R v B HC Auckland CRI 2005-044-3195
[2006] NZHC 885
•28 July 2006
This case has been anonymized
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI 2005-044-003195
THE QUEEN
v
B
Appearances: M R Harborow for Crown
G Bogiatto for Prisoner
Judgment: 28 July 2006
SENTENCE OF COOPER J
Solicitors:
Meredith Connell, Crown Solicitors, PO Box 2213, Upper Shortland Street, Auckland.
Copy to:
G Bogiatto, PO Box 106-120, Auckland
R V B HC AK CRI 2005-044-003195 28 July 2006
[1] Wayne B appears for sentence having pleaded guilty on 8 June 2006 to two charges laid under s 62(1)(a) of the Insolvency Act 1967 that being a bankrupt he took part in the management or control of a business. The maximum term of imprisonment for both charges under s 128A(1)(b) of the Insolvency Act is a term of imprisonment of two years, because he has been convicted on indictment.
[2] Mr B was adjudicated bankrupt on 31 January 2001. In 2002 he became involved in the affairs of two companies, BA Developments Ltd and WDA Construction Ltd. Both companies were involved in a development in Torbay. Mr B ’s role was that of a construction manager and quantity surveyor, providing estimates for the project which turned out to be well under the cost of what was feasible. Mr B was also in a position to sign operating authorities for the bank accounts of both companies, although Mr Bogiatto points out that he did that as one of two required signatories. It appears that he also dealt with most of the correspondence in respect of the project and was responsible for preparing the company’s financial records. Due to an inability to secure the further finance that was required above the estimated cost of the development, the project collapsed. BA Developments Ltd went into receivership on 3 November 2003 and WDA Construction Ltd was placed into liquidation on 6 November 2003. The total owed to unsecured creditors appears to have been in the vicinity of $150,000, although a greater liability was met personally by a Mr Farrell.
[3] This matter was previously before Harrison J who issued a minute on 8 June
2006 recording the events with which he had been concerned. In brief, on 7 June an application for a discharge on one of the counts came before Harrison J. As recorded in his minute of the following day he advised Mr Bogiatto of his conclusion that there was evidence which, if accepted by a jury, was competent to prove the Crown’s case on the count in question.
[4] Of relevance for today’s exercise Harrison J observed at paragraph [6] of his minute that:
It appears that primary responsibility for the business or financial matters rested with Mr David Rouse, Mr B ’s co-accused. Mr B ’s involvement was more limited to or specialised in the construction side – apparently general project management and control of costings.
[5] In the following paragraph he recorded that when it went into liquidation
WDA Construction Ltd owed about $150,000 to its creditors.
[6] A pre-sentence report has been prepared for the purposes of sentencing. From it I gather that Mr B is 56 years old, married with four children and now runs a building business having been discharged from his bankruptcy. That business employs three staff members. Mr B evidently has disposable income of $295 per week. In 2003 Mr B was successfully treated for prostate cancer. He has a ruptured disc in his lower back which restricts his ability to lift heavy objects. There is no indication of any relevant previous offending other than the matters which bring him before the Court today.
[7] There is apparent remorse for the financial losses which have occurred and an offer to pay reparation in the sum of $200 per week over a period of some 25 weeks, bringing the total up to $5,000, which co-incidentally is the maximum amount of a fine that may be imposed under s 128A(1) of the Insolvency Act.
[8] Mr B had on a previous occasion sought and obtained consent from the Official Assignee, to be employed as a construction supervisor for a company known as Harte Construction Ltd. Consent was given on the basis of representations that he made that he would take no part in the management or control of the company and was conditional on his future employment continuing on that basis.
[9] Mr Bogiatto submitted that in the circumstances, had a similar consent been sought in respect of the current offending, it would likely have been given. I accept that that is the case. On the other hand it does not appear to me that the consent that was granted would have authorised the degree of involvement which Mr B actually had in the two companies to which I have earlier referred, as being involved in the development project which failed.
[10] For the Crown, Mr Harborow, has identified as relevant to the purposes and principles of sentencing to be applied in the present case, observations made by Courtney J in Official Assignee v Carroll (HC AK CRI 2005-404-000261, 16
December 2005) in which at [19] Her Honour emphasised that the purpose of s 62(1)
is to protect the public from loss resulting from the imprudent management of businesses. The emphasis is not on penalising the bankrupt person, who can seek the consent of the Official Assignee to employment in circumstances outlined. Her Honour quoted, with approval, observations made by Quilliam J in R v Newth [1974]
2 NZLR 760 at 761:
I have no doubt that the object of the statutory provision is not the punishment of the bankrupt but the protection of the commercial community and I think it is this principle which points clearly the way in which the section is to be interpreted.
[11] However, as Mr Harborow points out, it is necessary for the Court to impose a sentence which deters not only Mr B , but also others from breaching the law.
