Hamilton v R
[2015] NZCA 28
•26 February 2015 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA416/2014 [2015] NZCA 28 |
| BETWEEN | HUGH EDWARD STAPLES HAMILTON |
| AND | THE QUEEN |
| Hearing: | 10 February 2015 |
Court: | Wild, Miller and MacKenzie JJ |
Counsel: | J G Krebs and I P Squire for Appellant |
Judgment: | 26 February 2015 at 10.30 am |
JUDGMENT OF THE COURT
The appeal, which is against sentence, is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Wild J)
Introduction
Mr Hamilton appeals against a sentence of four years and nine months imprisonment imposed on him by Faire J in the High Court at Auckland on 4 July 2014.[1] The Judge, sitting without a jury, had found Mr Hamilton guilty on 14 charges of theft by a person in a special relationship (Crimes Act 1961, s 220).
[1]R v Hamilton [2014] NZHC 1579.
Mr Krebs argued there is disparity between Mr Hamilton’s sentence and the sentences imposed by different Judges on Messrs Smith and Buckley for related offending.[2] Mr Krebs contended Mr Hamilton’s sentence ought to have been significantly lower because:
(a)the sentencing starting point of five years imprisonment adopted by Faire J was too high; Mr Krebs said it should have been three years imprisonment; and
(b)the sentencing discount of five per cent the Judge allowed for Mr Hamilton’s extensive community involvement and previous good character was far too small; Mr Krebs submitted it should have been in the range of 10–15 per cent.
Background
[2]R v Smith [2013] NZHC 1341; R v Buckley DC Auckland CRI-2011-004-17116, 30 August 2012.
Mr Hamilton’s offending relates to Belgrave Finance Ltd (Belgrave). Belgrave was a finance company which collapsed in May 2008 with a loss to its 1,268 debenture investors of some $12.5 million.[3]
[3]The receiver of Belgrave puts the loss at $14.46 million.
Belgrave was purchased in 2005 by Mr Schofield with the intention of using its funds to finance his own business ventures. Mr Schofield was a client of the legal firm Davidson Armstrong Campbell (DAC Legal). Mr Hamilton was a partner of DAC Legal and was responsible for the firm’s trust account.
On Mr Schofield’s instructions, Mr Hamilton set up a trust which, through a company, owned 80 per cent of the shares in Belgrave.[4] The trust was structured to conceal the fact it was a vehicle controlled by Mr Schofield. Over the next three years Mr Schofield organised loans from Belgrave via the trust to various of his business entities. Mr Hamilton prepared the documentation for these 14 loans and some of the loan moneys passed through DAC Legal’s trust account.
[4]The remaining 20 per cent of the shares were owned 15 per cent by Mr Buckley and five per cent by Mr Smith.
Throughout, Belgrave’s debenture trust deed proscribed lending to related parties, so each of the loans to Schofield interests breached the trust deed.
The sentence
In sentencing Mr Hamilton, Faire J observed the fraudulent related party lending was concealed from investors and the trustee for debenture holders by two methods. The first was the false statements Belgrave made to investors and to the trustee that it had not made any loans to related parties. By making those statements Belgrave sought to distinguish itself from other finance companies. The Judge commented:[5]
… Belgrave’s policy of no related party lending reassured investors and encouraged investment, making the related party lending a particularly egregious breach.
Faire J accepted Mr Hamilton had not been involved in the making of these false statements.
[5]R v Hamilton, above n 1, at [17].
The second method was what the Judge described as “the elaborate structure which hid Mr Schofield’s interests”.[6] The Judge stated “In forming this, you were instrumental. This allowed for related party lending.”[7] Setting up the structure which facilitated the fraudulent related party loans comprised the first aspect of Mr Hamilton’s offending. The Judge described the other aspect of Mr Hamilton’s offending in these terms:
[18] The nature of your offending was that you drafted and executed loan documents that you knew was [sic] in breach of the Debenture Trust Deed, and allowed such transactions to pass through your firm’s Trust Account. You[,] in essence, did not discharge your professional responsibilities adequately and assisted the breaches of the Debenture Trust Deed through your actions. …
[6]At [17].
[7]At [17].
For two reasons Faire J assessed Mr Hamilton’s role as smaller than that of Messrs Smith and Buckley. He was thus less culpable:
(a)beyond receipt of legal fees, Mr Hamilton had obtained no financial benefit from Belgrave.[8] By contrast, Messrs Smith and Buckley “as shareholders in Belgrave had a beneficial interest in the company”.[9] The Judge could have added that both Messrs Buckley and Smith received directors’ fees from Belgrave. Mr Buckley was the Managing Director of Belgrave. Mr Smith was a Senior Manager and Chairman of the Lending Committee. Mr Williams informed us each man had received approximately $800,000 in fees over the three years they had directed the company;[10] and
(b)Mr Hamilton, unlike Messrs Buckley and Smith, was not involved in the loan approval process, had no control over Belgrave’s funds, no knowledge of the company’s financial position and no involvement in the false statements to investors and the trustee.[11]
[8]At [19].
