Anderson v The King

[2023] NZHC 1165

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CRI-2023-409-42

[2023] NZHC 1165

BETWEEN

GREGORY JOHN ANDERSON

Appellant

AND

THE CROWN

Respondent

Hearing:	27 April 2023
Appearances:	R A Peters for the Appellant C C White for the Respondent
Judgment:	16 May 2023

JUDGMENT OF HARLAND J

Introduction

[1]                 On 29 March 2023, Mr Anderson was sentenced by Judge Gilbert in the District Court to a term of two years and six months’ imprisonment,1 having pleaded guilty to a charge of taking part in the management of a company between 9 December 2016 and 25 March 2020 while he was prohibited from doing so.2 The maximum penalty for this offence is a term of five years’ imprisonment or a fine not exceeding

$200,000.3

[2]                 Mr Anderson appeals to this Court on the grounds that the starting point adopted by the Judge was too high, the uplift to reflect his previous offending was excessive, insufficient discounts were provided and an end sentence of home detention was appropriate but was not imposed.

1      R v Anderson [2023] NZDC 6082.

2      Companies Act 1993, s 382.

3      Companies Act, s 373(4).

ANDERSON v R [2023] NZHC 1165 [16 May 2023]

[3]                 The Crown submits that the sentence was within range and therefore the appeal ought to be dismissed.

[4]                 Appeals against sentence are allowed as of right by s 244 of the Criminal Procedure Act 2011 and must be determined in accordance with s 250 of that Act. An appeal against sentence may only be allowed by this Court if it is satisfied that there has been an error in the imposition of the sentence and that a different sentence should be imposed.4 The focus is not on the process by which the sentence was reached, but on the correctness of the end result.5 In making this assessment, appellate courts do not interfere with the legitimate exercise of judicial discretion or indulge in mere tinkering with the sentence.

[5]                 I have decided to dismiss the appeal. This judgment sets out my reasons for doing so.

Factual background

[6]                 Mr Anderson originally faced four charges, however, two were alternative charges. He elected trial by jury on 23 January 2020. Mr Anderson pleaded guilty to charge two in the Crown Charge List dated 16 March 2022.

[7]                 As Mr Anderson pleaded guilty to the charge, the facts upon which he was sentenced were contained in a summary of facts. The Judge referred to the relevant facts in his sentencing decision.

Summary of facts - issues

[8]                 Mr White, for the respondent, was concerned to clarify the Judge’s observation at para [3] of the sentencing notes that the summary of facts for the charge Mr Anderson had pleaded guilty to had remained unchanged over the years. Mr White provided a copy of a previous summary of facts, which had been available prior to Mr Anderson’s guilty plea, and he helpfully highlighted the parts of the former summary of facts that had not made their way into the final summary of facts upon which Mr Anderson was sentenced.

4      Criminal Procedure Act 2011, ss 250(2) and (3).

5      Ripia v R [2011] NZCA 101 at [15].

[9]                 I am satisfied, having received Mr White’s explanation, that although a number of paragraphs were not included in the final summary of facts in the manner in which they had been presented in the former summary of facts, nonetheless, the information provided in them was either available by virtue of the statutory provisions or they repeat matters, albeit they are expressed in a different way. One paragraph was removed that related to a charge that was withdrawn.

[10]             Accordingly, I am satisfied that the Judge’s reference to the summary of facts remaining unchanged over the years is correct in substance, if not in form.

The facts

[11]I now set out the facts upon which Mr Anderson was sentenced.

[12]             In 2006, Mr Anderson incorporated Pro Machining Ltd (Old PML). When this company ran into financial difficulty in October 2012, Mr Anderson changed its name to ATFAB Ltd. Less than two weeks later, on 18 October 2012, this company was placed into receivership. The company was liquidated in December with over

$300,000 owing to creditors.

[13]             On 25 October 2012, less than three weeks after changing Pro Machining Ltd’s name to ATFAB, Mr Anderson incorporated a new company, once again using the name Pro Machining Ltd (New PML). That company traded as Tiny House Trailers and its line of business, namely, constructing tiny homes and tiny house trailers, was the same as the business undertaken by Old PML. The Judge described New PML as a classic phoenix company.

