R v Sullivan

[2014] NZHC 1365

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CRI 2011-076-1948 [2014] NZHC 1365

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, 9, 14, 15, 16, 28, 29, 30 April 2014
1, 2, 5, 6, 7, 8, 9, 13, 14, 15, 22, 26, 27, 28, 29, 30 May 2014
3, 4, 5, 10, 11, 12 and 17 June 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 McLeod
R Raymond for Mr G R Brown (potential witness)

Judgment:

17 June 2014

Reasons:

17 June 2014

REASONS FOR (ORAL) JUDGMENT (NO. 13) OF HEATH J

R v SULLIVAN [2014] NZHC 1365 [17 June 2014]

Background

[1]      During  the  course  of  an  argument  about  whether  the  (so-called)  co- conspirators’ rule of evidence should be applied in this trial,1 counsel for the Crown identified Mr Graeme Brown as an alleged unindicted participant in an unlawful joint enterprise in which the three accused, Messrs Sullivan, White and McLeod, together with the late Mr Hubbard, were said to be involved.  This issue arose in the context of a trial arising out of the collapse of South Canterbury Finance Ltd (South

Canterbury).  Messrs Hubbard, Sullivan and White were directors of that company, and Mr McLeod a former Chief Executive Officer. At material times, Mr Brown was the company’s Chief Financial Officer.

[2]      It transpired that Mr Sullivan intended to call Mr Brown as a witness.  I was alerted by counsel for Mr Sullivan to potential difficulties in calling Mr Brown, given the Crown’s additional indication that he might be at risk of prosecution.  Mr Brown has previously been charged with one count of false accounting, but had been released from the indictment for reasons set out later.2

[3]      Counsel for the accused advised Mr Brown’s counsel, Mr Raymond, of the Crown position in relation to Mr Brown’s potential criminal culpability.   An application to the Solicitor-General was made to have Mr Brown immunised against further prosecution.

[4]      For reasons into which it is unnecessary to go for present purposes,  the Deputy Solicitor-General dealing with the application declined to make a final decision until such time as a draft brief of evidence for Mr Brown had been made available to  counsel  conducting this  prosecution  for comment.    Understandably, counsel for Mr Sullivan was reluctant to provide the Crown with an opportunity to review the brief in advance of a likely witness being called, whether voluntarily or under subpoena.   At that stage, it was clear that the immunity application would

founder.

1      The outcome of which is set out in R v Sullivan (No. 11) [2014] NZHC 1312.

2      See paras [15]–[19] below.

[5]      This morning, I heard from counsel in an endeavour to negotiate  a path through the procedural thicket that has emerged.  At the conclusion of that hearing, I gave a decision indicating a number of rulings that I would make; effectively ones that would have been required under s 60(1)(b) of the Evidence Act 2006 (the Act) had the possibility of Mr Brown’s involvement in a joint unlawful enterprise not

been disclosed before he began to give evidence.3   These are my reasons for making

those rulings.

Analysis

(a)      The privilege against self-incrimination

[6]      The stance that the Crown has taken on potential criminal culpability for Mr Brown has led to an inquiry into whether he would be entitled to invoke a privilege against self-incrimination, if he were to give evidence.  Relevantly, s 60(1) and (2) of the Act provide:

60  Privilege against self-incrimination

(1)  This section applies if—

(a)       a  person  is  (apart  from this  section)  required  to  provide specific information—

(i)       in the course of a proceeding; or

(ii)      by a person exercising a statutory power or duty; or

(iii)      by a police officer or other person holding a public office  in  the  course  of  an  investigation  into  a criminal offence or possible criminal offence; and

(b)       the   information   would,   if   so   provided,   be   likely   to incriminate  the  person  under  New  Zealand  law  for  an offence punishable by a fine or imprisonment.

(2)      The person—

(a)       has a privilege in respect of the information and cannot be required to provide it; and

(b)       cannot be prosecuted or penalised for refusing or failing to provide the information, whether or not the person claimed the privilege when the person refused or failed to provide the information.

3      R v Sullivan (No. 13) [2014] NZHC 1359.

....

