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O'Brien v R [2019] NZCA 83 (1 April 2019)

Last Updated: 9 April 2019

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA
CA390/2017
[2019] NZCA 83



BETWEEN

MICHAEL JOSEPH O’BRIEN
Appellant


AND

THE QUEEN
Respondent
CA394/2017


BETWEEN

KEVIN MARTIN COFFEY
Appellant


AND

THE QUEEN
Respondent

Hearing:

21 May 2018

Court:

Williams, Venning and Mander JJ

Counsel:

R B Squire QC for Appellant O’Brien
N Levy for Appellant Coffey
G J Burston and M J Ferrier for Respondent

Judgment:

1 April 2019 at 3 pm


JUDGMENT OF THE COURT

  1. The application to adduce fresh evidence in CA390/2017 is granted.
  2. The appeal in CA390/2017 is dismissed.
  1. The appeal in CA394/2017 is dismissed.

____________________________________________________________________

REASONS OF THE COURT

(Given by Williams J)

Table of Contents

Introduction

[1] On 15 June 2017, following a Judge alone trial, the appellants Michael O’Brien and Kevin Coffey were found guilty and convicted by Dobson J of offences arising out of a gambling licencing scheme orchestrated by Michael O’Brien.[1]
[2] Michael O’Brien was convicted of five counts of obtaining a benefit by deception and sentenced to four years and six months’ imprisonment.[2] Mr Coffey was convicted of one count of obtaining a benefit by deception and sentenced to 12 months’ home detention.[3]
[3] Both men appeal against conviction and sentence.
[4] For completeness, we note that two other men were charged with related offending. Paul Max was convicted as a co-offender on three of the five counts on which Michael O’Brien was convicted. He has not appealed. Patrick O’Brien (Michael O’Brien’s father) was also charged as a co-offender with Michael O’Brien on the remaining two charges but charges against him were severed and his trial adjourned due to poor health.

Background

Class 4 gambling licences

[5] Class 4 gambling is closely regulated by the Gambling Act 2003 (the Act). Class 4 gambling relates to the operation of gaming machines or “pokie” machines located for the most part in pubs and clubs.[4] It is undertaken on a strictly not-for-profit basis.[5] Entities providing this form of gambling require two licences: one to operate gaming machines (a class 4 operator’s licence) and one to locate them at a designated venue (a class 4 venue licence).[6] Licence holders must be not-for-profit corporate societies.[7] They must return at least 40 per cent of their gambling turnover to purposes approved by the Secretary of Internal Affairs.[8] Licence holders are distinguished in the Act from “venue operators”. The latter occupy and operate the premises where the licence holders place their machines. They are often, but not always, the owner of the primary business at the venue i.e. the pub or club. They do not therefore hold gambling licences, rather they enter into formal arrangements with licence holders called venue agreements whereby they agree to host the licence holder’s machines. They do this for a fee set by regulation at 1.28 per cent of gambling turnover up to a maximum of 16 per cent of gaming ‘profits’.[9]
[6] The Department of Internal Affairs (DIA) is the state department that administers the Act under which it issues operator’s and venue licences. In considering applications for such licences, DIA must be satisfied of the suitability of “key persons” as defined under the Act.[10] Key person, in relation to an operating licence includes any person who “exercises significant influence in the management of ... an applicant”. In relation to venue licences, key person is separately defined to include “a person who has a significant interest in the management, ownership, or operation of a venue operator” and “any person who has the ability, directly or indirectly, to exert a significant degree of influence over the management or operations of a venue operator.”[11] In relation to venue licences, key person also includes the venue operator and venue manager. Among other things, DIA must be satisfied that no-one who is a key person in relation to a class 4 operator’s licence is also a key person in relation to a class 4 venue licence.[12] The effect of these provisions for the purposes of this case is that there must be complete separation between licence holders on the one hand and venue occupiers on the other.
[7] By the terms of s 68 of the Act, DIA must also be satisfied that each relevant key person is a “suitable person”. Section 68(1) provides as follows:

68 Determining suitability for class 4 venue licence

(1) In determining whether a key person is a suitable person for the purpose of sections 66 and 67, the Secretary may investigate and take into account the following things:

(a) whether he, she, or it has, within the last 7 years,—

(i) been convicted of a relevant offence:

(ii) held, or been a key person in relation to, a class 3 or class 4 operator’s licence, a class 4 venue licence, a casino licence, or a licensed promoter’s licence under this Act or any licence under previous gaming Acts that has been cancelled, suspended, or for which an application for renewal has been refused:

(iii) been placed in receivership, gone into liquidation, or been adjudged bankrupt:

(iv) been a director of a company that has been placed in receivership or put into liquidation, and been involved in the events leading to the company being placed in receivership or put into liquidation:

(v) been prohibited or disqualified from acting as a director or promoter of, or in any way, whether directly or indirectly, being concerned or taking part in the management of, a company under section 382, 383, or 385 of the Companies Act 1993:

(vi) been prohibited from acting as a director or directly or indirectly being concerned, or taking part, in the management of a company under section 299 of the Insolvency Act 2006:

(b) the financial position and the credit history of the key person:

(c) the profile of past compliance by the key person with—

(i) this Act, minimum standards, game rules, Gazette notices, and licence conditions; and

(ii) the Racing Act 2003 or the Racing Act 1971 (and any rules of racing made under either of those Acts); and

(iii) previous gaming Acts, and regulations made under previous gaming Acts; and

(iv) a licence or a site approval issued under a previous gaming Act; and

(d) any other matter that the Secretary considers relevant.

[8] Of particular relevance in this appeal is s 68(1)(c) which relates to the past history of compliance by the key person with the Act and regulations.

The DIA forms a negative view of Michael O’Brien

[9] In 2006, DIA refused to renew a class 4 operator’s licence held by the Metro Charitable Trust (Metro).[13] Michael O’Brien was significantly involved in the affairs of Metro. Reasons included a perceived failure to maintain proper separation between Metro and various South Island venues hosting Metro’s gaming machines; and between Metro and grant recipients. It was believed that the common problematic link was Michael O’Brien.[14] It was considered that Michael O’Brien’s involvement in Metro had arguably breached the Gambling Act.[15]
[10] The DIA also proposed to cancel a venue licence for Origins Sports Bar, premises where Metro had placed gaming machines as the venue licence holder.[16] The reason given was also Michael O’Brien’s involvement in that venue.[17]
[11] Following these difficulties Michael O’Brien then moved away from overt involvement as a key person in relation to class 4 licences. Instead his official work from 2005 to 2009 was to lobby gaming trusts to procure grants to fund the operation of racing clubs that had enlisted his help. Unofficially however he maintained his class 4 licence related activities.

Bluegrass obtains licences

[12] Bluegrass Holdings Ltd (Bluegrass) was incorporated on 2 June 2009 with the intent to operate class 4 gaming machines.[18] It had four directors including Kevin Coffey and Michael O’Brien’s father Patrick.[19] Bluegrass applied for a class 4 operating licence on the day it was incorporated.[20] The application did not advise DIA that Michael O’Brien was involved in the establishment of Bluegrass and would also be involved in its ongoing management if the application was granted.
[13] At the same time, that is in June 2009, Maximum Holdings Ltd (Maximum) applied for a class 4 venue licence for Hardware Bar and Café (Hardware Bar) in Stokes Valley, Lower Hutt.[21] Mr Max was identified as the venue manager. He was the sole director and shareholder of Maximum. It was intended that Bluegrass would place its gaming machines at Hardware Bar by venue agreement with Maximum.[22]
[14] When reviewing the applications, gambling inspectors expressed reservations over potential undisclosed links between Michael O’Brien and Bluegrass and Hardware Bar.[23] They suspected Michael O’Brien was an undisclosed player in one or both of these entities.[24] DIA’s experience with Metro and Origin Sports Bar meant he would not be considered “suitable” if this was the case. Mr Geoff Owen, the DIA National Investigation Manager, interviewed Bluegrass director Mr Coffey on 26 August 2009. Mr Coffey acknowledged that Michael O’Brien helped his father Patrick out with Bluegrass during set up and in relations with harness clubs, but he was not “the person behind Bluegrass”. It is common ground that Mr Coffey significantly down-played Michael O’Brien’s role in Bluegrass. DIA then commissioned one of its investigating officers, Mr Brook, to investigate and prepare a report on Michael O’Brien’s involvement. In the course of his investigation Mr Brook received statements from Patrick and Michael O’Brien and Mr Max. Patrick and Michael O’Brien both denied that the latter had any material involvement in either Bluegrass or Hardware Bar. Mr Max confirmed that with respect to Hardware Bar. Mr Coffey was the only individual who acknowledged some, albeit very limited, involvement by Michael O’Brien.
[15] Mr Brook concluded that despite suspicions there was not sufficient evidence to decline the applications on the basis that Michael O’Brien was involved inappropriately in either Bluegrass or Hardware Bar.
[16] In December 2009, John Currie, DIA’s National Manager Licensing, considered Mr Brook’s report, and decided to re-interview Patrick O’Brien and Mr Coffey (they attended the re-interview with Bluegrass’ solicitor).
[17] Mr Currie sought further assurances that Michael O’Brien was not involved. Assurances were given. Mr Currie then granted the licences; but instead of the usual 12-month tenure, the licences were for six months only. Mr Currie said in evidence that he did not have a sufficient basis to refuse to grant the licences at that point, but concerns remained and his investigators advised they could conclude their full investigation in a further six months. At that point, Mr Currie felt he would be in a position to decide whether the licences should be reissued.
[18] Additional venue licences were subsequently granted for other bars to operate Bluegrass gaming machines as Bluegrass expanded its operations. These included Hardy’s Bar in Nelson which was also owned by Maximum. The issue date for that licence was 25 May 2010.
[19] One further venue licence is relevant to the charges against Michael O’Brien. It was not held by Bluegrass, but by, what was during the charge period, the largest class 4 operator in New Zealand — the New Zealand Community Trust (NZCT). NZCT had held a venue licence in respect of the Terrace Tavern in Palmerston North since July 2009. On 28 October 2010 a revised venue licence was obtained by NZCT to reflect the arrival of a new venue operator — The Oldest Kiwi Pub Ltd (TOKPL). It appears that Mr Max was sole venue manager and key person in relation to both the Terrace Tavern and Hardy’s Bar. He was also the director and sole shareholder of TOKPL.[25]

SFO Investigation

[20] In 2012, the Serious Fraud Office (SFO) investigated Michael O’Brien’s involvement in the class 4 gambling sector. The investigation caused SFO to suspect Michael O’Brien was taking payments from certain racing clubs for the grants his licensing operations made to them. The SFO investigation led to the present charges being laid.

The charges

[21] Michael O’Brien originally faced 15 charges but in the end the Crown proceeded only with charges 11 to 15. Michael O’Brien was charged jointly with Mr Max of Maximum in relation to charges one to 10. They were both discharged on those charges during the course of the trial.
[22] The remaining charges (11–15) were laid pursuant to ss 240(1)(a) and 241(a) of the Crimes Act 1961 which relevantly provide as follows:

240 Obtaining by deception or causing loss by deception

(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,—

(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or

...

