R v Hickey CA390/01 [2001] NZCA 451 (13 December 2001)

Last Updated: 10 June 2023

IN THE COURT OF APPEAL OF NEW ZEALAND CA 390/01

THE QUEEN

V

RAYMOND DENIS HICKEY

Hearing: 6 December 2001

Coram: Blanchard J

Robertson J Hammond J

Appearances: J R Billington QC for Appellant B D Vanderkolk for Crown

Judgment: 6 December 2001

Reasons for Judgment: 13 December 2001

REASONS FOR JUDGMENT OF THE COURT DELIVERED BY HAMMOND J

Introduction

[1] Commencing on 7 February 2001, Mr Hickey stood his trial along with two alleged co-offenders on an indictment of nine counts alleging fraud in relation to two construction projects known respectively as Presidential Drive, and Aladdin’s Motel. The trial was before a District Court Judge sitting alone. It was to be a long trial, occupying the better part of a month.

[2] The Judge found it necessary to reserve his decision. On 4 October 2001 he delivered a written judgment of some 124 pages in length. Mr Hickey was convicted of two offences against s229A of the Crimes Act 1961. He was acquitted on the remaining counts.

[3] On 16 November 2001 Mr Hickey was sentenced to eight months imprisonment on the first of those counts, and six months imprisonment on the second count. Those sentences were ordered to be served concurrently. Leave was granted to apply for home detention.

[4] Mr Hickey then appealed to this Court. The appeal as lodged was against both conviction and sentence. The appeal against conviction was abandoned. It is dismissed. What remained before this Court was therefore solely the sentence appeals.

[5] Those appeals were heard on 6 December 2001. At the conclusion of the hearing, the Court indicated that the appeal against the sentences would be allowed; we quashed the sentences of imprisonment; and we substituted therefor a sentence of five months periodic detention. That sentence took into account that the appellant had actually served 21 days in prison. We said we would deliver reasons for having adopted the course we did as soon as we could conveniently do so. This we now do.

The facts

[6] The Crown case against Mr Hickey was that he created fraudulent schemes in relation to two construction projects. It was contended that, in relation to each of those projects, a separate limited liability company was utilised to undertake the particular construction, under the terms of a contract it entered into with the respective developer/owners.

[7] The central allegation at trial was that Mr Hickey conspired with two other persons to ensure that the contract price for each of the two projects was substantially below value, and that all debts would be incurred by the construction company. The company would then have insufficient liquidity to continue in operation, and be liquidated. The prospective outcome was said to be that Mr Hickey stood to benefit by

obtaining finished construction projects at substantially less than true value, whilst at the same time being shielded from claims made by creditors of the building company.

[8] Mr Hickey and his co-accused were all acquitted in relation to the charges of conspiracy to defraud. The Judge found that Mr Hickey had engaged in fraudulent conduct, but that his co-accused were not sufficiently involved so as to be properly labelled “conspirators”. No conspiracy having been grounded, it followed that the case against Mr Hickey on the charges of conspiracy failed.

[9] The two counts in the indictment on which Mr Hickey was convicted were as follows:

2. Section 229A(a) Crimes Act 1961 (Obtaining a Document With Intent to Defraud)

9. Section 229A(b) Crimes Act 1961 (Using a

Document With Intent to Defraud)

THE SAID CROWN SOLICITOR further charges that RAYMOND DENIS HICKEY on or about the 16^th day of May 1966 at Palmerston North with intent to defraud, did obtain a document capable of being used to obtain a pecuniary advantage, namely a statement of income from ADRIENNE’S HOME HELP in relation to PAMELA MARONA WARNER.

THE SAID CROWN SOLICITOR further charges that RAYMOND DENIS HICKEY on or about the 18^th day of December 1996 at Palmerston North with intent to defraud did use a document capable of being used to obtain a pecuniary advantage, namely a RAYMI DEVELOPMENTS LIMITED pro forma balance sheet dated 18 December 1996 for the purpose of obtaining for himself or any other person a pecuniary advantage.

[10] Count 2 related to a statement of income from “Adrienne’s Home Help”. Pamela Warner applied to a bank for finance, as the owner/developer of the Presidential Drive property. She misstated her income in a context in which the income was directly relevant to a bank advance of $150,000 which was being sought at that time, and which was subsequently advanced. The statement of income asserted that she was earning $1,000 per week gross from Adrienne’s Home Help. The Crown case was that Mr Hickey procured documentation to that effect from a Mrs Le

Marquand, knowing it to be false, and he caused that document to be produced to the Bank.

