The Queen v Harris
[2006] NZCA 273
•27 September 2006
IN THE COURT OF APPEAL OF NEW ZEALAND
CA121/06
CA126/06THE QUEEN
v
WILLIAM RAYMOND HARRIS
AND
MURRAY ATHOL OSMOND
Hearing:17 July 2006
Court:William Young P, Williams and Venning JJ
Counsel:P F Gorringe for Appellant Harris
P J Morgan QC for Appellant Osmond
A Duffy QC and G Andrée Wiltens for Crown
Judgment:27 September 2006 at 11am
JUDGMENT OF THE COURT
ALL APPEALS AGAINST CONVICTION AND SENTENCE ARE DISMISSED.
REASONS OF THE COURT
(Given by Williams J)
Introduction
[1] In a trial which commenced in the Auckland District Court on 23 January 2006, the appellants, Messrs Harris and Osmond, and a third person, a Mr Smitheram, faced an indictment brought by the Serious Fraud Office alleging that between 1 October 1998 - 14 April 1999 they “conspired by deceit, falsehood or other fraudulent means” to defraud Dorchester Finance Ltd by either or both of the following means:
(1)The said RAYMOND STANLEY SMITHERAM applying for and accepting a loan advance of $1.8m from Dorchester Finance Limited to enable settlement of an agreement for the sale and purchase of a quarry by Sands & Stones Limited for $2.8m from ROBERT JAMES SKINNER, by falsely stating he would provide his own cash contribution and by failing to disclose a material factor, namely vendor finance of $1m.
(2)being aware of Dorchester Finance Limited’s concerns regarding the said loan application, creating a commercially meaningless circular exchange of funds in the amount of $1m, for the purpose of misleading Dorchester Finance Limited.
[2] Following a trial of some three weeks in duration, all three were convicted by the jury.
[3] On 31 March 2006, the following sentences were imposed:
(a)Mr Harris: 2 years 3 months’ imprisonment;
(b)Mr Osmond: 2 years 9 months’ imprisonment; and
(c)Mr Smitheram: 15 months’ imprisonment with leave to apply for home detention.
[4] Messrs Harris and Osmond now appeal to this Court against the convictions on grounds appearing later in this judgment. They also appeal against their sentences on the basis they were manifestly excessive or disparate having regard to the sentence imposed on Mr Smitheram.
[5] Mr Smitheram abandoned his conviction appeal.
Facts
[6] No more than a relatively brief statement of the facts is required to set the context in which the appeals were argued.
[7] A Mr Skinner owned a Waikato quarry called East Point Sand. He decided to sell it in 1997. He was initially unsuccessful.
[8] Messrs Osmond and Harris are both former solicitors who practised in partnership in Cambridge. Mr Osmond, though struck off the roll of solicitors as a result of his conviction for theft of funds from his firm’s trust account (Osmond v R [1996] 1 NZLR 581), continued to operate out of his former firm’s building assisting clients with para-legal matters such as Resource Management consent applications and the like. He had been assisting Mr Skinner in that respect.
[9] On Mr Osmond’s advice, Mr Skinner offered the quarry for sale by tender. Mr Osmond was to receive a substantial fee if it sold.
[10] Mr Skinner received an offer for the quarry from a company, Cornerstone Management, in which Mr Smitheram had an interest, to buy the quarry for $2.75m including vendor finance of $1.5m.
[11] That transaction did not proceed, but Mr Smitheram continued to express interest and on 4 December 1998 they entered into a contract whereby a company controlled by Mr Smitheram, Sands & Stones Ltd, agreed to buy the quarry from Mr Skinner for $2.8m. In its terms, the contract provided for a deposit of $100,000 to be payable to Osmond Harris & Co and was conditional on the purchaser arranging finance in satisfactory terms. There were, however, no other financial conditions inserted in the contract. According to the evidence, however, $1.8m was to be raised on first mortgage of the quarry with the balance of $1m being left owing to Mr Skinner by way of vendor finance second mortgage. It was thus the case that Mr Smitheram was not intending to contribute any of his own funds or the funds of Sands & Stones Ltd to the purchase. Indeed, though few knew it at the time – and the jury was not told of it – Mr Smitheram was then an Australian bankrupt.
