Brown v Police HC Whangarei CRI-2011-488-000027

[2011] NZHC 475

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CRI-2011-488-000027

MARTIN BROWN

Appellant

v

NEW ZEALAND POLICE

Respondent

Hearing:         12 May 2011

Appearances: N Leader for Appellant

K R Thomas for Respondent

Judgment:      12 May 2011

(ORAL) JUDGMENT OF LANG J [on appeal against sentence]

BROWN V NEW ZEALAND POLICE HC WHA CRI-2011-488-000027 12 May 2011

[1]      Mr Brown’s counsel had made strong submissions to the effect that that was the appropriate sentence.  Mr Brown now appeals to this Court against the sentence that the Judge imposed.

The facts

[2]      The facts giving rise to the offending are important so far as the outcome of this appeal is concerned.  For that reason it is necessary to refer to them in a little detail.

[3]      Mr Brown was the owner of a camping ground in Northland, together with his wife and parents-in-law.   He and his wife also owned a number of residential properties.

[4]      The  camping  ground  was  subject  to  a  short-term  loan  from  a  finance company in the sum of $600,000.   In early 2008, Mr Brown became aware that, contrary to his expectations, the finance company was not prepared to roll the loan over.  For that reason he was urgently required to provide an alternative means of finance so that he could repay the loan.

[5]      Mr Brown chose two options to deal with this problem that led to disastrous consequences for him.  The first of these occurred in March 2008. At about that time Mr Brown decided to sell a property in Dargaville to a third party.  The third party was prepared to pay market value for the property, but apparently had no equity to contribute to the purchase.

[6]      At  that  time  Mr  Brown  was  employed  by New  Zealand  Home  Lending Limited (NZHL) as a loans consultant.  That company is a subsidiary of Kiwibank. Mr Brown used his position as a consultant to alter a valuation that he, or the prospective  purchaser,  had  obtained  in  respect  of  the  property.    The  alteration showed that the property was worth significantly more than was the case at that time. On  the  basis  of  the  information  contained  in  the  forged  valuation,  Kiwibank advanced funds to the third party to enable that party to purchase the property. Unfortunately, the third party was unable to meet the payments on the mortgage and

the property was sold by way of mortgagee sale.   The mortgagee sale led to a shortfall of approximately $145,000 plus the costs associated with the sale.

[7]      The second disastrous choice that Mr Brown made was in the manner in which he obtained refinance for the camping ground.  He fraudulently altered figures showing the income received from the camping ground so as to paint a rosier picture than was the case.  This persuaded another lender to advance the sum of $600,000 in order to refinance the existing short term-loan loan.

[8]      The gravity of the offending in each case is that the forgeries that Mr Brown carried out exposed the lenders to the prospect of loss.  In the case of the Dargaville property, it meant that the lender had no margin over and above the amount that it lent to the purchaser.  If it was forced to sell the property in a fire sale situation, as was eventually the case, the lender ran a significant case of incurring loss.  In the case of the camping ground, the lender may not have been prepared to advance the sum of $600,000 based on the original figures.  The fact that it made the advance when the income from the camping ground was significantly less than it understood to be the case meant that, it too, was exposed to loss.

[9]      Fortunately,  no  party has  ended  up  suffering  any loss  as  a  result  of  the offending relating to the camping ground.   Mr Brown’s parents-in-law have now acquired the interest that he and his wife formerly held in that venture.   The refinanced loan will accordingly be repaid by them.

[10]     There is, however, a residual loss in relation to the Dargaville property.  The amount of that loss has been reduced somewhat by the fact that Mr Brown’s wife has sold two properties that she owns.   This has reduced the outstanding balance to approximately $127,000.    The  lender  has  now  obtained  judgment  in  this  Court against Mr Brown for that amount.  He proposes to repay it by the sale of another property in his wife’s name.   That property is said to have equity in the sum of

$200,000 to $300,000.  If that proves to be the case, the lender will ultimately suffer

no loss as a result of Mr Brown’s offending.

