R v Coburn [2003] NZCA 450 (30 September 2003)

Last Updated: 11 December 2019

IN THE COURT OF APPEAL OF NEW ZEALAND

_CA133/03

THE QUEEN

v

PHILIP GERALD COBURN

Hearing: 24 September 2003

Coram: Blanchard J Goddard J William Young J

Appearances: J H M Eaton for Appellant

L M B Lamprati for Crown

Judgment: 30 September 2003

_{JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J}

[1] The appellant pleaded guilty to representative charges of forgery, dishonest use of documents and dishonest alteration of documents. He was sentenced in the District Court at Christchurch to five and a half years imprisonment. The maximum penalty for forgery and dishonest alteration of documents is ten years imprisonment, and for dishonest use of documents the maximum penalty is seven years. The

_{appellant now appeals the sentence on the ground that it was manifestly excessive.}

R V PHILIP GERALD COBURN CA CA133/03 [30 September 2003]

Background

[2] The background to the offending is recorded in the summary of facts prepared by the Serious Fraud Office, which is largely unchallenged by the appellant. It records that during a period between November 1997 and June 2002, when the appellant was practising on his own as a solicitor in Christchurch, he conducted a number of fraudulent and dishonest activities to obtain money. The forgery charge related to documents forged by the appellant to obtain 11 loans from various lending institutions to the value of $768,000. The appellant repaid only

$38,000 of those loans.

[3] The charge of dishonest use of documents related to more than 60 occasions where the appellant had used documents to obtain funds from his practice trust account for his own personal use. The money belonged to 34 of the appellant’s clients and totalled $1,015,971. The appellant repaid $322,220.

[4] The charge of altering a document arose from actions taken by the appellant to deflect a routine audit of his practice conducted by the New Zealand Law Society in 2001/2002. On three occasions the appellant altered particulars of deposits made into the bank account of his family trust before supplying bank statements to the Law Society’s inspector who was investigating his practice. Several of the misappropriations of trust account moneys occurred after the altered documents had been supplied.

[5] In total, the appellant had misappropriated funds to the value of $1,784,671, of which $360,220 was repaid. This left a shortfall of $1,424,451. The appellant used some of the funds to pay for travel and service his debts, but most of the money was employed at the Christchurch Casino where the appellant recorded over $1m worth of gambling losses (on a turnover of $10.7m). The pre-sentence report noted the appellant’s acknowledgement that he was unable to make any reparation.

[6] The appellant voluntarily underwent a psychiatric evaluation prior to being sentenced. The psychiatric report, prepared by Dr Ding, concluded that the appellant suffered from the psychiatric disorder of pathological gambling, but went on to say

that, although this would have impaired his sense of responsibility, it would not have rendered him incapable of appreciating the nature of his actions. The report also concluded that the appellant did not suffer from any other recognisable psychiatric condition.

[7] The appellant also voluntarily attended the Oasis Centre for Problem Gambling, run by the Salvation Army, prior to being sentenced. A letter was provided by the Centre recording the appellant’s attendance and stating that his gambling problem was severe.

The District Court

[8] At sentencing, counsel representing the Serious Fraud Office argued for a starting point of eight years imprisonment before mitigating factors, and submitted that the sentence for the charge of altering documents should be cumulative. The Judge agreed that the starting point should be one of eight years, but declined to impose a cumulative sentence.

[9] In arriving at the starting point of eight years, the Judge observed that the precedents, which included R v Renshaw (1992) 8 CRNZ 695, were clear: substantial dishonesty by a person in a position of trust required firm denunciation and the sentence needed to provide an adequate deterrent. The Judge also referred to what he saw were the aggravating features of the case. These included the large sums of money misappropriated ($1.78m), the breach of trust and authority, and the dishonesty and careful planning over a four year period. Other factors also weighed with the Judge, including the financial loss of the victims, the damage to the reputation of the legal profession, and the obligation of members of the legal profession to contribute to the Fidelity Fund to help compensate the victims. The Judge also identified a further aggravating factor, which he said was the lack of co- operation with the Canterbury District Law Society. A Mr McBeath, who was appointed to carry on the appellant’s legal practice for the benefit of his clients, had received no assistance from the appellant. The Judge said that this had a detrimental impact on the plea of remorse.

