R v Sullivan
[2014] NZHC 725
•9 April 2014
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
CRI 2011-076-1948 [2014] NZHC 725
THE QUEEN
v
EDWARD ORAL SULLIVAN ROBERT ALEXANDER WHITE and LACHIE JOHN McLEOD
Hearing: 12, 13, 17, 18, 19, 21, 24, 25, 26, 27, 31 March 2014
1, 2, 3, 4, 7, 8 and 9 April 2014
Counsel:
C R Carruthers QC, N F Flanagan, P W Gardyne and
E Rutherford for Crown
P H B Hall QC, M A Corlett and K H Cook for Mr Sullivan
R B Squire QC for Mr White
J H M Eaton QC for Mr McLeodJudgment:
9 April 2014
JUDGMENT (NO. 6) OF HEATH J
This judgment was delivered by me on 9 April 2014 at 2.00pm pursuant to Rule 11.5 of the High
Court Rules
Solicitors:
Registrar/Deputy Registrar
Serious Fraud Office, PO Box 7124, Wellesley Street, Auckland
Meredith Connell, PO Box 2213, Auckland
Gresson Dorman & Co, PO Box 244, Timaru
Rhodes & Co, PO Box 13444, Armagh, Christchurch
Cameron & Co, PO Box 1985, Christchurch
Counsel:C Carruthers QC, PO Box 305, Wellington 6140
P H B Hall QC, PO Box 3750, Christchurch
R B Squire QC, PO Box 10157, Wellington
J H M Eaton QC, PO Box 13868, Armagh, ChristchurchM A Corlett, PO Box 4338, Shortland Street, Auckland
R v SULLIVAN and Ors [2014] NZHC 725 [9 April 2014]
The application
[1] On 25 March 2014,1 the Crown signalled an intention to apply to amend count 10 of the indictment. Count 10 is one of a number of charges of dishonesty brought against Messrs Sullivan, White and McLeod, arising out of the collapse of South Canterbury Finance Ltd (South Canterbury).2 At material times, Messrs Sullivan and White were directors of that company, and Mr McLeod its Chief Executive Officer.
[2] A formal application was filed on 28 March 2014.3 Substantive amendments are opposed by all three accused. Having received written submissions in advance, I heard the application on 4 April 2014, the 15th day of the trial.
Background
[3] In September 2008, as a result of the failure of significant financial institutions in the United States, financial markets around the world went into turmoil. A massive loss of public confidence in the financial sector resulted. Governments in different parts of the world were driven to decide what steps to take to restore public confidence.
[4] On Sunday 12 October 2008, the Minister of Finance announced the terms of (what I shall call) the Crown Guarantee Scheme, which was designed to protect investors and to restore confidence in the New Zealand financial markets. An explanation of the raison d’être of the scheme can be found in the Preamble to (the subsequently executed) deed of 19 November 2008, between Her Majesty the Queen (in right of New Zealand) and South Canterbury (the Guarantee Deed).
AGiven turmoil in world financial markets and the need to maintain public confidence in New Zealand’s financial system and in order to maintain the confidence of general public depositors in New Zealand financial institutions such as [South Canterbury] it appears to the Minister of Finance that it is necessary and expedient in the public interest that the Crown guarantees certain obligations of [South Canterbury].
1 R v Sullivan & Ors (Minute (No 36)) HC Timaru CRI-2011-076-1948, 25 March 2014, at paras
[1]–[5].
2 The nature of the charge is summarised at paras [10]–[12] below.
3 The amendments sought are set out in para [13] below.
[5] Entry into the Crown Guarantee Scheme was at the discretion of the Secretary to the Treasury. That discretion was to be informed by factors identified in a policy document to which officials had regard. One of the factors to be taken into account was the extent of any related party exposure to the applicant entity. The Crown alleges that material related party lending was not disclosed to Treasury while South Canterbury’s application to join the scheme was being pursued.
