The Queen v Graeme Brent Raymond

IN THE COURT OF APPEAL OF NEW ZEALAND

CA183/01

THE QUEEN

GRAEME BRENT RAYMOND

Hearing:	26 September 2001
Coram:	Gault J Keith J Salmon J
Appearances:	D P H Jones for Appellant M R Heron for Crown
Judgment:	9 October 2001

JUDGMENT OF THE COURT DELIVERED BY GAULT J

The appellant, Mr Raymond, was adjudicated bankrupt on 26 August 1998. Thereafter he faced four criminal charges. The first was of perjury but at the commencement of his trial in the District Court at Auckland before a Judge alone, the Judge declined to deal with this charge on the ground that only the High Court had jurisdiction. The second charge was of a similar nature involving the allegation that he made a statement of assets and liabilities to an officer of the Official Assignee’s office that was false and so would have amounted to perjury had it been made under oath. He was found not guilty on that charge. The third and fourth charges are those with which we are concerned. They were laid under s126 Insolvency Act 1967. The first was that after presentation of a bankruptcy petition against him, or within two years before that, he concealed part of his property contrary to s126(1)(g)(i). The second charge was of the offence provided by s126(1)(c) that he materially contributed to, or increased the extent of, his insolvency by gambling, rash or hazardous speculation, unjustifiable spending or extravagance in living. At the end of a five-day hearing Mr Raymond was found guilty on both of these counts and was subsequently sentenced to imprisonment for 13 months and given leave to apply for home detention. The concurrent sentences were of six months in respect of the concealment of assets and 13 months for contributing to or increasing the extent of his insolvency. His appeal is against both conviction and sentence.
The Judge, in his reasons for the verdicts, first traced the circumstances leading up to the bankruptcy. It was in fact the third bankruptcy for Mr Raymond. He had been adjudicated bankrupt previously in 1980 and then in 1990. It appears that soon after his discharge in 1993 Mr Raymond established a company to engage in property investment activities. It was named First Investment Services Ltd and he was the sole shareholder and sole director. Within a comparatively short time the company had acquired substantial property holdings financed by extensive borrowing. Primarily by reference to his shareholding in the company, Mr Raymond was able to claim in a personal statement of assets dated 25 October 1996 that he had net assets of approximately $12 million. It is apparent, however, that even more quickly than his castle grew, it collapsed. He attributed the failure primarily to the refusal of one of the principal lenders to renew loans. Because Mr Raymond had been required to personally guarantee some of the company indebtedness, he was placed in a position where his own insolvency involved a deficit in the region of $6.8 million. The Judge found that Mr Raymond did not maintain any clear distinction between his personal moneys and those of the company and readily moved money between the two. He appears to have been content to act himself as a “concept” man in the company business and to leave to employees and professional advisers the day to day running of the business. In fact he appears to have had little appreciation of the true financial position of the company and its cash flow requirements.
On the concealment of assets charge the evidence was directed primarily to two assets, a Breitling watch having a value of about $2,000 and parts of stereo equipment that had been installed in an apartment occupied by Mr Raymond, the total value of which as installed was in the vicinity of $35,000. With reference to the watch the Judge had little difficulty in determining that it was not disclosed, that another watch, owned by Mr Raymond, had been disclosed and the circumstances were such that his mind must have been directed to the Breitling watch. The Judge found that there was concealment and, with reference to the statutory defence, he held that Mr Raymond had not succeeded in proving that he had no intent to defraud.
The position with the stereo equipment was more complicated. At the appropriate time Mr Raymond did disclose to the Official Assignee an instrument by way of security under which certain chattels were transferred by way of mortgage to a creditor. The stereo equipment was included in the schedule of assets. The instrument by way of security was signed just under three months before the date of adjudication. However, after adjudication, and with the knowledge of Mr Raymond, his wife purported to offer for sale parts of the stereo equipment which by then had been removed from the apartment prior to its being sold. The Judge found that in attempting to sell the equipment Mr Raymond was treating it as his own and treating the instrument by way of security as of no effect. He found that in attempting to hide behind the existence of the instrument by way of security Mr Raymond was concealing the stereo equipment and had attempted to sell it to provide money for his own use. The Judge similarly found that the defence of absence of intention to defraud was not made out.
