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Down v R [2011] NZCA 138 (6 April 2011)

Last Updated: 13 April 2011


IN THE COURT OF APPEAL OF NEW ZEALAND
CA497/2010
[2011] NZCA 138

BETWEEN CAROL MARGARET DOWN
Appellant

AND THE QUEEN
Respondent

Hearing: 8 March 2011

Court: Chambers, Harrison and Courtney JJ

Counsel: A D Banbrook for Appellant
F R J Sinclair for Respondent

Judgment: 6 April 2011 at 4 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

  1. The appellant must present herself to the Warkworth Police Station by no later than noon on 8 April 2011 in order to resume her sentence of imprisonment.

____________________________________________________________________


REASONS OF THE COURT


(Given by Courtney J)


Introduction

[1] Carol Margaret Down was found guilty at trial on four charges of using a document with intent to obtain a pecuniary advantage dishonestly and without claim of right under s 228(b) of the Crimes Act 1961 and acquitted of one further such charge. She was sentenced by Judge Joyce QC to concurrent terms of one year 11 months imprisonment.[1] Ms Down appeals both the conviction and sentence.
[2] The charges arose from five loan agreements entered into between UDC Finance Company Ltd and Cash for Scrap Ltd (CFS), of which Ms Down was the sole director and shareholder. The loans were obtained using false invoices. CFS was unable to repay the loans and of the total advances of $1.16m the loss to UDC was approximately $850,000.
[3] Ms Down signed the loan documents but maintained that she did not know about the false invoices. CFS’ accountant, Raymond John Moorhead, who provided UDC with the false invoices, was convicted on the same five charges as Ms Down faced.
[4] The grounds of appeal against conviction are that:
[5] The grounds of appeal against sentence are that the Judge erred in:

Circumstances of the UDC loans

[6] In 1999 the appellant was in a domestic relationship with William Conway, who was the director of Independent Demolitions Limited. That company was placed in liquidation in 1999 and Mr Conway was subsequently banned from being a company director for a period of four years.
[7] CFS was incorporated in 2000. Its business was buying and selling scrap metal. Between 2000 and 2005 Ms Down executed various documents in her capacity as the sole director of CFS, including a security agreement with UDC. In addition, she gave a personal guarantee for the company’s borrowings. In 2006 another company, Bairds Road Scrap Ltd (BRS) was incorporated with Mr Moorhead as its director. BRS took over CFS’ business and Ms Down became a director of BRS in 2007, taking over from Mr Moorhead.
[8] Throughout this period Ms Down was working as a retail assistant. She always asserted that she had no experience in the kind of business run by CFS and BRS and only became a director of these companies at Mr Conway’s insistence. She claimed that, in reality, the businesses were operated by Mr Conway and Mr Moorhead. During this period Ms Down did, however, receive substantial amounts of money from CFS and BRS including payments that she acknowledged were director’s fees.
[9] During 2005 Mr Moorhead negotiated two loans with UDC on behalf of CFS. These were said to be for the purchase of scrap metal bins and were each supported by an invoice from a non-existent company. After it took over CFS’ business in 2006 BRS assumed responsibility for these loans. In 2007 Mr Moorhead negotiated three further loans. These were obtained in CFS’ name even though BRS was running the business. These loans were, respectively, stated to be for the purchase of scrap metal bins, an excavator and a mobile baling press. They were all supported by invoices from non-existent companies.
[10] Ms Down signed the loan documents which comprised, in each case, a loan schedule, additional loan schedule terms regarding guarantors, additional collateral acknowledgement and a director’s certificate. Because of UDC’s internal procedures the invoices were not attached to the loan documents. However, the loan schedule did refer to the purpose of the loan, identified the equipment being purchased and named the supplier of the equipment to which the loan monies would be paid. The additional collateral acknowledgement identified the existing security agreement between UDC and CFS (of which Ms Down was guarantor) and the equipment being purchased, which was to be brought within the scope of the existing security. The director’s certificate signed by Ms Down recorded, among other things, that the company would be able to perform its obligations under the loan.
[11] UDC paid the loan monies to the bank accounts shown on the invoices as belonging to the vendors of the equipment. These were, in fact, accounts operated by Mr Moorhead. The funds from the first two loans were transferred to CFS’ account, of which Mr Moorhead and Ms Down were signatories. That money was withdrawn in lump sums by way of cash cheques, the ultimate destination being untraceable. The three later loans were paid into BRS’ account.