The Judge’s decision

[11]     In sentencing Mr Brown the Judge noted that his offending contained several aggravating features.   First, it involved actual dishonesty.   Second, it involved a breach of trust because of the fact that Mr Brown was at that time a sales consultant with NZHL.  As a result, he could expect his employer and through it, Kiwibank, to trust and rely upon the information that he placed before them.   He committed a gross breach of that trust when he falsified the two documents and duped Kiwibank into lending on the basis of the information that they contained.

[12]     The Judge took the view that the offending was serious.  The extent to which he held this view is to be discerned from the following passages from his sentencing remarks:

[7]       The aggravating features of this are that he was in a position of trust, working with this company, the home loan company which is an agent for Kiwi Bank.  The parent company of that is New Zealand Home Loans, so it was clearly a breach of that trust.  It was premeditated and planned.  There are many other sources available to Mr Brown other than to engage in criminal conduct to get himself and his family out of these financial difficulties.  He has really chosen to join, as I said to Mr Leader, the long line of financial intermediaries who have ripped off the public, the financial community and organisations in New Zealand in the last few years.  He is one of many who stooped to deceit and fraud causing substantial losses.  In this particular case the ultimate loss so far is $127,000 or thereabouts which is another aggravating feature.  It is said that that will be cleared from the sale of the property at Baylys Beach in due course.

[8]       It has also been acknowledged that fraudulent conduct is aggravated by forgery and in this case that is what Mr Brown did.   Not only did he engage in fraudulent and deceitful conduct, but he also engaged in forgery which aggravated that conduct.

[13]     Given the aggravating aspects of the offending the Judge selected a starting point of three years imprisonment.   He reduced that by 25 per cent to reflect Mr Brown’s early guilty plea.  He selected that figure using the guidelines given by the Supreme Court in R v Hessell[1], and notwithstanding the fact that Mr Brown had

pleaded guilty at a time when the Court of Appeal decision in R v Hessell[2]was still

in effect.  Under that decision Mr Brown could have expected a discount of up to 33 per cent for his guilty plea.

[1] [2010] NZSC 135

[2] [2009] NZCA 450

[14]     The Judge then reduced the sentence further by three months to reflect the fact that Mr Brown has no previous convictions and was genuinely remorseful for his actions. This led the Judge to an end sentence of two years imprisonment.

[15]     That being the case, home detention was available as a sentencing option. That sentence falls immediately below imprisonment in the hierarchy of sentences prescribed  by the  Sentencing Act  2002.   The  Judge then  engaged  in  a lengthy analysis of Mr Brown’s offending.   He concluded that its gravity was such that a sentence short of imprisonment could not adequately address the need to denounce Mr Brown’s conduct and to deter other persons from engaging in like conduct.  He took  the  view  that  Mr  Brown’s  offending  “was  driven  by  greed  and  personal interest”. The Judge’s conclusion was as follows:

[20]     …This Court frequently hears counsel submitting that such offences must be sentenced to home detention.   I am afraid that is not what the Sentencing Act says.  Indeed, the Court must consider whether the deterrent and denunciation aspects of home detention are sufficient in this particular case.   For offending of this gravity the maximum penalty is 10 years’ imprisonment; forgery, deceit, loss, whether home detention will be seen as sufficient.   This is a judgment I am asked to make.   In my view, home detention for some people does have a deterrent effect, it does denounce their offending, but I am afraid that, in my view, it is not sufficient for the offending of Mr Brown.  The peculiar circumstances of this man’s offending are such that if he received a sentence of home detention it would be sending completely the wrong message to the financial community, that when you are caught, you get home detention.  That is not the case at all.  That is not what the Sentencing Act says.  In my view, home detention is inappropriate for the level of offending.

