R v McKelvy

[2007] NZCA 340

IN THE COURT OF APPEAL OF NEW ZEALAND

CA252/06

[2007] NZCA 340

THE QUEEN

MILES MCKELVY

Hearing:         28 June 2007

Court:            Wilson, Rodney Hansen and Ronald Young JJ
Counsel:         S L Baigent for Appellant

K Raftery for Crown

Judgment:      9 August 2007 at 10am

JUDGMENT OF THE COURT

Appeal dismissed

REASONS OF THE COURT

(Given by Wilson J)

Introduction

[1] On 2 June 2006 Mr McKelvy pleaded guilty to 27 dishonesty charges, including one representative charge, that had arisen out of a police investigation into serious and organised fraud.    On 7 July, Heath J sentenced him to eight years

R V MILES MCKELVY CA CA252/06 [9 August 2007]

imprisonment with a minimum non-parole period of five years. Mr McKelvy now appeals to this Court on the basis that his sentence is manifestly excessive.

Background

[2] The police investigation (known as "Operation Allsorts"), which began in 2002, uncovered a highly organised group of at least 30 individuals engaging in fraudulent schemes for common gain. The structure of the group was hierarchical, and the appellant was identified as the person at the pinnacle of that hierarchy. The summary of facts to which he pleaded guilty (which runs to nearly 100 pages) noted in its introduction that:

McKELVY had established himself as a self-employed mortgage broker and in that role he was able to attract and identify potential victims. McKELVY's chosen occupation was used by him to legitimise his involvement in a large number of fraudulent transactions.

McKELVY headed the operations of the group throughout the Waikato whilst [Robert William] STIRLING (who held himself out to be a financier or investor) took responsibility for the organisation of the group in the Bay of Plenty. In respect of the various transactions with which they were each involved McKELVY and STIRLING would select the target property or individual, select the strategy to be used to achieve the group's ends and then bring the required parties together to accomplish that objective.

[3] There were four principal strategies by which victims were defrauded, which were aptly characterised by Heath J as identity fraud, price hydraulic fraud, equity fraud, and equity fraud through security realisation.

[4] Identity fraud involved unauthorised impersonation of an individual (the victim) with freehold title to real property, who had been identified through the Land Information New Zealand (LINZ) Land-on-line database. A frontman (usually another co-offender, Mr Orchard) would assume the identity of the victim and enter into a financial transaction involving that person's property. Victims would be unaware that their identity had been used to obtain finance, or their property offered as security, or that a debt had been incurred in their name. When no repayments were made against the loan advance, debt recovery action would be commenced against the victim.

[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 on-sale 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.

[6] The third stratagem, equity fraud, involved loans obtained under a false pretence secured against the equity of a third party (the victim). Typically, individuals targeted in this fraud would have real property that was at risk of public mortgagee sale, or that the owner was seeking to refinance. Victims would be approached and offered a solution to alleviate their financial situation. The solution would often involve transferring victims' assets into a sham trust, and then obtaining a larger loan advance against the property than that required to settle any outstanding obligations on it. Victims would be told that the surplus was to be invested on their behalf so as to yield sufficient returns to service the loan repayments. The victims were often given purportedly independent legal advice from a solicitor nominated by the perpetrators. In fact, they would receive no careful or proper legal advice at all, and so would not understand the true nature of the transactions into which they were encouraged to enter. Any excess funds from loan advances would be disbursed to the perpetrators and associates in accordance with authorities obtained from the victims on the basis of misrepresentations made to them.

[7] Victims of equity fraud would continue to occupy their property, believing that arrangements had been made to protect the equitable asset on their behalf. However, they would in reality have been defrauded of their title to the property, have lost the right to occupy it, and have been deprived of any equity that they might have had in the property. When no payments were made to service the loan obtained in the victim's name, the lending institution would proceed to enforce its legal rights by selling the property and thus leaving the victim homeless.

[8] The fourth fraud stratagem was equity fraud through security realisation. Heath J described this fraud as follows:

[68] The fourth methodology also involved equity fraud. This, in my view, was much more sophisticated and insidious in nature. It was the method used in relation to the Gore farm transaction, a transaction which demonstrates the escalation of the fraud to ever increasing amounts of money.

