SUPREME COURT OF QUEENSLAND

1. MUIR JA:  I agree with the reasons of Margaret Wilson AJA and with her proposed orders.

2. WHITE JA:  I agree with the reasons of Margaret Wilson AJA and the orders which she proposes.

3. MARGARET WILSON AJA:  The applicant, Stephen Paul Lather, pleaded guilty to two counts of dishonestly applying to his own use money belonging to him subject to a trust which should have been paid to the beneficiaries of a deceased estate.^[1]  On each count he was sentenced to six years imprisonment, to be served concurrently.  He will be eligible for parole after serving one-third of the sentence.

4. He seeks leave to appeal against the sentence on two grounds –

1. that the sentencing judge erred in treating an amount of $195,671.56 paid out of the Legal Practitioners’ Fidelity Guarantee Fund as loss caused by the offending; and

2. that the sentence is manifestly excessive.

His counsel submitted that he ought to have been sentenced to four years imprisonment suspended after 12 months.

The facts

5. The applicant, who was a solicitor in a small practice on the Gold Coast, was one of two executors and trustees of the estate of Sylvia Gladys Truelove who died on 20 August 1997.  By her Will, she left a number of pecuniary legacies and the residue in equal amounts to the Salvation Army Queensland Property Trust and the Royal National Lifeboat Institution.

6. The pecuniary legacies were paid in 1999. The value of the residuary estate, which consisted of a house in the UK (subject to a life interest that terminated on 31 January 2001), a home unit on the Gold Coast, cash and investments, was approximately $1.5 million.

7. Between September 2001 and February 2002 the applicant advanced moneys from the estate to MAM No 10 Investments Pty Ltd, a company in which he was a director and 50 percent shareholder.  The moneys were advanced without the knowledge or authority of the co-executor or the beneficiaries.  They were used to fund two investments – the acquisition of the freehold of the Emerald Memorial Club and towards the purchase of the Exchange Hotel in Townsville, the latter transaction never being completed.  There was very little information about these transactions put before the sentencing judge.

8. The first charge related to six payments from the trust account of the Truelove estate made between 12 September 2001 and 28 February 2002 totalling $768,950. It seems from a letter from the Queensland Law Society Inc to solicitors subsequently appointed to act on behalf of the estate that $650,000 was used to purchase shares and the balance was an unsecured loan.

9. The second charge related to three payments from that trust account made between 23 November 2001 and 13 February 2002 totalling $80,000.

10. The applicant was charged with a third count of fraud, which related to executor’s commission and legal fees he paid himself out of the estate. A few days before the trial was to commence, the Crown agreed to enter a nolle prosequi in relation to a third count, and the applicant indicated he would plead guilty to the two offences for which he was subsequently sentenced.

11. In about August 2002 the applicant’s accounts were audited by the Queensland Law Society Inc and a receiver was appointed to his practice. Thereafter he ceased to have any control over the investment.

12. Substitute executors were appointed to administer the estate. In a proceeding in the District Court the new executors obtained judgment against the applicant for $161,500, being the amount the applicant had paid himself as executor’s commission.^[2]  That judgment was not satisfied, and in due course the applicant was declared bankrupt.  He was struck off as a solicitor on 23 October 2003.

The sentencing proceedings at first instance

13. The sentencing proceedings took place over two days – 13 September and 8 November 2010.  On the first day, the prosecutor contended that there was a loss on the investments of $490,000, but this was not conceded by defence counsel. There was also discussion of two other amounts–

1. income from the Emerald Services Club totalling $113,000 which was paid to the applicant and his wife and so forgone by the estate; and

2. $195,671.56 paid to the estate out of the Legal Practitioners’ Fidelity Guarantee Fund, being $161,500 on account of the executor’s commission which the applicant had paid himself out of the estate and $34,171.56 on account of legal costs and outlays which he had paid himself out of the estate.

The third charge had related to the applicant’s paying himself the executor’s commission and legal lees, but the Crown had not proceeded with that charge.  The hearing was adjourned to allow both sides to obtain further instructions on what loss had been occasioned by the commission of the offences for which the applicant was being sentenced.

