Ross v R
[2019] NZCA 455
•26 September 2019 at 9.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA690/2018 [2019] NZCA 455 |
| BETWEEN | LEONARD JOHN ROSS |
| AND | THE QUEEN |
| Hearing: | 15 August 2019 |
Court: | Brown, Collins and Wild JJ |
Counsel: | R S Reed QC and A F Pilditch for Appellant |
Judgment: | 26 September 2019 at 9.00 am |
JUDGMENT OF THE COURT
AThe application for leave to appeal out of time is granted.
BThe appeal against sentence is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Collins J)
Introduction
Mr Ross appeals a sentence of 4 years and 4 months’ imprisonment imposed by Edwards J in the High Court at Auckland, following his convictions in relation to three charges of obtaining a credit facility by deception and two representative charges of using forged documents.[1]
[1]R v Ross [2018] NZHC 2552; Crimes Act 1961, ss 240(1)(b) and 257(1)(b).
Ms Reed QC and Mr Pilditch, counsel for Mr Ross, accept a sentence of imprisonment was inevitable because of the seriousness of Mr Ross’ offending and because of sentences of imprisonment are usually imposed by courts in this country in cases of serious fraud. They contend, however, that a sentence less than that imposed by Edwards J would serve the purposes and principles of the Sentencing Act 2002.
The deceptions and forgeries enabled Mr Ross and his co-offenders to gain access to a credit facility worth $41,150,000 from the ANZ Bank (ANZ). The bank did not, however, suffer any financial loss but instead earned close to $8 million from interest and fees that were charged as a result of transactions that were completed on the basis of the deceptions and forgeries.
Mr Ross provided personal guarantees to ANZ and secured the credit facility with a mortgage over his family home. Counsel for Mr Ross informed us that his assets that were secured to ANZ were valued at $14.5 million. Mr Ross told the author of the pre-sentence report that his home needed to be sold in order to meet his ongoing obligations. Thus, as a result of his convictions, Mr Ross has lost not only his reputation but also many millions of dollars worth of personal assets. In addition, Mr Ross’ wife and two of his children live in Melbourne. This increases the stress to him of being imprisoned in New Zealand.
It was submitted on behalf of Mr Ross that Edwards J focused too closely on the “headline” number and that this led to the following erroneous consequences:
(a)the starting point of 5 years and 6 months’ imprisonment was too high;
(b)inappropriate comparisons were made with another case, Serious Fraud Office v Huang;[2]
(c)insufficient consideration was given to Mr Ross’ personal circumstances and the option of a shorter period of imprisonment.
[2]Serious Fraud Office v Huang [2018] NZHC 86.
Mr Ross’ appeal was filed 12 days out of time. He has explained the circumstances that caused his delay in filing his notice of appeal. No prejudice has been caused to the Crown by the delay and we grant leave in order to deal with the merits of the appeal.
The offending
It is necessary to set out Mr Ross’ offending in order to gain a proper appreciation of his culpability.
Mr Ross was a successful property developer in Auckland. In 2008 he became involved in the development of the Waldorf Celestion Apartment Hotel (the Celestion), a twin tower development on the corner of Emily Place and Anzac Avenue in central Auckland. There are 127 apartments in this complex.
Mr Ross formed Emily Projects Ltd (Emily Projects) in July 2008 to develop and sell apartments in the Celestion. He was the director and major shareholder of Emily Projects, which was managed as part of the Tasman Cook group (Tasman Cook), Mr Ross’ property development business.
Mr Slack, who was the lawyer for Emily Projects and Mr Wehipeihana, who was described as Mr Ross’ “right hand man”, also held shares in Emily Projects. Mr Slack, Mr Foster and Mr Wehipeihana were subsequently charged with Mr Ross. Mr Foster was a contractor who assisted in the sale of the apartments. Mr Foster formed a company, Financial Gain Solutions Ltd (FGS), with a Mr Rota in order to facilitate sales of the apartments.
In August 2008, Emily Projects applied to ANZ for a finance facility to complete the development of the Celestion. The application said that contracts for sale either existed or were in the process of being completed in relation to 120 apartments. Mr Ross, Mr Wehipeihana and Mr Rota met with ANZ and made a presentation about the pre-sold apartments. On 24 October 2008, ANZ offered Emily Projects a credit facility of $40,400,000 subject to a number of conditions, including:
(a)That the purchasers of the qualifying pre-sold apartments sign an acknowledgement reconfirming their sale and purchase agreements. Qualifying pre-sales were required to be to New Zealand or Australian residents who had paid a 10 per cent deposit, had purchased no more than two units and were arm’s length transactions.