[69] First it is necessary to understand what the law provides when a property is sold at mortgagee sale. The law provides that the sale price is used to meet the cost of sale and the repayment of secured indebtedness in respective priorities. Once all secured debt has been paid any surplus goes to the owner of the property. Once the purchase price has been used in full, any secured indebtedness that is not met by the proceeds of sale will be extinguished from the land so that the only remaining remedy is for the lender to sue the owner personally. Claims of owners to the property will also be extinguished because the property is transferred and there is be no surplus from the sale.

[70] The purpose of this law is to enable a purchaser to obtain title to land from a mortgagee without having to meet existing indebtedness over the land not incurred by that person and above the market value paid. The law proceeds on two premises: the first is that the parties have entered into an agreement in good faith, the second is that it has been entered into for market value.

[71]     A method was devised to take advantage of that legal position.

[72] First, a property would be identified likely to be sold at mortgagee sale. That might be done by reading an advertisement in a newspaper. The mortgagee effecting the sale would be approached and an offer made to buy the mortgage off it for a price that equated to the moneys outstanding to it.

[73] There would be no ability to pay the purchase price so arrangements were made for back to back agreements to be entered into contemporaneously with a nominated related party.

[74] The second sale would be effected under the mortgagee's power to sell the land, the mortgage having been acquired by the first party. When the second sale was completed, the provisions of our law dealing with the extinction of subsequent registered claims were

brought into play. Effectively, the second entity obtains title to the land free of any encumbrances.

[75] The next step would be for a back to back transaction with the second purchaser with another party at true market value. That would be used to settle the original purchase. The property would be obtained, effectively for the price paid to the mortgagee for the original acquisition of the mortgage. The owners of the land would have no other interest because of the exercise of the mortgagee's power of sale. The subsequent mortgagees would have no claim either.

[76] A freehold title was obtained by defrauding the owners and the subsequent mortgagees, potentially with a handsome profit to be made from the land.

[77] That transaction, if entered into in good faith, and at market value would be entirely legitimate. It was the deliberate sale of the land at mortgagee sale at less than market value that caused the loss and equated to the fraud.

[9] After describing the four offending stratagems, the summary of facts continued (at 8-9):

As a result of the protracted investigation of Operation Allsorts numerous fraudulent transactions were uncovered.

McKELVY has been identified as the principal protagonist in respect of almost all of the offending encapsulated by the Operation Allsorts investigation and prosecution.

The charges on which McKELVY is to be sentenced reflect the leading role he played in each of the 10 transactions conveniently referred to as the Stevenson loan, the Thomas transaction, the McGregor transaction, the Wallen transaction, the Maxwell transaction, the Heta transaction, the Pine transaction, the Beamsley loan, the Campbell transaction and the Gore Farm transaction.

In addition, the representative charge contained in indictment three reflects McKELVY's role as the principal protagonist in respect of a series of price hydraulic transactions concerning properties in both Rotorua and Hamilton.

[10] The police investigation resulted in many charges being laid against many parties. The appellant pleaded guilty to, and was eventually sentenced on the following 27 charges:

(a)Two charges of using a forged document, for which the maximum penalty is 10 years imprisonment on each charge.

(b)Two charges of forgery, in respect of which the maximum
penalty is 10 years imprisonment on each charge.

(c)Four charges of money laundering for which the maximum
penalty is 7 years imprisonment on each charge.

(d)Sixteen charges of using a document with intent to obtain a
pecuniary advantage, each charge carrying a maximum penalty
of 7 years imprisonment.

(e)Two charges of obtaining a document with intent to defraud,
each carrying a maximum penalty of 7 years imprisonment.

(f)One representative charge of conspiracy to defraud, a charge
carrying a maximum penalty of 5 years imprisonment.

Sentencing remarks

[11] Heath J began his sentencing remarks by noting that the appellant had played a leading role in each of the transactions underlying his convictions. He was the "chief executive" in relation to many of the frauds investigated by "Operation Allsorts", and his standing within the group meant that he was responsible for recruiting associates and ensuring that appropriate functionaries were in place to complete particular transactions.

