R v Findlay

[2007] NZCA 553

IN THE COURT OF APPEAL OF NEW ZEALAND

CA393/07
CA394/07
[2007] NZCA 553

THE QUEEN

v

JAMES THOMAS FINDLAY

Hearing:21 November 2007

Court:Hammond, John Hansen and Miller JJ

Counsel:B J Horsley for Crown

G C Gotlieb for Respondent

Judgment:3 December 2007 at 10 am

JUDGMENT OF THE COURT

A        The appeal against the convictions is dismissed.

B        The Solicitor-General’s application for leave to appeal against the sentence is granted. 

CThe appeal against sentence is allowed.  The sentence of 12 months imprisonment, with leave to apply for home detention, is set aside.  We substitute instead a sentence of 18 months imprisonment, concurrent, on all counts, with leave to apply for home detention.

REASONS OF THE COURT

(Given by Hammond J)

Introduction

[1]       Mr Findlay was charged with 15 counts of fraudulently or dishonestly using a document, contrary to the now repealed s 229A of the Crimes Act 1961, and one count of dishonestly taking or using a document, contrary to s 228 of the Crimes Act.  Both offences carry a maximum penalty of seven years imprisonment.

[2]       He elected trial by judge alone and was tried by Judge Spear in the District Court at Hamilton over the course of a little over two weeks.  The Judge delivered a fully reasoned decision on 11 May 2007, finding Mr Findlay guilty on seven of the fifteen counts (DC HAM CRI 2006-019-138).

[3]       On 10 July 2007, Judge Spear sentenced Mr Findlay to 12 months imprisonment, with leave to apply for home detention (DC HAM CRI 2006-419-138). 

[4]       We have before us two appeals.  Mr Findlay appeals against his convictions.  The Solicitor-General has lodged an application for leave to appeal on the basis that the sentence of 12 months imprisonment was manifestly inadequate.

Background

[5]       Mr Findlay was a registered valuer operating a private practice in Hamilton through his firm, Findlay and Co. 

[6]       He came into association with one Miles McKelvy.  Mr McKelvy was the ringleader of a group of persons engaged in a fraudulent practice characterised as a “property price hydraulic scheme”.  This group has subsequently been investigated and prosecuted by the Crown in an operation known as Operation Allsorts. 

[7]       The nature of the scheme was described by Wilson J for this Court in Mr McKelvy’s sentence appeal, R v McKelvy [2007] NZCA 340 at [5]:

In a price hydraulic fraud, the offenders would identify property that was either for sale or due to be sold by public mortgagee sale. The parties would obtain the property under contract, generally by way of an open market transaction.  However, they would not be in a position to fund the original agreement for sale and purchase, so would enter into an agreement for a contemporaneous on-sale. The onsale agreement would be drawn up between the perpetrator and a related party at an inflated price, often supported by a valuation obtained from another associate (a compliant registered valuer). The perpetrators would then apply to a lending institution to borrow up to 80 percent of the inflated purchase price, on the strength of the contemporaneous sale and purchase agreement and fraudulent valuation. The lending institution would thus unwittingly finance the entire open market transaction.  The effect of this strategy is described in the summary of facts as follows (at page 5):

[L]ending institutions were induced to provide finance on the basis of a series of misrepresentations as to the purchase price and market value of the property being used as security. In these circumstances the purchasers were able to obtain property without providing equity and the lending institution were left with a security of lesser value than that relied on by them in deciding to advance loan funds.

[8]       Relying on a rising property market, if all goes to plan the perpetrator of the fraud would sell the property at a greater value than what it was purchased for, meaning the entire loan from a financial institute could be repaid with some to spare (ie a profit for the fraudster).  Of course, if the property did not appreciate in value, then the financial institute could lose money.

[9]       Mr Findlay would prepare fraudulent valuations of properties for Mr McKelvy and his associates, for the purposes of assessing the security value of property.  An inflated value would be ascribed to the properties through valuation reports, knowing that financial institutes would rely upon these.  Mr Findlay would either provide the false statements to Mr McKelvey and his associates, or directly to the financial institute.

[10]     We now briefly summarise the offending on the relevant counts.

[11]     Count 1 concerned 15A Lasenby Street, Rotorua.  Mr Findlay provided a company associated with Mr McKelvy with a valuation report assessing the value of 15A Lasenby Street at $74,000 and the fair sale value at $76,000.  In contrast, in 2001 the property had been valued by a different registered valuer as having a current value of $30,000 and an expected sale yield of between $22,000 – $24,000.  Mr Findlay had described the property as a three-bedroom dwelling, when in fact it only had two bedrooms, and he had used what the Judge described as “demonstrably inappropriate comparable sales” to reach the figure (judgment at [44]).  At trial, it was apparent that, in contrast to the contemporary assessments of other valuers, Mr Findlay’s assessment was inflated by around 55 percent.

