THE QUEEN v WAYNE STUART ROSS & IAN ALEXANDER ROSS [1999] NZCA 32 (18 March 1999)

IN THE court of appeal of new zealand

ca224/98

THE QUEEN

V

WAYNE STUART ROSS AND

IAN ALEXANDER ROSS

Hearing:	10 March 1999
Coram:	Eichelbaum CJ Robertson J Goddard J
Appearances:	R B Squire QC and G A Andree Wiltens for the Crown A R Davie for Wayne Ross R M Lithgow for Ian Ross
Judgment:	18 March 1999

judgment of the court delivered by GODDARD J

[1] The appellants are father and son.During the period of offending with which the appeal is concerned, Wayne Ross practised as a barrister and solicitor and was director of the Ross Partners Solicitors Nominee Company Limited ("the Nominee Company") which he operated as part of his legal practice.During the same period his father, Ian Ross, a former accountant, conducted a tax consultancy from the same building.

[2] Both appellants went to trial on an indictment containing 17 counts.All counts related to monies received through the Nominee Company or pursuant to other fiduciary obligations owed by one or both appellants.The period covered by theoffending was October 1993 to December 1994.Of the 17 counts, 15 alleged theft by misappropriation or by failure to account or pay; one alleged conversion; and one alleged conspiracy by both appellants to defraud investors in the Nominee Company over the period covered by the thefts.

[3] The jury convicted Wayne Ross on 14 counts of theft and of conspiracy to defraud investors in the Nominee Company.Ian Ross was convicted on 10 counts of theft and of conspiracy to defraud investors in the Nominee Company.Of the theft counts, nine were jointly laid; five concerned Wayne Ross only and one (conversion) concerned Ian Ross only.The jury failed to agree on one joint charge and acquitted Wayne Ross on one further theft charge.The sum of money involved in the nine joint charges was $449,000. The sum involved in the five theft charges of which Wayne Ross alone was convicted was $456,000. In total, therefore Wayne Ross faced sentence for 14 thefts of sums totalling $905,000 and conspiracy.The sum involved in the conversion charge of which Ian Ross was convicted was $26,000.In total, therefore, he faced sentence for 10 thefts of sums totalling $475,000 and conspiracy.These figures are representative only of the actual amounts involved, as these were never finally fixed.

[4] Wayne Ross was sentenced to 5 years' imprisonment on the theft charges and concurrently to 3 years' imprisonment for conspiracy.His father, Ian Ross was sentenced to 3½ years' imprisonment on the theft charges, concurrently with 2½ years for conspiracy.

[5] Ian Ross appeals against both conviction and sentence.Wayne Ross appeals against sentence only.

Background

[6] The funds invested in the Nominee Company were, in the main, advanced on registered mortgages.Between 1989 and 1992 three mortgages, approximating one quarter of the entire Nominee company investment at that time, fell into default.Subsequently, between August 1993 and March 1994 a second crucial quarter of the investment, representing the borrowings of the major borrower against the portfolio, also fell into default.

[7] Wayne Ross considered that, in the face of these defaults, he had an obligation to take steps to protect the Nominee Company's investors.Without, however, seeking any general mandate from the investors, he and Ian Ross devised a strategy for dealing with the problem.They purchased the properties that were the subject of the defaulting mortgages through "shelf" companies of which they were the shareholders and directors.The properties were purchased for the amount of principal and interest then outstanding.The appellants then made declarations that they would hold the properties - or in one case shares - so purchased for the benefit of the contributors to the mortgages in default. It was their intention to "trade on" and to prevent losses on mortgagee sales, the aim being to preserve the capital of the investors.

[8] The problem, however, was that there was no authority to use funds in this fashion.The Crown alleged that they then continued to use the monies supposedly acquired on trust for the benefit of contributors in a manner inconsistent with the trusts.In effect, it was alleged, the Ross's received funds invested in the company, and rather than investing them as directed, applied them to what they regarded as the "points of greatest need".This led to funds being applied to transactions quite unrelated to the investments intended and to securities already in default.

