Waters v Ministry of Economic Development
[2013] NZHC 3463
•18 December 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI 2013-404-000216 [2013] NZHC 3463
BETWEEN GERALD WATERS Appellant
ANDMINISTRY OF ECONOMIC DEVELOPMENT Respondent
Hearing: 5 December 2013
Appearances: GN Bradford for Appellant
J Blythe for Respondent
Judgment: 18 December 2013 at 4pm
(RESERVED) JUDGMENT OF ANDREWS J [Appeal Against Conviction]
This judgment is delivered by me on 18 December 2013 at 4pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Counsel/Solicitor:
M J Walmsley, Paeroa
Meredith Connell, Auckland
GN Bradford, Barrister, Auckland
WATERS v MINISTRY OF ECONOMIC DEVELOPMENT [2013] NZHC 3463 [18 December 2013]
Introduction
[1] On 31 May 2013, the appellant was found guilty by Judge S A Thorburn in the District Court at Auckland on two charges of being a party to the commission of an offence by Mr Jonathon Mann against s 382 of the Companies Act 1993 (“the trial judgment”).1 On 24 July 2013, Judge Thorburn entered convictions against the appellant on both charges, and imposed a fine of $2,000 on each charge (“the sentencing judgment”).2
[2] The appellant has appealed against conviction and sentence.
Background
[3] In February 2007, Mr Mann was convicted on a charge of dishonestly using a document to obtain a pecuniary advantage, under s 228(b) of the Crimes Act 1961. Because this was a crime involving dishonesty (as defined in s 2(1) of the Crimes Act) Mr Mann was, pursuant to s 382(1)(b) of the Companies Act, prohibited for a period of five years after the conviction from being “a director or promoter of, or in any way, whether directly or indirectly, concerned or take part in the management of a company”, unless he first obtained the leave of the Court.
[4] In January 2010, the appellant (who is a medical doctor) and Mr Mann became flatmates. At that time, Mr Mann told the appellant that he was interested in starting a business to make health products (a muscle balm), but was unable to do so because he was prohibited from being a director of a company. The appellant invested in the business and in July 2010 was issued shares in two companies IHO Holdings Limited (“IHO Holdings”) and IHO Limited (“IHO”). In all, the appellant invested $100,000 in the business, and advanced it a further $40,000.
[5] In February 2011, Mr Mann asked the appellant to be a director of the companies. The appellant agreed, and was appointed a director of IHO Holdings on
1 February 2011, and a director of IHO on 21 February 2011. He remained a
director until his resignation in August 2011.
1 Ministry of Economic Development v Waters DC Auckland CRN 12004502012 and CRN
12004502013, 31 May 2013.
2 R v Waters DC Auckland CRI-2012-004-9765, 24 July 2013.
[6] On 29 June 2012, Mr Mann pleaded guilty to two charges of taking part in the management of IHO and IHO Holdings.
District Court trial
[7] At trial, the prosecution evidence against the appellant comprised, in the main, an audio interview of the appellant by a Ministry investigator, Mr Scheepers (“the interview”). The appellant then gave evidence in his defence. The principal issue at trial was whether the appellant should be found liable as a party to Mr Mann’s offending, under s 66(1) of the Crimes Act. More particularly, the issue was whether the appellant did or omitted to do an act, for the purpose of aiding or abetting Mr Mann in taking part in the management of IHO and IHO Holdings?
[8] The evidence focused on Mr Mann’s role in the companies during the time while the appellant was a director. The prosecution submitted at trial that the appellant’s description of Mr Mann’s role in the companies, both in his interview and in his evidence at the trial, established that Mr Mann had taken part in the management of the companies. It was submitted that the appellant was guilty as a party to Mr Mann’s offending by continuing as a director when he knew of Mr Mann’s role in the companies, and by failing to curtail or control Mr Mann’s actions. The defence case at trial was that the appellant had restricted Mr Mann’s role in the companies, and that Mr Mann was an employee and never had a managing role.
