Supreme Court New South Wales Medium Neutral Citation: R v Pratten (No 25) [2016] NSWSC 539 Hearing dates: 27 October 2015 Date of orders: 29 April 2016 Decision date: 29 April 2016 Jurisdiction: Common Law Before: Rothman J Decision: (1) Conviction recorded for each count; (2) For each of Counts 1, 2 and 3 sentence imposed of three (3) years' imprisonment, commencing 20 January 2016 and concluding 19 January 2019; (3) For each of Counts 4, 5, 6 and 7, sentence imposed of four (4) years' imprisonment commencing 20 January 2017 and concluding 19 January 2021. (4) Aggregate sentence of five (5) years imprisonment concluding 19 January 2021 with a non-parole period of two (2) years concluding 19 January 2018. Catchwords: CRIMINAL LAW – sentence – guilty verdict after trial – accused charged with seven counts of obtaining financial advantage by deception contrary to s 134.2(1) of the Criminal Code Act 1995 (Cth) – filing of deliberately understated tax returns – determination of amounts understated and benefit obtained – sentence imposed. Legislation Cited: Crimes Act 1914 (Cth) Criminal Code Act 1995 (Cth) Evidence Act 1995 (NSW) Cases Cited: Veen v R (No 2) [1988] HCA 14; (1998) 164 CLR 465 Category: Sentence Parties: M McHugh SC/T Berberian (Crown) S Grant/ B Dean (Offender) Representation: Counsel: M McHugh SC/T Berberian (Crown) S Grant/ B Dean (Offender) Solicitors: Commonwealth Director of Public Prosecutions (Crown) O'Brien & Hudson Solicitors (Offender) File Number(s): 2010/315475 remarks on sentence 1. HIS HONOUR: On 9 September 2015, the offender, Timothy Charles Pratten, was found guilty of seven offences of dishonestly obtaining a financial advantage by deception, contrary to s 134.2(1) of the Criminal Code Act 1995 (Cth) ("the Code"). Each offence relates to the understating of income each financial year from 2003 to 2009 (being the year ending 30 June in each such year). 2. The Jury verdict of 9 September 2015 was the result of a retrial in circumstances where the offender had been convicted in a first trial of each of the seven counts, which first conviction occurred on 13 June 2012. The sentence in relation to those proceedings was delayed by a collateral attack on the jurisdiction of the Court arising from alleged invalid acts of various Commonwealth officers, being those concerned with the Commonwealth Director of Public Prosecutions, the Australian Taxation Office and the Australian Federal Police and an allegation as to a constitutional prohibition on the Court dealing with financial advantage resulting from the understating of income tax. 3. As a result of that collateral attack and an appeal therefrom, the first sentencing was delayed. The appeal was withdrawn by the offender in mid-December 2013, but the Court, as presently constituted, was not informed of that withdrawal. After making its own inquiries, the Court ascertained that the appeal had been withdrawn and sentence was passed on 31 March 2014. 4. The first convictions and the sentences were the subject of appeals. Those appeals were successful and the retrial eventuated. Following the retrial and conviction, proceedings occurred on sentence and the first assigned sentence date was abandoned due to the illness of the Court as presently constituted. 5. As a consequence of the foregoing, there has been a regrettable delay in the passing of sentence on the offender. While, in some senses, the offender may have benefited, in that he was able to attend to certain personal issues that arose, that delay must be taken into account to his credit, as these matters have been hanging over his head for some significant period. 6. Nevertheless, the first substantial delay was caused by the investigation and finalisation of the case against the offender, the second delay between the first conviction and the passing of sentence was mostly caused by the offender himself, and the last delay from the time at which sentence was first imposed (31 March 2014) until today has been caused by errors made in the original trial, for which the offender is not responsible, and the unavailability of the Court. 7. I take into account the entire period since the charging of the offender as a period during which the offender has been the subject of bail under conditions. While some of that time has been caused directly or indirectly by the collateral challenge to the original charges, during the whole of the period since 2010 the offender has been subject to bail (except for the 99 days during which he has been in prison) and I also take that period on bail into account in fixing an appropriate period of incarceration. I add that any account of the delay cannot lead to a sentence that is not, in all of the circumstances, appropriate. 8. Moreover, given that the offender was sentenced at the end of March 2014, there is a prima facie position that the result of any resentencing process on retrial should not impose a sentence greater than the sentence imposed after the first trial. That prima facie position is displaced only on rare occasions, when the evidence is substantially different or the first sentence imposed was manifestly inadequate. 9. It seems to me, even in those circumstances, if a more severe sentence were to be imposed on retrial, it should be at the lowest possible level within the range of appropriate sentences that may be available. Indeed, given all of the circumstances related to this offender, it seems to me that the Court should impose a sentence at the lowest end of the range appropriate for the offence. 