[9] A key aspect of their management was that in late 1993 the appellants decided that the company would cease to collect interest in respect of the mortgages not in default.The Crown alleged this decision particularly favoured the interests of Ian Ross, as one quarter of the balance of the mortgage portfolio of the companies was represented by his liabilities.As a result of this decision not to collect interest, Ian Ross was relieved of an annual interest liability of $117,000.The appellants sought to justify this by pointing to tax free "compensation payments" made by Wayne Ross to the contributors who were not getting interest.In the 1994 year he made such payments totalling $120,000.

[10] However, that accounts for only part of what happened.Wayne Ross also had a judgment debt liability which stood originally at $1.2m.To meet that he made a large initial payment of $320,000 but was required to satisfy the balance by annual payments of $80,000 which he met, in part, from monies received from contributors paid through him by Ian Ross to the creditor.

[11] The central issue for the jury at trial was whether the appellants had acted honestly or dishonestly; that is, whether the Crown had proved beyond reasonable doubt that they had knowingly acted in breach of their fiduciary duties with dishonest intent.The appellants raised a positive defence to this allegation, contending they had acted honestly, if unorthodoxly, throughout for the purpose of preserving the capital of investors and thus avoiding mortgagee `fire sales'.

Appeal Against Conviction

[12] The grounds advanced by Ian Ross in support of his appeal against conviction rest essentially on alleged misdirections by the trial Judge. Although accepting that evidence was available at trial upon which a properly instructed jury could have convicted him, his counsel argued that the jury were not properly instructed in respect of matters critical to their overall decision making process so there was a miscarriage of justice.In consequence, a retrial on all counts is sought.

[13] The basis of appeal is that the jury was misdirected by the trial Judge on the following matters:

[a] The meaning of beyond reasonable doubt;

[b] The drawing of inferences;

[c] The effect of the proviso to s.222 of the Crimes Act 1961;

[d] The use to be made of hearsay evidence adduced;

[e] The basis of the conspiracy charge;

[f] The effect of the evidence of the sole defence witness, Mr Robert Pope;

[g] The significance of companies as separate legal entities;

[h] The meaning and operation of trusts.

Burden of Proof

[14] The Judge gave the following direction:

Reasonable doubt means what it says.It is not necessary that you be satisfied beyond all possible doubt.None of us is ever given that state of certainty. Nor does it mean that you can seize on some thin or weak doubt to avoid finding an accused guilty of a particular count if you are really sure that he is guilty.What it does mean, and this is what you must hold on to, is that you must feel sure or certain before you find an accused guilty of a particular count.And, when you think about what sureness or certainty means, just bear in mind that level of sureness or certainty that you hope to bring to the important decisions in your own lives.

[15]Mr Lithgow relied on the decision of this Court in R v Manhaas CA 228/98, 3 September 1998 where the direction was in these terms:

The law is that the Crown must prove each count beyond reasonable doubt before you may bring in a verdict of guilty on that count.Reasonable doubt means what it says.It is not necessary that you be satisfied beyond all doubt to the point of mathematical certainty.That, as you will understand, is usually impossible in judging human events.Neither does it mean that you can seize upon some insubstantial, weak or thin doubt to avoid having to find the accused guilty.

[16] In accepting the contention that there had been a misdirection and allowing the appeal, this Court noted the words insubstantial, weak or thin were capable of elastic meaning.It said that although a reasonable doubt was frequently contrasted with a vague or fanciful doubt reference to such concepts was not essential, see R v Speakman (1989) 5 CRNZ 250, 260.The conventional New Zealand practice was to say little beyond the statement that a reasonable doubt meant a doubt which was reasonable in the circumstances, of which the jury was the judge.The Court pointed out that concepts which were not clearly outside what is reasonable eroded a fundamental principle of criminal responsibility:

Although the Judge no doubt intended to convey the flimsiness of a fanciful or vague doubt, we are not confident that the terms he used clearly conveyed that meaning.We are not persuaded that an "insubstantial, weak or thin doubt" is necessarily one which is not reasonable.(7)

[17] Mr Lithgow argued the present direction was open to the same objection.

