THE QUEEN v HOWARD MICHAEL WALKER-DIAMOND [2003] NZCA 176 (7 August 2003)

IN THE COURT OF APPEAL OF NEW ZEALAND

CA66/03

THE QUEEN

v

HOWARD MICHAEL WALKER-DIAMOND

CA208/02

THE QUEEN

v

HOWARD PETER WALKER

Hearing: 28 July 2003

Coram: Anderson J

Paterson J

Salmon J

Appearances: R A B Barnsdale for Appellant

D P H Jones and G A Andree Wiltens for Crown

Judgment: 7 August 2003

JUDGMENT OF THE COURT DELIVERED BY ANDERSON J

Nature of the appeal

[1]

The appellant pleaded guilty on arraignment and in the course of trial to five counts of fraudulently using a document to obtain a pecuniary advantage, contrary to s229A(b) of the Crimes Act 1961.He was sentenced to a total of three years nine months imprisonment and now appeals against sentence and seeks leave to appeal against conviction in respect of two of the counts on which he was convicted.Leave to appeal against conviction is required because the Notice of Appeal was filed out of time.

Background to the appeal

[2]	In mid 1997 the appellant entered into agreements to buy from a Mr S Thompson and Ms M Ware a building and associated bar and café known as Red Rock Bar and Café (Red Rock) for $1,040,000.He devised a scheme to settle the transaction on virtually a fully funded basis.That involved the incorporation of a company which he called Thompson and Ware Partnership Ltd, so that it might seem to be associated with the owners Mr Thompson and Ms Ware.He incorporated another company, Red Rock Partnership Ltd, which entered into an agreement to buy from Thompson & Ware Partnership Ltd for $1,650,000.Red Rocks Partnership Ltd also entered into an agreement to lease at a rental of some $100,000 per annum greater than the existing market influenced value.This must have been in order to suggest an income stream capable of servicing a loan for $950,000.An approach to the Bank of New Zealand on the basis of the purported purchase of $1.65 million and inflated lease provisions resulted in that bank lending $950,000.The bank’s lending policy was not to advance funds for more than 50 or possibly 55% of value and it is plain it would not have lent the funds they did on the basis of the actual purchase price and income stream.
[3]	To satisfy the bank that he had an equity equivalent to the balance of a $1.65 million purchase price, the appellant duped a chartered accountant, Mr C R Stephen into writing a letter certifying that $752,142.61 was held in a Westpac account to the appellant’s credit.Mr Walker displayed on a computer screen an electronic bank form indicating the existence of such a credit, having led Mr Stephen to believe that he had just accessed such form on line.It is a matter of speculation how in fact Mr Walker created the false electronic document but it is not difficult to understand how it may have been done.In any event, Mr Stephen was duped into believing that what he was viewing was the truth and in reliance on that he wrote the letter certifying the existence of a fictional credit.
[4]	Given the capital debt and revenue weakness it is not surprising that within a relatively short time Red Rock Partnership Ltd was in trouble.In that situation the appellant, now adopting the name Diamond, submitted to AMP Ergo a loan application form containing false details including purported employment of him by Thompson & Ware Partnership Ltd for four years as a regional manager.At that time the company had been in existence for less than a year.
[5]	The appellant then attempted to borrow $50,000 from Affco Finance and submitted a loan application again asserting a four year period of employment with Thompson & Ware Partnership Ltd and claiming that his salary was $88,000 per annum plus rental income.Next, he made an application to BNZ for a loan against the security of certain real property which he had purported to sell from himself as Walker to himself as Diamond for a consideration of $56,250.The land was independently valued at $5,000 at that time.As a result of submitting the sale agreement the appellant obtained a further loan of $12,000 from BNZ.
[6]	Because of the frauds BNZ lost a total of approximately $375,000.The appellant has been bankrupt since March 1999 and reparation orders are beyond any realistic contemplation.

The history of the guilty pleas

[7]	It is convenient to identify the relevant transactions by reference to the count numbers in the indictment.

Count 2 related to the presentation to BNZ of the purported agreements for purchase and by Thompson & Ware Partnership Ltd and on sale to Red Rock Partnership Ltd.

Count 5 related to the presentation of the letter which the appellant had fraudulently induced Mr Stephen to write.

Count 6 related to the false loan application to AMP Ergo.

Count 7 related to the false loan application to Affco Finance.

