Herbert v The Queen
[2015] NZCA 483
•12 October 2015 at 11 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA661/2014 [2015] NZCA 483 |
| BETWEEN | GRANT MALCOLM HERBERT |
| AND | THE QUEEN |
| Hearing: | 12 August 2015 |
Court: | Cooper, Simon France and Asher JJ |
Counsel: | P J Davey for Appellant |
Judgment: | 12 October 2015 at 11 am |
JUDGMENT OF THE COURT
The appeal is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Cooper J)
Introduction
On 11 September 2014, after a trial before Judge Gibson and a jury in the Auckland District Court, the appellant, Grant Herbert, was convicted of:
(a)17 counts of theft by a person in a special relationship under s 220 of the Crimes Act 1961; and
(b)seven counts of corruptly giving consideration to an agent, as an inducement or reward, contrary to s 3 of the Secret Commissions Act 1910.
The appellant had earlier pleaded guilty to one count of using a forged document under s 257 of the Crimes Act.
The appellant was sentenced on 16 October 2014.[1] The sentence comprised concurrent four-year terms in respect of the theft charges, a six month concurrent term for the forgery charge and a cumulative nine‑month term on the Secret Commissions Act charges. For totality reasons, three months were deducted resulting in an end sentence of four and a half years’ imprisonment.
[1]R v Herbert DC Auckland CRI-2012-004-9948, 16 October 2014.
Mr Herbert now appeals against his conviction on the 17 charges under s 220 of the Crimes Act.
Background
The appellant operated an insurance broking business through a number of companies referred to as the Herbert Insurance Group. Included in the group was Herbert Insurance Group Ltd (HIGL). At the relevant times, the appellant was the sole managing director of the companies in the group. He owned 15 per cent of the shares in HIGL; the balance was owned by the Herbert No 2 Trust. The trustees of that trust were the appellant and a Mr Paul Webb.
The group carried on business as an insurance broker, arranging contracts of insurance either as the agent of various insurance companies or as agent for the insured.
Each of the charges laid under s 220 of the Crimes Act relied on the fact that the appellant had breached obligations he had under the Insurance Intermediaries Act 1994. Section 2 of that Act contains the following definition of insurance intermediary:
insurance intermediary—
(a) means a person—
(i)who for reward arranges contracts of insurance in New Zealand or elsewhere; and
(ii)who does so as the employee of or agent for 1 or more insurers or as the agent for the insured; and
(b) includes a broker
The Insurance Intermediaries Act also contains a definition of “broker”. That term is defined, in relation to an insurer, as meaning a person:
(a)who carries on the business of arranging contracts of insurance (whether or not the business is the person’s principal business or is carried on in connection with any other business); and
(b) who is not the employee of the insurer; and
(c)who is not appointed, under a signed agreement, as the agent for the insurer for the purposes of receiving money due to the insurer from the insured and due to the insured from the insurer.
In addition, s 2(2) of the Insurance Intermediaries Act provides as follows:
(2)For the purposes of this Act, any person who is appointed, under a signed agreement, as an agent of the insurer shall be deemed, unless the agreement states otherwise, to be appointed, under that agreement, as an agent of the insurer for the purposes of receiving money due to the insurer from the insured and due to the insured from the insurer.
The Crown alleged that HIGL was either appointed under a signed agreement as agent for insurers, or it was a broker and subject to the duties of brokers imposed by the Insurance Intermediaries Act, in particular by ss 8 and 14. Those sections required HIGL to hold insurance premiums received in a separate insurance broking client account. It was then obliged to pay the money to the relevant insurer within a period set out in the Act, subject to the right to deduct money payable by the insurer to the broker as remuneration referable to the contract of insurance.
Section 220 of the Crimes Act provides:
220 Theft by person in special relationship
(1)This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a)to account to any other person for the property, or for any proceeds arising from the property; or
(b)to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2)Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3)This section applies whether or not the person was required to deliver over the identical property received or in the person’s possession or control.
(4)For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.