10. In order to determine an appropriate sentence, given those qualifications, the Court is required to look at the objective seriousness of the offence committed and the subjective circumstances of the offender. Before doing so, it is necessary to restate some well-known principles of sentencing. Principles of Sentencing 1. In this case, because the offences are Commonwealth offences, the sentence must be imposed according to the regime prescribed by Part 1B of the Crimes Act 1914 (Cth) ("the Act") and the commencement point for such a task is, in accordance with s 16A(1) of the Act, to impose a "sentence of severity appropriate in all of the circumstances of the case". This includes the proposition that a sentence of imprisonment may be imposed only where the Court is satisfied that no other sentence is appropriate in all of the circumstances: s 17A(1) of the Act. Reasons for the passing of a custodial sentence are required: s 17A(2) of the Act. 2. In assessing the sentence to be imposed, the Court is required to take into account, relevantly, the following matters: the nature and circumstances of the offence; the course of conduct in circumstances where the offence forms part of a course of conduct consisting of a series of criminal acts of the same or similar character; the degree to which the person has shown remorse or contrition and, in particular, whether the offender has taken action to make reparations; the degree to which the offender has cooperated with law enforcement agencies in the investigation of the offence; deterrence, both specific and general; adequate punishment; the character, antecedents, age, means and physical or mental condition of the offender; the prospects of rehabilitation; and the probable effect that any sentence would have on the offender's family or dependants: s 16A(2) of the Act. 3. Most of the foregoing criteria are factors that are taken into account in any sentencing exercise. The principles of sentencing are well-known. In white-collar crimes, particularly those involving fraud, more than most, general deterrence plays a significant role. Such crimes are generally not committed on the spur of the moment, but are planned and embarked upon after weighing advantages and disadvantages. As a consequence, the question of general deterrence becomes far more relevant in sentencing for a crime or crimes such as those now before the Court. 4. Sentencing is an intuitive process, involving the resolution of goals that often point in different directions and may often conflict. Those goals include the protection of society, the deterrence of the offender and of others who might be tempted to offend, retribution and reform. Some of the goals overlap. None of them can be considered in isolation from any other: Veen v R (No 2) [1988] HCA 14; (1988) 164 CLR 465 at 476. Because of the need to resolve these purposes, which, to some extent, at least, point in different directions, the sentencing process must remain intuitive. Objective Seriousness 1. It is necessary to set out the facts surrounding the offences. As has been stated a number of times, the Crown bears the onus to prove beyond reasonable doubt each of the matters upon which it relies at sentencing, as it did at the trial. 2. On the other hand, matters that are relied upon by the offender can be proved to the satisfaction of the Court on the lower standard of the balance of probabilities. The task of a sentencing judge, in the position in which the Court now finds itself, is to find all of the facts associated with the offending conduct, except that the Court does not have open to it a finding which is inconsistent with the verdict of the Jury. 3. Thus, the Jury verdict forecloses any finding that the elements of each offence have not been proved beyond reasonable doubt, but apart from the minimum necessary to prove each offence, the Court is required to find the degree of culpability of the offender's conduct. 4. In a case such as this, where the Crown put its case on guilt of the offender on the basis that the Jury needed only be satisfied of a single amount of ordinary income that was not declared in each income year, the degree of fact finding on sentence is significant. 5. The Jury was required to be unanimous on at least one item of income. In order to find guilt, the Jury was required to arrive at a unanimous finding in relation to such item of income and a finding beyond reasonable doubt. 6. As a consequence, the Court is required to find most, if not all, of the facts that were in dispute except dishonesty, deception and some financial advantage. 7. In this task, the Court is greatly assisted by admissions made formally under s 184 of the Evidence Act 1995 by the then accused at or near the commencement of the trial. The Court takes account of the co-operation of the offender in the conduct of the trial to his credit on sentence. 8. The offender was a Director of Rural & General Insurance Limited at all or most relevant periods during which it was operating. The shareholding of Rural & General Insurance Limited was held or controlled by Griffith Narrandera Primary Property Developments Limited ("GNPPD"). 9. GNPPD was owned by the offender (50% of the Class A shares) with the other 50% of the Class A shares being held by D'Artagnan Investments International Limited, which also held 100% of the Class C shares. D'Artagnan Investments was incorporated in the British Virgin Islands. 10. Further, in relation to GNPPD, there were Class H shares, 100% of which were owned by 71 Cowper Street Holdings Pty Limited. 71 Cowper Street Holdings was a company owned and operated by the offender who was, at all relevant times, the sole Director and the sole shareholder. The offender was a Director of GNPPD. 11. Rural & General Insurance Limited was incorporated in Australia and carried on the business of an insurance company, underwriting insurance risks and issuing contracts of insurance (policies). 12. As a result of legislative changes associated with some instability in the insurance industry, particularly the collapse of HIH Insurance, the Australian Government legislated to increase the requirements on insurance companies operating in Australia, which conditions Rural & General Insurance Limited could not meet. Those changes occurred in or about 2002. 13. From 1 July 2002, Rural & General Insurance Limited ceased issuing insurance policies and Rural & General Insurance Limited has been under external administration since 18 February 2004. The scheme that was established to overcome the requirements of the new legislative regime was that a broking company, Rural & General Insurance Broking ("the Broking Company"), was established by utilisation of a pre-existing company that changed its name on 15 August 2002. The pre-existing company was first registered on 26 June 2000. 