[9] The Judge accepted the prosecution’s case. He first said:3
It is not disputed that the defendant knew that Mr Mann was prohibited from participating in the management of a company. Nor is it disputed that Mr Mann did in fact participate in the management of the companies in ways which were unlawful given his prohibition.
[10] Turning to consider whether the appellant was a party to Mr Mann’s offending, the Judge noted that the prosecution had to prove that the appellant knew that Mr Mann intended to do certain acts that constituted an offence, even if the
appellant did not know the detail of the offence intended. The prosecution also had
3 Trial judgment at [8].
to prove an act or omission by the appellant, for the purpose of aiding and/or
abetting Mr Mann’s offence.4
[11] The Judge held that the first element of knowledge was established by the
appellant’s own evidence. He said:5
I do not put much store on that stance taken by the defendant having listened to the audio record of the interview. The defendant is an intelligent man, highly educated and articulate and no doubt now, has understandable regret that he agreed to the interview. However, his responses are there to be evaluated for what they signified at the time and at the end of the day they give a very clear indication that the defendant knew Mr Mann was prohibited from participating in management and that he well understood what Mr Mann was doing in the day to day functioning of the companies. In the Court’s view Mr Mann’s role in the companies clearly described by the defendant, was obvious participation in management in a variety of ways which the defendant was fully aware of.
[12] The Judge then held that the second element was also established. He said:6
Clearly there is a glaring act of omission on the defendant’s part in failing to intervene to curtail and control in a specific and prescriptive way the actions of Mr Mann. The defendant had a duty and an obligation as a director of the companies to ensure that his knowledge of Mr Mann’s prohibition translated into intervention on his part … to proscribe and control the actions of Mr Mann in a way which would limit his role and could properly demonstrate his engagement only as an employee and nothing more. The defendant’s duty to take such steps and his failure to do so is an omission which in the Court’s view amounts to abetting Mr Mann.
District Court sentencing
[13] At sentencing, an application was made for an order that the appellant be discharged without conviction.
[14] The Judge noted the consequences it was submitted would follow from the convictions: possible restrictions on the appellant’s travel and thus thwarting of his career progress in his medical specialty, and possible professional disciplinary proceedings. The latter, the Judge observed, were likely in any event, with or without a conviction. Against the possible consequences, the appellant’s offending
was more than “turning a blind eye” but was a deliberate decision not to intervene or
4 At [10].
5 At [12].
6 At [15],
control Mr Mann’s conduct. The statutory scheme required the seriousness of compliance with the obligations under the Companies Act to be made known and stated unequivocally.7
[15] The Judge described the appellant’s offending as being “very much in the lower range of severity of its sort”, but was not satisfied that the consequences of conviction would be out of all proportion to the gravity of the offence.8 The application for discharge without conviction was declined.
Approach on appeal
[16] In respect of both of the appeal against sentence and the appeal against conviction, this is a general appeal by way of rehearing, and the approach to be taken is as set out by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar.9
The appellant bears the onus of satisfying the appellate Court that it should differ from the original decision, but the appellate Court must come to its own view of the merits. The weight the appellate Court gives to the original decision is a matter of judgment. Deference to the assessment of the original decision-maker is not necessary, even where the assessment requires a value judgment.
[17] If the appellate Court’s opinion is different from the conclusion of the original decision-maker, then the original decision is wrong, even if the conclusion is one on which reasonable minds may differ. However, the original decision-maker may have had the benefit of assessing credibility and for this reason, an appellate Court may rightly hesitate to conclude that findings of fact or fact and degree are wrong.
[18] As noted above, an appeal against a refusal to discharge without conviction is also a general appeal, rather than an appeal against the exercise of a discretion. This is because s 107 of the Sentencing Act 2002 imposes a threshold for a discharge, that
the consequences must be out of all proportion to the gravity of the offending.
