R v Butler
[2013] NZHC 1436
•14 June 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2010-004-10228 [2013] NZHC 1436
THE QUEEN
v
ANN KATHLEEN BUTLER ROBERT BARRY WHALE
Hearing: 14 June 2013
Counsel: B H Dickey for Crown
T P Mullins and D J Valente for Mrs Butler
P J Davison QC and R C Woods for Mr Whale
Sentence: 14 June 2013
SENTENCING NOTES OF DOBSON J
[1] Mrs Butler and Mr Whale, I now have to sentence you both on seven convictions for offending under s 58 of the Securities Act 1978 (the Act). The charges arise out of your responsibilities as directors of Dominion Finance Group Limited (Dominion Finance) and North South Finance (North South). Three of the charges were brought under s 58(1) of the Act for distribution of an advertisement containing an untrue statement, and four of the charges are for distribution of a registered prospectus containing an untrue statement.
[2] Both those companies were in business as finance companies and depended on prospectuses and investment statements to raise money from investors for on-lending. (I am going to call the documents – the prospectuses and the investment statements and the advertisements - just “the offer documents”.) Dominion Finance
seems to have focused on commercial and business lending with particular emphasis
R v BUTLER and WHALE [2013] NZHC 1436 [14 June 2013]
on property-related transactions for residential and commercial development, and
North South was financing property developments.
[3] Dominion Finance issued a prospectus on 13 September 2007 and an investment statement on the same day. It also issued a newsletter in or about March
2008 called “Quarterly Return”. In North South’s case, it issued a prospectus and investment statement dated 11 September 2007 and was associated with a letter to investors of both Dominion Finance and North South dated 23 May 2008.
[4] Dominion Finance and North South operated with a common directorate, and board meetings of both companies were convened at the same time. In June 2008, their parent company announced that it would seek approval for a moratorium from trustees for debenture holders in both the finance companies. In Dominion Finance’s case, the trustee elected to put the company into receivership and that occurred in September 2008. In North South’s case, the trustee did enter into a moratorium from
1 December 2008, but that company subsequently passed into receivership in July
2010.
[5] You both separately sought sentencing indications, which I provided respectively to you, Mrs Butler, on 7 May, and to you, Mr Whale, on 22 May this year. Both of you have pleaded guilty in reliance on the sentencing indications I gave to you. Although those indications were delivered in open Court, the law prohibits publication of any of the detail in them. It is therefore necessary for me when sentencing you to traverse the considerations relevant to the end sentences, and in doing so I have to reflect much of what was said when I provided those sentencing indications. I have reconsidered the submissions made for the sentencing indications, and the supplementary matters that have been raised in further submissions filed since then.
[6] In assessing the relative seriousness of this offending under s 58, relative to other offending of this type, I take into account the nature of the false or misleading statements in the offer documents, the period in which those documents were in the market, the amount invested in reliance on those statements and the portion of it that is lost to investors. In focusing on any individual contribution you made to the
circumstances of the offending, I have regard to your respective positions on the board and what your individual presence might reasonably add for existing and potential investors in terms of the level of assurance that investors would have about the accuracy of statements in the offer documents, and whether you were held out in the offer documents as having particular expertise that might add to the quality of the assurances the offer documents conveyed. It is also relevant to assess whether you made any individual contributions to the preparation of the statements that turned out to be untrue.
[7] Now, dealing with each of these points, the summary of facts identifies three categories of untrue statements in the Dominion Finance offer documents. First, that there were a number of large related party transactions involving advances of some
$25 million that were not disclosed. Secondly, that the offer documents failed to disclose breaches of internal lending standards. Those standards were intended to require on-going assessments of the adequacy of security for loans, keeping appropriate loan to value ratios under review, and that the company had current valuations of the securities taken for the loans. Failures to adhere to such standards were likely to contribute to a more risky business than if the lending standards were uniformly adhered to. Thirdly, (but in respects that may have somewhat overlapped from the investors’ perspective with the second failure), there had been a material deterioration in the quality of Dominion Finance’s overall loans, its financial position, its solvency and its liquidity. Although the offer documents referred to such risks that could adversely impact on the company, they omitted to disclose the level of loan impairment.
