R v Douglas - [2013] NZHC 1600

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2009-004-028345 [2013] NZHC 1600

THE QUEEN

v

WAYNE LESLIE DOUGLAS AND
NEAL MEDHURST NICHOLLS

Charges:

Plea:

Mr Douglas:

Distributed advertisements which included untrue statement x1; Signed a registered prospectus that was distributed and included an untrue statement x 1

Mr Nicholls:

Distributed advertisements which included untrue statement x1; Signed a registered prospectus that was distributed and included an untrue statement x 2

Guilty

Appearances: N R W Davidson QC, N R Williams and K Chang for Crown
B D Gray QC and R J Sussock for Prisoners

Sentenced: 28 June 2013

SENTENCING NOTES OF VENNING J

Solicitors: Crown Solicitor, Auckland
Wilson Harle, Auckland

Copy to: N R W Davidson QC, Auckland
B D Gray QC, Auckland

R v DOUGLAS & NICHOLLS [2013] NZHC 1600 [28 June 2013]

[1] Wayne Leslie Douglas and Neil Medhurst Nicholls, you are for sentence having pleaded guilty to charges under the Securities Act 1978. In your case Mr Douglas you have pleaded guilty to one charge under s 58(1) and one under s 58(3). Mr Nicholls you have pleaded guilty to one representative charge under s 58(1) and two charges under s 58(3). The maximum penalty for the offending in each case is five years’ imprisonment.

[2] The charges to which you have pleaded guilty to arise out of your involvement as directors of Capital + Merchant Finance Ltd (CMF).

[3] You are currently serving prisoners. You were sentenced by this Court to serve seven and a half years’ imprisonment for offences under the Crimes Act following an investigation into the failure of CMF.

[4] CMF was a finance company. It funded its financing of property developments by inviting investments from and issuing debenture stock to members of the public under registered prospectuses and investment statements.

[5] Together with Messrs Ryan, Sutherland and Tallentire you were both directors of CMF at various material time periods. Relevantly for present purposes, Mr Douglas, you resigned as a director in February 2007.

[6] The s 58(3) offending relates to two prospectuses CMF issued. The first prospectus was on issue between 20 December 2006 and 9 September 2007. The second was on issue between 10 September 2007 and 23 November 2007. Both contained false and untrue statements. In addition while you were both directors CMF issued advertisements which included untrue statements. Those untrue statements and the advertisements support the s 58(1) charges. In your case Mr Douglas I accept that you are not responsible for statements in the prospectus that became untrue after February 2007. However, I accept Mr Davidson’s submission for the Crown that to the extent the prospectus contained untrue statements as at February 2007 the effect of that carried on.

[7] CMF was placed into receivership on 23 November 2007. As at the date of receivership it owed approximately 7,000 secured debenture holder investors approximately $167 million. Between 20 December 2006 and until your resignation on 15 February 2007, Mr Douglas, the total amount invested and re-invested…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading R v Douglas

Details

AGLC: R v Douglas [2013] NZHC 1600
Case: [2013] NZHC 1600
Decision Date: 28 June 2013

CaseChat Overview and Summary

Wayne Leslie Douglas and Neil Medhurst Nicholls, directors of Capital + Merchant Finance Ltd (CMF), pleaded guilty to charges under the Securities Act 1978. They were charged with distributing advertisements and signed registered prospectuses that contained untrue statements, leading to significant losses for investors. The court had to determine the appropriate sentences, considering the impact of the offending on the victims, the gravity of the offending, and the principles of sentencing. The court found that the offending had a severe impact on the investors, who were highly dependent on truthful disclosures in offer documents. The court rejected the defence argument for concurrent sentences, emphasising the need for denunciation and deterrence. It was determined that cumulative sentences were required, but the totality principle also had to be considered. The court concluded that an uplift in the existing sentences was necessary, imposing 12 months for Nicholls and eight months for Douglas, to be served cumulatively on their current sentences.

Orders