7 Sentencing judgment at [8]–[12].
8 At [17].
9 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3]–[5].
See also Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31]–[32], per Tipping J.
Determining whether the consequences reach this threshold is a matter of judicial assessment, rather than the exercise of a discretion.10
Appeal against conviction
[19] In the course of submissions, three issues crystallised:
(a) Did the actions of Mr Mann amount to directly or indirectly taking part in the management of IHO or IHO Holdings?
(b) If Mr Mann’s actions did amount to taking part in the management of
the companies, was the appellant aware of Mr Mann’s actions?
(c) Did the appellant fail to fulfil a duty to prevent Mr Mann from taking part in managing the companies?
The appellant’s submission that the prosecution failed to call certain evidence
[20] I deal first with the submission made on behalf of the appellant that certain evidence should have been called for the defence in the District Court. Affidavits were filed in this Court sworn by Ms Debra Chantry, Mr Garry Reynolds, and Mr Darryl Parsons. A statement of evidence for Dr Murray Cox was provided at the hearing of the appeal. I refer to the affidavits and statement as “the proposed evidence”.
[21] Mr Bradford submitted that the proposed evidence was relevant as showing Mr Mann’s “modus operandi”, in convincing flatmates to invest in his business and becoming a director, Mr Mann’s mental health, and Mr Mann’s fraudulent behaviour towards others. He submitted that the proposed evidence would have been helpful in establishing the hidden agenda Mr Mann may have had, and how he would have been perceived as believable.
[22] There are a number of difficulties with Mr Bradford’s submission. First, it is
apparent that the proposed evidence was available as at the time of the District Court
10 See R v Hughes [2008] NZCA 546 [2009] 3 NZLR 222 at [11].
trial. It is not admissible on appeal. Secondly, the submission amounts to one of counsel error, in that it was submitted that the appellant’s trial counsel should have called it, but failed to do so. As such, the procedure set out in r 12A of the Court of Appeal (Criminal) Rules 2001 should have been followed. That procedure was not followed: the alleged incorrect conduct (that is, the failure to call the proposed evidence) was not set out in the notice of appeal, or by a memorandum filed within
30 days after the notice of appeal was filed; and affidavits relating to this ground of appeal were not filed within the same period. Further, no waiver of privilege was filed.
[23] In the circumstances, I do not accept that the appellant can now submit that his trial counsel should have called the proposed evidence.
[24] In any event, I accept Ms Blythe’s submission for the respondent that the proposed evidence simply goes to those witnesses’ own knowledge of Mr Mann and his involvement in the companies. It does not go to Mr Mann’s actual involvement in the companies at the time the appellant was a director. I therefore conclude that the proposed evidence is irrelevant and inadmissible.
[25] I turn to discuss the issues outlined at [19], above.
Did Mr Mann’s actions amount to directly or indirectly taking part in the
management of IHO Holdings?
[26] Mr Bradford, for the appellant, submitted that the appellant’s own evidence did not establish that Mr Mann had taken part in the management of the company. He submitted that when looked at in the round, the prosecution had failed to prove anything that constituted management or directing the companies by Mr Mann. In particular, he submitted, there was no summary of facts setting out what Mr Mann had pleaded guilty to. He also submitted that the appellant’s responses to propositions put to him in the interview were not evidence of Mr Mann’s actions.
[27] Ms Blythe submitted, for the respondent, that there was ample evidence from the appellant’s statements in his interview as to Mr Mann’s participation in the management of the companies. She further submitted that it was agreed by counsel
for the informant and the defence at the District Court that the issue at the defended hearing was not whether Mr Mann had participated in managing the companies, but whether the appellant knew about this, and had aided and/or abetted it.
[28] Section 382 of the Companies Act provides, as relevant:
382 Persons prohibited from managing companies
(1) Where—
...