Count 9 related to the BNZ loan application resulting in the advance of $12,000.

[8]	The appellant was arraigned before a District Court Judge and jury on Monday 13 May 2002.He was represented by Mrs Ablett Kerr QC, an experienced and eminent criminal barrister and by her learned junior Mr T Shiels.The appellant was arraigned before the jury was empanelled and he pleaded guilty to counts 7 and 9.Shortly afterwards the Crown opened and began leading its evidence.On the afternoon of 21 May the Crown led evidence from Mr Stephen who was then cross-examined by Mrs Ablett Kerr.The appellant then asked to be re-arraigned, upon which he pleaded guilty to count 6.The following morning the Crown began to lead evidence from Mr A E Broad, a Dunedin barrister and solicitor, who had acted for Mr Walker in respect of various business transactions including the initial stages of the Red Rock Café deal.The effect of Mr Broad’s evidence was that he warned the appellant about its propriety; printed out for him relevant sections of the Crimes Act 1961 which dealt with fraud; and later that day Mr Walker withdrew his instructions and consulted another lawyer in relation to the Red Rock transaction.
[9]	Mr Broad’s evidence in chief finished shortly before the lunch adjournment and there was some cross-examination by Mrs Ablett Kerr.After lunch Mrs Ablett Kerr and her junior, along with Crown counsel, saw the Judge in chambers and defence counsel sought leave to withdraw.The reasons for this have not been disclosed nor need be.It is sufficient to infer that there had been developments in the trial which led defence counsel to the view that they could not conscientiously fulfil their client’s instructions.The trial Judge was prepared to grant leave to withdraw but not immediately because of the implications for the conduct of the trial.The possibilities were to discharge the jury and direct a new trial; to adjourn the trial whilst the feasibility of alternative counsel being engaged and being able to continue the defence was examined; for the trial to continue with the appellant representing himself; or the appellant might contemplate pleading in a way acceptable to him and the Crown so as to dispose of the outstanding charges.
[10]	The next morning defence counsel were given leave to withdraw.An approach was made, obviously as the result of some consultation between all counsel and the Judge, to the duty solicitor on the day, Ms M A Stevens, who saw the Judge in chambers.The Judge asked her to read the indictment and the Crown opening and to discuss with the appellant the possible courses of action open to him, in terms of those we have identified immediately above.Ms Stevens did read the material and she discussed Mr Walker’s position with him.She sought and obtained bail for him so that discussions might take place.
[11]	According to the appellant’s affidavit and other material supplied by him, the option of discharging the jury and obtaining a new trial was not emphasised to him; he felt under pressure at having seen his mother cross-examined in court; he was told that the Judge would not be prepared to give him any latitude if he conducted his own defence; and that although he instructed Ms Stevens to apply for a new trial she told him the Judge was not prepared to grant it.The purport of his affidavit is that he was put under inappropriate pressure to plead guilty.
[12]	Ms Stevens, however, deposes that the appellant asked her to approach the Crown regarding the possibility of offering no further evidence on some charges and applying to withdraw them if he pleaded guilty to others.Such an approach was made and eventually agreed to.The arrangement was that the appellant would plead guilty to counts 2 and 5.The guilty plea on count 2 would dispose of counts 1 and 3 because they were alleged in the alternative.The Crown would offer no further evidence on counts 4 and 8.
[13]	Affidavits by Mr W J Wright, a barrister and solicitor who prosecuted for the Crown, depose that the Crown was very reluctant to abandon its case on counts 4 and 8 but eventually agreed to do so in order to dispose of the trial.
[14]	Ms Stevens then obtained the appellant’s agreement and signature to full written instructions to deal with the Crown on that agreed basis.On 24 May, in accordance with the arrangement, the appellant was rearraigned.He pleaded guilty to counts 2 and 5 and the remaining four counts were disposed of as we have indicated.

Sentencing

[15]

The appellant was sentenced on 6 June 2002 when he was represented by Ms Stevens.The Judge approached the counts as two series of offending, counts 2 and 5 relating to the fraudulent use of documents in connection with the original purchase and counts 6, 7 and 9 as the fraudulent use of documents in connection with the post purchase difficulties.He took a starting point of three years imprisonment for counts 2 and 5 and allowed six months credit for the guilty pleas entered in the course of trial.He then imposed a sentence of 18 months imprisonment, concurrent with count 2, on count 5.He imposed 12 months imprisonment in respect of counts 6 and 7, and 15 months imprisonment in respect of count 9, the sentences on those counts to be served concurrently with each other but cumulatively on the two years six months imposed in respect of count 2.The result was a total sentence of three years nine months imprisonment.