[9]At [20].
[10]In Mr Buckley’s case at least, that sum includes his annual salary of $100,000 and possibly reimbursements for business related expenses.
[11]R v Hamilton, above n 1, at [19].
The Judge viewed Mr Hamilton’s position as a legal professional as an aggravating feature to be set against his lesser culpability.[12] He cited from this Court’s decision in R v Hustler:[13]
… a barrister or solicitor is under a special responsibility to the public so as to conduct himself as to promote respect for the law and confidence in the integrity of the administration of justice …
[12]At [21].
[13]At [21], citing R v Hustler CA162/80, 6 October 1980 at 10.
Turning to the position of the co-offenders, the Judge detailed the sentences imposed on each of Mr Buckley and Mr Smith.[14] Mr Buckley was sentenced by Judge Fraser in the District Court at Auckland on 30 August 2012.[15] The sentencing starting point was six years imprisonment, comprising a starting point of four and a half years on the lead charges under s 242 of the Crimes Act (false statement by a promoter) with an uplift of 18 months on the charges under s 220. [16] The fact that Mr Buckley had no previous convictions was neutralised by the duration (over three years) of his offending.[17] For remorse, cooperation with the authorities, rehabilitation, lapse of time and his early guilty pleas, Judge Fraser gave Mr Buckley a global discount of 50 per cent, producing an effective end sentence of three years imprisonment.[18] Concurrent sentences were imposed on the other charges Mr Buckley faced (one representative charge under the Securities Act 1978 of making an untrue statement in an advertisement; one representative charge under the Companies Act 1993 of making a false statement to a trustee).[19]
[14]At [25]–[26].
[15]R v Buckley, above n 2.
[16]At [60].
[17]At [41].
[18]At [61].
[19]At [62].
Mr Smith was sentenced in the High Court at Auckland by Toogood J on 7 June 2013.[20] He had pleaded guilty on 25 May 2013 to four counts under the Crimes Act of making a false statement as a promoter, 19 counts under the Crimes Act of theft by a person in a special relationship, one representative count under the Securities Act of making an untrue statement in an advertisement and one representative count under the Companies Act of making a false statement to the trustee.[21] For consistency, Toogood J adopted the sentencing starting point Judge Fraser had used for Mr Buckley, six years imprisonment, but made it clear he considered it overly lenient and would have adopted a higher one but for the need for consistency.[22] A discount of 12 months imprisonment was given for remorse and previous good character, though this was somewhat negated by the three year duration of the present offending. With a further discount of 12 months for the guilty pleas which came well after Mr Buckley’s, the end sentence was four years imprisonment.[23]
[20]R v Smith, above n 2.
[21]At [1].
[22]At [24]–[26].
[23]At [38].
Faire J noted there is no tariff case for this type of offending.[24] He mentioned this Court’s decision in R v Varjan,[25] referred to by Judge Fraser in determining the starting point when sentencing Mr Buckley.[26] He also distinguished the High Court sentencing decision in R v Douglas,[27] because of the quite different role Mr Douglas had played in Capital + Merchant Finance.[28]
[24]R v Hamilton, above n 1, at [27].
[25]R v Varjan CA97/03, 26 June 2003.
[26]R v Buckley, above n 2, at [49].
[27]R v Douglas [2012] NZHC 2271, since affirmed in Tallentire v R [2012] NZCA 610.
[28]R v Hamilton, above n 1, at [28]. Mr Douglas was a director of the company in that case.
The Judge’s sentencing starting point of five years imprisonment reflected his view that Mr Hamilton’s offending was significantly more serious than that in Varjan[29] due to the higher number of charges and the significant loss, but less serious than the offending of Messrs Buckley and Smith.[30]
[29]R v Varjan, above n 25.
[30]At [29].
The Judge explained the discount he allowed in these terms:
[30] Your extensive community involvement and previous good character does in my opinion warrant a discount, as was given in R v Douglas. However the extent of this discount is mitigated by the fact that you were censored by the New Zealand Law Society for unrelated misuse of client funds, and were struck off the roll of barristers and solicitors for breach of your professional obligations. It is also mitigated by the prolonged nature of the offending, which can diminish the benefit of an unblemished past. Therefore I consider that a discount of five per cent is appropriate.
The five years imprisonment starting point, less the five per cent (three months) discount resulted in the final sentence of four years and nine months imprisonment challenged on this appeal.[31]
Sentencing starting point
[31]At [32].
In support of his submission that the sentencing starting point adopted by Faire J was too high, Mr Krebs made two points. First, Faire J had not adequately and accurately distinguished Mr Hamilton’s role in Belgrave from that of Messrs Buckley and Smith. Secondly, the Judge had placed too much emphasis on Mr Hamilton’s professional status as a solicitor, misapplying the observations this Court made in Hustler.[32]
[32]R v Hustler, above n 13.
