R v Mitchell CA509/99 [2000] NZCA 441 (30 March 2000)

Last Updated: 25 April 2019

IN THE COURT OF APPEAL OF NEW ZEALAND CA509/99


THE QUEEN



V



ALLAN ROBERT MITCHELL


Hearing: 30 March 2000

Coram: Elias CJ
Gault J Fisher J

Appearances: R.Wade for Appellant
S. France for Crown

Judgment: 30 March 2000

JUDGMENT OF THE COURT DELIVERED BY ELIAS CJ

[1] The appellant was convicted after trial in the District Court at Auckland on 9 counts of theft by misappropriation contrary to s224 of the Crimes Act 1961. He was sentenced to 3½. years imprisonment on each count, the sentences to be served concurrently. The appeal is brought on the basis that the sentence was manifestly excessive having regard to the appellant’s previous good character, the fact that the appellant was himself a victim of a greater scheme of fraud during the course of which the offences for which he was sentenced were committed, and the appellant’s attempts to make good the losses caused by his actions and his co-operation with the police.
[2] The appeal is out of time. We are satisfied that it is however in the interests of justice to exercise the power under s388(2) of the Crimes Act 1961 to grant him extension of time. The period of delay was small and it has been sufficiently explained.

Background

[3] The appellant is aged 38. He had no previous convictions. He seems to have regarded himself as an entrepreneur and had in the past published investment advise. It was through these activities that he became acquainted with some of the investors in the scheme. In mid-1996 the appellant met a representative of a business purporting to be a merchant bank, described as Carter Harris Associates. Carter Harris Associates had a New Zealand representative who was a chartered accountant. This representative offered the appellant an investment offering extremely high returns of up to 108% in offshore deals. The appellant made some enquiries and although he did not fully understand what the plan entailed, he collected from 9 friends and acquaintances a total of over $500,000. Although the appellant gave slightly different accounts to each person, his overall explanation was that the money would remain in his ASB bank account in New Zealand and would be available as “security” for the investment. The investors were told they would receive their investment back within 90 days. The appellant did not know, nor did he explain, how the large return was to be generated from such “security”.

[4] The appellant was sent various documents by Carter Harris Associates. They included a joint venture agreement and a general power of attorney in favour of a third party not known to the appellant. The appellant was then told by the Carter Harris principals in the United States that deposit in a New Zealand bank was not acceptable security for the transaction and that the money would have to be remitted to the United States. The appellant sent $431,000 to the United States without authority from any of those who had invested with him. The money was sent by the appellant to an attorney’s escrow account. But the appellant also despatched a power of attorney which authorised one of the apparent principals in the United States to deal with the fund. The sending of the money and the power of attorney which authorised dealings with the fund were both contrary to the representations made by
the appellant to the investors and the authority upon which the money had been received by him. None of the money was recovered. The appellant received a number of excuses from his contacts in the United States as to the delay in progressing the scheme. Eventually, following Serious Fraud Office investigation, it transpired that the money had been stolen within 2 weeks of being remitted to the United States.

[5] The balance of the $545,000 collected, after remittance of $431,493 to the United States, was approximately $114,000. The appellant appropriated approximately $53,000 which he spent on personal expenses, including the purchase of a motor vehicle, the servicing his own debts and the paying of his credit card bills. No authorisation was obtained from the investors for this expenditure. Again, it was contrary to representations made by the appellant as to the use of the funds collected.

[6] The appellant himself did not invest funds in the scheme. He apparently hoped to obtain commission from the transaction although no specific commission was discussed with Carter Harris Associates.

[7] The basis of the charges as recorded in the indictment, was that between 7 August 1996 and 10 April 1997 the appellant, having received valuable security from his clients with a direction that the moneys would be held in a New Zealand bank account, fraudulently applied the money to another purpose in violation of good faith and contrary to the direction, thereby committing theft.

[8] The appellant maintained his innocence throughout. The jury verdict entailed rejection of his explanations that he was a wholly innocent dupe. It was not however suggested that his role in the overall scheme was as a principal. And it was acknowledged that the appellant had himself been the subject of deception. At the trial in emerged that other schemes of a similar nature had been set up by Carter Harris Associates and that the appellant may not have been the only one taken in.

[9] In the pre-sentence report available to the Judge, the appellant continued to maintain his innocence. He expressed the belief that he had done nothing wrong “except be defrauded himself”. He told the Probation Officer that he saw the
investors as “vindictive”. The interviews with former business associates and the victims undertaken by the pre-sentence report writer, indicate that the appellant was not reliable in his dealings, that he was plausible and charming and apparently taken in by his own stories. The appellant told the probation writer that he considered he deserved a suspended sentence because he was “not really a criminal”. Others interviewed by the pre-sentence report writer described him as a spender and ambitious. Still others viewed him as a “caring, honest person”.

[10] The personal circumstances of the appellant, as described in the pre-sentence report indicate that he is 38 years old and has not previously appeared before the Court. He has 2 children. He and his wife have parted since the offending. He has been unemployed for much of the last 2 years so at the time of sentencing, reported income of $200 per week. The appellant estimated that he had approximately
$27,000 in personal debts and no assets. Reparation therefore was not a realistic option.

[11] The pre-sentence report recommended a term of imprisonment given the amount of money defrauded and the duplicity involved.

