Court of Criminal Appeal Supreme Court New South Wales Medium Neutral Citation: Michael Robert Holloway v R [2017] NSWCCA 17 Hearing dates: 15 February 2017 Date of orders: 24 February 2017 Decision date: 24 February 2017 Before: Hoeben CJ at CL at [1]; Johnson J at [2]; Latham J at [3]. Decision: (1) Appeal against conviction dismissed. (2) Leave to appeal against the sentence is granted. (3) The appeal is dismissed. Catchwords: CRIMINAL LAW – appeals – conviction – whether inconsistency of verdicts – 79 counts of fraud – whether sentence manifestly excessive. Legislation Cited: Crimes Act 1900 (NSW) Cases Cited: Mackenzie v The Queen [1996] HC 35 ; 190 CLR 348 TK v R [2009] NSWCCA 151 Dinsdale v The Queen (2000) 202 CLR 321 Wong v The Queen (2001) 207 CLR 584, [2001] HCA 64 Stratford v R [2007] NSWCCA 279 Category: Principal judgment Parties: Mr Michael Robert Holloway (Appellant) Regina (Respondent) Representation: Counsel: F Coyne (Appellant) S Hughes (Respondent) Solicitors: C Sweeney (Appellant) C Hyland (Respondent) File Number(s): 2013/63599 Publication restriction: Nil Decision under appeal Court or tribunal: District Court of NSW Jurisdiction: Criminal Date of Decision: 12 February 2016 Before: Baly DCJ File Number(s): 2013/63599 Judgment 1. HOEBEN CJ at CL: I agree with the judgment of Latham J and the orders which she proposes. 2. JOHNSON J: I agree with the orders proposed by Latham J and with her Honour's reasons for those orders. 3. LATHAM J: The applicant stood trial between 30 September and 19 October 2015 on 79 fraud charges, the first 69 of which were preferred under section 176A of the Crimes Act 1900, the remainder preferred pursuant to section 192E of the Crimes Act. The applicant was acquitted of the first 69 counts but convicted of counts 70 to 79. 4. The applicant was sentenced to an aggregate term comprising a non-parole period of two years and six months with a balance of term of 18 months. 5. The applicant's appeal against conviction rests on one ground, namely that the verdicts in relation to counts 70 to 79 inclusive are inconsistent with the acquittals on counts 1 to 69. The applicant also appeals against the sentence on the grounds of manifest excess. The Evidence at Trial 1. The applicant was the chief executive officer of the Australasian branch of a company, B & H Worldwide Pty Ltd (BHW), which was a freight forwarding business. The parent company was based in the United Kingdom. Mark Bond was the major shareholder and the director of the company.. The applicant and Mr Bond had worked together at DHL for several years prior to Mr Bond establishing BHW. As a result, the applicant and Mr Bond had developed a close professional relationship. 2. Between January 2004 and January 2011 the applicant caused a number of invoices to be created which related to work allegedly performed by a company referred to as Helping Hand Packaging Services. No such company existed and no such work was performed. The applicant instructed a subordinate to issue cheques in payment of the false invoices to Helping Hands Packaging Services made out to cash. Invariably the cheques were cashed and some of the proceeds were deposited into the applicant's personal account held jointly with his wife. The total amount paid out of BHW's account in this way was approximately $2 million. 3. There was a legitimate company called Helping Hand Group which was a sporting memorabilia company and a legitimate customer of BHW. A partner of that company, Mr Slobodetsky, was a good friend of the applicant's and was known to Mr Bond. Mr Slobodetsky gave evidence of a conversation with the applicant in 2004 wherein the applicant asked him to help clear out some excess funds from a BHW account. The applicant provided Mr Slobodetsky with cheques to cash on about seven or eight occasions. On each occasion Mr Slobodetsky would deposit the cheques into his account, withdraw the funds and pay them to the applicant. According to Mr Slobodetsky, the applicant told him that Mr Bond was aware of the withdrawal of funds in this way. During a visit to the UK in 2004, Mr Slobodetsky said that he had a conversation with Mr Bond on the subject of cashing BHW cheques and that Mr Bond thanked him for assisting in that process. Eventually, Mr Slobodetsky told the applicant he could not continue in that role. 4. Mr Bond maintained that he was not aware of the use of the false invoices to withdraw cash from the company account, that he had never spoken to the applicant on the subject of such a scheme, that it was not created with his involvement and approval, was not for his benefit and he was not in receipt of the company reports that disclosed these payments. 