The 17 charges laid under that section followed a similar drafting pattern. In each case, the Solicitor-General charged that the appellant, on or between stated dates:
… at Auckland or elsewhere in New Zealand, had control over property, on terms or in circumstances that he knew required him to deal with any proceeds arising from the property, in accordance with the requirements of any other person and intentionally dealt with the property otherwise than in accordance with those requirements.
In each case, particulars were then given. For example, in the case of count one, the particulars read as follows:
Insurance premium money paid to Herbert Insurance Group Limited by TABCO Pty Limited trading as Norfolk Insurance Office, $398,512.27 of which was required to be paid to QBE Insurance (International) Limited.
To give another example, the particulars for count seven were:
… Insurance premium money paid to Herbert Insurance Group Limited by insured persons, $107,418.40 of which was required to be paid to New India Assurance Company Limited.
In essence, the Crown case at the trial was that the appellant as the sole managing director of HIGL had control over the insurance funds referred to in the indictment. That control was on terms or in circumstances that the appellant knew required him to account to the specified insurers in accordance with their requirements, but he intentionally dealt with those funds contrary to those known requirements. The Crown alleged that the appellant directed company employees to make transfers of funds from the premium account to the operating account.
HIGL was effectively insolvent over the period of the offending and unable to meet its expenses as they fell due. The Crown’s case was that during the period of the offending monies due to each of the insurers named in the counts were transferred out of the relevant insurance broking client account into the HIGL operating account and used for the operating expenses of HIGL’s business. Evidence was called that the money was used to pay staff salaries, pay for premises rental, settle claims of “insured” persons whose policies had not in fact been underwritten and to pay other expenses. As a consequence, insufficient funds remained to pay the insurance companies the sums due to them as set out in the particulars of the charges laid. That was a breach of the requirements imposed by ss 8 and 14 of the Insurance Intermediaries Act.
The appeal
The appellant raises four issues on appeal.
First issue: conflating offences under s 220
The first issue raised concerns the way in which the Judge worded the question trail given to the jury, and also his summing up in relation to one of the essential elements the Crown was required to prove on each count. The appellant contends that the Judge erred by stating in the question trail that the jury had to consider whether the appellant “failed to deal with” the funds for particular insurers and/or by stating in the summing-up that the Crown had to prove “Mr Herbert failed to account or deal with the property”.
Mr Davey submitted that the charges did not allege that the appellant had failed to account for the premium monies that were received by HIGL. However, in the question trail provided to the jury the Judge phrased the relevant question in relation to each count as whether Mr Herbert had failed to deal with the money in accordance with the relevant requirements. For example, in the case of count 1, the question included the following:
Has the Crown satisfied you beyond reasonable doubt that Mr Herbert failed to deal with the $398,512.27 in accordance with QBE Insurance (International) Limited requirements?
Further, Mr Davey complained that in the summing-up the Judge stated the Crown had to prove that Mr Herbert had control over the monies referred to in each count and then stated that the Crown had to prove:
… That the control of the money was in circumstances that required him to account to the insurer, and again to use the example of count 1 the allegation is he was required to account to QBE Insurance (International) Limited for the premiums that were paid to him by Tabco Property Limited trading as Norfolk Insurance Office.
They must then prove beyond reasonable doubt that Mr Herbert failed to account or deal with the property, the premiums in accordance with the legal position that I have just outlined to you and QBE’s own requirements …
Mr Davey submitted that s 220 clearly sets out two separate offences, one involving intentional failure to account and the other of intentionally dealing with the property. Mr Davey contended the question trail was incorrect because the Judge effectively conflated the two offences by asking the jury to consider whether Mr Herbert “failed to deal with” the premium funds received. In addition, by stating in the summing-up that the Crown had to prove Mr Herbert failed to “account or deal with the property”, the Judge had again incorrectly implied that the appellant could also be found guilty if he “failed to deal” with the funds.
In summary, Mr Davey submitted that it is not an offence to fail to “deal with” property under s 220. It is either an offence to “deal with” the property, or to fail to “account” to another person. Consequently, the trial Judge made an error of law in his directions to the jury.
