BETWEEN KATIE DIANNE RUTH WATSONAppellantANDNEW ZEALAND POLICERespondent
[2024] NZHC 1326
•24 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI-2024-404-158
[2024] NZHC 1326
BETWEEN KATIE DIANNE RUTH WATSON
Appellant
AND
NEW ZEALAND POLICE
Respondent
Hearing: 21 May 2024 Appearances:
D J Ratima for Appellant
J A E Tausi for Respondent
Judgment:
24 May 2024
JUDGMENT OF BOLDT J
[Sentence appeal]
This judgment was delivered by me on 24 May 2024 at 12.30 pm
Registrar/Deputy Registrar
Solicitors:
Crown Solicitor, Manukau for Respondent
WATSON v NEW ZEALAND POLICE [2024] NZHC 1326 [24 May 2024]
[1] On 14 March 2024, Judge Moala sentenced the appellant, Katie Watson, to two years and four months’ imprisonment. The appellant had pleaded guilty to two representative charges of theft by a person in a special relationship, two representative charges of accessing a computer system for a dishonest purpose and a representative charge of dishonestly using a document for pecuniary advantage.1
[2] In addition, and by accident, the appellant pleaded guilty to, and was convicted of, a single charge of theft, though the Police had intended to offer no evidence. Both parties have invited me to quash Ms Watson’s conviction on that charge, and I do that now. That charge involved property worth only $327. It is immaterial when assessing the appropriate sentence for the appellant’s wider fraud, which involved sums exceeding $500,000.2
Factual background
[3] From February 2011 to October 2020, the appellant worked for a company called Allied Petroleum Ltd (APL), which is a subsidiary of a larger company called H W Richardson (HWR). She initially worked as a Customer Services Administrator, and then as a Senior Customer Services and Inventory Controller.
[4] In March 2018 the appellant embarked upon a deliberate and sophisticated fraud of her employer. The frauds took two main forms; each was reflected in one charge of theft and one of dishonestly accessing a computer system.
[5] The first main fraud concerned courier bags and prepaid envelopes. These were products APL used in substantial quantities, so the fact the appellant was ordering them in large volumes did not ring alarm bells. Instead of using the bags and envelopes for APL’s business, however, the appellant sold them on Trade Me at less than face value. Over a period of more than two and a half years, she sold bags and envelopes which had a combined value of $428,248.44. The appellant’s own profit was $215,641.20.
1 Crimes Act 1961, ss 220(1)(a), 223(a), 228(1)(b) and 249(1)(b). All offences carry maximum penalties of seven years’ imprisonment.
2 New Zealand Police v Watson [2024] NZDC 7325 at [10].
[6] The second major fraud involved the appellant taking oils and lubricants which belonged to APL and putting them on Trade Me, again at a considerable discount. The cost to APL was $86,266, and the appellant personally profited by $20,910.
[7] The use of a document charge reflects a third, much smaller, course of fraud, involving the appellant using her APL credit card to purchase gift cards (mostly Countdown cards) on the pretext that these would be given to staff as performance incentives. She obtained $2,400 worth of gift cards in this way, and kept them all. Similarly, the appellant used her company credit card to pay off a personal debt of
$826 she had incurred with Trade Me, in the form of listing and success fees, while committing the two main frauds.
[8] The total loss to APL from the appellant’s frauds was $517,780.44, and the appellant personally profited by $239,551.20. There is the possibility of further, presently unquantifiable, losses to APL depending on how the fraudulently obtained courier bags come to be used; some may incur additional delivery fees for which APL will become liable.
[9] The effect of the appellant’s offending on HWR and the appellant’s APL colleagues has been profound. Indeed, in her submissions in this Court, Ms Ratima submitted that the reading of the victim impact statement “created a powerful effect” on the sentencing Judge. For reasons I will come to, I do not regard the sentencing Judge as having strayed off course at any stage, but it would have been understandable if the victim impact statement — delivered by Mrs Jocelyn O’Donnell, an owner and director of HWR — powerfully brought home the effect the appellant’s offending had had on her employer and colleagues. The appellant had been a trusted member of the team over an extended period, and the offending can only have been a profound shock when it was discovered. The following passage from Mrs O’Donnell’s statement gives a flavour:
Impact on Employees
The Lubricants Customer Service Team was a small team of four employees that operated as a small branch office of which Katie was the Manager and she had three direct reports. Due to the small number of employees in the Auckland Wiri Office it had a family type feel to it and Katie’s deception had a deep effect on everyone. The team were [devastated] when Katie abruptly
left Allied, as they were a tight working group who trusted and believed in Katie as their manager. Most of the team had worked hard for Katie for a number of years. Some had a personal relationship with Katie, so when Katie personally revealed the extent of her deceit and betrayal the team took Katie’s betrayal personally and suffered significant personal trauma.
