Supreme Court New South Wales Medium Neutral Citation: R v Kitson [2019] NSWSC 1109 Hearing dates: 27 August 2019 Date of orders: 28 August 2019 Decision date: 28 August 2019 Jurisdiction: Common Law Before: Payne J Decision: 1. Impose a sentence of imprisonment of 4 years and 6 months commencing on 28 August 2019 and expiring on 27 February 2024. 2. Pursuant to s 19AB of the Crimes Act 1914 (Cth), impose a non-parole period of 3 years commencing on 28 August 2019 and expiring on 27 August 2022. Catchwords: CRIMINAL LAW – sentence – federal offenders – conspiracy to cause loss to the Commonwealth –objective seriousness near the top of the range – significant loss to the Commonwealth – significant degree of planning – persistent course of conduct – early plea of guilty – [redacted] – good prospects of rehabilitation Legislation Cited: Crimes Act 1914 (Cth), ss 16A, [redacted], 16F, 17A Criminal Code (Cth), s 135.4(3) Evidence Act 1995 (NSW), s 191 Cases Cited: Bennett v R [2015] NSWCCA 56 Chang v R [2016] NSWCCA 296 Compania General De Tabacos De Filipinas v Collector of Internal Revenue 275 US 87 (1927) Dickson v R [2016] NSWCCA 105 Hili v The Queen (2010) 242 CLR 520; [2010] HCA 45 J Sakovits v R; R Sakovits v R [2014] NSWCCA 109 Kristensen v R [2018] NSWCCA 189 Liles v R (Cth) [2014] NSWCCA 289 Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25 Olbrich v The Queen (1999) 199 CLR 270; [1999] HCA 54 R v Agius; R v Zerafa [2012] NSWSC 978 R v Boughen; R v Cameron [2012] NSWCCA 17 R v Chang [2017] NSWDC 429 R v Hawkins (1989) 45 A Crim R 430 R v Ida Ronen, Nitzan Ronen, Izhar Ronen [2006] NSWCCA 123 R v Issakidis [2018] NSWSC 378 R v Mereb; R v Younan [2014] NSWCCA 149 Tyler v R; R v Chalmers [2007] NSWCCA 247 Category: Sentence Parties: Regina (Crown) Joshua Meredith Kitson (Offender) Representation: Counsel: P Neil SC / K Curry (Crown) M Dennis SC / P Butterfield (Offender) Solicitors: Commonwealth Director of Public Prosecutions (Crown) City Legal Solicitors (Offender) File Number(s): 2018/00216222 Publication restriction: (1) Pursuant to s 7 of the Court Suppression and Non-publication Orders Act 2010 (NSW) the parts of these reasons for judgment which are marked as redacted on the file copy of the judgment initialled by Payne JA are not to be published (other than to the parties and their legal representatives) until further order of the Court. (2) Order (1) is made on the ground specified in s 8(1)(c) of the Act. (3) Pursuant to s 11(2) of the Act, order (1) applies throughout the Commonwealth of Australia. Judgment – EX TEMPORE [Amended in accordance with the principles in Bar-Mordecai v Rotman [2000] NSWCA 123 at [194]] 1. PAYNE J: Mr Joshua Meredith Kitson has pleaded guilty and appears before me to be sentenced for the following offence pursuant to s 135.4(3) of the Criminal Code (Cth): "Between about 1 March 2014 and about 18 May 2017 at Sydney and elsewhere in the State of New South Wales, did conspire with others, namely Simon Paul Anquetil, Adam Michael Cranston, Lauren Anne Cranston, Devyn Michelle Hammond, Dev Menon, Jason Cornell Onley, Daniel Rostankovski, with the intention of dishonestly causing a loss to a third person, namely the Commonwealth." 1. The maximum penalty is 10 years' imprisonment and/or 600 penalty units. Mr Kitson pleaded guilty at the first available opportunity. An agreed statement of facts pursuant to s 191 of the Evidence Act 1995 (NSW) became Exhibit 1 before me. In what follows I have summarised those agreed facts for the purposes of sentence. I have also taken into account all of the other material tendered by the parties on sentence and will refer to it where appropriate. 2. It bears emphasising at the outset that the facts in Exhibit 1 and found by me relate only to Mr Kitson's plea of guilty to the conspiracy charge. That plea of guilty and the findings of fact made in relation to Mr Kitson do not represent findings, even tentative findings, about any of the remaining alleged conspirators or any other person. I do not intend to make and have not made any findings about any person other than Mr Kitson. The other alleged conspirators are presumed innocent of any charge until it is proven otherwise. Relevant facts 1. In September 2016, the Australian Federal Police ("AFP") commenced an investigation into a suspected conspiracy to dishonestly cause a loss to the Commonwealth. The AFP''s investigation involved extensive electronic surveillance, the seizure of a significant number of documents and digital devices and detailed financial analysis. Fourteen individuals have been charged with offences arising from the above investigation. 2. The conspiracy to which Mr Kitson was a party involved the establishment and operation of a payroll services company, Plutus Payroll Australia Pty Ltd ("Plutus") and a number of other related subcontracting companies, controlled by the conspirators. The object of the conspiracy was to deprive the Australian Taxation Office ("ATO"), which represents the Commonwealth for the purposes of the charged offence, of monies which should have been remitted to it. The funds not remitted comprised "Pay As You Go Withholding" ("PAYGW") amounts, which broadly speaking are amounts withheld from salary and wages payments made to employees and Goods and Services Tax ("GST") amounts which were collected and should have been paid to the ATO. 3. Over a three year period, Plutus collected a total of $141,291,923.08 in PAYGW and GST from its clients that it was legally required to remit to the ATO. At least $105,625,304.36 of that amount was misappropriated by the conspirators. It is agreed that the amount misappropriated by the conspirators represented 74.7% of all PAYGW and GST amounts collected by Plutus. Only $30,883,342.47 was ever remitted to the ATO and a further $4,783,276.25 was also recovered by the ATO using garnishee powers. 