14. The Broking Company, as the name suggests, acted as an insurance broker in Australia and all of the fees received for policies (or most of them) were transferred to Vanuatu and remitted to accounts of the Vanuatu International Trust Company Limited ("VITCO") from 2 October 2002 to 1 June 2004 and to International Finance Trust Company Limited ("IFTCO") from 15 June 2004 to 26 July 2009. VITCO and IFTCO operated different accounts at different periods, but those account details, to the extent they are known, are irrelevant for present purposes. 15. A company was established in Vanuatu originally under the name Rural & General International Insurance Limited and from March 2005 under the name Commercial Pacific Insurance Limited ("CPI"). Regardless of the name change, this remained the same company and the Court will refer to it as CPI. 16. As is clear from the documentation before the Court, one of the advantages in incorporating as a foreign company in Vanuatu is the secrecy provisions permitted under the applicable law and the tax regime and requirements that are extremely beneficial to foreign entities. 17. CPI was registered in Vanuatu as an exempt insurer and therefore operated under the beneficial scheme, some of the benefits of which I have just outlined. CPI was incorporated in Vanuatu on 20 August 2002. 18. On 23 August 2002, the Broking Company entered into an Insurance Agency Agreement with CPI, whereby CPI underwrote insurance policies that were sold to retail customers in Australia by the Broking Company. As a result of that agreement, the Broking Company remitted premiums collected from customers to CPI. Those moneys were paid into VITCO and IFTCO (the difference being the years in question). During the tax years 2003 through to 2009, the Broking Company remitted $19,049,046 to either VITCO or IFTCO on behalf of CPI. 19. During the same period (i.e. the periods of the charges from the tax year ending 30 June 2003 through to 30 June 2009) payments from VITCO or IFTCO were made either directly into the offender's St George Bank accounts or to third parties on the direction or instruction of the offender. Those amounts totalled $5,009,732 of which approximately $2,900,000 were direct deposits to the offender's bank account and $2,100,000 were payments to third parties on the offender's instructions or directions. 20. It is the foregoing $5,000,000 in transfers from CPI, to either the offender or to third parties at his direction, that the Crown alleged, at trial, was income, in the ordinary meaning of that term, in the hands of the offender, none of which was declared as income, granting to the offender a financial advantage, being the initial reduction in tax liability. Further, the Crown alleged that the offender was aware that the amounts ought to have been included as income and dishonestly, and by deception, obtained the financial advantage from the Commonwealth by understating his income. 21. It is necessary to describe the operation, to the extent that it is known, of VITCO and IFTCO. Each is a trust company operated by a firm of accountants. Each has, presumably, a number of accounts or one account in which a number of clients have an interest, the interest then being recorded by journal entries. 22. During the first trial, there was no evidence that the moneys transferred at the direction of the offender from VITCO and IFTCO were moneys obtained from CPI and the moneys from VITCO and IFTCO in Vanuatu could have been derived from clients other than CPI. It was a reasonable hypothesis, in those circumstances, that the moneys could have been transferred out of accounts held by the offender's Family Trust or other companies associated with the offender and not CPI. 23. Nevertheless, the terms of the formal admissions under s 184 make it clear (at [51], referring to "the accounts of VITCO and IFTCO" [my emphasis], being a reference back to those accounts at [50]) that the payments to the offender's personal bank account and to third parties came from the accounts of VITCO and IFTCO on the offender's instruction, being the accounts into which the $19,000,000 of premiums had been transferred. 24. Those amounts had been transferred for the purpose of completing (or improving) a rural property; the purchase of a hardware establishment; development proposals for a block of land; the purchase of a helicopter; the purchase of a motor vessel (boat); the purchase of other blocks of land; the payment of school fees for the offender's two daughters; rent at the offender's private premises; payments for an architect for a proposed development in Vanuatu; payments for a cattle truck; and other incidental payments. 25. Exhibits O and P, written or published in their current form after the date of these offences, set out the advantages associated with being a foreign company operating out of Vanuatu, but not involved in transactions in Vanuatu. As already stated, those advantages include no or minimal tax; total secrecy; total flexibility for meetings, rules and other formalities; and no requirements as to capital backing. 26. CPI (by whatever name then called) was established as a foreign corporation in Vanuatu. 27. The accounting firm, BDO Vanuatu, set up CPI to underwrite the business provided by the Broking Company (Transcript 1141, evidence of the offender). The offender met with the two directors (each a partner at BDO) in Vanuatu prior to 1 July 2002 in relation to the placing of insurance business in the Pacific region. Mr Sinclair, one of those directors, was described by the offender as his "good friend and partner": Transcript 1163; Exhibit A, Volume 1, p 52. 28. The placing of business with CPI by the Broking Company was accompanied by the transfer of premium payments from 20 August 2002, presumably for the period 1 July 2002 until 20 August 2002. Mr Aaron Stephenson was also a Director in the Broking Company, holding approximately one-third of the interests in the company, while the offender held two-thirds: Exhibit A, p 928; Transcript 1141. 29. The reason BDO set up the insurance company to underwrite the business provided by the Broking Company was that the offender could not move to Vanuatu to set it up himself: Transcript 1141 – 1142. 