(b) a person has been convicted of an offence under any of section 37 to 380 of this Act or of any crime involving dishonesty as
defined in section 2(1) of the Crimes Act 1961; or
...
That person shall not, during the period of five years after the conviction or the judgment, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company, unless that person first obtains the leave of the Court, which may be given on such terms and conditions as the Court thinks fit.
...
[29] “Management” is to be given a wide interpretation, covering activities relating to the real business affairs of a company, but is not intended to prohibit a person being involved in a minor capacity. In R v Newth, Quilliam J (in relation to the predecessor to s 382 in the Companies Act 1955) said that the prohibition was intended to protect the commercial community, and as such was not intended to
simply prevent a person acting as a director.11 The focus should be on whether the
person was involved “in the real business affairs of the company”.12
[30] In Tregurtha v Police, Fisher J considered that it was a question of degree as to whether a person was involved in the real business affairs of a company.13
Fisher J approved of the discussion in Commissioner for Corporate Affairs (Vic) v
Bracht, where Ormiston J said:14
... The concept of ‘management’ for present purposes comprehends activities which involve policy and decision-making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of the corporation, to the extent that the consequences of the formation of those
11 R v Newth [1974] 2 NZLR 760 (SC) at 761.
12 At 761.
13 Tregurtha v Police HC Auckland AP123/93, 15 October 1993.
14 Commissioner for Corporate Affairs (Vic) v Bracht (1988) 14 ACLR 728 at 733–736.
policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.
... I would see the prohibition as covering a wide range of activities relating to the management of a corporation, each requiring an involvement of some kind in the decision-making processes of that corporation. That involvement must be more than passing, and certainly not of a kind where merely clerical or administrative acts are performed. It requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised. Advice given to management, participation in its decision-making processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice.
[31] In his judgment in R v Le Noel, Judge Thorburn referred to the judgments in Newth, Tregurtha, and Bracht, and set out a non-exhaustive list of indicators that could be taken into account in deciding whether a person can be described as having taken “a hand in the real business affairs” of a company.15
1.Without there being a need for the accused to be a director or office holder did he exercise any supervisory control which reflected the general policy of the company?
2.Was the accused’s involvement any more than a passing involvement that would be consistent only with clerical or administrative acts expected of an employee?
3.Did the involvement of the accused include activities of responsibility and assumption of some control albeit not necessarily
of an ultimate kind?
4.Did the accused give advice to management and or participate in decision-making processes?
5. Did the accused partake in the execution of or implementation of
decisions made – beyond the mere carrying out of instructions as would be required of a mere employee?
6. Were the opinions of the accused given any weight in the decision-
making process of management?
[32] As noted earlier, the only evidence led by the prosecution in relation to Mr Mann’s actions was the statements made by the appellant in the interview. During the interview, the appellant denied that Mr Mann “managed” the company. However, he made the following statements:
[Mr Mann] was not by himself completely in control of the company’s
direction. The company management and directorship was a group thing.
...
[Mr Mann] had a number of roles. He did design work, he co-ordinated people we dealt with, the various people involved in the business, and
15 R v Le Noel (alternative citation R v L) [1998] DCR 229 at 235.
arranged meetings with people; he had some contact with distributors overseas and a variety of things.
...
I mean there’s day to day activity the company does; it wasn’t a large business and there were only a small number of people doing the day to day work but I guess I did some of that day to day work but given I had a fulltime job I was unable to do all of it. Some of that work was delegated to [Mr Mann].
...
The decisions were always joint decisions; [Mr Mann] could not make decisions without approval from myself or [Ms Pillinger, another director] or other people that were involved in the company. So meetings were held to discuss the direction of the company, how the company would run, major decisions, markets that we’d do into, sales plans and so on, these decisions were not made solely by [Mr Mann].
...