5. There were however two payments that Mr Bond did receive in cash from the company account in Australia. In 2005 the applicant had a conversation with Mr Bond on the subject of inflating an invoice from a cricket club sponsored by BHW so that the surplus funds could be taken out in cash and paid to Mr Bond, who was then in some financial difficulty. Later that year Mr Bond received approximately $14,000.00 in cash from an agent of the applicant's. About two years later whilst the applicant was in the UK on holidays, he gave Mr Bond approximately $30,000.00 in cash. According to Mr Bond, they were the only payments that he received. Mr Bond refuted the suggestion put to him in cross-examination that he received at least $1 million of the funds that were obtained through the false invoices. 6. During his evidence, Mr Bond was shown a series of emails in 2009 which disclosed a concern on his part that the Australian company was paying too much tax. A number of strategies were discussed by Mr Bond with the Chief Financial Officer of BHW, including increasing management charges or commissions, and accruing some large costs such as salary bonuses. In cross-examination Mr Bond stated that he had no specific issues about the Australian arm of the business paying too much tax, rather his concern was related to being tax efficient worldwide. However, Mr Bond agreed that if there was a benefit to the company in reducing profits in Australia and it was legitimate then it would be a strategy that he would entertain. 7. Two members of staff of BHW received cash payments from the applicant, which were offered by the applicant as cash bonuses, totalling approximately $100,000.00. It appeared from the company records that both employees became aware of the false Helping Hand invoices. 8. This evidence provided the basis for a submission on the part of the applicant that Mr Bond's denial of complicity in the false invoicing scheme ought not be believed, on the basis that Mr Bond did receive monies and Mr Slobodetsky's evidence established that complicity. Moreover, the applicant submitted at trial that BHW benefited from the use of the false invoices, in that it reduced the profits in the Australian company and additionally, represented work-related expenses that would have been recorded in the accounts of the company as tax-deductible. 9. There was a deal of other evidence which established that some of the cash proceeds from the cheques ultimately were devoted to payment of the applicant's and his wife's personal expenses. The applicant admitted during his evidence in civil proceedings taken against him by BHW that he personally benefited from some of the funds. However, he could not quantify the amount. That evidence was admitted at trial. 10. The applicant did not give evidence at trial. It is not necessary for the purposes of this appeal to provide any greater account of the evidence. In short, the applicant did not deny that he obtained a benefit from the funds provided by the false invoicing scheme, which he put into effect, but he maintained that Mr Bond was a co-architect of the scheme who benefited equally, if not more than the applicant. The applicant claimed that he provided cash to Mr Bond on many occasions. Mr Bond was content for the scheme to continue operating so that Mr Bond might continue to receive funds and the company's Australian tax liability might be reduced. At all relevant times the Australian company was profitable. 11. The applicant's counsel submitted to the jury that they would not be satisfied beyond reasonable doubt that the applicant was dishonest, given that he effectively created an audit trail which allowed his successor to discover the invoicing scheme and the cash withdrawals from the company account without any difficulty. 12. It was common ground that the applicant's conduct underpinning the charges was identical throughout the period charged in the indictment. The indictment merely reflected the change in the relevant legislation that took effect in early 2010. The Trial Judge's Directions 1. No complaint was made about the directions at trial. The essential ingredients of the offences were provided to the jury in writing :- Section 176A 1) That the accused was a director of a body corporate or company namely B&H Worldwide Pty Ltd. (not in dispute) 2) That the accused defrauded B&H Worldwide Pty Ltd of money or property or imperilled its right or interests. Section 192E(1)(b) 1) That the accused obtained a financial advantage, namely a sum of money. 2) That the financial advantage was obtained as a result of deception. 3) That the accused acted dishonestly in his deceptive conduct. Dishonest means that the accused acted dishonestly according to the standards of ordinary people. You as members of the community determine what is dishonest conduct. You must not only find beyond reasonable doubt that the accused acted dishonestly in deceiving B&H Worldwide, but also that he knew his conduct was dishonest according to the standards of ordinary people. 