[10] The Judge gave a discount of two and a half years for mitigating factors, which included the early guilty plea, co-operation with the Serious Fraud Office, the absence of prior convictions, remorse, loss of reputation and livelihood, and the gambling addiction. The Judge also took into account that the appellant had voluntarily returned to New Zealand during the investigation, had handed in his passport, and had taken steps towards rehabilitation.

Grounds of appeal

[11] The appellant advanced three grounds of appeal said to support the submission that the sentence of five and a half years imprisonment was manifestly excessive. The first was that the starting point of eight years was too high; instead, it should have been no more than seven years. Reference was made to a number of cases, in comparison to which the starting point was said to be out of line. They included R v Rose (1990) 5 CRNZ 638 (where a company secretary misappropriated over $2m over a five year period and this Court allowed an appeal by the Solicitor- General and imposed a sentence of four years from a starting point of seven to eight years) R v Renshaw (1992) 8 CRNZ 695 (where over $6 million was misappropriated and a sentence of seven years was imposed with a starting point of

10 years) and R v Edwards S52/92, High Court, Auckland Registry, 27 May 1992, Tompkins J (where offending by a solicitor over a nine year period involving $3.4 million attracted a final sentence of six years). Reference was also made to Barr v The Serious Fraud Office (A123/00, High Court, Christchurch Registry, 25 August

2000, Panckhurst and Chisholm JJ) where an appeal against a sentence of five years imprisonment for a series of misappropriations by an employee of a law firm from its trust account was dismissed. The starting point in that case, involving losses of $2.7 million, had been seven years.

[12] The second ground put forward was that the Judge erred in determining that the lack of co-operation with the District Law Society was an aggravating factor. This matter was said to have been significant in the setting of the starting point. It was submitted that neither the District Law Society nor Mr McBeath was a victim and that it was unfair, inappropriate and wrong in principle to give their views any

weight. It was also submitted that the appellant was at that stage assisting the Serious Fraud Office in its investigation and that there was a genuine dispute between the appellant and Mr McBeath over who was entitled to certain legal fees which had been received. The appellant had hoped to retain them for his wife who had not been a party to his wrongdoing and was suffering hardship.

[13] The third ground of appeal was that insufficient credit had been given for the appellant’s undoubted psychiatric condition. It was submitted that the Judge had not properly considered various documents from the Christchurch Casino, nor the report of Dr Ding and the letter from the Oasis Centre. The casino documents revealed the appellant’s betting turnover and amounts won or lost on a daily basis. It was said that these documents were not before the Judge and were highly relevant to sentencing because they verified the extent of the appellant’s gambling addiction and that he had used misappropriated money for gambling and not to acquire assets for reasons of personal greed. He had prior financial problems as a result of a disastrous business transaction and appeared to have begun gambling to try to retrieve the situation and, after making losses and under the influence of his addiction, had kept going in the misguided belief that he would win enough to restore his trust account.

[14] For the Crown, Mr Lamprati submitted that the sentence was well within the range available to the Judge. He said a starting point of eight years was entirely appropriate for the representative charges of forgery and dishonest use of documents. Counsel said that this was actually supported by the cases referred to by the appellant. It was submitted that at least one justification for the Court adopting a starting point of 10 years imprisonment in Renshaw, as opposed to the seven to eight years in Rose, was the position of trust and the harm caused to clients which had shaken public confidence in the legal profession. Mr Lamprati also pointed out that the defendant in Edwards had suffered from a gambling addiction which was taken into account as a mitigating factor, but a sentence of six years was still imposed.

[15] It was further submitted that the Judge’s reference to the lack of co-operation with the District Law Society had little effect on the level of sentence and that, although the Judge referred to it as an aggravating factor, he had also emphasised that it was relevant more to the question of remorse.