The remaining charge is, as the Judge noted, an unusual one. He reviewed in broad scope various activities of Mr Raymond. The matters particularly noted included the leasing of an expensive motorcar, the payments on which were made from another company established and operated by Mr Raymond. Further, there was the acquisition and enjoyment of a share in a helicopter which involved very substantial outgoings, also paid by the company. In total these payments were in the vicinity of $8,000 - $10,000 per month. There was reference to the ownership of race horses and activities surrounding that and gambling which the Judge described as, in New Zealand terms, at the highest level. The Judge concluded that Mr Raymond’s gambling diminished his available estate by a sum well in excess of $100,000. He duly found this charge proved.
Mr Jones argued a number of points in support of the appeal against the convictions. On the concealment of property charge he accepted that the Breitling watch was not disclosed but submitted that, because of the way in which the Judge linked his rejection of the statutory defence (absence of intent to defraud) to his determination in respect of the stereo equipment, his findings should fall in relation to both.
With reference to the stereo equipment it was submitted that the Judge erred in finding concealment when the equipment was disclosed in the list of assets included in the instrument by way of security. He emphasised that the instrument had not been challenged at any stage nor was there cross-examination challenging its continued effectiveness. Therefore he argued it was not open to the Judge to find that Mr Raymond treated the instrument as a sham.
On the charge of materially increasing the extent of the insolvency, it was submitted that so far as Mr Raymond’s conduct was as a director of the company it was to be set aside as irrelevant and that in all the circumstances the remaining conduct available to be relied on did not “materially” increase the extent of the insolvency in the circumstances.
Two general points should be made. The first is that the written reasons given by a Judge in support of a verdict on a trial by Judge alone are not required to be exhaustive, particularly in areas involving findings of fact, so that it is not productive to subject the reasons to the same analysis as might be undertaken in the case of a reasoned judgment. It is, of course, open to an appellant to contend that factual findings are unreasonable and are not supported by the evidence.
The second point is that although a number of matters were included within each of the two charges on which the appellant was convicted, it is sufficient for the convictions to be sustained if the findings are supported in respect of one instance of the conduct charged.
We deal with the points raised in support of the appeal in sequence.
With reference to the concealment of the Breitling watch the point relied upon by Mr Jones is based upon a sentence in the Judge’s reasons with reference to the defence available under the statute. The passage concerned reads:
The Crown have established beyond reasonable doubt that there was a concealment at least of the Breitling watch and nothing Mr Raymond has said has convinced me on the balance of probabilities that it was other than his intention to keep it for himself and therefore fraudulently deprive the Official Assignee of that item. I have arrived at that decision also in the context of what I am about to say concerning the stereo.
With reference to the last sentence it was submitted that the Judge’s finding that the appellant had not discharged the reverse onus in relation to the watch is intricately linked to the finding in relation to the stereo components. We do not read the Judge’s comment in that way. We think the sentence in issue conveys no more than that the statutory defence which he found not established in respect of the watch was also not established in respect of the stereo equipment that he was about to deal with. There is nothing else in the written reasons indicating any linkage in the defences, nor were we taken to any evidence that would support an inference to that effect. Accordingly, we are satisfied that the rejection of the defence in relation to the concealment of the watch stands by itself and that no basis has been established for interfering with the finding.
The issue of concealment of those parts of the stereo equipment subsequently offered for sale is less clear. Undoubtedly the existence of the equipment was disclosed by its inclusion in the list of chattels in the instrument by way of security. That disclosure, however, was of chattels transferred by way of mortgage as security for indebtedness. Upon bankruptcy, in the event of default under the instrument by way of security, the chattels could be seized and disposed of by the creditor. If they were not required for that purpose all remaining interest in them vested in the Official Assignee.