14. At the resumed hearing the prosecutor resiled from his earlier submission about loss. He informed the sentencing judge that there had not been any loss to the estate. The estate had apparently recovered the value of the shares and the unsecured loans. The administration of the estate had still not been finalised, although one of the residuary beneficiaries had been paid $1,063,824.50 and the other $1,070,000. He did not press to have the $113,000 taken into account as loss caused by the offending conduct, but submitted that the payment out of the Fidelity Fund was relevant to the sentence to be imposed.

15. Defence counsel submitted that the payment out of the Fidelity Fund was irrelevant. He submitted it related to payments which were not the subject of the charges for which his client was being sentenced, but rather to payments the subject of the third charge on which the Crown had not proceeded. Further, because he had not pleaded guilty to the third charge, his client had not examined in detail where the moneys had come from, and part of the claim for legal fees and disbursements would have been for work in legitimately winding up parts of the estate unrelated to his acts of dishonesty.

16. The sentencing judge ruled that the payment from the Fidelity Fund was relevant to the sentence, and in light of that ruling counsel made submissions on the appropriate level of sentence. On the first day, the prosecutor had submitted that a sentence of eight to nine years imprisonment would be appropriate; on the second day he still asked for a sentence at that level, but with a reduction in the non-parole period to reflect the fact that the beneficiaries had not effectively suffered any loss.  Defence counsel submitted that an appropriate sentence would be five years suspended after 20 months.

Loss caused by the offending?

17. In sentencing the applicant to six years imprisonment with parole eligibility after serving one-third, the sentencing judge referred to the two amounts of $768,950 and $80,000 and remarked –

“Those amounts were part of an estate, and the estate should have been wound up expeditiously and the amounts paid to the two residuary beneficiaries who were The Royal Lifeboat Society and the Salvation Army.

The fact of the matter is that the loss which has resulted from your offending appears to amount to only $195,671.56 as best I can determine.  That was an amount which should've been paid to the beneficiaries, but was paid to you in your capacity as the solicitor administering the estate, and the estate made a claim in respect of that amount on the Legal Practitioner's Fidelity Guarantee Fund.  That fund paid that money to the estate.  That fund is therefore out of pocket for that amount, as a result of your offending.

The fund would not have had to pay that money had you not offended in the way in which you pleaded guilty to.

It is not possible to say whether the Royal Lifeboat Society and the Salvation Army are worse off or better off as a result of what you have done.”

18. It is apparent from correspondence from the Queensland Law Society Inc which was before the sentencing judge that the new executors claimed on the Fidelity Fund for $243,139.00 (being $161,500 executor’s commission and $81,659 costs and outlays taken by the applicant but not authorised by his co-executor) together with undetermined losses arising from estate investments. The Committee of Management allowed the executor’s commission and only $34,171.56 of the costs and outlays. It reduced the amount claimed for costs and outlays by deducting amounts not paid from trust, GST and $16,000 on account of costs associated with the investments. It deducted the $16,000 because it considered that the investments were not specifically prohibited by the will. It refused to make a payment on account of the “related party loans made by [the applicant] using Estate funds” in the absence of more information including proof that the transactions were fraudulent misappropriations or stealing within the meaning of s 24 of the Queensland Law Society Act and full accounting so that it could determine whether there had been a profit or a loss sustained.

19. In R v D^[3] this Court considered the facts which may be taken into account as a basis for sentencing.  After an extensive review of relevant authorities it summarised the principles as follows –

“1.Subject to the qualifications which follow:

(a)a sentencing judge should take account of all the circumstances of the offence of which the person to be sentenced has been convicted, either on a plea of guilty or after a trial, whether those circumstances increase or decrease the culpability of the offender;

(b)common sense and fairness determine what acts, omissions and matters constitute the offence and the attendance circumstances for sentencing purposes (cp. Merriman at 593, R v T at 455); and

(c)an act, omission, matter or circumstance within (b) which might itself technically constitute a separate offence is not, for that reason, necessarily excluded from consideration.