1. In relation to counts 1 to 69 on the indictment, the trial judge gave the following direction (italics not in original) :- The Crown case that is brought against the accused in relation to counts 1 to 69 is that the accused caused the funds of the company, [BHW], to be paid pursuant to false claims for packing charges plus GST from a business called Helping Hand Packaging. The Crown case is not that the accused spent all the money for himself, or on himself, or that Mr Bond did not receive any of the money pursuant to that scheme. The Crown case is that the economic interests of the company were imperilled, that is, that the accused's conduct caused the possibility of loss to the company. The company was prejudiced in some aspect of its proprietary right, because the money went to the accused at the accused's direction. Therefore, even if some of the money did go to the company and to Mr Bond, the company's interests were imperilled, because the money was outside of its control. It was on the Crown case, being controlled by the accused, pursuant to the Helping Hand scheme that he set up. ……………………………………………………………………….. The Crown must prove beyond reasonable doubt that the accused intended to defraud [BHW]. To defraud is to "intentionally use dishonest means" to deprive [BHW] of its money or property, or to imperil its rights or interests. It involves the intentional creation of a situation by the accused to use dishonest means to deprive [BHW] of money or property, or imperil that company's rights or interests, knowing that he had no right to deprive [BHW] of the money or property, or to imperil the company's rights or interests. The Crown does not have to prove that the accused personally benefited. The Crown must establish the possibility of loss, that is, that [BHW] has been prejudiced in some aspects of its proprietary rights, or the enforcement of those rights. …… The Crown must establish beyond reasonable doubt that the accused had that knowledge, belief or intent and, if so, on that account the relevant conduct was dishonest. ……. There may be an intent to defraud, even though the defrauder does not intend to benefit himself. The essence of the meaning of the word "defraud" is detriment, or damage, or loss to the company defrauded by the use of dishonest means, not an advantage to the defrauder. The words "intent" and "intention" have the same meaning. They are familiar words and they carry their ordinary meaning. ………………………………………………………….. Whatever a person says about their intention may be looked at for the purpose of finding out what, in fact, that intention was at the relevant time. In some cases, a person's acts, or words, may themselves provide the most convincing evidence of their intention. A specific result is the obvious and inevitable consequence of a person's act. Where they deliberately do that act, you may readily conclude that they did that act with the intention of achieving that specific result. 1. In relation to counts 70 to 79 on the indictment, the following direction was given :- The Crown case in relation to counts 70 to 79 is similar. It is that the same scheme by which falls, or bogus, invoices were created for packing and/or transport plus GST, acted as a deception on the company, and it was a deception caused by the accused. The accused thereby obtained a financial advantage from this deception. The financial advantage was either permanent or temporary. Again, the Crown does not assert that all the money obtained pursuant to this scheme was spent by the accused on himself. Some may have been used on the company or given to Mr Bond. ……………………………………………………………………………. The Crown must prove beyond reasonable doubt that the accused obtained a financial advantage, namely, a particular sum of money alleged in a particular account. A financial advantage may be permanent or temporary. It includes obtaining money. The Crown does not have to prove that the accused personally benefited. The second essential element is that the Crown must prove beyond reasonable doubt the financial advantage was obtained as a result of deception. The Crown must prove beyond reasonable doubt that the accused perpetrated the deception intentionally to obtain the financial advantage, or recklessly. "Reckless" means foreseeing the possibility that, as a result of the deception, he would obtain a financial advantage and he, the accused, carried on the deception notwithstanding that possibility. The Crown alleges that the person being deceived was the company itself, not the individuals within it. ……………………. Essential element three is that the Crown must prove beyond reasonable doubt that the accused acted dishonestly in his deceptive conduct. Dishonest means that the accused acted dishonestly according to the standards of ordinary people. 