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The Queen v Parkin [2006] NZCA 139 (23 June 2006)

Last Updated: 13 July 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA489/05

THE QUEEN

v

WILLIAM ROY PARKIN

Hearing: 14 June 2006

Court: Robertson, Gendall and Venning JJ

Counsel: P T R Heaslip for Appellant
M D Downs for Crown

Judgment: 23 June 2006

JUDGMENT OF THE COURT

The appeal is dismissed.

____________________________________________________________________

REASONS

(Given by Gendall J)

[1] The appellant was convicted after a jury trial in the District Court at Auckland before Field DCJ on three counts of wilfully obtaining credit in excess of $100, whilst being a bankrupt, without first informing the person giving the credit that he was at the time an undischarged bankrupt. Such an offence is a breach of s 128(g)(i) of the Insolvency Act 1967. He appeals against those convictions.

Background

[2] On 11 April 2001 the appellant was adjudicated bankrupt and he had not obtained a discharge when he entered into an agreement to rent a residential property at New Lynn, Auckland on 7 June 2002. Later, on 25 October 2002 he entered into a further rental agreement for another property in New Lynn. Then, on 21 January 2003 he entered into a sale and purchase agreement to acquire a property from a vendor which agreement was a "Rent to Buy" arrangement. The evidence was that at no time were any of the other contracting parties advised by the appellant that he was an undischarged bankrupt.
[3] The first tenancy was for a fixed term from 8 June 2002 to 8 January 2003 and provided for in advance weekly payment of rent by direct credit of $310 per week and a bond of $600 was required. The second agreement was for a periodic tenancy commencing on 9 November 2002 at a weekly advance rental of $360. The "Rent to Buy Agreement" provided that the appellant was entitled to acquire a property at the purchase price of $225,900. That was to be paid by a deposit of $5,000 (through instalments of $1,000.per month over five months). Also, the appellant was to make weekly payments of $300 for 78 weeks. He had the right to occupy the property. A final payment of $197,500 was to be made on the settlement date, namely 22 July 2004. Based upon that agreement the appellant went into possession on 23 January 2004.
[4] Before trial, counsel for the appellant applied for an order quashing the third count relating to the "Rent to Buy Agreement". It was contended that such an agreement failed to establish an essential ingredient of the offence, namely the "obtaining of credit". J P Doogue DCJ ruled that the agreement was an agreement for sale and purchase, between the owners or vendors and the appellant. The latter incurred a contractual obligation to pay $225,900 with a collateral right to occupy the property as licensee pending completion of his legal obligations. Accordingly, the application to quash that count in the indictment was refused.
[5] At trial the Judge directed the jury on matters of law as to the ingredients that the Crown had to prove in respect of each of the charges. He said at 4:

I direct you as a matter of law that in signing each of the tenancy agreements, [the appellant] did obtain credit of $100 or more. There are reasons for that which I will not go into now. They have been the subject of discussions and submissions between Judge and counsel of course as you will appreciate but as a matter of law, if you are satisfied that he signed these agreements, then he did obtain credit of $100 or more.

[6] The Judge told the jury that the second element that the appellant was an undischarged bankrupt and knew that to be the case was not disputed. Because the appellant had said to an interviewing officer that he believed he was not breaching the law the Judge went on to say that ignorance of the law was no excuse. The Judge further directed that whether or not there was such a sincere and honestly held belief was not a defence to the charges.

Appellant’s submissions

[7] Counsel for the appellant submitted that the Judge’s direction as to the legal status of the agreements was incorrect. He said that it was a mixed question of law and fact whether there existed a "Contract of Credit", as counsel described it. He contended the Judge should have left it for the jury’s determination, as a matter of fact, whether by signing of the particular agreements the appellant was obtaining credit.
[8] Counsel further submitted that the Judge erred in directing the jury that the particular agreements were contracts of credit. He submitted that where a payment of rent in advance for a tenancy exists and is paid, the transaction was a cash transaction rather than a credit transaction, so long as the tenant did not enter into any obligation beyond payment in advance.
[9] Counsel submitted that R v Kinsman [1969] NZLR 678 (CA), which the District Court Judge found to be binding on him, did not apply as it was either wrongly decided or distinguishable on the facts. That case held that where a lessee incurred an obligation to pay rent throughout the term of a lease it was an "obtaining of credit" by the bankrupt for the purpose of the offence provision. Counsel’s argument was that the agreements in the present case gave no proprietary rights to the appellant and, therefore, there was no obtaining of credit in the form of a debt or liability to pay a sum of money.
[10] Counsel sought to further distinguish R v Kinsman by arguing that the Residential Tenancies Act 1986 was not in force at the time the case was decided. He argued that, in respect of Counts 1 and 2, termination of the tenancy agreements could only arise pursuant to the provisions of that Act and, therefore, by paying rental in advance each week the appellant could not fall into a situation where any credit arrangement, either in fact or law, arose. Counsel said that the obiter remarks of McCarthy J in R v Kinsman supported this proposition. There the Judge said the position of obtaining credit might be different:

if the tenant has the right to surrender the lease at any time and the rent is payable in advance.