4. Between February and March 2014, Messrs Onley, Anquetil, Cranston and Larcombe (who is now deceased) met with Mr Kitson and introduced him to a scheme they had devised that involved operating a payroll business as a means to misappropriate PAYGW and GST amounts that were payable to the ATO. The PAYGW amounts were collected in relation to payroll services provided by Plutus to legitimate clients. The payroll services supplied by Plutus to those legitimate clients were also a taxable supply attracting GST. Plutus was responsible for collecting and remitting that GST to the ATO. 5. It was agreed that Mr Anquetil would set up the payroll services company and Mr Kitson would help manage and conduct the company. Mr Kitson understood he was responsible for building up the apparently legitimate front office business, being Plutus. Plutus would receive payments from clients. Mr Kitson understood other conspirators would be responsible for managing subcontracting companies which were essential to the operation of the conspiracy. 6. Plutus was incorporated on 23 April 2014 with Mr Anquetil as the sole director. Plutus advertised its services as providing a payroll administration service. 7. Mr Kitson, while not initially employed by Plutus, acted as a consultant and recruited its legitimate clients. Eventually a large number of corporate entities and government agencies became clients of Plutus. Mr Kitson sourced these clients for Plutus using connections through his employer at that time, PeopleBank, where he was a Senior Account Manager. From December 2014, Mr Kitson was employed full-time by Plutus as a General Manager. 8. The principal incentive for companies and government agencies to become clients of Plutus was that Plutus did not charge a service fee. Plutus was able to afford not to charge a service fee because it was misappropriating PAYGW and GST amounts it was required to remit to the ATO. 9. Plutus had contractual arrangements with the legitimate corporate entities and government agencies that were its clients. These contracts governed Plutus' provision of payroll and labour hire services to these companies. Plutus subcontracted the provision of these services to companies incorporated and controlled by the conspirators which were referred to by the conspirators as the 'bots' or 'bottom companies'. The directors appointed to these 'bots' or 'bottom companies' were financially unsophisticated people selected by the conspirators as being unlikely to ensure compliance with relevant corporate responsibilities, including that of remitting PAYGW and GST amounts collected to the ATO as required. 10. Mr Rostankovski, under the direction of Mr Cranston, Mr Menon and Mr Onley, became responsible for recruiting and managing the directors of the 'bots' or 'bottom companies'. Part of his role was to ensure these directors had no unsupervised involvement in the affairs of the 'bots' or 'bottom companies'. Although the directors were legally responsible for remitting funds collected to the ATO, it was the conspirators who maintained effective control over the 'bots' or 'bottom companies'. The directors of the 'bots' or 'bottom companies' had no role in the actual management of these companies but instead were paid to sign documents as and when required and were used by the conspirators to conceal their involvement in those companies. 11. Ms Cranston and Ms Hammond operated the accounts for the 'bots' or 'bottom companies' with the agreement of the other conspirators. In liaising with Plutus staff, accountants and other third parties, Ms Cranston and Ms Hammond signed off as if they were the appointed directors or as 'bookkeepers' assisting the directors. Ms Cranston and Ms Hammond introduced themselves as directors of the 'bots' or 'bottom companies' in telephone communications. 12. The subcontracting arrangement between Plutus and the 'bots' or 'bottom companies' was a mechanism to: 1. transfer the gross payroll to a group of companies controlled by the conspirators from which the PAYGW and GST amounts could easily be misappropriated; and 2. transfer the PAYGW and GST liabilities to these companies, which would over time accrue substantial debts to the ATO and eventually be liquidated leaving the debts unpaid. In the event of any investigation or audit action being undertaken by the ATO, it would be the directors of the 'bots' or 'bottom companies' who would be responsible for any outstanding tax debt. 1. In summary, the conspiracy involved the following steps: 1. The companies and government agencies who contracted with Plutus made regular transfers to Plutus of funds equivalent to their gross payroll. Plutus was obliged to pay the wages and salaries of the relevant employees and contractors and withhold and remit to the ATO the required PAYGW amount. GST was collected from the legitimate companies as a taxable supply for the services Plutus provided. Plutus was also obliged to remit the GST it collected to the ATO. 2. Between July 2014 and March 2016, Plutus transferred the gross payroll monies, in full, to the 'bots' or 'bottom companies' pursuant to the subcontracting agreements. The 'bots' or 'bottom companies' paid the relevant contractors and employees their net wages and superannuation. However, instead of remitting all of the PAYGW and GST amounts collected to the ATO, a large proportion of these funds were misappropriated. 3. The 'bots' or 'bottom companies' paid the funds so misappropriated to other entities controlled by Mr Anquetil, Mr Onley and Mr Cranston, as payment for apparently legitimate 'invoices'. The services for which the invoices were allegedly raised were never provided. Payments were also made to individuals, including Mr Kitson, and also in some cases payments were made to Plutus. 4. In 2016, Plutus began retaining a portion of the PAYGW and GST amounts before the gross payroll was remitted to the 'bots' or 'bottom companies'. Plutus did not remit the amount so withheld to the ATO. The result was that additional amounts of PAYGW and GST were misappropriated. 