30. The arrangement was, at least in part, that an Agency Agreement was established under which the Broking Company issued cover notes and insurance policies on behalf of CPI under which the Broking Company was entitled to a commission equal to 33% of the net premium received: Transcript 1144; Exhibit 1, Volume 3, p 940. 31. The risks insured by CPI were reinsured through a London reinsurance broker, Alsford Paige & Gemes: Exhibit A, Volume 3, p 1068H, letter dated 28 September 2008; Transcript 1243. 32. The agent of the reinsurer, Mr Cantwell gave evidence that the offender told him that he had "an interest in" CPI and described it as "mine". Some criticism was made of the evidence of Mr Cantwell, but in my view the criticism was misdirected. 33. Mr Cantwell does not recall the offender saying he owned CPI but he clearly recalls the offender saying he had an interest in it and referring to it as "mine". I accept that evidence. However, that evidence is generally insubstantial in terms of the issues in these proceedings. 34. As earlier stated, and as admitted in the formal admissions, the Broking Company remitted premiums to VITCO up until June 2004: Exhibit B. 35. It was from these accounts, according to the formal admissions, that the moneys paid to the offender or at his direction to third parties, derived. 36. After June 2004, this was repeated in relation to the trust account IFTCO, operated by the offender's new accounting firm PKF Vanuatu. I accept that to some degree there is a "paper trail", by which I refer to the arguments before the Court during the trial, that the offender and the accounting firms concocted an elaborate subterfuge, the effect of which was to transfer premiums to Vanuatu, which were returned to the offender or entities associated with the offender for the benefit of the offender. 37. The façade is evidenced, at least in part, by the naming of two directors of CPI. Companies called Astrolabe Limited and Astrolabe Nominees Limited were appointed as Directors of CPI. Each of those companies are companies associated with PKF Vanuatu, the new accounting firm, yet, after the event, these two companies were named, ex post facto, as Directors of CPI at a point in time when BDO was CPI's accountants, namely, in the accounts that refer to the year ending December 2003. 38. As earlier stated, certain assets were acquired, namely a number of properties, a business at Stroud, a farm truck, a boat named "Los Lobos" and expenses were paid, which were the school fees of the offender's daughters, residential rent on a Darling Point property occupied by the offender and architectural fees, earlier described: Ms Celona's evidence at Transcript 158 – 160; Exhibit A, Volume 1, p 1; Transcript 381; evidence of the offender at Transcript 1250 and the facts admitted by the offender. 39. There is some question as to some of the earlier payments on which the Crown originally relied but which payments were disavowed by the Crown in its address. These were payments of $436,350 for Skallet Property on 29 July 2002 and transfers of $17,319, $3,319, $472 and $77 all of which occurred before 20 August 2002, when CPI was first incorporated. I accept that these transfers would not, individually, collectively or together with other later transfers, support the offences charged. 40. As for the assets, each was purchased in the name of an entity other than the offender. For example, the helicopter was purchased in the name of Sonarpia Pty Ltd, which is the company that is the trustee of the offender's Family Trust: Transcript 1191; Exhibit A, Volume 2, p 443, p 254, p 479, p481 and p 482. The Family Trust was a trust for the benefit of the offender and his two daughters. It was a discretionary trust formed in or about May 2003: Transcript 1131. 41. To take another example, it is appropriate to deal with the boat. The boat was originally purchased by the offender and his father, according to the offender's oral evidence: Transcript 1231. I accept that part of the offender's evidence. 42. Nevertheless, formal admissions refer to the offender purchasing the boat in January 1997: see [49] of Exhibit 2. In November 2005, the offender ordered a new generator and an invoice issued to the offender, care of the Broking Company in Sydney. IFTCO paid the invoice on 20 January 2006. 43. Likewise IFTCO paid all of the expenses associated with the expenses of the private school fees of the offender's two daughters. This also was paid at the direction of the offender. 44. Similarly, the formal admissions refer to the purchase of building supply material for the property "Skallet" by "an employee of" the offender. The offender was invoiced and paid $2,000 towards the invoice, the balance was paid out of CPI funds in IFTCO at the direction of the offender. 45. There were dealings with the boat. For reasons which did not become clear, the boat became registered in the name of a BDO nominee company, Global Nominees Limited, and after 2004 a PKF associated company, Astrolabe Services Limited. 46. Nevertheless, in May 2011, the offender asserted he was the beneficial owner of the vessel and, on the evidence before the Court, that remained the position at all times: Exhibit A, Volume 2, p 587; Transcript p 1044, a telephone intercept, in a conversation with Robert Agius of 3 December 2008, the offender refers to the boat as "my boat". At Transcript 1429, the offender agrees he is referring to Los Lobos as his boat and he is the beneficial owner. Apparently, according to the offender, he always thought he was the owner. 47. The foregoing also brings into play the relationship between Pacific Property Investments ("PPI"), which was incorporated in Vanuatu on 6 March 2001. The inference is irresistible that PPI was, at least to the extent of the properties in its name paid out of moneys from CPI, controlled by the offender. The subterfuge associated with interposing PPI was revealed in the memo from the accountants to the vendor relating to the obtaining of permission from the client, the principal of which was going to be in Vanuatu later in the month. The offender was the principal. 