regard were tendered. 5. A third category of documents included a Certificate of Appreciation awarded to "Senator Phillip Mark Egge" as the principal of Webster's Training Academy. This was tendered together with a Citation of Honour awarding the World Medal of Freedom for Significant Accomplishments in the Field of Education and Training (medal no. 48/50) from the Governing Board of Directors of the American Biographical Institute dated January 2006. 6. A further bundle of material was tendered touching upon the offender's character and background relating to his period of employment within the Department of Corrective Services. Whilst illustrating the perception of others during the time of his employment of approximately 12 years in the 1970's and early 1980's, these are of little importance in the present proceedings. 7. A reference has also been tendered from a Minister of the Uniting Church who has cared for his spiritual wellbeing in relation to the charges. 8. I will afford all of this material such weight as it deserves in the context of the jury's verdicts. Consideration 1. The Crown has provided the court with a number of broadly comparable cases with respect to defrauding the Commonwealth. I do not see the necessity to refer to them in any great detail. They include R v Neylon (unreported 20 June, 2008 Victorian County Court). Neylon pleaded guilty to offences relating to the fraudulent obtaining of GST refunds by a deliberate overstating of the cost of capital purchases. There was prior criminal offending of a similar nature and most of the almost $200,000 fraudulently obtained had been repaid. Neylon was sentenced to a period of imprisonment of 2 years but directed to be released on a recognizance after 9 months. 2. A similar outcome in R v McHaffie (unreported 8 April 2011, Queensland District Court) ensued following a plea of guilty to a fraud of approximately $150,000, again based on false claims to the ATO. The term of imprisonment imposed included a recognizance release order after 9 months. 3. A decision of the District Court of NSW of R v Michael (unreported 1 March 2013) was also provided to the court. That matter related to a tax agent who had lodged multiple false income tax returns leading to the fraudulent obtaining of almost $200,000. 4. Her Honour Judge Sweeney, having regard to the circumstances of the individual offences, including the amount of money involved and the time over which the offences occurred in a repeated course of conduct, imposed a sentence of 4 years imprisonment with a non-parole period of 2 years 6 months. 5. Various Court of Criminal Appeal judgments were also provided to the Court. The six cases provided related to fraudulently obtained amounts of money which ranged from approximately $140,000 up to approximately $185,000. The various outcomes ranged from Recognizance Release Orders of 9 months, 12 months and 14 months up to a non-parole period of 2 years. 6. Whilst it is not the only factor touching upon the objective seriousness of a fraud, the quantum of any fraud is an important consideration. 7. In light of the exercise which I have been obliged to undertake in order to make findings not inconsistent with the jury's verdicts, the quantum of the fraud for which Mr Egge falls to be sentenced is but a small proportion of what was alleged by the Crown. It is also but a small proportion of the total amount claimed with respect to count 3 which resulting in the guilty verdict. 8. I, of course, note that the verdict of guilt has been returned by a jury following the entering of pleas of not guilty to all counts. Mr Egge not only has no remorse, but he has endeavoured, through his instructions to counsel, evidence called on his behalf from his son on the sentence proceedings and in his account given to the Sentence Assessment Report writer, to place the blame for his predicament on his former bookkeeper, Mr Robert Currie. 9. Mr Currie was ultimately in the witness box in front of the jury over a period of 28 days. Whatever his flaws, in either character or the presentation of his evidence, I reject completely the proposition, implicit in Mr Egge's position, that Currie was the architect of the scheme to defraud the Commonwealth. 10. However, notwithstanding that view, which I strongly hold, I must sentence Mr Egge only for the one count of which he has been found guilty, and in that respect only with regard to the amounts of money which I am satisfied beyond reasonable doubt, and consistent with the other verdicts of not guilty, that he fraudulently obtained from the Commonwealth. 11. I am satisfied, in accordance with the principles applicable to defrauding the revenue, that there is no alternative to the imposition of a term of imprisonment. The importance of both general and specific deterrence with respect to offences relating to defrauding the revenue, has been highlighted in numerous cases over many decades: see by way of example, R v Van Tung Luu (BC8400397; unreported 7 December 1984, NSWCCA per Street CJ; Lusher and Roden JJ agreeing); R v Winchester (1992) 58 A Crim R 345. 