5. While Plutus regularly lodged Business Activity Statements ("BAS"), throughout the period of the conspiracy, the 'bots' or 'bottom companies' either lodged their BAS late (in some cases up to 13 months late) and significantly under-declared the amounts payable to the ATO or did not lodge any BAS at all. A few of the 'bots' or 'bottom companies' lodged a BAS after they had been subject to garnishee orders from the ATO. 6. On 24 January 2017, the ATO garnisheed five of the seven 'bots' or 'bottom companies'' accounts. Subsequently, the conspirators managed their obligations to Plutus' clients by paying wages directly from Plutus. 1. Between January and May 2017, a number of discussions between the conspirators were lawfully recorded. A significant amount of time was spent by the conspirators discussing how best to avoid ATO attention. Plans were made to wind up Plutus and the 'bots' or 'bottom companies'. 2. Between December 2016 and the end of January 2017, video and audio footage was lawfully recorded on covert surveillance devices. In these recordings, Ms Cranston and Ms Hammond operated the email and bank accounts of the 'bots' or 'bottom companies', posing as directors of those companies, and arranged the misappropriation of PAYGW and GST amounts which were required to be remitted to the ATO. 3. On 1 February 2017, one of Mr Kitson's co-conspirators made a demand of the other conspirators for a $5 million payment. He falsely represented he was acting on the instructions of the directors of the 'bots' or 'bottom companies', threatened media exposure of the conspiracy and also threatened violence. Mr Kitson attended a series of meetings with the other conspirators regarding how to respond to the demand and about the drafting of a deed to conceal the conspiracy. After the payment of $5 million was made a further demand was made for an additional $20 million. Over 12 weeks, a total of $24.4 million of PAYGW and GST amounts owed to the ATO was transferred from Plutus to a firm, Lands Legal, in response to the demands. Mr Kitson personally authorised these payments. 4. On 26 April 2017, the ATO served a garnishee order on bank accounts operated by Plutus. The AFP arrested Mr Kitson and his co-conspirators on 17 and 18 May 2017. Mr Kitson has been on bail since that date. Mr Kitson's role in the conspiracy 1. Mr Kitson was not the designer of the conspiracy but was actively engaged from an early stage. Mr Kitson performed a key role in concealing the conspiracy from legitimate clients and Plutus staff. He knew that Plutus' clients were not aware that Plutus had subcontracting arrangements with the 'bots' or 'bottom companies'. 2. Mr Kitson was aware that PAYGW and GST amounts, which were required to be remitted to the ATO, were being misappropriated as part of the conspiracy. He was aware of discrepancies between the information contained in group certificates provided to unwitting employees and the amounts which were actually remitted to the ATO. Mr Kitson knew of the scale and volume of gross wages received from clients. 3. In June 2016, after the sale of Plutus to another company controlled by two of Mr Kitson's co-conspirators, Mr Anquetil suggested that the management structure of Plutus should consist of three general managers, being Mr Kitson and two other Plutus employees. Mr Kitson actively managed these other general managers. Whilst the other general managers were on the same ostensible level of authority, they were unaware of the Plutus conspiracy. 4. Following the ATO garnisheeing some of the 'bots' or 'bottom companies'' bank accounts in late January 2017, Mr Kitson met and liaised with Mr Menon and instructed his staff to make payments to contractors directly from Plutus, rather than from the 'bots' or 'bottom companies'. By this time, Mr Kitson was broadly aware of the extent of the misappropriation effected by the conspiracy. In a recorded conversation in February 2017, Mr Kitson suggested to Mr Cranston that the misappropriated amount was about $60 million, to which Mr Cranston replied that he thought "it was more like 80 [million]". 5. Mr Kitson actively took steps to conceal the conspiracy, including attempted and actual destruction of records. Between February and May 2017, Mr Kitson participated in a series of discussions with other conspirators. These discussions were recorded and lawfully intercepted. Mr Kitson's knowledge of the Plutus tax fraud scheme, his active participation in and implementation of this scheme and steps to conceal the conspiracy are demonstrated in these discussions. Some of the key matters discussed in these conversations were as follows: 1. The conspirators had decided that Plutus needed to be shut down and discussed how this could be done: 1. On 23 February 2017, Mr Kitson suggested that Plutus start charging a fee for what was previously free, which would ensure that legitimate customers would leave Plutus. Mr Kitson said this would "purge" legitimate customers. Then, the "new owners" of Plutus (referring to the company controlled by two of the conspirators) could say it was a "terrible call" implementing a fee, necessitating them exiting the market. 2. Mr Kitson advised the others that the contractors would be furious with Plutus management once it announced that a fee was being introduced. Mr Kitson would himself say he was furious about the fee and leave the business. 1. On recordings made between 21 and 23 February 2017, Mr Kitson proposed that certain redundancies be made within Plutus, including pretending that he be made redundant. Mr Kitson would then sue Plutus for half a million dollars. Mr Kitson explained that the ostensible legal dispute with Plutus would allow him subsequently to argue that he did not know about its illegitimate dealings. 1. On 1 March 2017, in accordance with Mr Kitson's proposal, the other general managers and Mr Kitson were made redundant, with Mr Onley reading out a script that Mr Kitson had written for him. 2. Throughout March and April 2017, Mr Kitson continued to be involved in running Plutus. 