[8] In North South’s case, there were similar non-disclosures of related party transactions and a failure to disclose a material deterioration in its overall financial position.
[9] The last communication to the market, being a letter to investors of both Dominion Finance and North South issued on 23 May 2008, included a number of untrue statements, particularly in relation to the rate of re-investment by investors, and the relative health of the company’s liquidity when major shareholders had had
to provide a $300,000 temporary injection to enable Dominion Finance to meet its obligations just a fortnight before the letter was issued.
[10] As to the relative importance of these untrue statements, undisclosed related party transactions are of fundamental importance in misleading the market. Investors are likely to be more wary about a finance company lending other than on fully arm’s length terms than they are about just about any other component of its lending arrangements. If any significant lending is to related parties, the objectivity of the lender’s assessment of the risks assumed is likely to be compromised, and potential returns to investors may also be compromised by the prospect of terms more favourable for the borrower than arm’s length ones. The sad history of finance company failures in the 2007 to 2009 period shows that significant related party advances that were not fully recoverable have featured prominently in many of those failures.
[11] Here, the offer documents giving rise to the charges were in the market from September 2007, and extended through to the time when the companies ceased taking deposits on 17 June 2008. That period of nine months also contributes to the offending necessarily being seen as relatively serious.
[12] In terms of the scale of reliance on the offer documents, Dominion Finance had some 5,900 investors, with investments of nearly $177 million when it passed into receivership in September 2008. North South had 6,925 investors, with investments totalling $31 million on the date of receivership.
[13] The receiverships and liquidations of the companies have not been concluded. Returns to investors from the Dominion Finance receivership are some
12 cents in the dollar, and for North South some 65 cents in the dollar. Although there is some prospect for further recoveries, I have done calculations on the basis of recoveries to date. On the numbers given for gross investments less recoveries, that amounts to some $166 million.
[14] The extent of loss when the companies were put into receivership is not necessarily an accurate measure of the extent of monies lost in reliance on the offer
documents that contained untrue statements. It may be that a component of those amounts was neither invested, nor re-invested, in the companies during the period in which investors would be relying on the relevant offer documents.
[15] On the numbers projected at the time of sentencing indications, it appeared that new investments and re-investments for both companies over the nine months the offer documents were in the market totalled approximately $58.3 million. Since then, the Crown has checked further with the receivers and has been advised that those numbers include some new investments that were also re-invested within the same nine month period, so that the $58 million amount included an element of double counting in one sense. Removing that reduces the extent of investments in reliance on the offending offer documents to some $30.2 million, and deducting from the components of that number 12 per cent for recoveries to investors in Dominion Finance, and 65 per cent for investors in North South, leaves a net present loss in respect of investments made whilst the offending offer documents were in the market of some $21.37 million.
[16] I cannot make a direct comparison with the extent of losses caused by untrue statements in offer documents for some other finance company failures because I do not have the extent of recoveries to debenture holders in other cases. I note that in the case of Bridgecorp, there was a total loss to investors of some $487 million, of which it appears approximately $118 million related to investments made during the period to which the indictments in that case related. With Nathans Finance, the gross losses were just short of $69 million at the time when most of the directors were liable, and the smaller amount of $26 million for the shorter period in which Mr Hotchin was a director of that company. In the case of Lombard, the loss was some $10.45 million and Five Star Consumer Finance, some $23.7 million. So, on a comparison in terms of the amounts involved, the offending in relation to the offer documents for these companies puts it in the middle of the range of relative seriousness.
[17] In terms of your respective positions on the board, Mrs Butler, I infer that the impression potential investors were likely to have had is that you had a very long- standing link with the companies, having been the chief financial officer for some
years, and of course being the wife of the late Mr Butler, who I perceive was reasonably treated as the original driving force of the companies. It is fair to treat your inclusion on the board as having less cache in promoting these finance companies to potential investors, than would be the case for non-executive directors who were added to boards for their good standing and existing reputation in other areas.