[12] Mr Crooks, a broker, helped Sands & Stones Ltd apply to Dorchester Finance for funds. The broker was of the impression Mr Smitheram intended to contribute in excess of $1m of his own funds to the purchase. The broker was not told of the vendor finance. Although he sent Dorchester Finance a loan application, including a copy of the agreement for sale and purchase, that would not have alerted Dorchester Finance to the financing arrangements.
[13] That aspect of the matter obviously underpinned Particular (1) in the indictment earlier cited.
[14] The evidence was equivocal as to whether any Dorchester Finance broker was told of the vendor finance. One, a Mr Koni, though having no recall of the transaction, accepted that contemporaneous notes he made suggested he was told that the Cobra Trust, Mr Skinner’s trust, was leaving in $1m. He had no recollection of the source of that information or whether the present appellants were involved.
[15] The Crown’s case at trial was that all three accused never disclosed the vendor mortgage to any of the brokers or to Dorchester Finance. Indeed, they allowed the loan application to proceed on the basis that the quarry’s potential value exceeded the purchase price by as much as $1m.
[16] On 4 February 1999 Dorchester Finance made a conditional loan offer to Sands & Stones Ltd, that being approved by its directors on 23 February.
[17] Up to 22 February 1999 Mr Harris was acting only for Mr Skinner but on that date he accepted instructions to act for Sands & Stones Ltd in relation to the quarry settlement which was due one week later, Monday, 1 March 1999. At all material times thereafter he was, therefore, acting for both vendor and purchaser. He was also at that stage acting for Mr Smitheram personally and Mr Osmond.
[18] The following critical course of exchanges then occurred.
[19] On 23 February 1999 Dorchester’s solicitors sent the security documents to Mr Harris and set out their settlement requirements. Most of the documents, duly executed, were returned the following day. On 26 February 1999 Dorchester’s solicitor sent further documents required for settlement.
[20] On 26 February 1999 Mr Harris sent the ASB Bank a copy of a cheque for the Elstan No 2 Trust “which is to be used as a temporary advance to Sands & Stones Ltd to enable the settlement of the sandpit to proceed” and which was as “discussed with Sands & Stones Limited’s financial advisor M Osmond”. The Elstan No 2 Trust had been set up by Mr Smitheram. Mr Harris’s letter went on to say that a “bank cheque for $1m would be lodged on Monday at the same time being repayment of the temporary advance”.
[21] Further normal settlement correspondence passed between the respective solicitors on 26 February 1999. It is unexceptionable save that Mr Harris advised Dorchester’s solicitors that his firm was acting for both parties and that a second mortgage encumbered the property. Dorchester’s solicitors sought a copy of the mortgage in a further fax that day. That was sent on 1 March. The mortgagees were Mr Osmond and another person who were trustees of the Cobra Trust, and the mortgage had a priority sum of $1.65m. The latter information was faxed to Dorchester by Mr Osmond on 1 March. The fax said the Trust was not related to Mr Smitheram and resulted from the trustees being “approached to advance $200,000 of working capital by way of second mortgage”.
[22] Settlement did not occur on 1 March. Mr Harris faxed Dorchester’s solicitors on 2 March, following direct contact by a Mr Jensen of Dorchester, seeking advice as to when Dorchester’s advance would be made and saying:
We have instructions from Sands & Stones Ltd to attend to settlement of the purchase because we acted for the Vendor and it was necessary to work quickly given the delay by Dorchesters in confirming the loan. … As part of those instructions we were handed a cheque for $1,000,000 from The Elstan No 2 Trust. The instructions further were that we were to present that cheque personally for special answer only when the Dorchester advance was made to our trust account as there was to be no time delay relating to the use of money. Mr Smitheram advised that funds had been arranged to meet the cheque at that time.
[23] That led Dorchester’s solicitors to require an undertaking from Mr Harris in the following terms:
… the $1,000,000 provided by the Elstan No 2 Trust constitutes a distribution under that trust for the benefit of Sands & Stones Limited and will be used to complete the purchase of the quarry. The $1,000,000 is not a loan and Sands & Stones Ltd will not be borrowing any money to complete the purchase other than the $1,800,000 from Dorchester Finance Limited and the $200,000 working capital being borrowed from the Cobra Trust.
