R v Love
[2016] NZHC 2394
•7 October 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CRI-2013-485-379 [2016] NZHC 2394
THE QUEEN
v
RALPH HEBERLEY NGATATA LOVE
Hearing: 6 and 7 October 2016 Appearances:
M J Ferrier and R Parlane for Crown
C R Carruthers QC for DefendantSentence:
7 October 2016
SENTENCING REMARKS OF LANG J
R v LOVE [2016] NZHC 2394 [7 October 2016]
[1] Dr Love, you appear for sentence today having been found guilty of a charge of obtaining property by deception.1 The maximum penalty for that charge, as I am sure you know, is one of seven years imprisonment.
Background
[2] The charge was laid as a result of activities that you undertook in your capacity as the Executive Chairman and a trustee of the Wellington Tenths Trust (the Trust). In its current form the Trust is a relatively new organisation, but its task is to manage assets that have been preserved for the Maori people of the Wellington and Taranaki regions for many years. For some years the assets were administered by the Colonial Office and then by other entities including the Maori Trust. In more recent years it has fallen to the Trust to administer those assets for the benefit of Wellington and Taranaki-based Iwi.
[3] The affairs of the Trust are conducted through a board of trustees. Those trustees are elected on a three yearly basis at an Annual General Meeting of the beneficiaries of the trust. You have been a trustee of the Trust for many, many years. You have also been Executive Chairman for many years. As a result, you were seen as the leader of the trustees and held in extremely high esteem.
[4] One of the problems the Trust has faced is that it is asset rich and cash poor. It owns land, but the land traditionally has not returned a great deal of income. Your task and that of the other trustees was to try to turn that situation around by developing the various parcels of land held by the Trust so that they could produce more in the way of income and capital growth for the beneficiaries.
[5] You and the other trustees developed a business model under which you would make assets available for development by property developers on the basis that they took all the risk and met all the costs involved in the development project. This meant that the Trust did not have to outlay money and bore no risk in relation to the development. Furthermore, the Trust retained the ownership of the land and the
share in the income stream in the finished product.
1 Crimes Act 1961, s 240(1).
[6] One of the assets held by the Trust was holdings of land situated in Pipitea Street in central Wellington. The Trust owned several parcels of land in Pipitea Street, but the Crown owned the balance. You and the remaining trustees saw that this was a prime site for redevelopment and to that end you began negotiating with the Crown with a view to acquiring the properties the Trust did not already control. You were eventually successful in that, and were able to acquire the remaining properties for the sum of $1 million.
[7] At or about the same time, and in anticipation that you would be able to acquire those properties, you began negotiating with property developers in Auckland. In particular, you dealt with Mr Kerry Knight. You were the person from the board of trustees who dealt with Mr Knight and his colleagues. You asked others to act on your behalf to some extent including, I am satisfied, your son Matene Love and also your close associate Ms Skiffington. During this time you were also taking advice from Mr Adrian Burr, a respected property manager in Auckland who had assisted Ngati Whatua with the development of some of their lands.
[8] I am satisfied, as I indicated in my verdict, that towards the end of October and the beginning of November 2006 you became aware that the Trust could gain a substantial upfront payment in return for giving a property developer the right to develop the Pipitea Street land. This became known during the course of the trial as a “lease premium”. Negotiations with Mr Knight and his colleagues took some time. By mid-November 2006, it appeared that they had come to a stalemate. The events that occurred between 22 November and 22 December 2006 form the basis of the charge that you faced.
[9] On 22 November 2006 you and Ms Skiffington attended a meeting in Auckland with Mr Knight. That was a spirited meeting at which various views were exchanged. Following the meeting Mr Knight hand-delivered a letter to a barrister who had accompanied you to the meeting. The letter set out a proposal. There was then further correspondence, and on the afternoon of 23 November 2006 you had a telephone discussion with Mr Knight. Shortly after that telephone discussion, Mr Knight sent an email to a solicitor whom Ms Skiffington and another person called Mr Shaan Stevens had instructed in Wellington. The email referred to a tentative
agreement that Mr Knight had reached with you during the course of the telephone discussion that afternoon. Mr Knight said that the terms of the agreement would be contained in a draft agreement to lease that would be forwarded by email from his office later that day.
[10] Later that day, Mr Knight’s office forwarded a draft agreement to lease to the Wellington solicitor who had been acting for Mr Stevens and Ms Skiffington. This set out the terms on which the property developers were prepared to lease the Pipitea Street land from the Trust. It set out the annual rental that the developers were prepared to pay in respect of the site. It also set out a proposal under which the developers would pay pre-pay rental in the sum of $3 million. In fact the agreement referred to that sum as being the purchase price to be paid by the developers for the right to gain access to the Pipitea Street land.
