Knock v Serious Fraud Office HC Auckland CRI-2004-004-321

[2005] NZHC 1723

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2004-004-321

BETWEEN

BRETT WILLIAM KNOCK

Appellant

AND

SERIOUS FRAUD OFFICE

Respondent

Hearing:         21 April 2005

Appearances: Matthew Dixon for Appellant

Justine van Winden and James Mullineux for Respondent Judgment: 21 April 2005

JUDGMENT OF HARRISON J

SOLICITORS

Matthew Dixon (Auckland) for Appellant Serious Fraud Office (Auckland) for Respondent

KNOCK V SERIOUS FRAUD OFFICE HC AK CRI-2004-004-321 [21 April 2005]

Introduction

[1]    Mr Brett Knock pleaded guilty in the District Court at Auckland to 16 charges of using a document with intent to defraud (s 229A(b) Crimes Act 1961) and five charges of forgery (ss 264 and 265). The maximum terms of imprisonment following conviction on these charges are seven years and 10 years respectively. On 9 July 2004 Judge Anne Kiernan sentenced Mr Knock to concurrent terms of four and a half years imprisonment on 14 of the charges of using a document with intent to defraud. She also sentenced him to one and a half years imprisonment on the remaining two charges of using a document with intent and the five charges of forgery, to be served concurrently but cumulatively on the lead sentence of four and a half years. The effective term of imprisonment imposed by the Judge was thus six years.

[2]    Mr Knock now appeals against his sentence on the grounds that it is manifestly  excessive  or  wrong   in   principle.   Mr Matthew   Dixon   represents Mr Knock in this Court but did not appear for him in the District Court. His original notice of appeal was filed in the Court of Appeal but subsequently rejected because each  sentence  was  less  than  five  years  imprisonment.  Arguably,  though,  as  Ms Justine van Winden for the SFO points out, the two sentences constitute a notional single sentence of six years. If so, the appeal was properly filed in the Court of Appeal. However, it is unnecessary for me to consider that jurisdictional point.  Mr Knock wants his appeal determined promptly in this Court. Ms van Winden does not oppose.

[3]    Both Mr Dixon and Ms van Winden filed constructive synopses of submissions in advance of today’s fixture. Mr Dixon’s primary submission is that Judge Kiernan erred in adopting a starting point of eight years imprisonment for the totality of Mr Knock’s 21 offences. He also submits that the end sentence of six years was excessive because the Judge failed to give sufficient weight to mitigating factors and  imposed  cumulative  terms.  However,  he  realistically  accepts  that  Mr Knock’s appeal is likely to fail if he is unable to establish that the Judge’s starting point was erroneous.

Facts

[4]    Mr Knock is a chartered accountant. He qualified in about 1984. He went  into practice on his own account in 1991. He committed the subject offences between 1993 and 2003. Of his crimes of using a document with intent to defraud, 14 were committed against former clients and the other two against AMP Banking Ltd. Judge Kiernan noted that he used his professional skills “methodically and comprehensively” to defraud his victims. In total he defrauded his 14 clients of

$828,034. He has repaid some of the money. The balance still owing is $666,113.

[5]    Mr Knock’s fraudulent use of documents included (a) untruthfully informing clients that they owed taxes or that he had paid their taxes and requesting a cheque for the amount allegedly owed; (b) receiving and banking to his own account client refund cheques from the IRD; (c) filing tax returns as tax agent for clients with a direction that any refunds be paid into his own account; (d) completing IRD adjustment forms or tax return refund transfers and then, without his clients’ knowledge, redirecting tax credits to the accounts of himself or others; (e) using clients’ IRD refund cheques to pay taxes owed by himself or others; and (f) using cheques provided by clients to pay their taxes to pay his own or others taxes. The largest single sum defrauded from a client in this way was $188,000; the smallest was just over $12,000.