1. Mr Kitson, by agreement with his co-conspirators, authorised regular large payments from Plutus to a number of entities. As disclosed on a recording in February 2017, these payments included: 1. weekly $250,000 payments to the company controlled by two of the conspirators, Mr Onley and Mr Cranston; 2. Clamenz Legal bills, including a $90,000 invoice; and 3. the large payments made to Lands Legal I have earlier described. 1. On 20 March 2017, Mr Kitson, Mr Menon and Mr Anquetil discussed reducing the weekly $250,000 payments to the company controlled by two of the conspirators, to $125,000 per week to avoid suspicion. 2. On 28 March 2017, Mr Kitson informed Mr Onley he had dropped the regular weekly $250,000 payments to $125,000. 1. Between February and May 2017, Mr Kitson also performed a key role in concealing the conspiracy, in his communications with the Office of State Revenue ("OSR"), contractors, clients and Plutus staff. He made active attempts to destroy Plutus' business records. 2. On 23 February 2017, Mr Kitson falsely represented to the OSR investigator that Mr Larcombe was the best contact person for two of the 'bots' or 'bottom companies', knowing Mr Larcombe was deceased at that time. 3. Between 21 and 23 February 2017, Mr Kitson suggested to the other conspirators the best way to destroy and conceal records. 4. On 20 March 2017, Mr Kitson, Mr Anquetil and Mr Menon discussed how to remove and destroy incriminating electronic data. 5. On 13 April 2017, Mr Kitson explained to Mr Menon, Mr Cranston and Mr Onley that he had commenced attempts to destroy and conceal records, by having a Network Attached Storage drive installed. He planned to move all the records off Google Drive on to that device, not back-up the records, and then destroy the device. 6. On 3 May 2017, Mr Anquetil and Mr Kitson attended the Plutus office in Kings Cross and 'wiped clean' five laptops, and inserted a tool to ensure that no data could be recovered. They placed a link to the Network Attached Storage drive on the desktop of the laptops, to make it appear as if the Network Attached Storage drive was always used by staff (rather than Google Drive). Instead of destroying the Network Attached Storage drive as discussed in the meeting on 13 April 2017, Mr Anquetil encrypted the Network Attached Storage drive, and made it seem as if the Network Attached Storage drive had been hacked. 7. Between 3 and 5 May 2017, Mr Kitson wiped an additional laptop 'clean'. He then paid a North Sydney company to unsuccessfully attempt to recover the data, thereby providing confirmation that the records were destroyed. 8. Mr Kitson took five remaining laptops from the Plutus office and hid them at a neighbour's apartment. These laptops were not wiped. On 5 June 2017, Mr Kitson provided these laptops to the AFP. Mr Kitson's plan to transfer records to offshore-based accounting systems never came to fruition. Mr Kitson's financial gain 1. As a result of the conspiracy, Mr Kitson received an illegitimate financial gain of approximately $1.3 million. This included amounts paid directly by Plutus, as well as 'salary' amounts via the 'bots' or 'bottom companies' and also other large payments received from companies controlled by another co-conspirator which were used by the other conspirators to launder funds. 2. During the final stages of the conspiracy, Mr Kitson told the other conspirators that he would take an additional bonus of $500,000. On 13 April 2017, Mr Kitson confirmed he had paid himself three tranches of a $125,000 'bonus' payment and that he intended to pay himself a further $210,000 which would be disguised as a redundancy payment. The additional $210,000 was not obtained by Mr Kitson as he had not yet authorised the payment when the AFP raided Plutus. 3. On 17 May 2017, Mr Kitson was present during an execution of a search warrant on the Plutus office in Kings Cross, and then, later that day, an execution of a search warrant on his residential premises in Surry Hills. Amongst the items seized was the Network Attached Storage drive on which Mr Kitson had transferred Plutus' records. [redacted]. Consideration 1. The offender is to be sentenced for the offence against Commonwealth law and the Court is required to apply the terms of Part IB of the Crimes Act 1914 (Cth). The governing principle under s 16A(1) of the Crimes Act is the imposition of a sentence which is of a severity appropriate in all the circumstances of the offence. The Court must consider the matters identified in s 16A(2) of the Crimes Act, to the extent that they are relevant. 2. Given the length and detail of the submissions made by the Crown and the offender I will deal with the respective submissions when addressing each of the matters required to be taken into account by Part IB of the Crimes Act. 3. The offence with which Mr Kitson is charged, s 135.4(3) of the Criminal Code (Cth), carries a maximum penalty of imprisonment for 10 years and/or a fine of 600 penalty units. The maximum penalty serves as a yardstick: Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25. It is important to have regard to the maximum penalty to determine the degree to which the offender's conduct offends against the legislative object of ensuring compliance with taxation laws. In addressing this question, care should be taken to ensure that what the offender actually did is considered, rather than any shorthand labels: Olbrich v The Queen (1999) 199 CLR 270; [1999] HCA 54. I take the maximum penalty into account as an important guidepost. 4. The offending involved Mr Kitson's participation with his co-conspirators in a large-scale operation to defraud the ATO. The scheme was dishonest from the outset and was devised with the sole purpose of collecting PAYGW and GST amounts from other entities and not remitting these amounts to the ATO as required. The offending involved a sophisticated degree of planning, complex financial transactions and a significant level of dishonesty over several years, resulting in a substantial loss to the Commonwealth of over $105 million. 