48. The offender sought to deflect this evidence by suggesting that, while it was he, as a person, to whom the accountants were referring, the client was 71 Cowper Street, a company wholly owned by the offender and of which he was the sole Director and through which he owned the Broking Company. The difficulty with that explanation was that it was PPI that was required to give the authority. It was PPI that was the client of the accounting firm and 71 Cowper Street was never a client of the accounting firm. The accounting firm had never given 71 Cowper Street advice. Nor had it performed work for it in any other capacity. 49. The admission by the offender that it was he to whom the memo referred is telling. Given that the memo could not have been referring to 71 Cowper Street and was plainly in its terms referring to PPI, the irrefragable inference is that, at least for the purposes relevant to these proceedings, the offender controlled PPI. And given that Astrolabe Limited and Astrolabe Nominees were the Directors of PPI, the inference necessarily arises that, for the purpose of any decision made in relation to PPI, the offender controlled Astrolabe Limited and Astrolabe Nominees in terms of their decision making. 50. Moreover, the sole directorship of PPI transferred from Global Nominees, a BDO Vanuatu holding company, to Astrolabe and Astrolabe Nominees Limited at the same time that the offender moved accounting firms from BDO Vanuatu to PKF Vanuatu. 51. That brings the Court to the ownership of the properties being Skallet at Tereel Road, Ward's River, which is the rural property, an adjoining block referred to in the proceedings as the Macedo Block (a rural property adjoining Skallet) and the Stroud development block. Each of those was purchased in the name of PPI: see Exhibit A, Volume 1, p 60; Exhibit A, Volume 2, p 634; Exhibit A, Volume 1, pp 356 – 361 and 377. Again, at least in relation to these properties, the offender controlled PPI. 52. Further, it is clear from the inferences available from the history of the establishment of the respective companies and the evidence as to the attitude of the offender that, at least for the purposes or to the extent of the moneys received by the offender or at his direction, from VITCO and IFTCO, the offender controlled CPI and was entitled to a share of its profits. Certainly, the offender had an interest in CPI. 53. In one of the intercepted telephone conversations between the offender and Mr Greer, his then accountant, on 5 December 2008, the offender gave a truncated history of the establishment of the Vanuatu insurance company, referring at all times to "we" and then to the fact that the Vanuatu insurer had to cease writing business on 30 June 2008 because of further restrictions imposed under Australian law. The offender then said "I don't want the company now … it's got no income and it's going to go exactly the same way as the old RGI company, into run off": Exhibit N. 54. Further there is the conversation, to which the Court has already referred, with Mr Cantwell in which the offender referred to CPI as "mine" and that he had "an interest in it" (a conversation denied by the offender). I accept Mr Cantwell's evidence in this respect. 55. On 17 December 2007, in an email to his accountant, the offender stated: "I have a beneficial interest in Commercial Pacific Insurance Limited, which is a Vanuatu registered insurance company. My beneficial interest is that I will receive 25% of the profits of the business after it is wound up and by constitution it has to be within 10 years of its operations, i.e. 2012": Exhibit A, Volume 3, p 1189; Transcript 554 – 555; and see the exchange at Transcript 1428. 1. I have already referred to the formal admissions which disclose that the payments from VITCO and IFTCO to the offender and to third parties were the moneys of CPI held by VITCO and IFTCO and were expended at the direction of the offender. The offender, in his evidence, made clear that he understood all of the transfers and the relationship between each of the companies. This was no careless disregard for the separation between corporate bodies. This was a deliberate scheme in which moneys were transferred from Australia to Vanuatu and returned to various accounts controlled by the offender, either directly or indirectly, for his beneficial use. 2. The Jury were instructed that, if they believed the offender that the amounts received from Vanuatu were, to the relevant extent, loans, they were required to acquit the offender. Plainly, given the verdicts, the Jury did not believe the offender. Frankly, nor do I. 3. The amount received from Vanuatu was almost precisely 25% of the amount remitted to Vanuatu by the Broking Company. 4. There were a series of conversations during the periods in question relating to confirmation that the loans were available or for "standard debts" or concerning loans that were made from the profits of CPI. One example is the conversation with Mr Berry on 4 December 2008 in which the offender claimed he had "always borrowed money over there in order to buy things for the farm". On the same day, the offender expressed his fear to Mr Greer, his accountant, that the authorities would suggest that all moneys that were returned to him personally from Vanuatu were income: Exhibit A, p 1064. 5. In a conversation on that same day, 4 December 2008, with Kelly Fawcett of PKF, the offender asked for a dollar for dollar calculation of what all the loans had been over the years so that if the authorities decided to suggest a lot of it was income the offender would be able to argue that there were deductions available in relation to each such amount: Exhibit A, p 1056; Transcript 1441. There are significant examples in other telephone intercepts. 6. Essentially, the offender argued to the Jury that some of the amounts were the reimbursement of expenses and others were loans. There is evidence before the Court that refers to loans. The provenance of some of that evidence is doubtful. 7. As to the proposition that moneys were paid to reimburse expenses, this is not a matter relied upon by the offender and therefore not required to be proved, even at the lower standard, by the offender. Rather, it is said to be a reasonable hypothesis inconsistent with the moneys being income and therefore required to be disproved by the Crown. 