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R v Fellowes; ex parte Director of Public Prosecutions (Cth)


[2018] QCA 238







CA No 279 of 2017

DC No 1178 of 2017






FELLOWES, Lewis Anthony










FRASER JA:  The respondent pleaded guilty to three counts of dishonest use of position contrary to s 184(2)(a) of the Corporations Act 2001 (Cth).  He was convicted and sentenced to 12 months imprisonment on count 1, two years imprisonment on count 2, and three years imprisonment on count 3.  It was ordered that he be released forthwith upon entering into a recognisance pursuant to s 20(1)(b) of the Crimes Act 1914 (Cth) by giving security in the sum of $30,000.00 on the condition that he be of good behaviour for a period of five years.  The Commonwealth Director of Public Prosecutions has appealed against the sentence on the ground that it is manifestly inadequate.  The Director does not contend that the terms of imprisonment are inappropriate but argues that the order for immediate release rendered the sentence manifestly inadequate.

Before the offending the respondent had provided investment advice for about 20 years.  He had been a Financial Services Representative for more than six years and he had earlier been a Securities Representative.  The respondent worked as a financial adviser with one company during count 1 and with a different company during counts 2 and 3.  In committing the offences between July 2008 and July 2010 the respondent dishonestly abused his position of trust as a financial adviser employed by a corporation on five separate occasions in order to advantage himself and his wife.

Count 1 concerned three separate transactions between July and October 2008 in which the respondent dishonestly caused a margin lending company to transfer amounts totalling $170,000 from the margin loan account of clients of the respondent to a margin loan account held by the respondent’s wife.  In October 2008 the respondent gave false explanations when his clients asked why the transactions had been made on their account and, after repeated demands, the respondent arranged for repayment with interest of the client funds.

In count 2, in July 2009, the respondent caused the margin lender to transfer $65,000 from the margin loan account of the same clients and also $250,000 and $110,000 from the margin loan account of different clients of the respondent to the respondent’s margin loan account, and then to the account of a company of which the respondent was an alternate director and his parents were the other directors.  One of the clients detected the unauthorised transfer and sought to have their account transferred to a new adviser.  Another of the clients emailed the respondent to query the transaction and the respondent gave a false explanation for it.  In August 2009 the respondent arranged for repayment with interest of the funds belonging to the clients.

In count 3, in July 2009, the respondent caused to be transferred $1 million from an investment account held by different clients to an account in the respondent’s own name and then to the respondent’s margin loan account.  The clients had originally deposited part of the proceeds of the sale of a farm into the investment account pursuant to a recommendation made by the respondent about two weeks before he engaged in the unauthorised conduct.  On 1 July 2010 the respondent arranged for repayment with interest of the funds and asked that any fees be charged to the respondent’s margin loan account.  The respondent did not inform the clients of his conduct although he was in regular communication with them during the charge period.  The respondent also did not disclose his conduct when the clients made an unrelated inquiry to the respondent’s then employer in January 2011 in relation to which the respondent offered explanations to his employer’s compliance officer.

The respondent’s dishonest use of his clients’ funds contrary to the clients’ knowledge and without their authority exposed these clients to various risks.  The clients in count 1 were exposed to increased risks of receiving a margin call, and their ability to sell down securities linked to their margin account and to fund other expenses or investment opportunities was reduced.  The clients in count 2 were exposed to an increased risk of receiving a margin call in circumstances where two of the clients believed their margin loan account had no outstanding debit balance, and the ability of each of the clients to utilise their funds for other expenses or investment opportunities was reduced.  The respondent’s offending in count 3 did not provide genuine and accurate information of the clients’ account when requested, and as a result exposed the clients to risks associated with providing incorrect information to the Australian Taxation Office, including legal action.  The respondent’s conduct also limited the ability of these clients to draw on their funds to fund other expenses or investment opportunities.  None of these risks was quantified.

The respondent benefited by these offences, by using the money to reduce the incidence and value of margin calls and to pay debts with the client funds.  There was no quantification of those benefits.