Was the verdict unreasonable?

[12] The first ground of appeal was that the verdicts were unreasonable under s 385(1)(a) of the Crimes Act 1961. The test to be applied is that articulated by the Supreme Court in R v Owen: a verdict will be unreasonable where, having regard to all the evidence, the jury could not reasonably have been satisfied to the required standard that the accused was guilty.[2] In considering whether the verdicts satisfy this test, we have had regard to those aspects of the decision in R v Munro[3] endorsed by the Supreme Court in Owen:[4]
[13] The central issue in the case was whether Ms Down had “used” the false invoices. The defence position was that she knew nothing about the invoices and simply signed the loan documents at the direction of Mr Moorhead, believing them to be genuine. Mr Banbrook submitted that in these circumstances, there was no or insufficient evidence on which the jury could reasonably have been satisfied to the required standard that Ms Down was guilty of using the invoices.
[14] The Crown accepted at trial that there was no evidence directly connecting Ms Down with the invoices. It did not allege that she helped to create them. It did not allege that she handled them. It did not allege that she had any part in sending them to UDC. However, as Mr Banbrook accepted, use in such direct ways was not required and the Crown could prove use of the invoices by Ms Down in the indirect sense explained in R v Gunthorp:[5]

It was not disputed that a person may “use” a document without directly handling it (cf R v Paterson [1976] 2 NZLR 394). An instruction or direction to deal with the documents in a particular way will suffice. Counsel submitted that nothing less than that will do. This is too narrow an approach. An instruction to carry out a particular transaction necessarily carries with it an instruction to do what is normally and reasonably necessary for the purpose. That was the Judge’s approach. He concluded that it was “inconceivable” that the whole transaction would have taken place without express instructions from Mr Hawkins. He spoke in terms of Mr Curtayne giving the immediate directions to the accounting staff concerning the cheques and the journal entries. The evidence did not go quite as far as that, and there was certainly none that Mr Hawkins had first instructed Mr Curtayne. There was evidence that Mr Curtayne frequently acted on Mr Hawkins’ behalf, but none that he had done so on this occasion. Nonetheless for the reasons that follow we consider the Judge entitled to draw the inference that, whoever was the intermediary, the instruction to effect the transaction must have come from Mr Hawkins.