5. I take into account the approach to sentencing for a conspiracy charge which was summarised by Simpson J (Spigelman CJ and Harrison J agreeing) in Tyler v R; R v Chalmers [2007] NSWCCA 247 at [78]-[85]. It was held in Tyler at [83]-[84] that sentencing for specific acts alone would: "… be a negation of the complex inter-connection between the various participants, and the organisational nature of a conspiracy. It would represent too literal an application of the decisions that identify the "role" of any participant as a relevant factor in the sentencing exercise. It would be to ignore the essential feature of the offence of conspiracy – the agreement to participate in an organised criminal activity. That is not to say that the physical acts of the offender whose sentence is under consideration are irrelevant. They are relevant, as one part of a complex tapestry…" 1. I proceed on the basis that the tasks of the various participants should be seen in combination as having features which were sophisticated, coordinated, premediated, industrious and diversified. The conspiracy demonstrated the 'dangerousness' of individuals working in concert for a common unlawful end, being to retain funds required to be remitted to the Commonwealth for themselves. I also proceed on the basis that it is axiomatic that general deterrence is an important consideration in relation to white collar offences which are difficult to detect, investigate and successfully prosecute. 2. I turn now to the list of factors I must take into account under s 16A(2) of the Crimes Act. I will ignore those factors that the parties agreed did not apply here. Section 16A(2)(a): The nature and circumstances of the offence 1. From the outset, Mr Kitson understood that while Plutus was intended to look like a tax-compliant company, his co-conspirators would create a structure involving 'bots' or 'bottom companies' as subcontractors which were incorporated for the purpose of misappropriating PAYGW and GST amounts which were required to be remitted to the ATO. 2. The objective seriousness of the offending is towards the top of the range of objective seriousness for offences of this kind. I accept the Crown's submission that Mr Kitson's conduct extended over a three year period and involved a significant level of premeditation, planning and deception: 1. The conspiracy involved the conspirators setting up a large number of corporate entities via which it could be implemented and layers could be put in place to conceal their involvement. 2. The conspiracy's success depended upon the appearance of Plutus as a legitimate company so that it could attract a large number of legitimate clients. 3. The conspiracy involved creating a "paper trail" giving the appearance of legitimacy. 4. The conspiracy deliberately took advantage of what the conspirators knew about delays in tax administration to misappropriate funds required to be remitted to the ATO. 1. Mr Kitson played a significant and integral role in the implementation of the conspiracy: 1. Mr Kitson was a co-conspirator from the genesis of the conspiracy in March 2014. 2. Mr Kitson was also responsible for marketing Plutus to contractors and recruitment agencies. From December 2014, he was employed full-time as the General Manager of Plutus and was responsible for managing Plutus' general operations and staff. Mr Kitson was instrumental in concealing the true nature of the conspiracy from Plutus staff. Mr Kitson was the conduit between Plutus and the other conspirators. 3. In addition to his involvement in the planning and implementation phase of the conspiracy, Mr Kitson was also critical to the action taken by the conspirators in an attempt to avoid detection by the authorities. Mr Kitson devised the idea of how best to "pull Plutus out of the market" without what he described as a "media circus". Mr Kitson performed relevant banking transactions from Plutus' account on instruction from the co-conspirators and discussed steps to destroy evidence in an attempt to avoid detection. He participated in a deception upon his fellow Plutus employees by preparing a script for his co-conspirator to deliver to the staff as to why they would be made redundant. 4. Between February and May 2017, Mr Kitson took numerous steps to prevent Plutus' data from being seized by law enforcement agencies or regulators. The offender engaged in this conduct when it was clear that the ATO and the OSR were conducting an investigation of the companies. 1. I find that Mr Kitson's position in the hierarchy was slightly below the principal architects and beneficiaries of the conspiracy. His role may be best described as an essential facilitator of the conspiracy. I accept Mr Kitson's submission that he was not the "originator" or "brains trust" of the scheme. Mr Kitson's role, however, should be characterised as both significant and essential to the success of the scheme. 2. The amount of money involved and the length of time over which the fraudulent offending occurred are significant relevant considerations when determining the objective seriousness and gravity of fraud-related offending: R v Hawkins (1989) 45 A Crim R 430. In this instance, the conspiracy resulted in a significant loss to the Commonwealth in the sum of $105,625,304.36. 3. I find that Mr Kitson was not aware of the precise amount of the loss to the Commonwealth occasioned by the conspiracy but that he was aware during the currency of the conspiracy that approximately $80 million had been misappropriated. 4. I find that Mr Kitson was aware that large payments were being made from Plutus for the benefit of his fellow conspirators and others. Mr Kitson was personally responsible for authorising the payment of $24.4 million which was required to be remitted to the ATO to the law firm, Lands Legal, in response to the demand I have described above. 