(b)ANZ being “entirely satisfied” that there were a sufficient number of acknowledgements from purchasers for apartments to cover the bank’s facility.
(c)That all deposits paid for the pre-sold apartments would be held in Mr Slack’s firm’s trust account.
The offer was accepted on 28 October 2008 and the loan facility agreement signed on 16 December 2008. The terms of the loan facility were subsequently varied on 5 February 2009, when ANZ made a $750,000 overdraft facility available to Emily Projects.
ANZ instructed independent solicitors to verify that the conditions for the loan facility had been satisfied before Emily Projects could draw down any part of the loan facility. Those lawyers reviewed the correspondence received from Emily Projects and were led to believe:
(a)Forty-seven apartments had been pre-sold to New Zealand based purchasers through FGS.
(b)Thirty-three apartments had been pre-sold to purchasers in Australia through a Melbourne-based entity.
When ANZ became concerned that the total number of pre-sold agreements was less than had been previously represented, Mr Ross offered to sign 20 pre-sale agreements and to sell those apartments while Celestion was being constructed. ANZ agreed to this on the basis that these pre-sale agreements would not be treated as qualifying pre-sale agreements.
Emily Projects drew down the first part of the loan facility on 9 February 2009.
The construction of Celestion was completed during the course of 2010. None of the New Zealand or Australian pre-sale purchasers settled. Instead, Emily Projects arranged to on-sell the apartments that ANZ and its lawyers had been led to believe had been previously pre-sold to genuine New Zealand and Australian purchasers.
Obtaining by deception
Mr Ross and his co-offenders engaged in two discrete types of deception.
First, they deceived ANZ into believing that 80 apartments had been pre‑sold to New Zealand and Australian purchasers. This deception was elaborate. It comprised a series of misrepresentations to ANZ and its solicitors that 47 pre-sale agreements had been signed in New Zealand and 33 in Australia.
The misrepresentations included a schedule dated 5 February 2009 from Emily Projects that falsely said that the pre-sales were worth $56,607,049 and had led to Emily Projects receiving deposits totalling $3,975,990.
Mr Ross signed each of the fictitious pre-sale agreements on behalf of Emily Projects. There were, in addition, a series of false invoices purportedly from sales agents and letters signed by Mr Ross confirming that commission payments had been deferred.
In December 2008, Mr Ross provided a written undertaking to ANZ on behalf of Emily Projects, confirming that the qualifying pre-sale agreements were valid and binding.
All of these representations were false. No apartments had been pre-sold to genuine purchasers and a number of the pre-sale agreements signed by Mr Ross were forgeries.
The second general deception perpetrated by Mr Ross and his co-offenders concerned their false representations to ANZ that deposits received from the pre‑sale purchasers were held in Mr Slack’s firm’s trust account. None of the pre‑sale purchasers paid deposits into Mr Slack’s trust account.
Forgeries
Mr Ross and his co-offenders faced two representative charges of using forged documents. Those representative charges related to:
(a)Forged sale and purchase agreements and letters of acknowledgement that were prepared in order to satisfy ANZ that the relevant pre‑conditions to the loan facility had been satisfied.
(b)Forged deeds of arrangement and deeds of forfeiture that were created as part of the process of on-selling the apartments to legitimate purchasers. These deeds asserted that some pre-sale purchasers wished to be released from their original agreements and that the new purchasers would assume all the rights of the original purchasers. The forged deeds of forfeiture said that some pre-sale purchasers wished to be released from their pre-sale agreements and forfeit their deposit.
Pleas and trial
Mr Slack and Mr Foster both pleaded guilty to one representative charge of obtaining by deception. They were each sentenced to 10 months’ home detention.[3]
[3]R v Slack [2017] NZHC 2330; and Serious Fraud Office v Foster [2018] NZHC 1422.
Mr Ross and Mr Wehipeihana pleaded not guilty and elected trial by jury. Their trial commenced in the High Court at Auckland on 5 June 2018 and concluded almost 9 weeks later.
Sentencing
Mr Ross and Mr Wehipeihana were sentenced at the same time. Mr Wehipeihana received a sentence of 4 years and 3 months’ imprisonment. Edwards J adopted a starting point of 5 years’ imprisonment for Mr Wehipeihana. This reflected her assessment that he was less culpable than Mr Ross.[4] Mr Wehipeihana has not appealed his sentence.