Under the Insolvency Act “property” is defined very broadly and includes any interest in property. The interest in the stereo equipment disclosed by Mr Raymond by way of production of the instrument by way of security was not an interest which enabled him to sell the equipment and retain the proceeds for his own purpose. Any such interest he had at the time of production (or that he acquired subsequent to it) was not disclosed in accordance with his continuing obligation to do so. Indeed disclosure of the instrument by way of security and the message that conveyed pointed away from any personal interest held by Mr Raymond and must be said to have constituted concealment of it. That in effect is what the Judge found.
Mr Jones argued that the Crown had not excluded the possibility that the equipment was subsequently offered for sale on behalf of the creditor. However, in view of the express prohibition in the instrument by way of security against offering to sell the charged property, we consider that the Crown established enough to shift the onus to Mr Raymond to prove absence of intent to defraud as contemplated in the applicable statutory provision. There was no such evidence and, accordingly, we consider it was open to the Judge to conclude, as he did, that the stereo equipment so far as it constituted property the bankrupt was able to treat as available to him to sell as his own, was concealed.
Accordingly, the appeal in respect of the concealment charge is dismissed.
We turn to the offence under s126(1)(c) that Mr Raymond materially contributed to or increased the extent of his insolvency by gambling, or by rash and hazardous speculation or unjustifiable spending or extravagance in living.
It was submitted that because the cause of Mr Raymond’s bankruptcy was the demands of guarantors following the company collapse, any gambling, rash or hazardous speculation, unjustifiable spending or extravagance in living could not be said to have contributed to his insolvency (as distinct from the extent of the insolvency). We do not understand the Judge to have made such a finding. He did not need to do so. We make no further comment on that. We will concentrate on the finding that by his conduct Mr Raymond increased the extent of the insolvency.
The Judge found, and there was no real challenge to the finding, that Mr Raymond’s gambling diminished his available estate by a sum well in excess of $100,000. The argument on appeal was that because the net indebtedness on adjudication was some $6.8 million the amount of $100,000 did not “materially” increase the extent of the insolvency. It was said to be less than 1.5% of the total indebtedness.
In the course of argument there was reference also to the fact that for a person who claimed net worth of $12 million in October 1996, gambling on the scale undertaken was not out of order. The Judge quite rightly was not seduced by such an approach. He recorded that, in assessing whether the expenditure was unjustifiable or extravagant he needed to assess Mr Raymond’s finances at the time the particular expenditure was incurred. He referred to some of the evidence and expressed the following views:
In the first quarter of 1997 Mr Raymond missed the payments on his BMW. He failed to pay for the horses bought in Australia with Mr Ellis, his American Express debt was $33,642 and in those months he incurred losses of $33,000 at the Christchurch Casino and $55,000 at the Auckland casino. In July and August of 1997 his Amex card was overdue by $9,200. An application had been made to the High Court to appoint a provisional liquidator and that was of course settled but it again signals that he was beginning to face big problems.
The automatic payments on the BMW at that stage were cancelled and then became spasmodic after that. The Jet Ranger share was sold leaving a small outstanding debt – small in the region of $10,000 – and an account for sending the racehorse, St Petrus, to Australia was still outstanding at $10,200. Again in this same period he incurred losses of $33,000 at Christchurch, $73,600 in the Auckland Casino.
It is clear from all of the foregoing that at least from the beginning of 1997 there were constant reminders in the face for Mr Raymond that he had a severe liquidity problem and that his company was in difficulty because of cashflow yet he was continuing to gamble tens of thousands of dollars at casinos and was sustaining losses of tens of thousands of dollars. He seems to have abdicated his responsibility as director of the company. His lifestyle has led him away from that responsibility in such a way that an extraordinary amount of his time was spent in casinos and no doubt attending his racehorses.