[6] The Crown must prove that misleading information was made available deliberately by each of the accused; in other words that each was a party to making a dishonest representation to Treasury. While there is a good deal of evidence still to be given about the state of each of the accused’s knowledge at the material time, in the context of the application to amend the indictment, three pieces of correspondence require consideration.
[7] On 14 October 2008, Mr McLeod forwarded a letter to the Secretary to the Treasury, by which South Canterbury applied for entry into the Crown Guarantee Scheme. Among other things, the letter provided information relevant to the application, either in its body or in attachments. The letter concluded:
A signed statement from someone with authority to bind the applicant confirming that the details in this form are true and correct and that no Default Event as defined in the draft Deed of Crown Guarantee is in existence:
I, Lachie John McLeod, Chief Executive Officer of South Canterbury Finance Ltd confirm that the above information is true and correct and that no default event as defined in the draft Deed of Crown Guarantee is in existence
[Signed]
L J McLeod
The audited financial report for the year ended 30 June 2008, and Prospectus 58, dated 15 October 2007 were enclosed with Mr McLeod’s letter.
[8] On 3 November 2008, Mr Hutton, South Canterbury’s “Group Accountant”, wrote to Treasury:
New Zealand Deposit Guarantee Scheme
Please find enclosed a copy of our Prospectus and Investment Statement. Please note that at the time of writing the Prospectus has not been registered.
We are providing this document to you solely for the purpose of supporting
our New Zealand Deposit Guarantee Scheme application. The document has pre-registration approval from the Companies Office. We will be filing the signed prospectus for registration later today when the directors complete sign off.
Please advise should you require anything further.
The document that was attached became known as Prospectus 59.
[9] Under cover of a letter dated 17 November 2008, Mr White sent to Treasury an executed copy of the Deed of Guarantee. In doing so, Mr White wrote:
CROWN DEED OF GUARANTEE (NON-BANK DEPOSIT TAKER)
Various correspondence related to the above refers.
We now enclose for your consideration, Deed of Guarantee executed by two Directors of South Canterbury Finance Limited (In duplicate) In accordance with your instructions. The writer, as co-signatory to the Deed, confirms with you that the Information provided to you remains In all material respects true and correct and that no default event has occurred and is continuing unremedied. This confirmation is given within the writer's authority to bind the Company.
Count 10 of the indictment
[10] Count 10 is the most serious charge in the indictment. In very general terms, the Crown alleges that Mr Sullivan, Mr White and Mr McLeod deliberately provided misleading information to the Minister of Finance (through Treasury) and that the false information induced the Minister to execute the Guarantee Deed. After South Canterbury was put into receivership, the guarantee was called upon. A payment of something in the order of $1.6 billion was required to satisfy the guarantee obligation.
[11] Count 10 of the indictment is brought under s 240 of the Crimes Act 1961 (the Act), charging that the accused committed theft by a person in a special relationship. Count 10, in its current form, states:
10. The Solicitor-General further charges Edward Oral Sullivan, Robert
Alexander White and Lachie John McLeod on or about 18 October
2008 at Timaru or elsewhere in New Zealand by deception and without claim of right induced or caused Her Majesty the Queen in the right of New Zealand acting by and through the Minister of Finance to execute any document or thing capable of being used to derive a pecuniary advantage being the Crown Deed of Guarantee (Non-Bank Deposit Taker) dated 19 November 2008 namely by application for acceptance into the Crown Guarantee Scheme the value of which being in excess of $1,000.00 in favour of South Canterbury Finance Limited.
Particulars
Crown Guarantee Scheme
1. South Canterbury Finance Limited letter of application dated 14
October 2008 together with audited financial report for the year ended 30 June 2008 and Prospectus 58 dated 17 October 2007 which was misleading in the following respects:
Failing to properly refer to the lending to Woolpak Holdings Ltd or to give proper emphasis to the nature of the lending associated with the Hyatt Hotel Auckland;
Stating that the company had not entered into any other material contracts within the last two years not being in the ordinary course of business;
Stating that “[a]ssociated company and related party transactions totalled $65,450,426…. All transactions were in the normal course of business and are fully secured.” (p32);
2.South Canterbury Finance Limited letter dated 3 November 2008 together with Prospectus 59 dated 17 October 2008 which was misleading in the following respects:
Failing to properly refer to the lending to Woolpak Holdings ltd; Stating that the company had not entered into any other material
contracts within the last two years not being in the ordinary course of business;
Stating that “[a]ssociated company and related party transactions totalled $64,185,426… All transactions were in the normal course of business, are fully secured and, except for …, are at rates not less than the company’s cost of funds.” (p32);
Stating that the company was supported by an undrawn committed bank $150 million cash facility.