[12] After reviewing the submissions of counsel for the Crown and for the appellant, the Judge identified the relevant principles of sentencing for dishonesty charges to be accountability, denunciation and deterrence. He also noted the need to protect the community, both financial institutions and individuals, from the appellant in the future and stated that:

[39] The fact that your fraudulent conduct had the potential to cause people to lose a family home and, worse, that it did in some cases occur, underscores the seriousness of your offending and the absolute condemnation of it which I must reflect on behalf of society as a whole.

The Judge also noted the need for consistency in sentencing, identifying Mr Orchard and Mr Stirling as appropriate comparators among the appellant's co-offenders.

[13] After outlining the four stratagems used by the appellant and his co-offenders, Heath J considered the appellant's personal circumstances. He appeared for sentence aged 48, with his marriage having ended as a result of his offending and subsequent remand in custody. He was not in a position to pay reparation, but had indicated his willingness to assist police by providing information that may eventually help his victims.

[14] The appellant's pre-sentence report indicated that he had minimised his role in the offending: he had told his probation officer that his behaviour had been "borderline inappropriate and potentially illegal", and that he had terminated his activities on the advice of an ex-solicitor acquaintance once he became suspicious. Heath J discounted, as follows, the appellant's account of what had happened:

[83] In the course of determining a pre-trial application within these proceedings, I had cause to listen to audio recordings of intercepted telephone communications in which you were involved. What I heard brings an entirely different complexion to what you say occurred. The conversation I am going to refer to took place on 3 March 2003 and involved an alternative method of completing one of the transactions in issue, the Gore farm transaction.

[84] The proposal involved financing the owners' son and daughter in law to acquire the property whilst still profiting to the extent of $400,000 from the proposed sale. In the course of that conversation you said:

Pick up 2.6 off our friend Halifax, put the property into the son's name and the daughter in law's name who's clean in credit and work on the farm ... we can still clip the ticket for four hundred on the way through . . .

That does not accord with the explanation you gave to your probation officer.

[15] Heath J commented further in relation to the probation report before coming to the conclusion that the appellant was not truly remorseful for his actions:

[85] In addition, in talking to the probation officer you are said to have highlighted the offending occurred two years ago. There is a simple explanation for that. You have been in custody.

[86] You told the probation officer that you had had a lot of time to think and finally accept your role in the offending. You perceive yourself as someone who wants "to keep everyone happy" and who has a difficulty in "saying no".

[87] The probation officer reports that you were "candid and polite" when interviewed and based on the information you made available to the probation officer, you were reported as presenting "as remorseful and ashamed for the impact" your offending had had upon victims, family and friends.

[88] Regrettably, I do not accept that you are truly remorseful. The deliberate attempt to downplay the nature of your offending, having pleaded guilty to the offences, demonstrates to me that you were trying to [hood]-wink the probation officer in the same way you deliberately misled others in perpetrating these frauds.

[16] Next, Heath J considered aggravating factors relating to the offending, saying first that:

[90] Generally, in sentencing on fraud charges, culpability will be assessed by reference to the maximum penalties available and to the particular circumstances of the offending. Those circumstances will include its magnitude and sophistication, the type, circumstances and number of victims, the motivation for offending, the amounts involved, the losses suffered by victims and/or profits gained by the perpetrators, the period over which the offending occurred, the seriousness of any breach of trust involved and the impact of the offending on victims. Where deliberate and serious fraud occurs, or where recidivism is present, the need to protect the community becomes paramount and imprisonment is inevitable. [R v Varjan CA97/03 27May2003.]

[17] Heath J described the frauds in which the appellant was involved as sophisticated and organised, and recidivist in nature. The Judge highlighted the sophisticated planning, clear premeditation, long offending period (three and a half years), and the cynical targeting of numerous victims.

1. As to victim impact, the Judge made the following comments:

   [100] Most of the victims, certainly those who were not financial institutions, were vulnerable to the type of fraud you undertook. You preyed on the ill, the elderly and the commercially naïve. In one case you defrauded a widow of her home, notwithstanding the fact that you knew the family and she was ill with cancer at the time.

   [101] You held yourself out to many of your victims as a financier or mortgage broker. To that extent they relied upon you in that capacity, and you breached their trust.

[102] I have no doubt that your motivation for your offending involved delusions of grandeur and greed.