[Mr Mann’s] duties were to ... This is a small company with a small number of employees. There was a lot of these sorts of things that needed doing and [Mr Mann] [was] doing a lot of those things. He did a lot of work for the company for very little pay because he, I guess, he had the ideas for the company from the start and collected together the people that ran the company.
...
The decisions were joint decisions. [Mr Mann] did not have sole and unregulated control of the company during the time that I was a director.
[33] In his evidence at trial, the appellant said that in his interview, he had made some comments which were “inaccurate based on what I recalled at the time” and that his answers to Mr Scheepers’ questions “were based on, in part, what Mr Scheepers was, was trying to, to get out of me.” However, the appellant accepted that Mr Mann was working on design and marketing material for the companies (described by the appellant as “critical for the success of the company”), communicating with the company’s major manufacturer, completing Customs paperwork, maintaining contact with distributors, importers and exporters, and could incur debt on behalf of the company by making orders. Further, he accepted that Mr Mann was present at discussions regarding the running of the company.
[34] I am not satisfied that the appellant has established that the Judge was wrong to conclude that the appellant’s statements in his interview provided evidence that
Mr Mann displayed “obvious participation in management in a variety of ways”.16
To the contrary, I am satisfied that the evidence points to the appellant having accepted that Mr Mann was involved in decisions as to the direction of the company, how the company would run, and other major decisions. The fact that decisions were “joint decisions” and that Mr Mann did not have “sole and unregulated control of the companies” does not mean that Mr Mann was not taking part in the management of the companies. Advice given to management, participation in its decision-making processes, and execution of its decisions, going beyond the mere carrying out of directions as an employee, suffices as participation in the
management of the company.17
[35] It is clear from the appellant’s own evidence that Mr Mann’s participation in the management of the companies included giving advice and participating in the decision-making process. Whether or not Mr Mann had the final approval of such decisions is irrelevant.
Was the appellant aware of Mr Mann’s activities?
[36] It was submitted for the appellant that the evidence did not establish beyond reasonable doubt that the appellant “knew of any significant management role” on the part of Mr Mann. Ms Blythe submitted for the respondent that it was clear from the appellant’s statements in his interview that he was well aware of what Mr Mann was doing. I accept that submission. I have already referred to the appellant’s statements, and it is not necessary to repeat them. The appellant participated in meetings with Mr Mann, he delegated functions to Mr Mann, and he was aware of what Mr Mann was doing. I am not satisfied that there was insufficient evidence on which the Judge could conclude that the appellant knew of Mr Mann’s role in the company.
[37] It was submitted for the appellant that because Mr Mann did not have “sole and unregulated” control and that the appellant or another director, Ms Pillinger, had to approve the “joint decisions”, this meant that Mr Mann was not taking part in the
management of the companies. That submission is incorrect as a matter of law. As
16 Trial judgment at [12].
17 See Commissioner for Corporate Affairs (Vic) v Bracht, above n 14, at 735–736.
Quilliam J observed in R v Newth, it is “irrelevant whether, in the final analysis, what the accused did was given the seal of approval by someone else or not.”18 Similarly, in Bracht where Ormiston J said taking part in the management “requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised. Advice given to management, participation in its decision- making processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice.”19
Did the appellant fail to fulfil a duty to prevent Mr Mann from taking part in managing the companies?
[38] This issue arose from the Judge’s finding that the appellant was guilty as a party to Mr Mann’s offending, under s 66(1)(b) and (c) of the Crimes Act. Section
66 (1) provides, as relevant:
66 Parties to offences
(1) Every one is a party to and guilty of an offence who–
...
(b) Does or omits an act for the purpose of aiding any person to commit the offence; or
(c) Abets any person in the commission of the offence; or
...
(i) Party liability under s 66(1)(b)
[39] For the appellant to be a party to Mr Mann’s offending by aiding Mr Mann under s 66(1)(b), two elements needed to be proven. First, that the appellant did or omitted to do something that had the effect of aiding Mr Mann in breaching s 382 of the Companies Act 1993. Secondly, that the appellant did this or omitted to do it with the purpose of aiding Mr Mann.
