Broadlands Finance Limited v Reserve Bank of New Zealand
[2013] NZHC 3147
•27 November 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2013-404-0274 [2013] NZHC 3147
BETWEEN BROADLANDS FINANCE LIMITED Appellant
ANDRESERVE BANK OF NEW ZEALAND Respondent
Hearing: 19 November 2013
Appearances: R B Stewart QC for Appellant
D G Johnstone for Respondent
Judgment: 27 November 2013
JUDGMENT OF KEANE J
This judgment was delivered by on 27 November 2013 at 5pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
Solicitors:
Bell Gully, Auckland
Crown Solicitor, Auckland
BROADLANDS FINANCE LIMITED v RESERVE BANK OF NEW ZEALAND [2013] NZHC 3147 [27
November 2013]
[1] On 16 August 2013 Broadlands Finance Limited was convicted in the District Court, Auckland, of two offences between 1 December 2010 – 16 October 2012 against the Reserve Bank of New Zealand Act 1989. It was fined $6,000 for each offence. It appeals its conviction and sentence.
[2] In September 2011 Broadlands withdrew its prospectus and has not since received new money or investments from the public. But during the 22 months in issue it was, as it will remain while it has liabilities to depositors, a ‘deposit taker’ for the purposes of the Act.1 And on 1 December 2010 it became obliged to have at least two independent directors in the full sense that Part 5D of the Act then began to require - directors who are not employed by or are directors of or have more than a
10% interest in any ‘related party’, including any subsidiary.2
[3] During the 22 months in issue Broadlands did have two directors, who were independent under the NZSX/NZDX Listing Rules. But only one, and for 15 months only, was independent of Broadlands’ related parties, including its subsidiaries. During those 22 months one or more of Broadlands ostensibly independent directors was a director of its subsidiary, Beneficial Insurance Limited.
[4] Broadlands was charged with two offences, not one, only because the Bank excused any breach for three days, 13-16 February 2012; and on 30 April 2013
Broadlands pleaded guilty to the two offences charged, in reality its single offence, and applied for a discharge without conviction under the Act, on the ground that its contravention was in respect of a matter that was ‘immaterial’.
[5] As a matter of policy, Broadlands contended, it had since October 2010 had two directors, who were independent according to the Listing Rules, and it had assumed that they were sufficiently independent when it came under the duty that Part 5D imposed as from 1 December 2010. It then assumed that they could remain directors of its subsidiaries and thought that desirable as a matter of good
governance. The Bank itself, Broadlands contends, shared its error.
1 Reserve Bank of New Zealand Act 1989, s 157C(1)(a).
2 Reserve Bank of New Zealand Amendment Act 2008, s 17; Reserve Bank of New Zealand Act
1989, s 157L.
[6] In February 2012 Broadlands advised the Bank that two directors, whom it then considered to be as independent as the Act required, had been, or were also, Beneficial directors. The Bank did not identify Broadlands’ error. Then, in October
2012, when Broadlands realised its error, it immediately advised the Bank and applied for an exemption. Throughout the 22 months it was soundly based. It had not obtained any benefit from its failure to comply. No depositor or creditor had suffered loss.
[7] Broadlands also relies on the possibility that, had it been alert to the issue before 1 December 2010, it could have applied to the Bank to be exempted the prohibition against its independent directors being directors of its subsidiaries. The Bank has granted one such exemption; and in that instance directors, placed just as
Broadlands directors then were, are rated ‘autonomous directors’.3
[8] The Bank declined Broadlands’ exemption application, and opposed Broadlands application to be discharged without conviction. It accepted that Broadlands may have acted unwittingly and not benefited, and that no depositor or creditor had been prejudiced. But, it contended, Broadlands’ failure to comply with its structural governance duty under s 157L to reconfigure its board to ensure it had two directors completely independent of related parties could not be excused as immaterial.
[9] By 1 December 2010 that duty had been on the statute book for 27 months. (The Reserve Bank of New Zealand Amendment Act 2008, which introduced Part
5D governing deposit takers, received the royal assent on 9 September 2008.) After
1 December 2010 Broadlands’ failure to comply continued for 22 months. Throughout that period, under Part 5D, Broadlands’ board of directors was
constitutionally deficient.
3 Fisher & Paykel Finance Ltd Exemption Notice 2010.
Decision under appeal
[10] Judge Ryan, in her decision on 16 August 2013, agreed with the Bank.4 She held that a discharge without conviction for a contravention of that length would
‘turn the provisions of Part 5D on its head’. The power to discharge under the Act, she held, could only be for breaches, which are ‘truly technical, minor in nature, short in duration or caused by force majeure or other circumstances outside the directors’ control’.