[18] On issues of misdirection it is elementary that what has to be assessed is the effect, taken as a whole, of the summing up on the particular issue under consideration.In Walters v The Queen [1969] 2 AC 26, 30 the Privy Council approved the following passage from the judgment of Lord Goddard CJ in R v Kritz [1950] 1 KB 82:

It is not the particular formula that matters:it is the effect of the summing-up.If the jury are made to understand that they have to be satisfied and must not return a verdict against a defendant unless they feel sure, and that the onus is all the time on the prosecution and not on the defence, then whether the Judge uses one form of language or another is neither here nor there.(89)

[19] The following passage from Walters is worth noting:

It is the duty of each individual juror to make up his own mind as to whether the evidence that the defendant committed the offence with which he is charged is so strong as to convince him personally of the defendant's guilt. Inevitably, because of differences of temperament or experience some jurors will take more convincing than others.(30)

[20] Mr Lithgow argued that the reference to important decisions in the jurors' own lives was misleading.He submitted that while such a formula appropriately brought home to the jury the serious attitude they should bring to their approach to their task, it was an inappropriate way of describing the standard of proof.We note however that in Walters the Privy Council considered such an analogy was helpful and unexceptionable in bringing home to the jury that what was required of them was the common-sense with which they approached matters of importance to them in their ordinary lives.The Privy Council emphasised that what was required, as a matter of judicial discretion, was the most appropriate set of words in which to make the particular jury understand they must not return a verdict against a defendant unless they were sure of guilt.

[21] In the context of the present summing up the last point is significant in that the Judge twice emphasised that what the jury must hold on to is feeling sure or certain before finding an accused guilty of a particular count.This was not a point made in the corresponding passage in Manhaas.Indeed, in saying that the jury must not seize on some thin or weak doubt to avoid convicting the accused if really sure he was guilty the Judge put insubstantial doubts in quite a different context from use made of a similar expression in Manhaas.While we are with Mr Lithgow to the extent of saying that expressions such as insubstantial, weak or thin would be better avoided altogether, we are satisfied the overall effect of the passage in the present summing up is such as to sufficiently convey to the jury the essential need to be sure of the accused's guilt.As in R v Brown (1990) 5 CRNZ 606, 610 that we believe is the critical point.

[22] Mr Lithgow linked his criticism of the definition of reasonable doubt with the answer given by the Judge to part of a question asked by the jury during its retirement.This read:

2. We would be grateful if you would re-read your comments made in summing up about the 4 common elements of the types of theft.

We would be particularly grateful if you would clarify the degree to which we need to be certain on each of the elements in order to convict.

Could you also please expand on the 4^th of these elements (honest intent v straight dishonesty).For example if we all agree on the first 3 elements, do we also have to be convinced of guilt on the 4^th element in order to reach a verdict.

[23] After dealing at length with the other parts of the question the Judge continued:

That completes the full direction that I gave you on theft.I turn then to the standard to which each element of the offences must be proved.

The Crown must prove each element of each offence alleged beyond a reasonable doubt.In this respect each element is to be treated by you as of equal importance.The crux of this case, of course, is the final element.The question is, whatever else the Crown may have proved, has it proved beyond a reasonable doubt that the accused acted dishonestly.As I have just said to you in the direction that I read back to you, in proving dishonesty, the Crown must exclude any claim resting on some evidence that the particular accused acted out of an honest even if mistaken belief that whatever the position was in law, he was justified in acting as he did.

[24] Mr Lithgow complained that the Judge had failed to answer what he submitted was the jury's request for further help on the standard of proof, which he argued was contained in the second paragraph of the extract from the jury's question we have set out above.Thus the jury was left with what in Mr Lithgow's submission was the erroneous direction on that subject contained early in the summing up.We have already given our reasons for not accepting the argument that that section of the summing up was in error.Mr Lithgow relied on R v Routh [1992] 1 NZLR 290 in which case this Court allowed an appeal against conviction where the Judge had declined to give further directions when the jury requested definition of "reasonable doubt" during their retirement.

[25] We accept that as a matter of semantics the jury might have been asking for further help on the concept of reasonable doubt, especially if the second paragraph is considered on its own.But in the context it seems more likely that what the jury was seeking to clarify was whether each of the 4 elements of theft had to be proved beyond reasonable doubt, or whether it was sufficient if that was the jury's overall final conclusion.We were told that the Judge discussed the question and, in broad terms, his proposed response before answering.At the time evidently it did not occur either to the Judge or to counsel that the jury was seeking further definition of reasonable doubt.The question, which was a lengthy one, was carefully and intelligibly framed and the Judge gave a detailed answer.We have no doubt that if the answer had failed to meet the jury's concern, there would have been a further question. We are unpersuaded there is any merit in this second contention.

