Ministry of Business, Innovation and Employment v Lehman

[2017] NZHC 864

IN THE HIGH COURT OF NEW ZEALAND

HAMILTON REGISTRY

CRI-2017-419-000013

[2017] NZHC 864

IN THE MATTER OF

an appeal against District Court decision

BETWEEN

MINISTRY OF BUSINESS, INNOVATION AND EMPLOYEMENT

Appellant

AND

JOHN CHRISTIAN LEHMAN

Respondent

Hearing:

2 May 2017

Counsel:

M L Dillon for the Appellant

R A B Barnsdale for the Respondent

Judgment:

2 May 2017

(ORAL) JUDGMENT OF EDWARDS J

Counsel:     R A B Barnsdale, Hamilton

Solicitors:    Almao Douch, Hamilton

MINISTRY OF BUSINESS, INNOVATION and EMPLOYEMENT v LEHMAN [2017] NZHC 864 [2 May 2017]

Introduction

[1]    The respondent (Mr Lehman) pleaded guilty to one charge of carrying on or taking part in the management or control of a business while bankrupt and without consent of the Official Assignee. That offence carries a maximum penalty of two years’ imprisonment.1

[2]    Mr Lehman was granted a discharge without conviction pursuant to s 106 of the Sentencing Act 2002 in the District Court.2 The appellant (MBIE) appeals on the grounds that the District Court Judge erred by exercising a discretion to grant a discharge without first having determined that the consequences of a conviction would be out of all proportion to the gravity of the offence. MBIE says there was insufficient evidence that a conviction might carry adverse consequences for Mr Lehman, and in any respect any consequences of conviction were not out of all proportion to the gravity of the offence.

The offending

[3]    Mr Lehman was adjudged bankrupt on his own petition on 31 October 2012. He was accordingly prohibited from directly or indirectly entering into, carrying on, or taking part in the management or control of a business without the consent of the Official Assignee or the Court.

[4]    In January 2014, Mr Lehman visited a real estate office and represented that he was from Oracle Securities Ltd and was interested in buying a property suitable for development  of  a  retirement  complex.  Oracle  Securities   Ltd   is   owned   by  Mr Lehman’s son.

[5]    In the following months he had a number of dealings with a person from that real estate office and told him that there was a pool of investors behind his retirement complex project.

1      Insolvency Act 2006, s 436(1)(b)

2      R v Lehmann [2016] NZDC 13140.

[6]    On 7 October 2014, Mr Lehman signed a sale and purchase agreement for the Williamson St property for $2,570,000 on behalf of Oracle Securities Ltd. He also contacted a sales manager of GJ Gardner Homes in Hamilton and advised that he had land in Cambridge and he planned to build a retirement complex. He later met with the sales manager and outlined his plans for the retirement complex project. Concept plans were prepared based on the information and instructions given by Mr Lehman.

[7]    Mr Lehman also contacted Dunwoodie and Green Surveyors Ltd and instructed them to undertake initial survey work on the property. Mr Lehman outlined the scope of the development as involving the construction of 42 to 45 duplex style units. He signed a client agreement with the surveying firm on behalf of Oracle Securities Ltd.

[8]    Following the sale and purchase agreement going unconditional, Mr Lehman entered into an agency listing authority to market the units forming part of the retirement complex. The authority was signed  by  Mr  Lehman  on  behalf  of  Oracle Securities Ltd.

[9]    However, the sale and purchase agreement was cancelled by the vendors when the deposit was not received within the stated 14 days. The property was subsequently on-sold to another party on 24 March 2015. Mr Lehman made contact with the new owners who expressed an interest in the property, and suggested entering into a joint venture. That proposal was declined.

[10]   The surveyors sent an invoice on 5 February 2015 for $1,004.18 for work completed to date. That amount was not paid, and interest has continued to accrue on the outstanding amount.

Personal circumstances

[11]   Mr Lehman is now 66 years of age. He has no previous convictions, and pleaded guilty to the offending at the earliest opportunity.

[12]   In an affidavit filed in support of the application for discharge, Mr Lehman stated that he was helping out his son whilst he served the term of bankruptcy. He was not employed or paid by his son, and he was simply acting on his behalf.

[13]   Mr Lehman says that he has had a clean record and it is important to him that his record remains clear. He further says that he was a volunteer fisheries officer in the Auckland region a number of years ago, and would like to resume that role again now he is retired. He said that he had contacted the Auckland co-ordinator, advised them that he was facing one charge, and asked for a letter confirming the requirement that a volunteer have a clean record. The co-ordinator declined to provide such a letter stating that “the organisation did not think it was their role to influence the courts process”.

[14]   Mr Lehman says that he would like to be involved in giving back to his community and that a conviction may prevent him from doing so. He expressed extreme remorse for his offending, which he stated was the result of ignorance, and not disregard for the law.

District Court decision

[15]   After reviewing Mr Lehman’s offending the Judge turned to consider the principles relevant to an application for a discharge without conviction. The Judge noted that the Court must not discharge without conviction unless satisfied that the direct or indirect consequences of a conviction were out of all proportion to the gravity of the offence (at [5] of the decision). She also went on to outline the three-step approach to be adopted – first to identify the gravity of the offending, next to identify the direct and indirect consequences of the conviction, and finally to consider whether those consequences are out of all proportion to the offence (at [7] of the decision).

[16]   Following that approach, the Judge found that whilst Mr Lehman’s offending was not the most serious of its type, it was not as minor as counsel for Mr Lehman submitted. She took the view that it was moderate offending (at [7]). The early guilty plea, genuine expression of remorse and low re-offending were further taken into account (at [8]).