For the respondent, Mr Simmonds submitted that the Judge had properly addressed this element of the alleged offending, in both the summing-up and the question trail. He noted that in the summing-up, the Judge explained the appellant’s duties under the Insurance Intermediaries Act, and in terms of the particular contractual arrangements between individual insurance companies and the appellant’s firm. He explained further that the Crown was obliged to prove beyond reasonable doubt that the appellant failed to account or deal with the property (the premiums received) in accordance with the legal requirements that he had outlined. Mr Simmonds noted that the Judge then continued:
… And they must prove beyond reasonable doubt that the accused’s failure to comply with those requirements was intentional and in breach of his obligations. In other words, that Mr Herbert was aware of the relevant legal obligations and QBE’s requirements in relation to count 1 but that he deliberately acted in breach of them.
The Judge also said:
… But it is an essential element of these counts that the Crown must prove to you beyond reasonable doubt that the failure to comply with the legal requirements or with the contractual position with the insurer was intentional. …
Further, he stated:
But what the Crown is required with respect to intention is to prove to your satisfaction beyond reasonable doubt to leave you sure, and this is only one of the elements of these counts, that the accused knew of the requirement to pay the insurance premium money to the respective insurers less his company’s brokerage fees and that he intended to breach those requirements.
The question trail was provided to the jury after those statements in the summing-up. In respect of each of the theft charges, the question trail listed four elements that required proof. The third element was the subject of the question we have set out above at [19]. It was followed by a fourth question, worded as follows:
Has the Crown satisfied you beyond reasonable doubt that the failure to comply with the requirements was intentional, in that Mr Herbert knew of QBE Insurance (International) Limited requirements and deliberately acted in breach of them?
In the summing-up, when addressing the question trail in relation to that last question, the Judge said:
The last question, whether the failure to comply with the requirements was intentional in that he knew of the company’s requirements, knew of the legal position in other words and deliberately acted in breach of them, and that is the nub of the matter. …
Later, when summarising the Crown case, the Judge said:
The real issue the Crown says is … whether Mr Herbert dealt with the premium monies contrary to his legal obligations, contrary to the specific instructions from each of the insurers … and whether that was intentional or, in other words, deliberate.
After a very full summary of the defence case, the Judge noted that the appellant’s evidence was, “that he never had the intention of breaching these arrangements or his legal obligations”.
A little later, the Judge referred to counsel’s submission as follows:
… Mr Davey said to you, you just cannot use a broad brush in these circumstances. You have got to look at each individual count. There is no evidence, he said, that he instructed any staff member to transfer premiums due to a particular insurer into the operating account rather than transfer it to that insurer. And that you needed to be sure that he intended to breach the company’s obligations or encourage an employee to do so to a particular insurer at the time of each of the transfers.
On the basis of these various passages, Mr Simmonds contended that assessed overall the Judge’s remarks to the jury clearly outlined what was required to be proved by the Crown. The jury would have understood that before they could return a verdict of guilty they needed to be satisfied beyond reasonable doubt that the appellant knew of the applicable legal requirements and deliberately acted in breach of them.
We accept Mr Simmonds’ submissions. Each of the counts in the indictment was worded so as to allege the appellant intentionally dealt with property over which he had control otherwise than in accordance with the relevant requirements. As noted, the Judge referred in the question trail to the Crown satisfying the jury beyond reasonable doubt that the appellant failed to deal with the money in accordance with the insurer’s requirements. While not precisely repeating the statutory language, what the Judge said was nevertheless the equivalent of it.
Mr Davey told us from the bar that he had objected to the relevant question in the question trail when it was provided in draft before the summing-up. He said his objection was that the appellant was charged with dealing with the property, not with failing to deal with it. The Judge responded that he was giving a standard direction and was not prepared to alter the question. It does appear in fact that the question was asked in the terms suggested by a precedent question trail for this offence that would have been available to the Judge.
The words used by the Judge, while not following precisely the language of s 220 of the Crimes Act, had the same meaning. We do not consider that the jury would have been in any doubt as to what the Crown was required to prove. The same applies in relation to the question trail. The jury was properly instructed and we reject this alleged error of law.