[103] It is appropriate that I say a few words also about the inherent vulnerability of many of your victims.

[104] A widow knew you from your school days in Cambridge. At the time the loan arrangements that caused her to lose her house were undertaken she was very sick, suffering from cancer and undergoing treatment. She relied upon you to protect her interests. Now, she and her son have lost their family home and are living in rental accommodation in another town.

[105] Other victims were pensioners in their mid 60s when the frauds were perpetrated. Although they have not yet lost their home, they may do so as they remain in that home with the grace of a bank that acceded to a Police request not to force a sale while the prosecution proceeded. The husband has suffered a series of mild strokes, thought to have been induced by the stress caused as a result of events you brought about.

[106] Two other victims, while against all odds recovering much of their previous financial position, have suffered the impact of emotional distress. The husband suffered something of a nervous breakdown from which he is recovering. The breakdown led to problems in the domestic relationship, finally revealing itself in a form of physical violence to his wife. No such problems existed before the frauds.

[107] Two Maori brothers lost land near Hamilton as a result of the fraud you and others perpetrated upon them. They, I suspect, sum up the feelings of many of your victims when they say, in their victim impact statement:

We are simple people who thought we could trust people who appeared to be successful businessmen and were giving us advice. We realised too late that the advice we were given was for their benefit not ours.

[108] And finally, I refer to a retired pensioner now aged 80 years. He had lived in the same property for almost 37 years and had not taken out a loan for over 30 years. The property was unencumbered. He discovered that his identity had been stolen to procure a loan to be secured over his property. At his age one can hardly be surprised to learn that he considered it "a very frightening experience to discover that one's home is under threat as a result of identity fraud".

[109] They are the stories of some, but by no means all, of your victims. That summary cannot and does not reflect the full extent of financial and psychological harm you have inflicted. But they do provide an insight into the level of amoral conduct to which you were prepared to sink in order to gain financial benefits for yourself.

[110] All of those factors aggravate your offending. In my view, bearing in mind that the losses you personally caused were at least $1,400,000 I regard this as a case which I am entitled to say falls within the most serious of offences of this type. Accordingly, using the forgery charges as a basis, I take a starting point for sentencing,

having regard to aggravating factors relating to the offending alone of 10 years imprisonment, the maximum penalty for forgery.

[19] Having considered the aggravating factors relating to the offending, Heath J then highlighted two aggravating factors that were relevant to the appellant personally. First, the extent and similar nature of his prior offending and its close proximity in time to the current offending, and secondly, the fact that some of the prior offending occurred while the appellant was on bail or subject to a community-based sentence. Heath J accounted for these factors as follows:

[117] Those ... serious aggravating factors ... demonstrate, in my view, a failure to modify your behaviour as a result of prior sentences for fraud. I take the view that a further 2 years should be added for the purpose of determining a starting point, absent mitigating factors. That means my starting point before taking account of mitigating factors will be 12 years imprisonment.

[20] Having already found that the appellant was not genuinely remorseful, the Judge considered his early guilty pleas to be the only mitigating factor. For this, he applied a credit of one-third, which amounted to a credit of four years imprisonment. The result was an effective sentence of eight years imprisonment.

[21] Heath J considered that, for the following reasons, this sentence was consistent with sentences imposed on the appellant's co-offenders and with historical sentencing for this type of offending:

[132] I regard your offending as worse than Mr Stirling. I regard your offending as equivalent, if not worse, to Mr Orchard. I am satisfied that as between co-offenders who have been convicted and sentenced on offences detected during Operation Allsorts, that a term of imprisonment of 8 years reflects appropriate parity.

[133] I am also satisfied that the term of 8 years imprisonment is consistent with other sentences imposed on similar charges, notwithstanding Mr Kaye's submissions to the contrary.

[134] It has often been said that dishonesty sentencing is fact specific. It is difficult to compare precisely facts existing on individual cases. However, the nature of your offending requires, in my view, a higher sentence than most of those with whom the Court has previously dealt. [R v Rose [1990] 2 NZLR 552 (CA), R v Wallnutt (CA 182/93, 8 August 1993) (7 years imprisonment), R v Rutherford (High Court, Auckland, T992325, 16 August 2000, Randerson J) (6 years 6 months imprisonment) and R v Renshaw (1992) 8 CRNZ 695 (7 years imprisonment)] In making that comment, I acknowledge that my remarks reveal a more serious view of the consequences of fraud than has been expressed in some of the

earlier cases. Whether those views are confirmed by the Court of Appeal, one will find out in due course.