The Sentence

[12] The sentencing Judge accepted that the appellant was remorseful and that he was not a professional person who might have assumed greater responsibility. The Judge accepted that the appellant was himself conned by overseas interests. Nevertheless, he had taken it upon himself to send the investors’ money overseas without authority and was responsible for the loss which resulted. The money misappropriated by the appellant for personal benefit was apparently in the expectation that he would recover the money from the margin he expected to make on the investment.

[13] The Judge considered the aggravating features of the case to be:

• The considerable amount of money lost
• The breach of faith and trust reposed in the appellant
• The fact that the appellant was motivated by greed
• The inability of the appellant to make reparation
• The trauma suffered by the investors
• The inability of the appellant to accept responsibility for what had occurred. The Judge indicated his view that the appellant was still “hiding his head in the sand over what occurred”.

[14] In mitigation the Judge thought it appropriate to take into account the fact that the investors too, were inspired by greed. He took into account also the fact that the appellant himself was deceived, his previous good character, the good references put forward on his behalf and his remorse.

[15] The Judge considered a number of authorities cited to him. He found the case of R v Gore (CA407/94, 1 May 1995) to be generally comparable. In that case the sentence of 5 years imprisonment was reduced to 4 years on appeal. The circumstances are not directly comparable. On the one hand the accused in Gore had pleaded guilty. On the other, he was himself the architect of a sustained and elaborate deception.

[16] Taking into account the totality of the offending, the Judge sentenced the appellant to 3½ years imprisonment. The length of the sentence precluded the option of suspension.

The appeal

[17] The grounds of the appeal are that the sentence was manifestly excessive having regard to:

• The appellant’s previous good character
• The fact that the appellant was himself a victim of fraud
• The appellant’s co-operation with the police and the authority in the United States.

[18] Mr Wade, on behalf of the appellant, submitted that the authority referred to by the sentencing Judge concerned a person, Gore, who had personally benefited to a substantial degree from the offending and who had been dishonest from the outset and the architect of the deception. He accepts that the appellant was stupid, but submits that when he first obtained the funds from the investors, he genuinely believed that the funds would not leave the country. Mr Wade submits that a number of factors gave an air of authenticity to the transaction. They included documents which purported to licence Carter Harris under US legislation, the escrow arrangement for the funds and a confidentiality agreement which the appellant was required to sign. The appellant was deceived by others who have escaped prosecution. There is no directly comparable case.

[19] The $53,000 of the investors’ money which were applied by the appellant for his own benefit, was extracted in the expectation that the appellant would be able to replace the money from the return he expected for his participation in the venture. It was taken at the time the balance of the money was transferred to the United States and therefore before the appellant had any reason to believe there was any problem with the transaction. Mr Wade submits that effectively the action of the appellant was a one-off action not entailing a lengthy period of deception.

[20] Counsel for the appellant accepted that a term of imprisonment was inevitable. He submits however that given the appellant’s lack of previous convictions, the testimonials as to his good character, the fact that any benefit to him was short term, his efforts to repay all that he could, his co-operation with the police, the financial and personal toll paid by him, the appropriate sentence was one of 2 years imprisonment which, in all the circumstances of the case, it would be appropriate to suspend.

[21] Mr France for the Crown accepts that the sentence imposed was a stern one. He points out that in the case referred to by the sentencing Judge, R v Gore, the effective sentence, but for the guilty plea would have amounted to one of 6 years imprisonment, in reflection of the greater culpability of Gore. Here there was no guilty plea. The correct comparison was therefore between the sentence of 3½ years imposed and an effective sentence in Gore of 6 years. It is accepted that Gore was
more serious offending than the present case. Mr France agrees that there is no directly comparable authority.

Decision

[22] We are unable to agree that the sentence imposed was excessive in the circumstances. Although the appellant was clearly himself deceived by others, the loss of the funds invested with him were a direct result of his own conscious disregard of the instructions upon which he had received the money on trust. He appropriated a not inconsiderable sum for his own benefit. The appellant does not appear to have accepted responsibility for his actions. His characterisation of the investors as “vindictive” underscores his unwillingness to accept responsibility. The aggravating factors properly identified by the Judge are the scale of offending, the breach of trust, the effects on the victims and the appellant’s attitude.

[23] If the appellant had been a professional person dealing with the funds of clients, it is clear from the authorities that he could have expected a much longer sentence: R v Haddon (1996 CRNZ 508), a sentence of 6 years imprisonment. In that case too a seriously aggravating circumstance was that the appellant continued to minimise his own culpability. Although no exactly parallel sentencing authority has been referred to us and the cases relied upon by the sentencing Judge are cases where the accused was a principal in a sustained scheme of fraud. The 3½ years imprisonment is consistent with comparable cases of theft by misappropriation: see, for example R v Harris (CA334/98, 1 December 1998, 3¼ years imprisonment upheld following guilty plea and misappropriation leading to losses of $300,000); R v Caulderwell (CA223/89, 31 May 1989– 3½ years after guilty plea, losses between
.5m and $1m); R v Pickering [1984] NZCA 33; [1985] 1 NZLR 6 (solicitor, guilty plea, sum involved
$250,000 but no individual loss - 3½ years imprisonment upheld).

[24] Although the appellant was not a professional person, he had held himself out as a financial advisor to his clients, all of whom trusted him. Altogether, we are not able to say that the sentence imposed was not open to the Judge. The appeal is therefore dismissed.

Solicitors:

Roy Wade, Auckland Crown Law Office