[18] Mr Whale, in your case the Dominion Finance prospectus specified that you have degrees in commerce, tax and law. You were described as having been a partner in several national-based law firms since 1972 and that you specialised in commercial law and taxation. That prospectus also stipulated that you are a notary public, an office bestowed by the Archbishop of Canterbury on a select few trusted with the expertise and integrity to witness documents, take declarations and note protests for recognition internationally. Notwithstanding those qualifications and experience, you claim not to have understood the constraint imposed under the trust deed on related party lending, and not to have personally assessed the truth of statements made in the offer documents for which you were responsible.
[19] From the perspective of potential investors assessing the offer documents, it would be entirely unexpected, and testing credibility, for a senior commercial lawyer with commerce and tax degrees to claim such a fundamental gap in the relevant knowledge required to discharge your duties as a director of a finance company. You were the only lawyer on the board. Investors were entitled to treat you as being on the board because you would have the expertise to understand the requirements under the Securities Act when raising money from the public. The effect of your stance at your trial before Lang J on the charges brought by the Serious Fraud Office (SFO) was that, whilst you were expert in documenting the process of lending the money out, you had no expertise in the documentation required for getting the money in. Lawyers might just understand that distinction, but it is one that would make absolutely no sense to potential investors assessing the qualifications of the directors responsible for the offer documents.
[20] As to the personal contribution you each made to the untrue statements, neither of you were initiators of the content of the offer documents. Rather, your
clear statutory responsibilities were to check the accuracy of what others had prepared. For both of you, there is no issue of deliberate dishonesty and, on the continuum that has been used in a number of these sentencings, your omissions are clearly at the point of “gross negligence”.[1]
[1] R v Moses HC Auckland CRI-2009-004-01388, 2 September 2011 at [15].
[21] Mrs Butler, you were absent from New Zealand for parts of May and June
2008, so were not able to exercise “hands on” oversight, even as a non-executive director at that time. As Mr Mullins submitted, it seems most likely that the extent to which the statements in the offer documents were untrue increased through the early and mid period of 2008, as the companies’ financial positions deteriorated. You remained unaware of four out of five of the related party transactions until after Dominion Finance had ceased accepting deposits, and I accept that a high level of vigilance would have been required for you to have ascertained the true nature of all of those transactions. Mr Mullins has argued that your level of culpability has to take into account that you acted honestly at all times, that you had no day-to-day involvement in the management of the companies, that the pattern was for you to rely substantially on senior executives and advisers and that you did not have access to information beyond that available to the board.
[22] These features go some way to reducing your level of culpability, but they are not an answer. Each director putting their name to an offer document adds to the level of assurance and comfort that potential investors will take, implicitly in reliance on directors being conscientious, being in control of the extent of information they require from management (rather than passively accepting the information management chooses to give to them), and are presumed to be there because they have the expertise to ensure the accuracy of statements made by the company to the market.
[23] Mr Whale, you had far closer relevant involvement with matters bearing on the untrue statements in the offer documents. You documented virtually all aspects of the related party transactions and accordingly had intimate knowledge of them and all the circumstances in which they were undertaken. An aspect of your defence
to Crimes Act charges on this matter is that you were unaware of the obligation
under the trust deed to report such transactions to the trustee for debenture holders, and were similarly unaware that potential investors would be misled by omitting reference to the related party transactions in the offer documents Although the relevant failings by both of you puts your conduct in the sphere of gross negligence, yours has to be categorised as materially more serious, Mr Whale, than Mrs Butler because of that close involvement.
[24] In terms of starting points for your offending of this type, the Crown has submitted starting points of three years and two months’ imprisonment for Mrs Butler, and from three years two months to three years six months for Mr Whale. In doing so, the Crown suggests comparability with the starting points adopted in the Bridgecorp case for Messrs Davidson, Urwin and Steigrad, Messrs Ryan and Sutherland from Capital & Merchant, Mr Bowden from Five Star Consumer Finance, and Messrs Moses, Doolan and Young from Nathans.
