R v R HC Auckland CRI 2005-044-3195
[2006] NZHC 1403
•10 November 2006
This case has been anonymized
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI 2005-044-3195
THE QUEEN
v
R
Hearing: 10 November 2006
Appearances: B Tantrum for Crown
A D Banbrook for accused
Judgment: 10 November 2006
SENTENCING REMARKS OF ALLAN J
Solicitors:
Crown Solicitor Auckland
C K Lyon PO Box 99872/A D Banbrook, PO Box 3600 Auckland
R V R HC AK CRI 2005-044-3195 10 November 2006
[1] Mr R , you appear for sentence, having pleaded guilty on 16 August
2006, to three counts laid under ss 62 and 128A of the Insolvency Act 1967 which alleged that, being a bankrupt, you took part in the management or control of a business without the consent of the Assignee or the Court. The businesses concerned were those of BA Developments Ltd, WDA Construction Ltd, and Marsden Point Developments Ltd, respectively. The maximum penalty for each of these charges is two years imprisonment.
[2] You were adjudicated bankrupt on 6 June 2001. In 2004 the Official Assignee objected to your discharge and you remain bankrupt. Subsequent to your adjudication, in the latter part of 2002, you arranged with a Mr Ballard and a Mr Farrell, to develop a proposal involving the construction of four dwellings on a site in Torbay. At that time you had been working in the real estate industry. Mr Ballard was also bankrupt. He has already been dealt with by this Court for similar offending and I will return to his position shortly.
[3] BA Developments and WDA Construction were incorporated by Mr Ballard’s solicitor. You opened bank accounts for each of these companies. You were involved in negotiations over project funding and were responsible for liaising with real estate agents in respect of marketing.
[4] Early in 2003, you identified a further opportunity at Marsden Point. The result of that was that Marsden Point Developments Ltd was incorporated to engage in the residential subdivision of some 160 sections, together with a golf course and an industrial precinct.
[5] The assessment of project costs for Torbay was far too optimistic. BA Developments and WDA Construction both failed. There was a very significant shortfall. Mr Farrell met some $600,000 of liabilities pursuant to his guarantee, but there remains a deficit of about $150,000.
[6] The Marsden Point project has apparently been successful. There is no suggestion that it has lost money and significant profits are anticipated. This business
involved Mr Farrell and he stands to share in substantial profits as a result. Mr Banbrook submits that that is a relevant factor to set against the losses which Mr Farrell was required to meet on his guarantees in respect of the other project. I accept there is some force in that submission.
[7] You now dispute certain aspects of the prosecution summary of facts, although the Court was earlier given to understand that the summary was agreed. In particular, you assert that you had no responsibility for project costings which you believe to have been the primary cause of the financial demise of the Torbay project, nor do you accept you were involved in the day to day management and operation of BA Developments and WDA Construction.
[8] There is evidence that suggests that, contrary to your contention, you were involved to an appreciable degree in the financial side of those businesses. Along with his submissions Mr Banbrook has provided to the Court a letter of
18 September 2006 from your co-accused Mr Ballard. In that letter Mr Ballard says you played a relatively limited role in these companies.
[9] Mr Tantrum submits that it would not be proper for the Court to place any weight on the letter, and invites me to set it aside, unless Mr Ballard comes to Court to be cross-examined on the contents of his letter. On the view I take of this matter Mr Ballard’s letter is not of particular significance, and I simply place it effectively in the background.
[10] In some respects your current position is in conflict with the Crown’s contentions. But in the end it is unnecessary for me to make detailed factual findings because you accept that you did play a role in the management of these companies, and it is also common ground that you initiated the Torbay project. On the other hand, it is necessary to bear in mind the major roles played by Messrs Ballard and Farrell in the business.
Sentencing principles
[11] I take into account the purposes and principles of sentencing set out in ss 7 and 8 of the Sentencing Act 2002. An important aspect of sentencing for offences such as this is that of deterrence. That means I must impose a penalty which is likely to deter you and others from similar offending in the future. I must also take into account the need to protect the public from loss resulting from the imprudent management of businesses by those who have demonstrated, by virtue of their bankrupt status, that they may lack the skills necessary to succeed in business. That was a point made by Courtney J in Official Assignee v Carroll HC AK CRN 2005-
404-261 16 December 2005.
[12] The pre-sentence report provided to the Court is an instructive document. It reveals that you are 67 years of age and have worked in senior management for major companies for more than 40 years, sometimes as a contract consultant. You are married with two adult children. You became bankrupt for the first time after failing to meet interest payments on your home. You now work as a consultant for Bayleys Real Estate. You have no previous convictions. Your overall financial situation, as one might expect, is poor. You have some health problems which it is not necessary to detail, save to say you were recently hospitalised on an urgent basis, with internal bleeding. Your medical reports indicate that physical and emotional stress are likely to be highly detrimental to your on-going health.
[13] The writer of the pre-sentence report notes that there appears to be little remorse on your part in respect of this serious offending, and indeed, the question of remorse was not addressed in your counsel’s submissions this morning. It seems that at least to some extent you regard this offending as somewhat technical. If that is so, then you are badly mistaken. These offences exist in order to ensure that the public is not put at risk through the activities of persons who have been unable to manage their financial affairs in the recent past.
