R v Sullivan

[2013] NZHC 454

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CRI 2011-076-1948 [2013] NZHC 454

THE QUEEN

v

EDWARD ORAL SULLIVAN ROBERT ALEXANDER WHITE LACHIE JOHN MCLEOD

TERRENCE WILLIAM HUTTON AND GRAEME ROBERT BROWN

Hearing:         8 March 2013 (at Christchurch) Counsel:        N F Flanagan and P Gardyne for Crown

P H B Hall and K H Cook for Mr Sullivan
R B Squire QC for Mr White

Appearances on behalf of Messrs McLeod, Hutton and Brown excused

Judgment:      11 March 2013

JUDGMENT OF HEATH J

This judgment was delivered by me on 11 March 2013 at 2.45pm 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

Duncan Cotterill, PO Box 5, Christchurch
Counsel:
C Carruthers QC, PO Box 350, Wellington
P H B Hall, PO Box 3750, Christchurch

R B Squire QC, PO Box 10157, Wellington

J H M Eaton, PO Box 13868, Armagh, Christchurch

R Raymond PO Box 9344, Tower Junction, Christchurch

R V SULLIVAN HC TIM CRI 2011-076-1948 [11 March 2013]

The application

[1]      On 31 October 2012, Messrs Sullivan, White, McLeod, Hutton and Brown were each committed for trial in the District Court at Timaru on charges arising out of the collapse of South Canterbury Finance Ltd (South Canterbury).  The charges allege that the accused acted dishonestly, primarily in relation to the issue of prospectuses, between November 2004 and February 2010.  South Canterbury was placed in receivership by the trustee for first ranking secured debenture holders on

31 August 2010.  At the time of receivership, the deficiency to that class of creditors was approximately $1.58 billion.

[2]      The Crown applies under s 28J of the District Courts Act 19471 to transfer the proceeding  for  trial  in  the  High  Court.   The  application  is  opposed  by Messrs Sullivan and White.  Messrs McLeod, Hutton and Brown each abide the decision of the Court.

The Crown case

[3]      At  material  times,  Mr  Sullivan  and  Mr  White  were  directors  of  South Canterbury Finance Ltd (South Canterbury).  The remaining accused were its Chief Executive Officer (Mr McLeod), company accountant (Mr Hutton) and Chief Financial Officer (Mr Brown).  While not all accused have been charged with each offence, the charges involve alleged false statements by promoters (x5), theft by a person in a special relationship (x3), obtaining property by deception (x2) and false accounting (x2).

[4]      The most serious allegations are made against the two directors, Mr Sullivan and Mr White.  At the risk of over-simplifying them, the Crown assert that each was a party to the making of deliberately false statements in prospectuses issued to members of the public, to induce them to subscribe to securities offered by the company.  The first prospectus in relation to which that allegation is made was on

issue between 19 November 2004 and 28 October 2005.   The last (in respect of

1      Set out at para [7] below.

which only Mr Sullivan is charged) was available to members of the public between

20 October 2009 and 9 February 2010.   The Crown intends to link the losses of approximately $1.58 billion to subscriptions made on the faith of the alleged false representations.

[5]      In addition, Messrs Sullivan, White and McLeod are alleged to have used false financial statements in the name of South Canterbury to induce the Minister of Finance to execute a Crown Deed of Guarantee (Non-Bank Deposit Taker) document (dated 19 November 2008) which had the effect of guaranteeing any losses suffered by the secured debenture holders.

[6]      Ultimately, those investors who were owed money by South Canterbury at the  time  of  receivership  were  paid  out  by the  Crown.    Having  paid  a  sum  of approximately $1.58 billion to meet the claims of secured creditors, the Crown took over the securities held by the debenture trustee.

The transfer application: legal principles

[7]      Section 28J(1) and (2) of the District Courts Act states:

28J  Transfer of proceedings

(1)       Where any person is committed under section 184N of the Summary Proceedings Act 1957 to a District Court for trial, ..., the accused person or the prosecutor may, either before or after an indictment is presented, apply to a Judge of the High Court for an order directing that the person be tried in the High Court.

(2)       If it appears to the Judge, after giving the accused person and the prosecutor reasonable opportunity to be heard on the matter, that the accused person should be tried in the High Court, he may order that the proceedings be transferred to the High Court for the trial of the accused person at the place specified in the order.

....