[6]    The five charges of forgery and the remaining two charges of using a document with intent to defraud fall into a separate category. In early 2002 the Knock Family Trust borrowed $1 million from AMP Banking Ltd. Mr Knock was one of its trustees. The loan was raised through an agent, Stratus Financial Services Ltd. In support Mr Knock provided AMP with an application form together with financial statements for his firm’s performance for the 1999, 2000 and 2001 tax years. These documents were false and prepared with intent to defraud.

[7]    Separately, in October 2002 Mr Knock, on the Trust’s behalf, applied to AMP through Stratus for a loan of $190,000. AMP requested Mr Knock to provide tax assessments for the purpose of confirming personal drawings from family companies according to financial statements. On 13 November 2002 Mr Knock

forwarded to Stratus copies of four forged IRD notices of assessment and a copy of part of a forged tax return. The agent forwarded the documents to AMP. The company then approved the loan application and advanced the Trust just under

$190,000. The Trust complied with its legal obligations. It has since repaid the loan of $1.19 million in full.

District Court

[8]    Judge Kiernan’s sentencing notes are comprehensive and careful. She recited the relevant facts; fully recorded the  submissions  made  by  Ms van Winden  and Mr Knock’s former counsel; referred to the numerous authorities cited in argument; and identified all the relevant sentencing principles, with particular reference to aggravating and mitigating circumstances.

[9]    Judge Kiernan identified these five aggravating factors when fixing a starting point of eight years imprisonment: (1) the nature and duration of Mr Knock’s offending, extending over nearly 10 years and constituting numerous acts of dishonesty; (2) the extent of the net financial loss suffered by each of Mr Knock’s 14 client victims, to a net figure of $666,000, and the amount defrauded from AMP in excess of $1 million; (3) Mr Knock’s gross abuse of the trust reposed in him by his clients, the IRD, and AMP; (4) Mr Knock’s premeditation, as evidenced by the calculated and sustained nature of his crimes; and (5), perhaps most significantly, the financial and emotional harm which Mr Knock inflicted upon his  victims.  The Judge devoted some time to reviewing the 10 victim impact statements. She emphasised the common theme of loss of trust, stress and strain, in some cases resulting in health problems, financial hardship, betrayal of confidence and friendship, and resentment and enduring anger that Mr Knock had enriched himself and his family at his victims’ expense.

[10]   Judge Kiernan also acknowledged relevant mitigating circumstances, particularly Mr Knock’s plea of guilty, his previous good character, and domestic demands caused by his wife’s ill health.

[11]The Judge then concluded in these terms:

[50]      As to the tariff or the punishment, it is not a question of looking at the total loss and the amount of reparation sought and the period of time over which your offending occurred and then doing some mathematical calculation to arrive at the length of sentence. I must look at all the features of your offending and must also have in mind sentences imposed for comparable offending to arrive at a just sentence today.

[51]      In all these circumstances as I have mentioned them and the principles and purposes of sentence I have concluded that your offending falls into the serious category. I assess your offending as a high level of dishonesty over a long period by a professional. There is a need for a deterrent penalty as well as one which imposes an appropriate punishment upon you. A term of imprisonment is the only appropriate sentence to meet the principles and purposes of sentencing. For the totality of your offending I have come to the view that an appropriate starting point to include all of the aggravating features is a term of 8 years' imprisonment. From that starting point I give you credit for your guilty pleas, the fact that you are a first offender and the remorse that you express. I cannot take into account today an offer of reparation though I note that you intend to make full reparation to those victims when you are able to do so. I do not make a reparation order today.

[52]      In my view from an 8 year starting point I can discount 2 years for those factors so the ultimate final sentence I am going to impose is a term of 6 years' imprisonment. I impose that in this way. In relation to the 14 charges of using documents relating to those 14 victims a term of 4½ years' imprisonment. In terms of the 5 offences of forgery and the 2 offences of using documents relating to the AMP loan applications I impose terms on each of those of 1½ years' imprisonment. That is cumulative, so added onto the 4½ years, the total sentence is one of 6 years' imprisonment. I am satisfied that the offences of forgery and use of the loan applications are sufficiently different in kind and of a different nature to impose a cumulative sentence. I do not exercise my discretion in respect to a minimum parole period and as part of the sentencing exercise today I remit the fines of $730 that you currently owe.