2. An act, omission, matter or circumstance which it would be permissible otherwise to take into account may not be taken into account if the circumstances would then establish:

(a)a separate offence which consisted of, or included, conduct which did not form part of the offence of which the person to be sentenced has been convicted;

(b)a more serious offence than the offence of which the person to be sentenced has been convicted; or

(c)a ‘circumstance of aggravation’ (Code, s. 1) of which the person to be sentenced has not been convicted; i.e., a circumstance which increases the maximum penalty to which that person is exposed.

3. An act, omission, matter or circumstance which may not be taken into account may not be considered for any purpose, either to increase the penalty or deny leniency; and this restriction is not to be circumvented by reference to considerations which are immaterial unless used to increase penalty or deny leniency, e.g., ‘context’ or the ‘relationship’ between the victim and offender, or to establish, for example, the offender’s ‘past conduct’, ‘character’, ‘reputation’, or that the offence was not an ‘isolated incident’, etc.”^[4]

20. In my respectful opinion the sentencing judge erred in treating the payment from the Fidelity Fund as a loss caused by the offending for which he was sentencing the applicant. The applicant’s conduct in paying himself executor’s commission and $34,171.56 in costs and outlays was separate and distinct from his conduct in making the unauthorised investments. The Crown chose not to pursue the charge in relation to it. Accordingly, his Honour ought to have excluded it from consideration.

21. This Court should therefore allow the application for leave to appeal against sentence, and resentence the applicant.

Resentencing

22. The indictment was not presented until 1 May 2008, and thereafter the matter was reviewed by the District Court on a large number of occasions. The delay in bringing it to the point of trial was not adequately explained. It was significant that the Crown did not agree to enter a nolle prosequi on the third charge until a few days before the trial was to begin.  Only then did the applicant indicate he would plead guilty to the first two charges.  While his pleas of guilty were not truly early pleas, they should nevertheless be regarded as timely in all the circumstances.

23. There was no evidence from which it could be concluded that the applicant intended permanently to deprive the estate of the capital he applied to the unauthorised investments. His counsel told the sentencing judge –

“The transaction - well, in fact, if one goes back to the charges, charges 1 and 2, are concerned with the fact that the money was put across the table to be used in these transactions, not, in fact, what happened to it and the basis of Mr Lather's plea is that what he did was dishonest by the standards of either the community or in his own mind, at the time, because as a Solicitor, he knew that he should have

wound the estate up or alternatively got permission from the beneficiaries to utilise the money the way he did.”^[5]

...

“His instructions to me are that he blames the - the fact that he was in a small practice it makes it much - it makes him much more vulnerable to this sort of activity. The submission is that what he's really done here, in my submission, is acted a bit like a money lender who had authority to lend, where he didn't have the authority. Or, like a financier who had instructions to use the money as he saw fit. Whereas his plea of guilty is inconsistent with that.”

...

“But, his point is a simple one that he - he doesn't blame anyone. But, Mr Lather wants me to make the point to you that had he not had a small practice, not been on his own, not been, you know, so involved with people in terms of their investments, he doesn't think any of this would have happened.”^[6]

Clearly, he accepted responsibility for what he had done, and was remorseful about it.

24. Counsel for the respondent submitted before this Court that it was self-evident that the applicant’s conduct led to considerable delay and complications in the finalisation of the estate. I do not accept that such an inference is open on the facts put before the sentencing judge. The applicant was removed as an executor by late 2002, and yet by the time of sentence approximately eight years later the administration of the estate had still not been finalised. The prosecutor informed the sentencing judge that the Crown was having difficulty obtaining information from the solicitors involved in the finalisation of the estate. Perhaps because of a rising property market, the value of the residuary estate increased very considerably over the ensuing years, ultimately to the benefit of the two charities which were the residuary beneficiaries.  Certainly not all of the delay can be attributed to the applicant’s conduct, although some can be.

25. The applicant is to be sentenced only for the offences to which he pleaded guilty, and on the facts put before the sentencing judge, he should be sentenced on the basis that no financial loss was caused by his offending.

26. Born in Sydney on 28 July 1954, the applicant was aged 56 at sentence.  As I have recounted, he was struck off as a solicitor and made bankrupt.  His marriage ended, and he suffered poor health, including a heart attack.  At the time of sentence he was in receipt of a disability pension.  He had no real prospects of against being allowed to practise as a solicitor or being gainfully employed in some other avenue.  His father was in court to support him.