[11] The solicitors sent a copy of that agreement to Ms Skiffington the following morning, 24 November 2006. I am satisfied, as I said in my verdict, that you then received a copy of the draft agreement to lease and you knew that the developers were prepared to pay the sum of $3 million in order to gain access to the Pipitea Street land.
[12] The next monthly meeting of trustees was due to be held on 28 November
2006. As was usual, you sent out a Chairman’s Report summarising issues that you saw needed to be discussed. One of these was the Pipitea Street development. You also handed out to the trustees at the meeting on 28 November a further copy of these materials.
[13] The written material that you provided to your fellow trustees set out the annual rental that the property developers were prepared to pay to the Trust in respect of the lease of the Pipitea Street land. None of that material, however, contained any mention of the $3 million payment that the property developers had also agreed to make in order to acquire the right to lease the Pipitea Street land.
[14] The Pipitea Street project was duly discussed at the meeting of trustees on
28 November. I heard evidence from several of the trustees who attended that
meeting. It is fair to say that none of them had a detailed recollection of that meeting, but it is clear from the minutes that were produced and from their evidence overall that you never disclosed at any stage during the meeting the fact that the developers had agreed to pay the Trust $3 million to gain the right to develop the Pipitea Street land. As it turned out, the trustees were prepared to agree to the proposal as set out in the material you provided them. They therefore proceeded to approve further investigation of the project based on the rental returns contained in that material.
[15] Several other events of importance were also occurring at around this time. Earlier in November, you and Ms Skiffington had become interested in purchasing a property on the Plimmerton foreshore. This was a substantial residence, and you and Ms Skiffington ultimately agreed to purchase it for the sum of $1.8 million. Settlement of that purchase was due to be completed on 8 December 2006, but it was eventually settled one day earlier. In early November Ms Skiffington went to the bank and organised financing arrangements under which the whole of the purchase price would be funded by means of a loan.
[16] Two events of significance then occurred on 22 December 2006. The first of these was that a company called Pipitea Street Developments Limited (Pipitea Street Developments) entered into a services agreement with the company formed by the developers to carry out the Pipitea Street project. Pipitea Street Developments had been formed on the instructions of Mr Stevens and Ms Skiffington on or about 23
November 2006, the same day on which Mr Knight sent you the draft agreement to lease.
[17] The services agreement provided for the developers to pay Pipitea Street Developments the sum of $3 million. The sum of $1.5 million plus GST was to be paid soon after execution of the agreement. The services agreement went through several drafts and iterations. One of these was found on your computer. I said in my verdict that I was satisfied that you played a hand in drafting the services agreement and you were fully aware of what was going on in relation to it.
[18] Mr Knight said he understood Pipitea Street Developments was an entity set up by you in order to carry out works for the Trust and to recover treaty claims expenses and matters such as that. He understood that the $3 million payment that the developers had agreed to pay to the Trust had been transformed into the $3 million payment that the developers were to pay to Pipitea Street Developments. As I have said, he believed through his discussions with you that the money being paid to Pipitea Street Developments was money that would be used for the purposes of the Trust.
[19] On 22 December 2006 you signed an agreement to lease the Pipitea Street land to the company formed by the developers. You signed that document in your capacity as Chairman of the Trust. This committed the Trust to leasing the land to the developers on the terms set out in the agreement. Your fellow trustees had no knowledge of the fact that you were signing that document. Nor did they have any knowledge of the fact that Pipitea Street Developments had been formed and that it had entered into a services agreement with the developers under which it would receive the $3 million payment that was originally to be paid to the Trust.
[20] By 16 January 2007, the developers had paid the sum of $1.5 million plus GST to Pipitea Street Developments. As soon as that money was received, Pipitea Street Developments transferred it into a bank account in the joint names of two trusts. You and Ms Skiffington had settled these trusts in order to acquire the Plimmerton property. The Plimmerton property was to be owned as to a one-half share by the trust that you set up, and as to the remaining one-half share by the trust that Ms Skiffington set up. Once the money was received into the joint account in the names of the trusts, it was immediately transferred to the loan account the two trusts had used to acquire the Plimmerton property. This had the effect of reducing the loan of $1.8 million by the sum of $1.385 million. The sum of $1.385 was paid in reduction of the loan rather than $1.4 million.