[12]     Mr McKelvy, having purchased this property, then sold it to a Mr Tane.  Using Mr Findlay’s valuation, Mr McKelvy applied for loan finance for himself and Mr Tane.  Although Mr Tane understood that he was purchasing the property for $52,000 plus fees and insurance, the sale and purchase agreement was expressed to be for $76,000.  Mr McKelvy applied for $59,200 in finance on behalf of Mr Tane.

[13]     Count 1 is typical of what occurred.  In essence, Mr Findlay’s valuation reports were used to obtain finance in excess of the purchaser’s needs, to the advantage of Mr McKelvy.  Sometimes Mr Findlay would increase his valuation figures for the properties by reference to supposed “improvements” that had occurred.  In each instance where Mr Findlay was found guilty, these improvements were fictional.  What follows is a description of the disparities between Mr Findlay’s valuation and the actual value of the property, on the other counts where he was found guilty.

[14]     On count 2, bridging finance of $59,000 was obtained using a report valuing a property at Farnworth Avenue, Rotorua at $87,000.  The property was in fact worth about $75,000, a figure that Mr Findlay had reached only a month earlier.  The increase in value was said to be because of improvements and upgrades that never occurred.

[15]     On count 3, Mr Findlay valued a property at Clayton Road, Rotorua at $87,000 exclusive of chattels.  In contrast, evidence was adduced that the property was valued at around $65,000 and would obtain a mortgage advance of up to $45,000.  A loan for $69,000 was obtained.

[16]     On count 7, a property at Herbert Street, Kihikihi was valued by Mr Findlay at $121,000 with a fair sale value at $123,000.  The valuation was provided to a finance company to obtain bridging finance.  The property’s value at the time was closer to $95,000.  Mr Findlay had given an earlier valuation of the property at $101,000.  Again the increase was attributed to fictional improvements.

[17]     On count 8, Mr Findlay provided two valuations of a property at Turner Drive, Rotorua.  His first valuation ($91,000) was seen by the Judge to be excessive.  His second valuation ($106,000) was in contrast to the evidence of other valuers, which placed the property at between $50,000 and $66,000.  This particular transaction gave rise to count nine also, when Mr Findlay again applied the figure of $106,000 to an application made to ANZ Bank, a year later.

[18]     On count 12, Mr Findlay raised the valuation of a property at York Street, Rotorua from $89,500 to $118,000.  He did so on the basis of “improvements” undertaken.  At trial it was clear that no improvements had ever been made to the property.

[19]     To summarise, the lending institutes which were the victims of this fraud were led to believe that they were lending up to 75 – 80 percent of the real value of these properties, when in fact they were lending well in excess of 100 percent of the real value.

The appeal against conviction

[20]     The Notice of Appeal raised the following points:

(1)The learned judge misdirected himself on the law relating to parties to a crime.

(2)In assessing [Mr Findlay’s] credibility the learned judge placed undue emphasis on [Mr Findlay’s] business relationship with Myles McKelvy, a convicted fraudster, and in the process misinterpreted certain relevant evidence thus deducing a motive on [Mr Findlay’s] part to deliberately continue to offend.

(3)The learned judge refused to take into legal precedents, being the decisions of the Land Valuation Court (High Court decisions) showing very large variations in the valuations of different valuers.

(4)The learned judge failed to take into account evidence of all experts that property valuation is an entirely subjective exercise.  He also failed to take into account the fact that two of the Crown experts had used “forced sale” prices to assess current market value of properties concerned.

(5)The learned judge found [Mr Findlay] guilty on 7 counts and not guilty on 9 counts.  Had His Honour taken a consistent approach he would have found [Mr Findlay] not guilty on all charges.

[21]     There was a change of counsel and Mr Gotlieb, on behalf of Mr Findlay, in his submissions raised four arguments on the appeal against conviction, as follows:

·        Mr Findlay could only be found guilty, as per the Crown case, as a party to the offending of Mr McKelvy under s 66(1) of the Crimes Act.

·        The Judge was unduly influenced by his views of Mr McKelvy when assessing the credibility of Mr Findlay.

·        The Judge failed to take account of precedents illustrating the width of views available in the valuation process, and failed to give weight to the inherently subjective nature of valuing property (we have collapsed appeal grounds three and four into this form because they are interrelated).

·        The verdicts are inconsistent.

A party to the offence

[22]     Mr Gotlieb identified the following conclusions from the Judge’s reasoning:

(1)  McKelvy was the principal perpetrator of the fraud; (2) He [McKelvy] was the substantial beneficiary of the proceeds of the fraud; (3) The appellant knowingly assisted McKelvy in the commission of the fraudulent transactions; (4)  The appellant provided assistance by issuing false, overvalued property valuation reports; (5) These reports were used by McKelvy to obtain from the banks up to and exceeding 100% of the true value of the relevant properties; (6)  The banks, on the other hand, believed they were lending up to 75% - 80% of the value of those properties.