1. The trial judge went on to identify the principal issue for the purposes of counts 1 to 69, namely whether the Crown could prove beyond reasonable doubt that the accused defrauded BHW. The trial judge identified the issue with respect to counts 70 to 79 as whether the accused obtained a financial advantage and whether the Crown could prove beyond reasonable doubt that the financial advantage was obtained as a result of deception. The trial judge stressed that the main issue for determination in relation to each and every count in the indictment was whether the accused was acting dishonestly. 2. The jury retired to begin deliberations at 11:18 am on 15 October 2015. One hour and twenty minutes later, the jury asked for the transcript of the evidence of Mr Bond and Mr Slobodetsky. The jury also asked for the accused's affidavit which was prepared for the civil proceedings and which had been read onto the record at trial. That material was provided and they recommenced their deliberations at 12:42 pm. They deliberated for the rest of that day and the next day (a Friday), up to 3:30pm when they caused a note to be sent to the judge, requesting further directions solely in relation to counts 70 to 79 inclusive. The note asked for the definition of a company and an explanation of "acting dishonestly in deceptive conduct". They also sought clarification of the elements of counts 70 to 79. 3. In order to provide those directions, the trial was adjourned to the Monday. After explaining that a company is a separate legal person, her Honour gave this direction :- Counts 70 – 79 allege that the company was deceived, not the owner or anyone else. Knowledge of the alleged scheme, or even participation in the scheme on the part of others, including Mr Bond, the owner and main shareholder, does not deprive the Crown of proof that the company was deceived. 1. Her Honour then repeated the directions she had previously given in relation to dishonesty. 2. The jury further retired at 10:10am. The jury returned at 2:19pm with verdicts of not guilty on counts 1 through 69, and verdicts of guilty on counts 70 through 79. Insight into the Jury's Deliberations 1. During the evening of the same day that the verdicts were delivered, the applicant received a message via Linkedin from a juror. The message claimed that none of the jury members "wanted to find you guilty." It went on to say that "they took the words intent out of those counts. They made count 70 – 79 about purely the fact that B and H was a separate entity and that the entity itself was defrauded and that people were not part of the judgement (sic). No matter how the monies were used was irrelevant. The fact that it had hit your account by way of deception (the invoices) meant it was a financial gain." 2. The juror's summary of the requirements of a charge under s 192E(1)(b) appear consistent with the directions the jury were given, in particular the italicised passages above. The jury were instructed that recklessness on the part of the applicant would suffice, that the company as a separate legal entity could be defrauded or deceived, and that a temporary financial advantage to the applicant, that is, monies in his account as a result of the false invoicing, satisfied the charge. Inconsistency of Verdicts? 1. The applicant's counsel submitted on the hearing of the appeal that the note indicated that the jury misunderstood or misapplied the mens rea required for s 192E(1)(b), which was relevantly the same as that required for s 176A. Thus, it was submitted that the acquittals on counts 1 through 69 could not be reconciled with the convictions on counts 70 through 79, such that it followed that the latter verdicts were inconsistent with the former. 2. The applicant's argument is on all fours with the discussion in Mackenzie v The Queen [1996] HCA 35; 190 CLR 348 at 365 – 368. The plurality judgment referred to the constitutional importance of the jury verdict and the limited circumstances under which such a verdict could be set aside. One was said to be where some insight into the jury's thinking casts doubt upon a verdict because it cannot logically stand together with another verdict. The applicant must demonstrate that no reasonable jury could have come to the conclusion that he was guilty in respect of counts 70 to 79, yet not guilty of counts 1 to 69. 