Elaborating on his first point, Mr Krebs submitted Messrs Buckley and Smith had “skin in the game”, in that they were involved in making the day to day decisions at Belgrave which constituted the various types of offending to which they pleaded guilty. He emphasised that Mr Hamilton had been acquitted of two of the 16 charges under s 220 he initially faced, all three of the charges relating to a guarantee given by Belgrave,[33] and all 22 charges alleging false statements to the trustee, auditors and investors. Mr Krebs submitted Mr Hamilton’s case is different:
… Although it could be argued that the fact of the convictions demonstrates knowledge and intent the context of the conduct by [Mr Hamilton] sets him apart from the actual conduct of the co-offenders [who] were [the] principal offenders …
[33]This related to the guarantee Belgrave gave of the loan Mr Schofield obtained to fund the $3.175 million purchase price he paid to acquire Belgrave in 2005.
In his submissions for the Crown, Mr Williams gave examples of Mr Hamilton’s involvement in concealing the related party lending. One example was Mr Hamilton’s response to an 8 February 2007 email from Mr Buckley complaining that Mr Hamilton’s personal assistant had narrated a false interest payment in a way which might alert the auditors. The email stated “Obviously this can’t happen. I just hope the auditors don’t smell anything.” Mr Williams informed us Mr Hamilton, instead of questioning this, offered suggestions for avoiding the attention of the auditors in the future.
Mr Williams argued Mr Schofield had the fraudulent intention of using the company to fund his own business ventures from the time he purchased Belgrave in 2005. He submitted Mr Hamilton’s involvement in designing the trust and corporate structure which enabled the lending to Schofield interests, together with Mr Hamilton’s involvement in documenting the related party loans, put Mr Hamilton “in the thick of it”. He was no mere functionary following instructions. Indeed, on some measures, Mr Williams suggested Mr Hamilton was more culpable than Messrs Buckley and Smith.
We do not think Mr Krebs was correct in seeking completely to differentiate Mr Hamilton’s offending from that by Messrs Buckley and Smith. Each of the 14 charges of theft by a person in a special relationship on which Mr Hamilton was convicted was founded on a related party loan which breached Belgrave’s trust deed. Messrs Buckley and Smith each pleaded guilty to 19 such charges.
Nor do we accept Mr Krebs’ submission that Faire J, in fixing his sentencing starting point, failed to distinguish between the different roles played by Mr Hamilton and the two co-offenders in Belgrave, and to reflect the greater culpability of the two co-offenders. We consider the Judge accurately and adequately did that in those parts of his sentencing remarks summarised in [9] above.
We consider Faire J’s sentencing starting point is unassailable. By setting it one year lower than the six years adopted for Messrs Buckley and Smith, Faire J appropriately recognised Mr Hamilton’s lesser culpability. But the five years imprisonment sentencing starting point appropriately reflected Mr Hamilton’s very real involvement, as a solicitor, in the dishonest related party lending by Belgrave.
Turning to Mr Krebs’ second point, we accept the offending in Hustler was altogether different. Doubtless for that reason, Faire J did not describe what Mr Hustler had done. But we consider the point of principle the Judge extracted from Hustler applies to Mr Hamilton. Indeed, it applies more forcefully because Mr Hamilton, in the course of his professional work for Belgrave, designed the structure which enabled the dishonest related party loans to take place and attended to the documentation of those loans. It follows that we agree with Mr Williams that another observation this Court made in Hustler is equally apt to Mr Hamilton:[34]
… In the present instance Hustler not only condoned the criminal activities of his clients but also identified himself with them to an extent which involved the surrender of his professional independence. …
[34]R v Hustler, above n 13, at 10.
Some of the solicitors convicted of offending in relation to finance companies used their professional status to encourage the public to invest. Mr Hamilton is not in that category and Mr Krebs rightly did not suggest Faire J had placed him in that category.
Sentencing discount
The single point taken emerges from Faire J’s sentencing remarks at [30], set out at [15] above.
Mr Krebs submitted the Judge had already factored in the (three years) duration of the offending when fixing his sentencing starting point. He submitted the Judge had erred in using the same factor to erode what would otherwise have been a greater benefit for good character.
We disagree. The Judge was simply making the point that Mr Hamilton’s offending was not a momentary lapse in an otherwise unblemished career. Further, unrelated misuse of client funds had led to Mr Hamilton being struck off the roll of barristers and solicitors. When coupled with the fact that this offending had gone on for three years, not much credit remained available for Mr Hamilton’s past community service and good character. We can see no fault in that assessment, or in the five per cent discount the Judge allowed.
Result
As neither of the two points on appeal has succeeded, the appeal against sentence is dismissed.
Solicitors:
Crown Law Office, Wellington for Respondent
6
3
0