[23]     Mr Gotlieb submitted that the appellant should have faced criminal liability under s 66(1)(b) of the Crimes Act as an aider and abettor.  On this basis, Mr Gotlieb argued, it was necessary for the Crown to prove that Mr McKelvy had used the fraudulent documents and that the two (Messrs McKelvy and Findlay) shared the requisite mens rea.

[24]     The same argument was raised at trial, with trial counsel (Mr Koya) submitting that the Crown had failed to prove that Mr McKelvy had, as a principal, committed fraudulent activities.

[25]     The Judge rejected this argument.  The Crown relied on his reasons as clearly articulating the Crown case against the accused.  The Judge stated, with reference to the Crown’s opening of the case:

[4]       It is important to bear in mind that the case against the Accused does not depend on this Court finding that McKelvy (or his team) undertook some kind of fraudulent criminal activity in respect of the particular transaction or intended transaction that each of the counts relate to.  The Crown case is, however, essentially that the McKelvy [sic] was knowingly involved in a particular species of property/finance frauds generally described as a property price hydraulic.  …  Again, it is unnecessary, for the purposes of this case, to determine whether McKelvy actually undertook some kind of fraudulent activity in respect of a particular property or what type of fraudulent activity that might be. …

[5]       The Crown case against the Accused is focussed solely upon the valuation reports prepared and presented by the Accused and they accordingly stand for examination in their own right.  That notwithstanding, the evidence of the dealings by the Accused with McKelvy and his team in respect of each property can legitimately assist the consideration of whether the Accused had the necessary fraudulent intent.

[26]     Section 229A provided:

Everyone is liable to imprisonment for a term not exceeding 7 years who, with intent to defraud,­–

(a)Takes or obtains any document that is capable of being used to obtain any privilege, benefit, pecuniary advantage, or valuable consideration, or

(b)Uses or attempts to use any such document for the purpose of obtaining, for himself or for any other person, any privilege, benefit, pecuniary advantage, or valuable consideration.

[27]     Quite aside from the remuneration Mr Findlay received in the way of fees, his offending, in our view, related as it was to the Allsorts fraud, clearly falls under the terms of the section.

[28]     The appeal point is misconceived.  The Crown was perfectly entitled to charge Mr Findlay as a principal; it then stood or fell on that election.  As it transpired, it succeeded.

Assessing Mr Findlay’s credibility

[29]     Mr Gotlieb contended that the Judge adopted a “guilt by association” line of reasoning when assessing the credibility of Mr Findlay.  The example given was the Judge’s conclusions on counts four, five, and six, finding Mr Findlay not guilty.  At [88] of his judgment the Judge stated he was not satisfied that these transactions were “another fraudulent activity by McKelvy”.

[30] This is a make-weight point. The short answer is that credibility was a matter for the trial Judge. The Crown pointed to the completely rational basis for Judge Spear’s adverse findings against Mr Findlay. For example, at [31] the Judge states: “I found a number of his explanation[s] for difficulties the Crown identified with some of his valuation reports to be unconvincing and, in some cases, quite incredible.” (See also at [56], [58], [72], and [73].)

The nature of the valuation process

[31]     This is the crux of the conviction appeal.  Mr Gotlieb made three points with regards to the nature of the valuation process:

·        The Crown’s valuation witnesses were “ultra conservative” in their valuations.  Further, the valuers Jensen and Quirke also used mortgagee and other forced sale prices as points of comparison, resulting in considerably lower figures.

·        With reference to several land valuation cases from 1976 – 1979, Mr Gotlieb illustrated the potential for wide divergence that can arise in the valuations of different valuers.  The cases he listed presented a series of figures from different valuers, followed by the Court’s eventual determination, but the facts and circumstances of these cases are not mentioned.

·        The Judge should not have relied upon Crown witnesses because: (a) valuing property is inherently subjective; and (b) there was evidence to support some of Mr Findlay’s valuations.

[32]     There is nothing in the first point.  The valuations were before the Court and went into the pool of available evidence.  The Court was aware of the requisite information.

[33]     As to the second point, the decisions in these land valuation cases were of no assistance: they were (at best) illustrative of the rather obvious point that valuers routinely differ, and sometimes widely, in their views.

[34]     The third point was not at all well articulated.  It really came down to an assertion that because the figures differed – or at least did not differ enough – there was no room to convict Mr Findlay.