[14]             In late 2012, Mr Anderson resigned as a director and appointed his son as the sole director of New PML.

[15]             On 4 July 2013, Mr Anderson was adjudicated bankrupt on his own application. He was automatically discharged three years later, on 4 July 2016. As the Judge noted, because of his bankruptcy, Mr Anderson was prevented from being involved in the operational management of a company in the absence of consent from the Official Assignee.

[16]             Because Mr Anderson was operating New PML as a phoenix company, he was charged under s 386A of the Companies Act in respect of it. He pleaded guilty on 24 March 2015, which meant he was prohibited from managing a company for five years, that is until 24 March 2020.6

[17]             Mr Anderson was advised by the Ministry of Business, Innovation and Employment (MBIE) of his prohibited status. There was extensive communication about what this meant.

[18]             Just over a year after being discharged as a bankrupt, Mr Anderson was again adjudicated bankrupt on 10 August 2017. Again, Mr Anderson was prohibited from being involved in the management of a company and he was advised of this in correspondence from the Official Assignee. Mr Anderson applied on two occasions to the Official Assignee to allow him to be self-employed. On both occasions his requests were declined.

[19]             On 22 March 2018, MBIE sent Mr Anderson a formal warning about carrying on business without the consent of the Official Assignee, it having become aware of information that suggested Mr Anderson was trading as Tiny House Trailers.

[20]             On 16 July 2018, Mr Anderson phoned his Insolvency Officer advising that some of his customers had contacted him and told him they had been contacted by an Insolvency Officer who was making enquiries. His Insolvency Officer confirmed this and reminded Mr Anderson of the process to apply for consent to be self-employed.

[21]             On 7 May 2019, Mr Anderson was formally interviewed by an MBIE Investigator and explained:

(a)        New PML’s assets were sold in September/October 2017 for $15,000 to a new company, Gia Visto Ltd;

(b)        Gia Visto was in the same business, and Mr Anderson was working for it as a contractor while also receiving free accommodation at its registered address;

6      Companies Act, s 382.

(c)        Gia Visto had taken over operation of the Tiny House Trailers website;

(d)        Mr Anderson had not told the Official Assignee about the sale of New PML’s assets to Gia Visto. He said the money went to “pay current trading

-  well not trading accounts, but pay bills and things that we’re responsible for, for what I owed at that point in time or bills I had outstanding, whatever”; and

(e)        the money from the sale went into New PML’s bank account. Then Mr Anderson’s son withdrew it and gave it to him, and he used it to pay various unidentified creditors.

[22]             Between September 2017 and at least May 2019, several people bought tiny homes from New PML, trading as Tiny House Trailers. The purchasers dealt with Mr Anderson in relation to the ordering, design, purchase, and delivery of the trailers. Mr Anderson was responsible for liaising with potential customers who contacted the business about tiny house trailers, discussing options with them, providing quotes, setting and varying purchase prices, determining the timing of deliveries, and emailing out invoices using the email addresses […] and […].

[23]             The purchasers of tiny houses believed that Mr Anderson was the owner of Tiny House Trailers. He signed on behalf of the vendor various sales and purchase agreements. Some of the purchases were straightforward, others became problematic due primarily to delays in completion. One matter ended up in the Disputes Tribunal with Mr Anderson purporting to file a counterclaim, further suggesting he was managing or controlling New PML, trading as Tiny House Trailers. This counterclaim was struck out on the basis that Mr Anderson was making a claim as an undischarged bankrupt without the approval of the Official Assignee.

[24]             Mr Anderson also entered into agreements with suppliers. For example, he obtained $12,762 worth of steel on 31 March 2018. This was a cash sale, and payment was due upon collection of the goods on 31 March 2018. Mr Anderson paid $1,000 on 10 April 2018. The invoice was made out to “Greg Anderson trading as Pro Machining”. Mr Anderson defaulted on that payment which eventually resulted in a sealed judgment being issued by the Court on 1 October 2018. The judgment was

against Gregory John Anderson trading as Pro Machinery Ltd, and approximately

$10,000 of the debt remained outstanding.

