R v Graham - [2012] NZHC 575

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CRI-2010-085-2538 [2012] NZHC 575

THE QUEEN

v

DOUGLAS ARTHUR MONTROSE GRAHAM MICHAEL HOWARD REEVES WILLIAM PATRICK JEFFRIES
LAWRENCE ROLAND VALPY BRYANT

Hearing: 29 March 2012

Counsel: C R Carruthers QC and D R La Hood for Crown
P J Davison QC and R C Woods for Graham
S M Henderson for Reeves
D G Hurd and D H O'Leary for Jeffries

Sentence: 29 March 2012

SENTENCING NOTES OF DOBSON J

[1] At the conclusion of an eight week trial I found each of you guilty of four counts under s 58 of the Securities Act 1978 (the Act). The charges related to your responsibility as directors of Lombard Finance & Investments Limited (Lombard). Those were for misstatements in offer documents issued by Lombard in December
2007. Consistent with the guilty findings in my verdicts, I now formally enter convictions on each of those counts.

[2] The Act makes no attempt to limit the risks that directors might lawfully take with money raised from the public. Nor, obviously, does it impose anything in the

R v GRAHAM HC WN CRI-2010-085-2538 [29 March 2012]

nature of a guarantee by directors that investors will get their money back. What it does is to require directors to make adequate disclosure to the public when seeking money for investment in their company, to enable potential investors to make an adequately informed decision about the risks involved in making any such investment.

[3] The high importance of adequate disclosure was reinforced by the creation of a criminal offence for issuing offer documents that did not provide that. That has been the law in New Zealand since 1978. You, as a board, would have been as aware of those provisions in the Act as the board of any company in New Zealand because you, Mr Jeffries, were responsible for the administration of the Act throughout your term as Minister of Justice between August 1989 and November 1990, and you, Sir Douglas, were responsible for the administration of the Act throughout your tenure as Minister of Justice between November 1990 and February 1999.

[4] Reference has been made to the prospect that this part of the securities law may soon change, with the Financial Markets Authority proposing to restrict criminal conduct to cases involving deliberate or reckless misstatements or some such formula that is still subject of debate. However, I am obliged to deal with your offending on the law as it stands and, more importantly, to reflect the consequences of the offending in light of the law as it stood at the time.

[5] Your offending involved issuing offer documents that expressed your confidence that Lombard had, and would have, sufficient liquidity to meet its obligations as they arose. The reality was that the Lombard Board had serious and constant concerns at the liquidity squeeze confronting the company at the time. Further, in the months before December 2007, predictions of the level of loan repayments had been highly…

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 Graham

Details

AGLC: R v Graham [2012] NZHC 575
Case: [2012] NZHC 575
Decision Date: 29 March 2012

CaseChat Overview and Summary

The case of R v Graham involved a sentencing hearing for four defendants who had been found guilty of offences under section 58 of the Securities Act 1978. The defendants were directors of Lombard Finance & Investments Limited (Lombard) and had been responsible for issuing misleading offer documents in December 2007. The misleading statements expressed confidence in Lombard's liquidity, despite the company facing liquidity issues at the time. The court was required to decide the appropriate sentences for each defendant, taking into account the gravity of the offending, the effect on victims, and various mitigating and aggravating factors.

In deciding the sentences, the court considered the defendants' level of culpability, which was found to be towards the lower end of the scale. The court also took into account the defendants' previous good characters, remorse, and willingness to pay reparation. The court found that the appropriate starting point for the non-executive directors was a combination of community detention and community work, while the executive director (Mr Reeves) was to be dealt with differently due to his closer involvement with the company's day-to-day operations. The court also considered personal circumstances, such as health and family responsibilities, in determining the final sentences.

The court sentenced Sir Douglas Graham, Mr Bryant, and Mr Jeffries to 300 hours of community work on each of the four convictions, and ordered them to pay $100,000 in reparation. Mr Reeves was sentenced to 400 hours of community work on each conviction. All sentences were to be served concurrently. The court also directed that the reparation amounts be paid to the Registrar of the High Court by 31 May 2012 and disbursed to the victims by the receivers of Lombard.

Orders