ASIC commenced an investigation into the respondent’s conduct in October 2013.  In March 2015, after a hearing before an ASIC delegate, the respondent was permanently banned from providing financial services.

The sentencing judge concluded that in each case the respondent acted in a gross breach of trust and observed that this kind of crime was hard to detect and expensive to investigate and prosecute.  The judge inferred that the victims suffered some harm as a result of the respondent’s offending in terms of concern and anxiety, which they would have suffered when it became clear that there had been irregular transactions on their account.

The sentencing judge summarised the circumstances of the offences and referred to the respondent’s personal circumstances.  He was 34 to 36 years old when he offended and 43 years old when sentenced.  The respondent had no criminal history, he had pleaded guilty and he had facilitated the administration of justice.  The respondent expressed genuine remorse, cooperated with the authorities, and remained willing to assist investigators with other investigations in which he had provided information.  The respondent was married and in a long-term, stable relationship.  He had not reoffended in the seven years since the last offence.  He had transferred moneys to his own account or a related account to avoid margin calls and to project a positive financial position.  He did so as a result of the global financial crisis and difficulties in the franchise he operated, his motivation being to plug gaps until other funds became available.

The sentencing judge noted that all of the moneys were repaid with interest before the clients in count 3 and the authorities in relation to all counts were aware of the respondent’s dishonesty.  The respondent had suffered a significant financial, career and reputational consequence and would never provide financial services to clients again.  The sentencing judge found that the respondent was a low risk of reoffending in this way.  He was now working in a sales position with a home builder and was supported by his wife and parents.

The appellant contends that the sentences are manifestly inadequate because the respondent was not ordered to serve a period of imprisonment before release.  The appellant emphasises the fact and extent of the respondent’s dishonest abuse of his position of trust to advantage himself and his wife, the magnitude of the amount, $1.595 million, employed by the respondent in his dishonest conduct, the long period, about two years, during which the respondent engaged in the conduct, that he engaged in his dishonest conduct on five separate occasions, the deliberateness of the offending, and that the respondent continued to offend after he had deflected some of his victims by lying to them about what he had done.

The respondent acknowledges the seriousness of the offending and the aggravating features to which the appellant referred.  The respondent emphasises the mitigating factors taken into account by the sentencing judge: the guilty pleas were very early; the respondent repaid all of the moneys with interest years before any investigation and he repaid the vast majority of the moneys in charge 3 without the complainants raising any questions; the respondent had not reoffended in the period of more than seven years after the offences, although he continued to supply financial services to clients for a substantial part of that time; the limitation of any need for personal deterrence; the significant additional punishment the respondent earned in being banned for life from providing financial services; the respondent’s level of insight, honesty and remorse as reflected in a psychologist’s assessment accepted by the sentencing judge;  that the respondent was a very low risk of reoffending; the respondent’s cooperation with the authorities; and the delay in charging the respondent in early 2016 after the first report to ASIC in October 2013.

The respondent also referred to the circumstance that he was otherwise of good character before and after the offending, although the respondent accepted that this consideration carried less weight in cases of white collar crime such as this.  The parties acknowledge, as was observed in Nicholls v The Queen [2016] VSCA 300 at [38] that the few decisions of intermediate appellate courts upon offending of this character do not yield a sentencing pattern or applicable range of sentences.  However, both parties referred to R v Donald [2013] NSWCCA 238 and Director of Public Prosecutions (Cth) v Northcote (2014) 99 ACSR 1.  Both cases were referred to by way of illustration in Nicholls v The Queen at [39]-[40].