[35]     In relation to count 7, 103 Herbert Street, which was probably the strongest case from the appellant’s point of view, Mr Gotlieb pointed to the purchase price of the property in 1999, $123,000.  The appellant’s valuation was (in his final calculus) $121,000.  It is further said that there was a valuation prepared by a firm, MB Lascelles & Associates, dated 1 June 1999, that valued the property at $125,000.  This, Mr Gotlieb submitted, was overlooked by trial counsel.

[36]     Mr Gotlieb then rehearsed the different valuations given by Mr Findlay, Ms Quirke, and Mr Parker.  He submitted that Ms Quirke’s valuations are invariably too low and that, if disregarded, the comparison between Mr Parker’s valuations and those of Mr Findlay (generally a difference of around $20,000) are acceptable.

[37]     It must be noted, however, that the Judge did not solely base his conclusions on the comparative valuations.  Often, as was the case with the Herbert Street property, the Judge’s concern lay with the unexplained increase (to the tune of $20,000) in the valuation figure made by Mr Findlay in the space of one month. 

[38]     The Crown further argued that the Judge’s conclusions were also based on:

·        Inappropriate comparisons with houses purportedly of comparable value;

·        Deliberate misstating as to the description of the property: the number of bedrooms and repairs and maintenance work in particular.

·        The coinciding of the valuation reports with the nature of the sales and purchases conducted by Mr McKelvy.

[39]     All of these things were for the trier of fact, in this case the Judge.  He found that the margins in the particular cases were significant, in their particular contexts.  Not only was that view open to him, we have to say that we agree with his conclusions.

Inconsistent verdicts

[40]     Mr Gotlieb’s final submission is that the verdicts are inconsistent.  He argued that the work carried out by Mr Findlay in all instances was the same, such that he could not be found not guilty on some counts and guilty on others.

[41]     There is nothing in this ground.  The Judge clearly had to satisfy himself of Mr Findlay’s guilt on each count separately.  As the Crown argued, “if anything, the appellant was fortunate to receive the benefit of the doubt in cases where [the Judge] found that the appellant’s activities were highly suspicious but he could not be satisfied beyond doubt.”

The Solicitor-General’s appeal against sentence

Introduction

[42]     In sentencing Mr Findlay the Judge was clearly concerned with the message this offending (and subsequent sentencing) would send to the community.  He stated that it was difficult to quantify the financial loss incurred by the financial institutes, but there was a natural and substantial impact on the business confidence of the community (at [17]).  Similarly, the Judge emphasised that Mr Findlay, as a registered valuer, had engaged in a gross breach of community trust.

[43]     However, despite noting that Mr Findlay showed no real remorse, the Judge clearly considered Mr Findlay’s personal circumstances as indicating a lesser degree of culpability.  In commenting on Mr Findlay’s connection to Mr McKelvy, the Judge considered (at [15]), “[y]ou simply were not strong enough to withstand the force of his personality and resist acting in a way that you must have known was wrong.”  He labelled Mr Findlay, “an inherently weak man in an ethical sense” (at [19]).

[44]     Adopting a starting point of two years imprisonment, the Judge then reduced this by 12 months “to recognise [Mr Findlay’s] excellent and long-term involvement in the community and the high standing that you have justifiably obtained” (at [35]).

[45]     In seeking the leave of this Court to bring an appeal against Mr Findlay’s sentence, the Solicitor-General made three points:

·        The starting point adopted by the Judge of two years imprisonment was manifestly inadequate; the lowest possible starting point available was two years and six months imprisonment;

·        A 50 percent discount (12 months) on the basis of previous good character and community standing was excessive; a discount of six months would have been sufficient; and

·        The sentence imposed (12 months) raises issues of disparity between Mr Findlay and other offenders involved in other property fraud transactions, in particular R v Warburton HC HAM CRI 2006-419-135 30 January 2007 and R v Perry HC HAM CRI 2005-419-122 29 September 2005.

Starting points: No established benchmarks for fraud – a “culpability assessment”

[46]     By way of introduction to this section, it can be said that sentencing figures for fraud or “economic crimes” are generally low. 

[47]     The comments of Cooke P in R v Rose [1990] 2 NZLR 522 at 556 (CA) may be illustrative of the tensions in this area. For the Court, Cooke P noted that it may be beneficial to utilise the talents of these offenders in other ways:

The possibility of Parliamentary authorisation of more constructive forms of sentencing would seem to warrant consideration.  We appreciate that for minimum security prison inmates there are opportunities for work with some responsibility, and also various types of parole.  Still, these are not necessarily sufficient ways of achieving something positive by sentencing.