[25] On your behalves, both counsel suggested a notional starting point of two and a half years’ imprisonment.
[26] For reasons I traversed when giving each of you the sentencing indications I provided, I set the starting points for Mrs Butler at two years and nine months’ imprisonment and for Mr Whale at three years and two months’ imprisonment. I remain satisfied that those starting points place the offending you are each responsible for at the right point in the range of starting points that have been adopted by this Court and by the Court of Appeal for what is now, sadly, a relatively long list of finance company directors’ convictions.
[27] From this point in my sentencing process, I have to assess relevant circumstances personal to each of you.
[28] Mrs Butler, having ceased a day-to-day role in the companies in 2005, you were a non-executive director. My impression is you felt comfortable in the company of other directors who were perceived as competent professionals and were independent of the management of the company. You therefore relied on others and trusted management. That is an explanation, but it is not an excuse. Directors’
duties, and in particular the critical responsibility in ensuring the accuracy of any offer documents you put into the market, is non-delegable.
[29] I consider these elements of your contribution to the offending in the personal sense bring down the appropriate starting point by a modest margin. In short, you were not, and would not reasonably be perceived by potential investors to be, the leading light or most authoritative or influential of the board, and your conduct reflected that.
[30] Mr Mullins has urged me to give you credit for your previous good character. The debate you heard at the sentencing indication hearing on that is exemplified by the Crown’s concern, first, that you should not get credit for good character if it is that same good character that has helped the company raise funds. Secondly, that in any event in offending of this type, good character does not deserve a significant margin of credit.
[31] I am mindful of the observations that Heath J when he was sentencing Mr Young in the Nathans case and I think that approach applies here.[2] Certainly, in the wider sentencing context, I can discount the prospects of there ever being any further re-offending.
[32] So having reflected on it, I would be inclined to allow an initial discount of
15 per cent for the personal circumstances in which the offending occurred, and for your previous good character, where you did not trade on it in promoting investments in the companies.
[2] R v Moses at [54].
[33] Then, turning to your reaction to the offending and the impact of a sentence on you, Mr Mullins submits that the undoubted trauma of caring for your husband through debilitating cancer treatment, and the loss caused by his recent death, would justify a compassionate approach that reduced the appropriate sentence by a significant margin. I accept that a significant reduction becomes appropriate because the full rigour of the sentence that might otherwise be appropriate, for a woman of
64 in your circumstances of recent loss would be disproportionately severe.
[34] The next consideration individual to you is the offer to procure reparation of
$300,000. Mr Mullins submitted that the trust of which you are a discretionary beneficiary that would provide the amount would need to borrow to fund it, in which case this represents a commitment from those supporting you to provide a financial contribution that adds marginally to the recovery for investors harmed by the offending, and would represent a significant acknowledgement of the investors’ loss. Now, this involves a fine line in sentencing. You cannot pay your way out of what is otherwise the appropriate sentence, but in circumstances such as the present where the harm is essentially financial, an offer to procure a $300,000 reparation payment is meaningful as a sign of remorse, and acceptance of a measure of personal adverse consequences in depriving yourself of that amount in favour of the investors who have lost money.
[35] At the time of the sentencing indication, the Crown provisionally recognised such an offer as reflecting remorse. However, since then the Crown has analysed the financial statements for the trust of which you are a discretionary beneficiary, and apparently also other family trusts that had been settled by you and your late husband, leading Mr Dickey to make the submission that the offer of $300,000 is miserly, and not entitling you to the discount on account of remorse that I had proposed of 15 per cent.
[36] Mr Mullins’ rejoinder points out that the extent of assets you and your late husband settled on family trusts – put by the Crown at something more than
$10.5 million – is in the past and cannot be relied on as a reflection of your current financial capacity. Further, that the level of advance the trustees of the relevant family trust are prepared to make to assist in addressing the consequences of your offending is a matter of their independent judgement, in circumstances where you are but one of a number of discretionary beneficiaries and the trustees owe duties of even-handedness to all. Mr Mullins submitted that it remains a significant contribution that involves the trust providing the funds by borrowing them because its assets are substantially illiquid.