[40] Aiding means assisting, helping or giving support to a person. It must be proved that “the accused did an act which had the effect of aiding”.20 In the context
of an omission to do an act, liability arises where a person has a duty to act or where
18 R v Newth, above n 11, at 761.
19 Commissioner for Corporate Affairs (Vic) v Bracht, above n 14, at 735–736.
20 Larkins v Police [1987] 2 NZLR 282 (HC).
the omission was for the purpose of encouraging and did encourage the principal party to commit the offence.21
[41] In the District Court, Judge Thorburn considered that the appellant, as a director of the IHO Holdings and IHO, had a duty to “ensure that his knowledge of Mr Mann’s prohibition translated into intervention on his part ... to proscribe and control the actions of Mr Mann in a way which would limit his role and could properly demonstrate his engagement only as an employee and nothing more.”22
This finding was not appealed and rightly so. Under s 134 of the Companies Act
1993, a director is required to not act, or agree to the company acting, in a manner that contravenes the Companies Act 1993. Allowing Mr Mann to take part in the management of the companies contravened s 382 of the Companies Act 1993 and so the appellant was required to take reasonable steps to prevent Mr Mann from doing so.
[42] The appellant submitted in the District Court that he had discussed with Mr Mann what he could and could not do in the companies. Further, the appellant also said that he could not see what more he could have done “short of having someone follow [Mr Mann] around 24 hours a day supervising him...”. Such an argument is, however, unpersuasive given the appellant’s statements that Mr Mann was involved in discussions about the future of the company and that decisions were “joint decisions”.
[43] While the appellant submitted that he did not believe that these actions amounted to Mr Mann taking part in the management (and thereby committing an offence), that submission does not assist him. As the authors of Adams on Criminal
Law state:23
21 Charnley v R [2013] NZCA 226, (2013) 26 CRNZ 264 at [45]; See also AP Simester and WJ Brookbanks Principles of Criminal Law (4th ed, Brookers, Wellington, 2012) at [6.4.1(2)] and [6.4.3]; Jeremy Finn “Culpable Non-Intervention: Reconsidering the Basis for Party Liability by Omission” (1994) 18 Crim L J
90.
22 Trial judgment, above n 1, at [15].
23 Bruce Robertson (ed) Adams on Criminal Law (looseleaf ed, Brookers) at [CA66.19], citing R v
Gill (1999) 19 NZTC 15,526 (CA); Cardin Laurent Ltd v Commerce Commission [1990] 3
NZLR 563 (HC); Megavitamin Laboratories (NZ) Ltd v Commerce Commission (1995) 6 TCLR
231 HC); and van Niewkoop v Registrar of Companies [2005] 1 NZLR 796 (HC).
A secondary party must at least know that the principal party intends or contemplates doing certain acts that constitute the offence in fact committed, although it is immaterial that the secondary party may not know that those acts amount to an offence. ...
[44] Accordingly I am not satisfied that the Judge was wrong to find that by allowing Mr Mann to act as he did, the appellant omitted to prevent him from doing so, thereby enabling Mr Mann to breach s 382 of the Companies Act 1993. The Judge’s decision was in line with the evidence, and correct in law.
[45] The appellant then submitted that there was no evidence that he intentionally helped Mr Mann to breach s 382 of the Companies Act. Much of this lack of intention, it was claimed, arose from ignorance. For example, it was submitted that the appellant was not aware that what Mr Mann was doing was contrary to s 382, or that Mr Mann was not allowed to have shares. He further said that, following legal advice passed on to him, he considered that s 382 only prevented Mr Mann from being a director or a manager.
[46] In R v Brough, the Court of Appeal held that in duty cases, intention is established by proof of:24
(a) knowledge of the essential matters of the offence; and
(b) a deliberate omission to discharge the relevant duty.