[21] Those monies remained in that account until 31 January 2007. On that date a series of events occurred that saw the funds transferred back to Pipitea Street Developments. They were then used to pay fictitious invoices rendered by people called Skinner and Rowley, and the sum of $1.17 million was transferred back on the
same date into a joint account in the name of you and Ms Skiffington. The funds remained in that account until May 2007, when they were again transferred to the loan account in reduction of the mortgage.
[22] Matters then proceeded on. Ultimately, the agreement to lease never proceeded. Instead, the Trust entered into a new arrangement with the developers. Under this arrangement, the Trust was to retain ownership not only of the land but also a share of the completed building. That is the development that was ultimately undertaken. However, none of the trustees or beneficiaries knew about the $1.5 million payment that Pipitea Street Developments had received until several years later when the Serious Fraud Office began investigating the affairs of Messrs Skinner and Rowley. At that point matters came to light and you stood down from your position in the Trust.
Reparation
[23] Before I go on to deal with the issue of sentence, I want to clear away an issue that was raised during the hearing yesterday and that I consider should be disposed of now. This is the issue of reparation.
[24] The Crown submitted that I should make an order requiring you to pay reparation in respect of the funds that the developers paid to Pipitea Street Developments and that were then subsequently received by the two trusts.
[25] The Crown makes this submission largely on the basis that this may provide a means by which to unlock the equity held by your trust in the Plimmerton property. The evidence is that you remained living in that property until earlier this year. It is now subject to restraining orders under the Criminal Proceeds (Recovery) Act 2009, and I understand that following this hearing the Commissioner of Police is likely to make an application for an order that the property be forfeited to the Crown. The Crown seeks an order or reparation as a means of ensuring that the funds go not to the Crown, but to the Trust.
[26] The evidence given at trial and the statement of assets and liabilities that you provided prior to sentencing make it clear that you have no means of meeting any
order for reparation. The only way in which such an order could be satisfied is through the sale of your trust’s interest in the Plimmerton property. Although you were originally a trustee of that trust, however, that is no longer the case. You therefore have no direct ability to require the Trust to sell its one-half share of the property. Nor do you have any means of requiring or placing pressure on the trustees of the other trust, the trust set up by Ms Skiffington, to sell its interest in the property. For that reason I see no practical utility in making an order for reparation. I consider that the proceedings under the Criminal Proceeds (Recovery) Act 2009 will need to take their course. That legislation contains a means by which the Tenths Trust may register its interest in the property so that it can receive part of the eventual sale proceeds.
Starting point
[27] The first issue I need to decide is the starting point to be applied in respect of the sentence to be imposed on you. The starting point is the sentence that is appropriate having regard to all relevant aspects of the offending, but putting to one side factors that relate personally to you.
[28] The Court of Appeal has consistently said that in cases such as this there is no tariff or guideline for starting points to be applied.2 This is because offending of this type can occur in an infinite variety of ways, and it is impossible to set guidelines that will meet every eventuality.
[29] The Crown relies on a line of cases to suggest that the starting point should be between five years and five and a half years imprisonment.3 It relies on several factors in making that submission. First, there is the level of deception involved. You deceived the property developers into thinking that they were making a payment that was to be used for the benefit of the Trust. You deceived your fellow trustees by not telling them that the property developers had agreed to pay the sum of $3 million for the right to lease the Pipitea Street land. You did that at a time when the Trust was actively borrowing money to meet its other commitments. So your level of
deception was two-fold.
2 R v Rose [1990] 2 NZLR 552 (CA) at 555, R v Varjan CA 97/03, 26 June 2003 at [21].
3 Set out at fn 4.
[30] The most important factor, however, is the fact that your offending involved gross breach of trust. Any trustee who assumes responsibility for the administration or management of trust assets does so in the knowledge that he or she must administer the assets solely for the benefit of the beneficiaries. In particular, no trustee may benefit personally from the use or acquisition of trust assets. More than this, you were the Executive Chairman of the Trust. The other trustees left it to you to deal solely with the developers on their behalf. Other than your reports, they had no means of knowing what agreements or understandings you reached with them. You took advantage of the trust that they placed in you to acquire, for the benefit of Pipitea Street Developments and then yourself, a very substantial sum of money. Not only did you breach your general fiduciary duties as a trustee, but you breached the trust that your fellow trustees and beneficiaries placed in you to manage the Trust assets in a manner that was appropriate and for the benefit of the beneficiaries.
[31] The next factor is the magnitude of the property acquired. You caused Pipitea Street Developments to receive the sum of $1.5 million. That is a very substantial sum by any standard. That act rendered the offence of obtaining property by deception complete. But there was an added aspect to your offending because you then used that money to reduce the amount owing on your mortgage. Ultimately, that turned out to be the sum of $1.026 million once the fictitious invoices rendered by the Skinner Rowley entities had been paid. Even at that level, you derived a very substantial personal benefit.