[11] Counsel repeated his submission that the "Rent to Buy Agreement" relating to Count 3 was not a contract of credit as there was no obligation to purchase the property until all the weekly rental was paid. Counsel argued that the payments were not credit obligations as they were not mandatory upon the appellant.
[12] It was submitted that the Judge erred in ruling that mens rea was not an ingredient of the crime. Counsel submitted that the appellant had to know he was entering a contract of credit before his obligation to advise was triggered.

Crown submissions

[13] The Crown essentially submitted that this was a simple case to which the established authority of R v Kinsman applies. There the lease was for a period of 12 months and the lessee incurred a liability to pay rent throughout the period. Upon the agreement being signed he was let into possession so obtained credit based upon his undertaking as to the monetary obligation to pay the stipulated weekly rent. Mr Downs submitted that Counts 1 and 3 fall squarely within this proposition.
[14] With Count 2, the only difference is that it was a periodic tenancy agreement, which could be determined by either party giving notice in writing. The Crown submitted that the Kinsman principle nevertheless applied because the agreement enabled the appellant to obtain a possession and other rights in respect of the property by agreeing to pay, and continuing to pay rental. Nothing in the Residential Tenancies Act alters the proposition that there was an ongoing obligation to pay money over a period of time, and therefore credit was obtained.
[15] The Crown submitted that the offence is one of strict liability because it is designed to protect the public and is aimed at the mischief of the obtaining of credit by an undischarged bankrupt without advising the other party of that fact. Lastly, the Crown submitted that if certain facts are proved, then it is a question of law whether particular agreements or contracts comprise the obtaining of credit.

Discussion

[16] The obtaining of credit can take a variety of forms. It may be evidenced by agreements or contractual documents. Its essence is in obtaining property, money or money’s worth from another party, when correspondingly incurring a future liability to pay, or repay, money or money’s worth to that other party. In R v Kinsman North P said at 684:

In my opinion when he signed the tenancy agreement and was let into possession he immediately obtained credit for an amount in excess of $40. In my opinion it is immaterial that the appellant was required to pay the rent in advance....The fact that the lease gave the landlord a right in default to terminate the lease can make no difference. [The Judge] was in error in directing the jury that the point of time when the appellant obtained credit was later on when he fell into arrear with his rent payments. At that point of time it is true that the landlord could have sued for the rent then in arrear but as I have said the appellant in my opinion obtained credit when the contract was made.

[17] Turner J said at 684:

....that in consideration of this undertaking to pay rent in the future, and relying upon the faith of it, [the lessor] gave him possession, and granted him a lease for a term. In these circumstances I do not think that it matters whether the covenant is one to pay rent in advance or not; if it is one for the payment of rent in the future, and if in consideration of such a covenant the other party to the transaction parts with money or money’s worth, then I think ‘credit’ has been ‘obtained’.

[18] The dicta of McCarthy J, upon which counsel for the appellant sought to rely, speaks of the tenant having the right to surrender a lease at any time. Whether or not that dicta is accurate, the position is that at the time the two tenancy agreements were entered into, the appellant obtained possessory rights and could only terminate the tenancies upon giving notice. So, too for the landlord. In respect of Count 3 the deceased acquired a right which he could have enforced by specific performance, provided that he was prepared to meet his obligations. But his contingent right was caveatable. The ability to terminate a tenancy arrangement without notice, in the sense of surrendering a lease in accordance with its terms, did not arise.
[19] Section 128(g)(i) is designed to prevent a bankrupt from obtaining goods, or money’s worth, or some benefit, without payment and without stating that he is an undischarged bankrupt, R v Peters (1886) 16 Cox, CC 36. We do not consider that the present case falls outside the long line of authority culminating in R v Kinsman. Once the appellant signed the respective agreements and was let into possession he incurred a liability to pay rent throughout the period that he remained in possession. The Residential Tenancies Act 1986 which requires the giving of notice (apart from the case of a fixed-term tenancy) does not alter the position. Likewise, with the "Rent to Buy Agreement".
[20] The Judge was correct to advise the jury that as a matter of law the signing of the agreements were obtaining credit. The jury had to be satisfied as to the factual ingredients but the effect of a particular contract or document, in a case such as this was a matter of law. The direction of the Judge in telling the jury that they had to be first satisfied that the appellant signed the agreement which had been produced in evidence before it could be held as a matter of law that he obtained credit, was conventional and correct.
[21] We do not accept the argument that the Crown must prove mens rea in order to obtain a conviction. The section speaks about a person who "obtains credit" and there is a presence of a defence within the section providing that a person may escape liability if he proves that before obtaining credit he informed the person giving the credit that he was an undischarged bankrupt. The presence of such a positive defence indicates a legislative intention to impose absolute liability: McLaren Transport Ltd v Ministry of Transport [1986] 2 NZLR 81.
[22] Section 128(g)(i) is to be contrasted with other offence provisions in the Insolvency Act 1967, such as s 128(1)(e) which requires there be an intent to defraud creditors if a bankrupt acts in a particular way.
[23] It is the acting in a certain way to which the mischief is aimed, and not whether the undischarged bankrupt knows that as a matter of law he is "obtaining credit".
[24] To summarise, we are satisfied that the three agreements comprised the "obtaining of credit"; the trial Judge did not err in his directions to the jury and that actual knowledge by the appellant that he was obtaining credit did not require proof by the Crown. On the evidence, the convictions are not unsafe and were inevitable.
[25] For those reasons the grounds advanced by the appellant fail. The appeal is dismissed.