[25]             An accounting company was engaged in about December 2016 to prepare financial accounts and tax returns for New PML for the 2013 to 2016 financial years. The communication about this was with Mr Anderson. The accounting company spent a significant amount of time reconciling New PML’s accounts, which resulted in reducing New PML’s tax liability to the Inland Revenue Department. The accounting company later pursued civil proceedings against New PML to recover its fees and was awarded a judgment of $26,011.92 plus interest in the District Court, which has never been paid.

[26]             Between May 2016 and January 2019, Mr Anderson leased a commercial unit at Sockburn, Christchurch, which became the Registered Office of New PML. The address was also listed under the contact information on Tiny House Trailers’ website. Mr Anderson personally owes the landlord approximately $30,000 in unpaid rent, with no repayments having been made since he was evicted in January 2019.

[27]             During the timeframe outlined in the charge, Mr Anderson was prohibited from taking part, either directly or indirectly, in the management or control of PML, with that prohibition enduring over five years between 2015 and 2020. As well, Mr Anderson was prohibited from taking part in the management of any business by virtue of his status as an undischarged bankrupt. Mr Anderson did not have the leave of the Court nor did he have the consent of the Official Assignee to operate or be involved in the business.

[28]             MBIE has identified several creditors who have suffered losses amounting to approximately $110,000.

Victim impact statements

[29]             Seven victim impact statements were provided to the Judge at sentencing. They record financial stress and negative effects on health and wellbeing. Most ended up in various legal fora trying to recover their money. The Judge referred to them and observed that, broadly, all told the same stories. He noted “there were endless broken

promises and much unrecovered money”. The Judge considered that there was no realistic prospect of reparation being paid to the victims.

Previous conviction

[30]             Mr Anderson was convicted of a charge referred to as “carrying on business fraudulently” in his criminal history. This conviction was referred to by the Judge as he had read the associated sentencing notes of Judge Tompkins, who sentenced Mr Anderson to eight months’ home detention when he appeared for sentence in the Nelson District Court on 24 March 2015.7 Judge Tompkins’ sentencing notes outline that the charge upon which Mr Anderson was convicted was one laid under ss 386A(1)(b) and 373(4) of the Companies Act 1993, that being the director of a failed company within the period of five years after the date of commencement of the liquidation of that failed company, took part in the management of a phoenix company. Although this is not the same type of charge, the current offending is similar in kind.

Pre-sentence report

[31]             Because a sentence of imprisonment was a sentencing option, a Provision of Advice to Courts (PAC) report was requested. The PAC report is dated 16 March 2023 and recommended a sentence of home detention. It noted that Mr Anderson had sustained a serious injury to his pelvis in December 2022 and he was mostly confined to a wheelchair at that time. The report writer noted Mr Anderson’s prediction that he would need further surgery on his pelvis but, at that time, estimated it could be several months before he would be physically fit. Material was also provided from Te Whatu Ora Orthopaedic Department outlining aspects relevant to Mr Anderson’s injury.

[32]             The report writer also noted that Mr Anderson was residing at a rented address with his two adult sons and a woman who operates the business at which he is described as being employed as a contractor. Mr Anderson was described as a workaholic who, when fit, was said would work about 80 plus hours per week.

7      MBIE v Anderson [2015] NZDC 4912.

District Court decision

[33]             In setting the starting point, the Judge highlighted Mr Anderson’s lack of remorse, sense of entitlement, and lack of a sense of responsibility. He determined that personal deterrence was a salient sentencing principle engaged on the facts of the case. As Mr Anderson’s offending had caused harm to people, the Judge referred to the need to protect the public against Mr Anderson offending in this way in the future. But, the Judge also observed that a sentence of imprisonment should only be imposed in circumstances where it is strictly necessary under s 16 of the Sentencing Act 2002.