[37] I have reflected carefully on the Crown concern at giving credit where it does not impose significant financial sacrifice on you. Mr Mullins has frankly
acknowledged that that is the position in his further submissions this morning. In other contexts, that objection would carry more weight than I consider it should here, where your financial position was, as I understand it, structured before the implications of any offending arose, and you are in the hands of independent trustees with responsibilities to others. In the context of your situation, I remain satisfied that, as a reflection of, and contribution to, remorse, it justifies a second discount of
15 per cent.
[38] So, from a starting point for the offending of two years and nine months or
33 months’ imprisonment, the personal circumstances that affect your contribution to the offending, your good character and your present circumstances, which mitigate against the seriousness, would justify a combined reduction of 30 per cent. That would bring the sentence down to some 23 months’ imprisonment.
[39] The next consideration is the appropriate discount for your guilty pleas. Generally, the prospect of a guilty plea so close to trial, as is the case here, would prevent your getting anywhere near the maximum discount of 25 per cent. I accept Mr Mullins’ arguments that there are reasons why this point could not be reached earlier, both personal to you and in terms of the preparation of the case for trial. I also have regard to the strength of the case, and on an initial appraisal of the case against you it appears to be a relatively strong one. The Crown accepts there are reasons why the prospects for pleading guilty were not tested earlier, and would not oppose a discount of 20 per cent.
[40] I agree, and apply an additional discount of 20 per cent on account of the guilty pleas. That would reduce the term of imprisonment to about 18 and a half months.
[41] The next issue is whether a short prison sentence of that length should appropriately be substituted with a term of home detention, and I am satisfied that it would. Mr Mullins argued that home detention is itself likely to be unduly harsh for you because you attend on your very elderly mother who is in a retirement home, and I understand you have been visiting her up to three times a week. In other respects, Mr Mullins suggests that the trauma of the loss of your husband, plus all
the other recent events, would make the disciplines of a home detention sentence much tougher for you to bear than sentenced persons without those additional issues to deal with.
[42] Your home has been assessed as suitable for electronic monitoring. The submissions for the Crown acknowledged that, if the appropriate sentence settled on was two years’ imprisonment or less, substitution of home detention would not be inappropriate.
[43] My sentencing indication was that I would set the appropriate sentence at
18 months’ imprisonment, and would substitute for that a sentence of nine months’
home detention, subject to your commitment to pay reparation of $300,000.
[44] Since giving that indication, the Court of Appeal has upheld a Crown appeal against the level of sentences I imposed on the Lombard directors.[3] My approach to their sentencing was found to have erred in giving inadequate weight to a requirement for consistency with other sentences, and for deterrence and denunciation of conduct such as yours involving gross negligence as a director of a company that issued untrue offer documents to the public.
[3] Jeffries v R [2013] NZCA 188.
[45] Mr Mullins has argued that an adjustment to have regard to the Court of Appeal’s observations is unnecessary, but I am satisfied that it is necessary. Mr Mullins’ fall-back position was that, if I did get to this point, his instructions were that you would not oppose serving a sentence of community work as an additional component. Once an additional component in your sentence became a prospect in light of the Court of Appeal decision, you were afforded an opportunity to reconsider your pleas and you have elected to maintain them. For the sake of consistency and to reinforce the deterrent effect of the balance of your sentence, I will be adding a requirement that you undertake 80 hours’ community work.
[46] Now sentences of community work have become a common feature of sentences of company directors convicted under s 58, where prison sentences have
not been imposed. Such components of the sentences are appropriate because in the
wider sense your offending has caused harm to the whole community. In addition to the direct loss to the investors relying on the documents, misstatements in finance company prospectuses have caused a wider harm in severely denting the confidence of the community at large, in pursuing savings and investment initiatives. The cost of that harm to investor confidence is incalculable, but it makes it appropriate for such offenders to make a meaningful gesture in giving back to the community by some personal effort.