[8]      It is common ground that the touchstone for deciding whether a proceeding committed to a District Court for trial should be transferred to the High Court is the “interests of justice”.  While that phrase is not used in s 28J, there is a consistent line of  authority  holding  that,  in  determining  whether  the  High  Court  is  a  more

appropriate forum for trial than a District Court, a number of factors must be taken into account and weighed in the balance: in particular, see R v Boland2  and R v O’Brien.3    This Court is required “to reach a firm conclusion that the interests of justice require” this particular proceeding to be removed to this Court for trial.4

[9]      During the course of argument, Mr Squire QC, for Mr White, submitted that a slightly more onerous test should be applied, with the consequence that this Court should have a “clear conviction” that the trial should be heard by it.   I prefer the approach taken by Eichelbaum J in Boland and O’Brien.  That approach reflects the fact that, prima facie, a trial on charges such as these will be held in a District Court. Having said that, on the facts of this particular case, I would have reached the same result, whichever way the test was expressed.

The relevant factors

[10]     The authorities identify various factors that should be weighed in determining whether a trial should be heard in the District Court or the High Court. Those factors reflect  the  criteria  used  when  a High  Court  Judge  is  exercising the  (so called) “middle-banding” jurisdiction to determine whether cases in which accused have been committed for trial in the High Court should be transferred to the District Court. They are:5

(a)       Gravity of the offence charged,

(b)      The complexity of the issues likely to arise in the proceeding, (c)      The desirability of the prompt disposal of trials, and

(d)      The interests of justice generally.

2      R v Boland [1986] 2 NZLR 742 (HC).

3      R v O’Brien [1992] 3 NZLR 464 (HC).

4      R v Boland [1986] 2 NZLR 742 (HC) at 743 and R v O’Brien [1992] 3 NZLR 464 (HC) at 467.

5      For example, see R v Cozens HC Rotorua CRI 2006-087-1443, 24 May 2007 (Asher J) at para

[19] and s 184Q(4) of the Summary Proceedings Act 1957.

[11]     Recently, Parliament has re-stated the factors to be taken into account, in the context of a determination whether (what is termed) a “protocol offence” should be tried in the High Court, rather than a District Court.6   While generally reflecting the factors to which I have referred, Parliament has said that “the likelihood that the proceeding will be of wide public concern” and “the respective workloads of the High Court and the District Court in the locality of the trial” should be considered specifically.7    In my view, the recent re-statement operates to clarify rather than to change the criteria to be applied.

[12]     Both Mr Hall, for Mr Sullivan, and Mr Squire criticised the generic approach taken by the Crown to the assessment of a variety of factors on which it relied to obtain a transfer order.   Each submitted that a greater degree of analysis of the asserted gravity and complexity of the proceeding and the importance and profile of the case was required.  Mr Flanagan, for the Crown, rejoined that the approach taken by counsel for the accused over-compartmentalised the analysis required.   Mr Flanagan submitted that the Court should analyse the competing contentions at a “macro-level”.

Analysis

(a)      Gravity of allegations

[13]     Mr Hall and Mr Squire each submitted that the charges that each accused faced8  were regularly tried in a District Court, without criticism.   They submitted that there was no reason to believe that a High Court Judge was more likely to provide the accused with a fairer trial than would be the case than if a trial warranted District Court Judge were involved.   They pointed to the maximum penalties available.    They  are  seven  years  imprisonment  on  some  charges  and  10  years

imprisonment on others.

6      Criminal Procedure Act 2011, s 67(4).

7      Ibid, s 67(4)(b)(iii) and (v).

8      See para [3] above.

[14]     I agree that a trial warranted District Court Judge is able to deal with a dishonesty trial in a competent and conscientious manner.  However, the submission made by both Mr Hall and Mr Squire, with respect, confuses the relative seriousness of a particular offence (by reference to a comparison of maximum penalties) with the nature and seriousness of the particular charges advanced.9

[15]     An allegation that a company director has deliberately made false statements to induce members of the public to invest money in a company which ends up in receivership owing some $1.58 billion to its investors is extremely serious.  It raises significant concerns around the topic of investor confidence.

[16]     The gravity of the alleged offending is heightened when one has regard to the allied allegation that false financial statements were used to gain entry to a guarantee scheme for which, the Crown alleges, South Canterbury was not, in fact, a qualifying applicant.  If the Crown allegations were correct, those false representations resulted in the reallocation of loss from those who invested in the company to the general body of taxpayers.  $1.58 billion is a lot of money, whether viewed in terms of public or private finance.