Grounds of appeal

[16]     On appeal, counsel for Mr Brown advances two principal submissions.  He accepts that a starting point of three years imprisonment was appropriate, and that an end  sentence of two  years imprisonment  was  also  appropriate having  regard to mitigating factors.  He contends, however, that the Judge erred in principle in two respects when considering the issue of home detention.   First, he submits that the Judge took into account an irrelevant principle, namely his perception that home

detention was not a truly deterrent sentence.   Second, he submits that the Judge’s view of the gravity of the offending erroneously led him to place issues of deterrence and denunciation well ahead of other sentencing principles that were of equal importance.

[17]     The  first  submission  results  from  the  following  passages  in  the  Judge’s

sentencing remarks:

[16]      The Court, therefore, is asked to consider home detention and it is a sentence of a deterrent nature as Mr Leader has covered in his submissions. It is the least restrictive sentence after imprisonment on the hierarchy under s

10A.  It is not a custodial sentence but a hybrid sentence, and it is generally a sentence that is not imposed as a matter of course.  That is where there is

some  misinterpretation  or  misunderstanding  and  the  case  of  R  v  Iosefa

[2008] NZCA 453 is coming through. There is no presumption in favour of a sentence of home detention and it is noted that in the earlier days,

particularly as outlined in the case of R v Hill [2008] NZCA 41, that it is a

real alternative to a sentence of imprisonment for many offenders, not all.  it is full of aspiration or goals or expressed aspirational goals as set out in an explanatory note to the bill which I think some of those aspirational goals, from anecdotal and Court experience, have not come to fruition such as low rates of re-conviction and re-imprisonment, high rates of compliance, in my view that is not entirely justified.  It is a suitable sentence for rehabilitation and reintegration.

…

[18]     In each case it is necessary to make an assessment of whether a sentence of imprisonment is required to meet the sentencing goals identified in s 16 and, of course, Mr Leader has emphasised in his submissions that aspect.   Can a sentence of home detention respond adequately to the seriousness for the offending?  If the Court, as it is said, is going to hold this man accountable for the harm done to the community and to denounce and deter, it is a question of whether home detention can fulfil those needs. There is the need to consider imposing the least restrictive outcome having regard to the hierarchy of sentencing and in, as I say R v Iosefa, the Court analysed the sentence where it said there was a considerable measure of deterrence and denunciation in a sentence of home detention for a person sentenced to up to 12 months’ detention to spend their time at home.   My experience is that they do not, that there are many exceptions to that granted by probation officers, so that persons do not spend all of their time at a curfew in their home. (Emphasis added)

[18]     Counsel submits that the Judge was wrong to take into account the manner in which any sentence of home detention was likely to be managed.   He drew my attention to the following passage from R v D[3] where the Court of Appeal said:

We would have imposed home detention notwithstanding the expressions of concern by the Police in relation to the nature of D’s offending and the likelihood of re-offending.  Whether those factors exclude home detention as a sentencing option is a decision to be made by the exercise of judicial judgment.  They are not issues for the Police to address in a determinative fashion.  A sentencing Judge ought not to be faced with a risk of non co- operation from those involved in post-sentencing processes in deciding whether or not to impose home detention as a sentence.   Certainly, a sentencing Judge ought not to be swayed by a perception that public officials will not perform tasks imposed on them in the manner required by the law. (Emphasis added)

[3] [2008] NZCA 254 at [70]

[19]     There is some merit in this submission, but I do not consider that this issue was an important factor in the Judge’s ultimate conclusion.  I consider that he was driven to his ultimate conclusion instead by his perception by the gravity of Mr Brown’s offending.  That forms the basis of the second ground that counsel advances on appeal.

[20]     Reading the sentencing remarks as a whole, the Judge may have viewed Mr Brown’s offending as being to some extent analogous to that of a financier who seeks investments from the public on the basis of false assurances and then causes significant loss to those investors.   I draw that inference from the passage in his remarks cited above where he refers to Mr Brown joining a long line of financial

intermediaries  “ripping  off”  the public  and  other organisations[4].   This  was  not,

however, a case of financier seeking investments from the public and then making off with those investments through duplicitous or deceptive behaviour.  Instead, the gravity of the offending lay in the fraudulent obtaining of loans through the use of forged documents.  The behaviour was not directed towards the public at large, but towards a single lending institution.  For sentencing purposes I consider that there may be a significant difference between the two scenarios.