[12] Having referred to relevant authorities, including R v Holt (CA 59/06, 30
May 2006), R v Funnell and Seagrave (HC AK T013289, 27 September 2002), R v Harrod (HC AK CRI 2003-004-031531, 27 April 2004) Mr Harborow submitted that an appropriate starting point in the present case would be a sentence in the vicinity of 300 to 400 hours community work. He emphasised here the magnitude of the loss that had been involved, the suggestion of breach of trust involved in that Mr B had gone into business with a person who had trusted him and relied on his commercial acumen and integrity, made a submission that the offence involved premeditation, and mentioned the length of time over which the offending had occurred and concealment of his bankruptcy. He acknowledged, however, that a credit should be given for the guilty pleas, genuine remorse and an offer that had been made of reparation in the amount to which I have previously referred.
[13] On the question of reparation, however, Mr Harborow submitted that it would be appropriate to order payment of the sum of $40,000 at the rate of $250 per week. This would take approximately three years to pay off. Mr Harborow conceded that there was no particular science behind that figure, but submitted that a substantial amount would be appropriate in the circumstances of this case. An order for reparation in that amount would, he submitted, appropriately be coupled with a sentence in the vicinity of 150 to 200 hours community work, taking into account the mitigating factors mentioned.
[14] For Mr B , Mr Bogiatto has emphasised the guilty plea, the fact that Harrison J described the conduct as less serious than that of the co-accused, the lack of any previous offending, limited involvement in the financial affairs of the company, absence of any personal profit (Mr B having been salaried throughout), the lack of any causal nexus between the losses sustained and the actions of Mr B , and the acknowledgement by Mr B of the error of his ways and the remorse that he has shown. He records Mr B ’s contention that in fact all those who dealt with him were aware of his status as an undischarged bankrupt at the time. He repeats the offer of payment of a fine of up to $5,000 for both counts which would be payable at $250 per week. He submits in the circumstances that a requirement that a fine in that amount be paid, would be sufficient punishment in the circumstances of this case.
[15] In making his submissions Mr Bogiatto has argued that a sentence of community work ought not to be combined with a fine, having regard to the drafting of s 128A of the Insolvency Act. That section provides:
128A Offences by undischarged bankrupts in relation to management of companies
(1) Every person who is adjudged bankrupt and who— (a) Acts as a director of a company; or
(b) Fails without reasonable cause to comply with section 62 of this
Act,—
commits an offence and is liable on conviction on indictment to imprisonment for a term not exceeding 2 years or on summary conviction to imprisonment for a term not exceeding 12 months or to a fine not exceeding
$5,000.
(2) Notwithstanding anything in section 14 of the Summary Proceedings Act 1957, an information in respect of an offence against paragraph (a) or paragraph (b) of subsection (1) of this section may be laid at any time within
2 years after the date of the offence.
[16] Mr Bogiatto argued that if a sentence of community work is to be imposed under the authority of the Sentencing Act and as an included punishment available within the power to sentence to imprisonment, then there could not also be a fine and he submits that the reverse is true, and that if a fine were imposed there should not also be a sentence of community work.
[17] The drafting of the section is not ideal. Another alternative is that if a charge is laid, other than by indictment, the same maximum penalty in terms of fine would apply notwithstanding the clear intent to differentiate in terms of the length of imprisonment available, according to whether the charge is laid indictably or not.
[18] Mr Bogiatto goes on to submit that an order for reparation made under the section could not properly be for anything approaching the $40,000 to which Mr Harborow referred because, he submits, that would be completely disproportionate to the amount of the maximum penalty provided by way of fine in the section.
[19] In response to that submission Mr Harborow contends that the maximum fine provided in the section is dealing with a different concept from the amount that might be awarded by way of reparation and that the object of a requirement that reparation be paid is that the harm done should be suitably recognised. He points out that in R v Harrod an order for reparation was made in a sum which had significantly exceeded the penalty provided in s 128A(1).
[20] In my view the appropriate interpretation of the section does not need to be fully resolved for the purposes of this sentencing. I say that because notwithstanding the submissions that I have earlier summarised, Mr Bogiatto has in fact suggested that there be a fine of $5,000 in total, payable at the sum of $250 per week, paid in respect of each charge. On the other hand, in my view this is an appropriate case for imposition of a sentence of community work. Dealing with the matter simply by way of fine would not be sufficient to deter both Mr B and others from such conduct, so as to protect the public.
[21] I am of the view that an appropriate starting point for the purposes of sentencing would be a sentence of 200 hours community work, but that that matter ought to be reduced for the mitigating factors conceded by Mr Harborow and also to which Mr Bogiatto has given emphasis. I would add to the mix, a requirement that reparation be paid, but I would not add a fine. If a significant payment of reparation is made that would enable the final sentence, insofar as community work is concerned, to be reduced. I propose to follow that course and direct that Mr B
serve a period of 100 hours community work. I impose that sentence in respect of each count. I also direct in the case of each count, that reparation be paid in the sum of $5,000. Insofar as the sentences of community work are concerned, they are to be concurrent. So far as the orders for reparation are concerned, I direct that the sum of
$5,000 is to be paid in respect of each count. The reparation is to be paid in the total amount of $200 per week.
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