8. There are significant difficulties with each of these propositions. Further, it is not clear that it would make any difference to the outcome of the proceedings. 9. I assume for the purposes of the present discussion, without accepting, that the amounts paid were a reimbursement of expenses. If that were the situation, which I doubt, then the amounts received would be required to be shown as income and the expenses deducted. Moreover such an explanation is inconsistent with the explanation given by the offender. The offender maintained, at all times, that the moneys received, or any significant amount received, had been by way of loan. The offender pointed to a number of documents which referred to loans or advances including draft accounts, a draft loan agreement, finalised accounts and emails. 10. The difficulty with that explanation is that the Jury did not believe the offender. That of course does not end the situation. As was explained to the Jury, even if they did not believe the then accused, it did not prove the opposite and it was still for the Crown to prove, beyond reasonable doubt, each of the factual elements necessary for the finding of guilt. In other words, it was not for the then accused to prove that the amounts were loans, it was for the Crown to prove that they were not genuine loans. 11. The evidence discloses an extraordinary vagueness as to the amounts that had been "borrowed" or obtained and an even more vague assessment of whether the amounts would need to be repaid and whether, and if so how much, interest was payable. 12. The remarkable coincidence that the amount returned was almost precisely 25% of the insurance premiums remitted is one of the strands in this cable, rendering the combination of facts proof beyond reasonable doubt. Another is the fact that the moneys have not, in any real sense, been repaid. It is also clear that neither the offender nor anyone on his behalf has any record of the total amount paid at the direction of the offender. The failure of the offender to keep records of the amount he had allegedly borrowed is a matter which, with others, I use to draw the inference that he did not consider, at any stage, that he was under an obligation to repay the moneys advanced or to pay interest on them. 13. Each of the matters to which reference has already been made point starkly to the proposition that the moneys received were not loan moneys. Over and above that vagueness and the unreality of the so-called reasonable hypothesis inconsistent with guilt, are the two documents, given much play in the trial. The first, in time, is the email to the offender's business partner dated 19 December 2007, generally called the "Crash Email". 14. The Crash Email was a communication sent at a time when the offender was to travel by helicopter to Vanuatu, being the helicopter purchased and the subject of proceedings. In the email, the offender gives instructions to his business partner in the unfortunate circumstance of an air accident. It tells his business partner: to value the business and take it or sell it; to put the moneys in trust for his daughters; to make payments to his mother for the rest of her life; to make arrangements for the purchase of the business were his partner so minded; to arrange a placement of the old company's money into the Trust Account; about the sale of the helicopter; and about the sale of the boat, the sale of the property in Stroud and other such amounts. 15. While the terms of such a communication would not, in ordinary circumstances, be expected to be detailed or precise, there is no suggestion in the whole of the email that the full amount of value for the helicopter, the boat, the properties and the like, are not the assets of the offender, or are subject to the repayment of any obligation or loan. Nor is there any direction as to how or from which asset any such loan should be repaid. 16. The second document is a completed financial application sent by email to New Holland Finance on 24 September 2008. That application contained the handwritten note of the assets and liabilities of the offender, written by the offender, alongside each of which is a value. It refers to properties in Paddington and Woolloomooloo; it uses the term 'nil' in relation to entries for liabilities owing in respect of properties or bank overdraft or by way of loan. It lists the offender's total liabilities as "nil personally". 17. The document also refers to overseas properties and the property in the Hunter Region (a reference inferentially to the rural properties and to Stroud): Exhibit A, Volume 1, p 181; Transcript 1612. 18. There is another aspect to these explanations. If, as might originally have been thought were it not for the evidence otherwise available, the amounts were received by the offender on behalf of the Broking Company, it makes no difference to the offence. If the moneys from Vanuatu were paid to the offender (or at his direction to third parties) on behalf of the Broking Company, for the personal use of the offender, then the amounts received or paid would still be income to the offender. The offender was an employee and office holder of the Broking Company. 19. The Crown has discharged its onus of proving beyond reasonable doubt that the amounts alleged in its closing address were income and displacing any reasonable hypothesis that moneys were loans. 20. Lastly, the offender raises the reasonable hypothesis said to exist that there would have been deductible items associated with the income then received. It is not immediately apparent how this argument can be sustained. If there were deductible expenses associated with the operation of MyIdaho Farming Operation, for example, or any other business or venture, those expenses would be deductible (and deducted) whether or not the amounts alleged were loans or income. 21. Likewise, if there were expenses associated with the operation of the helicopter or the boat, those expenses may or may not be deductible, depending upon whether the helicopter or boat was used for the intended earning of income or in the operation of a business. 