The course of the appeals

[16]

On 24 June 2002 the appellant signed and on 2 July 2002 filed, a notice of appeal against sentence.The grounds of appeal were that the sentence of three years nine months imprisonment was manifestly excessive.There was not the least suggestion of complaint about the process by which the appellant came to plead guilty to counts 2 and 5.It was not until 17 August 2002 that submissions filed by the appellant raised the issue of those convictions and not until 19 February 2003 that a notice of appeal against conviction was filed.

Submissions on appeal against conviction

[17]	In his thorough and firmly argued submissions Mr Barnsdale acknowledged that an appeal against conviction following a plea of guilty will be entertained only where there is a miscarriage of justice and that such an appeal requires exceptional circumstances before it could succeed.If it appears that a defendant fully appreciated the merits of his or her position and made an informed decision to plead guilty, conviction could not be impugned.Sometimes a genuine mistake may induce an appropriate guilty plea, but a change of mind or belated regret will not suffice.Counsel referred us to R v Stretch [1982] 1 NZLR 225, R v B CA419/00 26 March 2001, R v Ripia [1985] 1 NZLR 122.
[18]	But in this case, Mr Barnsdale submitted, there was a miscarriage of justice because the pressure of circumstances led the appellant to make an inadequately informed and inappropriate decision to plead guilty before his intended defence of honest belief in the legality of his actions had been placed before the jury.It was argued that the withdrawal of his counsel in circumstances where there was no realistic prospect of obtaining a replacement in the foreseeable future put him in a very difficult situation.A decision whether to apply for a mistrial needed to be considered in the light of advice from counsel familiar with the implications of the case and not counsel brought in on an urgent basis as Ms Stevens was.The result was not a properly informed decision but one coerced in circumstances of inadequate information and the pressure of his previous counsel’s withdrawing.
[19]	Should the Court be persuaded that there was a miscarriage of justice it should not apply the proviso to s385(1) because it could not be satisfied that the jury would undoubtedly have convicted notwithstanding the miscarriage.

Crown arguments on appeal against conviction

[20]

The Crown submitted that the circumstances of the case, including the evidence heard at the time the trial finished, and the circumstances in which the appellant came to plead guilty to counts 2 and 5, as indicated by the affidavits of Ms Stevens and Mr Wright, show, in effect, that the outcome of the trial was not only very much in the appellant’s favour but that he knew and understood quite well the implications of disposing of a number of counts in the indictment by pleading guilty to two of them.The reasons advanced in support of those propositions generally reflect the reasons we will discuss later in this judgment as the basis for dismissing the appeal against conviction.

Submissions in support of appeal against sentence

[21]	Written submissions in support of the appeal against sentence were filed on the appellant’s behalf by Ms Stevens and also, subsequently, by Mr Barnsdale.The effect of such submissions is that the Judge gave insufficient weight to s7 of the Criminal Justice Act 1985 and that the sentence imposed is excessive in comparison with a broad sample of similar cases.In R v Rose [1990] 2 NZLR 552, the offender was convicted on 20 counts extending over a five year period and involving funds of $8.4 million, with a subsequent loss of $2 million.On a Solicitor-General appeal a sentence of 18 months imprisonment was increased to four years.In R v McKelvey [1990] 2 NZLR 559, which involved social welfare fraud resulting in a subsequent loss of $1 million, this Court refused leave to the Solicitor-General to appeal against a sentence of four and a half years imprisonment.In R v Hunter CA36/02, 31 May 2002, the offender was convicted on 422 counts of fraud in his capacity as a tax consultant.The loss to the Inland Revenue was $401,000.Mr Hunter pleaded guilty and this Court reduced an original sentence of four years imprisonment to 3.5 years in order to take proper account of the guilty plea.
[22]	Counsel referred to other cases which are not necessarily directly relevant but one of them was R v Russell CA449/96, 26 June 1997, where a sentence of four years imprisonment for six fraud convictions and five forgery convictions as well as one count of breaching the Insolvency Act 1967 was reduced on appeal to 2.5 years imprisonment.That course of dishonesty had cost the Inland Revenue Department $260,000.
[23]	Having regard to the range of sentences in other comparable cases, counsel submitted that the sentence in this case was manifestly excessive.This was in part due, in counsel’s submission, to the inappropriate accumulation of sentences and to insufficient recognition of the appellant’s guilty pleas.