(2) In this section, deception means—

(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and—

(i) knows that it is false in a material particular; or

(ii) is reckless as to whether it is false in a material particular; or

(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or

(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

241 Punishment of obtaining by deception or causing loss by deception

Every one who is guilty of obtaining by deception or causing loss by deception is liable as follows:

(a) if the loss caused or the value of what is obtained or sought to be obtained exceeds $1,000, to imprisonment for a term not exceeding 7 years:

...

[23] Charges 11 and 12 related to Bluegrass’ operator’s licence. Michael O’Brien was jointly charged with Mr Coffey, a Bluegrass director. Charges 13–15 related to three Bluegrass venues. Michael O’Brien was jointly charged in relation to those charges, with Mr Max.

The Bluegrass charges

[24] Charge 11 related to the circumstances in which Bluegrass obtained its operator’s licence. It alleged Michael and Patrick O’Brien and Mr Coffey obtained Bluegrass’ class 4 operator’s licence by deception and without claim of right. The charge covered the period 2 June to 22 December 2009 — from the date Bluegrass was incorporated and applied for the licence to the date DIA granted it. The charge alleged that the operator’s licence (valued at over $1,000) was obtained by concealing from the Secretary of Internal Affairs the fact that Michael O’Brien was a person with significant influence in the management of Bluegrass and therefore a key person.
[25] Such false representations were relevantly contained in:
[26] Charge 12 related to grants made by Bluegrass after it had obtained its operator’s licence and commenced operations. It alleged that Michael O’Brien and Mr Coffey obtained or retained control of Bluegrass’ net gambling proceeds without claim of right (the value of such control exceeding $1,000) by a fraudulent stratagem adopted to deceive the Secretary for Internal Affairs. The charge covered the period from 2 June 2009 (as with charge 11) to 31 July 2013 (the date DIA decided not to renew Bluegrass’ licence). The stratagem was to conceal Michael O’Brien’s significant influence both in the management of Bluegrass and over its grants process. By means of this undeclared influence the Crown alleged that Michael O’Brien was personally able to charge recipients a fee to ensure that they received the grants for which they had (on his advice) made applications.
[27] The Crown contended that between 2007 and 2013 Michael O’Brien received payments amounting to $11.57 million by this stratagem.[26]

The venue charges

[28] Charges 13 to 15 related to the Bluegrass applications for venue licences. These charges alleged that Michael O’Brien and Mr Max concealed from DIA, by use of a fraudulent device or stratagem, Michael O’Brien’s ownership or significant involvement in the three class 4 venues.
[29] Charge 13 related to Michael O’Brien’s interest and significant role in Maximum, venue operator of the Hardware Bar. In documents filed with DIA, Maximum was said to be owned by Mr Max but in fact a deed of trust dated July 2007 acknowledged he held those shares as trustee for Michael O’Brien. This charge related to the period from 22 December 2009 to 6 December 2010.
[30] Charge 14 related to the same issue with respect to Hardy’s Bar in Nelson, the other Maximum owned gaming venue. The period covered in this charge was from 25 May 2010 to 6 December 2010.
[31] Charge 15 related to a venue licence with respect to TOKPL which owned and operated the Terrace Tavern in Palmerston North. The Companies Office records showed that Mr Max owned all the shares in TOKPL. But a deed of trust dated 17 August 2007 had also been executed by Mr Max in favour of Michael O’Brien in relation to that company. The period covered in this charge was from 28 October 2010 to 6 December 2010.

High Court verdicts

Charge 11: Bluegrass operators’ licence — Michael O’Brien and Mr Coffey

[32] Dobson J found Michael O’Brien and Mr Coffey guilty of charge 11.[27]

(a) Deception

[33] After reviewing the evidence Dobson J found it was an irresistible inference that “Michael O’Brien was directing the business of Bluegrass, but concealing his involvement in doing so”.[28] The Judge was satisfied that Michael O’Brien had initiated the creation of Bluegrass; that the inquiries Mr Coffey made on behalf of Bluegrass to financiers were all undertaken “in liaison” with Michael O’Brien; that Michael O’Brien called Mr Coffey before the latter spoke to DIA about the former’s involvement in Bluegrass, the inference being to ensure Mr Coffey’s comments to DIA were consistent with his own story; that Michael O’Brien prepared forecast financial statements for Bluegrass based on his own calculations; that Michael O’Brien negotiated with the Bank of New Zealand (the BNZ) as an alternative funder, claiming to be a staff member of his father Patrick O’Brien; that he arranged multiple link loan agreements with client racing clubs to hide their debt funding of Bluegrass; that he organised Bluegrass’ premises and venue agreements with Maximum and TOKPL; that he personally invested in additional bars because of their suitability as venues for Bluegrass’ gaming machines; and that he forged Patrick O’Brien’s signature on documents relating to the business of Bluegrass, including correspondence with banks, private funders, and external accountants.[29]
[34] As to Mr Coffey, Dobson J rejected as intentionally false his claim that Michael O’Brien’s involvement in Bluegrass was peripheral and only because he was Patrick O’Brien’s son.[30] Mr Coffey knew, for example, that Michael O’Brien had been involved in preparation of the Bluegrass performance forecasts.[31] He claimed his (Mr Coffey’s) communications over the forecasts were with Patrick O’Brien but in fact his emails had been sent to Michael, not Patrick.[32] The Judge reached the same conclusion with respect to Mr Coffey’s denial that Michael O’Brien was a key person in respect of the Hardware Bar per his 20 September 2009 email referred to in the charge’s particulars.[33] It was Mr Coffey who had advised Michael O’Brien that the Hardware Bar was for sale. The Judge concluded:

[74] A more accurate statement of Mr Coffey’s awareness of the management and ownership of the Hardware Bar would have required him to acknowledge that he had introduced the prospect of acquiring that venue to Michael O’Brien and Mr Max in August 2006. Further, that he was aware (at least at that time) that venues owned by Michael O’Brien were being managed by MaxLam [a hotel management company part-owned by Mr Max].

[35] Dobson J found beyond reasonable doubt that Michael O’Brien knew his noninvolvement representations were false.[34] He knew that DIA viewed adversely his involvement in Metro and such involvement “would be highly likely (if not certain) to result in his being found unsuitable to be a key person in Bluegrass when it applied for an operator’s licence”.[35]
[36] Dobson J was similarly satisfied in relation to Mr Coffey.[36] Although Mr Coffey acknowledged some low level of involvement by Michael O’Brien, the context of such acknowledgement was important. As the Judge said:

[78] ... [T]he context here was whether Michael O’Brien was a person who exercised sufficient influence in the management of a corporate society to bring him within the concept of key persons who had to be approved as suitable by DIA. The level of involvement was therefore a focused enquiry. Mr Coffey’s representations would assure investigators that the relatively low level of Michael O’Brien’s involvement as described by Mr Coffey kept Michael O’Brien outside the definitions of key persons, whereas the factual extent of Michael O’Brien’s involvement brought him very much within that definition.

[37] Dobson J carefully assessed the occasional inconsistencies between the evidence of Michael O’Brien and Mr Coffey and eventually dismissed these as incapable of undermining his essential conclusion. He concluded:

[93] Either an explicit or implicit version of the understanding between Michael O’Brien and Mr Coffey enables me to be satisfied beyond reasonable doubt that Mr Coffey was aware of and intentionally participated in the misrepresentation as to the nature of Michael O’Brien’s involvement in the application to obtain an operator’s licence for Bluegrass.

(b) Causation

[38] Dobson J then addressed the question of whether these misrepresentations were material.[37] In cross-examination, Mr Owen (the DIA National Investigations Manager who interviewed Mr Coffey) confirmed that the decision to issue a six month licence (as opposed to the usual 12 month licence) was to allow DIA time to further consider whether the role of Michael O’Brien was not as minor as the applicants claimed.[38] It was argued by the defence that this meant the deception could not have caused the Secretary to issue the licence.
[39] Dobson J rejected this argument. He found the licence was of limited duration:

[104] ... Rather, because of the strength of the departmental feeling about Michael O’Brien’s unsuitability and the prospect that there may be an extent of involvement that had not been disclosed, granting a licence for the shorter than usual period would enable that to be revisited. I am satisfied that approach would not have been adopted if Mr Currie was aware of the true extent of Michael O’Brien’s involvement. It follows that the false representations were material to the DIA decision to grant the operator’s licence.

(c) Value

[40] As to whether the Crown had established the licence exceeded $1,000 in value, Dobson J applied the decisions in Dixon v R and Li v R.[39] The Judge found the contrast between a class 4 operator’s licence in Bluegrass’ case and embarrassing celebrity video footage in Dixon v R or a fake educational certificate in Li v R, is that the prospects of the operator’s licence generating significant revenue for Bluegrass was a “bankable proposition for lenders funding acquisition of gaming machines”.[40] The Judge noted the promoters of Bluegrass adopted annual financial performance forecasts of $1.3 million in proceeds from 18 operating gaming machines.[41] This forecast could be discounted to make allowance for “the uncertainties involved in the licence generating that level of proceeds”.[42]
[41] Furthermore, while renewal of the licence was not guaranteed, it was a reasonable expectation provided the operator operated within the law including that as to key persons.[43] And while the licence was not tradeable, that did not mean it had no value. The fact that the applicants were prepared to commit $9,148 in application fees for the operator’s licence and the venue licence, which included $5,085 for the venue operator’s licence, in addition to associated legal and accounting costs, demonstrated that the licence was considerably more valuable than $1,000 and neither Michael O’Brien nor Mr Coffey had a claim of right in relation to it.[44]

Charge 12: Michael O’Brien’s control of Bluegrass grants

[42] Dobson J also found Michael O’Brien guilty of charge 12. The Judge summarised the relevant elements:[45]
[43] Harking back to his conclusions with respect of charge 11, Dobson J found that Michael O’Brien had a prominent role in all of Bluegrass’ operations and used Patrick O’Brien as the front for that role including signing letters in Patrick O’Brien’s name.[46] The Judge rejected the suggestion that Michael O’Brien’s role was merely advisory in the early stages of the Bluegrass set up.[47] He was not, as agreed, merely helping Ms Bak, Bluegrass’ new chief executive officer (CEO), as she learnt the job. In reality, Michael O’Brien was directing her. Far from being a mere advisor, his involvement included raising finance, acquiring machines, securing venues and the receipt and processing of grant applications.[48] Dobson J found Michael O’Brien’s involvement ranged across “the majority, if not all, of the material aspects of the business of Bluegrass”.[49] The Judge concluded:

[150] Michael O’Brien exercised as much, and in many respects more, authority over Bluegrass’ affairs than would ordinarily be the case for a director. I am satisfied that the absence of appointment to office was because Michael O’Brien sought to conceal the nature of his involvement. I am also satisfied that the nature, scale and duration of Michael O’Brien’s involvement throughout the period to which charge 12 relates inarguably qualified him as a key person.