22. If the expenses were of a personal nature and not for a business purpose, then the expenses would not be deductible, regardless of the character of the receipts. If, on the other hand, the expenses were necessarily incurred in earning income, or properly utilised for the purpose of production of the profit of a business or venture, then those expenses would be deductible and were deductible, again regardless of the character of the amounts received as income or loans. 23. Put another way, if a business or person receives a loan, the moneys from which are then used to pay school fees, that expense is not deductible. If the moneys were received as income, rather than as a loan, and were used for the same purpose, those moneys or expenses would still not be deductible. 24. On the other hand, if loan moneys were received and the moneys used for business expenditure, then that expenditure would be deductible, as would the interest on the moneys borrowed. There is no suggestion that any interest was paid or known to be payable in relation to any moneys received by the offender. It is neither probable nor reasonably possible on the evidence before the Court that the offender or his companies did not claim every business expense available. 25. There may be expenses incurred in earning the income found to be derived. Those expenses would be expenses in the administration of the funds in VITCO and IFTCO, including accounting fees. The necessary inference from the evidence before the Court is that those expenses were paid in Vanuatu and were moneys over and above the $5,000,000 received. No reduction is appropriate, probable or reasonably possible. 26. As a consequence of the foregoing, I accept the allegation of the Crown in its entirety as put in its closing address and as submitted during the course of the sentencing proceedings. With the exception of the first five payments in 2002, relating to a period during which it seems the Broking Company was operating but the Vanuatu insurer had not been incorporated, the amounts received and paid for the benefit of the offender are income in the ordinary sense. 27. During the course of these remarks, I have referred to the term income in the ordinary sense. The Crown, in my view appropriately, relied on amounts received which would be income in the ordinary sense of the term, as distinct from any special meaning given to it under the various income tax statutes. On the other hand, it did not rely on income in the ordinary sense that was exempted or excluded from income under the various income tax statutes. 28. Such a course may have had the effect of reducing the amount of income to which these charges relate. Nevertheless, that is the course the Crown undertook. That course was a fairer one; but it may have rendered the offences more difficult to prove and the trial more complicated. 29. Lastly, I comment on the effect of the evidence of the offender. As earlier stated, the offender was required to prove nothing and, even if his evidence were disbelieved, which it is in large measure, if it were to raise a reasonable hypothesis inconsistent with guilt, it is material that must be given consideration. I have given it that consideration. 30. The offender's evidence discloses that the offender was not under any mistaken view as to the operations of companies with which he was associated or with which he dealt. The offender's evidence also disclosed that the offender set upon a deliberate course of conduct in the expectation that, by returning the moneys and calling them loans, he could escape a considerable amount of income tax. This course was neither accidental nor lacking dishonesty. 31. It is also clear from his evidence that the offender lacks any remorse and was prepared to dissemble and give explanations that he knew to be incorrect in order to avoid the consequences of his conduct. I consider his prospects of rehabilitation poor, as he rationalises his conduct and considers he has done nothing wrong. 32. Further, these offences, committed over a significant period, depend less on the amounts received than on the nature of the criminal conduct in receiving them. 33. The Crown submits that the offender was an instigator of the plan. I am not satisfied, to the requisite standard, that when first initiated, the offender undertook this activity otherwise than on the basis of advice from accountants. I am not, in those circumstances, prepared to accept, in its totality, that particular submission of the Crown. 34. However, when the offender changed accountants in 2004 from BDO Vanuatu to PKF Vanuatu, it is clear from the communications that it was he, not PKF, that explained the workings of the company and the manner in which control was effected. At least from 2004 and in relation to the alteration to PKF Vanuatu, it is clear that the offender was one of the instigators and deliberately set upon a course that continued the planned, deliberate and intended dishonesty. 35. In all of the circumstances, I consider on the evidence before the Court in these proceedings that the conduct of the offender is objectively above the mid-range in seriousness. Subjective Circumstances 1. I have already mentioned some aspects of subjective circumstances, such as remorse. 2. The offender was born in 1960. Both his parents are deceased. He has one sibling. He was married in 1995 and separated in 2000. At least for some significant period he had custody of his two daughters, whose welfare and state of health were the subject of some evidence and caused some issues during the course of the trial. 3. The delay in imposing a sentence means that each of the daughters is now older and, subject to ill health, capable of living independently. Nevertheless, I accept that the hardship caused to the offender's two daughters warrants consideration in mitigation of sentence, particularly given the state of health of one of them. 4. I also have updated reports dealing with the offender's high levels of depression. I accept that the offender will find it difficult to cope in a custodial environment. Most while-collar offenders do, but in his case, he should have regular treatment for his psychiatric/psychological issues. Those issues did not form any part of the reasons for the offending. Nevertheless, they disclose circumstances that would allow the community not to treat him in a manner that it would treat another offender not so afflicted. 