Crown’s submissions on sentence

[24]

The Crown submitted that a cumulative sentence was entirely appropriate for two discrete series of offences.The second series occurred some nine months after the first and involved deliberate attempts to obtain funding from financial institutions at a time when the appellant knew he was in difficulties with the BNZ mortgage.He adopted a different name and falsified documents to support his attempts to obtain money.In the Crown’s submission this was not a situation of “spree” offending where a court might consider a number of offences to be linked and in the nature of a single course of ongoing conduct.The Judge gave six months credit for the guilty pleas at trial and this was all that could be expected for late pleas.The Judge was satisfied that convictions were inevitable and that the appellant had had the chance to plead guilty well before trial.Neither s6 nor s7 of the Criminal Justice Act could properly ameliorate the sentences which were imposed.There was a large amount of money involved, particularly in the Red Rock transaction, and a large loss was ultimately sustained.The fraud involved sophisticated and detailed planning and, as the Judge noted, the appellant was prepared to go to considerable lengths in order to deceive people.

[25]

The Crown annexed a schedule of cases involving fraud, including many unreported cases in different jurisdictions.

Discussion of appeal against conviction

[26]

The appellant’s affidavits seek to convey a picture of coercion into pleading guilty.He has deposed that the idea to plea bargain with the Crown was not in any way conceived by himself but was imposed on him by Ms Stevens.He deposes that he was advised he would have to represent himself and that this would be fatal to his defence on account of the impression created by the absence of Mrs Ablett Kerr.He says also that if he lost his defence he would receive a harsh sentence for wasting the court’s time.He denies that he was ever advised of any alternative to plea bargaining, particularly the option of a rehearing.

[27]

On the other hand, the affidavits of Mr Wright and Ms Stevens show that the option of discharging the jury was discussed in chambers with the trial Judge and Ms Stevens has deposed that she discussed with the appellant the possibility of seeking a direction that the jury be discharged and a new trial ordered.Although in his second affidavit the appellant has said that at no stage was he advised of the option of a rehearing, we think it significant that in his first affidavit he has said:

The option of discharging the jury and obtaining a new trial had not been emphasised to me at all.This was always my preferred option.

[28]	Ms Stevens has also deposed that she informed the appellant that although the Judge was not happy about the trial being aborted and could insist that it proceed on the following Monday, that was most unlikely.And if the Judge did so insist there would be a ground of appeal to the Court of Appeal which would grant a retrial in those circumstances.Ms Stevens has deposed that the discussions with Mr Walker extended over two days and covered much of the same material several times.There are some points of coincidence between her affidavits and the appellant’s as to what was discussed but the appellant’s perception, now, is one of coercion rather than advice on the alternatives.
[29]	None of the deponents was called for cross-examination on his or her affidavits and we do not have the benefit, therefore, of evaluating credit in the light of our personal assessment of the deponents.Accordingly, the question whether, in all the circumstances, the appellant’s affidavits satisfy us that he was unjustly constrained to enter two of the guilty pleas because he thought the only alternative was for him to conduct the trial himself, without counsel, with potential consequences of being unable to do justice to his defence and in the process to irritate the Judge in a manner that would bear on ultimate sentencing, falls to be determined by an assessment of the context in which the events occurred and inferences that might be taken from conduct then and subsequently.
[30]	We note that the appellant is a person who has had some tertiary education and has had some experience in business affairs.The handwritten documents which he has filed in support of his appeals are consistent with an intelligent and educated person.The evidence indicates a familiarity with computers, commercial agreements and financing.No doubt it was very disturbing to him that his trial counsel felt unable to continue immediately after Mr Broad’s evidence which, if accepted, would demolish any suggestion of honest intent.But in the circumstances the time that could have been taken to make a decision on whether to apply for a new trial or pursue some other solution was several days and, as Ms Stevens has deposed, she spent time over the space of two days to inform the appellant of his options.
[31]	We infer from the Crown’s reluctance to accept an arrangement which would dispose of several of the counts without conviction that the Crown was confident of the strength of its case.Indeed the Judge indicated his provisional view to that effect at that stage also.As things then stood, the idea of acquittal was a hope with no foundation in reality.
[32]	We simply cannot accept that the option of discharging the jury and ordering a new trial was not put to the appellant.We think it significant that in his first affidavit he regards the matter as one of emphasis rather than omission and we think it inconceivable that having discussed this option with the Judge in chambers, and it being so obviously a possible course of action, Ms Stevens would not have raised and discussed that possibility with her client.We also consider it significant not only that the appellant was prepared to be represented by Ms Stevens at the sentencing but that he also instructed her to appeal against the sentence.It was only belatedly that he raised the issue of coercion.
[33]	We have, on the one hand, a version of events by the Crown Solicitor and another barrister which, if accepted, must entirely dispose of the appellant’s appeal against conviction.On the other hand, we have the assertions of the appellant, a dishonest man by his own admissions in respect of 6, 7 and 9, whose first affidavit adverted to the issue of discharging the jury in terms of emphasis and his later affidavit in terms of omission.A possible defence of no fraudulent intent would face the burden of the evidence of another lawyer who has testified that he expressed concern about the legitimacy of the appellant’s scheme, even to the extent of printing out provisions in the Crimes Act relating to fraud.
[34]	Having regard to these various matters we do not accept that the appellant was ignorant of the possibility of applying for the jury to be discharged and a new trial ordered.We do not accept that he made an uninformed and coerced decision into pleading guilty to two charges in exchange for the disposition of others which he faced.In our view the appellant adequately understood his position and made an informed decision to instruct Ms Stevens as he did.Those instructions had the potential to salvage some advantage in the face of very damaging Crown evidence.In short, we are not persuaded that the circumstances in which he came to enter pleas of guilty has occasioned a miscarriage of justice and the appeal against conviction will be dismissed.