[24] Mr Harris declined to give an undertaking in those terms but instead, the same day, faxed advice that the Elstan No 2 Trust owned 90% of the shares of Sands & Stones Ltd and the “Trust’s cheque for $1,000,000 is a loan and will not be a distribution as this would defeat the Trust’s intentions and cause taxation implications”, going on to say, however, that:
We are prepared and do undertake that we hold a cheque from The Elstan No 2 Trust drawn in favour of our Trust Account for the credit of Sands & Stones Ltd to complete the purchase from Skinner and that the advances from Dorchesters and the Trust will be used for that purpose and to meet costs etc.
[25] Mr Harris also threatened a damages claim should Dorchester not make the advance.
[26] Having taken further instructions, Dorchester Finance’s solicitors faxed Mr Harris, still on 2 March, to require an undertaking in the following terms:
That the full purchase price of $2.8m will be paid by the borrower to the vendor in cleared funds upon receipt of the loan moneys (less the deductions that we will make) and that there is no arrangement for the vendor to refund any part of the purchase price to the borrower.
[27] Mr Harris’s faxed reply the same day said that “We would not be able to settle without the ASB clearing the Elstan No 2 Trust cheque” and that “to our knowledge there is no arrangement for Mr Skinner, the vendor, to refund any part of the purchase price to the purchaser”. He said that he intended to “present the Elstan No 2 Trust cheque personally for a special answer”. Settlement was requested.
[28] It is, however, of note, that on the same day Mr Osmond faxed Mr Skinner’s bank, the BNZ, saying that Sands & Stones’ financier required Mr Harris to have “clear funds” to settle and that:
As some of the settlement funds are by way of loan from the Cobra Trust which in turn is receiving funds from Mr Skinner, it will be necessary for Mr Skinner to borrow the money for a short time (say one (1) hour or so).
We propose a temporary advance of $1,000,000 be made to Osmond, Harris & Co. Trust Account for the credit of Mr Skinner. He will advance the money to the shareholder so the purchase can proceed. Osmond Harris will then repay the money to you under their undertaking in relation to the discharge mortgage. We have obtained their undertaking …
and at the same time Mr Harris faxed the BNZ concerning Mr Osmond’s request giving an undertaking that on settlement the moneys due to the bank under the mortgage would be repaid including the “$1,000,000 advance being made today”.
[29] Virtually all of the above was sparked by Dorchester’s apprehensions that the contract purchase price for the quarry was being inflated to provide a false equity or, as the defence termed it at trial, “hydrauliced”. It was also, naturally, concerned to ensure that the funds ostensibly being advanced by the Elstan No 2 Trust were a genuine loan and not refundable immediately as a result of the non-existent represented equity.
[30] Though none of the three accused referred in their SFO interviews to the possibility that everything done in relation to Dorchester was because the transaction was a “price hydraulic”, that possibility became central to their defence at trial.
[31] Mr Pearce, a Dorchester employee, accepted that a “price hydraulic” can occur when parties to an agreement for sale and purchase decide on price but dishonestly represent to a financier that the price is in fact a sum which they have artificially increased to appear to provide equity for what would actually be a loan of the whole of the true purchase price. Mr Pearce said that, should a financier sense such is being done, its protection is to insist on appropriate undertakings. He accepted that Dorchester’s instructions to its solicitors were intended to ensure the sale to Sands & Stones was not “price hydrauliced”, by ensuring that the Elstan No 2 Trust loan was actually a genuine long-term loan and not a temporary advance designed to make it appear that Dorchester’s loan was not for the full purchase price.
[32] What actually happened, as the SFO investigation and the trial evidence showed, was, as Judge Joyce QC succinctly put it in his summing-up:
[67] … the allegation here is that the objective was to have Dorchester believe settlement of the transaction was going to involve a substantial and lasting injection of cash by the purchaser rather than an arrangement amounting to a funding of the shortfall – between the purchase price and the Dorchester loan – by the vendor.
[33] Mr Skinner’s cheque was transferred to Osmond Harris & Co’s trust account to his credit on 3 March and then transferred by journal entry to the Cobra Trust the same day. A trust account cheque was then issued by Osmond Harris to the Elstan No 2 Trust which obtained a bank cheque drawn on its ASB account. The bank cheque was then paid to Osmond Harris which credited the account of Sands & Stones Ltd. That cheque was then journaled first to the Cobra Trust and then to Mr Skinner’s account in the Osmond Harris trust account and then to Mr Skinner and paid into the BNZ to repay Mr Skinner’s overdraft. The upshot was that Sands & Stone Ltd owed $1.8m to Dorchester and $1m to the Cobra Trust.