[11] Broadlands’ two offences each notionally attracted a maximum penalty of
$1M. The Judge deemed them to be a single offence. In the fine she then imposed she took a global starting point, $25,000, taking into account the starting point taken in the only other similar case5 and also the possibility that Broadlands had placed before the Bank in February 2012 material that might have resulted in the Bank alerting Broadlands to its offence.
[12] The Judge gave Broadlands a 20 per cent credit for bringing the matter to the Bank’s attention; a 10 per cent credit for its sound trading history, lack of previous convictions, and good governance; and a five per cent credit for acting in good faith when it contacted the Bank in February 2012. Then she gave it a 25 per cent credit for its early plea. In that way she arrived at the $12, 000 global fine she imposed; a
$6000 fine for each offence.
Grounds of appeal
[13] On this appeal Broadlands contends that, in refusing a discharge under the Act, the Judge erred in principle. Essentially, Broadlands contends, the Judge construed ‘immateriality’ too narrowly. Her focus was on the length of time for which Broadlands had contravened its duty. She should have offset against that the lack of any benefit to Broadlands and, more materially, the lack of any prejudice to depositors. That lack of prejudice rendered the duration of the contravention
immaterial.
4 Reserve Bank of New Zealand v Broadlands Finance Ltd DC Auckland CRI-2013-004-003086,
16 August 2013.
5 Reserve Bank of New Zealand v Avanti Finance Ltd DC Auckland CRI-2012-014-012467, 11
December 2012.
[14] Broadlands also contends that the Judge took into account an irrelevant factor: the issue, on an application for discharge under s 106 of the Sentencing Act
2002, whether a conviction would be out of all proportion to the gravity of the offence. However, Broadlands also contends that the Judge was entitled to take into account, if only as factors consistent with a discharge, that it had acted unwittingly and in good faith and its otherwise sound governance and good financial record.
[15] Broadlands contends, alternatively, that the fine the Judge imposed was manifestly excessive. Its single offence, in reality, was formal and technical at most. A nominal fine from a $5,000 starting point, in the vicinity of $2,000 - $2,500, was the most that the Judge could in principle rightly impose.
Appeal principles
[16] Broadlands, correctly I consider, has appealed the refusal of a discharge without conviction as an appeal against conviction, not sentence, under s 115 of the Summary Proceedings Act 1957.6 An appeal under s 115, whether against conviction or sentence, is a general appeal7 and is by way of rehearing8 and this
Court’s powers on appeal are correspondingly wide.9 But there is this pertinent
distinction between the two.
[17] Where an appeal is against sentence there is a single and intelligible focus. It is whether the sentence imposed is ‘clearly excessive ... or inappropriate’.10 Where there is an appeal against conviction, resting on a guilty plea and the refusal of a discharge without conviction, there is an issue as to nature and scope of the review to be made, which arises in this case. Is it as on a general appeal against conviction, or is it as on appeal against the exercise of a discretion?
[18] On a general appeal by way of rehearing, the Supreme Court recently reaffirmed in Kacem v Bashir, ‘the appellate Court has the responsibility of
considering the merits of the case afresh’; and ‘the weight it gives to the reasoning of
6 Rutherford v Papakura District Council HC Auckland CRI-2005-404-162, 20 September 2005;
Mohammed v New Zealand Customs Service CRI-2008-404-56, 29 May 2009.
7 Summary Proceedings Act 1957, s 115(4).
8 Section 119(1).
9 Section 121.
10 Section 121(3)(b).
the Court or Courts below is a matter for the appellate Court’s assessment’.11 On such an appeal, the Court said, the appellant is:12
entitled to judgment in accordance with the opinion of the appellate Court, even where that opinion involves an assessment of fact and degree and entails a value judgment.
[19] The Supreme Court also distinguished such an appeal from an appeal against the exercise of a discretion. As the Court then said: 13
In that kind of case the criteria for a successful appeal are stricter: (1) error of law or principle; (2) taking account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong.