[34]             The Judge found that Mr Anderson was extensively involved in the management of the business, to the point that those interacting with Mr Anderson thought of him as the company. He considered this was an aggravating factor relevant to the offending. He also noted that the offending was highly premeditated and occurred while Mr Anderson was subject to two separate prohibitions preventing him from taking part in the management of a company.

[35]             The Judge next referred to the substantial harm caused by Mr Anderson’s offending, with financial losses to others amounting to around $110,000. He referred to the fact that the offending had a significant emotional impact on the victims.

[36]             Finally, the Judge referred to the scale of the offending, which he considered was aggravated by the substantial time over which it had occurred.

[37]The Judge found there were no mitigating factors relevant to the offending.

[38]             A starting point of two years and six months was adopted, which the Judge observed “might be considered generous having regard to the aggravating features present”.8

[39]             The Judge applied a 15 per cent uplift to reflect Mr Anderson’s previous conviction, which I have referred to above.

[40]             The Judge next considered mitigating matters personal to Mr Anderson. He referred to the pelvic injury suffered by Mr Anderson following his industrial accident. But the Judge observed that the most up to date report he had received indicated Mr

8      R v Anderson, above n 1, at [60].

Anderson had some mobility issues but was still able to get around on crutches and would be able to return to work within a few months. The Judge considered a five per cent discount was appropriate to reflect this mitigating matter.

[41]             The Judge then referred to Mr Anderson’s guilty plea, which had come just before trial, over three years after the charges were laid. He noted that the charge to which Mr Anderson pleaded guilty had always existed, the summary of facts had not changed, the evidence was overwhelming, and the Crown had undertaken substantial work and was ready for trial when Mr Anderson said he would plead guilty. The Judge indicated an eight per cent discount for the guilty plea would be available but later increased this to 10 per cent.

[42]             The end sentence imposed was one of 30 months’ imprisonment. This meant that home detention was not an available sentencing option.

Was the starting point adopted too high?

Submissions

[43]             Mr Peters, for Mr Anderson, submitted that, when analogous cases are considered, the starting point adopted by the Judge was too high. Mr Peters submitted that:

(a)        the Judge gave undue weight to the fact that Mr Anderson incurred a debt in a personal capacity (the lease) and while bankrupt;

(b)        the loss to consumer creditors was overstated as the terms of trade stated that deposits were non-refundable in the event the contract was not completed; and

(c)        certain accounting debts were for an unspecified company between 2013 and 2016 so must predate the offending.

[44]             Mr White, for the Crown, submitted the starting point adopted by the Judge was appropriate. He referred to the aggravating features of the offending, which he submitted included:

(a)        the significant losses suffered by the victims;

(b)        the fact that the offending was premeditated and disguised;

(c)        the offending occurred while Mr Anderson was an undischarged bankrupt;

(d)        Mr Anderson had been warned by MBIE; and

(e)        New PML had operated as a phoenix company up until 12 December 2017.

[45]             Mr White rejected Mr Peters’ suggestion that the deposit losses could not be attributed to Mr Anderson as, he submitted, they related to the terms of trade contained in the contracts between New PML and its customers.

Analysis

[46]             The Judge was correct to assess the starting point with reference to what were the aggravating factors relevant to the offending. I agree that the offending was premeditated and cynical. It occurred over an extended period of time and in the face of several warnings. The five-year ban was noted when Mr Anderson was previously sentenced, he had the effect of his previous conviction explained to him at length by MBIE, his Insolvency Officer reminded him of the restrictions on him in relation to being self-employed, and he had made two unsuccessful attempts to obtain the Official Assignee’s consent to be self-employed.

[47]             In my view, he was well aware of what was required but took steps to disguise the fact that he was effectively running the tiny house and tiny house trailer business. These steps included installing his son as a director of New PML and transferring assets into Gia Visto. Mr Anderson was also banned from being involved in the management of a company due to being an undischarged bankrupt and, as the Judge noted, had received specific warnings in relation to his ongoing activities. The Judge aptly referred to the prohibition and bankruptcy as “two layers of prohibition”.9

[48]             I also consider the offending was aggravated due to New PML operating as a phoenix company for a period while the offending was taking place.