[34] Within a relatively short time, Sands & Stones Ltd defaulted on its obligations to Dorchester and the Cobra Trust. The quarry was sold by mortgagee sale. Dorchester was effectively fully repaid but the Cobra Trust received nothing.
Grounds of appeal
Expert opinion evidence on the ultimate question
[35] For Mr Osmond, Mr Morgan QC submitted that the Crown’s two expert witnesses, Ms Payne and Mr Eades, impermissibly gave evidence on the ultimate issue, that is to say the principal issue which was for the jury to decide.
[36] At trial, the Crown case was that irrespective of whether there was a price-hydraulic, Dorchester, as a proven financier, would not have been prepared to lend the money if it knew the transaction was 100% financed; partly because this might suggest a price hydraulic but also for ordinary prudential reasons.
[37] The Crown asserted that the whole course of events relied on showing an attempt (which was successful) to induce Dorchester to believe that Mr Smitheram was putting in fresh money. The communications referred to earlier indicate this occurred.
[38] The defence case was that Dorchester was only concerned about the price-hydraulic, but the transaction was genuine and there was no intention that Mr Smitheram and his company be released from liability for the debt to Cobra. So there was no dishonesty. In closing, defence counsel submitted that the lender’s primary concern had been to protect itself against a “price hydraulic”. It submitted that the transaction created by Messrs Osmond and Harris, including in the latter’s trust account, in combination with the Bank transactions did not amount to the “commercially meaningless circular exchange of funds” to mislead Dorchester as particularised in the indictment. If accepted, that submission could have impacted on whether the Crown could prove the necessary mens rea of intention to defraud though, by its verdicts, the jury clearly rejected the defence.
[39] During trial, the defence mounted an objection to passages in the evidence of Ms Payne and Mr Eades said to infringe the ultimate issue rule. The Judge rejected the challenge though requiring amendments to the briefs to remove certain passages the Judge regarded as conclusory. He permitted both witnesses to be asked questions “relating to whether or not she or he can identify any commercial purpose or efficacy in the way things were gone about”.
[40] That notwithstanding, Ms Payne concluded her evidence-in-chief by saying she was unable to identify any apparent commercial need for the “money-go-round”, a point repeated in re-examination, though her cross-examination had only tangentially referred to the commercial reasons for the transaction.
[41] Mr Eades, in evidence-in-chief, said the transaction was needlessly complicated but accepted that in a transaction such as this the method adopted was one which could have been used. Like Ms Payne, he said in evidence-in-chief that he could see no purpose in the “money-go-round”, something he, too, was asked to repeat in re-examination.
[42] Mr Morgan submitted that such evidence was evidence on the ultimate issue, namely whether it was fraudulent to conceal from Dorchester that the buyer was not making a lasting monetary contribution towards the purchase and whether the transactions undertaken were to allay Dorchester’s concerns about the transaction being a “price hydraulic”. He submitted that, by permitting the two witnesses to give the evidence they did, the Court allowed the experts to say they did not believe the defence case was a reasonable possibility.
[43] Mr Morgan submitted the evidence went beyond legitimate expert assistance to a jury to decide a jury question: see R v B(An Accused) [1987] 1 NZLR 362 at 367 (CA), R v Makoare [2001] 1 NZLR 318 at [21] (CA), and R v Eade (2002) 19 CRNZ 470 at [19] (CA).
[44] For Mr Harris, Mr Gorringe associated himself with Mr Morgan’s submissions.
[45] For the Crown, Ms Duffy QC argued that this ground of appeal had been dealt with by the trial Judge in a way which, she submitted, was appropriate and correct. She made the point that, after the Judge’s ruling, no challenge was mounted during trial to the way in which the expert evidence was elicited. The expert evidence was helpful to the jury in understanding an over-complicated transaction including whether such may have had a proper commercial purpose.
[46] In our view, there is nothing in this ground of appeal.
[47] Objection was taken – albeit at a late stage ‑ to the form of the experts’ briefs. The objection was partially successful. In our view, the Judge’s direction was correct in law. The evidence was elicited in accordance with that direction. While the re-examination could be thought to have gone slightly beyond what was allowable, no objection was taken, it added nothing to the evidence-in-chief and is accordingly unexceptionable.