[10] The Victim Impact Statement went on to discuss the significant and ongoing effect the appellant’s offending had on APL, which included the challenge of having to manage customers who believed they had been dealing legitimately with the business, but who had instead been caught up in the appellant’s fraud. The appellant’s colleagues became understandably anxious during the investigation, as they felt that they, too, were under suspicion. Fraud by employees always involves a breach of trust, but in this case that breach was acute and had a significant effect.
[11] The appellant is a 37-year-old woman. Her only previous conviction was for driving with excess blood alcohol in 2008. I put that conviction to one side for the purposes of this appeal; these are the appellant’s first charges of dishonesty.
[12] The appellant suffered from a gambling addiction. It appears her fraud funded this addiction, and it is the principal explanation — indeed the only apparent explanation — for what happened. The PAC Report noted that the appellant linked her gambling addiction to a history of depression, which led to unhealthy coping behaviours. The appellant said she sought treatment for her gambling addiction in 2019, though that was not successful, and that she also engaged a psychotherapist between 2019 and 2021.
[13] Little was left of the money the appellant stole. She was able to offer reparation of $16,000 from her Kiwisaver. That sum was only a drop in the bucket when measured against the overall fraud, though it did represent an offer by the appellant to do what she could.
Judge’s approach to sentencing
[14] In the District Court, Judge Moala reviewed several cases involving substantial frauds of this nature. She noted there were numerous aggravating factors, including the severe breach of trust. The Judge noted the scale, sophistication and duration of the offending, and referred to the time and expense the investigation had required. The
Judge referred to the “huge financial loss to the company”, of approximately
$517,000, and the significant impact of the offending on the victims, including the appellant’s colleagues who felt they were under a microscope during the investigation, and feared they may be implicated in the fraud themselves.3
[15] The Judge selected a starting point, which she described as at the top end of that suggested by the Police, of 56 months’ — or four years eight months’ — imprisonment.4 The Judge then applied multiple discounts.
[16] First, the Judge gave the appellant a 20 per cent discount based on her pleas of guilty and her efforts to help the investigation.5 The appellant’s pleas took some time to be entered; she first appeared in August 2021 and did not plead guilty for more than two and a half years. Those delays were caused by a number of factors outside the appellant’s control. There were multiple administrative adjournments due to the pandemic, and it also became apparent that further work was needed to determine the full extent of the offending. It was only after a forensic accountant was instructed in 2023 that the final agreed summary was settled, detailing the sums set out above, and when that process was complete the appellant entered her pleas. Though the pleas were far from immediate, the Judge was still satisfied that a substantial discount was appropriate.
[17] Judge Moala allowed a further discount of 10 per cent in recognition of the appellant’s gambling addiction and personal background.6 In reaching this figure, the Judge had regard to a cultural report which set out numerous serious personal setbacks the appellant had suffered as a younger woman.
[18] The Judge allowed the appellant a further 10 per cent discount in recognition of her efforts at rehabilitation.7 The appellant also expressed extreme remorse in a letter to the owners of HWR.
3 New Zealand Police v Watson, above n 2, at [18].
4 At [21].
5 At [22].
6 At [23].
7 At [23].
[19] Finally, the Judge allowed another 10 per cent to recognise the appellant’s strong family support, offer of reparation, and in recognition of the impact a term of imprisonment will have on the appellant’s children.8
[20] The discounts added up to 50 per cent, meaning that from a starting point of four years and eight months the Judge imposed a final sentence of two years and four months’ imprisonment on all charges.
The appeal
[21] On behalf of the appellant, Ms Ratima submitted that the 56-month starting point was too high, though that submission fell away in argument. Ms Ratima had initially been concerned that the Judge had proceeded on the erroneous basis that the offending spanned four years rather than two and a half, but accepted, on reflection, that the Judge had not made any error in that respect. She also fairly accepted that even at two and half years, this remained a very lengthy course of systematic offending.
[22] Ms Ratima referred to the appellant’s immediate acceptance of responsibility and the assistance she provided with the investigation, but agreed that those matters are more appropriately addressed as matters of mitigation, rather than in assessing the appropriate starting point.