[32] The benefit was two-fold. First, it directly reduced your liability to the bank. Secondly, it thereby created equity in the property for the two trusts. So there was a large amount of property acquired by deception, and then there was the use of that property for significant personal and indirect benefit.
[33] There is then the effect of the offending on the Trust. I have received a thoughtful and measured victim impact statement from the Trust. This makes it clear that your offending has had a profound effect on it. The first, and most obvious, is financial. You diverted funds that would be otherwise payable to, and for the use of, the Trust for your own purposes. The Trust suffered the loss of funds that it should have received to use for the benefit of beneficiaries.
[34] But the losses go far deeper than that. The Trust has been immersed and enmeshed in all of the publicity and uncertainty that has surrounded the charges that you and Ms Skiffington faced. I add, for those who do not know it, that the charges against Ms Skiffington were stayed because of her very ill health.
[35] The issue became public in 2012. Since that time the Trust has faced great difficulties because one of its trustees, and indeed its Executive Chairman, has been at the centre of alleged criminal offending. This has caused all kinds of issues for the Trust. One practical example is that it has had to devote an enormous amount of time and effort to provide material and information to the Serious Fraud Office in relation to the charges against you and Ms Skiffington.
[36] But there is another angle too, and this relates to the rifts that apparently have occurred between different factions within the beneficiaries of the Trust. Until the trial, when name suppression was lifted and then when my verdict was delivered, none of the beneficiaries really understood exactly what this case was about. No doubt they proceeded on the basis of rumour, innuendo and speculation. It is only now that they have clarity as to what exactly has occurred. So those are significant losses, or detriments, if you like that the victim of your offending has suffered.
[37] Those effects have also been felt by the Port Nicholson Block Settlement Trust, which is a trust set up to manage assets acquired through the Treaty Settlement process. You were also the Chairman and a trustee of that trust at the time that all of this occurred. I am satisfied from the victim impact statement filed by that trust that they too have been caught up and enmeshed in all of the issues that your offending has raised.
[38] The Crown has referred to me a number of cases.4 None of these are directly on point, but they certainly illustrate that starting points of around five to five and a half years imprisonment are routinely selected in cases of serious fraudulent
offending of this type.
4 R v Prestney [2003] 1 NZLR 21 (CA); Serious Fraud Office v Ellis HC Auckland CRI-2005-
404-1587, 18 July 2006; Serious Fraud Office v Lapham DC Auckland CRI-2008-004-25128, 29
November 2010; Serious Fraud Office v Rangitauira DC Auckland CRI-2010-063-5669, 16
December 2011; Serious Fraud Office v Hobbs DC Hamilton CRI-2011-072-0578, 1 March
2013.
[39] The only case that relates to offending by a trustee is Rangitauira v R.5 in that case a trustee acquired the sum of approximately $330,000 by deception from the trust of which he was a trustee. The Judge in that case took a starting point of five and a half years imprisonment, but there are factual differences between your case and that case which mean that it is not a true comparator.
[40] Had you been the sole perpetrator of this offending, I would readily have accepted a starting point of five and a half years imprisonment. I am satisfied, however, that there is force in the submission by Mr Carruthers on your behalf that Ms Skiffington is likely to have had some influence on your decision to undertake this offending. I do not know what measure of influence she had, because you never spoke about it when you gave evidence at trial and I do not have the benefit of her version of events. But the prospect that she must have had some influence is, I think, the only reasonable inference to be drawn from the fact that you have offended in this way after leading such a blameless life in the past. There must be an explanation for it, and it may well lie in the influence that she had over you.
[41] But what you cannot escape, Dr Love, is that Ms Skiffington was not a trustee. She did not deal with your fellow trustees. She did not tell them what the developer’s proposal was. You were the person who placed the material before the trustees. You were the person who spoke to that material on 28 November 2006, and you were the person who ultimately signed the agreement to lease on 22 December
2006. For that reason I cannot reduce the starting point greatly. I propose to adopt a starting point of four years nine months imprisonment to reflect your overall culpability on the charge.
Aggravating factors
[42] You have no previous convictions at the age of 79 years. There are obviously no aggravating factors personal to you that would operate to increase the starting
point that I have selected.
5 Rangitauira v R, above n 4.
Mitigating factors
[43] I now need to consider the extent to which I should reduce that starting point to reflect mitigating factors personal to you.
[44] The first and most obvious of these is that you come before the Court with an impeccable previous record. For that alone you would be entitled to credit, but you come with far more than that.