[48] In any event, it must be doubtful that the expert evidence was on the ultimate issue. That was whether the accused had conspired to defraud Dorchester by either of the means set out in the indictment. It was not whether the transaction was, to adopt the slightly emotive wording of the particulars included by the SFO in the indictment, whether what occurred was a “commercially meaningless circular exchange of funds”. With what actually occurred by way of journal entries, correspondence, exchange of cheques and the like being admitted, a test of whether the accused had conspired to defraud the financier was whether the transaction might be seen to have been effected in a commonplace way or whether it was needlessly complicated with the obvious implication if the jury found that to be the case. All that Ms Payne’s and Mr Eade’s evidence did was to offer expert views on that topic, leaving other views open.
[49] We decline to accept this ground of appeal.
Disclosure of Mr Osmond’s previous conviction
[50] During Mr Osmond’s cross-examination, senior counsel questioned him about aspects of the facts relating to his previous conduct as recorded in the NZLR report of the matter cited at [8], though without express reference to Mr Osmond’s conviction for theft. Despite the fact Mr Osmond admitted in evidence-in-chief that he had been struck off the roll of solicitors and prosecuted, he gave a largely exculpatory account of what occurred.
[51] The Judge was plainly uneasy at that line of questioning and intervened to prevent the answer being given to a question that there was a prosecution to which “you eventually pleaded guilty to a charge of theft and were sentenced to six months in gaol”.
[52] Ms Duffy made the point that Mr Osmond had himself disclosed his being struck off and subsequently prosecuted. The line of cross-examination followed his attempt to minimise those matters. Cross-examination as to his sentence was the most appropriate means of demonstrating that. It was, in any event, stopped by the Judge.
[53] It may have been slightly unfortunate that a question was put to Mr Osmond which referred to the length of his previous imprisonment but, seeing the Judge intervened and no answer was ever given, little, if any, additional damage to Mr Osmond’s case could have resulted. After all, when he – no doubt for precautionary reasons – opened his evidence-in-chief by telling the jury he had been struck off the roll of solicitors and prosecuted for actions he described in relation to his trust account, the fact that a question was put to him – even though it was unanswered – concerning the outcome of his prosecution could have come as no surprise.
[54] In our view, this ground of appeal is not made out.
Cross-examination of Mr Osmond on Mr Smitheram’s out-of-court statement
[55] Mr Morgan also raised as a ground of appeal the fact that the prosecutor had invited Mr Osmond to look at a particular passage in the SFO interview with Mr Smitheram. The interview with Mr Smitheram had earlier been played to the jury. In the presence of the jury, the propriety of that approach was questioned.
[56] The question as to what Mr Smitheram said concerning Mr Osmond’s participation in events was never in fact answered – the next questions in cross-examination relating to Mr Osmond’s advice to Mr Smitheram being accepted by Mr Morgan as properly put – but he said that the damage had already been done by the prosecutor’s reference to the Smitheram interview. That offended against the rule that out-of-court statements of a co-accused are not admissible against another accused, particularly when Mr Smitheram had not and did not give evidence and his counsel had not cross-examined Mr Osmond on the passage in question.
[57] Mr Morgan submitted the prosecutor’s conduct was improper: R v McKenzie [2004] 1 NZLR 181 at [34] and [35] (CA).
[58] Mr Gorringe submitted the prosecutor’s actions also affected Mr Harris given he was charged as a co-conspirator and the evidence demonstrated a close business relationship between the two appellants.
[59] Ms Duffy accepted that McKenzie limits the extent to which a co-accused can be cross-examined on an out-of-court statement by another accused but submitted that this case, unlike McKenzie, did not include any lengthy cross-examination on the topic. Furthermore, cross-examination on the substance of a co-accused’s statement is permissible and, because of the objection, any contradiction between Mr Smitheram’s out-of-Court account and Mr Osmond’s evidence was never expressly put before the jury. In any event, she submitted, the questions occupied only about four lines and were insignificant in the context of a four and a half hour cross-examination covering 60 pages of transcript. She also made the point that counsel for Mr Osmond neither sought to have the jury discharged nor a direction from the trial Judge. Mr Osmond denied the questions put to him on the substance of Mr Smitheram’s assertions.