[17]   In terms of consequences, the Judge noted that whether or not Mr Lehman could be a fisheries officer was undetermined. The highest the Judge could put it was that a conviction may prohibit appointment, but there was nothing to suggest that a conviction would otherwise impact on the ability to travel or earn a living.

[18]In terms of the proportionality analysis, the Judge said:

[10]      The question then becomes would those consequences be out of all proportion to the gravity of the offending and it cannot be said that the consequences of a conviction would have a direct impact on your ability to act either as a volunteer Fisheries Officer or in any other role. But, it is important to emphasise that the consequences of offending are only one matter to which I must have regard and the consequences of a conviction are not determinative of whether a discharge should be granted because I must still exercise my discretion.

[11]      Mr Dillon says that the consequences of a conviction are minor and they do not outweigh the gravity of the offence. Mrs McLeod accepts there is a fine line and it is a very fine line Mr Lehmann but ultimately she really stresses you should be given the opportunity at your stage of life to give back to the community unimpeded and there is a risk. It does not have to be established that there is an absolute bar but it cannot be dismissed that there is a risk that you would be unable to perform any volunteer duties.

[12]      In determining whether the discretion under s 106 should be exercised I take all of those matters into account. I also take into account the fact that this is your first offence. The risk of your re-offending is I assess extremely low and when I look at the public interest and balance that against the particular facts leading to this charge I come to the conclusion that in the exercise of my discretion I am prepared to discharge you without conviction.

Approach on appeal

[19]   Section 106 of the Sentencing Act 2002 gives the Court the discretion to discharge an offender without conviction. Section 107 provides that this discretion cannot be exercised unless the direct and indirect consequences of a conviction would be out of all proportion to the gravity of the offence.

[20]Section 107 requires the Court to undertake a three-step analysis and consider:3

(a)The gravity of the offence;

(b)The direct and indirect consequences of a conviction; and

3      Z (CA447/12) v R [2012] NZCA 599, [2013] NZAR 142 at [8].

(c)Whether those consequences are out of all proportion to the gravity of the offence.

[21]   If the offender meets the s 107 threshold, then the Court will go on to consider whether to exercise the residual discretion under s 106.4

[22]   The proportionality test under s 107 is a question of fact requiring judicial assessment. General rights of appeal apply and the appellate court undertakes the evaluation of the s 107 matters afresh.5

Analysis

[23]   Mr Barnsdale submits that the Judge’s notes could be interpreted as only referring to the direct consequences of a conviction, and it is implicit in Her Honour’s judgment that she considered that the indirect consequences were disproportionate to the gravity of the offence.

[24]   I respectfully disagree. As counsel for MBIE submits, the passages in the Judge’s decision (and in particular the latter portion of [10]) suggest that the Judge erred by proceeding to exercise the discretion in s 106, when the threshold question of disproportionality had not been determined. I therefore consider the question of a discharge afresh.

[25]   In terms of the gravity of the offence, I agree with the Judge that considered on its own, Mr Lehman’s offending falls into the moderate range. Mr Lehman was actively involved in Oracle’s business. He held himself out as representing that entity, negotiated contracts and signed them on its behalf. That was not just a one-off incident, but occurred on a number of occasions over a period of time.

[26]   However, Mr Lehman’s misunderstanding regarding his employment status, the acceptance of responsibility when questioned, his prompt guilty plea, genuine

4      Z (CA447/12) v R, above n 3, at [9].

5      R v Hughes [2008] NZCA 546, [2009] 3 NZLR 222 at [11]; and H v R [2012] NZCA 198 at [34]–

[36].

remorse, and previous good character, reduces the overall gravity to minor to moderate in my view.

[27]   As to consequences, I agree with counsel for MBIE that there is no evidence that a conviction will impact on Mr Lehman’s ability to undertake volunteer work, nor any evidence of a real and appreciable risk that it will do so. As the Judge noted, the highest that it can be put is that it “might” have an impact. Furthermore, it appears from Mr Lehman’s evidence that the circumstances of his offending will be weighed and considered by those responsible for appointing fisheries officers. That also reduces the risk of any negative impact on Mr Lehman’s aspirations to work in the community in the future.

[28]   I take into account the reputational harm which flows from having a conviction. That may be particularly acute for Mr Lehman given his blemish free record for over 60 years. But, reputational harm is nevertheless a normal consequence which flows from all types of offending, and it is not so extreme for Mr Lehman that it can be said to be out of all proportion to the gravity of his offending.

[29]   Overall, I do not consider the consequences of conviction are disproportionate to the gravity of the offence. The essential threshold for a discharge without conviction cannot be established and, for that reason, the appeal must be allowed.

[30]   That leaves consideration of the appropriate sentence. Counsel for MBIE submits that a community-based sentence would be appropriate. In my view, the minor to moderate nature of the offending, the prompt guilty plea, Mr Lehman’s previously unblemished record, his genuine remorse, and the near nil risk of re- offending in the future, favour a sentence where he is convicted and discharged. That sentence is the least restrictive sentence in the circumstances. Mr Lehman is present in Court today and I intend to sentence him accordingly.

Result

[31]The appeal is allowed. The discharge without conviction is quashed.

[32]   Mr Lehman, if you would please stand. On the charge of carrying on or taking part in the management or control of a business while bankrupt and without the consent of the Official Assignee or the Court, you are hereby convicted and discharged. Thank you. You may stand down.

Edwards J