In making that distinction the Court affirmed May v May,14 and later cases which confine appeals against the exercises of discretion to error review and do not permit the appellate court to substitute its own view.15
[20] The Supreme Court acknowledged that the distinction between a general appeal and an appeal from the exercise of a discretion is ‘not altogether easy to describe in the abstract’.16 That a decision requires a ‘factual evaluation and a value
judgment’, the Court said, does not ‘of itself’ make a decision discretionary.17
Conversely, the Court later said, a decision calling for ‘assessment and judgment’, is not from the exercise of a discretion.18 Just how elusive the distinction between ‘a true discretionary decision’ and ‘an evaluative one’ can be is illustrated by the Court’s later decision in Brooks Homes Ltd v New Zealand Tax Refunds Ltd.19
[21] The decision whether to grant or withhold a discharge without conviction, however, has always been held to involve the exercise of a discretion. In Fisheries Inspector v Turner, to take just one example, Richardson J said, speaking of the then
power to discharge without conviction, that it was a ‘discretion’ under which, ‘the
11 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1.
12 At [32].
13 At [32].
14 May v May [1982] 1 NZLR 16.
15 Harris v McIntosh [2001] 3 NZLR 721 (CA).
16 Kacem v Bashir, above n 11, at [32].
17 At [32].
18 Kacem v Bashir, n 10 above, at [32].
19 Brooks Homes Ltd v New Zealand Tax Refunds Ltd [2013] NZSC 60.
Court is required to balance all the relevant public interest considerations as they apply in the particular case’.20 That has invariably been the position since.21 That seems to me to be decisive as to the nature and scope of this appeal. It is to be deemed to be an appeal against the exercise of a discretion.
[22] In one sense, that does not matter. The essential issue, even on a general appeal, would be whether the Judge understood correctly what she had to decide and what she did and did not take into account and with what weight. In another sense, it does matter. It goes to the extent to which I may intervene if I differ from the Judge on the merits. On the view I take of this appeal, however, that difficulty does not arise.
Power to discharge
[23] The general power to discharge without conviction is conferred by ss106-109 of the Sentencing Act 2002. Broadlands initially applied for such a discharge, but withdrew that application. It applied instead for a discharge under s 157ZU of the Act itself, which confers on the Court the power to discharge a deposit taker in these terms:
(1) If a deposit taker is charged with an offence against section 157ZR or 157ZS, the court may direct that the charge against the defendant be dismissed if the court considers that the alleged contravention was in respect of matters that were immaterial.
(2) A direction under subsection (1) may be made at any stage of the proceeding—
(a) on the motion of the court or on the application of the defendant; and
(b) after giving both the prosecutor and the defendant a reasonable opportunity to be heard on the matter.
(3) The dismissal of a charge under this section is deemed to be an acquittal.
(4) Nothing in this section limits sections 106 to 109 of the Sentencing
Act 2002.
20 Fisheries Inspector v Turner [1978] 2 NZLR 233 (CA) at 241.
21 Delaney v New Zealand Police HC Wellington CRI-2005-485-22, 22 April 2005 at [12],
Alshamsi v New Zealand Police HC Auckland CRI-2007-404-62, 15 June 2007 at [9].
[24] The sole ground for discharge that s 157ZU allows, on the face of it may seem to allow the Court a wide discretion. It rests on whether ‘the court considers that the alleged contravention was in respect of matters that were immaterial’. Section 157ZU(4) speaks of the power to discharge given by s 106 of the Sentencing Act 2002, but does not import the ground for such a discharge: that a conviction would be wholly disproportionate to the offence. It does no more than preserve the ability to apply for such a discharge independently. The concept of ‘immateriality’ is not defined in s 157ZU or elsewhere.
[25] In common speech something is ‘immaterial’ when it is ‘of no essential consequence; unimportant’.22 But what ‘matters’ can be contravened under s157L that may also be ‘immaterial’, and why is that so? Is materiality to be assessed solely against the duration of a contravention regardless of context or consequences? Or are context and consequences material and can the absence of prejudice be given decisive weight regardless of duration? Is there a mid point?
[26] In the absence of a statutory definition, immateriality must be given a meaning consistent with the purpose and scheme of Part 5D, set against the Act as a whole; and what that must entail in this case particularly is apparent from three recommendations made by the Finance and Expenditure Committee of the House of Representatives, when reporting on the 2008 amendment act then in bill form after the first reading.
Three select committee recommendations
[27] First, the Committee considered that the governance requirement that s 157L imposes on deposit takers is a ‘basic requirement’. In the bill, as it was on the first reading, that requirement was to be imposed by regulation. The Committee considered that to be inconsistent with the significance of the requirement and that is why it is imposed by s 157L.