Purposes and principles of sentencing
[4]R v Ross, above n 1, at [52].
Edwards J recognised that the relevant sentencing purposes included holding Mr Ross accountable, promoting in him a sense of responsibility for the harm he had caused, denunciation, deterrence and assisting Mr Ross in his rehabilitation and reintegration into the community.[5]
[5]At [18].
The relevant principles of the Sentencing Act identified by the Judge, included the desirability of achieving consistency in sentencing, the effect of the offending on the ANZ, Mr Ross’ personal circumstances and the need to achieve the least restrictive outcome.[6]
Starting point
[6]At [19].
Edwards J treated the obtaining by deception charges as the lead offences. The starting point of 5 years and 6 months’ imprisonment reflected the Judge’s assessment of:
(a)Mr Ross’ role in the offending. She described him as the “architect” of the deception, a description she based upon all the evidence she heard during the trial.[7]
(b)The gravity of Mr Ross’ offending, which she described as being “highly sophisticated”.[8]
(c)The magnitude of the offending which involved multiple ongoing false misrepresentations and forgeries.
(d)The amount that was obtained which Edwards J described as a “solid marker” of Mr Ross’ culpability.[9]
(e)The fact that although ANZ did not suffer financial loss, it nevertheless suffered harm. The deception perpetrated in this case was described by the Judge as threatening “the trust and confidence which is essential to commercial deals” in New Zealand.[10]
[7]At [35].
[8]At [23].
[9]At [28].
[10]At [33].
Edwards J noted the differences inherent in cases concerning deceptive conduct making it difficult to draw a “meaningful comparison” with other cases.[11] Nevertheless, she found Huang “to be the most comparable” case.[12]
[11]At [56].
[12]At [57].
In Huang, a starting point of 6 years was adopted. Edwards J recognised there were differences between Mr Huang’s offending and that engaged in by Mr Ross. In Huang, the amount involved was $52,498,000. Mr Huang’s offending involved more than one financial institution and 57 separate applications for loans. All but two of those loans were repaid. In Mr Huang’s case there was a loss of $394,000. Edwards J considered Mr Ross’ offending was less serious than that of Mr Huang, and therefore justified a starting point 6 months lower than the starting point adopted when Mr Huang was sentenced.
No uplift
Edwards J concluded no uplift was required to reflect the charges for the use of forged documents and that there were no personal aggravating factors which required an uplift from the starting point.[13]
Discounts
[13]At [59] and [63].
Discounts were applied by the Judge to reflect the following four considerations:
(a)Mr Ross had expressed genuine remorse. Edwards J applied a discount of 5 months’ imprisonment to reflect this factor.
(b)Mr Ross’ prior good character and his “fall from grace”.[14] A discount of 4 months’ imprisonment was applied in relation to this consideration.
(c)The time and money saved during the trial as a result of admissions made by Mr Ross, which avoided the necessity for the Crown to call approximately 70 witnesses. A 2-month discount was given on account of this factor.
(d)Mr Ross suffers claustrophobia, a condition that will be exacerbated while he is incarcerated, and he also suffers depression. These concerns resulted in a further 3-month discount.
These discounts produced a provisional sentence of 4 years and 4 months’ imprisonment.
Alternative sentence
[14]At [71].
Consideration was given by Edwards J to Mr Ross serving part of his sentence by undertaking charitable work. She noted however, that this option was not appropriate because of the need to ensure that “a strong message be sent that the type of fraudulent behaviour [the offender] engaged in is entirely unacceptable in our society”.[15]
Overall assessment
[15]At [82], quoting from R v Xu [2018] NZHC 1971 at [28].
Edwards J assessed the overall appropriateness of a sentence of 4 years and 4 months’ imprisonment. She concluded that such a sentence met the purposes and principles of the Sentencing Act and was the least restrictive sentence in the circumstances.[16]
Grounds of appeal
[16]R v Ross, above n 1, at [85].
The comprehensive submissions filed in support of Mr Ross’ appeal can be conveniently distilled to four key points.
First, it was submitted that courts in this country have placed too much weight on the amount involved when sentencing defendants in fraud cases and that the search for consistency has resulted in a failure to properly balance all of the relevant purposes and principles set out in the Sentencing Act. It was contended that the sentencing of Mr Ross reflected these defects in New Zealand sentencing methodology.
Second, Huang was not really comparable to Mr Ross’ offending.