[45] For more than 40 years now you have devoted your life selflessly to the advancement of Maori interests, both in this region and nationwide. I cannot hope here to capture the contribution that you have made to New Zealand society over the last 40 years. Some of it was touched upon yesterday by the persons who spoke on your behalf to support you in your hour of need.
[46] You have been involved in a raft of matters from Treaty negotiations, fishery negotiations, the Hui Taumata initiative and also all of the other affairs of the iwi in the Wellington, Manawatu and Taranaki regions. In addition to that you held a position as Professor at the Business School of Victoria University. You held that position at the time of this offending. You obtained a doctorate. Those kinds of actions make you an inspirational leader in Maoridom, somebody whom the young people can look up to. So you are entitled to very significant credit for that.
[47] The Crown suggests that a discount of up to 20 per cent should be applied to reflect those factors. I do not consider that sufficient to recognise the contribution that you have made to New Zealand society in general and to Maoridom in particular. I propose to apply a discount of 30 per cent, or 18 months, to reflect that factor.
[48] The next issue in respect of which I can apply a discount is the fact that you are 79 years of age and you present with significant health issues. I do not propose to go into them in any detail, but you have very significant heart issues, and you also suffer from diabetes. In addition, you have now been diagnosed with the onset of dementia and this is beginning to impact on your day to day life.
[49] The law permits a discount for these factors, not to recognise them in themselves, but to recognise the fact that they are likely to make serving a sentence of imprisonment more difficult than would be the case for a younger offender or a person who enjoys good health.
[50] Prior to the hearing your counsel filed medical reports from doctors who have been involved with you over the years. These raised issues of concern about the extent to which your health issues you can be managed and treated within a prison environment. I then asked the Crown to obtain advice from the Department of Corrections regarding the manner and extent to which those issues can be addressed within a prison environment. I received yesterday a very helpful report from the Department of Corrections dealing with those issues. I have also received today helpful responses from two of the doctors engaged by your counsel to provide the reports that were previously before the Court.
[51] This material persuades me that your health issues can be managed within a prison environment. I acknowledge, however, that your admission into prison will need to be carefully managed and the prison authorities will need to ensure that over the forthcoming days, weeks and months you will be closely monitored. If possible, the input of your own cardiologist should be obtained. As I have said, age and physical and health issues can be met with a discrete discount to reflect the fact that they mean the offender will find it more difficult to serve a prison sentence.
[52] I propose to allow a further discount of nine months to reflect that factor. This brings me to a sentence of two years six months imprisonment.
[53] Your counsel also asks me, and this is echoed in the statements made yesterday by those who spoke to the Court in your support, that I should apply yet a further discount in what would really be an exercise of mercy to ensure that the sentence is reduced to two years imprisonment so that you will be eligible for a sentence of home detention. The Court has that power, but it must be exercised according to principle. If wrongly exercised, it undermines the integrity of both the sentencing process and the criminal justice system overall.
[54] Two factors lead me to my conclusion on this point. The first is that the sentence I have imposed is designed to be a deterrent sentence. Trustees who manage assets on behalf of beneficiaries must know that serious consequences will follow in the event that they help themselves to trust assets.
[55] Secondly, I have read the material prepared in respect of this sentencing. I note that you have told the person who prepared the pre-sentence report that you understand how the Court came to its decision and that you accept the decision and must “get on with it”. I do not see anywhere, however, an acknowledgement of the effect that your offending has had on the victims. I do not see any insight into the damage that you have caused, and I do not see any remorse for what has occurred. If I can just read a passage from the victim impact statement by the Wellington Tenths Trust:
The single most important item of redress sought from Sir Ngagata Love is a formal, unreserved and sincere apology to the beneficial owners and the trustees of Wellington Tenths Trust who completely trusted him in all matters concerning the trust. That trust was betrayed.
I have seen no formal apology of the type that the trust seeks and to which I consider it is entitled.
[56] For those reasons I am not prepared to reduce the sentence further than the approximate 50 per cent reduction that I have already made.
Sentence
[57] Dr Love, on the charge of obtaining property by deception, you are sentenced to two years six months imprisonment.
[58] Stand down.
Postscript
[59] After I delivered these remarks the Registrar reminded me that, at Mr
Carruthers’ request, I did not enter a conviction at the time I delivered my verdict.
To rectify this omission, Court reconvened and I entered a conviction on the charge
of obtaining property by deception.
Lang J
Counsel:
C R Carruthers QC, Wellington
Solicitors:
Luke Cunningham Clere, Wellington
Bisson Moss, NapierSerious Fraud Office, Wellington