[48]     Similar sentiments have been expressed in the United Kingdom, with Lord Woolf CJ for the Court of Appeal stating in Mills [2002] 2 Cr App R (S) 52 at [15], “the ability of the prison service to achieve anything positive in the case of a short prison sentence is very limited”.  In both Mills and Kefford [2002] 2 Cr App R (S) 106, his Lordship stressed the importance of “imprisonment only when necessary and for no longer than necessary” (Kefford at [19]).  This view was expressed against the backdrop of concern over the ever-increasing prison population, and with a mind to avoiding prison sentences in favour of “an offender repay[ing] his debt to society by performing some useful task for the public [rather] than spending a short time in prison” (Kefford at [10]).  Indeed, Lord Woolf considered that “[p]articularly in the case of those who have no record of previous offending, the very fact of having to appear before a court can be a significant punishment” (Kefford at [10]).

[49]     This point (at least insofar as avoiding unnecessary prison terms) is reflected in s 16 of the New Zealand Sentencing Act 2002, which provides:

16       Sentence of imprisonment

(1)When considering the imposition of a sentence of imprisonment for any particular offence, the court must have regard to the desirability of keeping offenders in the community as far as that is practicable and consonant with the safety of the community.

And of course sentences of home detention are available if the minimum requirements are met.

[50] Mr Gotlieb also drew our attention to the Sentencing Amendment Act 2007. In particular, reference was made to the explanatory note to the first reading of the Criminal Justice Reform Bill (from which the Amendment Act was generated):

The purpose of the Bill is to introduce a range of measures to arrest the sharp increase in the prison population in recent years.  This increase is no longer sustainable, neither financially nor socially.

[51]     Turning now to the New Zealand case law surrounding sentences for fraudulent behaviour, this Court in R v Varjan CA97/03 20 June 2003 noted at [21] that there is no established benchmark for cases of this kind.  Understandably so, because the contours of fraud are limited only by the ingenuity of the fraudster.  Offending “must be assessed in light of the guidance to be found in previous decisions” (Varjan at [21]).  The court must undertake a “culpability assessment”, described at [22] of Varjan as follows:

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 the victims; the motivation for the offending; the amounts involved; the losses; the period over which the offending occurred; the seriousness of breaches of trust involved; and the impact on victims.

[52]     Varjan concerned a scheme similar to the present case, where the appellant, acting as a mortgage broker and officer of the financial institute, would obtain mortgages for clients at inflated values.  In total, financial institutions lost just over $546,000 while the appellant gained approximately $5,000.  The Court considered that “t]he authorities clearly indicate that in cases of major defalcations, misappropriations, schemes dishonestly to obtain money or property or where recidivism indicates the need to protect the community, imprisonment is appropriate” (at [25]).  In the end, and considering the appellant’s guilty plea and personal circumstances, the Court reduced the sentence from two years and eight months to two years.

[53]     In Mr Varjan’s case, the Court was concerned with differentiating his offending from the more substantial offending of his partner in the fraud, a Mr Bracken.  Mr Bracken had gained approximately $1.2 million from the offending and had engaged in further and separate offences.

[54]     The victim’s monetary loss and the offender’s monetary gain, as quantifiable figures, are consistently important in the “culpability assessment”.

[55]     In Cole v Police [2001] 2 NZLR 139 a Full Court of the High Court (Heron ACJ and Ellis J) stated at [12]:

The amount of money lost or dealt in is not determinative of the seriousness of the offence but there is obviously some connection when assessing the need for deterrence, especially when a breach of trust is involved or where the frauds take advantage of friends or others who place their trust in the offender.

[56]     In that case, the offender pleaded guilty to 43 charges of forgery, 29 of uttering a document, 18 of obtaining a document, 18 of using a document, and 30 of obtaining by false pretences.  She had engaged in insurance fraud following a fictional theft at her house.  When on bail for this offence, she had skipped the country to Australia, returning with a false identity.  She then proceeded to assume the identity of twelve children who had died in the 1950s and 1960s.  This allowed her to do such things as apply for loans, enrol in universities, obtain benefits, and obtain credit cards.  Her subsequent expenditure on an overseas trip amounted to $450,000.  The Full Court considered that a starting point of four to five years imprisonment was appropriate (at [10]), with a final sentence of three and a half years imprisonment.

[57]     A similar reasoning process appears in R v Rose, a judgment of a Full Court of this Court.  Mr Rose, a successful and promising business manager, pleaded guilty to 20 charges of criminal dishonesty extending over five years.  He was initiated into defrauding his employer, Dairy Containers Ltd, by two older associates, but was effectively critical to the operation.  The Court quantified the loss according to the three separate acts of fraud that had been undertaken, noting that following reparation, the loss to the company would amount to over $2 million, with a further potential loss of $8.4 million.

[58]     The Court stated (at 555) that there had been, at that point in time, a number of cases involving solicitors or accountants with numerous charges and amounts between $600,000 and approximately $2 million which had attracted a sentence of between four and five years imprisonment.  A starting point of seven or eight years in such circumstances as Mr Rose’s was adopted.  The case arising as a Solicitor-General’s appeal against sentence, Mr Rose’s sentence was increased from 18 months to four years imprisonment (reflecting also his early guilty plea and the significant co-operation he gave to the police).