5. I assume the tax not initially paid has been. I am aware of the amended assessments and the levying of tax penalties. The penalties are an extra curial punishment, but not for dishonesty or deception which are the gravamen of these offences. Nevertheless, I take some account of that extra curial penalty in setting an appropriate sentence. 6. As earlier stated, the offender has no prior criminal record and is entitled to the leniency associated with a first-time offender. Conclusion 1. I have found that the objective seriousness of the offences is slightly above the mid-range of offending. The maximum sentence for each offence is 10 years' imprisonment and/or a fine of $66,000. There are seven offences. 2. I do not accept that the offences are the product of one course of continuing conduct. It is true that the offences were implemented on three occasions over seven years. 3. It is also accurate to suggest, as did the offender, that, at least to some extent, there is a continuing course of conduct. However, as earlier noted, the conduct differed between 2003 and 2004 on the one hand and 2005 through to 2009 on the other. There was a deliberate change in accountants at which time the offender was the moving party rather than one that may have been following advice. 4. Further, the change in accountants in Australia was occasioned by a communication with his accountant relevant to the possession of an interest in an overseas company. The communication with the accountant, which I do not consider to be wholly innocent in relation to either of them, suggested a course of conduct followed by an exclamation mark, which, while not expressly stating such, did impliedly suggest that Mr Pratten might want to adjust his comments about his overseas interests. 5. Nevertheless, Mr Pratten changed accountants. When he did so, he did not disclose to the new accountants the information that he had disclosed to his immediately past accountant. While there may have been other reasons for the change in accountant, his non-disclosure of his interests in overseas entities was part of his deliberate dishonesty. 6. I am mindful of the delay that has been occasioned in the sentencing, as originally noted. I am also mindful that prima facie the sentence should be no more severe than that originally imposed upon the offender. As earlier stated, there are two exceptions to that prima facie position. 7. In my view, the evidence in this second trial is significantly different from that which was adduced in the first trial. If I am wrong, then I had misunderstood the nature of the evidence adduced in the first trial and the sentence imposed would, if the evidence were the same as that adduced in this trial, be manifestly inadequate. 8. Notwithstanding his severe depression, I still consider that general deterrence is an important element. Given the process of self-assessment, there is a heavier duty on the taxpayer to be honest. Moreover, the practical restrictions that exist in policing every tax return require the Courts to adopt an attitude that deceitful conduct, once discovered, is appropriately punished. 9. As has been said in a number of judgments and earlier in these remarks, in white-collar crime, general deterrence plays a large part. Unlike emotional opportunist offending, white-collar crime is usually premeditated, planned and the result of a balancing exercise by offenders between the advantages to be gained, the chances of apprehension and the disadvantage if caught. 10. Nevertheless, as earlier stated, I take account of the delay. I take account of the offender's age and lack of prior convictions, the time he has spent on conditional liberty and the time spent on remand and as a sentenced prisoner. 11. I intend to set a sentence that is a full-time custodial sentence, bearing in mind that that is the end result of a consideration that it is the last option to be imposed and only because no other sentence is appropriate. I consider these offences sufficiently serious to warrant full-time custodial sentence. I do not consider specific deterrence to be a significant factor. As earlier stated, I take into account the offender's health and the effect on his family. 12. In all of the circumstances I intend to impose a sentence for each of Counts 1, 2 and 3 that is wholly concurrent and separate sentences for Counts 4, 5, 6 and 7 each of which should be concurrent with the others but partly cumulative with the sentences for Counts 1, 2, and 3. The sentences for each will take account of the 99 days of imprisonment by adjusting the starting date accordingly and will be set bearing in mind the conditional liberty under which the offender has served for an extended period since 2010. 13. I impose a sentence that is, given the subjective circumstances of the offender and the objective circumstances of the offence, at the lowest end of the range I consider appropriate and available. I also take into account the illness, the delay and the other subjective circumstances in fixing an unusually short non-parole period, given the length of the head sentence. In part, this has been effected also because of the fact of re-sentencing, and the effect of "double jeopardy". Sentence 1. For each of the offences in Counts 1, 2 and 3, being the returns for 2003, 2004 and 2005 committed in 2005 and 2006 you are convicted and you are sentenced to three years' imprisonment wholly concurrent, commencing 20 January 2016 and concluding 19 January 2019. 2. For each of the offences in Counts 4, 5, 6 and 7, being the offences committed by the lodging of the return for the years 2006, 2007, 2008 and 2009, on 23 September 2009, you are convicted and you are sentenced to imprisonment for four years, to be served concurrently with each other and commencing 20 January 2017 and concluding 19 January 2021. 3. The aggregate sentence is a sentence of five years' imprisonment commencing 20 January 2016 and concluding 19 January 2021. I fix a non-parole period of two years' imprisonment, commencing 20 January 2016 and concluding 19 January 2018. ********** 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: 29 April 2016