Inferences

[26] The second ground of appeal rests on the adequacy of the trial Judge's direction to the jury on inferences.He said:

"I come now to the subject of inference, which again is highly important in the context of this trial.You are entitled to draw inferences from facts that are proved to you in the evidence.An inference is simply a conclusion that you reach when you put together facts that you do find to be proved.If putting certain facts together leads you to a certain conclusion, you are entitled to draw that conclusion.What I would stress to you is that inferences are not guesses.Rather they are logical, reasonable and fair deductions from facts that have been proved.So please be careful in any inference that you draw. Avoid speculating especially against the accused.

This case, as you know, finally turns on inference.The ultimate question is on each of these counts whether the two accused, each in his own way, acted fraudulently, that is in knowing breach of obligation and dishonestly or whether by a variety of means, some irregular, they tried to shore up the nominee company and other investments to preserve the capital of investors.I will come back to that topic more than once, but please remember it rests on inference on the whole body of evidence."

[27] For the appellant Mr Lithgow submitted that the Judge failed to explain what an inference was and how it could be used; nor did he give any example to help the jury recognise what might or might not amount to an available inference.As a result, he submitted, the jury would have been left with the impression that the drawing of inferences was no different from decision making generally, and provided "care" was exercised the decision was effectively theirs.

[28] It is not every case, however, that requires explanation by way of example to be given in relation to the drawing of inferences. In the circumstances of this case, involving as it did serious fraud, no useful or apt example readily presents.Therefore none was required:see for example R v Puttick (1985) 1 CRNZ 644 at 647:

"In these circumstances any general direction as to the use of inference in this case, as in most cases, did not require special elaboration, and could have been in the simplest terms."

[29] The direction contained in the passage from the summing up quoted above adequately informed the jury about the requirement to draw inferences in determining guilt or innocence.It was sufficient in the circumstances of this case for the Judge to simply explain to the jury that the drawing of an inference was a "logical, reasonable and fair" deduction from facts that had been proved.

Section 222 - Theft by Failing to Account

[30] The next ground of appeal was that the trial Judge had erred in his direction relating to s.222 of the Crimes Act, by not expressly advising the jury of the proviso to that section in relation to Count 7.The proviso reads:

"Provided that if it is part of the said terms that the money or other thing received, or the proceeds thereof, shall form an item in a debtor and creditor account between the person receiving it and the person to whom he is to account for or pay the same, and that such last-mentioned person shall rely only on the personal liability of the other as his debtor in respect thereof, the proper entry of the amount of the money or proceeds or any part thereof in that account shall be a sufficient accounting for the amount so entered; and in such case no fraudulent conversion of the amount accounted for shall be deemed to have taken place."

[31] Mr Lithgow submitted that whilst the Judge gave a detailed direction on the four elements required to prove s.222 (namely; money received - on terms requiring to pay or account - failure to pay or account - dishonest intention) he failed to advise the jury as to how it could apply evidence that, at times, Ian Ross met the drawings of two of the complainants from his own resources and, on one interpretation, was in credit with those complainants.He further submitted that the Judge compounded.This alleged non-direction by making a factual error when he advised the jury that the complainants were "reliant on Ian Ross, and accepted what he told them, and meant their authority literally". The evidence, as given, did not establish that the complainants had spoken to Ian Ross personally but rather had dealt with him through the legal executive at Wayne Ross' legal practice.

[32] The defence, as put to the jury and reflected in the Judge's summing up, was that Ian Ross was making monthly payments to those complainants, some from his own resources.Such payments amounted to $14,000.As Ian Ross was running a current account, he was entitled to off-set funds he paid out to the complainants from his own resources in this manner, against funds which came in on their behalf.

[33] It is clear from the summing up and the verdict that the jury clearly understood the significance of the set-off of funds paid out to the complainants against funds which came in to the current account on their behalf. The Judge carefully explained the elements of s.222, which required proof beyond reasonable doubt on the part of the Crown and, just as carefully, detailed the defence case in respect of Count 7; the defence being absence of fraudulent intent.In returning their verdict, the jury reduced the amount alleged in the indictment as stolen by Ian Ross, by the amount he had paid out to the complainants from his own resources.The defence afforded by the proviso was, thus, effectively applied by the jury to the current account situation.