[15] We observe that because the Crown alleged that the loan documents were part of the fraud the Crown could have approached this case in a much more straightforward way by simply relying on the loan documents Ms Down signed as constituting the subject matter of the charge. However, on the case as advanced at trial, the Crown had to prove that Ms Down had knowledge of the invoices, knew they were false and used them in some indirect way.
[16] Mr Banbrook argued that the Crown case had relied primarily on two aspects of the evidence to prove use and that these were insufficient to found a guilty verdict. The evidence was that of a UDC witness, Mr Proffit, about his meeting with Ms Down on 11 October 2007 and the extent of cash deposits received by Ms Down to the credit of her ANZ credit card account. The Crown, however, maintained that its case was not so narrow and that it had proceeded on the basis that Ms Down’s knowledge and use of the invoices could be inferred from her overall involvement in CFS prior to and during the period of the loans.
[17] It is evident from the Crown’s closing that the case was put on a much broader basis than asserted by Mr Banbrook. We accept that Mr Profitt’s evidence was relied on both as evidencing a lie going to Ms Down’s credibility and as showing that she was aware of the ongoing significance of her personal guarantee. The fact that Ms Down received money from CFS was also relied on. But these pieces of evidence formed just part of the overall circumstances.
[18] The Crown placed significant emphasis on the real nature of Ms Down’s involvement with the company and the extent of her knowledge about company affairs. It pointed out that when she became the director of CFS she knew that Mr Conway was banned from acting as a director. Not only did she take over the directorship of CFS but she also later assumed directorship of BRS, which was inconsistent with her claim of not wanting to be involved. Her personal exposure as a result of the guarantee she had given for CFS’ borrowings was inconsistent with not being involved, as was her attendance at a meeting in 2003 when CFS was in arrears with its UDC borrowings.
[19] It was clear that the Crown was inviting the jury to regard Ms Down, by virtue of her knowledge and experience in CFS, as not merely a director in name only, but someone actively involved in the company and a knowing party to the fraud on UDC. If the jury accepted that, it could reasonably have concluded that Ms Down knew that the invoices existed since they were integral to the fraud. In addition, the loan agreements contained reference to the goods being supplied and the name of the payee. Ms Down, as the sole director and the company’s agent entering into the loan agreement must have known that the advances were being made for the purchase of equipment which the company had not, in fact, bought.
[20] In our judgment there was sufficient evidence on which the jury could reasonably have found that Ms Down was a party to the fraud on UDC. That being so, the jury was entitled to find that Ms Down knew that the invoices existed and were false. Ms Down’s actions in executing the loan documents amounted to the indirect use of the invoices because, in doing so, she enabled the false invoices to be used. Without loan documents validly executed on behalf of the company, the invoices could have had no effect. For these reasons we consider that there was evidence on which the jury could reasonably have been satisfied that Ms Down was guilty.

Were the guilty verdicts on Counts 2-5 inconsistent with not guilty verdict on Count 1?

[21] Mr Banbrook submitted that because each of the loan transactions had the same modus operandi and that Ms Down’s role in each was the same there was no logic in the jury finding her not guilty on Count 1 but guilty on Counts 2-5 and the verdicts should be regarded as inconsistent.
[22] In R v Shipton this Court summarised the basis on which a verdict might be set aside for inconsistency:[6]

The general principle has long been that a conviction is unsafe if no reasonable jury, properly instructed, could have arrived at the conclusion which was in fact reached (R v Stone [1955] Crim LR120 per Devlin J). The burden is on the accused to demonstrate that the only explanation for the inconsistency must be that the jury was confused or adopted the wrong approach thus making the verdict unsafe. Only this can warrant the intervention of an Appellate Court, and generally there ought to be a curial reluctance to interfere with a jury verdict (R v H [2000] 2 NZLR 581 at 589 per Keith J).

A prima facie inconsistency is never enough to set aside a verdict. Once a prima facie inconsistency is established, the Court must enquire whether there is any rational or logical explanation for the inconsistent verdict.

[23] Significantly, it was the first loan which created doubt in the jurors’ minds. Mr Sinclair, for the Crown, suggested that this fact explained any apparent inconsistency in the verdicts; whilst it may have been reasonably possible that Ms Down did not appreciate the true nature of the first UDC loan it was not reasonably possible that she could have remained ignorant when executing subsequent similar loans, particularly when they were coupled with the receipt of substantial sums of money. Further, the Crown case on the later counts would have been stronger than the case on Count 1 because the circumstances of the first loan agreement constituted an additional piece of circumstantial evidence in relation to Count 2. Likewise, Count 3 would be decided taking into account that two such transactions had already taken place and so on.
[24] For these reasons, we consider that the not guilty verdict on Count 1 is not inconsistent with the other verdicts.

