Kerr v Simpson[2016] QDC 34

DISTRICT COURT OF QUEENSLAND

1. [1]
   The appellant entered a written plea of guilty to six charges of failing to comply with an order under s 162 of the Income Tax Assessment Act 1936 (Cth) to furnish an income tax return.  The learned Magistrate imposed a fine of $2,500.00 with costs of $211.45 and referred recovery of those amounts to the State Penalties Enforcement Registry.  The effect of this sentence under Commonwealth legislation is that convictions were recorded against the appellant on each charge. 

2. [2]
   The appeal is brought against the sentence and the recording of convictions.

Appeal grounds

3. [3]
   The appellant’s Notice of Appeal lodged on 12 October 2015 stated the grounds of appeal as:

“The sentence and recording of conviction are manifestly excessive. I submit the fine should be $500.00 with no conviction recorded.”

4. [4]
   The appellant was not legally represented before me. On the appeal, the appellant submitted the sentence was manifestly excessive due to the failure by the learned Magistrate to discharge the appellant without proceeding to conviction.

Background

5. [5]
   On 24 November 2014, the Australian Tax Office issued the appellant with a notice in writing, pursuant to s 162 of the Income Tax Assessment Act 1936 (Cth), requiring him to furnish to the Commissioner of Taxation income tax returns for the six financial years ending 2009, 2010, 2011, 2012, 2013 and 2014 by 5 January 2015.

6. [6]
   On 5 January 2015 the appellant had not complied with the notice as he had failed to provide any income tax returns for the requested periods. At the time of sentence on 20 July 2015, the appellant had not as yet complied with the notice.

7. [7]
   The appellant was charged on complaint and summons and chose to enter a plea of guilty by way of letter dated 18 July 2015. On 20 July 2015 the matter proceeded in the absence of the appellant pursuant to s 142(1)(a) of the Justices Act 1886. 

8. [8]
   The appellant’s letter provided information and made submissions to be considered by the Magistrate upon hearing the plea. Under s 142A(5) the Court, in dealing with such a complaint, may take into account any information brought to its notice by or on behalf of the defendant in relation to the circumstances of the offence and the imposition of a penalty.

9. [9]
   The appellant’s written information advised that he operated a small cattle property with his ex-wife who performed all data entry for the business. After they separated the appellant suffered a serious back injury which required emergency surgery in early 2009. Lengthy hospitalisation and rehabilitation was required. He is now on a disability pension. Following the breakdown of the marriage the property had to be sold and the proceeds failed to clear all debt.

10. [10]
    Due to limited financial resources the appellant could not meet debts to his accountant who refused to prepare the outstanding tax returns until the fees were paid. The appellant advised the court that he told the Australian Tax Office that he would have to prepare the returns himself, that there was some complexity and that as he was not an accountant it would take some time. He said that he knew there would be no income tax liability due to the impact of drought on the conduct of the agricultural business. In the information provided to the Magistrates Court, the appellant stated that he had completed the returns for 2009, 2010, 2011 and 2012 financial years, and that all data had been entered and total annual figures could be retrieved for the remaining 2013 and 2014 financial years. He claimed that the Tax Office would be in receipt of all outstanding tax returns within one week and, as expected, no income tax would be payable due to a substantial loss carried forward.

11. [11]
    The appellant’s letter advised the learned Magistrate that he had been studying a law degree, which he commenced in 2012, and submitted that the consequence of recording a conviction would impact on his ability to pursue a career in the legal profession. He submitted that no conviction should be recorded. He asked the court to consider his current limited financial capacity when determining a financial penalty.

12. [12]
    The prosecutor advised the court that the defendant had no prior taxation convictions.

New evidence

13. [13]
    On the appeal the appellant tendered, without objection by the respondent, copies of his tax returns up to and including the 2013/14 financial year and a document confirming that he had no tax liability in any of those years.