[47] In this case, it is clear from the evidence given in the District Court that the appellant was aware of Mr Mann’s actions, and that those actions constituted an offence against s 382 of the Companies Act.
[48] For the second element (a deliberate omission to discharge the relevant duty), the test is whether the appellant intended to allow Mr Mann to take part in the decisions and to do activities that constituted “taking part in the management of the company”.25 On the evidence, the appellant did have such an intention. As noted earlier, it is immaterial if the appellant did not know that Mr Mann’s actions were in breach of s 382 of the Companies Act. Accordingly, I am not satisfied that the Judge
was wrong to find that the appellant had the requisite intention, and as such was a
24 R v Brough CA507/96, 27 February 1997 as affirmed in R v K CA97/06, 19 September 2006.
25 R v Gill (1999) 19 NZTC 15,526 (CA); Adams on Criminal Law, above n 23, at [CA66.19].
party to Mr Mann’s offending under s 66(1)(b) of the Crimes Act. Again, the finding was in line with the evidence, and correct in law.
(ii) Party liability under s 66(1)(c)
[49] The Judge also concluded that the appellant was a party to Mr Mann’s
offending under s 66(1)(c) by abetting the offending.
[50] The appellant appealed against the Judge’s finding that any omission by the appellant “abetted” Mr Mann’s offending. Much turns on whether or not an omission can be “abetting”. In R v Coney, Hawkins J stated that to be an abettor:26
... some active steps must be taken by word, or action, with the intent to instigate the principal, or principals. Encouragement does not of necessity amount to aiding and abetting, it may be intentional or unintentional, a man may unwittingly encourage another in fact by his presence, by misinterpreted words or gestures, or by his silence, or non-interference, or he may encourage intentionally by gestures, or actions intended to signify approval. In the latter case he aids and abets, in the former he does not.
[51] As such the focus is on encouragement and this can be by way of omission. In Cooper v Ministry of Transport, McGechan J held that a vehicle’s owner, by not preventing a drunk person to drive the car (and thereby permitting the person to drive), was liable as a party.27 Therefore an omission to act can abet a principal.
[52] However, a further requisite for a party to abet a principal is intention. As mentioned in Coney there has to be an intent to instigate the principal.28 As set out at [39] to [42], above, I am not satisfied that the Judge was wrong to find that the appellant intentionally allowed Mr Mann to do certain actions, and those actions constituted taking part in the management of the companies. Therefore the Judge did not err in finding that the appellant could be a party under s 66(1)(c) of the Crimes
Act.
26 R v Coney (1882) 8 QBD 534 at 557–558, cited in Shriek v R [1997] 2 NZLR 139 (CA) at 147–
148.
27 Cooper v Ministry of Transport [1991] 2 NZLR 693 (HC).
28 R v Coney, above n 26, at 557–558 as approved in Lewis [1975] 1 NZLR 222 (CA) and R v Pene
CA63/80, 1 July 1980.
(iii) Conclusion as to the appellant’s liability as a party
[53] On the above analysis, I am not satisfied that the Judge was wrong to find that the appellant was a party to Mr Mann’s offending under both s 66(1)(b) and (c) in that he aided and abetted Mr Mann.
Appeal against the Judge’s refusal to discharge the appellant without conviction
[54] Under s 106 of the Sentencing Act 2006, the Judge had jurisdiction to discharge the appellant without conviction as he had been found guilty of an offence for which there is no minimum sentence imposed by statute. However, pursuant to s
107 of the Sentencing Act 2006 the Court was required, first, to be “satisfied that the direct and indirect consequences of a conviction would be out of all proportion to the gravity of the offence.”29
[55] In determining whether the threshold set out in s 107 is met, the Judge was required to consider three factors:30
(a) The gravity of the offence;
(b) The direct and indirect consequences of a conviction; and
(c) Whether those consequences are out of all proportion to the gravity of the offence.