The gambling was extraordinary. Mr Raymond enjoyed VIP status at the casinos at Auckland, Christchurch and Adelaide. He visited casinos in Brisbane and Melbourne. The Judge referred to almost $30 million crossing the tables over the period from September 1995 up to adjudication. He identified loss situations as at 21 August 1997 (before some later winnings) of almost $200,000 at Auckland, and $240,000 at Christchurch. There was in addition a heavy involvement in horse racing. Also, shortly before his adjudication in a bet with a friend Mr Raymond lost a watch valued at $27,000.
The likely success of the argument that his gambling did not materially increase the extent of the insolvency must, in the light of these facts, be put at long odds.
Materiality is a question of fact. The Judge had no difficulty in finding the charge proved. He did not expressly address whether “a sum well in excess of $100,000” can be said to have materially increased indebtedness totalling $6.8 million. No doubt he did not regard it as an issue.
Mr Jones relied on a comment in the judgment of the English Court of Appeal in R v P (a bankrupt) [2000] 1 WLR 1568. With reference to the first of the two limbs of the provision creating the corresponding offence (contribution to the insolvency as distinct from its extent) the Court gave an example (p1571):
That does not, as we see it, mean that the contribution made by gambling or by rash and hazardous speculations need be decisive, or need make the difference between solvency and insolvency. If someone with £100,000 worth of assets makes £7m. worth of losses with, say, £1m. worth of such losses coming from gambling or rash and hazardous speculations, it seems to us that the gambling or rash and hazardous speculations could well be said to have materially contributed to his insolvency.
That dictum does not warrant any general inference that an increase in the extent of insolvency of something less than 15% is not a material increase. It was not even directed to the question of the degree to which insolvency must be increased before it can be said to be material.
We consider that under the second limb the insolvency would be increased materially whenever the bankrupt’s indebtedness can be shown to have been increased by more than an insignificant amount and there is a clear causal link between the conduct alleged and the indebtedness at the time of adjudication.
We are not persuaded that it was not open to the Judge to find this second charge proved.
The further ground is to be considered not because it could affect the verdict but because it is relevant to penalty. Much of the evidence of extravagance by Mr Raymond was said to be in respect of his conduct as a director of the company, First Investment Services Ltd, or the other company established by him, Day Investments Ltd. The second company made the payments on the BMW car and the helicopter. These items were said to have been used in the business of First Investment Services Ltd. But the Judge found that the money spent on them could have gone towards reduction of the guaranteed debts.
Mr Jones submitted that Mr Raymond’s conduct in the capacity as director is irrelevant to the charge arising out of his own bankruptcy. The Judge dealt with the point this way:
Mr Jones for the defence was at pains to point out in his closing address that the present charges relate to Mr Raymond personally not to his conduct acting as a director of a company. Whilst I accept that this may be true in principal [sic] the particular circumstances of this case are such that any expenditure or activity or conduct on the part of Mr Raymond are both in his personal conduct and when he is wearing the hat of a director. I cannot help but reflect on the extent of his own bankruptcy. This arises because his company shares were, of course, the main source of his wealth. Further, his own bankruptcy was brought about solely because of personal guarantees which he had given to the lending institutions who advanced money to the company. The link arises further because he was the sole shareholder and sole director of the company and also when we are considering criminal charges such as these the veil of incorporation should, in my judgment, provide little protection.
Counsel contended that any wrongful conduct as a company director should have been prosecuted under the Companies Act and that the Insolvency Act specifically relates to acts and situations of an individual not a company or someone acting on behalf of a company. He emphasised the separate legal entities of the company and the appellant.
This argument is misconceived. If the conduct of a person makes up the elements of a criminal offence that person is liable and it matters not that, because of the capacity in which the conduct was carried out, it constituted another offence or resulted in another person or corporate body also being liable: Peacock v The New Zealand Performance & Entertainment Workers’ Union [1990] 2 NZILR 257, 265.