Solicitors:
P T R Heaslip, Auckland for Appellant
Crown Law Office, Wellington for Respondent

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[2]	On 11 April 2001 the appellant was adjudicated bankrupt and he had not obtained a discharge when he entered into an agreement to rent a residential property at New Lynn, Auckland on 7 June 2002. Later, on 25 October 2002 he entered into a further rental agreement for another property in New Lynn. Then, on 21 January 2003 he entered into a sale and purchase agreement to acquire a property from a vendor which agreement was a "Rent to Buy" arrangement. The evidence was that at no time were any of the other contracting parties advised by the appellant that he was an undischarged bankrupt.
[3]	The first tenancy was for a fixed term from 8 June 2002 to 8 January 2003 and provided for in advance weekly payment of rent by direct credit of $310 per week and a bond of $600 was required. The second agreement was for a periodic tenancy commencing on 9 November 2002 at a weekly advance rental of $360. The "Rent to Buy Agreement" provided that the appellant was entitled to acquire a property at the purchase price of $225,900. That was to be paid by a deposit of $5,000 (through instalments of $1,000.per month over five months). Also, the appellant was to make weekly payments of $300 for 78 weeks. He had the right to occupy the property. A final payment of $197,500 was to be made on the settlement date, namely 22 July 2004. Based upon that agreement the appellant went into possession on 23 January 2004.
[4]	Before trial, counsel for the appellant applied for an order quashing the third count relating to the "Rent to Buy Agreement". It was contended that such an agreement failed to establish an essential ingredient of the offence, namely the "obtaining of credit". J P Doogue DCJ ruled that the agreement was an agreement for sale and purchase, between the owners or vendors and the appellant. The latter incurred a contractual obligation to pay $225,900 with a collateral right to occupy the property as licensee pending completion of his legal obligations. Accordingly, the application to quash that count in the indictment was refused.
[5]	At trial the Judge directed the jury on matters of law as to the ingredients that the Crown had to prove in respect of each of the charges. He said at 4:

[7]	Counsel for the appellant submitted that the Judge’s direction as to the legal status of the agreements was incorrect. He said that it was a mixed question of law and fact whether there existed a "Contract of Credit", as counsel described it. He contended the Judge should have left it for the jury’s determination, as a matter of fact, whether by signing of the particular agreements the appellant was obtaining credit.
[8]	Counsel further submitted that the Judge erred in directing the jury that the particular agreements were contracts of credit. He submitted that where a payment of rent in advance for a tenancy exists and is paid, the transaction was a cash transaction rather than a credit transaction, so long as the tenant did not enter into any obligation beyond payment in advance.
[9]	Counsel submitted that R v Kinsman [1969] NZLR 678 (CA), which the District Court Judge found to be binding on him, did not apply as it was either wrongly decided or distinguishable on the facts. That case held that where a lessee incurred an obligation to pay rent throughout the term of a lease it was an "obtaining of credit" by the bankrupt for the purpose of the offence provision. Counsel’s argument was that the agreements in the present case gave no proprietary rights to the appellant and, therefore, there was no obtaining of credit in the form of a debt or liability to pay a sum of money.
[10]	Counsel sought to further distinguish R v Kinsman by arguing that the Residential Tenancies Act 1986 was not in force at the time the case was decided. He argued that, in respect of Counts 1 and 2, termination of the tenancy agreements could only arise pursuant to the provisions of that Act and, therefore, by paying rental in advance each week the appellant could not fall into a situation where any credit arrangement, either in fact or law, arose. Counsel said that the obiter remarks of McCarthy J in R v Kinsman supported this proposition. There the Judge said the position of obtaining credit might be different:

[11]	Counsel repeated his submission that the "Rent to Buy Agreement" relating to Count 3 was not a contract of credit as there was no obligation to purchase the property until all the weekly rental was paid. Counsel argued that the payments were not credit obligations as they were not mandatory upon the appellant.
[12]	It was submitted that the Judge erred in ruling that mens rea was not an ingredient of the crime. Counsel submitted that the appellant had to know he was entering a contract of credit before his obligation to advise was triggered.

[13]	The Crown essentially submitted that this was a simple case to which the established authority of R v Kinsman applies. There the lease was for a period of 12 months and the lessee incurred a liability to pay rent throughout the period. Upon the agreement being signed he was let into possession so obtained credit based upon his undertaking as to the monetary obligation to pay the stipulated weekly rent. Mr Downs submitted that Counts 1 and 3 fall squarely within this proposition.
[14]	With Count 2, the only difference is that it was a periodic tenancy agreement, which could be determined by either party giving notice in writing. The Crown submitted that the Kinsman principle nevertheless applied because the agreement enabled the appellant to obtain a possession and other rights in respect of the property by agreeing to pay, and continuing to pay rental. Nothing in the Residential Tenancies Act alters the proposition that there was an ongoing obligation to pay money over a period of time, and therefore credit was obtained.
[15]	The Crown submitted that the offence is one of strict liability because it is designed to protect the public and is aimed at the mischief of the obtaining of credit by an undischarged bankrupt without advising the other party of that fact. Lastly, the Crown submitted that if certain facts are proved, then it is a question of law whether particular agreements or contracts comprise the obtaining of credit.

[18]	The dicta of McCarthy J, upon which counsel for the appellant sought to rely, speaks of the tenant having the right to surrender a lease at any time. Whether or not that dicta is accurate, the position is that at the time the two tenancy agreements were entered into, the appellant obtained possessory rights and could only terminate the tenancies upon giving notice. So, too for the landlord. In respect of Count 3 the deceased acquired a right which he could have enforced by specific performance, provided that he was prepared to meet his obligations. But his contingent right was caveatable. The ability to terminate a tenancy arrangement without notice, in the sense of surrendering a lease in accordance with its terms, did not arise.
[19]	Section 128(g)(i) is designed to prevent a bankrupt from obtaining goods, or money’s worth, or some benefit, without payment and without stating that he is an undischarged bankrupt, R v Peters (1886) 16 Cox, CC 36. We do not consider that the present case falls outside the long line of authority culminating in R v Kinsman. Once the appellant signed the respective agreements and was let into possession he incurred a liability to pay rent throughout the period that he remained in possession. The Residential Tenancies Act 1986 which requires the giving of notice (apart from the case of a fixed-term tenancy) does not alter the position. Likewise, with the "Rent to Buy Agreement".
[20]	The Judge was correct to advise the jury that as a matter of law the signing of the agreements were obtaining credit. The jury had to be satisfied as to the factual ingredients but the effect of a particular contract or document, in a case such as this was a matter of law. The direction of the Judge in telling the jury that they had to be first satisfied that the appellant signed the agreement which had been produced in evidence before it could be held as a matter of law that he obtained credit, was conventional and correct.
[21]	We do not accept the argument that the Crown must prove mens rea in order to obtain a conviction. The section speaks about a person who "obtains credit" and there is a presence of a defence within the section providing that a person may escape liability if he proves that before obtaining credit he informed the person giving the credit that he was an undischarged bankrupt. The presence of such a positive defence indicates a legislative intention to impose absolute liability: McLaren Transport Ltd v Ministry of Transport [1986] 2 NZLR 81.
[22]	Section 128(g)(i) is to be contrasted with other offence provisions in the Insolvency Act 1967, such as s 128(1)(e) which requires there be an intent to defraud creditors if a bankrupt acts in a particular way.
[23]	It is the acting in a certain way to which the mischief is aimed, and not whether the undischarged bankrupt knows that as a matter of law he is "obtaining credit".
[24]	To summarise, we are satisfied that the three agreements comprised the "obtaining of credit"; the trial Judge did not err in his directions to the jury and that actual knowledge by the appellant that he was obtaining credit did not require proof by the Crown. On the evidence, the convictions are not unsafe and were inevitable.
[25]	For those reasons the grounds advanced by the appellant fail. The appeal is dismissed.