[16] In relation to the documents said not to have been properly considered, Mr Lamprati submitted that the Judge clearly gave sufficient weight to the appellant’s gambling addiction, the severity of which had been identified in the material actually before the Judge. He had made reference to the addiction being a psychiatric problem and had referred to it as a mitigating factor. It was also submitted that the figures shown in the casino documents had never been in dispute and that the information did not take the appellant’s case any further.

Decision

[17] We have not been shown that the Judge’s starting point or, more importantly, the sentence ultimately imposed of five and a half years was beyond the range available to the Judge. Mr Coburn used his position as a solicitor to defraud his clients and lending institutions of more than $1.78 million, of which only about

$350,000 has been repaid. His numerous defalcations or frauds took place over a period of four to five years. It may be that all or most of the unpaid balance will be restored to the victims by payments from the Fidelity Fund of the New Zealand Law Society but that is simply to transfer the very substantial losses to the members of the legal profession who, additionally, will have suffered from the adverse perception of lawyers and the loss of the public’s confidence in the profession which is an inevitable result of publicity given to any substantial dishonesty offending by a solicitor. In this sense the District Law Society and Mr McBeath were representing victims and it was quite proper to take full account of their views.

[18] Some of the cases mentioned by counsel, in particular Renshaw and Edwards, were worse, but sentences for more serious offending of this kind cannot maintain proportionality with the large sums which have been misappropriated in each case. Like those cases, the present matter is in the more serious category of this type of offending for which a starting point of eight years is certainly not out of line. A matter which must attract particular condemnation in this case is that, even after the appellant’s practice was under investigation by the Law Society, he not only supplied the Society’s inspector with forged bank statements on three occasions, the purpose of the forgeries being to conceal past offending, but he also continued with

his misappropriations to the further extent of more than $160,000. The forgeries thus appear to have provided him with time and opportunity to take money for further gambling, by means of which he irrationally considered that he might be able to make up the losses. He expressed to the Probation Officer the view that, if the Law Society had not interfered, all of the victims would have been paid back ultimately.

[19] Mr Eaton suggested that at least a two year deduction is normally available for guilty pleas and cooperation with the authorities in cases of this kind. Here, he said, there should also have been a significant allowance because of the appellant’s diminished responsibility for his conduct, thereby reducing its culpability, on account of his severe gambling addiction.

[20] We do not view the two and a half year deduction made by the Judge as insufficient. In cases of this kind, the deterrent element of the sentence must be to the fore, which means that generally a gambling addiction of the offender will not be accorded very much importance, though some account can be taken of it. Clearly the sentencing Judge did take it into account to some extent and, we think, adequately.

[21] The appellant’s guilty pleas and cooperation with the Serious Fraud Office deserved credit, which they received, but, against that, the Judge rightly took an adverse view of the attitude which the appellant manifested towards the District Law Society and Mr McBeath. The appellant had gone so far as to try to lay claim to a relatively small amount ($2,000) of fees received for his legal services in circumstances in which a truly remorseful person might have been expected readily to make those moneys available to the Law Society in reduction of the losses which he had caused to clients and others.

[22] Mr Eaton referred particularly to the fact that the sentence imposed in Rose, where the stolen amounts in the 1980s exceeded those in the present case even without adjustment for inflation, was four years. But, although that case involved theft from an employer, and therefore a breach of trust, misappropriations from a solicitor’s trust account are to be regarded even more seriously, in view of the fiduciary relationship between members of the legal profession and their clients and

the adverse effects on the profession of the dishonesty of one of its members. Furthermore, Rose was an appeal by the Solicitor-General. There is little doubt that a rather higher sentence, possibly approaching that imposed on the present appellant, would not have been disturbed if an appeal had been brought by Mr Rose.

[23] In the end, having considered the cases to which we have been referred, we have not been persuaded that the five and a half year sentence was manifestly excessive. The appeal is therefore dismissed.

Solicitors:

Crown Law Office