The Queen v Fatu [2007] NZCA 430 (4 October 2007)

Last Updated: 20 October 2007

IN THE COURT OF APPEAL OF NEW ZEALAND

CA187/07

[2007] NZCA 430

THE QUEEN

v

ARDEN ERIC FATU

Hearing: 19 September 2007

Court: Ellen France, John Hansen and Wild JJ

Counsel: J P Temm for Appellant
R L Mann for Crown

Judgment: 4 October 2007 at 3 pm

JUDGMENT OF THE COURT

Extension of time to appeal is granted but the appeal is dismissed.

REASONS OF THE COURT
(Given by John Hansen J)

[1] Following the appellant’s plea of guilty to four counts of using a document with intent to defraud, Heath J sentenced him on 28 May 2007 to four years on each count concurrently. He seeks an extension of time to appeal against that sentence on the ground it is manifestly excessive.
[2] As a consequence of a police operation called Allsorts, a number of individuals were charged with deliberate and complex fraud in the Waikato and Bay of Plenty regions over a significant period of time. The three types of fraud employed were succinctly described by this Court in the sentence appeal of a co-offender, Mr Stirling (R v Stirling [2007] NZCA 106):

[3] ... The first was described by the Judge as “price hydraulic fraud”. The appellant would identify land likely to be sold by mortgagee sale. He would then enter an agreement with the owner to buy it at a price in the vicinity of the market value. The appellant would then enter a back to back agreement to on-sell the land at a higher price to a related third party. The on-sale would be supported by an unrealistic valuation obtained from a compliant valuer. The appellant would then borrow from a lending institution to settle the purchase. The effect of the scheme was to induce a lending institution to lend more money than it would otherwise have been prepared to advance.

[4] The second type of fraudulent activity was described as “equity fraud”. The appellant would identify property owners in financial difficulty and in danger of losing their homes. The owners would be induced to transfer their assets to a trust. The trustees would then seek a loan from a financial institution but at a greater amount than that required to settle the obligations under the mortgage. The home owner was referred to a compliant solicitor who would arrange for the owners to sign authorities in favour of the solicitor for disbursement of funds at the solicitor’s direction. A variation of the scheme involved the preparation of a fictitious sale and purchase agreement. Money would then be drawn down from the financier and paid to the solicitor. After paying the debt the surplus funds were disbursed to the appellant and his associates rather than the home owners. In reality the owner became no more than a tenant in their own home, their equity in the property having been extinguished by the transaction. Within a short period of time the banks and lending institutions took steps to realise the land and evict the people from their homes.

[5] The final method can be described as “equity fraud through security realisation”. This method took advantage of the provisions of the Property Law Act 1952 that clear secured indebtedness behind the first mortgage. The appellant again identified properties at risk of mortgagee sale. He then bought the mortgage for a price that equated to the monies owing under it. The appellant had no ability to pay the purchase price for the mortgage so again a back to back agreement was made to on-sell the property to a related party. The money from that sale would be used to complete the initial purchase. As a result the appellant and his associates effectively obtained the property for the price paid to the mortgagee.