…
[12] It can be seen that the Crown relies on the letters of 14 October and 3
November 2008 (and the supporting financial information set out in the two prospectuses) to prove its claim that misleading information was provided to the Minister:
(a) Particular 1 refers to the information annexed to the original letter of application sent by Mr McLeod on 14 October 2008. The three bullet points of Particular 1 identify the nature of the allegedly misleading information.
(b)Particular 2 is based on Mr Hutton’s letter of 3 November 2008. That enclosed (what became) Prospectus 59, which is alleged to be misleading in the four respects set out in Particular 2.
Analysis
(a) The proposed amendments
[13] The Crown seeks to amend count 10 in three ways:
(a) By changing (in the body of the count) the words “on or about 18
October 2008” to “between 14 October 2008 and 19 November
2008”. The proposed dates are fixed by reference to the letter sent by Mr McLeod on 14 October 2008, and the day on which the Crown Guarantee was executed on behalf of the Crown, 19 November 2008.
(b) By changing Particular 1, from “Prospectus 58 dated 17 October
2007” to “Prospectus 58 dated 15 October 2007”; and
(c) By adding a new Particular 3, in these terms:4
Letter dated 17 November 2008 to Treasury from South Canterbury Finance Limited enclosing an executed copy of the Crown Deed of Guarantee.
4 The relevant parts of this letter are set out at para [9] above.
[14] The accused accept that the second of the proposed amendments is formal in nature and reflects the date of Prospectus 58 that is in evidence. An order amending the indictment in that respect is not opposed.
(b) Competing contentions
[15] Mr Carruthers QC, for the Crown, submits that all of the proposed amendments are formal in nature, and that there is no question of “surprise or prejudice “ to the accused if they were allowed. With respect to the contested amendments, he contends:
(a) The first provides a more precise range of dates during which the Crown asserts that the three accused engaged in a continuing course of conduct that gave rise to the alleged offending.
(b)The third simply includes a specific reference to the letter forwarded by Mr White to Treasury on 17 November 2008. That is a letter on which the Crown has placed reliance, evidentially, for some time.
[16] The burden of argument on behalf of the accused was carried by Mr Corlett. In comprehensive and helpful written submissions, Mr Corlett based their objections primarily on grounds of jurisdiction. He submitted that there was no “variance between the proof and the charge” from which the Court could exercise its power to
amend under s 335(1) of the Act.5 Alternatively, Mr Corlett submitted that there
would be material prejudice to the accused if the amendment were permitted. On the view I have formed, it is unnecessary to consider the prejudice point.
(c) Legal principles
[17] As charges were first laid before 1 July 2013, the application falls to be determined under s 335 of the Act.6 Relevantly, s 335(1), (2), (5), (7) and (8)
provides:
5 Section 355 is set out at para [17] below.
6 This is the effect of the transitional provisions set out in s 397 of the Criminal Procedure Act
2011.
335 Variance and amendment
(1) If on the trial of an indictment there appears to be a variance between the proof and the charge in any count of the indictment either as filed or as amended, or as it would have been if amended in conformity with any such further particulars, the Court before which the case is tried, or the Court of Appeal, may amend the indictment, or any count in it, so as to make it conformable with the proof.
(2) If the Court is of opinion that the accused has not been misled or prejudiced in his defence by such variance it shall make the amendment.
...