[34] Further, as Mr Lithgow acknowledged, the defence never found it necessary to expressly refer to the proviso to s.222 at trial.Nor do we find there was any need for the trial Judge to have read the actual section out to the jury. Its effect and the defence available was perfectly clear to the jury and evidently acted upon.

Hearsay

[35] Mr Lithgow next criticised hearsay evidence given by one witness in relation to one particular transaction.The effect of this witness' evidence was that Wayne Ross had told him action was being taken to prefer the second mortgagee concerned, because of pressure from that mortgagee.The Judge found this evidence to be admissible and directed the jury on the use they could make of it as follows:

"There was an issue about whose responsibility it was, whether it was the responsibility of Trevor Salisbury who gave the authority or was something that happened at the initiative of Wayne Ross, and there is that issue about triple hearsay.

As to that, where evidence is given by one person that someone told them what amounts to an admission against interest that is not something that offends the hearsay rule; and that may possibly be right, the hearsay rule is a complicated rule with numerous exceptions.But the real focus is first of all on what weight you would give to that evidence whether it is hearsay or not, and secondly how you would place it in the context of the evidence as a whole."

[36] Mr Lithgow's complaint related to the above direction.He asserted that it failed to adequately direct or instruct the jury on the use they could make of the hearsay evidence and effectively left the jury to its own devices.

[37] The count to which this hearsay evidence related did not, however, concern the appellant Ian Ross and therefore has no relevance whatsoever to his appeal against conviction.Thus we disregard it as a ground of appeal.

Conspiracy

[38] The conspiracy charge preferred against both Ian and Wayne Ross was framed as follows in the indictment:

"THE Solicitor-General charges that WAYNE STUART ROSS and IAN ALEXANDER ROSS on or between the 18^th day of November 1993 and the 1^st day of December 1994, did conspire by deceit to defraud investors in the Ross Partners Solicitors Nominee Company Limited by placing their own personal interests ahead of those of investors for whom they were acting in a professional capacity and to whom they owed a duty, namely by investing clients funds in projects that were in default, and by refraining from collecting interest and/or principal and/or calling in the same as and when they were due, thereby causing a detriment of $1,165,000.00 to the said investors."

[39] As is plain, the charge details the particulars of the conspiracy relied on by the Crown.

[40] It is common ground that the Crown's case in relation to the conspiracy was based on criminal misconduct.During the course of his directions to the jury on conspiracy, the trial Judge said this:

"The second thing the Crown must prove is the subject matter of the agreement; and that is that it was to commit a crime, or for that matter a civil wrong, involving deceit and fraud, and that too must be established beyond reasonable doubt.

So to recap, the essence of conspiracy is an agreement.That is the offence. It is not necessary for the Crown to prove that the crime or the civil wrong necessarily involving deceit or fraud was actually carried through or, if it was carried through, what the tangible result was.The issue always is whether there was an agreement and what its terms were."

[41] Mr Lithgow criticised the above passages as amounting to a direction that the conspiracy alleged by the Crown could include an agreement to do a "civil wrong".Further, he submitted, the trial Judge gave no assistance to the jury as to what, in the context of the case, a civil wrong might be, such as to give rise to a conviction of conspiracy.Therefore the jury may have convicted Ian Ross on the basis that he agreed with Wayne Ross' breaches of Nominee Company rules, that is, on the basis of a civil wrong only.

[42] That criticism overlooks the fact that, implicit in the above directions on conspiracy, is the necessity for the crime or "civil wrong" to involve deceit or fraud.Further, those passages in the summing up follow an earlier strong direction to the jury to not only put aside sympathy or prejudice but also to put aside, as totally irrelevant, any breaches of Law Society Rules by Wayne Ross and any Law Society disciplinary proceedings taken against him.On this issue the jury were firmly advised the jury to focus not on the breach of the Law Society Rules but on:

"...the quite distinct and different question, whether the accused Wayne Ross committed the criminal offences which are alleged against him.And equally, if any such issue arises with the accused Ian Ross you must likewise just focus on these charges and decide whether or not they are proved."