5. The conspiracy continued for approximately three years from 1 March 2014 to 18 May 2017 when it was brought to an end. I take this significant period into account when considering the criminality of the offence. 6. I find that Mr Kitson was motivated by the personal financial gain he would receive from his involvement in the conspiracy and that he received over $1.3 million from his participation in the conspiracy. Section 16A(2)(c): If the offence forms part of a course of conduct consisting of a series of criminal acts of the same or a similar character – that course of conduct 1. In R v Agius; R v Zerafa [2012] NSWSC 978 at [62] Simpson J found that the offenders in a conspiracy to defraud the Commonwealth, which included the filing of false income tax returns over a number of years, had engaged in a course of criminal conduct for the purposes of s 16A(2)(c). 2. The same conclusion should be reached here. Mr Kitson's conduct took place over a period of several years and involved the continued maintenance and operation of the Plutus front office which was integral to the success of the conspiracy. This represented a persistent course of conduct. Section 16A(2)(e): Any injury, loss or damage resulting from the offence 1. As US Justice Oliver Wendell Holmes said in Compania General De Tabacos De Filipinas v Collector of Internal Revenue 275 US 87 (1927) at 100: "Taxes are what we pay for civilized society" 1. There is no doubt that revenue fraud on the scale here has a potentially corrosive effect on our society. The injury suffered is a collective financial injury. The $105 million loss to the Commonwealth will need to be made up from additional taxes levied on other taxpayers or by cuts to government spending. I take these matters into account. Sections 16A(2)(f) and (g): The degree to which the person has shown contrition for the offence and the offender's plea of guilty 1. The Crown accepted that the plea of guilty was entered by Mr Kitson at the earliest opportunity. Mr Kitson is entitled to the full utilitarian value for that early plea. This is especially so in circumstances where on the evidence before me he is the only one of the alleged conspirators [redacted]. 2. Frauds on the revenue are notoriously difficult to detect and to prosecute. Mr Kitson could, had he chosen, have forced the Crown to spend significant time and resources in proving the offence. Despite the apparent strength of the Crown case, Mr Kitson could have engaged in lengthy and potentially complex technical challenges to the case. I find that Mr Kitson is entitled to a significant discount on the sentence, which I calculate as 25% of the sentence which otherwise would have been imposed, by reason of the contrition shown and the desire to facilitate the course of justice that his early plea represents. [redacted] 1. [redacted]. 2. [redacted]. Sections 16A(2)(j) and (ja): The deterrent effect that any sentence or order under consideration may have on the person or on other persons 1. Taxation crime is easy to commit, difficult to detect and, as I have said, comes at a great cost to the community both in terms (in this case) of the amount involved and the effect it has on other taxpayers. This conspiracy was calculated, systematic and persisted over a lengthy period of time. I proceed on the basis that the sentence imposed on Mr Kitson should encompass a significant component for general deterrence. 2. I also take into account that the imposition of a full-time custodial sentence is likely to have a significant impact upon Mr Kitson who has never spent time in custody. Section 16A(2)(k): The need to ensure that the person is adequately punished for the offence 1. Section 17A of the Crimes Act provides that a court shall not pass a sentence of imprisonment on any person for a federal offence unless the court, after having considered all other available sentences, is satisfied no other sentence is appropriate in all the circumstances of the case. Sentences for offences in the nature of tax evasion should have both a deterrent and punitive effect. This is particularly so in cases such as the present where the fraud is calculated and systematic, and is persisted in for some time. 2. I have concluded that a sentence of full-time imprisonment is the only appropriate sentence to impose in this case. Given the gravity and objective seriousness of the offending, a significant sentence of full-time imprisonment should be the starting point before the application of relevant discounts. Senior Counsel for Mr Kitson accepted that the imposition of a full-time custodial sentence was here inevitable. Section 16A(2)(m) and (n): The character, antecedents, age, means and physical or mental condition of the person and the prospects of rehabilitation of the person 1. Mr Kitson is 37 years old and has no relevant criminal convictions. He is an intelligent and experienced professional person who has had a career in recruitment. I accept that Mr Kitson is entitled to be sentenced on the basis that he is a person of prior good character. Senior Counsel for Mr Kitson accepted, however, that prior good character is of less weight in sentencing for a matter of this nature. 2. Mr Kitson relied upon a psychiatric report of Dr Furst. I accept the contents of that report in circumstances where no challenge was made by the Crown to any part of it. That report identified some difficulties in the past with mental health issues. Senior Counsel for Mr Kitson accepted there was no causal connection between these matters and the offending behaviour nor any reason that the matters raised warrant any particular weight in mitigation of penalty. It was accepted that mental health issues rise no higher than being part of the offender's subjective background and circumstances. I agree. 3. I make the following findings about Mr Kitson's subjective case: 1. Mr Kitson has a history of emotional difficulties. He saw both psychologists and psychiatrists in relation to mental health concerns during his adolescence. Mr Kitson has suffered from anxiety and panic attacks. 