[11] The Judge found that a document falsely certifying Ms Warner’s income was provided; that document was one capable of obtaining a pecuniary advantage namely, the provision of a loan advance; that Mr Hickey was well aware of the purpose for which it was sought; that it was being acted upon; and that accordingly all the requisite elements of the offence were made out.

[12] Count 9 related to a pro-forma balance sheet for Raymi Developments Ltd, which was the developer of the Aladdin’s Motel project. As work proceeded on that development site, the need to pay both employees and suppliers of materials had become pressing. More money was needed for this purpose. It was said that, with intent to defraud, Mr Hickey used this pro-forma balance sheet for the purpose of obtaining a pecuniary advantage for Raymi. He represented to another Bank that he and Paul Green, a co-accused, had introduced $150,000 into Raymi Developments and that those monies had then been utilised on account of the first 30% progress payment Raymi had to make to third parties.

[13] The Judge found that this balance sheet was made available to Countrywide Bank as Mr Hickey intended, to gain a pecuniary advantage. A sum of $600,000 was advanced by the Bank. The Judge held “that Mr Hickey was attempting to obtain a concession by deliberately and dishonestly misleading those at Countrywide as to the cash contribution made by [himself] and Mr Green”.

The appellant’s personal circumstances

[14] Mr Hickey is 36years of age. He was living with Pamela Warner and their two children, aged 3 and 6 years of age. His occupation is still said to be that of a developer/constructor of commercial and light industrial buildings.

[15] The pre-sentence report indicated his income as $70,000 to $100,000 per annum. He has a residential property in New Plymouth with equity of perhaps

$60,000; and a vehicle valued at $12,000.

[16] Mr Hickey had been brought up in the Manawatu region. He had trade apprenticeships and he had completed advanced trade certificates. He worked for Mainzeal. By the time he was 23 years old he had started developing properties of his own.

[17] Mr Hickey had three previous convictions entered in 1990 and 1991 but none for offences involving dishonesty. Mr Hickey also told the Probation Officer that “there was no financial gain to him or any financial loss to any other party as a result of these offences. Further, he considers that he has paid quite a price already due to the protracted nature of the court proceedings and the affects on his ability to pursue work opportunities”. The Probation Officer recommended a fine.

The victim impact statements

[18] The Victim Impact Reports relate to people who were not strictly speaking victims as a result of the two matters upon which he was convicted. Hence although there were people who were hurt by Mr Hickey’s activities they do not come within this category, for sentencing purposes.

The sentence in the District Court

[19] After dealing with the facts, and background matters, the sentencing Judge made these points:

• The Judge accepted a submission from Mr Billington that Mr Hickey should not be sentenced for what the Judge had found to be Mr Hickey’s intentions with respect to the conspiracy matters, and which had failed at prosecution.

• The Judge also accepted that the practical consequences for creditors in a broad context could not be taken into account with respect to the offences for which Mr Hickey was to be sentenced.
• On each of the two offences, the Judge noted that Mr Hickey had caused a bank to advance funds, in one case $150,000, and in the other $600,000. But the Judge acknowledged that in each case the bank was repaid.

• The Judge referred to the considerations raised by ss 6 & 7 of the Criminal Justice Act 1985 viz., that imprisonment for a property offence is to be avoided wherever possible, and, if imposed, should be kept to the shortest possible period consistent with the gravity of the offence.

[20] The Judge said that “the two offences for which you are to be sentenced were committed within the context of a dishonest undertaking designed to cause gain to you and consequential loss to others”.

[21] Turning to the specific counts, the Judge found that the offending was not limited to a single isolated incident. He thought there to be a need for deterrence and “the discouragement of any development of a business environment in which cheap dishonest tricks masquerade as cleverness and the cynical infliction of damage on others masquerading as legitimate hard-headedness”. He noted the “manifest dishonesty” and the absence of remorse.

[22] As mitigating factors, the Judge took into account the lack of extensive convictions (indeed they are not really relevant considerations); that there was no financial loss to the immediate victims of these offences (the banks); nor was any financial loss to the banks intended by Mr Hickey. The Judge noted Mr Hickey’s family circumstances.

[23] In the result, the Judge considered that there were special circumstances arising both out of the offence, and by virtue of Mr Hickey’s own reaction to this whole enterprise and its sequel, which merited imprisonment. The Judge then passed the sentences we have noted.

The grounds of appeal

[24] Five grounds of appeal were advanced:

• The learned District Court Judge failed to properly apply on the facts of this case the provisions of sections 6 and 7 of the Criminal Justice Act 1985.

• The sentencing Judge took into account irrelevant matters, and in particular matters in respect of which the appellant had been acquitted.

• The sentencing Judge failed to take into account the lapse of time between the trial, and sentencing, February 2001 to November 2001.

• The sentencing Judge failed to take into account the comparative sentence imposed on the co-offender.

• The sentencing Judge failed to take into account or give due weight to the effect of the sentence on third parties.

The essential features of the offending

[25] In his written submissions Mr Vanderkolk helpfully summarised the essential features of the offending, as the Crown sees them to be, as follows:

“. The appellant conceived and orchestrated a dishonest scheme in respect of each project. The scheme in relation to each was essentially the same.

. Neither scheme could succeed to the benefit of the appellant without the complicity of Green or Warner.

. The appellant deliberately mislead banks to obtain finance which was always insufficient to complete each project for true commercial cost.

. The appellant’s dishonest intentions were clear and manifest throughout both projects.

. Once successful in respect of the residential project the appellant embarked on the second scheme which was a significant commercial project both in terms of scale and value.

. The appellant stood to gain value from the implementation of the dishonest scheme, but also derived protection from attack by creditors.”

Resolution

[26] As the appeal progressed before us, it became increasingly apparent that Mr Billington’s principal concern was that the sentencing Judge had taken into account irrelevant matters “and in particular matters in respect of which the appellant had been acquitted”. Put shortly, Mr Billington’s concern is that in sentencing Mr Hickey the Judge had had regard to matters “in respect of which there is no criminality”.

[27] It is trite that the law renders it criminal for parties to agree to defraud creditors. An agreement to construct an artifice so as to avoid paying creditors would amount to conspiracy to defraud and could attract a penalty of a maximum of five years imprisonment. But, Mr Billington said, the law does not make it criminal for a party on their own account to conduct their affairs in such a way as they may avoid meeting the claims of creditors. He said, “however morally culpable such conduct may be viewed it is not criminal and if the Judge concluded that was Mr Hickey’s aim, then real care had to be taken in connection with the sentencing in respect of matters where true criminality had been found”.

[28] It has to be said that if Mr Hickey’s intention was as claimed then he would have been subject to a condign punishment. But no such finding was made against him. What he was convicted of was the two quite precise counts which we have set out. It would be wrong in principle to take into account a supposed background of scheming on which no criminal liability had been grounded. Unfortunately, there are passages in the sentencing notes, some of which we have already referred to, which do strongly suggest that the Judge nevertheless thought that Mr Hickey’s generalised

conduct was such that he ought to be subjected to the sanction of a present custodial term.

[29] We were taken closely through the actual workings of the shortfall in this case and the impact on the various banks and creditors. It is unnecessary to recite here all the details of the transactions. In essence, the banks suffered no loss; and on the first transaction creditors (if anything) gained something that they would not otherwise have had. There was therefore no consequential no loss to them. On the second project there was certainly a substantial shortfall of over $500,000, about half of which resulted from liquidator’s costs. But that arose from the underfunding from the outset of a project which has been found not itself to have involved any fraud.

[30] Mr Hickey told untruths, in a commercial context, which he ought not to have told; and which reflect no credit on him whatsoever. He thoroughly deserved the opprobrium of the criminal convictions which were in fact entered, and an appropriate sentence. But it goes too far altogether to say that on the convictions as returned that he was running a dishonest scheme which was designed to, and which did in fact cause loss to third parties. That is precisely what the court did not find against him. But in our view the sentencing did have, as Mr Billington complained, some real flavour of that character about it.

[31] A second broad factor, which was enlarged upon during argument, and in response to questions from the Bench, is that this offending occurred over five years ago now. Mr Hickey did deserve, as Mr Billington said, some credit for “sticking with” the projects after the various problems had come to light. They were completed as best could be achieved. This was not one of those situations in which the offender simply threw up his hands and walked away, leaving an even greater mess. And importantly, Mr Hickey has seemingly taken on board the lessons of his wrongdoing in this venture, and has stayed out of trouble with the law since these offences.

[32] For the Crown, Mr Vanderkolk very sensibly recognised that this is one of those difficult cases which turned, as to whether the sentence was appropriate, on how much the sentencing Judge could take into account of the adverse view he had formed of Mr Hickey’s activities when there had only been two convictions, and very precise

ones at that. Mr Vanderkolk characterised the case as one of dishonesty “with questionable impact”.

[33] In the result, we were satisfied that the Judge took into account in this case matters which, in view of his other verdicts, he ought to have put to one side. When that is done, a prison term is not appropriate. The appellant’s dishonesty is adequately marked by a term of periodic detention, which, allowing for time now spent in prison, we have set at five months.

Solicitors:

Crown Law office, Wellington