Third, insufficient attention was given to the fact that ANZ did not suffer financial loss in this case and in fact, made a significant amount through interest charges and fees.
Fourth, the purposes and principles of sentencing would be achieved in this case by a shorter term of imprisonment because of Mr Ross’ previous good character, the low risk of reoffending and the effect of a sentence of imprisonment upon a person in his circumstances.
Analysis
Sentencing methodology in fraud cases
We do not accept the submission that the Taueki sentencing methodology when applied to fraud cases deflects sentencing Judges away from the purposes and principles of the Sentencing Act.[17] The sentencing of Mr Ross illustrates how the relevant purposes and principles in the Sentencing Act are able to be integrated into the Taueki sentencing methodology.
[17]R v Taueki [2005] 3 NZLR 372 (CA).
We have set out at [28] and [29] the purposes and principles of sentencing referred to by Edwards J when sentencing Mr Ross. We agree, for the purposes of this case, they are the most relevant matters referred to in ss 7 and 8 of the Sentencing Act. We will now explain why we believe Edwards J incorporated these considerations into the orthodox sentencing process that she followed.
Starting point
In Mr Ross’ case it was necessary to set the starting point by taking into account the following principles of sentencing:
(a)his degree of culpability;
(b)the gravity of his offending;
(c)the seriousness of the offences compared with other types of offences;
(d)the general desirability of consistency with similar offenders committing similar offences; and
(e)the effect of the offending on ANZ.
In assessing Mr Ross’ culpability the following factors were correctly identified by Edwards J:
(a)Mr Ross’ role as the “architect” of the deceptions perpetrated upon ANZ. Mr Ross was the mastermind of the scheme. Without him there would not have been any offending.
(b)The offending involved an elaborate series of misrepresentations and the use of numerous forged documents. It required careful planning. It also required persistent offending over a significant period of time.
(c)Mr Ross abused his position as a respected businessman whom ANZ expected would act with honesty and integrity.
(d)There was only one victim.
The first three of these factors are particularly significant. They are factors referred to by this Court in R v Varjan as being relevant when assessing a defendant’s culpability in fraud cases.[18] They are also factors identified by the Sentencing Council for England and Wales when determining culpability in fraud cases.[19] Our assessment of these three factors leads us to conclude that Mr Ross was highly culpable.
[18]R v Varjan CA97/03, 26 June 2003.
[19]Sentencing Council Fraud (effective from 1 October 2014).
Assessing the gravity of Mr Ross’ offending requires consideration of the seriousness of the offences and the extent of the harm caused by his offending. In the present case, Edwards J correctly concluded that the deception charges, which carry a maximum penalty of 7 years’ imprisonment, were the lead offences for sentencing purposes, even though the forgery charges carried a maximum penalty of 10 years’ imprisonment. Edwards J reasoned that the forgery offending formed part of the deceptions perpetrated by Mr Ross and his co-offenders and that therefore the deception charges should be treated as the lead offences.[20] We agree with the Judge’s approach.
[20]R v Ross, above n 1, at [21].
Acknowledging the harm caused by the offending is a discrete principle of sentencing. It is also a factor that is engaged when assessing the gravity of the offending.
There are potentially four categories of harm that may arise in cases of fraud:
(a)quantifiable actual loss;
(b)quantifiable intended loss that does not materialise;
(c)quantifiable potential loss which may not be intended; and
(d)broader harm such as reputational loss.
In the present case, Mr Ross did not cause actual loss and it is clear he did not intend to cause any loss to ANZ when he embarked upon the scheme of deceptions and forgery. His intention was that Emily Projects, and therefore he and his co‑offenders, would profit substantially from the Celestion project and that ANZ would also financially benefit from having lent money to Emily Projects. Nevertheless, the sums at risk were very high. While ANZ had security, the amount that was at risk was significant. Had market conditions changed it is likely that ANZ would have lost many millions of dollars. It was for this reason that ANZ put in place a number of measures to ensure it was protected as best it could be. The existence of pre-sale agreements for 80 apartments was an essential feature of the protections ANZ required. It would not have risked lending to Emily Projects without the assurance of those pre-sale agreements.
Of significance in this case was the broader harm to ANZ caused by the deceptions perpetrated by Mr Ross and his co-offenders. The banking industry is an integral component of the New Zealand economy and this country’s reputation as a place where business and banking take place in an environment of honesty and integrity. That broader reputation of ANZ was placed at risk by Mr Ross and his co‑offenders.