[60] McKenzie was a case in which, amongst other grounds, this Court dealt with cross-examination by a prosecutor of one co-accused by reference to an out-of-Court statement by another. This Court accepted the relevant rules were not simple and reviewed cross-examination in a single accused’s trial on a document which is not in evidence and statements made by persons not called as prosecution witnesses as contrasted with multiple accused trials. Glosses discussed included cross-examination of an accused on another’s diary then put in evidence, and cross-examination on an excluded statement. With particular reference to the case in hand, this Court concluded:
[31] All of this indicates that it is the appearance of what is done which may be important. Assuming relevancy, an accused may be cross–examined upon all manner of factual propositions, some of which may be derived from a co–accused’s statement. But is it going too far to openly identify the proposition as one derived from that source where the statement is before the jury although not evidence against the particular accused?
[32] [Crown Counsel] argued that in such circumstances drawing a distinction between cross–examination on the subject-matter of a statement and cross–examination by reference to it was illusory. We understood him to mean that it was only natural for the prosecutor to refer to the similarities in the accounts of the complainant and the co–accused. Such would hardly escape the attention of the jury in any event. Therefore was it not appropriate to challenge the accused with reference to such concurrence and provide the opportunity for him to comment upon it? Provided the trial Judge gave adequate directions concerning the effect of out-of-Court statements, no harm was done.
[33] [Appellant’s counsel], however, focused more upon the evidentiary aspects. The appellant was not responsible for what his co–accused said to the police. Moreover, the co–accused’s statement was not evidence against him. Why, therefore, should he be asked to comment upon the co–accused’s account, even if it was materially similar to that of the complainant in some respects? To permit cross–examination of this type would only render the task of the jury in following the directions of the trial Judge more difficult.
[34] As is probably apparent from the above brief review of the cases the proper limits upon cross–examination of accused can be a difficult area in practice. It is important, therefore, that the approach adopted is workable both from the perspective of counsel and trial Judges. In our view the approach indicated in Cross [(1990) 91 Cr App R 115], Rice [[1963] 1 QB 857], Windass [(1988) 89 Cr App R 258] and Pui [CA153/95 30 May 1996] is an appropriate one. In each the direct cross–examination of an accused upon a statement other than his own was found to be irregular. On the other hand cross–examination upon the substance of the statement, without reference to source, was permissible. This, we think, represents an appropriate dividing line as to what should be allowed.
[35] It enables a prosecutor to fully explore any relevant issue of fact, including issues which may already be before the jury through a co–accused’s statement or other documents such as a diary. But a balance is struck to the extent that the accused is protected against the need to explain or even comment upon remarks which are not of his making. And if counsel may not cross–examine with direct reference to another person’s document the Judge’s direction as to who the document is evidence against is less likely to be compromised.
[61] We take the view that the prosecutor in this case may have risked transgressing the requirements of McKenzie when he directly referred Mr Osmond to Mr Smitheram’s statement but that the situation was saved by Mr Morgan’s objection, particularly when Mr Morgan accepted that the following questions, which were based on the statement, were proper. The result, in the end, was that Mr Osmond was cross-examined on the substance of Mr Smitheram’s statement not on the statement itself.
[62] Further, in summing-up the Judge directed the jury conventionally as to the inadmissibility of an accused’s out-of-court statements against other than their maker but said Mr Osmond’s evidence was admissible against all three. He particularly directed the jury that such applied only to propositions accepted by Mr Osmond. Sensibly, counsel did not ask the Judge to direct the jury specifically on the matter now raised on this appeal.
[63] For all those reasons, this ground of appeal fails.
Direction on Conspiracy
[64] Mr Gorringe argued that the Judge was in error in failing to direct the jury on the evidential ingredients of the two sets of particulars in the indictment. This was of prime importance to Mr Harris whose involvement in the matters in contention only began on 22 February 1999 and largely ended with settlement of the transaction on 5 March. He submitted the Judge should have directed the jury on the prosecution’s need to prove beyond reasonable doubt that in joining the conspiracy Mr Harris knew Mr Smitheram had falsely stated to Dorchester he would provide the cash contribution and had failed to disclose the vendor finance. In addition, he submitted, the Judge should have directed the jury as to the need to prove Mr Harris’s awareness of Dorchester’s concerns relating to the loan application and the reasons for them. He said Mr Harris would need to be proved to have had actual knowledge of the misrepresentations and the reasons for Dorchester’s concern.