2. Mr Kitson has a history of substance abuse. Mr Kitson's major drug of addiction has been cannabis, which he has smoked over the last several years. 3. Mr Kitson told Dr Furst that he has thought a lot about his actions in relation to the conspiracy before the Court, both by himself and with therapists. Mr Kitson told his psychologist that: "I wanted to develop a persona. Success and wealth. I thought that was my purpose and it would provide happiness. I was depressed even before Plutus. I was in IT recruitment for about 10 years. $250,000 per year. I didn't feel happy. I had a pretty girlfriend, a Porsche and an expensive apartment. I was still not happy … I had an emotional breakdown after the [AFP raids in 2017]. … I came to the conclusion that wealth was not the answer … I spent months at home after the raids. I couldn't do anything." 1. In Dr Furst's opinion, which I accept, Mr Kitson's depression in the period leading up to his employment at Plutus, around 2014 or earlier, was more properly a description of his lack of fulfilment or dissatisfaction in his chosen career. 2. I accept Dr Furst's opinion that it is likely that Mr Kitson's underlying personality is somewhat introverted and anxious and that Mr Kitson's more severe symptoms of depression and anxiety developed after the police raids in 2017 and after he was arrested. 3. Mr Kitson's condition over the past 18 months has required treatment with antidepressant medication and regular sessions with a clinical psychologist. 4. In relation to his current work, Mr Kitson has been applying his knowledge of technology and automation and has started a business, which allows him to help people with a disability automate their homes through voice commands. He feels much happier in his current work, which gives him a sense of purpose and satisfaction. 5. I accept Dr Furst's opinion that Mr Kitson has gained insight into his offending, as evidenced by his account of his offending to the AFP and his reflections in relation to his offending actions, both by himself and with therapists. 1. I also take into account the following character references: 1. Mr Kitson's mother, Mrs Kitson, explained in a helpful way Mr Kitson's early life and upbringing. Mrs Kitson explained that her son is and always has been loved and supported. Subsequent to being charged, Mr Kitson has been seeing a therapist and has become more self-aware. It is relevant that Mr Kitson has the continued support of a close and loving family. 2. Mr Lipski, a friend who suffered from a significant injury, explained that Mr Kitson has worked with him to implement a fully voice-controlled automation system into his home that allows him to control every aspect of his environment entirely through voice control. The system Mr Kitson implemented has now been rolled out into other homes of people with disabilities. Mr Kitson has developed a business model that allows him to do this at no cost for those with disabilities, while charging others for his services. Mr Lipski expresses hope that he will be able to work together with Mr Kitson again as soon as he is available. 3. Ms Smith, a family friend and teacher, explained that she has known Mr Kitson since he was in Year 5. She expressed the view that Mr Kitson is and was a caring and good friend to his peers and a loving son and brother. Ms Smith expressed the view that "the whole matter has been a huge and permanent wake-up call". 4. Ms Mudgway has worked with Mr Kitson for the past four years. In the time Ms Mudgway has worked with Mr Kitson, she has witnessed change. On Ms Mudgway's recommendation, Mr Kitson has begun to learn greater self-responsibility. 1. On all of the evidence I am cautiously optimistic that Mr Kitson is unlikely to re-offend in a similar nature in the future, as he appears to have adopted a different outlook in life. I find that Mr Kitson has good prospects of rehabilitation for the following reasons: 1. He is a person of intelligence and ability who has the support of close and loving family and friends. 2. His approach to these proceedings indicates both genuine remorse and insight into the corrosive effect of his offending behaviour. 3. He has found useful and worthwhile endeavours in his new business in assisting people with a disability. 4. There has been no further offending in the period since the conspiracy was uncovered in May 2017. Section 16A(2)(p): The probable effect that any sentence or order under consideration would have on any of the person's family or dependents 1. In the absence of exceptional circumstances, potential hardship to Mr Kitson's family does not effect any substantial reduction in a sentence of imprisonment. Senior Counsel for Mr Kitson accepted that no exceptional circumstances exist. Accordingly, this principle was not enlivened. 2. The probable effect of the sentence upon the offender's family and dependants remains a relevant factor to take into account as part of the general mix of subjective features and I take it into account in that way. Comparable cases 1. In Hili v The Queen (2010) 242 CLR 520; [2010] HCA 45 the High Court reiterated that consistency in federal sentencing is achieved with regard to what has been done in other cases through the work of the intermediate courts of appeal. Accordingly, the Crown provided a summary number of decisions of intermediate courts of appeal. It was not suggested that any of the cases in the schedule were comparable in the sense that they were factually similar in all respects to the current offence. The schedule of cases said to be comparable were: 1. Dickson v R [2016] NSWCCA 105. The offender was found guilty following a trial of two serious offences. Count 1 related to a complex tax fraud with net losses to the Commonwealth in excess of $100 million. The other count related to money laundering of over $63 million. The offender's personal gain was found to be $19,616,996.37. The offending occurred over a period of about 6 years. In relation to the comparable offence, Mr Dickson ultimately received a sentence of imprisonment of 9 years. Because of the money laundering offence he received a much lengthier head sentence and a single non-parole period of 9 years and 3 months was imposed. Mr Dickson obtained a significantly greater personal gain than Mr Kitson. [redacted]. 