Decision

[12]   As noted, Mr Dixon’s challenge to the sentence focuses upon the Judge’s adoption of a starting point of eight years imprisonment. Mr Dixon presented, in summary schedule form, a comparative analysis of Mr Knock’s sentence with 13 other sentences imposed in various Courts for crimes of dishonesty. His schedule included an itemised reference to starting points, amounts involved, offending periods, and numbers of crimes. With characteristic realism, Mr Dixon acknowledges that sentencing is not “simply a mathematical exercise”.  Nevertheless, he submits that by reference to two authorities (Serious Fraud Office v Francis, District Court, Nelson, 19 January 2001, and Heald v Serious Fraud Office,

AP312/98, Wellington Registry, Gendall J, 17 March 1999) an appropriate starting point would be six years imprisonment. He submits also that the Judge should have given more weight to the undiagnosed depression suffered by Mr Knock for part of the offending and his domestic stress caused by his wife’s illness. In these circumstances, Mr Dixon submits, an appropriate sentence is four years imprisonment.

[13]   Separately Mr Dixon  submits  that  the  type  of  dishonesty  practised  by  Mr Knock on AMP was no different from the dishonesty which he committed against his clients; and that the forgeries occurred in early 2002 while Mr Knock was still offending against his clients. Accordingly, he submits that cumulative sentences were not appropriate here (s 84(1) Sentencing Act 2002). However, he concedes that if the Judge’s net totality point of six years was appropriate, his argument over imposition of cumulative sentences becomes academic.

[14]   In  support  of  the  Judge’s  sentence,  Ms van Winden  takes  issue  with   Mr Dixon’s reliance on a number of the authorities summarised in his schedule. She distinguishes the sentences imposed in Heald, Francis and other cases. She submits that a starting point of eight years was appropriate and that the Judge was acting well within her discretion in imposing cumulative sentences.

[15]   With respect to both counsel, I am satisfied that for the purposes of determining this appeal only two authorities, both in the Court of Appeal, are relevant. All sentencing is largely fact dependent. It is an exercise in judgment. Judges are guided or directed by authoritative statements of principle, normally at appellate level. Often sentences imposed in the same jurisdiction for crimes of the same or similar nature offer comparative assistance. There is a danger, though, in this area in seeking to fit one sentence into a consistent mosaic where different aggravating factors are present in varying degrees. A comparative exercise is only of value if the variables are closely aligned and it establishes that a sentence is manifestly disparate, and thus excessive or inadequate.

[16]   The sentence of six years imprisonment which Judge Kiernan imposed upon Mr Knock was at the high end of the comparative scale. But in my judgment her

starting point of eight years was not manifestly excessive. It was within the range available to her. I need only to refer to two authorities in support.

[17]   First, in R v Coburn (CA133/03, 30 September 2003) the Court of Appeal upheld a sentence of five and a half years imposed on a solicitor who pleaded guilty to representative charges of forgery and dishonest use and alteration of documents. His offending occurred over a five year period. By forgery he obtained 11 loans  from various lending institutions to a value of $768,000. Separately by dishonest use of documents on more than 60 occasions the solicitor obtained funds from his practice account for his personal use. The money belonged to 34 of his clients. In this way he stole a total of $1.015 million. He repaid $322,000. The net  loss  was just under $700,000. The total of his misappropriations including forgeries against lending institutions totalled $1.784 million. Repayments left a shortfall of

$1.424 million. He was suffering from a gambling addiction. He spent most of the stolen money at the Christchurch Casino. A psychiatrist diagnosed him as suffering from a pathological gambling disorder.

[18]   The Court of Appeal upheld the sentencing Judge’s adoption of a starting point of eight years, from which a discount of two and a half years was allowed. Blanchard J said this:

[17]      We have not been shown that the Judge's starting point or, more importantly, the sentence ultimately imposed of five and a half years was beyond the range available to the Judge. Mr Coburn used his position as a solicitor to defraud his clients and lending institutions of more than

$1.78 million, of which only about $350,000 has been repaid. His numerous defalcations or frauds took place over a period of four to five years….