(5) If the Court is of opinion that the accused has been misled or prejudiced in his defence by any such variance, error, omission, or defective statement as aforesaid, but that the effect of his being misled or prejudiced might be removed by adjourning or postponing the trial, the Court may in its discretion make the amendment and adjourn the trial to a future day in the same sittings, or discharge the jury and postpone the trial to the next sittings of the Court, on such terms as it thinks just.
...
(7) In determining whether the accused has been misled or prejudiced in his defence, the Court that has to determine the question shall consider the contents of the depositions, as well as the other circumstances of the case.
(8) The propriety of making or refusing to make any such amendment shall be deemed a question for the Court, and the decision of the Court upon it may be reserved for the Court of Appeal, or may be brought on appeal before the Court of Appeal, in the same manner as any other decision on a point of law.
[18] While the authorities on the s 355(1) jurisdiction are not easy to reconcile, there seems to be no doubt that (subject to jurisdictional pre-requisites) the discretion to amend must be given a broad interpretation.7 The jurisdictional pre-requisite is that “there appears to be a variance between the proof and the charge in any count of the indictment”.
[19] The concept of “variance between the proof and the charge” was discussed by the Court of Appeal, in R v Bovey. North P said:8
… first that the words in what is now s 335 “there appears to be a variance between the proof and the charge in any “count of the indictment” are to receive a wide interpretation; one class of case will be where “the proof” is
7 R v Bovey [1964] NZLR 865 (CA) at 872 (North P), 875 (Turner J), with both of whom
Hutchison J agreed.
8 Ibid, at 872.
inconsistent with some element in the crime charged. Another will be where “the proof” supports a different crime from the one charged. A third – and this is the present case – will be where “the proof” is consistent too with an alternative crime and only one has been charged. Secondly, the words “may amend the indictment” are wide enough to cover all three classes of case, so that, if necessary, a count may be substituted for one already charged or an additional alternative count may be added to the indictment. I think too, that the line of authority to which I have referred justifies the view that the word “proof” is used in the sense of the evidence as it stands at the point of time when the application to amend the indictment is made, and therefore it is immaterial that the variance occurs as the result of evidence called for the defence. The question whether an indictment may be amended by adding a new count in addition to the count or counts on which the prisoner has been arraigned I think should be left open as the question does not arise in the present proceedings, which are concerned with the adding of an alternative count.
[20] Turner J added:9
As to the extent of the power, leaving aside for the moment the effect of possible prejudice resulting from its actual exercise, the meaning to be given to subs (1) must depend principally upon the meaning to be given to two words – “variance” and “amendment”. The power is given conditionally upon it appearing to the Court that there is “a variance between the proof and the charge in any count of the “indictment”. The word “variance” is not a term of art. It is the original word used by the Criminal Code Commissioners of 1879 in their draft Bill, and was not deliberately selected in the course of any Parliamentary process; and in these circumstances it must be read in its ordinary well-accepted meaning, which I understand to be a difference or discrepancy. There must be a difference or discrepancy, then, between what is proved and what is charged. This is the condition upon which s 335 gives the power of amendment to the Court. The subsection proceeds to provide that when this condition is satisfied the Court “may amend the indictment, or any count in it, so as to “make it comformable with the proof”. Again the words are the identical words of the draft Bill presented by the Commissioners. Again the word “amendment” is not a term of art; accordingly it must be read in its ordinarily accepted meaning – viz alteration or change. Anyone familiar with Parliamentary and other formal procedure will agree that an “amendment” may be made by way either of deletion, or of substitution, or of addition. If it is argued that an “amendment” is more naturally understood as a matter of substitution only, and that the addition of an extra count cannot fairly be regarded as the kind of “amendment” contemplated by the section, it may be replied that the words “may amend the indictment or any count thereof” appear perhaps more apt to denote the amendment in the wider than in the narrower sense.
(d) Has any “variance” been established?
[21] Mr Corlett submitted that neither of the contested amendments arose out of
any “variance” between the evidence adduced and the form of count 10. I agree. I
9 Ibid, at 875–876.
can find nothing in the evidence given up to the point at which the application was heard (that being the most generous position that could be taken in favour of the Crown) and the terms of count 10 that would come within the classes of “variance” discussed by North P and Turner J in Bovey. However, in case I am wrong on that point, I consider separately the two remaining proposed amendments.