Discussion of appeal against sentence

[35]	The trial Judge determined that there should be a starting point fixed for the Red Rock offending and a starting point for the remaining offending.He specifically referred to the need to apply the totality principle and he formed the view that although a cumulative sentence was required it should take account of the totality principle.He also recognised the need to give a discount for guilty pleas, although noting that it would be reasonably minimal given that such were not entered at the first possible opportunity.He had regard to the fact that the appellant was a first offender and that there was co-operation with the Serious Fraud Office.Taking such matters into account he determined that there should be a starting point of three years in respect of the Red Rock offending but that it should be reduced by six months for the guilty pleas.He regarded the second set of offending to be sufficiently separated in time to warrant a cumulative approach.Having regard to the principle of totality in relation to an overall sentence which was three years nine months imprisonment, he seemed reassured by a sentence of three years six months imprisonment imposed in the District Court at Auckland in R v Felts, T112/96, 1 November 1996, where fraudulent loan applications had resulted in advances of $694,205.Whilst noting the several cases that had been referred to him and considering them for the purpose of the present sentence, he was of the view that each case turns on its own particular facts and in this case the sentence reflected the overall criminality of conduct but apportioned it between the two courses of offending.
[36]	The principles applied by the Judge are beyond reproach.A firm sentence of imprisonment was inevitable notwithstanding s6 and 7 of the Criminal Justice Act 1985, as a great many sentences in the area of white-collar crime have demonstrated.The way in which the Judge identified two courses of offending and imposed cumulative sentences for them was entirely appropriate.The sentence was undoubtedly stern but a palpable response was required given the amounts obtained and sought to be obtained by deliberate and manipulative fraud.
[37]	In just one respect, however, we think the learned trial Judge has erred.He acknowledged the need to allow a discount for the guilty pleas and in fact did so in respect of counts 2 and 5 notwithstanding the belated timing of the pleas.But he overlooked any specific allowance for the pleas in relation to counts 6, 7 and 9.Although at a very late stage the potential effect of their entry must have been a significant reduction in trial time and the release of potential witnesses.We think the entry of such plea should be recognised by allowing a further three months.The mechanism for effectuating that is to allow the appeal in respect of count 9 and reduce the sentence on that count to 12 months imprisonment.

Result

[38]

We grant leave to appeal against conviction because the issues raised warranted examination.But in the result, the appeal against conviction proved to be without merit and it is dismissed.The appeal against sentence is allowed to the extent that the sentence of 15 months imprisonment in respect of count 9 is quashed and a sentence of 12 months imprisonment is substituted therefore.