In Donald, the New South Wales Court of Criminal Appeal set aside a sentence of two and a-half years imprisonment with release forthwith upon entering a recognisance to be of good behaviour for two years, and instead imposed a sentence of two years imprisonment with an order that the offender be released after serving 12 months of that sentence.  That was a more serious case.  The charge represented offending in 30 separate transactions, compared with the five separate transactions in which the respondent engaged.  The offending resulted in an advantage to that offender of $1,782,000, whereas the respondent derived a temporary unquantified advantage from his offending.  The offending caused additional loss of about $750,000, whereas the respondent’s offending did not cause any quantified loss.  The total amount recovered was $75,000 paid to an insurer, whereas all the amounts involved in the respondent’s offending were repaid to his victims with interest and, unlike the respondent, that offender was not found to be at a low risk of reoffending in the same way.

In Northcote, the New South Wales Court of Criminal Appeal set aside a total effective sentence of two years imprisonment to be served by way of intensive correction in the community, and instead sentenced the offender to three years and six months imprisonment with release upon recognisance after two years.  But Garling J, Hoeben CJ at CL and RS Hulme AJ agreeing, observed that, but for the principle of double jeopardy applicable in that case, a longer period of custody would have been plainly appropriate: (2014) 99 ACSR 1 at [128].  For present purposes, it is significant that one of the circumstances to which Garling J referred in finding that the sentence was manifestly inadequate was the extent to which that offender, the managing director of the corporation, was financially advantaged by the offence.  He profited by more than $1 million, whereas in the present case the respondent profited by an unquantified amount reflecting his use of his clients’ money before he repaid it in full with interest.  That, too, was a more serious case than this one.

The maximum penalty for each of the three offences committed by the respondent is five years imprisonment and a fine of $220,000.  General deterrence is an important factor in sentences for offending of this character.  Bearing that in mind together with the factors emphasised by the appellant, particularly the duration of the offending, the advantage derived by the respondent from the offending, the grossness of his abuses of trust, and the respondent’s self-interested motivation for the offending, a sentence requiring actual custody was certainly within the sentencing discretion.  It does not follow, however, that the absence of a custodial component in the respondent’s sentence in the particular circumstances of this case renders the sentence manifestly inadequate.

There was here an unusual combination of circumstances.  In addition to the particular circumstances which are not rare, the early guilty plea, genuine remorse, adverse consequences to the respondent resulting from his offending, and his otherwise good character, there are here the more unusual circumstances that none of the respondent’s victims suffered any quantifiable loss, the respondent had not reoffended for some seven years after these offences although he continued in the same occupation holding positions of trust for a substantial part of that time, and the respondent’s cooperation with the authorities extended to a willingness to cooperate in relation to other matters.

Having regard also to the High Court’s emphasis upon the discretion committed to sentencing judges, for example, in Lowndes v The Queen (1999) 195 CLR 665 at [15], my conclusion is that the sentence is not unreasonable or plainly unjust.  The sentence is not manifestly inadequate.

It is not necessary to consider the respondent’s alternative argument that if the sentence were to be found to be manifestly inadequate the Court should exercise its residual discretion to decline to intervene.  For that reason, I would refuse the respondent’s application for leave to adduce evidence in support of that alternative argument.

I would refuse the application for leave to adduce evidence and dismiss the appeal.


McMURDO JA:  I agree.

FRASER JA:  That is the order of the Court.


Editorial Notes

  • Published Case Name:

    R v Fellowes; ex parte Commonwealth Director of Public Prosecutions

  • Shortened Case Name:

    R v Fellowes; ex parte Director of Public Prosecutions (Cth)

  • MNC:

    [2018] QCA 238

  • Court:


  • Judge(s):

    Fraser JA, Philippides JA, McMurdo JA

  • Date:

    27 Sep 2018

Litigation History

Event Citation or File Date Notes
Primary Judgment DC1178/17 (No Citation) - Sentence upon defendant's pleas of guilty of three counts of dishonest use of position contrary to s 184(2)(a) of the Corporations Act 2001 (Cth).
Appeal Determined (QCA) [2018] QCA 238 27 Sep 2018 Commonwealth Director of Public Prosecutions' application for leave to adduce evidence refused and appeal against sentence dismissed: Fraser JA, Philippides JA and McMurdo JA.

Appeal Status

{solid} Appeal Determined (QCA)