12. Bearing in mind the reduced quantum in respect of which I am able to be satisfied beyond reasonable doubt, I have ultimately determined that an appropriate period of imprisonment is a period of 19 months. 13. A sentence of less than two years permits a further consideration of whether or not such a sentence might properly be served other than by way of full-time custody. I note what might be perceived as tension between some judgments from the Court of Criminal Appeal with respect to whether or not a sentencing judge, where an appropriate sentence has been determined to be a period of 2 years or less, is required or obliged to give consideration as to whether or not an intensive correction order would be an appropriate way to serve the sentence. 14. In EF v R [2015] NSWCCA 36 the then Chief Judge of this jurisdiction, Blanch CJDC, was found to have fallen into appellable error because of his failure to consider an intensive correction order in the disposition of a sentence in that matter. Schmidt J held that such a failure was "plainly unjust and contrary to the requirements of s5 of the Crimes (Sentencing Procedure) Act" (at [42]). Simpson J, in agreeing substantially with the reasons of Schmidt J also made specific reference to the fact that no reference had been made by the sentencing judge to an alternative way of serving the sentence (at [14]). Macfarlan JA agreed with the reasons of Schmidt J and also the supplementary remarks of Simpson J. 15. Simpson J also made reference to this principle, and the decision in EF, in her Honour's judgment in Robertson v R [2017] NSWCCA 205. 16. I note that more recently the Court of Criminal Appeal in R v Fangaloka [2019] NSWCCA 173 (per Basten JA; Johnson and Price JJ agreeing) and in Karout v R [2019] NSWCCA 253 (in particular the judgment of Fullerton J at [89]-[90]) has expressed the view that the statutory provisions were not intended to impose an obligation on a sentencing court to give such consideration. 17. Notwithstanding any actual or perceived tension in the respects to which I have referred, I have specifically given consideration to whether such an alternative way of serving the sentence will reflect the objective seriousness of the offence and fulfil the purposes of punishment. I am conscious that the more lenient a manner of serving a sentence may well reduce the likelihood that such factors will appropriately fulfil such objectives (see R v Zamagias [2002] NSWCCA 17 at [28]). 18. I have endeavoured to carefully distil a consideration of the extraordinary planning and diligent attention to detail by the offender in creating surrounding documents regarding Research and Development which were intended to be used prospectively, from a consideration of the only substantive offence in respect of which he has been convicted. 19. This exercise is, to some considerable extent, artificial because of the principles of law by which I am bound. To the extent that it has any relevance to the task at hand, I am not satisfied that there was any legitimate Research and Development being carried out by either of the companies. However, that factor must be put to one side in the ultimate disposition of the single count which I am required to determine. In the interests of abundant clarity I put entirely out of my mind potential uncharged offences, whilst I do take into account, bearing in mind the customary "inscrutability" of a jury's verdict, the rationale which I can divine for the verdicts of not guilty. 20. I have taken into account the age of the offender, his multifarious health concerns, the present situation with coronavirus concerns and the need for general deterrence. I have given consideration to the objective seriousness of the single substantive offence and the purposes of punishment. 21. I have ultimately come to the conclusion that the sentence which I will impose of 19 months should be served by way of an Intensive Correction Order. 22. Mr Egge would you please stand up. 23. You are convicted. There being no other appropriate penalty, you are sentenced to a term of imprisonment for a period of 19 months. 24. Pursuant to section 7(1) of the Crimes (Sentencing Procedure) Act 1999, the sentence imposed on you is to be served by way of an intensive correction order. That sentence will commence today, 5 June 2020 and will expire on 4 January 2022. 25. You must report to the Community Corrections Office at Newcastle as soon as practicable but no later than seven days from today's date. 26. The standard conditions of the order apply: 1. you must not commit any offence; and 2. you must submit to supervision by a Community Corrections Officer. 1. I impose an additional condition that you are to perform community service work as identified in the Sentence Assessment Report of 4 December 2019 of 120 hours. 2. The Commonwealth seeks an order for reparation. In light of the restricted findings which I have been obligated to reach, I make an order that the sum of $25,800.75 be paid to the Commonwealth by way of reparation. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 June 2020