[17]     In   my   view,   the   gravity   of   the   alleged   offending   is   such   that   it overwhelmingly tells in favour of a transfer to the senior trial Court within the judicial hierarchy.

(b)      Complexity

[18]     Mr Hall and Mr Squire also criticised the Crown for over-exaggerating the legal and factual complexity of the trial.   While not disputing that it may take somewhere between 12 and 16 weeks to complete, Mr Squire referred me to R v Tukuafu,10  in which the Court of Appeal held that a very lengthy jury trial in a District Court, involving multiple accused and counts of dishonesty offending, did

not result in unfairness or a substantial miscarriage of justice.

9      Criminal Procedure Act 2011, s 67(4)(b)(i).

10     R v Tukuafu [2003] 1 NZLR 659 (CA).

[19]     Each submitted that it was inappropriate for me to determine this question on the basis of the summary of facts prepared by the Crown.  Rather, they contended that I should review in some detail the witness statements provided to the District Court on which the accused were committed for trial.

[20]     In my view, I am entitled to consider the issues raised on the basis of the Crown summary.  While I emphasise that the accused dispute the summary, counsel did not suggest that it failed to fairly reflect the evidence that the Crown put before the District Court for committal purposes.  On an application that is designed simply to determine the appropriate forum for a trial, it is sufficient to consider a summary of the Crown allegations.   Having said that, a cursory reading of relevant witness statements confirms the complex nature of some of the trial issues.

[21]     I   agree   with   Mr   Flanagan’s   submission   that   the   trial   will   involve consideration not only of the elements of the charges brought but also a detailed review of the nature of the transactions and the accounting treatment applied. Examples are the need to consider and apply concepts of “related party” transactions and “materiality”, in the context of statements in prospectuses on which investors were intended to rely.

[22]     In my view, these are issues which are better suited to determination in the High Court than the District Court.   There are likely to be both legal and factual complexities arising out of the evidence.  High Court Judges have greater experience in dealing with complex commercial cases.  Further, the High Court has the ability to assign a particular Judge to preside over the trial and to bring a more intensive case management process to pre-trial questions.  The complexity of the case justifies its trial in the High Court.

(c)      Prompt disposal of the trial

[23]     The other feature that tells in favour of transfer is the desirability of the prompt disposal of trials.  I have conferred with the Executive Judge of the District Court who has responsibility for both the Christchurch and Timaru areas, and am informed that unless significant additional judicial resource were provided (which

cannot be guaranteed) it is unlikely that the District Court could accommodate a trial before the second half of next year.  In contrast, this Court is able to indicate a firm date on which the trial can commence, 10 February 2014.   That date can be accommodated irrespective of the venue ultimately determined.  The desirability of a prompt trial is enhanced by transfer to the High Court.

(d)      Public interest

[24]     Undoubtedly, there is public interest in this trial.  The reasons for that interest are self-evident from the nature and seriousness of the charges levelled against the accused.   Like the many finance company cases already heard in this Court,11  the circumstances in which so much money was lost is a significant public concern; the more so when the allegation of use of false financial information to obtain entry to the guarantee scheme is added to the mix.   That factor (while not determinative)

supports transfer to the High Court.

Result

[25]     For those reasons, I have reached a firm conclusion that the trial should be transferred  to  the  High  Court  for  hearing.    I  make  an  order  that  the  trial  be transferred to the Timaru Registry of the High Court.

[26]     I have been assigned as the trial Judge.  I shall issue directions later today to progress the resolution of any pre-trial applications.

[27]     Counsel should proceed on the basis that the trial, whether Judge alone or jury, will commence on 10 February 2014.   Unless an order for change of venue

were later made, the trial will take place in Timaru.

11     For example, R v Moses HC Auckland CRI 2009-004-1388, 11 July 2011 (Nathan Finance Ltd), R v Petricevic [2012] NZHC 665 (Bridgecorp Ltd), R v Graham [2012] NZHC 1467 (Lombard Finance Ltd) and R v Douglas [2012] NZHC 1746 (Capital + Merchant Finance Ltd).

[28]     I thank counsel for their assistance.

P R Heath J

Delivered at 2.45pm on 11 March 2013