[3] The fraudsters preyed on simple people who were seeking help. The Judge at [23] described the appellant, and others involved, as people who “cynically abused that trust for personal gain”: HC HAM CRI 2006-419-134 28 March 2007.
[4] The appellant initially faced a large number of charges. He was discharged on a number. Ultimately, in the course of the trial, he pleaded guilty to four described as the Martinborough transaction, the Wallen transaction, the Heta transaction, and the Maxwell transaction. The ringleaders were Mr McKelvy and Mr Stirling. The appellant’s involvement was as an implementer of the frauds operating from the same business premises as Mr McKelvy. These all appear to fall under the second category set out in [2].
[5] Through counsel the appellant accepted the total benefit he received was $129,493.36. The effect on his victims was considerable. Mr McGregor lost the equity in the land he owned. The Wallens effectively lost their life savings, although the mortgagee has allowed them to remain in possession of their home. The Heta brothers lost a once unencumbered farm, although culpability for the whole of the loss cannot be blamed on the appellant. Ms Maxwell lost her property in Cambridge. As a consequence they all suffered severe emotional harm.
[6] The appellant says the sentence is manifestly excessive because of a claimed disparity with others sentenced in the context of Allsorts and with fraud offenders in general; undue emphasis by the sentencing Judge on the physical characteristics of the appellant; the appellant being sentenced in respect of a perceived role and not his actual offending; an absence of any relevant previous convictions; and that the financial benefit of $129,493.36 (accumulated over six months) did not support such a sentence.
[7] We disagree.
[8] Mr Temm accepted there were no tariff cases for this type of offending, but after extensively reviewing a large number of decisions and comparing the sums involved with the end sentence, submitted that a two-year sentence was appropriate in this case. He also submitted that in comparison with some other offenders in Allsorts, the appellant’s culpability was not so great.
[9] We consider a bald comparison with other fraud cases is misplaced. What the Judge has done in this case is to compare the culpability of the various offenders at differing levels of the frauds in this operation and sentence on the basis of that assessment of culpability.
[10] In R v Varjan CA97/03 26 June 2003 at [22] this Court said:

Culpability is to be assessed by reference to the circumstances and such factors as the nature of the offending, its magnitude and sophistication; the type, circumstances and number of the victims; the motivation for the offending; the amounts involved; the losses; the period over which the offending occurred; the seriousness of breaches of trust involved; and the impact on victims.

[11] In our view that is exactly what Heath J has done in this case. Furthermore, this Court has already considered appeals against sentence in relation to Mr Stirling, Mr McKelvy ([2007] NZCA 340) and Mr Orchard (CA123/03 24 October 2003), another co-offender. This Court has upheld the assessment of culpability carried out by Heath J in relation to those offenders and dismissed their appeals.
[12] The Judge was in the best position to objectively assess the relevant culpability of these victims. In his submissions, Mr Temm has been critical of the Judge referring to the appellant’s overbearing physical appearance and his perceived role. However, in our view the sentencing Judge was in a unique position, having heard volumes of evidence on the subject, to assess the appellant’s role. It is clear that this role was considered as being to cajole and encourage the victims to enter transactions he knew were fraudulent. The Judge was also well placed to determine that this encouragement operated from the appellant’s personal charm, his use of strong and aggressive language and, indeed, his physical presence. Moreover, there is nothing to support the submission the Judge was sentencing the appellant on anything other than the four offences he pleaded guilty to.
[13] The sentencing Judge placed the appellant’s culpability as between that of Mr Stirling and another co-offender, Mr Slavich. In the case of Mr Slavich (who was ordered to pay reparation of $60,000), a four-year starting point was taken with a final sentence of two years and three months’ imprisonment being imposed. In the case of Mr Stirling, this Court said that the starting point of eight years was available, and the sentence of five years and three months imprisonment was upheld. In the appellant’s case a starting point of four years and nine months’ imprisonment was taken. The Judge allowed a 15 per cent credit for what was a very late guilty plea. Also of relevance in the sentencing process is the fact that reparation was promised and the hopes of the victims built up, however, these were ultimately dashed when payment was not made.
[14] Overall we are satisfied that this appeal must be dismissed. The Judge has appropriately approached sentencing in this matter on the basis of the appellant’s culpability in the context of Allsorts. Having read all of the sentencing notes in relation to those offenders of relevance, we see no error in that assessment.
[15] Furthermore, this Court has already approved an approach that requires a consideration of the respective culpability of each of these offenders. Sentences have been confirmed, both in relation to more serious offending than the appellant’s, and less serious. It is appropriate to assess the appellant’s culpability in the context of this case, and it is not of great assistance to do a simple mathematical comparison with other fraudsters.
[16] An extension of time to appeal is granted, but the appeal against sentence is dismissed.

Solicitors:
Crown Solicitor, Hamilton