Second issue: directions on failing to account
This ground of appeal builds on the first issue, and focuses on the fact that in the summing-up the Judge referred to Mr Herbert having “failed to account or deal with the property”. Mr Davey claimed that the Judge’s reference to “failing to account” came as a surprise, as this had not been part of the Crown case. Mr Davey contended that by summing up to the jury on the basis that the requirement, in respect of the insurance premiums, was that “they were to be accounted for to the insurer by being paid over to the insurer after deduction of brokerage”, the Judge incorrectly suggested that failing to “account” equated with simply failing to make payment: there had been no explanation to the jury of the particular meaning of the word “account”.
In this respect, Mr Davey referred to authority on the meaning of the words “account” and “account for” submitting that they showed the word was not synonymous with simply failing to make a payment.[2] Mr Davey noted further that s 220(1)(a) specifically refers to persons required “to account to any other person” for property. He also observed that s 222 of the Crimes Act, prior to being replaced by the current s 220, provided for an offence of “fraudulently omitting” to account for or pay money received on terms requiring him or her to account for it. Mr Davey submitted this was a further indication that the words “account for” should not be regarded as including payment. We record also that in his written summary of argument Mr Davey went so far as to suggest that, by summing up as he did, the Judge had “introduced an offence of failing to account”, thereby denying Mr Herbert a fair trial.
[2]The King v Walker [1946] NZLR 512 (CA) at 519, Shields v Jefferies [1953] NZLR 666 (SC), Flyger v Commissioner of Inland Revenue (2003) 21 NZTC 18,431 (HC) at [20].
We have already quoted the passage in which the Judge referred to the appellant failing “to account or deal with the property, the premiums in accordance with the legal position …”.[3] In this part of the argument, Mr Davey also relied on the Judge’s response to a question raised by the jury about proof of intent. The Judge’s response included the following:[4]
The ingredient [of intent] is just to remind you … whether the accused, Mr Herbert, had control over the monies in each individual count, whether he had control in circumstances that required him to account to the insurer named in each individual count in accordance with that insurer’s requirements, whether he failed to do so in accordance with their requirements and whether the failure to comply with their requirements was intentional and in breach of his obligations.
[3]Above at [20].
[4]See below at [46] for the full quotation.
We accept that the cases to which Mr Davey referred show that the concept of “account” can have specialised meanings, but we do not consider the Judge’s use of the term here required any special explanation. In the summing-up, we consider the Judge’s use of the word in the phrase “failed to account or deal with the property” would have made it plain that he was treating “account” as synonymous with “deal”. The summing-up, as a whole, adequately instructed the jury as to the elements of the offence that the Crown needed to prove. It would have been very clear to the jury that the Crown was obliged to prove beyond reasonable doubt that any failure of Mr Herbert to comply with an insurer’s requirements was intentional, and in knowing breach of his obligations. We consider no juror would have been confused by the use of the word “account” either in the summing-up, or in the Judge’s response to the jury question.
This ground of appeal also fails.
Third issue: general or specific intent
The third issue raised is whether the Judge made an error of law when directing the jury on the issue of intent.
Mr Davey noted that the counts in the indictment were not representative charges, but consisted of 17 specific allegations that Mr Herbert had intentionally dealt with premium monies contrary to the requirements of the named insurers over a period of approximately two years. He submitted that while the Judge had referred to the issue of intent “broadly” in the summing-up, and said that the intent needed to be established at the time that the offence was committed, he did not direct the jury as to when that occurred. Consequently, he had failed to advise the jury that the intent needed to be considered at the time that the transfers (from the premium account and the operating account) were made.
Mr Davey also complained that the Judge had failed to advise the jury that the Crown needed to establish that the appellant intended to breach the requirements relating to the particular insurer named in each count. It was necessary for the Judge to advise the jurors they needed to be satisfied in respect of each count that Mr Herbert intended to transfer monies due to the particular insurer from the premium account and intended to encourage another HIGL employee to breach the requirements of that particular insurer or intended to breach those requirements for that particular insurer himself at the time that the transfers were made.