[43] Later, in his summing up, the Judge again returned again to the issue of conspiracy and to a discussion of the elements required to be proved by the Crown. He again made it clear that if the jury accepted there had been an agreement between the appellants, they must be satisfied that it was an agreement to commit a crime or civil wrong "in which there was deceit and fraud involved".

[44] The conspiracy count encapsulated the substantive counts in the indictment and embraced the appellants' pattern of conduct over the period of time covered by the substantive counts, an element being the number of matters involved. Each substantive count, embraced by the conspiracy charge, identified the particular aspects of criminality alleged by the Crown in relation to the particular transactions.

[45] On a reading of the indictment and the summing up as a whole, it is impossible to discern any risk that the jury approached its task in relation to the conspiracy charge on any basis other than the need to be satisfied `beyond reasonable doubt' of criminal misconduct.We see no danger that the jury may have convicted the appellants of conspiracy, based merely on breach of Law Society Rules or some other "civil wrong".We are satisfied that there was evidence before the jury to sustain the conviction on Count 18 and that they were properly directed as to its use and as to the application of relevant legal principle.

The Evidence of Mr Pope

[46] One witness only was called for the defence at trial.This witness, Mr Pope, qualified himself as a senior figure in New Zealand accountancy.His evidence related to the scheme of tax free "compensation payments" adopted by the appellants, which he found to be available and effective in law.In his view, the Ross's had approached this scheme with a view to meeting their obligations to investors rather then avoiding them.

[47] The Judge's summing up contained no more than a reference to the fact

Mr Pope had given evidence.Mr Lithgow was critical of that bare reference and submitted that the Judge should have directed the jury that, if they accepted

Mr Pope's evidence, it was capable of supporting the proposition that the "compensation payment" scheme was in itself legitimate and could effectively provide a defence.The fact that the scheme ultimately did not succeed, he submitted, was distinguishable from dishonest intent on the part of the appellants.

[48] Against that criticism, we note that Mr Pope was the final witness at the trial.His evidence clearly supported the defence case, the whole thrust of which was that the appellants actions (whether in accordance with Law Society Rules or not) were undertaken for the benefit of investors and not for any dishonest motive. Undoubtedly his evidence was forcefully reiterated by defence counsel shortly after, when closing to the jury.Certainly, the positive nature of the defence is fairly reflected in the Judge's summing up.The detail of the evidence given by the witnesses at the trial could not feasibly have been referred to by the Judge in summing up.As it was, his summing up occupied a whole day. Mr Pope's evidence, he being the last of 38 witnesses, must still have been fresh in the minds of the jury at the time they retired to commence their deliberations.Therefore the significance of his evidence would not have been lost to them.

The Use of Companies and Trusts

[49] Although advanced as separate grounds of appeal, it is convenient to deal with both these remaining heads of appeal together.

[50] Mr Lithgow submitted that the Judge gave no direction as to the legal significance of Wayne Ross' use of companies to buy mortgages in default and administer them but left the jury with a direction that directors can be personally liable as the "hearts and minds" of the company, without further elaboration.He further submitted that the Judge left it unclear in his summing up as to whether theft could be fixed by that process.The Judge should have directed that, if it was acceptable to use `shelf' companies to buy mortgages from the Nominee Company, it was illogical to then fix criminal liability through failure to conduct those mortgages in accordance with Law Society Nominee Company Rules.

[51] Likewise, in respect of the use of trusts, Mr Lithgow submitted that the Judge gave no direction to the jury as to what proper function a trust could perform in such circumstances, nor did he explain what a trust was.

[52] Contrary to Mr Lithgow's submissions, the summing up contains clear and concise directions to the jury, that it was the appellants actions and intentions with which they had to be concerned in assessing whether the elements of theft and conspiracy were made out.

[53] The central question was always whether the appellants applied monies received consistently with the obligations or trusts they assumed.Law Society Rules, prior investor authorities and the like, were part of the context although relevant only as part of the context in which the appellants conducted their activities.The Crown never sought to "fix liability" by reference to the Law Society Rules and the direction given by the Judge in relation to those Rules correctly described their significance.The Judge directed the jury to focus principally on determining what obligations or trusts were assumed including Deeds of Trusts and whether what was done was consistent with those trusts.This was clearly re-emphasised by him in response to a written jury question seeking, inter alia, clarification on the status of the Deeds of Trust.