[4] At [12]

[21]     Of much greater importance, I deduce from the Judge’s sentencing remarks that he concluded that Mr Brown was motivated throughout by greed and personal interest.  Appellate courts will always hesitate to differ with a sentencing Judge in conclusions  regarding  the  motivation  for  offending.    In  this  case,  however,  Mr Brown did not appear for sentence after a trial in which the sentencing Judge heard the  evidence  and  was  therefore  in  a  unique  position  to  reach  his  or  her  own

conclusion regarding the motivation for offending.  The Judge was operating in the present case from a summary of facts and a pre-sentence report, both of which are available to me.  I consider that I am in equally as good a position as the Judge to draw my own conclusions regarding the motivation for Mr Brown’s offending.

[22]     When I consider the circumstances in which the offending arose, I conclude that they were driven by Mr Brown’s perception that he needed to take whatever steps were necessary to ensure that the institution that who had lent money to him in relation to the camping ground did not suffer loss.  He knew that he had to repay that loan, and if he did not do so, then consequences were likely to follow not only for the lender but also for his wife and parents-in-law.  I am satisfied that that is what drove him to commit both offences.  Both were directed towards a desire to obtain funding in order to repay the loan on the camping ground.  There is no suggestion that Mr Brown has gained anything personally out of the offending, let alone that he spent the loans on a lavish lifestyle or other personal interests.   I therefore, respectfully draw a different conclusion from the Judge regarding the motivation for Mr Brown’s offending.  I do not consider that it was driven by greed or self-interest as those terms are ordinarily understood.

[23]     The Judge was also influenced by his perception that Mr Brown needed to be held accountable for his offending.  That is undoubtedly correct, but I suspect that a sentence of imprisonment was not required to achieve that outcome.  By the time Mr Brown appeared for sentence, his reputation was in tatters and his family stood to lose a great deal.  He was aware by that stage of the trauma that he had put his wife and family through.  I have no doubt that Mr Brown felt fully accountable for his actions by that point.

[24]   I consider that the Judge concentrated on the need for deterrence and denunciation  to  the  virtual  exclusion  of  other  equally  relevant  principles  and purposes contained in the Sentencing Act 2002.   Included in those is the need to impose the least restrictive outcome possible having regard to the circumstances of the offending and the offender.   In the present case, there was a less restrictive outcome open to the Judge than imprisonment and that was home detention.

[25]     I also consider it to be relevant that since the offending was uncovered, Mr Brown and his family had taken significant steps to minimise the loss to the victims of Mr Brown’s offending.   As I have already indicated, the loan relating to the camping ground is now being repaid solely by Mr Brown’s parents-in-law, and the loan from the lender in relation to the Dargaville property has been partially repaid. That lender is likely to be repaid in full through the sale of Mr Brown’s wife’s remaining property.

Result

[26]     All of those factors lead me to the conclusion that this was a case in which home detention was available, and that it was the appropriate sentence.   For that reason I allow the appeal and quash the sentence of two years imprisonment.

[27]     I now need  to  consider  the appropriate  length  of any sentence of home detention.  Mr Brown has served approximately two and a half months of his prison sentence.  This equates to a five month sentence.  Taking that end result, I substitute for the prison sentence a sentence of ten months home detention subject to the following conditions:

(a)      Upon being released from prison Mr Brown is to travel directly with his wife from prison to 4 Cynthia Place, Baylys Beach, Dargaville.

(b)Mr Brown is to remain at that address for the duration of the sentence and is not permitted to leave it without the prior authorisation of his probation officer to do so.

(c)      He is to abstain from consuming alcohol and non-prescription drugs for the duration of the sentence.

Lang J

Solicitors:

Crown Solicitor, Whangarei

Mr N Leader, Whangarei