Decision of the Magistrates Court

14. [14]
    The learned Magistrate took time to read the appellant’s letter and then gave brief reasons for her Honour’s decision. They are as follows:

“Mr Kerr has submitted a written plea of guilty to six offences of failing to lodge income tax returns for the periods 2009-2014.  The returns remain outstanding.  The last return was lodged in 2008 and recorded a loss of $39,464.  I have regard to the written plea of guilty which refers to financial hardship, break down of the marriage, the sale of property and then medical circumstances which were serious.  He is now on a disability pension.  I have regard to the fact that he has no prior taxation history.  The administrative penalty lost to the department is $5,100, the maximum penalty is $28,400.  The prosecution has referred me to the decision of R v Green.  Six charges.  Green had a significant debt to the department of $86,791.19 which is not the case in this instance.  Mr Green was fined $6,000 plus costs.  In all the circumstances, a fine of $2,500 is imposed and costs of $211.45 to SPER and I grant the orders pursuant to HES per the draft order and they are to be lodged by 18 September.”

Respondent’s submissions

15. [15]
    It was submitted by the respondent that an appeal under s 222 should only be granted where the Magistrate acted “under a misapprehension of fact or on some wrong principle in awarding sentence”^[1] or where the sentence was such that there must have been “some misapplication of principle”.^[2]It was further submitted that the fine imposed fell in the lower range of those indicated by comparable sentences. 

16. [16]
    It was correctly observed by the respondent that under Commonwealth law a conviction will be recorded unless the sentence proceeds under s 19B of the Crimes Act (1914) (the Act).  It was submitted that sufficient circumstances did not exist, either in isolation or jointly, to justify exercise of the sentencing discretion under s 19B of the Act.

17. [17]
    The ultimate submission was that there was no error disclosed and the sentence imposed was not excessive.

Section 19B Crimes Act

18. [18]
    The appellant submissions ultimately limited the issue for consideration to whether the learned Magistrate erred in not discharging him under s 19B of the Act without recording a conviction. The appellant’s primary concern is the impact the conviction may have upon his future in the legal profession. There is no provision under Commonwealth law for a conviction to be entered but not recorded. If the appellant is to escape the recording of a conviction he must obtain a discharge without conviction under s 19B.

19. [19]
    Section 19B provides that a court may discharge an offender without proceeding to conviction upon his giving security by recognisance conditioned that he will be of good behaviour where:

20. [20]
    In Commissioner of Taxation v Baffsky^[3]it was held that a court should approach its task under the section as follows:

“Section 19B(1)(b) itself consists of two stages.  First is the identification of a factor or factors of the character specified in subparagraphs (i), (ii) and/or (iii) of the paragraph.  The second stage is the determination that, having regard to the factor or factors so identified, it is inexpedient to inflict any punishment” or to reach the other conclusions for which the paragraph provides.”

21. [21]
    It is apparent that the court must give careful consideration to the evidence in order to identify whether relevant factors exist before moving to stage two.

Impact of conviction

22. [22]
    In his written submission to the learned Magistrate, the appellant clearly raised the impact a conviction might have on him.. The appellant was not legally represented and consequently inaccurately spoke in terms of a conviction not being recorded. Nevertheless, that submission should have been sufficient to put the learned Magistrate on notice as to the true issue being raised.

23. [23]
    Regrettably, the prosecutor below addressed no submission to the Court in response to the applicant’s written argument on the voiding of a conviction. The learned Magistrate was not referred to s 19B of the Act. The only sentencing option the prosecutor referred to was a fine.

24. [24]
    The learned Magistrate’s sentencing remarks made no reference to the appellant’s submission that a conviction not be recorded or to the possible impact it might have on his future. Nor do the sentencing remarks refer to his status as a person soon to seek entry to the legal profession.

25. [25]
    In my respectful opinion the circumstances of this case required the Court to give careful consideration to the appellant’s submission in this respect. The absence of any reference in the sentencing to the impact of conviction leads me to the conclusion that her Honour failed to have regard to that issue. That failure amounted to an error in the sentencing process. The sentencing discretion having miscarried, it falls to me now to sentence afresh on both the material before the learned Magistrate and the new material tendered on appeal.

Discussion

26. [26]
    The appellant was sentenced under Commonwealth law and accordingly it is necessary to have regard to s 19B of the Act rather than to the Queensland Penalties and Sentences Act.  Before exercising a power under s 19B the court must determine that one or more of the factors listed in paragraphs (i), (ii) and (iii) of s 19B(1)(b) is relevant and then decide, having regard to that factor or factors, whether it is “inexpedient to inflict any punishment”.^[4]

27. [27]
    The appellant had no tax liability and that mitigates the seriousness of the offending. He was sentenced on the basis that his business was experiencing losses and that no tax would be payable. The documents tendered on appeal confirm that in this regard the information he supplied to the learned Magistrate was accurate.