[23] Ms Ratima’s next submission was that the appellant should have received more than a 20 per cent discount for her pleas of guilty. She argued that there is no reason the appellant should not have received the maximum 25 per cent discount mandated by the Supreme Court in Hessell,9 as all the delays between charge and pleas were well explained.
[24] Finally, Ms Ratima submitted that the Judge should have allowed the appellant a greater discount for the $16,000 reparation she offered.
8 At [24].
9 Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607 [Hessell SC].
[25] Viewed as a whole, Ms Ratima argued — at least initially — that the starting point should have been lower. She then argued that two of the discounts should have been larger, bringing the final sentence down to two years’ imprisonment or less, allowing the Court to consider a sentence of home detention.
Crown submissions
[26] Ms Ratima began her submissions by acknowledging the excellence of the submissions filed by Mr Tausi on behalf of the Crown, and I do likewise. Mr Tausi submitted that the 56-month starting point was well within the available range given the serious breach of trust, the scale and sophistication of the offending, its extended duration and the substantial loss APL sustained. Mr Tausi noted that the Judge took appropriate account of all those matters, and that the starting point was closely aligned with other frauds of a similar magnitude.
[27] Mr Tausi submitted that the 20 per cent discount for the appellant’s guilty plea was also within the range available to the Judge. The 25 per cent referred to in Hessell is only a maximum, and Mr Tausi argued that the difference between the final amount of the fraud and sum the appellant believed she had stolen turned out, after a lengthy delay, to have been far less than she originally maintained.
[28] Similarly, Mr Tausi argued that a 10 per cent discount for reparation and the appellant’s family situation, including the support she has available to her and the impact of a prison sentence on her children, was within range. Assessment of the significance of an offer of reparation is always fact specific, and in this case, given the sum offered represented such a small proportion of the sum stolen, the discount for reparation was appropriate.
[29] Finally, and most importantly, Mr Tausi submitted that the overall sentence was open to the Judge, and cannot be described as manifestly excessive. He argued the appellant’s offending was simply too serious for a sentence of home detention to be contemplated.
Discussion
[30] The principles governing this appeal are well understood. By virtue of s 250 of the Criminal Procedure Act 2011 I must dismiss the appeal unless satisfied the Judge has made an error, and that a different sentence should be imposed. While s 250 makes no express reference to the sentence having to be manifestly excessive, or wrong in principle, those standards are well understood and continue to govern appeals against sentence.10 My focus is on the sentence finally imposed; it does not matter if the Judge made one or more errors in the course of reaching her final sentence as long as the sentence itself was one reasonably available to her.
[31] For reasons discussed in more detail below, this case turns entirely on whether the starting point the Judge selected was within the range available. Considered together, the discounts the Judge awarded in mitigation were entirely reasonable, if not generous. The overall discount of 50 per cent from the 56-month starting point cannot be described as inadequate.
[32] There is no tariff case offending of this kind. While the sums of money involved provide an obvious benchmark, other factors, such as the breach of trust involved, the time over which the fraud extends, the levels of sophistication involved and the impact on the victims will vary widely from case to case. Even leaving aside the fact sentencing is a discretionary exercise, there can be no expectation that two cases involving broadly similar sums will necessarily attract the same sentencing response. As the Court of Appeal observed in R v Varjan:11
[21] It was said in Rose that there is no established benchmark. That is still the position. The circumstances of, and culpability in, offences of dishonesty vary widely. They must be assessed in light of the guidance to be found in previous decisions. …
[22] Culpability is to be assessed by reference to the circumstances and such factors as the nature of the offending, its magnitude and sophistication; the type, circumstances and number of the victims; the motivation for the offending; the amounts involved; the losses; the period over which the offending occurred; the seriousness of breaches of trust involved; and the impact on victims.
10 Tutakangahau v R [2014] 3 NZLR 482 at [33].
11 R v Varjan CA97/03, 26 June 2003.
[23] It is in the assessment of culpability that comparison with other cases is to be undertaken. Matters of mitigation such as reparation, cooperation with investigators, plea, remorse and personal circumstances necessarily must be assessed in each particular case.