3. As Simpson J (as she then was) pointed out in TK v R [2009] NSWCCA 151; 74 NSWLR 299 at [128], a consideration of a ground of appeal framed in this way takes account of all of the facts and circumstances of the particular case : MFA v The Queen [2002] HCA 53; 213 CLR 606 at [34]. "The focus of the inquiry is upon any explanation, not for the convictions, but for the acquittals. If such an explanation can be found … the verdicts of guilty may not be unreasonable." (per Simpson J, italics not in original) 4. A ready explanation is available for the acquittals on the charges under s 176A. The jury were entitled to regard Mr Bond's evidence with some scepticism in the light of Mr Slobodetsky's evidence and the emails demonstrating a concern on Mr Bond's part with the amount of tax being paid by the Australian arm of the company. The jury undoubtedly accepted that the false invoicing scheme was a deception, indeed that was never seriously in issue. Whether or not Mr Bond was entirely complicit in that scheme, the Crown case was left to the jury on the basis that the scheme imperilled the company's interests and that the applicant knew that it did. The jury may well have entertained a doubt that the applicant knew or believed that the company's interests were at risk, in circumstances where Mr Bond wished to minimise tax and the false invoicing scheme achieved that end. 5. Far from an inconsistency in the application of the mens rea requirements of each offence, the jury's verdicts demonstrate a conscientious approach to the directions of the trial judge and a careful consideration of all of the evidence. The jury rightly recognised that a temporary advantage to the applicant constituted by deposits into his private bank account as a result of a deception practiced intentionally or recklessly upon the company made out the charges under s 192E(1)(b) and they convicted accordingly. 6. I would dismiss the appeal against conviction. The Appeal Against Sentence: Manifest Excess? 1. The judge sentenced the applicant on the basis that the financial advantage represented by counts 70 to 79 totalled $269,291.00. The findings of fact for the purpose of sentence included that the applicant acted intentionally, the offences involved a degree of planning over a ten month period, the applicant held a position of trust which he abused, and whilst the amount of money was not particularly large, it was not recoverable. Her Honour concluded that the offending fell into the mid-range of objective gravity. 2. The applicant had no relevant criminal record. He was 54 years of age and supported his family financially but had lost employment as a result of his offending. His health was compromised by poor vision and migraine headaches. He was depressed at the time of sentencing. A measure of delay in commencing criminal proceedings and the onerous bail conditions imposed upon the applicant called for a reduction of the sentence. Her Honour also found special circumstances. None of these findings are challenged. 3. The applicant refers to six cases where sentences were imposed between 1997 and 2000 for fraud offences involving breaches of trust. The only factor in these cases to which the applicant draws attention is the amount of money the subject of the offending. The applicant also refers to a decision of her Honour's in 2015 relating to the defrauding of $1 million over a period of eight years. 4. A raw comparison between cases that are relatively similar to the circumstances of the applicant's offending does not establish manifest excess. The applicant must persuade this Court that the sentence is unreasonable or plainly unjust, so much so that an inference that the sentencing discretion has miscarried may be drawn: Dinsdale v The Queen (2000) 202 CLR 321, [2000] HCA 54 at [6]; Wong v The Queen (2001) 207 CLR 584, [2001] HCA 64 at [58]. 5. None of the allegedly relevant cases on which the applicant relies assist the applicant. Of the six cases cited, four were Crown appeals from the inadequacy of sentences imposed at first instance and two of those four related to counts carrying maximum penalties of five years and seven years, not ten years. Of the remaining two, one was a sentence concerning offences over a five week period which was described by this Court as "lenient". The other case concerned an appeal against the severity of a sentence, imposed after an early plea of guilty, which this Court also described as "lenient". 6. The amount of money defrauded is but one factor among many to be weighed in sentencing for fraud offences. Objective and subjective circumstances are infinitely varied. An aggregate sentence of four years for ten offences, each carrying a maximum penalty of ten years imprisonment, was well within the sentencing discretion. A non parole period of two years and six months is also entirely appropriate as a reflection of the minimum period in custody having regard to the totality of offending : see Stratford v R [2007] NSWCCA 279 and the cases referred to in the judgment of McClellan CJ at CL. 7. I would grant leave to appeal against the sentence but dismiss the appeal. ********** 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: 24 February 2017