(e) The dates on which the alleged offending occurred
[22] In determining whether it is necessary to amend the dates in the body of count 10, to reflect a period of offending between 14 October and 19 November
2008, it is necessary to explain the precise nature of the Crown’s case, as it presently
stands.
[23] As Mr Corlett correctly submitted, count 10 pleads two acts which form the basis of the Crown’s case. They are the letters of 14 October and 3 November 2008. They were forwarded to Treasury on behalf of South Canterbury, under the hands of Messrs McLeod and Hutton respectively. It is the (alleged) misleading information contained in the attachments to those two letters that forms the basis of the Crown’s charge under s 240 of the Act. Necessarily, any criminal intent on the part of an accused must be linked to the specific act in issue.
[24] Although the phrase “on or about” was used originally in count 10, the references to the letters of 14 October and 3 November 2008 make it clear that the phrase necessarily encompasses the period between those two dates. Further, it was always clear (and the accused accept that they have always prepared on this basis) that Mr White’s letter of 17 November 2008 is a piece of evidence (in relation to post event conduct) that may be taken into account by a fact-finder in determining whether the requisite dishonest intent can be proved on the part of Mr White, and perhaps other accused.
[25] It is not disputed that inferences of intent will need to be drawn (whether in favour of or against any particular accused) on the basis of evidence of the extent of their knowledge in the period leading up to the letter of 14 October 2008, as well as information gathered before the Guarantee Deed was executed on behalf of South Canterbury and forwarded to the Treasury on 17 November 2008 by Mr White.
[26] I am not inclined to allow an amendment to the dates identified in the body of the indictment. The term “on or about” is accepted as being sufficiently elastic to cover the times at which both the letters of 14 October and 3 November 2008 were sent to Treasury. It is accepted that evidence of conduct on the part of each accused after 3 November 2008 will be relevant to the question of intent. An amendment is unnecessary and does not justify the exercise of the Court’s s 335(1) discretion.
(f) Should a reference to the 17 November 2008 letter be added as a particular?
[27] Mr Carruthers expressly disclaimed that the addition of a particular referring specifically to the letter of 17 November 2008 was intended to add a new charge. That position was taken in response to a point raised by both Mr Corlett (and myself) about whether, if a new particular to that effect were added, the count might both infringe against the principles set out by the Supreme Court in Mason v R10 and
(illegitimately) add a new charge to the indictment.11
[28] Mr Carruthers contended that the proposed Particular 3 was justified, because it made clear the period during which the accused were alleged to have engaged in a course of conduct that led to misleading information being provided to Treasury in support of the application to join the Crown Guarantee Scheme. Further, he submitted, the dates more accurately reflected the period during which the alleged offending occurred.
[29] However, as Mr Corlett submitted, (by reference to the letter of 17 November
2008) the fact that Mr White confirmed information as being correct could be consistent with both an honest belief in the truthfulness of the information provided, or of knowledge of falsity. Of itself, the letter of 17 November 2008 proves nothing. In combination with other pieces of evidence it may assist me to determine what
inferences can properly be drawn.
10 Mason v R [2011] 1 NZLR 296 (SC) at para [9].
11 The question whether there is jurisdiction to add a new (rather than a substituted or alternative)
charge (under s 335(1)) was expressly reserved in R v Bovey [1964] NZLR 865 (CA).
[30] In those circumstances, there is no need for a new particular to be added. I conclude that it would be inappropriate to exercise the s 335(1) discretion in the manner sought.
Result
[31] Save for the amendment to correct the date of Prospectus 58, the application to amend the indictment is dismissed.
[32] The Crown need not file a new indictment. The Registrar shall make the change on the copy of the indictment on which the accused were arraigned at the start of the trial. I shall initial the change and date it as having been made on 9 April
2014.
P R Heath J
Delivered at 2.00pm on 9 April 2014
3
0
1