[28] Secondly, the Committee endorsed as ‘fair and reasonable’ the single
stringent defence that the Act allows where a deposit taker breaches one of the duties
22 Oxford English Dictionary.
that Part 5D imposes and an offence arises; a defence requiring the deposit taker to establish not just reasonable precautions and due diligence but an absence of responsibility or control.
[29] Thirdly, the Committee did not speak about materiality, when discussing the s
157L governance requirement. But when speaking of a trustee’s duty to report to the Bank any ‘material’ non-compliance by a deposit taker, it described ‘immaterial’ non-compliance as ‘technical non-compliance with no serious or ongoing implications’. It also said, presciently as this case illustrates:
In some cases seemingly small compliance issues could be of import. For example, if an organisation were two days late in reporting a risk management plan, this is likely to be immaterial as regards whether a plan had in fact been produced. However, it might be material if the organisation had just collected a number of deposits.
[30] Before coming to s 157L itself, the subject of the first of the committee’s three recommendations, I will refer first to three aspects of Part 5D that reflect, or are consistent with, the committee’s second and third recommendations.
Strict liability, exemption and defence
[31] First, the duties Part 5D imposes on deposit takers are underpinned by related offences of strict liability; and so, to take this instance, a deposit taker contravening s 157L, commits such an offence against s 157ZR(b), which describes s 157L as imposing ‘requirements concerning the governance of deposit takers’.
[32] Secondly, deposit takers can be exempted from their Part 5D duties, but the Bank’s power to exempt is closely circumscribed to preserve the integrity of Part 5D. An exemption must be consistent with the principles s 157F(2) prescribes,23 and they
include, ‘the desirability of sound governance of the deposit takers’,24 and ‘the
desirability of effective risk management by deposit takers’.25 The Bank is prohibited by s 157G from granting an exemption unless satisfied that:
23 Reserve Bank of New Zealand Act 1989, s 157F(1)(a).
24 Section 157F(2)(d).
25 Section 157F(2)(e).
(a) the exemption will be consistent with the maintenance of a sound and efficient financial system; and
(b) compliance with the relevant provision or provisions would, in the circumstances, require the deposit taker, class of deposit takers, or trustee to comply with requirements that are unduly onerous or burdensome; and
(c) the extent of the exemption is not broader than what is reasonably necessary to address the matters that gave rise to the exemption.
An exemption can also be hedged with terms and conditions amongst which, to take
one example, is ‘a maximum limit on exposures to related parties’.26
[33] Thirdly, Part 5D does allow a deposit taker a defence, but subject to an exacting burden. Section 157ZT says this:
(1) In any prosecution of a deposit taker for an offence against section
157ZR or 157ZS, it is a defence if the deposit taker proves that—
(a) the contravention was due to the act or omission of another person, or some other cause beyond the deposit taker's control; and
(b) the deposit taker took reasonable precautions and exercised due diligence to avoid the contravention.
(2) For the purposes of subsection (1)(a), the term another person does not include a director, employee, or agent of the deposit taker.
...
[34] To benefit from this defence a deposit taker must prove a complete absence of fault. Reasonable precautions and due diligence are not enough. The deposit taker must prove a complete lack of responsibility. Absent that ability, a deposit taker’s only resort is to apply for a discharge without conviction, either under s 106 of the Sentencing Act 2002, with which we are not concerned, or under s157ZU.
[35] The Court’s ability to grant a discharge under s 157ZU on the ground of
‘immateriality’, I consider therefore, must strike a balance between two principles inherent in Part 5D, which are in tension. One is that Part 5D imposes on deposit takers strict liability to comply with the duties it imposes and only exempts them
from that duty exceptionally. The other is that Part 5D does allow a deposit taker to
26 Section 157G(3)(f).
be excused strict liability for a contravention but again only exceptionally, when that does not offend against purpose of the duty.
[36] There can be no fixed prescription. As the select committee said, a two day contravention, without prejudice to depositors, might well be immaterial. But even a two day contravention might be material if that carried a sensible risk of prejudice to depositors. Conversely, an absence of prejudice might well be relevant to whether a contravention is immaterial, but where a contravention continues as it did here, that might be decisive.
Section 157L
[37] Section 157L imposes in fact two governance requirements, and they are to the same intent and are plain on their face. This is what the section says:
(1) If a deposit taker is a company or a building society, -
(a) the governing body of the deposit taker must include at least two independent directors; and
(b) the chairperson of the governing body of the deposit taker may not be an employee of either the deposit taker or a related party.