Miscarriage of justice as a result of publicity

[25] The trial commenced on 24 May 2010 and the Judge summed up on 1 June 2010. On 30 May 2010 the Herald on Sunday newspaper published an article entitled “Nothing to Show for Loans”. The article summarised the case against Ms Down and Mr Moorhead. However, it also referred to Ms Down’s relationship with Mr Conway, who was described as controversial, and noted the fact that Mr Conway and Ms Down had both been convicted on “polluting offences”.
[26] Mr Banbrook submitted, quite correctly, that the content and tenor of the article portrayed Ms Down in a poor light. It also contained a statement that was incorrect, namely that the Crown case was that both Ms Down and Mr Moorhead had created the false invoices; it was never part of the Crown case that Ms Down had been involved in the preparation of the invoices.
[27] Mr Banbrook was concerned about the article at the time. However, on discussing it with Crown counsel, he formed the view that there was little to be done. He did not anticipate that the Judge would be able to do anything more than give the usual direction about ignoring media reports and therefore did not raise the matter with the Judge. We would make the observation that if counsel are genuinely concerned during the course of the trial by the effect of adverse publicity the appropriate course is to raise the matter with the trial Judge and discuss what options might be available. It is almost always too late to raise a matter of this kind on appeal if no complaint or request for action has been registered at the trial.
[28] It is clear, however, that the Judge in this case was aware of the article and in summing up gave a direction that adequately countered any risk of the jury being influenced by the article. This included identifying the risk that newspaper reports could be wrong. Further, since the jury was specifically told by the Crown and by the Judge in summing up that it was not being alleged that Ms Down had created the invoices, it was highly unlikely that the jury would think otherwise on the basis of the newspaper report.

Appeal against sentence

[29] Ms Down was sentenced to one year and 11 months imprisonment. She served one month of this sentence before being granted bail pending the determination of her appeal. Mr Banbrook submitted that sentence was manifestly excessive. In particular, he submitted that the Judge wrongly took the same starting point for Mr Moorhead and Ms Down and that home detention should have been preferred over imprisonment.
[30] Ms Down was sentenced together with Mr Moorhead and the Judge took the same starting point of three-and-a-half years’ imprisonment for both. In setting that starting point the Judge referred to the decisions in R v Varjan,[7] Cole v Police[8] and Waghorn v Police.[9] In those cases starting points were taken of three years, four to five years and two years nine months to three years respectively. The starting point of three-and-a-half years in this case reflected the fact that the loss to UDC was higher than in all those cases but that the offending in Cole was more sophisticated and persistent.
[31] In considering whether Ms Down and Mr Moorhead should be treated equally in terms of a starting point, the Judge said:

[60] The Crown contends for equal responsibility. It equates Ms Down’s integral role (the offending could not have occurred but for her use, or rather abuse, of her directorship powers) with Mr Moorhead’s connection to the invoices and his post-receipt of the advances distribution or allocation of the loaned monies.

[61] Obviously I must factor in for Ms Down that she was acquitted on the first count but, and beyond that, I do find it difficult to differentiate between the pair of offenders each playing a crucial, although different role. Conscious as I am of the suggestion that Ms Down’s role was “peripheral”, perhaps to call it mechanical would have been closer to the mark, I cannot – in primary terms at least – divide responsibility between the two other than equally. That is because, in each case, without the participation of the two of them, the crimes could scarcely have been committed.