[47] Mrs Butler, I accordingly sentence you on each of the seven convictions to a concurrent term of home detention for nine months. Consistently with the report from the Department of Corrections, the conditions of that sentence are that you are to travel directly from the Court to 9 Darwin Lane, Remuera, and wait there until your home detention connection is facilitated by the Probation Officer. A further condition is that you are to reside at 9 Darwin Lane for the duration of this home detention sentence and are not to leave that address without the prior written approval of a Probation Officer.
[48] In respect of that second condition, I acknowledge the compassionate grounds for a partial exemption allowing you to leave your home for periods of up to two hours, two or three times a week, for the strictly limited purpose of visiting your mother in her retirement home. I cannot make that a condition of your sentence, but would encourage the Probation Officer supervising your sentence to consent to narrowly defined absences of that type, on terms that can be effectively managed without significant additional work for those monitoring your sentence.
[49] In other respects, you are sentenced to a term of 80 hours’ community work and you are required to make a payment of $300,000 in reparation. You are to report, within 72 hours, to the Community Probation Centre at 17-25 Boston Road, Mt Eden, in relation to arrangements for serving the sentence of community work.
[50] You may stand down.
[51] Mr Whale, reverting to consideration of your position from the starting point
identified of three years and two months’ imprisonment.
[52] You are of previous good character and the numerous testimonials supporting your plea in mitigation attest to your being a valuable member of the legal community and the wider Auckland community. You have also expressed remorse, which I accept is genuine. However, as canvassed at the sentencing indication hearing, I am troubled by an instance of apparent dishonesty. After both companies had withdrawn the offer documents but when the companies’ auditors were still completing their audits, you were asked directly whether the WAFD transaction, one of the significant related party transactions, involved any other related party elements beyond your status as a director of both companies. The enquiry of you was whether a related party enjoyed beneficial ownership of WAFD. Your
29 August 2008 response to an audit inquiry, to the effect that there were no additional related party disclosures required, was flat out wrong, and you knew it to be. You have not faced any charge in relation to it and it is outside the period to which the present convictions relate. At the sentence indication hearing, Mr Davison QC urged that it was a case of misleading that stands on its own and that I could, in effect, disregard it in assessing you as a sentencing prospect.
[53] In the end, when weighed against what appears otherwise to have been a life including substantial worthwhile service, it does not deprive you of credit for good character, but I am bound to consider that it does shave the extent of that credit available.
[54] I have also reflected on the view that credit for good character should not be available in your case where the issuers of the relevant offer documents have traded on that good reputation in attracting investments. That is the approach that some judges have taken in sentencing directors on such convictions. I do not see that a credit should be denied you on that account in the circumstances of your participation as a director of these companies.
[55] Your offer of reparation to pay $75,000 appears certainly underwhelming, and uninformed investors assessing that offer as a contribution to the millions in losses they have all suffered are likely to dismiss it as derisory. In an affidavit you have completed as to your assets and liabilities, you have justified it as a material demonstration of your remorse and regret, given that you have no resources of your
own and are dependent on a family trust borrowing the money to enable you to make a payment at that level. Crown counsel treats the amount as too modest and suggests an expectation that more could be expected because of assets in those trusts. On the similar approach to that I have taken in relation to Mrs Butler, I do not feel able to rely on that expectation. It follows that the $75,000 reparation offered is at a level that represents what I treat as a meaningful commitment relative to the resources that you can call upon.
[56] I am minded to give you a discount of 20 per cent on account of good character, remorse and the demonstration of remorse and regret that is represented by the offer to pay $75,000 in reparation. The Crown argues that a toting up of credit under these heads should not afford you more than 10 to 15 per cent discount and that, when added to the likely level of a subsequent discount for guilty pleas, the discounts should not go in total beyond 30 to 35 per cent when larger discounts are to be reserved, on the Crown view, for those who positively co-operate with the authorities in the course of prosecuting co-offenders.
[57] I have reflected on that and I am satisfied that a 20 per cent discount does not exceed what is appropriate in your case, notwithstanding the absence of any commitment to assist the prosecution of co-offenders.