[59]     This focus on the offender’s gains and victim’s losses provides a useful starting point, but it has its limitations in a case like the present.

[60]     The Sentencing Advisory Panel (UK) (the United Kingdom Panel) in its recent Consultation Paper on Sentencing for Fraud Offences (2007) has recommended one guideline to cover fraud against Her Majesty’s Revenue and Customs, benefit fraud, payment card and bank account fraud, insurance fraud and obtaining credit through fraud.

[61]     In undertaking an assessment of the offender’s culpability, the Panel has recommended that sentencing judges begin by assessing the amount of money the offender intended to obtain as a starting point, and then adjust this to take account of the actual loss suffered by the victim.

[62]     For offending that is fraudulent from the outset, professionally planned, and either carried out over a significant period or multiple times, the Panel has recommended the following:

Amount obtained or intended to be obtained
£20,000 – less than £100,000	£100,000 – less than £500,000	£500,000 or more
Starting point: 2 years Range: 18 months to 3 years	Starting point: 4 years Range: 3 to 5 years	Starting point: 6 years Range: 5 to 8 years

The full account of the United Kingdom Panel’s recommended sentencing ranges and guidelines can be found at 60 of the consultation paper.

[63]     In the present instance, however, there is a real difficulty in the lack of detail concerning the effect of Mr Findlay’s offending on potential victims.  The Judge identified this issue at [20] – [21] of his sentencing remarks:

The victims are, of course, difficult to identify except, that is, the business community.

The Crown submission is that substantial amounts of money were involved.  Certainly they were.  It is impossible really to identify how much was lost but no doubt it was expected that, on a rising property market, it would be extremely hard for any of these frauds to be detected.

[64]     Even when it can be said that the victim(s) suffered no loss, a period of imprisonment may be appropriate.  In R v Rod CA236/99 6 September 1999 the appellant participated in 43 fraudulent transactions, obtaining bridging finance for residential home buyers.  By providing false information, he was able to obtain increased finance.  The “only” benefit was the commission from the home sales that he obtained, but the financial institutes themselves, in a buoyant property market, did not suffer any loss.  Despite this the Court noted that the institutes were placed in risk.  Following trial, a sentence of 18 months imprisonment was imposed.

[65]     This difficulty of quantifying loss aside (it has not been asserted that there was no loss as in Rod), if the assessment were to focus on the benefit Mr Findlay himself accrued, it is clear that this was minimal.  As the Judge noted, Mr Findlay only obtained commissions for his valuation work.

A position of trust

[66]     Relevant to the nature of the offending, and therefore the starting point for sentencing purposes, is Mr Findlay’s position as a registered valuer and the consequent abuse off trust.

[67]     The Judge in sentencing emphasised “the loss of business confidence that [this offending] might have caused in registered valuers.  That is, a subverting of the business world when a person who is entrusted to provide professional appraisal as to value is prepared to depart from his or her required standards” (at [17]).  And as the United Kingdom Panel has stated, “It is asserted that fraud affects each and every person: the costs are passed on by companies and the state to consumers and taxpayers” (at 3).

[68]     Several of the cases discussed above entailed an abuse of trust.  Mr Rose was a secretary of the company and Mr Varjan was a mortgage broker and officer of the financial institute in question.

[69]     The clearest statement of the integrity required from persons in positions of professional trust comes from R v Nandan CA136/98 2 September 1998.

[70]     That case concerned a scheme similar to that of Allsorts.  The appellant would enter into contracts to purchase houses with no intention of settling the purchase unless he could on-sell the property at an increased value.  Mortgages were obtained for the second purchaser, with the appellant acting as a mortgage broker and providing false details as to creditworthiness.  The mortgage would be obtained with reference to the inflated sale price, leaving the difference between the initial purchase price and the subsequent purchase price as the appellant’s profit.  Although he continued to deny that he had committed any offence, the appellant pleaded guilty to seven counts of using a document with intent to defraud and three counts of conspiracy to defraud.

[71]     Mr Nandan was sentenced to 12 months imprisonment, after a six month reduction for his guilty plea.  He had, the Court noted, previously engaged in similar dishonesty offending, and had obtained in this instance a net profit of some $17,000 or $46,000 gross.  $720,938 had been forwarded by the banks pursuant to the fraud. 

[72]     At issue in Nandan however was an argument of disparity.  Mr Nandan’s co-offender, a Mr Sivanantham, had been sentenced to 12 months also on four counts of conspiracy and three counts of forgery.  Mr Sivanantham was a solicitor who had assisted in the fraudulent scheme.  This Court considered that there was no disparity of sentence.  Indeed, Mr Nandan’s sentence could only have been considered lenient but for the comparison with the “exceptionally light” sentence of Mr Sivanantham.  The Court stated that, in the absence of a guilty plea, “[i]n the case of a solicitor who has lent himself to dishonest practices of this nature, a sentence in the region of 2½-3 years could not be regarded as out of range”.  No reference was made to how much Mr Sivanantham gained or stood to gain out of the fraudulent transactions.