[7]      The Deputy Solicitor-General who has considered the immunity application has been careful to ring-fence information that he has received from information available to the Crown, in its capacity as prosecutor.  In the course of his inquiries into the immunity issue, the Deputy Solicitor-General sought information from counsel representing the Crown in this trial as to the areas in which Mr Brown might be put in jeopardy, if he were to give evidence.  In an email to the Deputy Solicitor- General, counsel identified four such points:

1.Mr Brown provided documents to the [Serious Fraud Office] under notice issued pursuant to s9 of the Serious Fraud Office Act 1990 (SFO Act). If it emerges in his evidence that he failed to provide any document within the ambit of the notice, he might face prosecution under s45(d)(iv) of the Act. If it emerges in his evidence that his provision of documents or information under that notice was false and misleading or he was reckless about whether it might be, then a charge might be brought under s45(e) of the Act.

2.Mr Brown was originally charged in relation to his role with the Kelt transaction. The indictment was amended under [s345D] of the Crimes Act to remove  the  charge  and  he was  not given  a  s347 discharge.  Plainly  if  substantial  further  information  emerged  that was not previously known to the [Serious Fraud Office] in relation to his involvement, the charge might be revisited.

3.Evidence has emerged during the trial that Mr Brown was heavily involved in the preparation of the Prospectuses at issue. If he gave evidence that indicated he knew or must have known that any one was false in various respects, then he might be in jeopardy in relation to that. In particular, there has been some evidence that he knew that the banking facilities the subject of Prospectus 59 were not in place or at risk and were he to give evidence to that effect, an issue might arise. (For completeness, his involvement with the banking facilities and his communications in relation to them with the Board will be a primary focus of cross-examination, as that is a key issue in the trial). Likewise, there has been evidence that his role involved oversight of the company's impairment provisioning, which the Crown says was improperly reported in Prospectus 60.

4.We have also heard evidence that Mr Brown was involved in the entry into the Crown Guarantee. That being the subject of a charge, obviously an issue might arise.

[8]      In terms of s 60(1)(b) of the Act, Mr Brown would be entitled to invoke the privilege if any information he was asked to provide “would ... be likely to incriminate [him] under New Zealand law for an offence punishable by a fine or

imprisonment”.   It is clear from the terms of s 60(1)(b) that a specific qualifying offence must be identified before the privilege can be claimed.

[9]      The nature of the threshold test was considered by the Supreme Court in

Singh v R.4   Giving the unanimous reasons of the Court, William Young J said:5

[31]     Under s 60(1)(b) of the Evidence Act, the privilege against self- incrimination can only be invoked in relation to information which, if provided, would be “likely” to incriminate the person claiming the privilege. The use by the legislature of the word “likely” shows that it intended to confine the privilege to circumstances where the potential for incrimination is “real and appreciable” and not “merely imaginary and fanciful”. This means that the claim can only be invoked where later prosecution is itself likely. We also see the current test under the statute as being the same as that explained by Cockburn CJ in R v Boyes:

… [T]he Court must see, from the circumstances of the case and the nature of the evidence which the witness is called to give, that there is reasonable ground to apprehend danger to the witness from his being compelled to answer. … Further than this, we are of opinion that the danger to be apprehended must be real and appreciable, with reference to the ordinary operation of law in the ordinary course of things – not a danger of an imaginary and unsubstantial character, having reference to some extraordinary and barely possible contingency, so improbable that no reasonable man would suffer it to influence his conduct. We think that a merely remote and naked possibility, out of the ordinary course of the law and such as no reasonable man would be affected by, should not be suffered to obstruct the administration of justice.

(Emphasis added and footnotes omitted)

[10]     I address each of the points raised by the Crown in its email to the Deputy

Solicitor-General6 in light of that test.

(b)      The Notice/s under s 9 of the Serious Fraud Office Act 1990

[11]     Section 9 of the Serious Fraud Office Act confers powers on the Director of that Office to require any person whom he or she has reason to believe may have

information  or  documents  relevant  to  an  investigation  to  attend  and  answer

4      Singh v R [2011] 2 NZLR 322 (SC).

5 Ibid, para [31]. See also Busby v Thorn EMI Video Programmes Ltd [1984] 1 NZLR 461` (CA)

at 469 (Cooke J) and R v Boyes (1861) 1 B & S 311 at 330.

