THE QUEEN v TUHOEA WAHANGA WATENE [2002] NZCA 14 (13 March 2002)

IN THE COURT OF APPEAL OF NEW ZEALAND

CA282/01 CA328/01 CA332/01 ca340/01

THE QUEEN

V

TUHOEA WAHANGA WATENE

PREM KUMAR

TONY RALPH BURRELL

Hearing:	28 February 2002
Coram:	Tipping J Robertson J Durie J
Appearances:	T Sutcliffe for Appellant Watene J N Bioletti for Appellant Kumar D A Ewen for Appellant Burrell J R Billington QC and G A Andrée Wiltens for Crown
Judgment:	13 March 2002

judgment of the court delivered by ROBERTSON j

[1] These three appeals were heard together.They have their genesis in an indictment laid in the District Court at Hamilton which was eventually in the following terms:

Count 1 Section 257 Crimes Act 1961

THE SOLICITOR GENERAL OF NEW ZEALAND charges that TONY RALPH BURRELL, TUHOEA WAHANGA WATENE, MILES JOHN MCKELVY and PREM KUMAR on or about and between 17 November 1998 and 1 September 1999, at Hamilton and elsewhere in New Zealand, conspired together by deceit, falsehood or other fraudulent means to defraud members of the public in that they agreed to provide false information to and mislead members of the public in relation to borrowings from lending institutions by those members of the public.

Count 2 Sections 229A And 310 Crimes Act 1961

THE SOLICITOR GENERAL OF NEW ZEALAND charges that TONY RALPH BURRELL, TUHOEA WAHANGA WATENE, MILES JOHN MCKELVY and PREM KUMAR on or about and between 17 November 1998 and 15 July 1999, at Hamilton and elsewhere in New Zealand, with intent to defraud various lending institutions, conspired together to use documents capable of being used to obtain a benefit namely: loan applications, Agreements for Sale and Purchase of property, and letters relating to deposit monies, for the purpose of obtaining a benefit for themselves, or for any other person.

[2] In summary, the Crown case was that Mr Burrell and Mr Watene decided to purchase a large number of houses from Housing New Zealand which was involved in disposing of some of its housing stock.They put in an offer to purchase 46 properties for $2.2 million but did not have the funds to complete the purchase.Mr Watene knew about a loan facility arrangement which was called an "equity loan".A number of his associates, friends and family were persuaded to invest their life savings (including any equity they had in their homes) in this scheme without any real knowledge or understanding of what was involved.The proposal was presented to investors on the basis that if they permitted the title to their home to be used for a short period they would receive an immediate cash payment in the vicinity of $5,000-$10,000 and then they would get their homes back and that there was no risk involved in what was occurring.Some were told that a consequence of this arrangement would be better housing for poor Maori families.

[3] In answer to enquiries from a national real estate firm which had been appointed by Housing New Zealand to effect the sale of the property, advice was sent by Waikato Trust (which was a mortgage-broker operated by Mr McKelvy) and Kumar Law (the legal practice of Mr Kumar).These advisers offered unsubstantiated and misleading support for the proposal.

[4] The fundamental allegation made was that the four accused set about dishonestly inducing members of the public to enter into loan contracts which would have the effect of raising money for Focus Finance (Auckland) Limited and at the same time putting at risk their own financial positions.There was in fact a potential to lose everything as turned out to be the position for many of the investors.

[5] The other phase of the unlawful arrangement, which was encompassed in the second count, related to obtaining funds from trading banks.This involved the provision of false and misleading information, forged signatures and other devices to bolster and support loan applications.Documents were created to present sound loan propositions to the bank and for charges and costs in association therewith.Although clearly another phase of the scheme, there were substantial inter-relationships between the two phases.

[6] There were a substantial number of interlocutory hearings relating to this matter including an application to transfer the matter from the District Court to the High Court for hearing, various hearings seeking orders for non-publication of the appellants' names and other issues relating to the conduct of the trial.

[7] Eventually on 3 July 2001 Mr McKelvy, who had openly admitted his complicity when spoken to by the Serious Fraud Office and who had not participated in the depositions, entered a plea of guilty to the second count in the indictment.The prosecution offered no evidence against him on the first count.On 18 July he was sentenced to ten months' periodic detention, fined $10,000 and placed on supervision for two years with a special condition that he permit his business records to be inspected and his business practices reviewed by a chartered accountant appointed by his probation officer regularly and not less than every six months.

[8] The three present appellants proceeded to trial in the District Court at Hamilton on 23 July 2001. On 29 August 2001 all three were convicted on the first count.Mr Watene and Mr Kumar were also convicted on the second.

[9] On 12 September 2001 each of the appellants was sentenced to three years' imprisonment.

[10] Mr Burrell initially appealed against both conviction and sentence.He has abandoned the appeal against conviction and now appeals only against his sentence on the basis:

(a) that the imposition of the same sentence on all three appellants made insufficient allowance for his lesser participation; and

(b) that there was an unjustifiable disparity between the sentence imposed upon him and that imposed on Mr McKelvy.

[11] Mr Kumar appealed against both conviction and sentence.The conviction appeal was advanced on the basis that there was a miscarriage of justice because of:

(a) the Judge's failure to direct the jury in terms of the essential ingredients required when dealing with a solicitor as discussed by the New South Wales Court of Appeal in R v TigheandMaher [1926] NSWStRp 3; (1926) 26 SR (NSW) 94;

(b) the admission of evidence of Mr McKelvy's plea of guilty which was irrelevant and prejudicial;

(c) the "rolled-up" nature of the second count meant that the jury could not focus on the essential items; and

(d) Mr Kumar's trial counsel had previously acted for Mr McKelvy and when Mr McKelvy became a Crown witness this altered the position and was to Mr Kumar's detriment in the trial.

His sentence appeal was based on an unjustifiable disparity having regard to that sentence imposed on Mr McKelvy.

[12] Mr Watene initially appealed against a refusal to grant permanent name suppression but abandoned that appeal.He appealed against sentence only on the basis that the Judge:

(a) failed to take into account particular and exceptional circumstances relating to his health, age, position and previous good character; and

(b) created an unjustifiable disparity between the sentence imposed upon Mr Watene and the co-appellants Mr Burrell and Mr Kumar having regard particularly to their previous offending.

Kumar conviction appeal

[13] The first ground relates to the contention that there was a failure to explain sufficiently to the jury the need to differentiate between a solicitor's duty to his client and the necessity to prove the solicitor did things in combination with the client over and above what his duty as a solicitor required of him.This is based on a relatively ancient New South Wales Court of Appeal decision which we have considered.

[14] We accept that at no point in the summing up is this issue specifically referred to and it is candidly acknowledged that the point was not adverted to at trial.

[15] The fundamental test is whether there has been a miscarriage of justice. We are satisfied that none could possibly have occurred in the factual circumstances of the case.The overwhelming evidence was that Mr Kumar had done far more than simply act as a solicitor.It was an inevitable inference that he knew what he was doing and that it was carried out in the clear knowledge that it was dishonest and involved a blatantly fraudulent scheme.We accept Mr Billington's submission that a solicitor cannot be treated differently from any other conspirator when he is knowingly and actively involved in the conspiracy.That is the only inference to be drawn from the manner in which Mr Kumar behaved both with the exorbitant fees which he charged and the clear representations which he independently made to the banks as to what was occurring.There was adequate evidence of false agreements for sale and purchase, false loan applications, false solicitor's certificates and false deposit letters all of which demonstrated an involvement by Mr Kumar which went far beyond that in a normal solicitor and client relationship.We find no substance in this ground of appeal.

[16] The second ground of appeal against conviction by Mr Kumar arises from the fact that Mr McKelvy in evidence told the jury that he had entered a plea of guilty to what was Count 2 in the indictment.Mr Bioletti argued this was inadmissible and irrelevant.He said that the only purpose of evidence on the point could have been to bolster his credibility and would inevitably have influenced the jury to believing that he must be telling the truth or he would not have pleaded guilty to the charge.

[17] Mr Billington on the other hand submitted that the evidence of Mr McKelvy's plea of guilty was necessary in terms of the decision of this Court in R v Currie [1969] NZLR 193.He referred particularly to the passage where North P for the Court observed (at 210) (emphasis added):

... Hampton was charged jointly with the other accused and this being so, it was necessary for the Chief Justice to be satisfied that his evidence was admissible having regard to the limitation imposed by s.5(5) of the Evidence Act 1908 which provides that where any person is charged with an offence jointly with any other person, he shall be a competent and compellable witness for the prosecution against the other person without his consent if ... (c) he has pleaded guilty to the offence.It is the practice of the Supreme Court, moreover, to require a person in the position of Hampton to have been sentenced as well.The jury, in our opinion, were fully entitled to be acquainted, with the fact that Hampton had pleaded guilty and had already been sentenced...

[18] In Currie the Court drew a distinction with the different factual situation which applied in its own earlier finding in Cane v The Queen [1968] NZCA 9; [1968] NZLR 787.

[19] The tension which can exist in this area was adverted to by this Court in R v Nigro [1981] 2 NZLR 178, 185 where Somers J stated:

We have deliberately refrained from discussion of the circumstances (if any) in which the fact of conviction of an accomplice who gives evidence may be made known to the jury.In R v Windsor [1953] NZLR 83, 90-91 the fact that an accomplice had pleaded guilty to the same conspiracy was held inadmissible. In Cane v The Queen [1968] NZCA 9; [1968] NZLR 787 the same view was taken.In R v Currie [1969] NZLR 193, 210 the plea of guilty was held to have been properly elicited for the witness had been jointly charged on the same indictment and required to be qualified to give evidence under s 5(5) of the Evidence Act 1908.These cases are referred to in Adams on Criminal Law (2^nd ed) paras 3793, 4079 and 4080.While at first sight Cane suggests evidence relating to the prior charge against the accomplice is not admissible the reliance on Windsor and the passage at [1968] NZCA 9; [1968] NZLR 787, 789 that it would be dangerous to allow testimony "which might have the effect of increasing its probative effect" shows that the Court was speaking of that part of the evidence which referred to a plea of guilty.

It is implicit in these cases that a reference by the accomplice to his having been dealt with is not objectionable.But as that wider issue has not, so far as we are aware, been the subject of a considered opinion in this Court, and as it does not arise in this case, we say no more about it.

[20] The problem and competing interests are mentioned again in the decision of this Court in R v O'Brien [2001] 2 NZLR 145 where the issue was still left open.

[21] A plea of guilty by any person is to be treated as an admission by that person but it can have no probative value against a co-accused.With respect to the reasoning of this Court in Currie it may be arguable that the s5(5) determination of admissibility should be treated solely as a matter of law and so for the Judge and that there is no need for the jury to know of the basis upon which admissibility has been determined.Once it has been established, there may be no probative effect in hearing about it and the evidence accordingly should not be given before the jury.It is a point which in light of the authorities may need consideration by a full bench of this Court at an appropriate time.

[22] Whatever the outcome of that might be, in the circumstances of this case we are of the view that no miscarriage of justice could have arisen.Mr Billington placed particular emphasis on the fact that the Judge in his summing up had said about the evidence of Mr McKelvy:

How can you accept that he is a witness of the truth?I suggest that, if you reach the point where it is clear that McKelvy is the turning point, that the acceptance of his evidence will determine whether you convict any of the accused, then you must not convict based on his evidence.

More importantly in our view however there was such an abundance of evidence apart from Mr McKelvy of the knowing, active and enthusiastic involvement of Mr Kumar in all that was going on, that the uncommented upon brief testimony about Mr McKelvy's plea of guilty could not have been of importance. One way or another this ground of appeal could not succeed.

[23] Mr Kumar's third ground of appeal against conviction was a complaint about what is described as the "rolled-up" conspiracy in Count 2.

[24] The Judge directed the jury:

Count 2, it says here with intent to defraud various lending institutions, conspire together to use documents capable of being used to obtain a benefit, namely loan applications, agreements for sale and purchase of property and the deposit letters, for the purpose of obtaining a benefit for themselves or any other person.

...

Now in this case, well I can tell you that it is a crime in this country, with an intention to defraud, for someone to use documents capable of being used to obtain a benefit for the purposes of obtaining a benefit in general terms.So there is a specific crime for that.But none of the three accused are charged with committing any of the specific crimes relating to those documents, they are charged with conspiracy to undertake those criminal acts.

...

In relation to count 2, you well understand what the Crown case is in respect of the institutions - that they were deceived by false statements being provided to them to enable the funds to be advanced to the individual investors and that the funds were then employed by the conspirators for their own purposes.

[25] Mr Bioletti argued in this Court that the Crown case had to be that all the accused had agreed to use all the documents specified and this had not occurred.This was never the position at trial and need not be.The count referred to various documents including loan applications, agreements for sale and purchase of property, letters relating to deposit moneys for the purposes of obtaining a benefit for themselves or any other person.It was necessary for the Crown to establish that the various conspirators had used some of these documents in furtherance of their unlawful pact.There is no substance in this ground of appeal.

[26] The final ground of complaint was expressed that Mr Kumar's counsel at trial had previously also been counsel for Mr McKelvy.Three points arise. First, according to the Court records at all material times Mr McKelvy was represented by Mr Paul Mabey QC of Tauranga.There is no evidence to support the assertion that there was any common representation.Secondly, and as importantly, there is no suggestion as to what questions could or should have been asked that were not asked of Mr McKelvy by Mr Kumar's counsel.Thirdly, it is to be noted again that the Judge had specifically heavily discounted the value of Mr McKelvy's testimony in his summing up.

[27] To the extent that this was a backdoor attempt to raise issues relating to competence of counsel it did not comply with the clearly established requirements and has no substance.

[28] Mr Kumar's appeal against conviction is accordingly dismissed.

Sentence Appeals

[29] Turning then to the issue of sentences there are two factors which arise. The first is the inter-relationship between the sentence of three years' imprisonment imposed on each of these three appellants when compared with the sentence imposed on the co-offender Mr McKelvy.Mr Sutcliffe for Mr Watene did not pursue this line directly but advised that if there was advantage in it for his client he sought to receive the benefit.

[30] Mr McKelvy was sentenced on one count only.There is no dispute that the Crown did not seek a term of imprisonment with immediate effect.

[31] Notwithstanding this stance, in sentencing Mr McKelvy the Judge noted:

I can tell you that, but for matters that have arisen quite recently, I would have sent you to prison for between two and a half and three years.However, you have now pleaded guilty to this charge of conspiracy relating to the financial institutions.You have made a full confession.You have also indicated to the Crown that you are prepared to give evidence for the Crown at the trial of your three former co-accused which starts next week.

It is well appreciated that those who co-operate with the prosecution agencies, with the Crown, are to receive significant credit in relation to sentence.Mr Andre Wiltens for the Crown indicates his assessment of the value of your intended assistance by indicating that the Crown does not seek an immediate term of imprisonment to be imposed upon you.Mr Andre Wiltens also indicates that, insofar as the four conspirators are concerned, you are considered by the Crown to be the person who offended at the least serious level.

[32] Having regard particularly to a previous conviction for not dissimilar offending the Judge later said:

I am prepared to accept that but I have to tell you that it is with some hesitation that I reach that conclusion.You do not seem to have learned, from your earlier sentence of imprisonment and the periodic detention that was imposed on you, that you have to conduct yourself in a completely clean way insofar as financial arrangements are concerned.

[33] It is now submitted that in light of the principles discussed by this Court in R v Lawson [1982] 2 NZLR 219 there is such a marked and unjustifiable difference between the McKelvy sentence and that imposed on these three appellants that it will tend to bring the administration of justice into disrepute.

[34] When sentencing the present appellants the Judge was acutely conscious of this issue and said:

McKelvey was initially charged with the three of you as being a member of both conspiracies.Prior to the trial commencing on 23 July 2001, McKelvey pleaded guilty to count 2 (the charge of conspiring to defraud the banks by the use of the false documents) and the Crown offered no evidence in respect of the first conspiracy relating to the private individuals.He was discharged on that count.

I sentenced McKelvey on 18^th July 2001 to a fine of $10,000.00, ten months periodic detention and placed him under supervision for a term of two years.I said that I reached the conclusion that he could be dealt with by way of community based sentence with some hesitation and that was because of his previous convictions that had seen him imprisoned.I told him that I would have sent him to prison for between two and a half and three years except for the fact that he had recently made a full confession, that he had undertaken to the Crown that he would give evidence against you along the lines of his confession, and the Crown specifically invited the Court to deal with him in a way short of an immediate prison sentence.The Crown submission was that McKelvey's level of involvement was at the lowest as between the four conspirators, that he was essentially something of a bit player, and that while he received in net term some $60,000.00, essentially you were the principal offenders in this case.I was provided with an agreed summary of facts that supported that final submission by the Crown.

Of course, I now know a lot more about McKelvey's involvement in these conspiracies.I can tell you that if McKelvey had continued to deny these charges, I have no doubt at all that he would have been convicted, as the three of you were convicted, and he would have been convicted of both conspiracies. In that event, I would have sentenced him to approximately five years imprisonment.The Crown provided me with an agreed summary of facts, and I was invited by counsel to approach sentencing on that basis.It portrayed McKelvey as somebody who was aware that the banks were being mislead, were being deceived, but still continued to operate as the finance broker but very much at the level of a functionary.

I am now, however, in no doubt at all that McKelvey was given a level of control of the operation shortly after he was brought in by you as you saw him as the person with the expertise to raise all the funds necessary to the purchase of the Housing New Zealand properties.

As I said, I would most certainly have sentenced McKelvey to approximately five years imprisonment if he had denied both charges and been found guilty of them - given what I know now about the case.His involvement in my view was substantially greater than that portrayed by the Crown in the summary of facts.

Where does he fit between the four of you as to culpability.I do not consider that his involvement was less than any one of the three of you [in] so far as the conspiracies are concerned.

I have invited and received submissions relating to the issue of parity as it relates to any sentence that I impose on the three of you and the sentence that I imposed on McKelvey.It is certainly a troubling issue for me.It is important that I impose a sentence on each of you that marks society's outrage that people such as you would go out and so cynically and substantially defraud members of the public.Equally, it is also important that there is an understandable relationship between sentences imposed on each co-offender.

So with those difficulties, I do have regard to the McKelvey sentence but I am only prepared to be influenced to a slight degree by it.I am only prepared to be influenced to that slight degree principally because McKelvey was invited by you Burrell, and I have no doubt also you Watene, to become involved and he was allowed to direct the operation without any sign of resistance of any one of the three of you.So while I have regard to that McKelvey sentence, I do not consider that it has or should have the significance that a sentence on a co-offender would usually have.

[35] Mr Billington accepted that at first blush there did appear to be a substantial gulf between the sentence imposed on Mr McKelvy and that imposed on these three appellants.He nonetheless submitted that an objective observer appraised of the relevant facts and conversant with the general principles of sentencing would not conclude that the administration of justice had miscarried (R v Haronga CA399/93, 28 February 1994).

[36] Mr Billington specifically rejects any criticism implicit in the sentencing Judge's remarks of the stance taken by the Serious Fraud Office with regard to Mr McKelvy and notes in particular:

(a) The Judge appears to have overlooked the fact that Mr McKelvy was only convicted of one count;

(b) The count which he was convicted on was the one which was treated throughout as being the less serious of the two;

(c) Mr McKelvy confessed his involvement to the Serious Fraud Office during investigation and co-operated thoroughly thereafter;

(d) He was willing to give evidence against the co-accused; and

(e) Mr McKelvy, although an instrumentality for the plan, was not an instigator of the idea and although he created a template he had no continuing involvement.

[37] Mr Billington therefore submitted that even though Mr McKelvy had a previous conviction for not dissimilar offending the Judge would necessarily have had a starting point after trial for Mr McKelvy in the vicinity of two years.

[38] The Crown specifically reject the possibility of a higher starting point for Mr McKelvy than for the co-accused as being a comment per incuriam in the course of the Judge's sentencing comments on these appellants, which was based on some unsustainable premises.

[39] From the assumed starting point, Mr Billington argued that in accordance with well established principle Mr McKelvy's early admission of guilt, co-operation and plea of guilty would have justified a very substantial discount particularly when he was prepared to give evidence and suffer the hostility which arose in connection therewith.

[40] Upon that basis the Crown submitted that a sentence of not more than 12 months' imprisonment could have been imposed.It was submitted that it was within sentencing discretion of the Judge to determine that instead of a term of twelve months' imprisonment, ten months' periodic detention, a $10,000 fine and two years' supervision with strict conditions relating to his business activities was properly available.

[41] We have not been persuaded that this analysis is invalid.Clearly there are very substantial discounts available for those who at an early stage admit guilt, co-operate with authorities and avoid lengthy, exhausting and expensive trials.Although to a large extent the counts were inter-related we accept that Mr McKelvy was convicted of the count involving lesser culpability.

[42] An observer without knowledge of all the facts and circumstances might initially have thought something had gone wrong, but we are of the view that when appraised of all the relevant circumstances (and bearing in mind that the Judge specifically noted that he was adopting a lenient approach to Mr McKelvy), we can not be satisfied that the disparity argument as between the present three appellants and Mr McKelvy is sufficient to justify reduction of what are if anything already lenient sentences imposed on them.

[43] The second ground of appeal related to the inter-relationship between each of these three appellants themselves.The thrust of Mr Watene's case was that, unlike the others, he at 59 had no previous convictions and was an unsophisticated man in ill-health.Mr Kumar contended that he had merely been an operative for the others whose idea it was.The major point advanced by Mr Burrell for lesser culpability was the fact that he was not convicted on the second count.

[44] In his remarks on sentence the Judge adverted to all relevant material. He had presided over a five week trial.He was in a special position to be able to weigh the various competing interests.

[45] Mr Watene had the benefit of coming to the Court without a criminal history, with a high reputation in the community and, because of ill-health, imprisonment was likely to impinge on him more harshly than on others.As against that, it is impossible to read the evidence without concluding that he was a central and crucial figure in all that occurred.He was one of the two who dreamed up the scheme.He used his position and influence in the community to dupe a large number of innocent people of their entire life-savings.We are of the view that in his case the three year sentence was in fact merciful and must have reflected the issues which are now said to weigh in Mr Watene's favour.

[46] It is not to be overlooked that this was large scale fraudulent activity including losses of between $1 million and $2 million dollars incurred by a number of people for whom it was their entire life's savings.The consequences for them was catastrophic and occurred because of the trust and confidence they had reposed in the authors and operations of this scheme.

[47] We do not overlook the fact that Mr Burrell was not convicted on the second count but he too was an instigator.In his case a serious aggravating factor was that he had been to prison for crimes of dishonesty before.It appears to us that it was available to the Judge who was so acquainted with the total circumstances, to conclude that the absence of conviction on the second count was in fact counter-balanced by the fact that he was no stranger to dishonesty of this type.

[48] Mr Kumar was a member of the legal profession and had previous convictions.The Judge was entitled to view both of these as aggravating factors.Although not one of the instigators, he became enthusiastically and integrally involved in the deceptive conduct which occurred with regard to both individual investors and the financial institutions.

[49] In all the circumstances we are not satisfied that the approach in sentencing adopted by the trial Judge was not within the properly available sentencing discretion.The appeals against sentence are also dismissed.

Solicitors

Till Henderson King, Hamilton, for Appellant Watene

J Bioletti, Auckland, for Appellant Kumar

Crown Law Office, Wellington/Serious Fraud Office, Auckland