[135] Your offending was more widespread than other similar cases. It was systematic in its attempt to defraud both financiers and individuals. It preyed on the naïve, the elderly and the inexperienced. I assess the cumulative effect of your offending as worse than what has occurred in similar cases. The sentence to be imposed needs to reflect that.

1. Finally, Heath J imposed a minimum non-parole period of five years, saying that:

   [139] I have no doubt that most citizens of this country would find the idea that you would be eligible for parole after serving one-third of your sentence abhorrent.

   [140] Your offending is sufficiently serious to fall outside that type of offending on which minimum periods are not imposed. My finding that your offending was within the worst of its type makes that assessment inevitable.

   [141] If I were not to impose a minimum sentence, the sentencing goals identified by the Court of Appeal in R v Brown [[2002] 3 NZLR 670 (CA)] could not be met. Denunciation of your conduct, deterrence of you and others from committing similar offences and the need to punish you adequately, require a minimum term to be imposed.

   [142] In Mr Stirling's case I took the view that the minimum sentence should be close to the maximum available. Notwithstanding the Crown submissions, I am not prepared to treat you differently from Mr Stirling.

   [143] The minimum sentence should be close to the maximum available. I round the minimum sentence to one of five years imprisonment.

Submissions for the appellant

[23] Ms Baigent, for the appellant, submitted in her written submissions that the sentence of eight years was manifestly excessive for three reasons.

[24] First, she submitted that the starting point of 10 years imprisonment (before two years was added for aggravating factors personal to the appellant) was too high, saying that she could find no previous instances of courts adopting so high a starting point for offending of this kind. She submitted that Heath J may have been adversely influenced by evidence to which he  had listened in the course of

determining a pre-trial application in relation to a co-accused. Counsel pointed us to a reference in the sentencing remarks where Heath J quoted from that evidence in the course of making an adverse finding about the appellant's credibility. Ms Baigent submitted that this evidence was never intended to be part of the case against the appellant once he had pleaded guilty, and that it was improper for it to influence the determination of his sentence.

[25] Ms Baigent also referred us to this Court's decision in R v Rose [1990] 2 NZLR 552, which she described as the leading case for sentences of this nature. In that case, there were 20 charges of fraud and forgery, the offending having been committed by a person in a position of trust over a five-year period and resulting in potential losses of $8.4 million. Mr Rose had been sentenced in the High Court to 18 months imprisonment, but this Court stated in allowing the appeal that the starting point for such cases should be seven to eight years. Ms Baigent submitted that the offending in Rose was over a longer period and resulted in greater losses than in this case, and that a starting point no higher than eight years was appropriate here.

[26] Ms Baigent did accept that personal aggravating factors relating to the appellant justified an uplift to that starting point, but suggested in her written submission that the two-year uplift applied by Heath J was severe, although within the margins of what was properly open to him. She submitted that a starting point of 10 years after consideration of all aggravating factors matched the maximum penalty for forgery, would sit comfortably with Rose, would adequately meet the requirements of the Sentencing Act 2002, and would not disturb sentence parity with co-offenders.

[27] Secondly, Ms Baigent submitted that the one-third discount applied to reflect the appellant's guilty pleas inadequately reflected the benefit to the community, and the victims, of those early pleas. She pointed out that, prior to his pleas, the appellant had faced 75 charges spanning three indictments. She submitted that his pleas had saved the community the expense of preliminary hearings and trials, had saved the Crown the burden of presenting evidence to support so many charges, and had saved the victims the stress of anticipation of trial and the tension of having to give evidence. Ms Baigent submitted that these factors amounted to exceptional

circumstances that merited a greater than one-third discount; a 35 to 40 percent reduction would be appropriate.