[33] That said, patterns have emerged which ensure that starting points for frauds of similar magnitude are at least in the same ballpark. In R v Borlase — a case of bribery and corruption which bears no factual resemblance to the appellant’s case —
Fitzgerald J observed:12
[73] As a further cross-check to your level of culpability, I have also considered a number of cases of fraud more generally, including theft by a person in a special relationship and obtaining by deception.13 In cases where benefits of between approximately $1m to $3m had been obtained, starting points in the vicinity of seven to nine years imprisonment have been adopted. Where the benefits obtained were around $500,000 to $750,000, starting points of around five to seven years’ imprisonment have been adopted.
[34] Both counsel endorsed the correctness of that passage. Of the cases cited by Fitzgerald J, McGregor provides the closest comparison to the present. The appellant pleaded guilty to 10 charges of theft from her employer. She stole just over $470,000 and, like the appellant, her offending involved a grave breach of trust. A starting point of five years’ imprisonment was upheld on appeal.14 Other cases of similar magnitude include Mears v R,15 where a fraud involving $380,000 over six years resulted in a four year and a half year starting period. Fitzgerald J’s analysis, identifying five years as a sustainable starting point for frauds of around $500,000, is well supported.
[35] Against that background, there can be no criticism of Judge Moala’s selection of four years and eight months as the appropriate starting point for the appellant. As the Judge noted, and as Ms Ratima accepts, the offending involved a very serious breach of trust. The appellant offended steadily for more than two and a half years. She had considerable opportunity to reflect on what she was doing. The offending involved a deliberate and prolonged course of deceit against people who regarded her highly and trusted her completely.
12 R v Borlase [2017] NZHC 236.
13 R v Douglas [2012] NZHC 2271; R v Ludlow [2013] NZCA 196; R v Wallnutt CA182/93, 8 August 1993; R v Rowley [2012] NZHC 2087; Lindup v Inland Revenue Department (2008) 23 NZTC 22,025 (HC); R v Patterson [2008] NZCA 75; Mount v R [2015] NZCA 489; Arnott v R [2015] NZCA 236; and McGregor v R [2015] NZCA 565.
14 McGregor v R, above n 13, at [23].
15 Mears v R [2014] NZCA 30.
[36] While there is no exact science behind the selection of starting points in a case of this kind, even a slightly higher starting point would probably have been sustainable given all the aggravating features just discussed.
[37] Having settled upon the starting point, the Judge applied a series of generous discounts, beginning with 20 per cent for the appellant’s pleas of guilty. As Ms Ratima accepted in argument, Hessell does not create an expectation of a 25 per cent discount upon entry of a guilty plea; indeed, the effect of the Supreme Court’s decision was to overturn the far more rigid discounting regime proposed by the Court of Appeal.16
[38] The Supreme Court noted that discounts for guilty pleas must reflect all the circumstances in which the pleas entered, including whether they are truly to be regarded as early or late, and the strength of the prosecution case. The challenge for the Court is to identify “the extent of the true mitigatory effect of the plea”.17 This will often be an assessment where reasonable minds can differ, and there can be no criticism of the approach taken by Judge Moala. For example, in this case the appellant’s conviction was inevitable from the moment her fraud was detected. That factor alone might have been sufficient to justify a reduction from the 25 per cent maximum. There was also extensive delay, which was based in part on the appellant’s belief that she may have defrauded APL of something in the order of $300,000. At the same time, the initial estimate of the company’s loss turned out to be somewhat inflated; the final figure was roughly $100,000 less than initially alleged. The 20 per cent figure represented a well-balanced assessment of the true mitigation afforded by the pleas.
[39] On top of that, the Judge extended credit for the appellant’s gambling addiction, offer of reparation, efforts at rehabilitation, remorse, family support, and the effect of the offending on the appellant’s children. A combined 30 per cent discount for those factors cannot be criticised; other Judges may not have given as much. While Ms Ratima submitted that greater credit should have been extended for the offer of reparation, I accept Mr Tausi’s submission that the sum the appellant was able to offer was modest, that the Judge plainly had regard to it, and that regardless of the exact
16 Hessell v R [2009] NZCA 450, [2010] 2 NZLR 298.
17 Hessell SC, above n 9, at [74].
reduction for reparation the total discount for the various mitigating factors remained generous.
[40]It follows that, even if the starting point had been too high — which it was not
— the final sentence would still have fallen well short of being manifestly excessive.
Result
[41] The appeal against the appellant’s conviction on CRN20192008397, which was entered in error, is allowed. The appellant’s conviction on that charge is quashed, and under s 233(3)(a) of the Criminal Procedure Act a judgment of acquittal is entered.
[42]The appeal against sentence is dismissed.
Boldt J
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