[49]             Much of Mr Peters’ argument about the starting point took issue with the weight attributed to the level of loss related to the offending. Specifically, he contested

9 At [56].

the forfeited deposits, the lease entered into by Mr Anderson, and the attribution of the accounting fees owed to other entities.

[50]             In my view, the forfeited deposits should be considered as part of the harm flowing from Mr Anderson’s offending. Mr Anderson was deeply involved in the management of New PML, to the extent that many dealing with him thought he effectively was the company. As the Judge observed, he was engaged in nearly all facets of the running of the business, including organising the supply of materials, interacting with customers, and even defending the company in disputes in legal fora. It is artificial to refer to the forfeited deposits simply as the result of terms of trade. I agree with the Judge that the losses referred to are properly attributable to Mr Anderson’s involvement in the management of the business.

[51]             Mr Peters submitted that the fees owing to the accountant between 2013 and 2016 were for an unspecified company and therefore cannot relate to the offending. With respect, I do not understand this submission. On the material before the Court, namely the summary of facts to which Mr Anderson pleaded, the only reference to unpaid accountancy fees arises from when an accounting firm was engaged in December 2016 to prepare financial accounts for New PML in respect of the financial years 2013–2016.

[52]             With reference to the lease debt in respect of the Sockburn premises, while this lease was entered into by Mr Anderson in his personal capacity, the lease was for a commercial unit which became the registered office of New PML, it was listed on the Tiny House Trailer website as part of its contact information and the lease clearly relates to the management of New PML’s business.

[53]             Accordingly, the Judge was correct to take these matters into account as losses suffered by the victims of Mr Anderson’s offending. These losses were correctly attributed as an aggravating feature of the offending.

[54]             There is no tariff decision that applies, and previous cases have adopted a wide range of starting points reflecting the numerous circumstances in which such offending can occur.

[55]             In Blake v R,10 the Court of Appeal upheld a starting point of 18 months’ imprisonment on a charge laid under s 382 of the Companies Act 1993. The victims of Mr Blake’s offending suffered loses of around $300,000. In other respects, Mr Blake’s offending was less serious; Mr Anderson received more warnings about his conduct, and there was no phoenix company in that case. As well, when sentenced in relation to his previous offending, which also has a maximum penalty of five years’ imprisonment (or a fine not exceeding $200,000), Mr Anderson faced a starting point of 2 years.11

[56]             The judgment in Le Roy v MBIE is also relevant.12 The charges faced by Mr Le Roy included three charges laid under the Insolvency Act 2006 which involved taking part in the management or control of a business while bankrupt, the maximum penalty for which was a term of two years’ imprisonment. The other Insolvency Act charge carried a maximum penalty of 12 months’ imprisonment. Brewer J commented on the seriousness of such offending and considered a two-year starting point to be light.

[57]             The starting point adopted in respect of Mr Anderson’s prior offending was a term of two years’ imprisonment. In sentencing Mr Anderson, Judge Tompkins adopted the starting point another Judge had indicated at a sentence indication hearing. He described it as lenient. The question is whether, for this offending, which is similar, a starting point of two years, six months was within range or not.

[58]             I have reached the view that a starting point for this offending, to reflect the principles of sentencing and the gravity of the offending, would have been a sentence of between two years and two year six months’ imprisonment. This means that the Judge’s starting point was stern and at the upper end of the appropriate range. How this impacts on the end sentence and my assessment of whether the sentence was manifestly excessive will be considered after I have dealt with the remaining two points on appeal.

10     Blake v R [2018] NZCA 204.

11     MBIE v Anderson, above n 7.

12     Le Roy v MBIE & CIR [2023] NZHC 677.

Was the uplift provided for previous convictions excessive?