6      See para [7] above.

questions, supply any information and produce documents for inspection.   This is

done by “notice in writing”.7

[12]     Self-incriminating statements made in the course of answering any question, supplying  information  or  producing  any  document  under  s 9  “may  be  used  in evidence against that person only in a prosecution for an offence where the person gives evidence inconsistent with that statement”.8    If the recipient of a s 9 notice is prosecuted for providing false or misleading information following service of a s 9 notice,9  information provided may be used in evidence in that prosecution, but not otherwise.10

[13]     Mr Carruthers QC, for the Crown, submitted that Mr Brown might be at risk of prosecution if he had failed to provide any document within the ambit of the notice, or had provided false or misleading information.  In my view, if it were put to Mr Brown that he had provided false information pursuant to s 9 of the Serious Fraud Office Act, that would be sufficient for the privilege against self-incrimination to be claimed, given the likelihood of a prosecution for a discrete offence. Accordingly, if such a question were put, I would advise Mr Brown, at that stage, that he had the right to refuse to answer that question on the grounds that it may incriminate him.  He could then choose whether or not to answer.

(c)      The Kelt Finance Ltd transaction charge

[14]     It is necessary to provide some background in relation to Mr Brown and his involvement in the (so-called) Kelt transaction.

[15]     Following committal for trial, the accused named in the indictment were Messrs Sullivan, White, McLeod, Hutton and Brown.  By that time, Mr Hubbard had died.  On 6 August 2013, all accused appeared for arraignment before me.  Before the accused were arraigned, the Crown sought leave to amend the indictment to remove Mr Brown’s name.  The application was made under s 345D of the Crimes

Act 1961.  In addressing me, Mr Carruthers said:

7      Serious Fraud Office Act 1990, s 18.

8      Serious Fraud Office Act 1990, s 28(1).

9      Section 45(d)(iv) and (e).

10     Ibid, s 28(2)(b).

Your Honour I apply to amend count 12 of the indictment by removing the name of the accused [Graeme] Robert Brown. The application Your Honour, is under s 345D of the Crimes Act.   Your Honour the explanation for the application is set out in the grounds which are the statutory grounds required by the section.  The background to the application Your Honour is this. As a result of an approach on behalf of Mr Brown additional evidence was provided for the accused and an additional explanation was provided.  As a result the Crown has reached a position that it would not be proper to proceed against Mr Brown which is why the application is made.

(Emphasis added)

[16]     In a Minute recording directions made at the 6 August 2013 hearing, I said:11

The Crown is satisfied that it would be inappropriate to proceed against Mr

Brown.

[17]     Although  Mr  Hutton  remained  in  the  amended  indictment,  he  was  not arraigned.  Discussions with the Crown were continuing.  Subsequently, Mr Hutton was discharged under s 347 of the Crimes Act 1961 in respect of the two offences with which he had been charged.12

[18]     It is plain from the correspondence between Mr Raymond (for Mr Brown) and the Crown that preceded the removal of Mr Brown through the filing of an amended indictment, that Mr Raymond had intended to apply for a s 347 discharge on the Kelt count.  That would have had the effect of an acquittal on that charge.  Mr Raymond informed me that, before the intended arraignment, he had been told by one of the Crown’s counsel that “[his] pen could be put down”.  Subsequently, Mr Brown was interviewed (voluntarily) for the purpose of the Crown deciding whether to call him as a prosecution witness.   He was not represented by counsel.   The possibility of further jeopardy does not sit easily with what occurred.

[19]     Had I realised, on 6 August 2013, that the Crown regarded Mr Brown as at risk  of  further  prosecution,  I  would  not  have  allowed  an  amendment  to  the indictment.  Rather, I would have required Mr Brown to plead to the charge, or to have discharged him under s 347.   That being so, I am confident that any Judge would treat Mr Brown’s removal from the indictment in relation to the charge of

false accounting for the Kelt transaction as if he had been discharged under s 347

11     R v Sullivan (Minute (No. 16)) HC Timaru CRI-2011-076-1948, 6 August 2013 at para [1].

12     R v Sullivan (Minute (No. 25)) HC Timaru CRI-2011-076-1948, 2 December 2013 at para [1].

and would enter a stay of any future charge.  For that reason, I regard it as fanciful that Mr Brown is at risk of prosecution for that offence.   No self-incrimination warning will be given to Mr Brown in respect of this issue.