[54] This direction was later emphasised by the Judge in response to a written jury question seeking, inter alia, clarification on the status of the Deeds of Trust.

Appeals Against Sentence

[55] The common ground advanced by both appellants in support of their appeals against sentence is that, in each case, their respective sentences were manifestly excessive, given the circumstances of and motivation for their offending.

[56] The appellants were found guilty at trial, the jury rejecting their defence of honest and justifiable, although unorthodox, measures to preserve the capital of investors to avoid `fire sales' of mortgages in default. By their verdict the jury accepted the Crown's case, that the appellants had put their personal interests ahead of their duty to investors and had conspired by deceit to defraud those investors.This deceit manifested in their investing funds in projects in default and refraining from collecting principle and interest or acting on remedies where there was a default.The Judge found that the investors' legitimate concerns had become incidental to the appellants' perception of their own financial needs and professional standing.On that basis he approached the sentencing exercise.

[57] He commenced by reviewing a number of relevant authorities. In particular he noted R v Rose [1990] 2 NZLR 552 (CA), R v McKelvey [1990] 2 NZLR 558 (CA), R v Haddon [1990] NZCA 252; (1990) 6 CRNZ 508 (CA), R v Wallnut (CA182/93, 8 August 1993), R v Renshaw (High Court, Wellington, S41/92, 3 July 1992), R v Edwards (HC, Auckland, S 52/92, 27 May 1992), and R v Miliszewski (CA533/93, 3 June 1994).From those decisions he derived the following broad principles:

* professional persons who commit theft in the course of their practices, especially solicitors conducting solicitors nominee companies, can expect to be sentenced to imprisonment despite the provisions of s.6 of the Criminal Justice Act;

* the term of imprisonment available may well be close to the maximum possible if the defalcation is sufficiently great, even if the prisoner has no previous convictions, and despite the provisions of s.7 of the Criminal Justice Act;

* the term of imprisonment may be reduced significantly if there has been plea of guilty, and if there has been reparation paid;

* the exact sentence to be imposed will necessarily depend on the unique circumstances of the case, but the range seems to lie typically between sentences of three and seven years imprisonment in this class of case.

[58] The Judge regarded the theft convictions as primary and the conspiracy conviction as contextual.This because the tangible result of the conspiracy was unable to be established.In his view, Wayne Ross was initially responsible for the offending.It was through his Nominee Company that the mortgages went into default and therefore it was his responsibility to respond in the first place.Further, the sums involved in the thefts of which Wayne Ross was convicted approximated twice the sums stolen by Ian Ross.The difference between the appellants for the purposes of sentencing was found to be one of degree only, however, the Judge was satisfied that both were equally culpable of the breaches of trust involved in their offending.

[59] Some investors in the Nominee Company had lost a great proportion of their savings and some all of their life savings.However, the Judge also noted that even if the appellants had not offended in the manner in which they had, the situation may not have been entirely different.Nevertheless it was clear that the loss to the investors had been compounded by their offending.This because funds intended for the investors were applied in ways that increased the losses to those investors, or at least did not ameliorate the loss.A further aggravating factor was that the improper application of funds was deceitfully done.This had caused additional stress to the victims, who felt betrayed. Then, compounding the situation, both appellants had become bankrupt.This meant that all losses must necessarily remain where they fell.

[60] The Judge took account of the mitigating factors.He recognised that the offending had its origin in mortgage defaults, which were not the fault of either appellant.Initially at least, both appellants had acted out of an intention to assist the investors and had been persons of good standing in their local community.Neither of them had profited from the offending. Additionally, Wayne Ross had been struck off the rolls of barristers and solicitors; and the families and interests of both men had suffered greatly.

[61] Given the scale of offending and its duration, however, the Judge was satisfied that sentences in the range he identified had to be imposed.