[28] Finally, Ms Baigent submitted that the minimum non-parole period of five years was manifestly excessive, given that it was only just below the two-thirds maximum allowed under the Sentencing Act, and the Crown had sought only a 50 percent minimum non-parole period at sentencing. Although Ms Baigent accepted that a minimum non-parole period was appropriate in this case, she submitted that the sentencing Judge had failed to turn his mind to the principles outlined in sections 7, 8 and 9 of the Sentencing Act. In that respect, she submitted that Heath J had diverted from the course prescribed by this Court in R v Brown (2002) 19 CRNZ 534 at [34]. She suggested that a minimum non-parole period of no more than 50 percent would satisfy issues of parity with other co-offenders and the common law principles outlined in Brown.

[29] At the hearing, Ms Baigent modified her position. She accepted that a term of ten years imprisonment was within the permissible range but submitted that the uplift of two years was excessive and that 11 years would be an appropriate starting point before considering the personal circumstances of the appellant.

Submissions for the respondent

[30] Mr Raftery, for the Crown, submitted that there was no established sentencing benchmark for dishonesty offending and that culpability must be determined by considering a range of factors: R v Varjan CA97/03 26 June 2003 at [21]-[22]. Although these factors include the losses caused and the period over which the offending occurred, Mr Raftery submitted that these should not be determinative. In particular, he submitted that the vulnerability of victims and the impact of offending on victims were equally important. Because many of the appellant's victims were particularly vulnerable and severely affected by his offending, Mr Raftery submitted that Heath J was justified in considering the appellant's offending to be more serious than the offending in Rose, and meriting a higher starting point.   The 10-year starting point adopted by Heath J was therefore

appropriate, and the two-year uplift to recognise aggravating factors personal to the appellant was entirely within the Judge's discretion.

[31] In response to Ms Baigent's suggestion that Heath J made inappropriate use of evidence from a co-accused's pre-trial hearing, Mr Raftery suggested that that factor had little or no impact on the overall sentence. He submitted that the appellant would have been very unlikely to receive credit for remorse, given the widespread and systematic nature of his offending, his consistent targeting of the financially vulnerable and commercially naïve, and the fact that he was a recidivist fraudster.

[32] Heath J, with the assistance of his detailed knowledge of the offending, was entitled to find that the appellant's professed remorse was not genuine.

[33] Mr Raftery also submitted that a 12-year starting point was not inconsistent with previous sentencing decisions (citing Rose and R v Wallnutt CA 182/93 8 August 1993) and achieved parity with the sentences imposed on the appellant's co-offenders.

[34] As to the minimum non-parole period, Mr Raftery submitted that the five-year period imposed, which amounted to 62.5 percent of the appellant's end sentence, could not be challenged given the extent of the appellant's culpability and the non-parole periods imposed on his co-offenders. Although the Crown at sentencing had sought a 50 percent minimum, this did not bind the Judge.

[35] The most important point, counsel submitted, was that the sentence of eight years imprisonment was not excessive given the wide net, not only of victims, but also of other offenders who had been introduced by the appellant.

Discussion

[36] In 2003, this Court said in Varjan that there was no established benchmark when sentencing dishonesty offending. The circumstances of, and culpability in, offences of dishonesty vary widely and must be assessed in light of the guidance to be found in previous decisions.

[37] We agree with Mr Raftery that Rose did not feature the same degrees of breach of trust and victim impact as in the present case, and that the 1993 decision in Wallnutt is more directly comparable. Although the offending in Wallnutt occurred over a longer period (seven years), it involved losses of 1.7 million, gross abuse of trust, a callous disregard for the plight of victims, a significant impact of offending on a wide circle in the community, and a complete absence of reparation. Mr Wallnutt was described as preying on persons recovering from illness or injury, as well as targeting the elderly. The High Court Judge in that case had taken a starting point of eight years and reduced it by one year for the offender's early guilty plea. On appeal, this Court found that the one-year discount was insufficient, saying that it should have been two years. However, the appeal was nonetheless unsuccessful. This Court said that an eight-year starting point in the circumstances could not be described as other than moderate.

[38] Although the offending in this case involved smaller losses than in Rose and occurred over a shorter time period than that in either Rose or Wallnutt, we think that Heath J was correct to categorise the appellant's offending as being "within the most serious of offences of this type". Given the appellant's deliberate targeting of vulnerable victims, the significant planning and premeditation involved, and the key organising role played by the offender, we do not consider the starting point of 10 years before consideration of personal aggravating factors to be manifestly excessive, or indeed at all excessive. Nor do we think that Heath J's consideration of evidence from a co-offender's pre-trial hearing can have significantly influenced his choice of starting point. The summary of facts detailing the fraudulent transactions and their impact on victims makes grim reading.