[58] Now, the second component of the discount is for your guilty plea. Chronologically, that has been offered very near to trial but the Crown did not dispute Mr Davison’s explanation that guilty pleas were potentially available shortly after you were interviewed in relation to the charges in 2011, but could not be committed to whilst the SFO charges were outstanding. I therefore treat the guilty pleas as notionally being made at a relatively early stage.
[59] On the other side, my view is that the case against you on the Securities Act charges is a very strong one. The stance adopted and, as I see it, accepted in your evidence on the SFO charges, leaves you little room to avoid liability on the basis of gross negligence in failing to prevent untrue statements in the offer documents. I consider that the strength of the Crown case prevents you getting the maximum discount available and the appropriate level would be 20 per cent.
[60] The correct approach is to apply these discounts sequentially in two
20 per cent calculations, rather than one at 40 per cent. Accordingly, from a starting point of three years and two months or 38 months, the first 20 per cent deduction would get to a little more than 30 months, and a second deduction of 20 per cent would get to just over 24 months or two years. Now that is the threshold at which the Sentencing Act 2002 enables me to consider substituting a sentence of home detention. In arriving at that point, I have settled on the discounts I consider appropriate, without in any way engineering the numbers that would be sufficient to get it down to that threshold.
[61] In addition, when I go on and assess whether home detention is appropriate, I cannot have regard to the relative severity of the sentence it would represent if combined with another component, logically a period of community work, which has been an additional feature of many of the sentencings of company directors convicted under s 58 and which has been raised both by the Crown and by Mr Davison.
[62] I have to have regard to all of the principles and purposes in ss 7 and 8 of the Sentencing Act. I have reflected on whether a sentence of, say, 12 months’ home detention is adequate to denounce the criminal conduct involved in the gross negligence that contributed to the untrue statements in these offer documents. Is it enough to deter others, and does it adequately reflect the harm done to the victims of that offending, namely the thousands of investors who have lost some, and in many cases all, of their life’s savings?
[63] In considering home detention as a substitute for two years’ imprisonment, on the one hand I am mindful that the outcomes of longer terms of home detention from, say, nine to 12 months, suggest that for many offenders, home detention sentences become exponentially more difficult to serve, the longer they continue. Confinement to a single address for nine to 12 months is oppressive and it is inarguably a punishment in the real sense.
[64] On the other hand, I anticipate that the punishment inflicted on you in being confined to your existing comfortable home would be unlikely to impose the level of
constraints that bear down, say, on a young offender confined to a modest flat that is shared with numerous other members of a large family.
[65] I have reflected carefully and consider that home detention is adequate and therefore becomes the appropriate sentence because it is the least restrictive that will effect the purposes I have to apply.
[66] Reverting to the comparators of those who took the advantage of discounts for guilty pleas, I put you on the same side of the line as Mr Davidson from Bridgecorp, rather than on the Urwin side of the line from the directors in that case, in terms of the matters needing to be addressed in choosing the appropriate sentence.
[67] An additional component of your sentence will also be a period of community work. That is a not insignificant measure of doing something for the community when you have caused substantial harm to the community, and I will impose a period of 250 hours’ community work.
[68] As I have noted in exchanges with Mr Davison, the Court of Appeal decision on my sentences in the Lombard Finance directors’ case has been announced since I gave you a sentencing indication. I have reconsidered all the steps in my reasoning in light of that judgment, and am satisfied that in your case it does not require me to change the sentence to be imposed.
[69] Mr Whale, I accordingly sentence you to 12 months’ home detention, together with 250 hours’ community work and order you to pay reparation in the amount of $75,000.
[70] The conditions of this sentence are that you are to travel directly to
20 Inverary Avenue, Epsom, and await the arrival of the Probation Officer and the security officer. You are to reside at that address and are not to leave it without the prior authorisation of your Probation Officer. In relation to the sentence of community work, you are to arrange with the Probation Officer to attend at the Community Probation Centre at 17-25 Boston Road, Mt Eden, Auckland within
72 hours of this sentencing.
[71] You may stand down.
Dobson J
Solicitors:
Crown Solicitor, Auckland