Disparity of cases

[73]     The potential issue of disparity formed the main focus of the submissions for the Solicitor-General.

[74]     Reference to the facts and result of Warburton and Perry is necessary.

[75]     In Warburton Heath J sentenced Mr Warburton to 21 months imprisonment, with leave to apply for home detention, and ordered him to pay $25,000 in reparation for one count of using a document with intent to defraud and three counts of obtaining a document within intent to defraud.  Mr Warburton was found guilty at trial.

[76]     Mr Warburton, a solicitor and barrister of some 20 years practice, had been enlisted by the architects of the Allsorts frauds to effect land transfer fraud.  Sales of land were completed at undervalue in contravention of the mortgagee’s legal duty to obtain the best price reasonably obtainable.  In essence, the mortgages on a property were purchased and then, using the power of sale, the property would be sold to a related and complicit party at undervalue.

[77]     Mr Warburton contributed to the recuperation of the victim’s losses.  His conviction meant he would be required to pay out insurance of $60,000 for one victim, while the reparation order was put towards losses of between $50,000 and $80,000 suffered by a second victim.  A third victim suffered no direct pecuniary loss.

[78]     The Judge identified the following aggravating features relevant to the starting point in that case (at [63]):

·        The repetitious nature and duration of the offending (some 14 months);

·        The known vulnerability of relatively unsophisticated victims;

·        The emotional and financial turmoil occasioned by the offending; and

·        The abuse of trust as against the community, especially in light of Mr Warburton’s role as a barrister and solicitor.

[79]     Following the adoption of a starting point of three years imprisonment, the Judge identified the following mitigating features (at [67]):

·        Mr Warburton’s good character, community involvement, and committed professional life;

·        The professional ruin occasioned by this offending (Mr Warburton had voluntarily surrendered his practice certificate);

·        The resultant degree of public shaming that had occurred; and

·        A significant degree of remorse.

[80]     In assessing Mr Warburton’s motive, Heath J considered that Mr Warburton had succumbed to a pattern of “self-damaging unassertive behaviour” (at [37]) that saw him too closely identify with clients whom he hoped to keep on side.

[81]     The starting point of three years was reduced by 12 months, and then a further three months to reflect the additional reparations order.

[82]     In R v Perry Asher J sentenced Mr Perry to 12 months imprisonment with leave to apply for home detention on one count of conspiring to defraud a financial institute, following a guilty plea.  Mr Perry was also convicted and discharged on one count of money laundering.

[83]     Again, caught up in the Allsorts web, Mr Perry signed false sale and purchase documents that misled banks on at least three occasions.  In total, he participated in 14 transactions, playing a central role in eight, and misrepresenting that deposits of $243,245 had been made on properties totalling $1,620,250.  $1,251,999 was received from loaning banks, in favour of a Perry Family Trust meaning that although Mr Perry was not gaining directly, he stood to gain as a discretionary beneficiary of the trust.  Fortuitously, the money itself was repaid due to a buoyant property market.

[84]     The Judge adopted a two year starting point, and then reduced this to 20 months to take account of the following: Mr Perry’s involvement began at the instigation of his father, he had suffered a consequential breakdown in family relations, his good character and admirable community involvement, and his genuine remorse.  This sentence was then further reduced to 12 months imprisonment to reflect Mr Perry’s early guilty plea and subsequent co-operation with the police.

[85]     Using Warburton and Perry as points of comparison, Judge Spear considered Mr Warburton’s offending to be clearly more substantial (at [24]).  In assessing the offending of Mr Findlay in comparison to Mr Perry, the Judge considered Mr Perry’s offending was less serious on account of him having no professional responsibility, but that the offending in Mr Perry’s case also resulted in substantially more significant gains.  Mr Findlay only obtained his fees for work done.  On the whole then, the Judge considered it appropriate to adopt the same starting point as in Perry – two years imprisonment.

[86]     The Solicitor-General submitted that Warburton is directly comparable.  Weight is placed on the breaches of positions of trust in the community in both cases, and the pecuniary gain of the offenders (fees rather than substantial profits).  In contrast to Perry, both Warburton and the present case resulted in losses to finance companies or property holders.

Conclusion as to starting point

[87]     While this case is clearly not in the category of such offending as Rose and Cole, the statement in Nandan as to professional responsibility would appear to lend weight to the view that the starting point in this case (two years) was lenient.  Although there is no quantified figure as to the loss incurred by the financial institutes, the Court in Nandan appears to have taken the view that simply lending professional weight to the fraudulent scheme of a group is reprehensible enough to warrant a term of imprisonment that could reach two and a half to three years.  However, the Court did state that this was a sentence that would not fall outside the permissible range.  It was not, in other words, set as the permissible range itself. 