[44] The Judge then reviewed the evidence about whether Michael O’Brien had control over the crucial Bluegrass’ grants procedure. He outlined the Crown’s case in these terms:

[151] ... At the heart of it was the Crown’s reconstruction of the scheme it contends [Michael O’Brien] was running to charge a large number of racing clubs for so-called lobbying services, in return for which he would procure grants for them from Bluegrass and other trusts operating gambling licenses. The Crown case was that Michael O’Brien charged approximately 33 per cent of the extent of the grants that he would procure for each club. He invoiced the clubs at the start of the racing year for fees that he claimed as payable before grants were procured.

[45] Grants were considered by a sub-committee of the Bluegrass Directors called the Net Proceeds Committee (NPC). The NPC was advised either directly by Michael O’Brien (or the Judge found) indirectly by him via Ms Bak, who had been a Bluegrass director, but was by this stage, the official CEO.[50] Up until October 2012, the NPC comprised Ms Bak and Messrs Monk and Owen.[51] After that date the NPC members changed completely, but the Judge found the new NPC maintained much the same approach.[52] Ms Bak and Messrs Monk and Owen gave evidence. They described their involvement as “rubber-stamping”, though Mr Owen was only prepared to say it felt like that at times.
[46] Michael O’Brien sought to show that grant distribution outcomes he predicted did not always eventuate.[53] This demonstrated, he said, the NPC exercised genuine oversight of the grants process using independent judgement. Dobson J did not accept this characterisation. For the most part, the NPC followed Michael O’Brien’s direct or indirect advice in relation to racing club applications but exercised greater judgment on other applications. The Judge accepted the evidence of the NPC members in all material respects. This perspective, he considered, was consistent with extensive evidence of email traffic between Michael O’Brien and his clients, as well as intercepted oral communications.
[47] Dobson J also found that Michael O’Brien was able to exert “a measure of influence” over grant applications directed to the much larger class 4 licence operator, the New Zealand Community Trust (NZCT).[54] The evidence was that NZCT approved 60–70 per cent of the grants to racing clubs on whose behalf Michael O’Brien had lobbied.[55] That level of approval was considered sufficient to establish the required influence. The evidence was also that Michael O’Brien used Bluegrass as a kind of ‘float’ for his wider lobbying activities.[56] That is, he used the Bluegrass grants procedure to make up any shortfalls where other entities such as NZCT failed to deliver on expectations he had created for clients.
[48] As to value, the SFO’s forensic accountant, Denise Phillips, concluded that Michael O’Brien and his associated entities were paid $11.57 million between July 2006 and July 2013 to assist in his procurement of grants.[57] Over the charge period from June 2009 to July 2013, Ms Phillips’ evidence showed payments of $6.86 million. The Judge accepted that a significant proportion of the total grants paid to racing clubs on behalf of which Michael O’Brien had lobbied, were made by class 4 licence holders other than Bluegrass. This reflected Michael O’Brien’s wider influence. Dobson J concluded nonetheless “that component does not diminish the substantial value that is readily attributable to the control he enjoyed over the Bluegrass grants proceeds”. [58]
[49] The Judge concluded beyond reasonable doubt that the value of Michael O’Brien’s control over grants process exceeded $1,000 and Michael O’Brien had no claim of right.[59]

Charge 12: Mr Coffey’s role in relation to Bluegrass grants

[50] Mr Coffey was acquitted on charge 12.[60] The Judge took the view that Mr Coffey’s involvement was “very limited from the time the operator’s licence was granted”.[61] The Judge also accepted Mr Coffey’s submission that there was no direct evidence that he knew Michael O’Brien was charging racing clubs to procure grants for them.[62] The Judge accepted that the evidence of communications between Michael O’Brien and Mr Coffey suggested they discussed acquisition of Bluegrass’ licence rather than grant applications.[63] The Judge further accepted Mr Coffey expected that a third party, Andrew Morgan, would take over as manager of Bluegrass, removing the need for Michael O’Brien’s significant role with the organisation.[64]
[51] Dobson J concluded that the Crown was unable to prove Mr Coffey participated in the concealment stratagem central to this charge.[65] In particular, he found there was no evidence of an intention by Mr Coffey to conceal Michael O’Brien’s involvement in the grants process.[66]

Venue licences: Michael O’Brien and Mr Max

[52] Charges 13 to 15 were venue licence related. In each case, the particular was that Michael O’Brien engaged in a stratagem with Mr Max to conceal his involvement as (effectively) the controlling mind behind Maximum, the venue operator at the Hardware Bar (charge 13) and Hardy’s Bar (charge 14), and of TOKPL, the venue operator of the Terrace Tavern (charge 15). The Judge accepted as proved that in each case Michael O’Brien and Mr Max: (a) employed a plan or scheme to conceal from DIA Michael O’Brien’s involvement as a person with a significant interest in the management, ownership or operation of each venue operator;[67] (b) that the plan was dishonest and deployed to deceive DIA;[68] and (c) that such plan played a material role in the acquisition or retention for Bluegrass of the relevant venue licences,[69] each of which was a benefit which exceeded $1,000 in value.[70] They were convicted accordingly.
[53]

2019_8300.png

As noted, Mr Max’s shares in Maximum and TOKPL were in fact held on behalf of Michael O’Brien in trusts that were undisclosed to DIA at least until 6 December 2010. Dobson J noted that Mr Max himself characterised Michael O’Brien as “the real owner” of the businesses.[71] Mr Max said Michael O’Brien was involved in deciding when a new venue would be purchased, he arranged and provided funding to do so and provided further working capital when needed.[72] Further Michael O’Brien decided whether a venue would contract with a particular class 4 operator and controlled relevant arrangements.[73] Venue profits were “solely Michael O’Brien’s entitlement”.[74] Finally, Michael O’Brien made all decisions on selling venues and the proceeds were disbursed in accordance with his instructions.[75] This description by Mr Max was not challenged by Michael O’Brien.[76] The Judge effectively concluded this evidence was sufficient.[77]

Charge 14: Hardy’s Bar

[54] The Judge first dealt with Hardy’s Bar (charge 14). The evidence was that Michael O’Brien instructed his Nelson lawyer to prepare an agreement to purchase shares in Hardy’s of Nelson 2002 Ltd, which owned the bar.[78] Although the transaction was formally between the vendor Mr Hunter and Mr Max as purchaser, a file note written by a staff member in the Nelson law firm, confirmed the structuring of the transaction was a favour by Mr Max to Michael O’Brien and, Michael O’Brien made clear, in effect “the buck stops with him”.[79] Mr Max and Michael O’Brien then both signed a deed of indemnity in relation to any responsibility arising from Mr Max’s acquisition of the shares on behalf of Michael O’Brien.[80] Hardy’s of Nelson 2002 Ltd then changed its name to Maximum Holdings Ltd. The Judge noted Hardy’s Bar had a venue agreement with venue licence holder the Eureka Trust (Eureka) prior to September 2009. Once agreement was reached between Eureka and Bluegrass for the gaming machines at that bar and two other venues to be sold to Bluegrass, DIA granted Bluegrass the necessary venue licence.[81] This was done on 25 May2019_8301.png 2010.[82] The charge period begins from then, and ends on 6 December 2010 when Mr Max’s shares in Maximum were “transferred to” Michael O’Brien and the transfer disclosed.[83]
[55] Dobson J found that the deceptions maintained over that period were a continuation of a broader course of conduct which began much earlier (from at earliest 24 August 2006). From this date on, Mr Max was the only person identified to DIA as Maximum’s key person.[84] He was also recorded in the Companies Office Register as its sole shareholder and director.[85] But the Judge was satisfied Michael O’Brien “had a relevant interest in Maximum ... ”.[86] In an email in June 2007 to Eureka (that is prior to Bluegrass acquiring a licence) over Eureka’s poor support for racing clubs, Michael O’Brien threatened to shift three venues including Hardy’s to a different licence holder unless that support was increased.[87] This demonstrated his control of Maximum. Further, the evidence showed that Michael O’Brien arranged for Maximum to borrow $150,000 from the Manawatu Harness Racing Club using Hardy’s Bar as security.[88] Repayment was personally guaranteed by him.[89] The money was then paid from Maximum to a personal account maintained by Michael O’Brien.[90]

Charge 13: The Hardware Bar

[56]

2019_8302.png

The Judge then moved to the Hardware Bar (charge 13). That bar and “the Jolly Miller” in Paraparaumu were purchased together by Maximum.[91] Michael O’Brien personally provided the funding to Mr Max ($165,000 for the Jolly Miller and $190,000 for Hardware).[92] $150,000 of that money was provided by loans of $50,000 each from the Oamaru Harness Racing Club, Kurow Trotting Club and Westport Trotting Club.[93] Side letters record these arrangements with the clubs and a letter from Michael O’Brien to the members of the Westport Trotting Club confirmed that Mr Max held the Maximum shares as trustee for Michael O’Brien.[94] He separately agreed to guarantee the borrower’s performance, these stipulations being necessary to avoid the attention of DIA.[95]

Meanwhile, Mr Max completed a key person notification form for DIA in relation to NZCT’s application for a venue licence for the Hardware Bar.[96] Mr Max confirmed that he was “director/shareholder/venue operator/venue manager”.[97] He was identified himself as the only key person.[98] A venue licence was duly granted to NZCT, stipulating Maximum as the venue operator and Mr Max as its venue manager on 26 September 2006.[99] Bluegrass subsequently made application in July 2009 to replace the NZCT. Mr Max accepted in evidence that Michael O’Brien initiated the change and attended to all procedural details in relation to it.[100] Mr Max admitted that his own agreement to this change was not required despite his officially recorded roles at Maximum.[101]

Charge 15: The Terrace Tavern

[58] The Terrace Tavern (charge 15) was acquired by TOKPL in August 2007.[102] Mr Max was ostensibly its sole shareholder and director.[103] Here the Judge focussed on the terms upon which Michael O’Brien acquired the Terrace Tavern in January 2010 — the venue licence being issued on 28 October 2010.
[59] TOKPL shares were recorded as having been formally transferred from Mr Max to Michael O’Brien on 6 December 2010, but the Judge considered the sale and purchase agreement underpinning the transfer to be a “unsatisfactory on its terms and inconsistent with earlier documentation”.[104] He concluded:

[244] Mr Max had no explanation for the artificial terms of this agreement for sale and purchase. Those terms would give the impression to any third party considering the agreement that Michael O’Brien was paying to take over both legal and beneficial ownership of the shares when no consideration was warranted for a simple transfer of the legal ownership with Michael O’Brien already enjoying beneficial ownership of those shares. A transaction by way of sale inconsistent with Mr Max’s obligations as trustee under the original TOKP deed was undertaken some nine months before Michael O’Brien and Mr Max recast the nature of their respective relationships to ownership of shares of TOKP in the declaration of trust that the records of the lawyers’ firm suggest was prepared on 1 August 2011.

[60] As the Judge noted, the trust deed was backdated to 17 August 2007.[105]

Specific defence challenges to venue charges

[61]

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At trial, Michael O’Brien levelled a number of separate challenges to the elements and particulars of the venue charges.[106]

The first challenge related to the proposition advanced by Michael O’Brien that the venue licence for Terrace Tavern was a nullity because it was invalid and so could not support a charge.[107] That was because it had been processed as a licence renewal under the Act even though it had been applied for after the immediately preceding licence held by Eureka had expired. The application for renewal was dated 22 December 2009 but the previous licence had expired nearly a year earlier on 31 December 2008.[108]

Section 72(6) of the Act required the licence holder to make a renewal application before the expiry date of the preceding licence. The application should therefore have been for a new venue licence rather than a renewed one. Mr Squire QC, for Mr O’Brien, argued this undermined the charge itself. The Judge rejected that submission relying on various authorities suggesting that administrative actions will not be treated as a nullity in the absence of express setting aside even where they are in error.[109] Dobson J considered that the failure to treat the application as a fresh application was not fatal in the circumstances.[110] At the relevant time, NZCT was the largest class 4 licence holder in New Zealand.[111] There was no suggestion that there were any grounds upon which DIA would have refused to grant or renew its operator’s licence for the Terrace Tavern in 2009.[112] Secondly the Judge concluded even if that was wrong, it would be appropriate to amend the charge under s 133 of the Criminal Procedure Act 2011 to add “or purported venue licence” to cover the issue.[113] Reference was made to R v Hadfield.[114]

[64] The Judge then addressed Mr Max’s criticism of an aspect of the particulars with respect to charges 13 and 14 where it was alleged that the trust deed dated 12 July 2007 effected the transfer of Michael O’Brien’s shares in Maximum to Mr Max.[115] Mr Max submitted this was wrong because the deed did not in its terms effect a transfer.[116] Rather it confirmed an existing split in the legal and beneficial ownership. The Judge accepted the point but did not consider it was material.[117] There was, he said, no prejudice to Mr Max to the way in which he mounted his defence.[118] It was no more than a minor error in particulars.
[65] A similar argument was made with respect of the ownership of the TOKPL shares in relation to charge 15. The Judge accepted that the SFO had wrongly disregarded the original TOKPL deed of 17 August 2007. He found:

[273] ... I am not persuaded that the Crown is deprived of the opportunity to prove charge 15 because the particulars of a fraudulent device or stratagem as alleged in the terms of the charge turn out on the evidence not to be in the form alleged in the particulars.

[66] Dobson J found Michael O’Brien was aware of DIA’s attitude to his involvement with Metro.[119] He was aware that DIA’s view that the experience of Metro made him unsuitable as a key person in the gambling industry.[120] When Michael O’Brien arranged for Mr Max to acquire legal ownership of Maximum he did so for the purpose of concealing his involvement.[121] The same was true with respect of TOKPL.[122]
[67] Dobson J found also that there was at least an implicit understanding between Michael O’Brien and Mr Max that this device was adopted for the purpose of concealment.[123] The Judge found further that this concealment was material to DIA’s assessment of the venue licence application.[124] Had officials known of Michael O’Brien’s involvement, they would not have granted or renewed licences.[125] Rather they would have suspended or cancelled any already issued.[126]
[68] Finally, Dobson J found that Bluegrass’ venue licence was in each case worth more than $1,000 and Michael O’Brien had no claim of right in respect of them.[127]
[69] The Judge found Michael O’Brien and Mr Max guilty of charges 13, 14 and 15 accordingly.

Application to adduce further evidence on appeal

[70] Michael O’Brien applied for leave to adduce further evidence on appeal in relation to the question of licence valuation elements of charges 11 and 13 to 15. It is convenient to address that application here.
[71] The additional evidence was entirely documentary. It included: Bluegrass’ financial statements 2010 to 2013, demonstrating that the Bluegrass operator’s licence was treated as a deductible expense rather than a capital item; DIA guidance notes to assist applicants’ for class 4 operator’s licences, including a full discussion of the constraints on use and deductibility of revenue; the New Zealand Gazette limits and exclusions on class 4 venue costs notice of 17 July 2008 which controlled allowable costs for venue licence holders operating pursuant to a venue agreement; advice from DIA confirming that fees are set with a view to cost recovery; and a proposed fees consultation document with respect to fees that became operative as of 1 January 2008.
[72] Michael O’Brien relies on the argument that he was taken by surprise by the approach the Judge ultimately took to assessing value and so could not have known that the provision of such evidence was necessary. He submitted that the evidence could therefore be construed as ‘fresh’. There is in any event a risk of miscarriage if Michael O’Brien were not given an opportunity to meet the Judge’s reasoning. Whether or not that is so, we are minded to admit the evidence to ensure that the argument in respect of valuation could be properly ventilated. We have taken the further evidence into account accordingly.

Charge 11: Michael O’Brien’s appeal against conviction

Causation

[73] For Michael O’Brien, Mr Squire mounted two challenges to the High Court’s reasoning in relation to charge 11. The first was that the Judge was wrong to find causation had been established. Mr Squire submitted that the decision by the official to whom the discretion had been delegated to grant a licence (Mr Currie) was based on the following state of his knowledge:
[74] Mr Currie could not therefore be said to have granted the licence because he was deceived by Michael O’Brien about his involvement in Bluegrass. The point was that Mr Currie knew he did not know the full extent of Michael O’Brien’s involvement with Bluegrass. It could not therefore have been a cause of his decision to grant the application.

Analysis

[75] As this Court said in Morley v R, the deception referred to in s 240(1) of the Crimes Act need not be the only cause for Bluegrass obtaining the class 4 operator’s licence.[128] It is sufficient if the deception played a material part in the acquisition of the licence.[129]
[76] The evidence from DIA officials, including Mr Currie, was that they remained suspicious Michael O’Brien was heavily involved in Bluegrass but knew also that the evidence was insufficient to crystallise that suspicion into a level of proof that could justify refusal of the licence. Mr Squire was right that Mr Currie decided instead to give Bluegrass a short leash. He did this because he did not have a proper basis to decline the application, and the six-month term granted would have given his investigators time to complete their work.
[77] As it turns out, Mr Currie and his investigators were right to be suspicious. Michael O’Brien and Mr Coffey do not now challenge the Judge’s findings that their statements to investigators concealed the true level of Michael O’Brien’s involvement and the extent of Mr Coffey’s knowledge of that involvement.
[78] There is no basis either in the evidence or in logic to the suggestion that Mr Coffey’s advice to DIA that Michael O’Brien’s involvement in Bluegrass was inconsequential, displaced Michael O’Brien’s own advice that he had no involvement at all. On the contrary, the advice from senior investigator Mr Brook to Mr Currie was the “Mike O’Brien is adamant he is not involved [in Bluegrass]”. Mr Currie confirmed in cross-examination that he had read the report.
[79] It must follow that Mr Currie was successfully deceived as intended by the combined statements of Michael O’Brien and Mr Coffey, or more accurately by their combined failure to disclose the true position. Had he known the truth, Mr Currie would never have granted even the short leash he gave to Bluegrass. The deception therefore worked. It is true that the grant also served the purpose of furthering the investigation, but that is to miss the point. The further investigation was only necessary because of the combined deception.
[80] This ground of appeal has no merit.

Valuation

[81] In his second ground for challenging the conviction in charge 11, Michael O’Brien argued that Dobson J had adopted a valuation methodology for the Bluegrass operator’s licence that had not been suggested by the prosecution or the defence, and about which the Judge had not warned them. This made the trial unfair because it lead to the licence being valued at more than $1,000. This in turn meant the maximum penalty increased from three months’ imprisonment if the value was $500 or less, to seven years’ imprisonment. [130] Further, Michael O’Brien argued, the Judge’s conclusion, in any event, was wrong in fact. Although the Judge accepted that the value of the licence fell to be assessed at the time it was granted,[131] he concluded that the cashflow forecasts showed that significant revenue was sufficiently probable for a licence to be considered a “bankable proposition” on a net present value basis after uncertainties were discounted.[132]
[82] Michael O’Brien submitted that an operator’s licence is not a bankable proposition at all:
[83] Michael O’Brien finally submitted that the authorities are clear it is in any event impermissible to take account of evidence about value that post-dates grant of the licence.[133]

Analysis

[84] We see no merit in these arguments. As a starting point, the value of the benefit or privilege in question is what prospective class 4 operators are prepared to pay for one. This operator’s licence was plainly valued at more than $1,000 because Bluegrass paid $9,148 to obtain it. It is irrelevant that this fee was calculated to recover the cost to DIA of assessing the application as the new evidence suggested. What matters is $9,148 was the price Bluegrass was prepared to pay in addition to the significant legal and other compliance costs associated with making the application. To state the obvious, if the licence was not worth at least that, Bluegrass would never have applied for it. It is, presumably, the price every class 4 gaming operator is prepared to pay to obtain the right to run its machines. We agree with the Judge’s analysis on this point. It may be that Bluegrass would have been prepared to pay more than it did but no purpose would be served by requiring the prosecution to call valuation or economic evidence to establish more precisely the value of an operator’s licence. It is enough that prosecution evidence demonstrated the threshold of $1,000 was exceeded.
[85] Thus, the fact that licence holders are tightly regulated, cannot earn an orthodox profit, and must allocate surplus funds to specific approved purposes, are all quite beside the point.
[86] Nor do we think the Judge was wrong to look, as he did, to evidence of Bluegrass’ expectations of revenue. The Judge accepted, by reference to the decision of this Court in Li v R, that the point at which the status of the item as a “benefit” and the value of that benefit must be assessed, is the time it is obtained.[134] The holding in Li v R reflected the fact that in that case, the deception was a fake business qualification. Mr Chen was an investigative television journalist who had asked Mr Li to obtain the qualification for him. Mr Chen had no intention of using it for its intended purpose. His intention was to expose fraud in the foreign student industry. The rejected argument was that the journalist had received no benefit because he did not use the qualifications.[135] That is the opposite of the situation in the present case where the benefits predicted prior to acquisition of the licence did flow once it was obtained.
[87] That said, it is unnecessary in this case for us to consider whether evidence of revenue actually derived after the licence is obtained will always be irrelevant in the value calculation. That is because the Judge referred to two further facts (in addition to the licence fee) from which it could be inferred at the time the licence was obtained, that its value far exceeded $1,000. The first was that Bluegrass had obtained loan funding to purchase its machines.[136] Hence the “bankable proposition” reference. Second, the Judge referred to Bluegrass’ own net proceeds expectations from its forecast cashflows.[137] Bluegrass expected to obtain $1,313,312 in net proceeds in its first 12 months of operation if it deployed 18 gaming machines. Neither assessment drew on post-grant evidence of actual future earnings. Rather, they referred to Bluegrass’ expectations and the independent expectations of Bluegrass’ funder as to the likelihood of financial success. It could not be said these assessments were speculative, and particularly not given Bluegrass was in the hands of experienced class 4 operators, such as Mr Coffey and (as far as the BNZ knew) Michael O’Brien.
[88] It is difficult to see how such obvious points of inference from the available evidence would have taken Michael O’Brien by surprise. This ground of appeal fails accordingly.

Charge 11: Mr Coffey’s appeal against conviction

[89] Mr Coffey also mounted a challenge against the Judge’s conclusion as to causation, though on a different basis to that advanced by Michael O’Brien. In addition, he argued that Bluegrass had received no benefits as a result of obtaining the operator’s licence, that in any event its value was nominal and not $1,000; and further, even it if the licence value exceeded $1,000, Mr Coffey did not intend that level of value to accrue to Bluegrass.

Causation

[90] Mr Coffey argued that the statutory delegate, Mr Currie, who made the decision to issue the operator’s licence to Bluegrass had ignored Mr Coffey’s reference to Michael O’Brien’s limited involvement. On that basis, there was no causal link between the statements and the grant of the licence. Specifically:

Analysis

[91] The evidence is that Mr Currie was aware of Mr Coffey’s representations. He confirmed this in response to questions from Mr Squire, who as we have set out, argued Mr Coffey’s statements had actually neutralised Michael and Patrick O’Brien’s denials:
  1. Right, okay, so can I put this to you then? Is it fair to suggest to you that most probably when you issued the licence on the 22nd of December 2009 you knew that Michael O’Brien was involved with Bluegrass Trust along the lines that Mr Coffey had indicated to Mr Owen in the interview but that you formed the view that that involvement wasn’t sufficient to persuade you not to issue a licence? Does that fairly put the situation?
  2. Yes.

[92] As the Judge noted at [49], Mr Coffey was interviewed by DIA investigator Mr Owen. Mr Coffey’s comments in the interview contradicted the flat denials of Michael and Patrick O’Brien. Mr Coffey’s advice was as follows:
  1. Certainly I think, he’s certainly been involved in helping Pat. I presume he set the thing up. I mean he ran a trust. Pat didn’t strike me as the sort of guy that would you know rush off and do all the donkey work. But they had been using Jarrod True up in Auckland. And Jarrod I believe was the solicitor for Perry Foundation. I’d met him once before when a venue was changing hands between trusts. In fact it was the Caversham stuff with NZCT. And so how much involvement Mike’s had on that but yeah he’s his son. He works for him. I believe he works for harness, some harness clubs, south island harness clubs doing something along those lines. So I would imagine that yeah his involvement may have been behind the scenes um or helping Pat. But directly being the person behind Bluegrass no.

[93] As the Judge correctly noted, the suggestions of Michael O’Brien’s involvement were not presented as settled facts, but rather expectations or likelihoods.[139] The only exception was that his role had certainly been to assist his father Patrick. The impression clearly given is that the role was minor followed by some suggestions as to what might be included. Nothing specific or precise.
[94] As Michael O’Brien and Mr Coffey do not now challenge the Judge’s findings that that their statements to investigators concealed Michael O’Brien’s true level of involvement, it is common ground that this misrepresented the correct position, and Mr Coffey well knew what that position was. His description to Mr Owen of the likely position was therefore a misrepresentation.
[95] Mr Coffey subsequently communicated with Mr Owen by email. He said:

In relation to Mike O’Brien I have already advised that to my knowledge he has no direct involvement with the Trust other than doing some organising or providing advice for Pat or as an interested party with regard to harness racing. However for some reason the department has a fascination with Mike so I felt it prudent to make enquiries regarding his involvement with the Hardware Bar and history with gaming activities. I have not been able to determine any “Key Person” relationship between Mike and the Hardware Bar.

[96] This communication was intended to give the impression that Mr Coffey had become innocently concerned at DIA’s focus on Michael O’Brien, had undertaken his own investigation, and this had produced no evidence that Michael O’Brien had a key person role with respect to the Hardware Bar. That too was a misrepresentation.
[97] Mr Currie therefore was, on his evidence, aware that Mr Coffey had said that Michael O’Brien was likely involved in a peripheral way in Bluegrass, given his father was the chairman, and had concluded that this was not enough. Once again, Mr Squire’s cross-examination demonstrated this:
  1. Well, can I suggest to you that if whatever advice you’d received from legal or whoever policy people you’re talking about had mentioned what Mr Coffey had told Mr Owen that would’ve raised a flag because the whole point of Mr Brook’s investigation was to find out if Mr Michael O’Brien was involved in the Bluegrass Trust and here there was some evidence that he was?
  2. Yes, and I think even though we had one person saying that Michael O’Brien was involved, it comes down to was that still sufficient evidence? What else did we need to have to support that statement and I just didn’t think we were there at that point.

[98] The problem with the argument that Mr Coffey’s statements could not have deceived Mr Currie is it mischaracterises their effect. They were designed to hide the true state of affairs because if Mr Coffey had told the truth about Michael O’Brien’s involvement, the application would have been declined. If, as Mr Coffey argued, his representations were effectively set to one side because of the unequivocal denials of Michael and Patrick O’Brien, that was only because they too falsely underrepresented Michael O’Brien’s actual involvement. As the Judge noted, if they had conveyed the whole truth, they would certainly not have been ignored. The fact that Mr Coffey’s comments were less false than Michael and Patrick O’Brien’s denials is beside the point.
[99] As noted with respect to Michael O’Brien, Mr Coffey’s misrepresentations did not need to be the only reason for DIA granting the licence, so long as it played a material part in that result. We are also satisfied that Mr Coffey’s false representations contributed materially to the grant of an operator’s licence to Bluegrass.

Benefit

[100] Here Mr Coffey argued that because Bluegrass could not lawfully derive a profit, it was in fact the recipients of Bluegrass grants — primarily racing clubs — that would derive relevant benefit from the operator’s licence, not Bluegrass itself. While Mr Coffey accepted that the licence allowed Bluegrass to generate revenue, the revenue was not for Bluegrass. Bluegrass was no more than a passive mechanism to collect gambling proceeds and then channel the actual benefits elsewhere.
[101] “Benefit” is not defined in the Crimes Act (although “property” is).[140] This Court in Li v R adopted the ordinary dictionary meaning of benefit, that is advantage or good.[141] We see no reason to look beyond that approach.
[102] As the Crown argued, benefit (and advantage) is to be understood in context, both factual and statutory. It is true that the recipients of Bluegrass grants receive cash benefits. If they had joined in the deception, they too could be said to have obtained a benefit by deception. But that does not mean this is the only relevant benefit or that grantees are the only relevant beneficiaries. Bluegrass was created for the sole purpose of providing grants to authorised purposes particularly in the racing industry in accordance with the procedural and other requirements of the Act. The advantage to Bluegrass is that the operating licence allowed it to achieve the purpose for which it was created. It was therefore a benefit to Bluegrass.
[103] While not strictly necessary, it is perhaps also possible to argue that once Bluegrass was set up, additional advantage came from the fact that the revenue it generated from gambling allowed it to discharge its debt and other contractual or statutory obligations to lenders, venues, staff and the like. We see no reason why the concept of “benefit” in this tightly controlled statutory context should be restricted to surplus cash able to be spent freely by its recipient.

Value

[104] Mr Coffey’s submission in this respect essentially repeated that of Michael O’Brien which we have dealt with above.

Benefit and intention

[105] Finally under this charge, Mr Coffey argued that he could not be convicted of obtaining a benefit valued at more than $1,000 unless the Crown could establish he intended Bluegrass to benefit within that value range.
[106] The decision of this Court in Morley v R related to causing loss by deception pursuant to s 240(1)(d) of the Crimes Act.[142] The Court found that loss in that case had to be proved as part of the actus reus, but there was no requirement in the statute for the Crown to prove an intention to cause such loss, provided some level of material loss (more than trivial) was a reasonably foreseeable consequence of the deception.[143]
[107] Mr Coffey argued that this rule was too absolute where the benefit was obtained for a third party — in this case Bluegrass — and where value was a matter of genuine argument. It could, Mr Coffey argued, lead to unjust consequences. For example, unknowing or naive offenders could find themselves facing more serious penalties despite low culpability due to the happenstance that the Crown could establish a loss in excess of $1,000. Further, R v Lee, the decision Morley v R relied upon in deriving this principle, was a manslaughter case and not analogous to tiered sentence maximums in the fraud offending provided for in s 241 of the Crimes Act.[144]
[108] Despite these submissions we see no particular reason to depart from the approach taken in Morley v R even if it were appropriate for us to consider such a course. In particular, we agree with the Crown that the wording of ss 240 and 241 of the Crimes Act are inconsistent with the addition of a further requirement of intention as to value range. Section 241 sets the sentence maximum for the three value tiers: up to $500; up to $1,000; and over $1,000. The calculation is expressed in mechanical terms (“loss caused” or “value ... obtained”) and may be contrasted with the clear language of intent used in s 240, and particularly in the definition of deception in s 240(2).[145] It is nonetheless unnecessary for us to come to any final view on that question. That is because it is, on these facts, inconceivable that Mr Coffey was not aware of the substantial benefit that would accrue to Bluegrass if his deceit succeeded. For the reasons we have already discussed, we have concluded Bluegrass obtained a benefit and it was valued at more than $1,000. First, Bluegrass obtained the benefit of being authorised to pursue the purpose for which it was created, that purpose being otherwise unlawful (gambling); second, the licence would enable Bluegrass to generate sufficient revenue to discharge its statutory and contractual obligations; and third, the licence cost Bluegrass $9,148 plus the additional and significant cost of legal and other compliance fees. As a director of Bluegrass, and a person experienced in the workings of the gambling industry, Mr Coffey must have known these things and therefore have known that the licence would have been worth more than $1,000.
[109] This ground must fail accordingly.

Charge 12: Michael O’Brien’s appeal against conviction

[110] As noted, charge 12 covered the period between that date of Bluegrass’ incorporation and application for a Class 4 operator’s licence (that is, on 2 June 2009) and the date on which DIA refused to renew that licence (that is, 31 July 2013). The essential allegation in this charge was that Michael O’Brien concealed from DIA his significant influence in the management generally of Bluegrass and (specifically) the direction of Bluegrass’ grants process. The latter, it was alleged, was to enable Bluegrass to retain control over its grant funds, despite the fact that grant decisions were formally made by an independent committee of directors, the NPC.
[111] The separate ground advanced by the Michael O’Brien under this charge was a narrow one. As a preliminary point, Michael O’Brien argued that the timeframe for the charge was too wide. The period prior to 19 January 2010 could not have been relevant because that was the date on which Bluegrass’ operator’s licence was issued in final form.[146] There were, in any event, no funds to be distributed prior to that date. Second, that licence expired six months later on 30 June 2010. From that point on, the licence was deemed to continue because Bluegrass filed an application for renewal on 25 June 2010, five days before expiry of the extant licence. Section 56(6) of the Act extended the extant licence pending consideration of the renewal application.
[112] Michael O’Brien then submitted:

The result was that there was no evidence to explain how the Operators Licence was renewed or continued in force from [30 June 2010] up to 31 July 2013 or, who, if anybody, was responsible for its renewal or continuation in force over that period. In the absence of any such evidence it is not known what matters were taken into account in deciding the Operators Licence should be renewed or continued in force over that period and there is no evidence from the persons responsible for the decisions to renew or continue the licence in force that they were deceived into making those decisions by the matters alleged in Charge 12.

[113] Michael O’Brien argued that Dobson J erroneously applied a hypothetical counter factual test in the absence of direct evidence — that is to posit what DIA would have done had it known of the true nature of Michael O’Brien’s involvement in Bluegrass. Michael O’Brien argued this reasoning was impermissible. The only relevant evidence, he submitted, was of the actual effect of any material representations as to Michael O’Brien’s non-involvement during the relevant period.

Analysis

[114] The first point is that there was considerable evidence during the period 19 January 2010 to 31 July 2013 of Michael O’Brien’s ongoing control of Bluegrass and his use of various strategies to hide that fact. The Judge referred to a number of these strategies.[147]
[115] One example will suffice:

[135] David Macdonald, a senior gambling inspector, undertook a compliance audit of Bluegrass in November 2010. His inquiries included a request for a detailed explanation of Michael O’Brien’s involvement in Bluegrass on the basis of DIA’s understanding when the licence to operate was granted that he had no involvement in it.

[136] A draft reply to that letter which is in Michael O’Brien’s handwriting included statements that he had no involvement in Bluegrass’ decision making and that he had no involvement in the loan that Patrick O’Brien made to Bluegrass of $300,000. The letter was subsequently typed for dispatch to DIA and completed in Patrick O’Brien’s name.

(Footnotes omitted.)

[116] The foregoing example post-dates the period leading up to the deemed continuation of 30 June 2010, but in our view that does not matter. The evidence that Michael O’Brien was exercising effective control of Bluegrass both before and after 30 June 2010, leads inexorably to the inference that he was also doing so on or about that date, in the absence of evidence to the contrary.
[117] Similarly, Dobson J was satisfied there was considerable evidence of Michael O’Brien’s significant influence in relation to Bluegrass’ grant applications despite the appointment of an independent grants committee, the NPC.[148] The Judge concluded in relation to the period prior to the extension date:

[162] For the few applications Bluegrass approved up to May 2010, Michael O’Brien prepared the documentation for consideration by those comprising the NPC. I am satisfied that those applications were approved because he was, in practical terms, running Bluegrass and recommended that they be approved in circumstances where the new directors had no basis for taking any independent view.

[118] As to the post-extension period, the Judge concluded as follows:

[163] After May 2010 applications to be considered at a given meeting were collated with a section on the printed application form “for trust use only” already completed with an outcome as to whether that application was approved or declined, the amount for which the grant was approved (if it was), and the date of the NPC’s decision. Those details were routinely completed by Ms Bak in terms of instructions she would receive before an NPC meeting from Michael O’Brien. Messrs Monk and Owen were confident that they would not have signed as NPC members the “for trust use only” confirmation by trustees with the details left blank and at least the predominant practice was for the applications to be discussed, for the most part perfunctorily, during the meetings but with the outcome already stated in the appropriate places on each form.

[164] Until July 2010 Michael O’Brien completed a cheque butt for each of the cheques issued to successful applicants to Bluegrass for grants. There are further instances thereafter of Michael O’Brien completing the details of cheques drawn on Bluegrass’ account.

[165] Sometime after Ms Bak took over as the chief executive officer, she changed the form in which the applications were put to NPC members, by preparing a schedule of the grants that were to be considered at each meeting. Her schedule included a decision on approval or refusal of each application for a racing club, and would also include the amount proposed to be approved (routinely somewhat less than the amount applied for). A number of the intercepted telephone and facsimile communications between them demonstrate a pattern of Ms Bak stipulating what Michael O’Brien wanted.

(Footnotes omitted, emphasis added.)

[119] It may be therefore inferred once again, that Michael O’Brien exercised significant influence on the decisions of the NPC from on or about 30 June 2010.
[120] Michael O’Brien then submitted that the Judge had still to be satisfied a relevant official had considered the prospect of an extension but was deceived about Michael O’Brien’s control of Bluegrass and its grants. This is to misunderstand the operation of s 56(6). The subsection provides as follows:

56 Renewal of class 4 operator’s licence

...

(6) A class 4 operator’s licence continues in force after its expiry date if—

(a) the corporate society has applied for renewal before the expiry date; and

(b) the application has not been refused.

[121] There is no need for an official to grant any such extension. It occurs automatically on timely receipt by DIA of a licence renewal application. It continues unless and until the renewal is refused. DIA officials made it clear in evidence that they apply the subsection in this way. The suggestion that a particular official had to give evidence that he or she was deceived over the extension, is misconceived.
[122] The deceit in this case was in not advising successive DIA investigators and officials charged with processing the Bluegrass renewal application, what the true position was with respect to Michael O’Brien’s involvement in Bluegrass. The Judge was right to infer from the surrounding context that if any of the Bluegrass related individuals who knew the true position, had advised DIA of it, the application for a renewal would have been declined on its merits in due course, because DIA had already concluded Michael O’Brien was unsuitable for the purposes of s 52(4)(a)(ii) of the Act. It was, with respect, the inevitable inference to be drawn from the facts. Indeed that DIA had a closed mind on the issue was conceded by Michael O’Brien in submissions. Further, ongoing inquiries by DIA investigators about that very issue during the charge period demonstrated this view of Michael O’Brien had not changed. Michael O’Brien well knew that if word of his involvement got out, Bluegrass’ operator’s licence would be in jeopardy. That is why he tried to hide it. Dobson J was also correct to find that this deception was an ongoing state of affairs which affected the renewal just as it had affected the original grant of the operator’s licence.[149]

Charges 13–15: The Venue Licences

[123] To summarise the factual background for the period set out at the beginning of this judgment, relevant details of the charges are as follows:

Charge 13

Venue: The Hardware Bar and Café, Stokes Valley, Lower Hutt

Venue licence holder: Bluegrass

Venue operator: Maximum

Venue manager: Mr Max

Date range: 22 December 2009 to 6 December 2010

Charge 14

Venue: Hardy’s Bar, Nelson

Venue licence holder: Bluegrass

Venue operator: Maximum

Venue manager: Mr Max

Date range: 25 May 2010 to 6 December 2010

Charge 15

Venue: The Terrace Tavern, Palmerston North

Venue licence holder: NZCT

Venue operator: TOKPL

Venue manager:[150] Mr Max

Date range: 28 October 2010 to 6 December 2010

[124] The date range for each charge begins on the date either Bluegrass or TOKPL was issued with its venue licence. That is why those dates vary. The range ends on the date Michael O’Brien formally advised Bluegrass and NZCT that he had acquired Paul Max’s shares in Maximum and TOKPL. It was accepted by Michael O’Brien, for the purposes of the appeal, that, up until that date, Michael O’Brien was the beneficial owner in the shares owned by Paul Max, who held them as trustee.
[125] Two overall aspects of the Judge’s reasoning in relation to the venue charges were challenged. First, Michael O’Brien argued there was insufficient evidence to establish that the appellant’s suppression of his ownership of Bluegrass and TOKPL deceived DIA officials into granting the three venue licences. Second, he argued there was insufficient evidence upon which the Judge could have been satisfied that the venue licences were each worth more than $1,000. A third argument was advanced with respect to the validity of the venue licence for the Terrace Tavern covered by Charge 15. We will address that last.

The causation issues

[126] Michael O’Brien put the causation argument slightly differently in relation to each charge.

Charge 13

[127] In respect of charge 13, he argued the Judge was required to be satisfied beyond reasonable doubt that Michael O’Brien’s deception operated on the mind of the DIA official who issued the Hardware Bar licence so as to make him believe that Michael O’Brien had no role in relation to Maximum. That articulation of the issue is accurate as far as it goes, although as we have said, the deception need not have been the only cause for the grant of the licence. It will be enough if it played a material part in the decision to grant the licence.
[128] Mr Currie was National Licencing Manager in the Gambling Compliance team at DIA. He was the official with high levels of responsibility within the organisation for licencing decisions. He did not say that when he granted the Hardware Bar venue licence he bore specifically in mind, the comfort he felt because Michael O’Brien was not involved in that venue. Instead Mr Currie’s evidence posed a counter-factual. He said:
  1. If Michael O’Brien had been identified as a key person in any of these venues and because he’d already been determined to be unsuitable to work within the industry, the applications would’ve been declined.

[129] There was a great deal of circumstantial evidence to support this assertion:
[130] Michael O’Brien was clearly persona non grata across DIA’s gambling compliance team. The essence of Mr Currie’s evidence was that he had suspicions about Michael O’Brien’s involvement, but there was insufficient evidence to justify declining the application on that ground at the time. There is simply no room for reasonable doubt that if Mr Currie had known the true position, the venue licence application for the Hardware Bar would have been declined. This is not speculation, rather it is the inevitable inference that is to be drawn from proven facts. Taken in context, that inference satisfied the Morley v R test for material cause.[151]

Charge 14

[131] In respect of charge 14, Michael O’Brien argued that the Crown had failed to call the official within DIA with responsibility for processing the application for Hardy’s Bar. This meant the Crown could point to no individual who had in fact been deceived into granting the licence in accordance with the test counsel proposed.
[132] We do not accept that argument. As Mr Currie noted, he was the official ultimately accountable in licensing matters and any decision to refuse a licence application was required to be made by him personally:
  1. But the delegation to refuse to grant unless satisfied stops at the national manager level, is that correct?

A. That’s correct.

[133] The evidence was clear that if Michael O’Brien’s true involvement in Maximum had been disclosed, the application would have been escalated to Mr Currie’s office and the application refused by him. To that extent the entire gambling compliance team was deceived, including Mr Currie himself by Michael O’Brien’s ruse. The fact that DIA noted that it would not allow an application to amend the venue licence for Hardy’s Bar when DIA was advised of the true position, demonstrates the effect of that teamwide deception.

Charge 15

[134] In relation to charge 15 the argument was that neither Mr Currie nor Rochelle Brown (who personally processed the application on 28 October 2010 to amend the Terrace Tavern licence to substitute TOKPL as venue operator) gave evidence about what had influenced them in granting the application.
[135] Again, for the reasons we have already given with respect to charge 14, we do not see the failure of Mr Currie to use a particular form of words as fatal. The clear context of antipathy within the gambling compliance team towards Michael O’Brien made that unnecessary.

Venue licence value

[136] In his verdicts judgment, Dobson J accepted that individual venue licences were less value than an operator’s licence but considered they were nonetheless “a necessary part of the regulatory approvals required to generate gambling returns”.[152] The Judge also found that the venue licence represented considerable value to the host business as a matter of “commercial reality”, although he accepted this did not assist in establishing the value of the venue licence itself since that value accrued primarily to the licensed operator.
[137] According to the Gambling (Fees) Regulations 2007 the fee for a class 4 venue licence (other than a horse racing or non-commercial venue) was $1,017 at the relevant time.[153] In addition these regulations set an annual fee per gaming machine at $425. The regulations also imposed a per machine per day monitoring fee of $1.35. Any amendment to the licence incurred a further fee. A change of key person (relevant here in respect of the Terrace Tavern) was $636. Annual venue licence renewals cost $191.
[138] In truth, it makes no particular sense to divide these costs from the costs of an operator’s licence (to which we have already referred) because they are, as the Judge pointed out, all part of the cost of a single overall operation. An operator’s licence has no value without venue licences and vice versa. But even if that were not so, this combination of fees in relation to venue operation alone still significantly exceeded the $1,000 threshold for the charge. And in each case Bluegrass was happy to pay them, in addition to any other legal or technical costs that might have been required to complete and file the application.
[139] As we reasoned with respect to the value of the operator’s licence,[154] venue licence fees (by which we mean the whole suite of fees) provide an unarguable minimum value for the purposes of the charges. Whatever these cost they were plainly worth more than that to Bluegrass because that is what it was prepared to pay. On any analysis that sum exceeded $1,000. Furthermore, and for the reasons set out at paragraph [87] of this judgment in relation to the operator’s licence, the three venue licences in question were in fact worth considerably more than that floor value. As we found with respect to the operator’s licence, the constraints on profit, and use of proceeds provided in the Act were quite beside the point. So is the fact that these venue licences were not transferable and could be cancelled without compensation for breach of the relevant statutory requirements for operation of the licence. These limitations obviously reduced the value of the licences, but not to a figure below $1,000.

Validity of the venue licence in Charge 15

[140] The second argument Michael O’Brien mounted in respect of charge 15 was that by the time the amended venue licence for the Terrace Tavern was issued on 28 October 2010, the original licence it purported to amend (which then recorded NZCT as the venue licence holder and Braecourt Investments Ltd as venue operator) had expired. NZCT obtained its venue licence for the Terrace Tavern on 28 July 2009, but for some reason the licence only covered the 2008 calendar year — that is the period 1 January 2008 to 31 December 2008. It thus appears the licence had expired seven months before it was granted. It was not therefore possible for NZCT to apply to renew the licence before its expiry date as required by s 56(6) of the Act.
[141] Michael O’Brien argued that the amended licence was therefore void and NZCT should in fact have applied for a new venue licence rather than to amend the earlier one. It was then argued that since the licence was void, it could not have been of benefit to NZCT.
[142] As noted, the Judge rejected this argument. First, he said, an administrative action will not be treated as a nullity in the absence of it being expressly set aside, and, in any event, it would have been appropriate to amend the charge to add the term “or purported licence”.[155]
[143] We take no issue with these responses by Dobson J to Michael O’Brien’s challenge. While the venue licence may have expired, nobody treated it as having done so during the relevant period, least of all Michael O’Brien himself. Further, the suggested amendment under s 133 of the Criminal Procedure Act would have been made without controversy on these facts.[156] The substantive point is that the charge particulars alleged NZCT derived a benefit from the deception in the form of a venue licence. DIA and NZCT both proceeded on the basis that the licence was valid throughout the charge period. Neither picked up the problem with the dates on the face of the licence. NZCT duly received the net gaming machine proceeds from the Terrace Tavern to which DIA presumed it was entitled. TOKPL had presumably deducted its rental entitlements as venue operator and applied them to its, that is to say to Michael O’Brien’s, private purposes. The sums must have been significant. And finally, Michael O’Brien was then separately able to exploit this hidden position on both sides of these transactions to strengthen his influence over the allocation of grants by Bluegrass and NZCT. Thus, the status of the licence is less important than whether it represented a tangible benefit to NZCT (and ultimately Michael O’Brien for sentencing purposes). It plainly did, because all relevant parties treated it as if it was in fact the venue licence referred to in the particulars.
[144] Section 133 of the Criminal Procedure Act could have corrected the error as the Judge suggested, but the defect could also have been cured by s 379 of that Act. It was, in truth, a defect in the form of the charging document and could have produced no miscarriage of justice to Michael O’Brien. On the contrary a miscarriage would have been caused if despite Michael O’Brien’s reliance on the venue licence document to execute his scheme of deception, he could evade criminal sanction for doing so.[157]

Sentence appeal: Michael O’Brien

The sentence

[145] Michael O’Brien was sentenced to a total of four years and six months’ imprisonment.[158] The Judge elected not to select a lead charge remarking that it could have been either of charge 11 or 12 because they represented an interdependent course of conduct both as to mode and motive.[159] A starting point of four years was adopted on charge 11,[160] with a six month uplift for charge 12 and a further consolidated uplift of nine months for charges 13, 14 and 15.[161] This five years and three months starting point was then reduced to five years on the basis of totality.[162] Personal circumstances then justified a further 10 per cent reduction, that is six months, leading to the final sentence of four years and six months’ imprisonment.[163]
[146] No issue is taken with the personal mitigating factors. Rather, Michael O’Brien challenges various aspects of the starting point adopted. It is argued that the starting point should have been two years and six months’ imprisonment in relation to charges 11 and 12 with no uplift for the venue licence charges.
[147] The Judge considered that there was no real distinction in seriousness between charges 11 and 12.[164] It was, the Judge considered, “near the top range of fraud, or the top of the mid range on the fraud offending spectrum”.[165] It involved a “persistent and determined deception”.[166] In an industry that relied on applicant integrity this was, the Judge considered, akin to orthodox breach of trust considerations for the purpose of sentencing.[167] The Judge said “[i]t is conduct that needs to be denounced in the strongest terms, and deterred as effectively as compliance with other sentencing considerations will allow”.[168]
[148] The venue licence charges attracted concurrent sentences of three years nine months concurrent on each other and on charges 11 and 12.[169] They were reflected in the final sentence by a nine month uplift on the starting point for charges 11 and 12.[170] The Judge accepted that the venue licence charges were less serious both in scale and value, but he took the view that the two categories of licence were in truth interdependent given that venues can only operate under the authority of an operator’s licence and an operator’s licence has no value without a venue licence.[171]
[149] The Judge concluded that Michael O’Brien’s hidden role with respect to venues enabled him “to have an influence over the working relationship between the venues and the respective gaming trusts which they each contracted”.[172]
[150] The Judge concluded:

[40] ... I am satisfied that the relationships thereby created were relevant to Mr O’Brien’s dealings with executives in those other gaming trusts, when you liaised with them Mr O’Brien about applications that you referred to them for particular racing clubs. Although slightly less significant because of the scale of each venue’s operation, this deception is nearly on a par with that about the Bluegrass operator’s licence.

[151] The Judge also noted that the victims in this pattern of offending were the racing clubs that refused to pay Michael O’Brien’s fee, and wider community and racing interests that lost the opportunity to obtain grants because the allocation to particular racing clubs was effectively pre-determined by factors other than whether the relevant purpose was deserving.[173]

Submissions

[152] Michael O’Brien argued that the five-year combined starting point for all charges was manifestly excessive. The following detailed arguments were made:

Analysis

[153] We consider that the starting point was within range for this level of offending. We agree with the Judge that it would have been artificial to separate Bluegrass obtaining its operator’s licence in charge 11 and control of the proceeds from that licence in charge 12. After all, control of the proceeds was the whole point of the deception and that depended on Bluegrass having the right to receive them. We agree with the Judge’s conclusion on the evidence that these charges were interdependent. They formed part of a wider strategy whereby Michael O’Brien could exercise considerable influence over grant decisions of Bluegrass and other operator’s licence holders he separately lobbied on behalf of his client racing clubs.
[154] We agree with the Crown that such conclusion was far from speculative. Rather it could be readily inferred from intercepted phone communications and documents as well as from the schedules Michael O’Brien prepared for his own purposes.
[155] Isolating Michael O’Brien’s actions in relation to charge 11 from the mode and purpose of the wider deception would have produced a false picture of his culpability. That is true also with respect to the venue charges. We accept, as Michael O’Brien argued, that Maximum and TOKPL complied in all respects with their venue licence requirements except that relating to disclosure of key personnel. But to suggest that this significantly mitigated the seriousness of the offending is to studiously miss the point. The key to the success of Bluegrass, Maximum, TOKPL and Michael O’Brien’s own lobbying business was in preventing the DIA from detecting his presence in the scheme.
[156] Second, we agree with the Judge that culpability in relation to charges 11 and 12 sat at the top of the mid-range of fraud.[175] The wider deception was elaborate. It required Michael O’Brien to coordinate the activities of separate entities (Bluegrass, NZCT, other operator’s licence holders, Maximum and TOKPL, and his client racing clubs) as well as individuals (Patrick O’Brien and Kevin Coffey). We accept the sums involved were significant but not spectacular. That is why this was mid-range offending rather than top-of-the-range. Placing culpability at that point did not depend on a more precise calculation of licence value than the Judge carried out. The true measure of Michael O’Brien’s culpability was in the cashflow the operator’s licence generated for Bluegrass and the fee income that enabled Michael O’Brien to generate in his lobbying work on behalf of client racing clubs. As we have said, these figures were significant enough to locate the offending in the upper mid-range.
[157] Third, we accept, as did the Judge, that Michael O’Brien did not exercise total control of the grant decisions of the Bluegrass NPC. The Judge seems to have accepted that the grant allocations budgeted for in Michael O’Brien’s seized spreadsheet did not pan out every time.[176] But there was ample evidence for the Judge to be satisfied that the “you scratch my back, and I’ll scratch yours series of relationships” Michael O’Brien had established over the years was sufficient for Michael O’Brien to make reasonably accurate predictions of the source of grants from within the funding sector, even if not the precise amounts.[177] As the Judge found on the basis of the evidence, Michael O’Brien did use Bluegrass as a float to plug gaps created where his predictions overstated grants actually made.[178] As the Crown noted in submissions, in an intercepted conversation played during the trial, Michael O’Brien warned his father that if Bluegrass ceased to operate, he (Michael O’Brien) would lose half his income.

Conclusion

[158] Accordingly, Michael O’Brien’s appeal against sentence fails.