[65] Having examined the summing-up we find nothing to support Mr Gorringe’s submissions.
[66] The Judge read the indictment into the summing-up, describing Particular (2) as an alternative or additional element. He made the point that “people can join or leave a conspiracy at various stages of its overall existence” and that an accused could “become a party to an already existing [conspiracy] if he co-operates knowingly to further its objective”. Even a person naïve at the outset could become a conspirator if they discovered what was “really and wrongly going on [and] stayed co-operatively and actively involved”.
[67] He then comprehensively analysed the requirements of proof of the conspiracy and stressed the need for unanimity “that the Crown had made out its case in terms at least of one in particular of the two numbered allegations”.
[68] In our view, those passages are unexceptionable and more than adequately addressed the points now raised by Mr Gorringe for Mr Harris.
[69] That ground of appeal accordingly also fails.
Jury’s Internet research
[70] At the end of sitting on 14 February 2006 it seems Court staff found a print-out from the World Wide Web in the jury room. It amounted to two pages downloaded from on “burden of proof” and “beyond a reasonable doubt”. There may have been up to six other pages as well. It would appear to have originated from the United States and contained advice which, in New Zealand terms, was erroneous. This was at a stage between the conclusion of defence evidence and final addresses. It was shown to the Judge the next morning.
[71] At the commencement of trial, Judge Joyce, as part of his introductory remarks, specifically directed the jury not to undertake any research on the topics arising in the trial and, particularly, not to search the Internet.
[72] In summing-up, plainly as a result of the Internet printout being drawn to his attention, the Judge delivered the firmest of directions on the topic. He recorded his earlier direction for jurors not to undertake any computer exploration of the World Wide Web and said that:
Despite that specific warning one of you obviously downloaded a document discussing the American approach to the burden of proof and standard of proof in a criminal case.
He described the juror’s actions as “disappointing and disconcerting” and told them such action could lead to a new trial. He expressly directed them:
That the contents of that document be forgotten by whoever amongst you may have read it
and continued by directing them that:
with all the strength at my command that there is to be no repetition of this conduct or any other like it.
He went on to make the point the American approach differed from that in New Zealand and the document was accordingly misleading. He told them they were to:
take your instructions on the burden and standard of proof from me and no other source.
[73] There was no complaint from counsel at the trial that the Judge’s method of dealing with the matter was inadequate or inappropriate.
[74] That notwithstanding, Mr Gorringe submitted that the jury may have assessed the burden and standard of proof and the meaning of reasonable doubt in accordance with the Internet printout rather than the Judge’s direction and that this amounted to juror misconduct rendering Mr Harris’s conviction unsafe: R v Bates [1985] 1 NZLR 326 (CA), R v Riley [1982] 1 NZLR 1 (CA).
[75] Mr Morgan associated himself with Mr Gorringe’s submissions.
[76] Ms Duffy submitted the Judge did all he could have done to counteract what was plainly juror misconduct transgressing the Judge’s earlier directions.
[77] We agree. Even without the Judge’s direction in his opening remarks, whichever juror downloaded the material was clearly acting in breach of his or her obligations. They could have been left in no doubt on that score in light of the Judge’s opening directions.
[78] However, jury rooms are cleaned every day and it is thus unlikely the printout had been in the jury room for more than 14 February and it was, of course, removed that evening. The strength of the Judge’s direction in summing-up on the topic could have left no juror under the slightest doubt that he or she was required to deal with the topics of burden of proof and reasonable doubt solely in accordance with the Judge’s direction and put entirely from their minds anything they may have gleaned from the Internet material. Juror research has shown that jurors generally follow Judges’ directions in summing-up and accordingly the chance that the jurors in this case applied the wrong test on burden of proof and reasonable doubt is extremely remote.
[79] This, the last ground of appeal, accordingly also fails.
Sentence Appeal
[80] The sentences imposed on the three accused were recounted earlier.
[81] In sentencing, the Judge described Mr Smitheram’s participation as that of a person determined to obtain the quarry and uncaring how that was achieved, Mr Osmond as “pulling the wool over Dorchester’s eyes as a perverted intellectual challenge” and Mr Harris as being “manipulated by Mr Osmond” though, as a result of his professional standing, able to dupe Dorchester into advancing the funds.