28. [28]
    However, the six charges relate to the failure to furnish tax returns for financial years from 08/09 to 13/14. The appellant was required by notice dated 24 November 2014 to furnish all the returns by 5 January 2015 and yet by 20 July 2015 he had failed to do so. Compliance with the obligation to file returns is fundamental to the integrity of the tax system and failure to do so calls for a deterrent sentence. The offences charged cannot, in my opinion, be regarded as “trivial”.

29. [29]
    It is possible to identify a number of factors under paragraph (i) of s 19B(1)(b) to which regard ought to be had. The appellant is a mature man of good character with no prior taxation convictions. He was suffering severe financial hardship flowing from the impact of drought, the breakdown of his marriage, the sale of his property at a loss and his indebtedness to his accountant. He suffered serious injury in 2009 requiring hospitalization, surgery and lengthy rehabilitation. As a consequence he is on a disability pension.

30. [30]
    As explained in Commissioner of Taxation v Baffsky the professional status of a defendant falls within the meaning of “antecedents” in paragraph (i).^[5]

31. [31]
    The appellant’s status as a final year law student hoping soon to enter the legal profession is a matter that ought to be taken into account. As stated in Baffsky where the respondent was a barrister:

“Any threat to the Respondent’s right to practice could transform the moderate fine actually imposed into a substantial penalty”.^[6]

32. [32]
    Gleeson CJ observed in R v Ingrassia that:

“the legal and social consequence of being convicted of an offence often extends beyond any penalty imposed by a court”.^[7] 

33. [33]
    This Court can take judicial notice of the fact that a conviction for a criminal offence must be disclosed by a person seeking admission to the legal profession. Even if the conviction does not preclude admission, it will have potential to damage the person’s ability to obtain employment in a competitive labour market for junior lawyers.

34. [34]
    Turning to paragraph (iii) of s 19B(1)(b), there are relevant “extenuating circumstances” that can be identified. It is important to note that regard may only be had to “the extent to which the offence was committed under extenuating circumstances”.^[8]That is, a link must be identified between any extenuating circumstance and the commission of the offence, before regard may be had to the circumstance. 

35. [35]
    The appellant advised the learned Magistrate, without challenge by the prosecutor, that he told the Australian Tax Office that the complexity of preparing the returns required accounting skill, that he lacked the financial capacity to pay his accountant, that he would have to prepare the returns himself, and due to his lack of skill it would take him some time to do so. The appellant submitted that his strained financial circumstances, arising out of the matters mentioned earlier, directly impacted upon his ability to provide the returns in a timely way. Although the offences cannot be regarded as “trivial”, these extenuating matters provide an explanation for the circumstances under which the offences were committed.

36. [36]
    Having identified relevant factors under paragraphs (i) and (iii), I now turn to consider whether it is inexpedient to inflict any or nominal punishment. Relevant considerations to be taken into account are set out in s 16A of the Act. That section reads:

37. [37]
    In addition, relevant considerations for determining “expedience” extend beyond the factors listed in s 19B(1)(b) and extend to the “whole of the circumstances of the offender and the offence”.^[9]

38. [38]
    In having regard to the relevant factors under paragraphs (i) and (iii) it is necessary to take into account all the other circumstances of the offender and the offence. On the one hand the nature of the offences justifies a deterrent response. The offences attract a significant maximum penalty and an administrative penalty of $5100 would have been available. The offences involved a lengthy delay in submitting the returns and a failure to deliver any of them by the date of sentence. As against that, the defendant owed no tax, was of good character and had suffered significant medical and financial setbacks.

39. [39]
    The potential for the convictions to adversely impact upon the appellant’s future professional opportunities, taken in combination with the other extenuating factors, has satisfied me that it is “inexpedient to inflict any punishment other than a nominal punishment”.

40. [40]
    The sentencing discretion should be exercised in favour of discharging the appellant upon his giving security by recognisance to be of good behaviour.

Order

41. [41]
    The order of the Court will be: