THE QUEEN v ERUERA GARY WIRINGI MEROITI [1999] NZCA 245 (26 October 1999)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca392/99

THE QUEEN

V

ERUERA GARY WIRINGI MEROITI

Hearing:	20 October 1999
Coram:	Keith J Blanchard J Baragwanath J
Appearances:	C M Gallagher for the Appellant D J Boldt and D R F Gardiner for the Crown
Judgment:	26 October 1999

judgment of the court DELIVERED BY BARAGWANATH J

[1] Mr Meroiti pleaded guilty to charges of forgery and uttering and was sentenced in the District Court at Auckland to eight months imprisonment, against which sentence he now appeals.

[2] The circumstances of the forgery was unusual and will shortly be described. Perhaps unusually also, nobody appears to have suffered any loss as a result of the appellant's actions.But it is a very serious matter to forge a commercial valuation and the appellant did not come before the Court as a first offender, having previously served a sentence of two years imprisonment for forgery imposed in 1987.

[3]Forgery is the making of a document which tells a lie about itself (Russell on Crime 12^th ed pp1232-4) with the intent that it should be acted upon as genuine.Uttering is using a document as if it were genuine.

[2] In their Report on Forgery and Counterfeit Currency (1973) 5 Law Commission Reports 91 at 105 the Law Commission of England and Wales stated

14 ... In the many and varied activities of modern society it is necessary to rely to a large extent on the authenticity of documents as authority for the truth of the statements which they contain.Indeed, in the vast majority of forgery cases the purpose of the forgery is to lull the person to whom the document is presented into a false position in which he will be unlikely, because of the apparent authenticity of the document, to make further inquiry into the correctness of the facts related ...

[3] It is common in business dealings for participants to be exposed to heavy temptation.

[4] Mr Gallagher's powerful arguments in mitigation on behalf of the appellant, inviting us to suspend his prison sentence, emphasised what he saw as a dilemma, between committing what was said to be a immaterial forgery and risking millions of dollars of loss.It was reminiscent of Bassanio's plea

Wrest once the law to your authority, to do a great right do a little wrong ...

[5] But this Court must give a clear message to the business community that forgery will not be tolerated, whatever the apparent temptation.As Portia responded

It must not be, ...

`Twill be recorded for a precedent,

And many an error by the same example

Will rush into the state.It cannot be.

The Merchant of Venice IV.i.215-223

We must uphold the imposition of a prison term.

[6] It is nevertheless the duty of this Court to "focus ... narrowly on the precise criminality" which the case involves:R v Duffy (1994) 15 Cr App R (S) 677 at 681.

[8] Having done so we recognise the unusual mitigating factors in this case by reducing the eight months sentence imposed by the learned District Court Judge to one of six months.

[9] The charges relate to a letter apparently written by Professional Forestry Services Limited (PFS), a New Zealand forestry company, to Multi Line Securities Limited (Multi Line) a New Zealand investment company, concerning the character of a teak forest in Papua New Guinea being developed by Brown River Forestry Partnership Limited (BRFP) of which the appellant was Chairman and in which he held an 8.2% shareholding.

[10] In late 1995 BRFP entered into written memoranda of understanding with the members of the Varagadi clan, the customary owners of the teak plantations at Brown River.BRFP undertook to pay to sub clans of Varagadi PGK90,000 in return for receipt of exclusive rights to the plantations.Unless a Government Project Agreement and Timber Permit were received by 24 June 1996 the agreement was terminable by the Clans.

[11] Although the shareholders in BRFP, substantially Maori, had invested more than $NZ1m, no funds were available to pay the PGK90,000 until the issue of its timber permit by the Minister for Forests.

[12] In October 1996 a New Zealand delegation including the appellant were told by the village people of the sub clans that they were tired of waiting for their money and required payment before Christmas.

[13] By the end of November 1996 the villagers were getting very angry.They had received an offer from a public company which was in a position to settle.

[14] The appellant was told that unless the money owed by BRFP was paid before Christmas the sub clans would immediately terminate the agreement.

[15] The difficulty in securing the funds due to the sub clans arose from events in New Zealand.In the latter part of 1995 Multi Line had committed itself to contribute $US650,000 in return for an approximate 30% shareholding of the project.A condition of that investment was an independent valuation which would allow Multi Line to raise funds from existing private clients.

[16] Valuations of the project were prepared by PFS in September 1995, February 1996 and November 1996.It was the November 1996 valuation which precipitated the appellant's offending.

[17] The initial valuation prepared on a net present value basis yielded a figure of $US9.475m.A valuation of 28 February 1996 yielded a slightly lower figure of $US9.36m.Examination of its schedules revealed that that figure derived from an assumed FOB price for sawn timber of $US1,100 per cubic metre. Reduction of the FOB price to $US750 per m³ abated the NPV to $US8.25m.That valuation was supplied to Mr Toohill of Multi Line.

[18] A second valuation also dated 28 February 1996 was prepared by PFS.It maintained the NPV of $US9.36m for an assumed FOB price of $US1,100 m³.The NPV for an FOB price of $US750 m³ was shown as only $US2.39m.There is no evidence that these last figures appeared of any particular importance to the appellant at the time.

[19] Some time in mid 1996 the appellant told Mr Toohill that a third valuation was being prepared.Mr Toohill deferred committing Multi Line investors further until that report was received.

[20] The PNG National Forest Service had been performing a resource inventory survey to assess the volume of standing teak growing in the clan areas.In September and October that data was collated in consultation with PFS. The appellant expected the further valuation would be around 30% higher than earlier ones and believed that the appropriate figure should have been over $US13m.

[21] On 27 November 1996 the appellant received a draft of the further PRS report.It employed an FOB price of $US750 and valued the project at only $US3.42m.

[22] The appellant contacted PFS and advised that he rejected the valuation. He attempted to persuade its author that the valuation should be revised upwards.The author refused.

[23] Concurrently the appellant was under increasing pressure both from the sub clans and from Mr Toohill, who was expecting the updated valuation which he could then use to secure further funds from his investors which could be applied to paying the sub clans and securing BRFP's position.

[24] Rather than informing Mr Toohill of the facts, the appellant forged a letter, expressed to be from PFS to himself, advising that the valuation had been delayed and that the draft valuation could not be used for any purpose. The forged letter went on to say that the new report was likely to conclude that the volume of teak was around 30% greater than had been previously estimated and that this would be reflected in the revised valuation.The forgery was achieved by pasting text, which had been composed by the appellant, on to a piece of paper bearing PFS letterhead and the signature of its valuer. The appellant faxed the forged letter to Multi Line together with a cover sheet saying that the new valuation was likely to be $US13.44m but that he had been asked by PFS not to quote that figure.

[25] Following receipt of the PFS letter Multi Line secured further investments of almost $NZ900,000.Mr Toohill deposed that approximately $157,500 of that may have been received from investors relying on the forged letter.

[26] Over the ensuing period Mr Toohill pressed the appellant for the final PFS valuation report.On 28 May 1997 Mr Toohill telephoned PFS and learned that the purported PFS letter of 6 December 1996 did not come from PFS and had probably been forged.

[27] Multi Line thereupon stopped raising capital.All investors were contacted and told that there was a forged document relating to valuation.No investor withdrew his or her investment.Investors were only concerned that their investment was safe and that a valuation of over $US9m could be achieved at the time.Mr Toohill was prepared to give and did give the assurances sought by investors.

[28] He believes that the project is currently worth in excess of $US10m and is potentially very lucrative for investors.

[29] Following his arrest at the end of October 1998 the appellant deferred his plea of guilty until after the depositions hearing on 21 June 1999 at which he called two PFS witnesses whom he cross examined in person.After elaborate cross examination the author of the February reports acknowledged that, employing his assumed FOB price of $US1,100 m³, the true NPV was not $US9.36m but $US13.44m.

[30] Another PFS valuer also acknowledged certain errors although maintaining that assumptions he had made, which were challenged by the appellant as too conservative, had been sound.

[31] Mr Betteridge, an accountant with 20 years experience in plantation forestry was an investor in the project.He deposed that the volume of the standing teak resource at Brown River was under estimated by PFS by at least 30%, a conclusion supported by the PNG Forest Authority (PNGFA) prior to the forgery.He rejected the use of an FOB price of $US750 m³.He exhibited a list from an authoritative database showing some variation of figures but generally indicating an average price over the period 1993 to 1995 of over $US1,000 m³.

[32] What then is the appellant's "precise criminality" for which he must be sentenced?

[33] The answer is that he deprived Multi Line and its actual and potential investors of the benefit of what they thought they were getting - a valuation report from the expert valuers, PFS.It is an incomplete answer to say and even to prove that PFS were wrong as to fact (as appears to be the case) and as to opinion (which seems likely).(We record that PFS are not, of course, represented before us;our comment is made in the context of the dispute between other parties - the appellant and the Crown.)

[34] The entitlement of these members of the New Zealand public was to the opportunity to form their own view on the information they thought they were getting and not on what the appellant chose to provide by means of a forgery.

[35] Mr Gallagher has emphasised that Mr Toohill has described the appellant's role in BRFP's continuing affairs as vital to its investors' security, although the urgency had receded by the time of the hearing in this Court.

[36] We have considered the further plea by a representative of the Varagadi clan who both assert that PFS had acted incompetently and state

We humbly ask that the court ... dismiss the charges brought against Gary by PFS.What Gary did in December 1996 saved the project.If he had not done what he did, the project and BRFP would have been finished.

Gary has never blamed us for the problems he now has to face, but we feel responsible.We told Gary that if he did not make sure BRFP kept its promise to pay us our money we would immediately terminate the project.

What has happened since then is that Gary saved our project again this year [1999] when the PNGFA suspended the project and tried to terminate the project. The PNGFA seized assets of the company.No other person in BRFP could have done what Gary did this year to save the project.He brought unity to our clan who were divided and frustrated by the management and direction of the project. He got us together to support one plan.He convinced the PNGFA that the project could succeed under new management and with a new direction and he got the suspension uplifted.The Managing Director of the PNGFA was adamant that the project would be terminated, but Gary brought the project back from the brink of disaster.

It would be wrong if Gary was punished.If it wasn't for Gary we would all be losers, especially all of the New Zealand investors.

[37] The careful and concise remarks of the sentencing Judge fairly recorded the submissions on both sides.We endorse her conclusion that the Court cannot condone criminal behaviour in a commercial context;and that, while business expediency explains the appellant's actions, it cannot justify his conduct.

[38] We further agree with her conclusions both that a term of imprisonment is appropriate and that this is not a case for a suspended sentence.

[39] As an experienced businessman of 42 years of age the appellant knew precisely what he was doing.He had over a decade before committed forgery as a solicitor and been imprisoned as well as struck off the rolls.

[40] We are however of the view that the mitigation factors are of such unusual cogency as to warrant the reduction of the prison term to six months.The appeal is accordingly allowed, the sentence of eight months imprisonment quashed and a sentence of six months imprisonment substituted for it.

Solicitors

Greig Davidson Gallagher & Co, Wellington for the Appellant

Crown Law Office, Wellington for the Crown