[32] Proceeding on the basis that Ms Down and Mr Moorhead were equally culpable, the Judge revised the initial starting point down to three years to reflect Ms Down’s acquittal on Count 1.
[33] Mr Banbrook submitted that the Crown had not put its case to the jury on the basis of equal responsibility, describing Mr Moorhead during the trial as being at the epicenter of the transactions. He contended that Mr Moorhead and Ms Down were not equally culpable and that Ms Down’s involvement was peripheral to that of Mr Moorhead who actually proffered the false invoices to UDC and received the advances from UDC in the first instance. On the basis that three-and-a-half years was an appropriate starting point for Mr Moorhead, Mr Banbrook submitted that the appropriate starting point for Ms Down would have been two years’ imprisonment, to reflect her acquittal on Count 1 and the disparity in the culpability.
[34] We do not accept that Mr Moorhead played a greater role than Ms Down. Given the verdicts, sentencing had to proceed on the basis that Ms Down knew of the fraudulent nature of the transactions and was party to them. The fact is that UDC would never have parted with its money but for Ms Down signing the loan documents, guarantee and acknowledgement of collateral obligation. The invoices and the loan documents were both needed for the fraud to occur. The fact that Ms Down signed apparently genuine documents whereas Mr Moorhead proffered false invoices does not make her culpability any less.
[35] The Judge’s revised starting point for Ms Down to three years to reflect her acquittal on Count 1 was reasonable. Mr Banbrook accepted that the Judge’s substantial reduction from that starting point to reflect Ms Down’s personal circumstances was appropriate. As a result, there is no basis on which to interfere with the length of the sentence imposed.
[36] Mr Banbrook next submitted that the Judge had erred in refusing to impose a sentence of home detention. The Judge referred to R v Hill, recognising the statements by this Court that the sentence of home detention reflects a perception that society’s interests are better served in some cases by restrictions on liberty through home detention rather than through imprisonment and that a sentence of home detention provides a genuine alternative to imprisonment. [10]
[37] However, because of the seriousness of the type of offence and the need for deterrence and denunciation, the Judge held that home detention was not appropriate for Ms Down:

[84] The imposition of any sentence of home detention, even if possible or practicable for either offender would, in my judgment, send a message of but comfort and relief to others that such offending carried no severe consequences in terms of criminal sanctions.

[85] In other words, I accept that in this case the element of deterrence is a substantial, a most important one and hold that any sentence of home detention would be entirely inappropriate.

[86] In any event, and as regards Ms Down, such a sentence is on the advice of the probation officer ruled out as being without utility. Her circumstances, were she put on home detention, would scarcely change from what they are as of today.

[38] Mr Banbrook submitted that, in reaching his decision, the Judge gave inadequate weight to Ms Down’s personal and mitigating factors namely that, at 63 years of age Ms Down had no previous dishonesty convictions, had health problems, had been the victim of “emotional battering” by Mr Conway and was very likely to have been manipulated by Mr Conway and Mr Moorhead in the current offending. Against those factors Mr Banbrook submitted that the Judge gave too much weight to the need for deterrence having regard to the nature of the offending.
[39] It is true that Ms Down could lay claim to very strong personal and mitigating factors. It is also true that, as the Judge recognised, Ms Down was unlikely to offend again. Her offending in this case seemed to be the product of her relationship with Mr Conway, which no longer existed. As against those factors, however, we think the Judge was right to place significant weight on the need for a strong message that might have general deterrence. These were brazen frauds that resulted in substantial loss to UDC. We cannot say that the Judge made an error in viewing the offending as one which required imprisonment to satisfy the purposes of deterrence to others and denunciation.

Result

[40] None of the grounds raised on the appeal against conviction have been made out.
[41] On the appeal against sentence we consider that the Judge was right to treat Ms Down and Mr Moorhead as equally culpable. The starting point was appropriate, as was the sentence of imprisonment rather than home detention.

Solicitors:
Crown Law Office, Wellington for Respondent

[1] R v Down DC AucklandCRI-2009-004-7739, 16 July 2010.
[2] R v Owen [2007] NZSC 102, [2008] 2 NZLR 37 at [5].
[3] R v Munro [2007] NZCA 510, [2008] 2 NZLR 87.
[4] At [13].
[5] R v Gunthorp [2003] 2 NZLR 433 at [134], aff’d R v Thompson [2005] 3 NZLR 577 at [13].
[6] R v Shipton [2007] 2 NZLR 218 (CA) at [75]–[76].
[7] R v Varjan CA97/03 26 June 2003.
[8] Cole v Police [2001] 2 NZLR 139.
[9] Waghorn v Police HC Invercargill CRI-2008-425-1, 4 March 2008.
[10] R v Hill [2008] NZCA 41, [2008] 2 NZLR 381 at [33].

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