Of course, so far as Mr Raymond’s conduct may have affected the company’s insolvency, it is irrelevant for present purposes, but to the extent that it has increased his own insolvency (because of his obligations under the guarantees) it is directly relevant. We reject this argument.
The appeal against conviction on both counts is dismissed.
The appeal against sentence was carefully argued by Mr Jones. His arguments were directed to the separate sentences in respect of the two offences. With reference to the charge of concealing property he emphasised that the value of the watch concealed was only some $2,000 and that the stereo components made up only part of the whole installation to which the value of $35,000 was attributed. He said that the watch has been recovered and is in the hands of the Official Assignee and that the Official Assignee has taken no steps to take possession of the stereo components which remain with the appellant’s wife. Accordingly he said that no loss to the bankrupt estate can be identified.
We were referred to the decisions in R v Gray CA389/97, judgment 19 November 1997, in which concealment was dealt with by a sentence of six months periodic detention which was not disturbed on appeal. We were referred also to a sentencing by Nicholson J in R v Craig, High Court, Auckland S40/98, 17 November 1998, involving concealment of property and resulting in a sentence, after a plea of guilty, of imprisonment for 13 months.
It was submitted that in respect of the concealment count the values of the property were relatively minor; that although the reverse onus was not discharged there was no finding of fraud; that the Judge did not address ss6 and 7 of the Criminal Justice Act nor the recommendation in the pre-sentence report for a non-custodial sentence.
With reference to the second offence of recklessly increasing the extent of the insolvency it was submitted that the sentence of 13 months imprisonment (albeit with leave to apply for home detention) is excessive. Again it was said that ss6 and 7 of the Criminal Justice Act should have been applied and that account should have been taken of the fact that the nature of the offence is such that the conduct only becomes criminal retrospectively if bankruptcy follows. We were invited to consider the offending as at the lower end of the scale because of the absence of proof of deliberate fraud.
Counsel also raised the question of victim impact statements, drawing attention to the fact that the lengthy and sometimes emotive statements filed in the Court were from creditors of the company rather than of Mr Raymond personally. Although we are not sure that there is a great deal in the point, having regard to the close link through the personal guarantees, we note that the Judge accepted that he should set aside the statements so far as they were directed to the impact of the company collapse.
We were invited to take into account again on sentencing the fact that the gambling was not outrageous having regard to the claimed asset position of the appellant. We already have commented on that.
The sentences were concurrent. Rather than consider them separately we think the correct approach is to assess whether imprisonment for 13 months is manifestly excessive for the total offending.
We note that the Judge did not expressly address in his sentencing remarks ss6 and 7 of the Criminal Justice Act. However, we are not convinced that the offending in this case is to be regarded as simply property offending. Insolvency is a statutory process, it enables debtors to be released from the burden of unmanageable debts at the expense of creditors. Its processes are dependent upon proper disclosure and co-operation with the Official Assignee. Dishonesty or fraudulent conduct which frustrates the proper administration of an insolvent’s estate is not easily detected. It goes to the heart of the system. In this respect it can be likened to interference with the course of justice.
This was Mr Raymond’s third bankruptcy so he cannot be heard to plead ignorance of the requirements nor claim that he did not recognise his obligations. The Judge who sat through the trial over several days plainly formed an unfavourable impression of him and regarded him as manipulative and unreliable. In this respect he said:
But I am satisfied that you have endeavoured to make full use of the law and your knowledge of it in your present bankruptcy and I do not accept that you have acted openly and helpfully with the Official Assignee in this particular bankruptcy.
There is some support for this in the fact that Mr Raymond still contends that his conduct was reasonable. This surely shows little appreciation of proper mercantile conduct and little insight into the harm being inflicted on others while he was living his high life.
The totality of the offending involving both offences, the first having an element of fraud in the concealment of assets, and the second serious recklessness, or worse, in the dissipation of creditors’ money, leaves us in no doubt that the scale of offending fully warrants a sentence of imprisonment. It could not be said that misappropriation of moneys well in excess of $100,000 in other circumstances should not be met with a custodial sentence.
Accordingly, we are not disposed to interfere with the sentences imposed and the appeal against sentence also is dismissed.
The Judge granted bail pending appeal. The appellant must now surrender to the police to commence his sentence. He must do this at the Central Police Station at Auckland at 10.00am on the morning following delivery of this judgment.

Solicitors
Crown Solicitor, Auckland

[2001] NZCA 242

9 October 2001