[88]     On the whole, considering the non-quantified values at stake (which we have assumed to be less than most of the cases discussed) and the limited gains obtained by Mr Findlay, we do not think a starting point of two years in this instance was one which could not have been adopted by the sentencing Judge, though we remark that a higher starting point could not have been criticised

Discount for previous good character

[89]     In R v Sargeant (1974) 60 Cr App 74 (CA) Lawton LJ once said: “[F]or men of good character the very fact that prison gates have closed is the main punishment.  It does not necessarily follow that they should remain closed for a long time” (at 77). 

[90]     To the contrary is the comment of Holland J in Ravlich v Police (1989) 4 CRNZ 160 at 162 (HC):

There may well be sound argument for the proposition that people of intelligence, from good homes, with good educational backgrounds and who are in employment and who then out of pure greed decide to commit criminal activity, are much more deserving of punishment than the inadequate who have nothing to lose in society, and often feel with some justification that society has offered them very little.

[91]     This Court has, however, recognised the place of good character and a life of community involvement as a mitigating feature.  In R v Howe [1982] 1 NZLR 618 at 629 this Court said: “Persons who have shown themselves generally law-abiding citizens of good character are usually entitled to invoke their creditable record in mitigation when they come before the Courts, even for quite serious offences”. The point finds legislative endorsement in s 9(2)(g) of the Sentencing Act. Two things underpin this feature of mitigation: recognising a fall from grace as punishment in itself, and recognising the greater potential for rehabilitation where community involvement and good character bears witness to a reduced probability of re-offending.

[92]     The Judge in this case was particularly impressed by Mr Findlay’s long-standing commitment to the local community.  In particular, it is clear that Mr Findlay has led a life of considerable service to the Anglican Church, at both a local and national level. 

[93]     The sentence of two years was accordingly reduced by 12 months.

[94]     The Solicitor-General submitted that this reduction was out of line with the reductions granted to Mr Warburton and Mr Perry, and that a six months reduction was all that was warranted.  Mr Warburton received a reduction of 12 months, but, the Solicitor-General argued, this was on the basis of the ruin of his reputation, public shaming, and genuine remorse, as well as his community standing.  In Mr Perry’s case, a discount of four months was given for his community involvement and genuine remorse.

[95]     The Solicitor-General also submitted that a reduction for good character in this instance is potentially dubious.  The argument runs that it was Mr Findlay’s good standing (as a valuer) that allowed him to facilitate these frauds.  This confuses Mr Findlay’s roles.  The Judge rightly recognised the aggravating nature of his valuer role.  It was in reference to his position within the community and the church – quite distinct from his professional role – to which the Judge turned in mitigation.  As was said in R v Webb CA13/04 17 June 2004 at [71], “Wherever character evidence is raised it is along the lines that the offender, in respects other than the offending in question, is a person of good character” (emphasis added).

[96]     Mr Gotleib acknowledged that “the discount is unusual”, but submitted that a larger than normal discount is within a judge’s discretion.

[97]     This is not an altogether easy case.  The overall sentence was reached after careful and anxious consideration by a very experienced Judge, and was effectively a “merciful” sentence. 

[98]     The short point is whether a 12 months (50 percent) discount was too great.

[99]     Comparison could be made to the general allowances for guilty pleas where, as this Court has noted, discounts between 20 and 33 percent have generally been given (see R v Tryselaar (2003) 20 CRNZ 57 and more recently R v Fonotia [2007] NZCA 188 at [50] and [51]).

[100]   In the present instance, Mr Findlay does not have the benefit of multiple mitigating features: he was given a substantial discount solely for previous good character.  Moreover, that discount was applied to an already lenient starting point. 

[101]   Mr Findlay still seems to have difficulty grasping the wrongfulness of what he did.  There is distinct culpability in what he did, in lending his professional assistance to a scheme of the character we have described.  Yet he did not plead guilty, and a lengthy, expensive and in its own way complex trial was required.  Mr Findlay’s obvious lack of remorse must at least reduce his claim for a discount for previous good character.

[102]   We take the view that an allowance of over 25 percent solely for good character would be outside an appropriate range.

[103]   In the result, we grant the Solicitor-General’s application for leave to appeal against the sentence.  We set aside the sentence imposed in the District Court.  We impose instead an effective sentence of 18 months, on all counts (calculated on the basis of two years less 25 percent for the appellant’s previous good character), with leave to apply for home detention.  We consider this is the lowest sentence that could have been imposed in this case.

Solicitors:

Crown Law Office, Wellington