(2) If a deposit taker is a subsidiary, the constitution of the deposit taker must not include any provision under which the directors of the deposit taker may act otherwise than in the best interests of the deposit taker.
(3) For the purposes of this section, independent director means a director that –
(a) is not an employee of either the deposit taker or a related party; and
(b) is not a director of a related party; and
(c) does not, directly or indirectly, have a qualifying interest in more than 10% of the voting securities of the deposit taker or a related party.
[38] Two definitions complete s 157L and they are equally clear. A ‘governing body’ is ‘in relation to a body corporate, the board of directors (or other persons or body exercising powers of management, however described) of the body corporate’;
and a ‘related party’, in relation to a deposit taker, includes ‘subsidiaries’.27
27 Section 157B(1).
[39] Section 157L’s sole purpose, Broadlands contends, is to prevent transactions between deposit takers and related parties, including their subsidiaries, to the detriment of depositors. Section 157L assumes that two directors without any link to related parties will stand against such transactions. The Bank accepts that may be the most evident purpose s 157L serves but, more broadly, its purpose is to promote the
‘sound governance’ of deposit takers; and I agree that it has that wider purpose.
[40] One of the Bank’s three primary responsibilities is to ‘promote the maintenance of a sound and efficient financial system’.28 Part 5D also has that as one of its two purposes. Its second purpose is more significant still. The Bank must exercise its responsibilities for the purpose of ‘avoiding significant damage to the financial system that could result from the failure of a deposit taker’.29 So too, when carrying out its functions and exercising its powers, the Bank must take into account the ‘desirability of sound governance of deposit takers’.30
[41] Correlatively, Part 5D imposes on deposit takers duties as to credit ratings, risk management, minimum capital, capital ratio, related party exposures, liquidity and the like; and the governance requirements s 157L imposes are part of that continuum. S 157L is not confined to preventing related third party transactions. By requiring two directors fully independent of related parties, s 157L promotes sound governance as a free standing prime value.
An analogous analysis
[42] In Garrett v Halton Borough Council,31 a case concerning materiality of a breach by solicitors of statutory conditions governing a client’s liability to meet their fee, the English Court of Appeal concluded that an absence of prejudice to the client did not render the breach immaterial. The purpose of the statutory condition was not just to protect the client. Its purpose was to encourage solicitors to comply with the
statutory regime. That was a prime value in itself.
28 Section 1A(1)(b).
29 Section 157A(b).
30 Section 157F(2)(d).
31 Garrett v Halton Borough Council [2006] EWCA Civ 1017.
[43] The Court went on to say, ‘the fact that it may produce harsh or surprising results in individual cases is not necessarily a good reason for construing the statutory provisions in such a way as will avoid such results’.32 Echoing an earlier case, the court said, parliament must have painted with a broad brush:33
It must be taken to have deliberately decided not to distinguish between cases of non-compliance which are innocent and those which are negligent or committed in bad faith, nor between those which cause prejudice (in the sense of actual loss) and those which do not. It would have been open to Parliament to distinguish between such cases, but it chose not to do so.
[44] In the result the court concluded that only ‘literal but trivial and immaterial departures from the statutory requirements’ could be excused as immaterial.34 That reasoning and conclusion, though only analogous, accords with my own reasoning and conclusion in this case.
Reasons discharge declined
[45] The Judge, as she made plain at the outset, understood that Broadlands was applying for a discharge under s 107ZU, not under s 106 of the Sentencing Act 2002. However, she understood Broadlands also to ask her to take into account six matters that are relevant to a s 106 discharge, those outlined in paras [5] - [7] of this decision.
[46] Nor was the Judge distracted by cases cited by Broadlands where s 106 discharges have been granted or declined. They did not, she said, capture why Part
5D was introduced, or its intent, ‘to improve the integrity of the financial markets and enhance investor confidence’.35 To the extent that she did meld the two discretions, that was largely to take into account the wider factors Broadlands advanced.