[56] In R v Hughes, the Court of Appeal considered that the last requirement is crucial. After considering the first two factors, the Court must be satisfied that the consequences would be out of all proportion to the gravity of the offending before it is entitled to consider whether the discretion conferred by s 106 should be exercised.31 The Court of Appeal considered that this disproportionality test requires:32
... consideration of all relevant circumstances of the offence, the offending and the offender, and the wider interests of the community, including the factors required by the Sentencing Act to be taken into account under ss 7, 8,
29 In R v Hughes, above n 10, at [8] the Court of Appeal held that despite the use of the word
“guidance” in the heading of s 107, s 107 was mandatory.
30 Z (CA447/2012) v R [2012] NZCA 599, [2013] NZAR 142 at [8].
31 R v Hughes, above n 10, at [23]; Z (CA447/2012) v R, above n 30, at [9].
32 R v Hughes, above n 10, at [41].
9 and 10. Having taken account of those factors, the judge must determine whether the s 107 test is met and whether it is appropriate that he or she makes an order under s 106 to deal with the offender.
[57] In Blythe v R, the Court of Appeal considered that the test set out in R v Hughes included a misstatement as “the content of ss 7, 8 and 9” was not relevant to the s 107 disproportionality test itself, rather they were relevant to assessing the gravity of the offending which then factored into the test.33
[58] Further, in Blythe v R, the Court did accept that the factors in ss 7–10 and
10B were relevant to the exercise of the residual discretion. The Court pointed out that:34
... the Court must first consider whether the disproportionality test in s 107 has been met. Only if it has been may the Court proceed to consider exercising its discretion to discharge without conviction under s 106. It is at that stage – when exercising the residual discretion under s 106(1) and in deciding whether further orders are required under s 106(3) – that the purposes and principles of sentencing set out in ss 7 and 8 of the Sentencing Act, the aggravating and mitigating factors listed in ss 9 and 9A (as we have pointed out these were relevant to the s 107 disproportionality test), and the matters dealt with in ss 10 and 10B must all be taken into account. That is because all those sections apply, not only in sentencing, but also in
‘otherwise dealing’ with the offender. In that respect, we agree with
Hughes. ”
[59] So for the appellant to succeed on appealing his sentence, he must first establish that the Judge was wrong in his conclusion that the consequences would not be out of all proportion to the offending.
[60] At sentencing, the Judge considered the consequences and the gravity of the offending, as put forward on behalf of the appellant. Those consequences were “perhaps some likely thwarting of [the appellant’s] career progress in some medical specialities and/or travel”.35 The Judge observed that, as a medical practitioner, there would be consequences for the appellant, whether or not a conviction was entered
with regard to the medical council or monitoring bodies of his profession. The Judge
33 Blythe v R [2011] NZCA 190, [2011] 2 NZLR 620 at [11].
34 At [12].
35 Sentencing judgment at [16].
considered these consequences to be inevitable and to come with accountability for
one’s actions.36
[61] Turning to the gravity of the offending, the Judge considered that the offending was more than turning a blind eye as the appellant knew that Mr Mann was a prohibited person. The appellant was in a position to stop the offending, and failed to do so. In relation to the offence itself, the Judge said that it was important for company managers and directors to be meticulous in their duties and the seriousness of compliance with a director’s obligations had to be made known and
stated unequivocally.37 Taken together, the Judge considered that the consequences
were not out of all disproportion to the gravity of the offending.
[62] No further material was put before this Court, on which I could conclude that the Judge was wrong to conclude that the consequences of conviction were not out of all proportion to the gravity of the appellant’s offending. In the circumstances, I am not satisfied that the Judge was wrong to conclude that the threshold for a discharge was not met, and that a discharge should not be granted.
Result
[63] The appellant’s appeals against conviction and sentence are dismissed.
Andrews J
36 At [8].
37 At [9].
5
5
1