[82] He regarded Mr Osmond as the most serious offender. Aggravating features in his case included his previous offending and lack of remorse. His personal, family and financial setbacks were regarded as self-inflicted. From a starting-point of 2½ years’ imprisonment, the Judge added three months for the aggravating features to arrive at the 2 years 9 months sentence imposed. “Anything less”, the Judge said, “would be to ignore the fact that he was the leader of the deceiving team” and that he had “shown himself to be distinctly worse than irresponsible”.
[83] The starting-point for Mr Harris’s offending would, in the Judge’s view, have been well in excess of two years imprisonment but having regard to his loss of professional career and other personal circumstances, two years three months was imposed.
[84] Mr Smitheram was 72 years old at the time of sentence. Had he not been as elderly and in poor health, the Judge said he would have imposed a significantly longer sentence. The 15 month term was imposed with leave to apply for home detention. Given the lapse of time since the offending and the changed legislative approach to home detention, deferment of the commencement date of the term was declined.
[85] On appeal, Mr Morgan made the point that Mr Osmond stood to gain from the transaction only “modest fees” and kudos for seeing the transaction through. In this case, he submitted, the only victim was a “very substantial public company”, one which suffered no or very little loss. He submitted that an independent-minded observer would conclude that there was an unjustified disparity between the sentence of 2 years 9 months imposed on Mr Osmond by contrast to the sentence of less than 50% of that length imposed on Mr Smitheram.
[86] Mr Gorringe submitted Mr Harris acted only as solicitor and stood to gain nothing from the transaction except a fee. All he did, Mr Gorringe suggested, was act on instructions. Because Dorchester was repaid all or virtually all its loan, it was incorrect to describe this case as relating to a “fraud of $1.8m”. He stressed there was one offence only in this case and that Mr Harris had no previous convictions. It was not a case of breach of trust, he suggested, as Mr Harris owed no professional obligation to Dorchester. While accepting that comparable cases are difficult to find in fraud matters, he relied on what he suggested was the similar decision in R v Perry HC HAM CRI 2005-419-122 29 September 2005 Asher J, where, in a somewhat larger though similar fraud, the Judge took a starting point of two years imprisonment and imposed a term of 12 months. Mr Harris came late to the conspiracy and had only a partial understanding of what lay behind his instructions. He had suffered an “enormous fall from grace” through being struck off. All he did was lend his firm’s name to a fast-moving transaction which he did not entirely understand. He took advice from a senior practitioner on 4 March as to his obligations.
[87] Ms Duffy relied on the well-known decisions in R v Lawson [1982] 2 NZLR 219 (CA) and R v Rameka [1973] 2 NZLR 592 (CA) both of which lay down the proposition that where disparate sentences are asserted, the proper course is not to look at the disparity between co-accused but to consider the appropriateness of the sentence imposed in each particular case. Even if one sentence was arguably too short – something she did not concede as far as Mr Smitheram was concerned – that provided no necessary basis to interfere with a co-accused’s sentence. The sentences imposed were, she submitted, appropriate in the circumstances.
[88] While there are significant differences between the sentences imposed on the present appellants by contrast with that imposed on Mr Smitheram, we take the view that the Judge ‑ who was, after all, the trial Judge ‑ was the person best placed to assess the relevant culpabilities. There could be no doubt, for the reasons outlined by the Judge, that the sentence to be imposed on Mr Osmond would be the most severe, particularly having regard to his previous history, and that the sentence to be imposed on Mr Harris, then still a solicitor, would not be much less in extent. On the other hand, while Mr Smitheram provided the impetus for the offending through his determination to acquire the quarry despite his impecunious circumstances, it was open to the Judge to treat his age and significantly worse personal circumstances by comparison with the present appellants as justifying a significantly lesser sentence. Indeed, the Judge made it plain that, had it not been for those circumstances, a substantially longer term of imprisonment would have been imposed.
[89] We are not disposed to interfere. The disparity between the three accused, in their particular circumstances, was not such as to suggest the sentences imposed on the present appellants were manifestly excessive by contrast with that imposed on Mr Smitheram given his personal situation, even though the sentence imposed on Mr Smitheram may, perhaps, be regarded as somewhat lenient.
[90] The appeals against sentence are accordingly dismissed.
Result
[91] In the result, all the grounds of the appeals against conviction having been dismissed, those appeals are themselves dismissed as are the appeals against sentence.
Solicitors:
Crown Law Office, Wellington
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