[47] The Judge does appear to have merged the two discretions at the level of principle when she said that, though the s 157ZU power to discharge exists to
ameliorate the otherwise strict liability Part 5D imposes on deposit takers, ‘the
32 At [27].
33 At [30].
34 At [31].
35 Reserve Bank of New Zealand v Broadlands Finance Ltd, above n 4, at [77].
consequences of a conviction and a fine in this case are not out of all proportion to the gravity of the offending’.36 At that point also, she noted, Broadlands’s contravention was three times longer than that in the one comparable case in which the deposit taker had accepted responsibility and been convicted and fined.37 She then weighed against any harm to Broadlands’ reputation ‘the public interest in [a] conviction of this nature and the need for company directors to ensure compliance’.38
[48] What counts finally are the reasons that the Judge gave for declining a discharge. She said this:39
I find that a discharge without conviction would run contrary to the purpose of s 5(d). If all or any non-compliant companies could escape liability by pleading ignorance or inadvertence, no harm, or no deliberate misfeasance and even though their breach was not just for a few days or months but up to
22 months, that in my view would turn the provisions of Part 5D on its head. Section 157ZU in my view exists for cases where the breaches are truly technical, minor in nature, short in duration or caused by force majeure or other circumstances outside the Directors’ control.
[49] In those conclusions the Judge did introduce to ‘immateriality’ concepts
foreign to it ‘force majeure or other circumstances outside the Directors’ control.’40
But she was right to say, I consider, that the power to discharge is confined to those cases where ‘breaches are truly technical, minor in nature, short in duration’;41 and Broadlands’ contravention, she was entitled to hold, could not be considered immaterial in those ways.
Sentence appeal
[50] Broadlands next contends that the $12,000 fine the Judge imposed is manifestly excessive because she took an excessive $25,000 starting point without assessing what was proper. She adopted uncritically that taken in Avanti. She ought, Broadlands contends, to have set against the high maximum penalty for the offence $1M, the circumstances of Broadlands’ offending and the consequences.
There had to be some due relationship between the two.
36 At [79].
37 Reserve Bank of New Zealand v Avanti , above n 5.
38 At [80].
39 Reserve Bank of New Zealand v Broadlands Finance Ltd, above n 4, at [81].
40 At [81].
41 At [81].
[51] Here too Broadlands relies on the fact that it offended unwittingly and derived no benefit, that depositors and creditors suffered no loss, and the other mitigating factors I have outlined in paras [5] – [7]. Broadlands contends that the Judge’s starting point should have been no higher than $5,000 because a criminal conviction is a significant penalty in itself.
[52] As well as distinguishing three NZ Markets Disciplinary Tribunal decisions where civil penalties were imposed for breaches of the Listing Rules, Broadlands also contends that Avanti was not a proper reference point. Avanti had received a conditional exemption but failed to comply. One ostensibly independent Avanti director was a director of two related companies and had a 25 per cent interest in one.
[53] The Bank contends that the Judge’s starting point, when set against the maximum penalty, accorded to Broadlands a credit for the mitigating factors on which it relied, before the Judge reduced it by half by the credits she gave. Both the starting point and the fine, it contends, could have been higher. The only issue I have to decide is whether the file is manifestly excessive. I do not consider that it is.
Conclusions
[54] Broadlands’ failure for 22 months to comply with its duty to have two directors independent of related parties, including subsidiaries, gave it no benefit and involved no prejudice to depositors. It was clearly unwitting. But that cannot make Broadlands’ contravention ‘immaterial’. The governance requirement that s 157L imposes is plain. On 1 December 2010, when it came into force, it had been on the statute book for 27 months. Broadlands did not come to terms with it for 22 months afterwards. Throughout those 22 months Broadlands board of directors, under Part
5D, was constitutionally deficient.
[55] Nor can Broadlands be excused that contravention because on 17 February
2012, when it wrote to the Bank, it said that two of the three directors to which it then referred, and whom it then deemed to be independent under the Act, were also Beneficial directors. Broadlands did not say that it deemed them independent. Nor
did it disclose its full board complement or their directorships or interests. There was nothing in that letter to put the Bank on notice.
[56] Ultimately, moreover, the question whether Broadlands’ continuing failure to comply with its s 157L governance requirements over the 22 months was
‘immaterial’ is to be assessed objectively, once the Court is invited to exercise its power to discharge under s 157ZU. As to that, I am satisfied, the Judge made no error. I uphold her decision to decline Broadlands a discharge and I dismiss Broadlands’ appeal against conviction.
[57] I am unconvinced that, as the Bank contends, the Judge gave Broadlands the benefit of the mitigating factors on which it relied twice over. The starting point she adopted derived intelligibly from the one case comparable, and the generous inference that the Bank might have been put on notice by Broadlands’ 17 February
2012 letter. But Broadlands did receive unusually generous discounts halving the
Judge’s starting point. The sentence she imposed falls well short of the manifestly excessive. I decline also Broadlands’ appeal against sentence.
P.J. Keane J
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