(d)      Prospectuses/Crown Guarantee

[20]     Counsel for the Crown suggested, in their email to the Deputy Solicitor- General, that evidence had “emerged during the trial that Mr Brown was heavily involved in the preparation of prospectuses that are in issue”.  There are five counts relating to South Canterbury’s prospectuses numbered 55, 57, 58, 59 and 60.  Those charges have been brought against Messrs Sullivan and White (or Mr Sullivan alone in respect of Prospectuses 55, 57 and 60) under s 342 of the Crimes Act.  No such charges have been brought in respect of Mr McLeod, who (as Chief Executive Officer) was (like Mr Brown) a member of South Canterbury’s senior management team.

[21]     It is disingenuous to suggest that evidence has “emerged” during trial that goes beyond the information that was available to the Crown at the time when it elected not to charge Mr Brown with such offences and to withdraw the Kelt false accounting charge.

[22]     On the basis of the evidence I have heard to date, I consider (with one exception) that the possibility of a prosecution (arising out of the issuing of prospectuses) being brought against Mr Brown is minimal, and ought to be regarded as “fanciful”.   In making that assessment I have regard to Mr Brown’s role as a member of the senior management team, the fact that Mr McLeod has not been charged with such offences, and the inherent unlikelihood that the Crown would wish to proceed with yet more charges after a trial against Messrs Sullivan, White and McLeod that will have taken something in the order of four and a half months to complete.

[23]     The  one  exception  relates  to  banking  facilities  that  were  disclosed  in Prospectus 59.  There is evidence, in the form of email traffic, that Mr Brown knew that the banks had withdrawn the relevant facility.   The evidence is unclear, at present, on whether that information was or was not passed on to the directors of

South Canterbury.  The issue in relation to any false statements about the existence of the banking facility is also relevant to a charge arising out of the Crown Guarantee13  in which a misleading statement is said to be that South Canterbury “was supported by an undrawn committed bank $150 million cash facility”.14

[24]     While I think it is unlikely that Mr Brown would be prosecuted further in respect of the bank facility issue, I will err on the side of caution and provide a self- incrimination warning to Mr Brown on that issue.   One point of differentiation in respect of the Crown Guarantee from the charges brought under s 242 of the Crimes Act15  is that Mr McLeod has been charged with obtaining a benefit by deception, along with Messrs Sullivan and White, in respect of the Crown Guarantee.

(e)      General

[25]     Mr Carruthers referred me to a file note, prepared by a Serious Fraud Office investigator, which is said to have been typed on 19 March 2014, but which relates to a conversation that allegedly took place between that person on 28 November 2013. No prior note of this conversation exists.

[26]     Part of the note suggests that Mr Brown harboured a degree of animosity towards the Serious Fraud Office.  To the extent that the Crown wishes to allege that some (or all) of Mr Brown’s intended evidence has been fabricated to “get at” the Serious Fraud Office, questions to that effect may be put in cross-examination.  No jeopardy seems to exist in that regard, though I reserve the point for later determination, if necessary.

Conclusion

[27]     It was for those reasons that I indicated that I would make these rulings at the completion of this morning’s hearing.16

13     For details of this charge see R v Sullivan (No. 8) [2014] NZHC 1019.

14     Count 10, particular 2, fourth bullet point.

15     See para [22] above.

[28]     There  is  no  need  for  me  to  expand  upon  other  decisions,  such  as  Mr

Raymond’s  presence  in  Court  while  Mr  Brown  gives  evidence.     My  earlier judgment17 deals with those issues adequately.

P R Heath J

Solicitors:

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 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, Christchurch M A Corlett, PO Box 4338, Shortland Street, Auckland R Raymond, PO Box 9344, Christchurch