[39] We also consider that Heath J was fully justified in adding two years to that starting point in recognition of the appellant's personal aggravating factors, given the scale and extent of his previous similar offending and its close proximity in time to the current offending. A two-year uplift in those circumstances is well within acceptable bounds.

[40] As to the discount applied for the appellant's early pleas, we agree with Ms Baigent that these saved the Crown considerable expense and difficulty, and the

victims considerable additional stress and pressure. However, we also agree with Mr Raftery that these benefits were fully accounted for in the four-year credit given by Heath J for this purpose. The fact that an offender initially faces a high number of charges, against multiple victims, that would necessitate complex trial proceedings cannot constitute an exceptional circumstance that would justify the offender being given an exceptional discount on entering early pleas to a lesser number of charges; if it did, the offender would be rewarded for the scale of the offending.

1. This Court recently said in R v Fonotia [2007] NZCA 188 at [50]:

   This court has yet to deliver a guideline judgment on reductions for guilty pleas, although reference has previously been made to the excellent work which has been done on this topic by United Kingdom's Sentencing Guidelines Council and the New South Wales Court of Appeal in R v Thomson (2000) 49 NSWLR 383: see R v Hannagan CA396/04 18 July 2005 at [25], R v Growden CA67/05 25 October 2005 at [50], and R v Marsters (2005) 22 NZTC 19,649 at [27]. This court has regularly approved discounts of between 10% and 33%. The extent of the discount primarily reflects when the guilty pleas were entered: the earlier the plea is entered, the greater the discount. That accords with the position under the United Kingdom and New South Wales guidelines.

[42] The one-third discount allowed by Heath J for the guilty pleas, as the only mitigating factor, is consistent with these authorities.

[43] The final point to consider is the length of the non-parole period. In Brown, this Court stated as follows in relation to determining whether a non-parole period should be applied, and if so, how long it should be:

[34] If it is found that the sufficiently serious threshold is crossed [such that a non-parole period is appropriate], the sentence must then, again as a matter of sentencing discretion, determine whether to impose a minimum sentence and, if so, the period between one-third of the nominal sentence and the maximum prescribed by s 86(4). It is at this stage that all the sentencing principles in ss 7, 8 and 9 require consideration. It will be wrong simply to go to the point of two-thirds of the sentence without carefully reviewing the circumstances of the offence and of the offender.

[35] To sum up, when a minimum non parole period is in issue the sentencing Judge is involved in a two stage process. First, the nominal or maximum length of the sentence is fixed. That is done, as hitherto, by reference to all relevant sentencing considerations, largely now incorporated in the sentencing principles set out in ss 7, 8 and 9 of the Sentencing Act. Second, as a separate exercise, the Judge must consider whether the offending itself is sufficiently serious so that for

the offender to serve only the ordinary minimum period of one-third of the length of the sentence would not be enough to punish, deter and denounce the offending. If that is so the Judge may fix a minimum non parole period at a level (not more than two-thirds of the nominal length of the sentence or ten years) which does sufficiently punish, deter and denounce the offending.

[44] We disagree with Ms Baigent that Heath J failed to turn his mind to the sentencing principles set out in ss 7, 8 and 9 of the Sentencing Act 2002 when setting the length of the minimum non-parole period. He clearly did so, and did so fully, in the course of determining the appropriate sentence for the appellant. It is disingenuous to suggest that those principles were then overlooked when it came to determining the length of the non-parole period to be applied. Given that Heath J categorised this offending as among the most serious of this type, and found that community protection was required, a non-parole period four months shorter than the maximum two-thirds allowed under the Sentencing Act cannot be considered manifestly excessive. The appeal must also fail on this point.

[45] In summary, the end sentence of eight years imprisonment, with a minimum non-parole period of five years, cannot possibly be said to be manifestly excessive.

Result

1. The appeal against sentence is dismissed.

Solicitors:

Crown Law Office, Wellington