We do not consider the Judge erred as Mr Davey alleges. We note first that the Judge made it plain in the summing-up that it was an essential element of the charges that the Crown prove beyond reasonable doubt that there had been a failure to comply with the legal requirements relevant to each insurer. The summing-up included the following passages:
… So what you must do is look at all of the circumstances, all of the facts as you find them to be proved, his experience, awareness of the legal and particular contractual positions, his knowledge as to what he was entitled to deduct, all of the circumstances that prevailed at the time …
But what the Crown is required with respect to intention is to prove to your satisfaction beyond reasonable doubt to leave you sure … that the accused knew of the requirement to pay the insurance premium money to the respective insurers less his company’s brokerage fees and that he intended to breach those requirements.
Similarly, in the case of each count the question trail asked the question we set out (taking count one as the exemplar) above [26]. That part of the question trail was in fact the subject of a question from the jury, which asked, in relation to that particular question in respect of each count:
Can we have clarification:
Intentional and deliberately as described in 1.4, 2.4, 3.4 …
do we have to prove intent for each charge? ie does “deliberate” apply to the individual insurer or is it inferred through inaction?
are “deliberate breach” and “intend” the same thing?
(Emphasis added).
The Judge’s response included the following:
So you have to look at all of the circumstances to discern intention and you can do that if you find, for instance, there was a specific instruction given. Obviously that would be sufficient or, as I think I told you, whether he issued a general instruction in relation to how the premium account monies were to be used and that is something that you can take into account as part of the circumstances that might lead you to discern what his intention was at the time.
Mr Davey was critical of that answer because it did not deal directly with the jury’s question about whether “deliberate” applied to the individual insurer. However, we consider that other parts of the answer the Judge gave would have sufficiently clarified for the jury that intent had to be proved for each charge. Mr Davey quoted from what the Judge said towards the end of the response. However, the Judge began with the following:
You asked me, can you have clarification on whether the issue of intentionally or deliberately mean the same thing. They do, obviously. Do you have to prove intent for each charge? For the theft in a special relationship, intent is an essential ingredient of each of those counts. The ingredient is just to remind you that whether the accused, Mr Herbert, had control over the monies in each individual count, whether he had control in circumstances that required him to account to the insurer named in each individual count in accordance with that insurer’s requirements, whether he failed to do so in accordance with their requirements and whether the failure to comply with their requirements was intentional and in breach of his obligations. … And as I said, intention is not — you cannot look into his mind to see what he intended at the time and you do not often have a document that tells you exactly what an intention was at the time.
We are in no doubt that this was a sufficient response to the question asked. It would have emphasised, as had the summing-up, that the jury needed to be satisfied for each count that Mr Herbert had intended to transfer monies due to a particular insurer from the premium account at the time the transfers were made.
Mr Davey raised a further issue in connection with this ground of appeal, submitting it had been necessary to address the question of party liability where the transactions in question had actually been carried out by a person other than the appellant. However, the Crown’s case was that the appellant was the person responsible for causing the breaches. It alleged he was the principal offender and that he directed the transactions either by way of a specific instruction (in some cases) but also in terms of a general instruction that the funds held in the client accounts were to be used to supplement HIGL’s operating account when necessary.
There was a considerable amount of evidence substantiating this aspect of the Crown’s case from the witnesses who worked in the company at the relevant times. Mr Herbert’s response to that evidence was one of denial. He left the operation of the accounts to his employees and was not involved in operating the accounts. These issues were fairly put to the jury, which rejected Mr Herbert’s defence.
Importantly for present purposes, the appellant took no issue at the trial with the Crown’s allegation that Mr Herbert had control over the sums of money paid by the various insurance companies. Counsel for the appellant had also specifically acknowledged, in closing to the jury, that Mr Herbert had control on terms or in circumstances that required him to account to the insurance companies for the monies received on their behalf. We accept Mr Simmonds’ submission that in the circumstances there was no need to consider the position of Mr Herbert as anything other than the principal.
Miscarriage of justice
The fourth issue raised was that the various errors alleged in the summing-up and in responding to the jury’s question during its deliberation collectively meant there had been a miscarriage of justice.
It will be apparent from the conclusions expressed above that we disagree.
Result
The appeal is dismissed.
Solicitors:
Crown Law Office, Wellington for Respondent
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