The harm suffered in this case falls into categories (c) and (d) we have set out at [49]. The harm suffered was not as serious as would have been the case if there had been quantifiable actual loss, or quantifiable intended losses. Nevertheless, the potential losses were significant as was the broader harm suffered by ANZ that we have referred to at [51].
Comparisons
Ms Reed criticised the High Court Judge’s reliance on Huang as being a comparable case.
Deception may involve a wide spectrum of conduct and consequences. For this reason, it is likely that points of difference will be able to be drawn between any two cases.
We accept that there are differences between Mr Ross’ offending and that of Mr Huang. For example, Huang involved more money, more victims and resulted in a quantifiable loss. Those differences do not mean, however, that Huang is not a comparable case when setting the starting point for Mr Ross. Both cases involved elaborate deceptions upon financial institutions to facilitate property development with the aim of making substantial profits. While in Mr Huang’s case there was actual loss, that factor is adequately reflected in the lower starting point adopted by Edwards J. The comparisons made by Edwards J with Huang were appropriate and lent weight to the starting point of 5 years and 6 months’ imprisonment she adopted.
Mr Ross’ case presented some unusual features. His culpability was very high, but the consequences of his offending were less serious than the other cases involving deception. The only case referred to us involving high levels of culpability but ultimately no financial loss to the victim was Ministry of Social Development v Patterson.[21] In that case the offender received an end sentence of 8 years’ imprisonment after he pleaded guilty to 10 representative charges following his use of over 100 false identities to receive $3.4 million in benefit payments from the Ministry of Social Development. Mr Paterson invested some of that money and made a profit. His case is distinguishable from the present case, however, because extreme efforts were required to recover the money from Mr Paterson. In addition, he had prior convictions and showed no remorse. It is understandable why Mr Paterson’s case resulted in an end sentence significantly longer than that imposed on Mr Ross.
Discounts
[21]Ministry of Social Development v Patterson HC Auckland CRI-2006-090-10420, 12 October 2007.
A central feature of Mr Ross’ appeal was the contention that a shorter term of imprisonment would adequately meet the purposes and principles of the Sentencing Act.
This submission was underpinned by the reasoning that Mr Ross has in all other respects been a respected member of society, who takes full responsibility for his wrongdoing and is unlikely to offend again. Entwined with this submission is the proposition that a shorter term of imprisonment will:
(a)hold Mr Ross accountable for the harm he did to ANZ and society;
(b)promote a sense of responsibility for, and an acknowledgement of the harm he did;
(c)denounce his conduct; and
(d)deter others from similar offending.
We accept Mr Ross has in all other respects been a worthwhile member of society, that he is unlikely to reoffend and that for him, any period of imprisonment will be a salutary lesson.
It is, however, essential that the courts denounce offending of the kind committed by Mr Ross. Denunciation involves the Court marking society’s condemnation of the offending in issue. This is, in the circumstances of this case, a particularly important principle. Mr Ross enjoyed a privileged position in his community and embarked upon an elaborate and sophisticated large-scale deception in the expectation that he would profit significantly from his offending. Society, through the courts, must denounce such behaviour.
It is also important that the courts endeavour to deter others from committing similar offences. A function of the significant period of imprisonment that was imposed on Mr Ross is to discourage others from committing similar offences through fear of suffering the same consequences as Mr Ross. Deterrence is an important sentencing principle in many cases of fraud where potential offenders can understand and reflect upon the consequences of offending.
In our assessment, the principles of denunciation and deterrence outweigh all other features that were said to justify a lower sentence of imprisonment for Mr Ross.
We do not accept that the discounts made by Edwards J were inadequate. Nor do we accept that any other form of discount was reasonably available.
Overall assessment
Before settling upon the end sentence, Edwards J made an overall assessment of whether or not a term of 4 years and 4 months’ imprisonment would properly reflect the purposes and principles of the Sentencing Act.[22] She was satisfied that it did and it was the least restrictive outcome that was appropriate in the circumstances.
[22]R v Ross, above n 1, at [85].
We agree with the conclusions reached by Edwards J when making her overall assessment. In this case, no sentence short of imprisonment was realistically available.
Result
We are satisfied that the sentence imposed by Edwards J was not manifestly excessive. There are no grounds upon which we can allow the appeal.
The application for leave to appeal out of time is granted.
The appeal against sentence is dismissed.
Solicitors:
Cook Morris Quinn, Auckland for Appellant
Crown Law Office, Wellington for Respondent
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