[59]             Previous convictions are typically dealt with at the second stage of sentencing, although there are certain exceptions for offending such as breaching protection orders where the previous convictions more relevantly inform the gravity of the offending. Mr Anderson’s previous conviction may be regarded as relevant insofar as it brings into focus the principles of sentencing the Judge identified as important, namely, the need for the sentence to reflect specific personal deterrence and the need for it to protect the community. However, the Court must be careful to avoid double- punishment.13

[60]             Mr Anderson’s previous conviction is similar in nature and in fact to such an extent that an uplift from the starting point was entirely warranted. Both instances involved Mr Anderson knowingly committing a crime relating to the improper management of businesses over an extended period after having been warned that such conduct was illegal. Both sets of offending involved the use of separate businesses as vehicles to avoid difficulties one business had encountered and, in both, phoenix companies were present. Further, both the present offending and the previous offending were marked by a sense of entitlement on the part of Mr Anderson.

[61]             There is no fixed limit to the uplift for previous convictions. The extent to which and the manner in which previous convictions are taken into account is a matter for the sentencing Judge, having regard to their type, frequency and seriousness. On appeal, the assessment of the uplift will take place within the context of an enquiry into whether the sentence has been shown to be manifestly inadequate.14

[62]             Accepting that prior offending of a similar type will generally carry a greater weight than prior offending of a different character altogether,15 it must nonetheless be proportionate in the circumstances. In this case, an uplift of 15 per cent amounted to an increase of 4.5 months. It is appropriate to consider that uplift in the final assessment as to whether the end sentence was manifestly excessive.

13     Beckham v R [2012] NZCA 290.

14     Crutchley v R [2015] NZCA 473 at [22]; and Ripia v R, above n 5, at [10].

15     R v Ward [1976] 1 NZLR 588 (CA) at 591; and Kushell v Police [2012] NZHC 2380 at [12].

Should more of a discount been allowed to reflect the guilty plea?

[63]             Mr Peters submitted that the guilty plea discount was insufficient. He accepted that the plea was entered just before trial and significant preparation for trial would have been undertaken by the Crown, but he noted the compromise reached was suggested by the Crown Solicitor the day before the plea was entered.

[64]             An evaluative assessment is required of all the circumstances in which a guilty plea is entered when considering the appropriate discount.16 The Judge noted that the Crown case appeared to be strong. As this case was proceeding to a jury trial, the Judge would have seen the formal statements of the witnesses the Crown intended to call to support its case and was therefore able to make this assessment with the benefit of that information.

[65]             The fact that the plea came extremely late, over three years after the charges were first laid, was relevant. Significant investigative effort would have already been expended, and the Crown was completely prepared for trial. The trial was only set down for three days, did not have an extensive witness list, and did not involve the sort of traumatic offending that guilty pleas often save victims and witnesses the discomfort of reliving.

[66]             While the plea came following a reduction in the charges, the facts which would otherwise have supported the dropped charge remained in the final summary of facts and are appropriately considered as an aggravating feature of the charge to which Mr Anderson pleaded guilty. I consider that the guilty plea discount of 10 per cent was within range and generous.

Conclusion

[67]             The end position reached by the Judge is outlined in para [66] of his sentencing notes as follows:

When I do the maths, from a starting point of two and half years or 30 months, uplifting by 15 per cent for your previous conviction but then reduced by 13 per cent for your personal mitigating features I arrive at a sentence of just over 30 months. However I will round that down to 30 months effectively giving you ten percent for pleading guilty.

16     Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607 at [51].

[68]             Effectively, the uplift and discount for personal mitigating matters resulted in a neutral adjustment to the starting point. The end result was, in my view, a stern sentence but still within range.

[69]I am not satisfied therefore that the end sentence is manifestly excessive.

[70]             I observe that, even if I had reached a contrary view, I would not have considered a sentence of home detention to be appropriate. Given the nature of this offending, which can be described as brazen, a sentence of imprisonment was, in my view, inevitable.

Result

[71]The appeal is dismissed.

Harland J

Solicitors:

Alpers & Co., Northwest Law Office, Christchurch Raymond Donnelly & Co, Christchurch.