[18]      Some of the cases mentioned by counsel, in particular Renshaw and Edwards, were worse, but sentences for more serious offending of this kind cannot maintain proportionality with the large sums which have been misappropriated in each case. Like those cases, the present matter is in the more serious category of this type of offending for which a starting point of eight years is certainly not out of line…

[19]      Second, in  a  passage  cited  by  Ms van Winden,  the  Court  of  Appeal  in  R v Varjan (CA97/03, 26 June 2003, Gault P, Fisher and O’Regan JJ) identified the aggravating factors for consideration when assessing culpability for dishonesty offences in this way:

Culpability is to be assessed by reference to the circumstances and such factors as the nature of the offending, its magnitude and sophistication; the type, circumstances and number of victims, the motivation for the offending; the amounts involved; the losses, the period over which the offending occurred; the seriousness of the breaches of trust involved; and impact on the victims.

[20]      Judge Kiernan took into account and gave weight to each of these particular factors identified in Varjan. She was satisfied that in combination they disclosed a high degree of culpability. Mr Knock’s offending was characterised by the combination of a number of aggravating features. By reference to the Judge’s notes, Mr Dixon submits that she gave undue weight to the duration of Mr Knock’s offending. On a comparative scale he says that it is less culpable than, for example, the amount of money involved. I disagree.  There are risks in placing undue focus  on the amounts at issue once dishonesty crimes reach a certain level of seriousness. It can have an illusory or distortionate effect. The amount is but one of a number of factors for a sentencing Judge to consider. Once he or she has undertaken that exercise, an appellate Court should not interfere unless the sentence is manifestly excessive or the Judge erred in principle.

[21]      The facts of this case illustrate my point. The total amount fraudulently obtained by Mr Knock was about $2 million. On that touchstone his offending was clearly in the most serious category. His dishonesty caused other parties to part with substantial amounts of money. AMP, his largest victim in monetary terms but ironically the victim most able to bear loss, was not ultimately disadvantaged. The Knock Family Trust repaid the debt. But the fact of repayment, while of importance, does not diminish the scale and significance of the originating fraud. The aggregate amounts which Mr Knock stole from his clients was also substantial. Again in isolation the total placed his offending in a serious category. What is more, his victims were individuals who could not afford to absorb the loss caused by his crimes. On a comparative basis the harm which Mr Knock inflicted on them was much greater than on a financial institution.

[22]      In my judgment victims’ rights in this area are too frequently played down because the nature of the loss is financial and not physical. That approach ignores  the enduring emotional damage suffered by victims who feel acute betrayal at the

hands of the very person in whom they reposed absolute trust and confidence to protect and secure their financial affairs and future. Judge Kiernan was influenced  by all these factors. She also placed appropriate weight on the deterrent principle. I am not satisfied that she adopted an excessive starting point. To the contrary, I endorse it. It is also justified by reference to the approach adopted and result reached in Coburn and by the principles enunciated in Varjan.

[23]      As noted, Mr Dixon submits that an insufficient discount was given for mitigating factors. He has referred to Mr Knock’s mental health during part of the period. I am not satisfied that the Judge erred in allowing a discount for these factors of two years, or 25%, against the starting point, to fix an end sentence of six years.

[24]      Mr Dixon accepts that the discrete sentences of four and a half years and one and a half years imprisonment were not excessive. He challenges their cumulative effect. However, once a six year term of imprisonment is upheld as reflecting the totality of Mr Knock’s offending, the argument as already noted becomes academic. Again, I am satisfied that the Judge adopted the correct approach in imposing cumulative sentences in this case.

[25]      Accordingly, Mr Knock’s appeal is dismissed. I wish to acknowledge the quality of the written submissions tendered by Mr Dixon and Ms van Winden.

Rhys Harrison J