Sentence appeal: Mr Coffey

[159] Mr Coffey was convicted in relation to charge 11 only. Dobson J found the Crown had failed to prove Mr Coffey was aware of and involved in the matters covered in charge 12 and he was acquitted accordingly on that charge.[179]
[160] In relation to charge 11, he was sentenced to 12 months’ home detention from a starting point of two years and six months’ imprisonment.[180] Crucial to the Judge’s reasoning was that Mr Coffey’s position as a director of Bluegrass was critical to the success of Michael O’Brien’s wider deception because if Mr Coffey had provided accurate information about Michael O’Brien’s involvement, the application would have been declined and Mr Coffey knew that.[181] The deception was therefore intentional.
[161] That said, the Judge accepted that Mr Coffey believed he would be able to extricate himself once the licence was granted to Bluegrass.[182] He accepted also that Mr Coffey was unaware of Michael O’Brien’s fee charging activity for procurement of grants.[183] Nonetheless, the Judge concluded that DIA officers (even if subconsciously) must have taken a “measure of comfort” from Mr Coffey’s experience in the sector as a DIA compliance officer and work at NZCT.[184]
[162] The Judge then deducted six months for mental health issues (that would have made incarceration harsher), previous good character and work history, commitment to helping others in the community, and previous employment as a police officer and corrections officer (also factors that would make incarceration harsher).[185]
[163] The Judge then commuted the sentence to 12 months’ home detention given the foregoing considerations and the substantial rehabilitative advantages if Mr Coffey remained in the community.[186]
[164] Mr Coffey submitted that the sentence was manifestly excessive because the starting point was too high. It was argued that his offending was altogether of a different class to that of Michael O’Brien because Mr Coffey knew nothing of the personal profit Michael O’Brien would obtain after the licence was granted. Mr Coffey was only involved in set up, and genuinely believed, it was submitted, that DIA’s concerns about Michael O’Brien were an unwarranted obstacle to the production of useful grant funds for harness racing.
[165] It was submitted that the true culpability of the deception lay in stage two of the scheme — the procurement commissions charged by Michael O’Brien. These were matters in which Mr Coffey had no involvement or knowledge.
[166] Finally, it was argued that the Judge indicated when sentencing Michael O’Brien and Mr Coffey that in descending order of seriousness was the culpability of Michael O’Brien, then Mr Max with Mr Coffey the least culpable. Nonetheless, Mr Max and Mr Coffey received the same sentence.

Analysis

[167] We accept that the starting point for Mr Coffey was stern given his noninvolvement in stage two where the scheme of deception was brought to fruition. But all things considered, we do not agree that it was manifestly excessive. Mr Coffey clearly knew that he was deceiving the DIA and that the effect of that deception would be the grant of a very valuable operator’s licence that would not otherwise have been obtained. We agree that Mr Coffey was also trading on his prior work in high trust positions — the police, corrections the DIA gambling compliance team and NZCT. His evidence to the DIA would have carried additional heft for that reason. There is accordingly a significant breach of trust aspect to this sentencing in the sense that community acceptance of regulated gambling depends on confidence in the integrity of the regulatory process that relies on honesty and transparency. For a former compliance official to engage in the deception in which Mr Coffey engaged is therefore a serious matter. With all of his experience, Mr Coffey would have known how important strict compliance was in this system. It would be wrong (as he sought to argue) to treat him as if he were an innocent dupe of Michael O’Brien. In relation to Michael O’Brien, the Judge took the firm view that his conduct required denunciation “in the strongest terms” and deterrence “as effectively as compliance with other sentencing considerations will allow”.[187] In Mr Coffey’s case too, denunciation and deterrence are important sentencing principles given, as the Judge pointed out, “the level of reliance by the regulator on full and truthful disclosure”, particularly in relation to matters “that are solely within [Michael O’Brien’s and Mr Coffey’s] own knowledge and control”.[188]
[168] As to sentencing relativity, it is true that the Judge considered Mr Coffey’s culpability to be less than that of Mr Max.[189] But when he sentenced Mr Max two weeks later, he noted that although overall he considered Mr Max’s offending to be a little more serious, having reflected on all the circumstances, he was comfortable with the end result between Mr Coffey and Mr Max.[190] Importantly, with respect to the venue charges Mr Max faced, the Judge had cause to reconsider relative culpability between Michael O’Brien and Mr Max following counsel’s submissions.[191] Having initially been of the view that the two offenders were equally culpable, those submissions led him to conclude that Mr Max’s role was the lesser one.[192]

Conclusion

[169] Overall, we are not satisfied that the sentence in relation to Mr Coffey was manifestly excessive.

Result

[170] The application to adduce fresh evidence in CA390/2017 is granted.
[171] The appeal in CA390/2017 is dismissed.
[172] The appeal in CA394/2017 is dismissed.






Solicitors:
Fletcher Vautier Moore, Nelson for Appellant in CA390/2017
Crown Solicitor, Wellington for Respondent

[1] R v O’Brien [2017] NZHC 1317 [Verdicts judgment].

[2] R v O’Brien [2017] NZHC 1625 at [65] [Sentencing notes].

[3] Sentencing notes, above n 2, at [65].

[4] Gambling Act 2003, s 30(e)(ii).

[5] Gambling Act, s 30(a).

[6] Gambling Act, s 31.

[7] Gambling Act, s 50.

[8] Gambling (Class 4 Net Proceeds) Regulations 2005, reg 10(1).

[9] Gambling (Venue Payments) Regulations 2016, regs 6 and 7.

[10] Gambling Act, s 4.

[11] Gambling Act, s 4.

[12] Gambling Act, s 67(1)(m), in circumstances where there is a class 4 venue agreement in place.

[13] Verdicts judgment, above n 1, at [11].

[14] At [11].

[15] At [11].

[16] At [11].

[17] At [11].

[18] At [12].

[19] At [12].

[20] At [13].

[21] At [13].

[22] At [13].

[23] At [14].

[24] At [14].

[25] We were not provided with original evidence to support these propositions and so note that these details may be incorrect. We note that nothing turns on this information in this appeal.

[26] Verdicts judgment, above n 1, at [33].

[27] Verdicts judgment, above n 1, at [120].

[28] At [63].

[29] At [63].

[30] At [67].

[31] At [68].

[32] At [68].

[33] At [69].

[34] At [75].

[35] At [75].

[36] At [77].

[37] At [94]–[104].

[38] At [96].

[39] Dixon v R [2015] NZSC 147, [2016] 1 NZLR 678; and Li v R [2016] NZCA 237.

[40] At [114].

[41] At [114].

[42] At [114].

[43] At [115].

[44] At [117]–[118].

[45] At [124]–[127].

[46] At [128].

[47] At [146].

[48] At [145].

[49] At [145].

[50] At [163]–[166].

[51] At [161].

[52] At [173].

[53] At [171].

[54] At [156].

[55] At [158].

[56] Sentencing notes, above n 2, at [15].

[57] Verdicts judgment, above n 1, at [179].

[58] At [179].

[59] At [180] and [373].

[60] At [189].

[61] At [182].

[62] At [182].

[63] At [182].

[64] At [183].

[65] At [189].

[66] At [189].

[67] At [278] and [365].

[68] At [278].

[69] At [371]–[372].

[70] At [371].

[71] At [199].

[72] At [199].

[73] At [199].

[74] At [199].

[75] At [199].

[76] At [200].

[77] At [200].

[78] At [207].

[79] At [208].

[80] At [209].

[81] At [210].

[82] At [210].

[83] At [211].

[84] At [212].

[85] At [212].

[86] At [221].

[87] See also the level of influence over gaming machines in Hardy’s Bar exercised by Michael O’Brien in a 3 June 2007 email to Eureka Trust about the level of grants that could be paid to racing clubs (see [213]).

[88] At [214].

[89] At [214].

[90] At [215].

[91] At [224].

[92] At [224].

[93] At [225].

[94] At [225].

[95] At [225].

[96] At [228].

[97] At [228].

[98] At [228].

[99] At [229].

[100] At [232].

[101] At [232].

[102] At [234].

[103] At [234].

[104] At [241].

[105] At [245].

[106] The Judge’s treatment of these matters is set out from paragraphs [246]–[275].

[107] At [246].

[108] At [246].

  1. [109] A J Burr Ltd v Blenheim Borough Council [1980] 2 NZLR 1 (CA) at 4–6 per Cooke J; Hill v Wellington Transport District Licensing Authority [1984] 2 NZLR 314 (CA) at 319 per 2019_8304.pngMcMullin J; and Waikanae Christian Holiday Park Inc v New Zealand Historic Places Trust 2019_8305.pngMaori Heritage Council [2015] NZCA 23, [2015] NZAR 302 at [55]–[56].

[110] Verdicts judgment, above n 1, at [249].

[111] At [255].

[112] At [255].

[113] At [258].
[114] R v Hadfield [2007] NZCA 414.

[115] Verdicts judgment, above n 1, at [267].

[116] At [267].

[117] At [269].

[118] At [270].

[119] At [276].

[120] At [276].

[121] At [276]

[122] At [276].

[123] At [365].

[124] At [369].

[125] At [369].

[126] At [369].

[127] At [371]–[373].

[128] Morley v R [2009] NZCA 618, [2010] 2 NZLR 608 at [34].

[129] Morley v R, above n 128, at [34].

[130] Section 241(c), or per s 241(b), if valued at less than $1,000 but more than $500, a term not exceeding one year’s imprisonment.

[131] Verdicts judgment, above n 1, at [113].

[132] At [114].

[133] Dixon v R, above n 39; and Li v R, above n 39.

[134] At [113], citing Li v R, above n 39.

[135] Li v R, above n 39, at [26].

[136] Verdicts judgment, above n 1, at [114].

[137] At [114].

[138] At [102].

[139] At [103].

[140] Crimes Act 1961, s 2(1).

[141] Li v R, above n 39, at [26]. See also Dixon v R, above n 39, at [51]; and Shorter Oxford English Dictionary (6th ed, Oxford University Press, Oxford, 2007) at 220.

[142] Morley v R, above n 128.

[143] At [51]–[54].

[144] R v Lee [2006] NZCA 60; [2006] 3 NZLR 42 (CA).

[145] See above at [22].

[146] The licence was in fact granted on 22 December 2009 but re-issued on 19 January 2010 due to a technical flaw in the original grant. That is the original licence failed to set out the authorised purposes for which Bluegrass could make grants.

[147] Verdicts judgment, above n 1, at [129].

[148] See generally [151]–[177].

[149] At [177].

[150] We note that the evidence suggests that a Ms Walsh and a Ms Rawiri were also key persons in relation to the Terrace Tavern. Nothing turns on these details.

[151] Morley v R, above n 128.

[152] At [370].

[153] Gambling (Fees) Regulations 2007.

[154] Above at [84].

[155] At [250] and [266].

[156] R v Hadfield, above n 114.

[157] See generally Talley’s Group Ltd v Worksafe New Zealand [2018] NZCA 587 and authorities referred thereto at [45].

[158] Sentencing notes, above n 2, at [65].

[159] At [27].

[160] At [31].

[161] At [45]

[162] At [45].

[163] At [53].

[164] At [27].

[165] At [28].

[166] At [28].

[167] At [28].

[168] At [29].

[169] At [65].

[170] At [45].

[171] At [39].

[172] At [40].

[173] At [44].

[174] The evidence of Ms Phillips was that fees totalled $1.4 million for the relevant four-year period while the evidence of Ms Willembrook suggested it was $792,000 on the basis of the Judge’s assessment that the total fees charged represented approximately one-third of the grants made.

[175] At [28].

[176] At [12].

[177] At [13].

[178] At [15].

[179] Verdicts judgment, above n 1, at [189].

[180] Sentencing notes, above n 2, at [38] and [65].

[181] At [33].

[182] At [36].

[183] At [36].

[184] At [37].

[185] At [55]–[57].

[186] At [60]–[62].

[187] At [29].

[188] At [28].

[189] At [41].

[190] R v O’Brien [2017] NZHC 1753 at [19].

[191] At [6].

[192] At [6].

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