27. The applicant’s conduct involved a gross breach of trust by a solicitor. It was dishonest and reprehensible in the extreme. As Davies JA (with whom the other members of the Court agreed) remarked in R v Marsden; Attorney-General of Queensland,^[7] the public are entitled to expect a very high degree of integrity from solicitors, and the maintenance of public trust in them demands substantial deterrent sentences for offences of this kind.  The sentence imposed on him must involve a substantial term of imprisonment as condign punishment, as an expression of the community’s condemnation of this sort of conduct by a professional person, and by way of general deterrence.

Comparable authorities

28. In R v Lory^[8] the applicant was a 61 year old solicitor who pleaded guilty to misappropriation as a trustee under s 436 of the Criminal Code.  Four clients placed moneys totalling almost $200,000 with him to invest on certain instructions which he failed to observe.  Instead, he placed the moneys in investments and property which provided insufficient security for his clients.  When the property market collapsed, the assets were insufficient to repay the loans.  The Law Society recovered about $14,000 and the balance was paid out of the Fidelity Fund.  He was sentenced to four years imprisonment with no recommendation for early eligibility for parole.  The Court of Criminal Appeal dismissed an application for leave to appeal against the sentence.  In agreeing with the leading judgment of McPherson J, Dowsett J said –

“Although the age and previous good character of the applicant may in other circumstances have militated in favour of a recommendation for early parole, it seems to me that the practice of the solicitors’ branch is such that clients must be able to have complete confidence in the propriety of practitioners in the handling of funds.  This means that when impropriety is discovered it must be dealt with in such a way as to show the seriousness with which the Court views such misconduct.  Fairness to the public and to the vast bulk of the profession demands this.  In this light the sentence cannot be seen to be excessive in any respect and in my view the application must be refused. ...”

29. In R v Marsden; Attorney-General of Queensland^[9] the applicant was a solicitor who managed funds for her client for nine or 10 years.  She pleaded guilty to stealing a sum of over $500,000.  Without her client’s authority, she paid nearly $600,000 which she held on her client’s behalf to an organisation in the Bahamas which promised substantial profits from investments.  She intended to return the capital sum and some interest to her client when it was returned to her, but to appropriate to herself part of the profit from the investment.  No motive other than greed was ever clearly advanced for the solicitor’s dishonesty.  The investment was lost with disastrous consequences for the client.  At the relevant time, the maximum penalty was seven years imprisonment.  The solicitor was sentenced to four years imprisonment with a recommendation for parole eligibility after one year.  The recommendation for early parole was apparently based on her early plea of guilty, her remorse and the fact that she had the care of two young children one of whom had serious medical problems affecting his behaviour.  The Attorney-General appealed against the leniency of the sentence.  This Court dismissed the appeal, observing that the sentence, on the whole, appeared to be towards the lower end of the appropriate range.

Outcome

30. At the time of the offending, the maximum penalty for each of the offences was 10 years imprisonment.^[10]

31. In all of the circumstances, it appears to me that a head sentence of five years imprisonment would be proper.

32. There should be some recognition of the applicant’s timely pleas of guilty and personal circumstances.

33. The applicant’s counsel asked the Court to suspend his sentence after less than one-third of the head sentence. He conceded that it would be open to the Court to do so after one-third, the point at which parole eligibility is often fixed for an offender who has pleaded guilty. He submitted that because the applicant had been struck off as a solicitor and was unlikely to find gainful employment there was no real risk of reoffending and the constraints of parole upon him and the expense to the community of parole were not required.

34. I do not accept that a partial suspension of the sentence would be appropriate in this case. While there seems no real risk of reoffending in the capacity of a solicitor, the risk of reoffending by dishonest conduct in some other capacity cannot be ignored.  The applicant should be subject to parole upon his release from actual incarceration.  He should be eligible for parole after serving about one-third of the sentence.

35. I would make the following orders:

(1) Application for leave to appeal against sentence granted.

(2) Appeal against sentence allowed.

(3) Sentence varied by reducing to five years the term of imprisonment imposed on each count. The applicant is eligible for parole on 9 July 2012.