[62] Theappeals against sentence essentially rested on the defence as mounted at trial; namely, that the appellants' offending was initiated to preserve the interests of investors in the Nominee Company and was not motivated out of personal gain.This was advanced as a unique factor which, when considered with other mitigatory factors, should persuade the Court that reductions in sentence were merited.Other mitigatory factors emphasised on appeal were the appellants' desire to keep Upper Hutt's remaining major Nominee Company afloat in the wake of the collapse of the only other major Nominee Company (Renshaw & Edwards).Also, the $120,000 "compensation payments" they made to investors.A further factor advanced as mitigatory was the alleged exacerbation of losses caused by mortgagee sales instituted by the Wellington District Law Society.

[63] On behalf of Wayne Ross, Mr Davie argued that the sentence of five years imprisonment was manifestly excessive and accorded insufficient weight to the unique features of the case.

[64] In addition, Mr Lithgow, on behalf of Ian Ross, pointed out that he is 69 years of age and that he and his wife have effectively lost everything as a result of his involvement in matters, which was motivated out of a desire to protect investors after mortgages in his son's Nominee Company had gone into default.Mr Lithgow also submitted that Ian Ross' obligations did not arise from the investors in the Nominee Company directly, as he was not subject to Law Society Rules.

[65] Both appellants argued that the conspiracy charge should play no real part in the sentencing exercise, and when seen in combination with their personal circumstances, the sentences should be viewed as excessive, especially if compared with Edwards.Both accepted, however, that the range identified by the Judge as "typically between sentences of three and seven years imprisonment for this class of case" was correct, submitting nevertheless that it was the unique features which took it out of that particular range. Neither contended that the sentences were wrong in principle.

[66] We are satisfied that neither the "compensation payments" nor the intervention of the Wellington District Law Society are mitigating factors. Rather, both are incidents of the appellant's fraudulent conduct.Without that fraudulent conduct the Law Society would not have been compelled to intervene and the "compensation payments" were made consequent upon the decision to cease collecting interest on mortgages not in default - a decision which the investors concerned were not consulted over.

[67] Nor are loss of profession, family consequences and resulting bankruptcy unique circumstances.They are an unfortunately common result of fraudulent conduct by professional persons.The only unusual feature of this case is that the offending was not initially motivated by personal gain and the losses to the investors may have occurred anyway.That said, this case is not entirely dissimilar to Renshaw.Renshaw was a solicitor who sought to conceal his mismanagement of his firm's trust account.The difference in the appellants' case is the factor of seeking to protect investors.Against that distinguishing factor, Renshaw pleaded guilty.He was sentenced to 7 years imprisonment, the aggravating factor being the amount involved, $6.4m. R v Miliszewski is another example of a case in which the offending was not motivated out of greed but instead out of a need to control a financial crisis.Miliszewski too was a solicitor.Eight hundred thousand dollars of his clients' money was involved in his attempt to make ends meet. Of that money, $400,000 was irretrievably lost.He pleaded guilty and the Judge took into account the fact that he had a young child who was seriously ill. Miliszewski was sentenced to 4 years' imprisonment.

[68] These decisions and others relied on by the District Court Judge indicate that a range of 4-7 years imprisonment for this type of offending is available. Some of those cases involved greater sums of money and aggravating factors not present in the appellants' case.But a distinguishing feature of those other cases, except for Haddon, is that guilty pleas were entered.In the appellants' case there may be reasons why a denial of fault was justified, but they are nevertheless now precluded from claiming credit forguilty pleas.

[69] Although the sentences imposed by the trial Judge were at the top of the range for this offending, the majority consider they were available and are appropriate when viewed against the respective levels of culpability of each appellant.Their offending was the result of a deliberate course of conduct which involved, to a significant degree, their preferring their own interests to those of the investors.Due and proper allowance was made for the mitigating factors.The contention that there was no personal gain to either appellant is not totally accurate.As Mr Squire pointed out, Ian Ross benefited by having available the sum equivalent to approximately one quarter of the investment portfolio as a result of which he was able to avoid interest liability of $117,000 pa.This assisted him to meet his son's judgment debt commitments.The sentences imposed reflect the jury's verdict that both appellants acted fraudulently and that the investors had become incidental to their scheme to keep the Nominee Company afloat and their own personal and professional interests intact.

[70] The appeal against conviction by Ian Ross is dismissed.The appeals by both appellants against sentence are also dismissed.

Solicitors:

R B Squire QC, Wellington

A R Davie, Wellington

R M Lithgow, Wellington