[14] In the present case very substantial losses have accrued. Those losses would not have arisen had you complied with your obligation not to involve yourself while
bankrupt in business management because this project would never have got off the ground without you.
Aggravating and mitigating factors
[15] An aggravating factor here is the degree of premeditation involved in this offending. Of course, a certain element of premeditation is inherently part of the offence itself, in that all management involves a degree of planning. However, this was offending that went on over a very long period, almost a year. Moreover, I must take into account the fact that there were very significant losses. Many creditors will never be repaid, at least in full.
[16] In mitigation there is your guilty plea, and you are entitled to credit for that. However, I observe that the plea came only a week before trial, so the discount must be less than would be justified by an early plea.
Crown Counsel’s submissions
[17] Counsel for the Crown submits that this is a case in which the appropriate sentence is a relatively short term of imprisonment. Mr Tantrum points to the late guilty plea, the apparent absence of remorse, and the limited extent of the proffered reparation to which I will turn shortly.
[18] On your behalf, Mr Banbrook submits that reparation would itself be a sufficient penalty. Otherwise he submits you should simply be convicted and discharged. There is an obvious discrepancy between those two approaches.
Co-offenders’ sentence
[19] Mr Ballard was sentenced by Cooper J on 28 July 2006. The Judge referred to an earlier decision of Harrison J on 7 June 2006, in which that Judge dealt with an application for discharge. Apparently Harrison J formed the view that the primary responsibility for business and financial matters rested with you, rather than
Mr Ballard. Cooper J was content to accept that observation in the course of sentencing Mr Ballard.
[20] Before me, as I have already discussed, there is a dispute as to the extent (if any) to which your management role was greater than that of Mr Ballard. I am inclined to think you may have been more involved in core financial matters than him, but I think there is sufficient similarity in the degree and scale of your offending, to require me to have regard to the sentence imposed on Mr Ballard. Cooper J sentenced Mr Ballard to 100 hours community work on each of two counts, but directed those sentences be served concurrently. In addition, he directed that reparation of $5000 was to be paid in respect of each count.
Discussion
[21] In a recent decision of the Court of Appeal, R v Holt CA59/06 30 May 2006, the Court reviewed several decisions of this Court in which short terms of imprisonment were imposed for offending similar to this, and dismissed an appeal against a sentence of nine months imprisonment. The Court pointed out that offending of this sort can vary significantly in its scale and gravity, and that therefore only limited assistance can be gained from sentences imposed in other cases. The offending in Holt was significantly worse than this, although the amount of the loss involved (about $55,000) was substantially less than arose here. But Mr Holt was bankrupt for the second time, was well aware of his obligations, ignored express warnings to desist from his unlawful management activities, and when later detected, simply discontinued one activity and started a further, quite separate, unlawful business.
[22] An important factor in that case was Mr Holt’s failure to proffer anything concrete by way of reparation, although he expressed himself as being prepared to pay reparation if ordered to do so. It is perhaps appropriate to add to what I have said about Holt, that because I wrote the judgment in the Court of Appeal in that case, I have some considerable knowledge of it. A matter which was taken into account by the Court of Appeal is the fact that the sentencing Judge expressed the
view that were it not for the second set of offences following a warning, a sentence of imprisonment may not have been imposed in that case.
[23] In the present case, your counsel has indicated that you are able to pay $5000 by way of reparation in respect of each of the two counts relating to BA Developments Ltd and WDA Construction Ltd respectively. He submits that there ought to be no reparation in respect of Marsden Point Developments Ltd because it has sustained no loss.
[24] As I understand it, you would need to turn to your mother for the funds in order to make reparation, because you have no assets of your own. In doing that you would be drawing in advance on expectations of future inheritance. Mr Banbrook has confirmed you are in a position to pay reparation of that order immediately
[25] I am quite unable to accept Mr Banbrook’s submission that the payment of such reparation represents the outer limit of any appropriate sanction. I have decided not to impose a term of imprisonment, but I must say that you have avoided a custodial sentence by a relatively fine margin. These were quite large scale businesses and there is no doubt you took a major role in setting them up and maintaining them. Your apparently limited ability to acknowledge your offending is a worrying factor.
[26] I intend to impose a sentence of community work, and to make an order for reparation. Cooper J imposed a sentence of 100 hours community work upon Mr Ballard. In my view that is insufficient in your case. Your guilty plea came later than his. It is difficult to discern any real acceptance of, or regret for, your offending, and further, and importantly in my view, you initiated these business proposals, and recruited the others for that purpose.
[27] I therefore impose a sentence of 150 hours community work on each of counts 1 and 2 in the indictment. I impose a sentence of 100 hours community work on count 3 and distinguish count 3 because no losses arose from the Marsden Point project. All those sentences are to be served concurrently so that the total penalty is
150 hours.
[28] I also direct that you pay reparation of $5000 each in respect of counts 1 and
2. That is a total of $10,000. That sum is to be paid on or before 17 November
2006. Reparation is to be paid to the Official Assignee, who is best placed to determine how these sums ought to be disbursed.
C J Allan J
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