2. R v Issakidis [2018] NSWSC 378. This case involved Mr Dickson's co-conspirator. Mr Issakidis' personal gain was approximately $15,738,020. Like Mr Dickson he faced two serious charges. On the comparable charge he was sentenced to imprisonment for 7 years. Because of the lengthy sentence imposed for money laundering a single non-parole period of 7 years and 6 months was imposed. [redacted]. 3. Chang v R [2016] NSWCCA 296; R v Chang [2017] NSWDC 429. These cases involved two separate but related conspiracies contrary to s 135.4(3) of the Criminal Code. The offender pleaded not guilty to the 2016 case, and guilty in 2017 case. The amount involved in the 2016 case was $2.994 million and in the 2017 case $10.5 million. The offender did not appear to obtain any financial benefit beyond his employment with the company. A single non-parole period of 4 years and 6 months was imposed. The principal difference between this case and the present case is that two serious offences were involved and thus the maximum penalty available was much higher. 4. Bennett v R [2015] NSWCCA 56. Mr Bennett pleaded guilty to two offences of conspiracy. In substance, there was only one conspiracy alleged – the need for two counts on the indictment arose from the changed statutory provisions. About $1.5 million was involved. A total effective sentence was imposed of 4 years and 9 months with a non-parole period of 2 years and 4 months. 5. Liles v R (Cth) [2014] NSWCCA 289. The offender was an accountant who devised tax schemes and pleaded guilty to four offences relating to two conspiracies. A head sentence was imposed of imprisonment for 5 years and 9 months. A single recognizance release order was imposed for all counts of 3 years and 6 months. 6. J Sakovits v R; R Sakovits v R [2014] NSWCCA 109. This involved two of Ms Liles' co-conspirators. They pleaded not guilty to two counts. As above, the necessity for two separate counts was brought about by legislative change. The amount involved was between $1 and $2 million. The eventual effective sentence was imprisonment for 5 years to be released after 2 years and 6 months upon entering into a recognizance. 7. R v Mereb; R v Younan [2014] NSWCCA 149. The offenders were found guilty of one count of conspiracy contrary to s 135.4(3) of the Criminal Code. The amount involved was approximately $1 million. The conspiracy occurred over approximately five years. The sentence imposed was imprisonment for 4 years with a non-parole period of 2 years. A Crown appeal against sentence was unsuccessful. 8. R v Boughen; R v Cameron [2012] NSWCCA 17. These offenders pleaded guilty to two counts. The sentence imposed was imprisonment for 1 year and 6 months for each offence. At the expiration of 18 months the offenders were released, upon recognizance. 9. R v Ida Ronen, Nitzan Ronen, Izhar Ronen [2006] NSWCCA 123. The offenders were charged with two counts of conspiracy for a period from October 1991 to February 2011. Again, there were two counts rather than one. The amount involved was between $15 and $17 million dollars. Nitzan and Izhar Ronen were sentenced to a total effective sentence was imprisonment for 8 years and 6 months with a non-parole period of 4 years and 6 months. 1. It is clear that those cases involve a wide range of conduct. I take into account what the High Court made clear in Hili v The Queen at [18] that consistency in federal sentencing is not demonstrated by, and does not require, numerical equivalence. Conclusion and sentence 1. But for the very significant discounts I have identified and the reasons given in these remarks I would have imposed a sentence of 9 years imprisonment. The closest comparable is the same sentence which was imposed on Mr Dickson for the same offence after a trial. Of course, Mr Dickson was also convicted of a very serious money laundering offence so no further direct comparison is appropriate. In all of the circumstances here I would have imposed a non-parole period of 6 years. 2. Having regard to all of the matters identified in these reasons, and in particular Mr Kitson's early plea of guilty representing a genuine desire to facilitate the course of justice and the exceptional nature of the matters arising under s 16A(2)(h) of the Crimes Act, I impose a sentence of a period of 4 years and 6 months' imprisonment commencing on 28 August 2019 and expiring on 27 February 2024. I impose a non-parole period of 3 years commencing on 28 August 2019 and expiring on 27 August 2022. This period is the minimum time that justice requires Mr Kitson serve having regard to all the circumstances of the offence. 3. [redacted]. 4. I am required by s 16F of the Crimes Act to explain the sentences I have imposed. I have imposed a head sentence of 4 years and 6 months imprisonment commencing on 28 August 2019 and expiring on 27 February 2024. I have fixed a non-parole period of 3 years commencing on 28 August 2019 and expiring on 27 August 2022. That means that Mr Kitson will be imprisoned for not less than 3 years. If he is granted parole at the end of that time, or before the expiration of the head sentence, he will serve the balance of the sentence in the community. If he is granted parole, the order will be subject to conditions determined by the relevant parole authority, and may be amended or revoked. If he fails, without reasonable excuse, to comply with the conditions of his parole, his parole may be revoked and he may be taken back into custody to serve the remainder of his head sentence. ********** Amendments 27 March 2023 - Partially redacted to comply with publication restrictions. 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: 27 March 2023