Tonga v R [2011] NZCA 257 (8 June 2011)

Last Updated: 14 June 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA73/2011 [2011] NZCA 257

BETWEEN SYLVESTER TONGA Appellant

AND THE QUEEN Respondent

Hearing: 26 May 2011

Court: Glazebrook, Simon France and French JJ

Counsel: P H H Tomlinson for Appellant J Mildenhall for Respondent

Judgment: 8 June 2011 at 2.30 pm

JUDGMENT OF THE COURT

The appeal against sentence is dismissed.

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REASONS OF THE COURT

(Given by Simon France J)

Introduction

[1] Mr Tonga appeals a sentence of 28 months’ imprisonment imposed by Judge Field in relation to six counts of fraud.[1] The crucial question is whether a starting point of three years was manifestly excessive.

Facts

[2] Mr Tonga was a director of a company which ran a car sales yard. Potential purchasers would often need finance, and the business organised this for them through Southern Finance Ltd. Mr Tonga had worked for that company prior to setting up the car sales business.
[3] The first necessary step was to obtain a credit check which would be forwarded to Southern Finance, along with the application. The credit checks were provided by Veda Advantage New Zealand Ltd. Mr Tonga’s fraud was to alter these credit reports prior to forwarding them to Southern Finance. The purpose was to disguise the true report which would have resulted in the applications being declined.
[4] Mr Tonga did this on 111 occasions. Many involved two applications, for example a husband and wife. If one was approved, the other would not be proceeded with. Ultimately, 85 loans were obtained that would not otherwise have been approved. The finance company notes that the number of false applications that have been identified reflects the extent to which it has searched; it has not been worthwhile for the company to go further back in time. In this sense the date of first offence is an arbitrary cut off chosen by the company.
[5] As at the time of sentencing, 42 of the 85 borrowers had defaulted. It is not clear how many defaults were remedied, nor what a normal default rate would be. However, Southern Finance reports a loss of $151,000. This obviously did not include any future defaults that might occur. The size of the loss was disputed by Mr Tonga, but the Judge seems to have accepted it as reasonably indicative of the correct amount.
[6] Concerning what gain Mr Tonga made, there are two figures. The first is settled, and is the commission of $350 for every approved loan. The second is less certain, being the mark up on each car sale. For sentencing purposes it was averaged out at $2,000 per car. This figure is quite speculative, but we accept that Mr Tonga, who seems to be a one third owner as well as director, would have benefited to some degree from the sales.
[7] The charged offending spans from 21 March 2006 to 12 May 2008.

Decision

[8] There is no tariff for offending of this nature. In R v Varjan this Court identified the factors that influence the starting point:[2]

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.

[9] Applying these considerations to the particular facts, the most obvious factors are the length of time over which the offending extended and the number of offences that were committed in this time. More than two years, and 111 false applications, represent a sustained period of dishonesty. However, the offending, which seems to have been motivated solely by personal gain, was not particularly sophisticated.
[10] We need to comment in more detail on two other factors identified in the Varjan passage. Mr Tonga challenges both the size of the loss, and the number of victims. Mr Tomlinson queries the claimed loss of $151,000, and we consider there are two aspects to it that give the challenge some weight. First, the company’s loss calculation is based on a loss of profits model which we do not consider is a correct analysis for this type of exercise. Second, it seems that the commission fee of $350 may have been double counted.
[11] That said, Southern Finance’s Victim Impact Statement is a reminder that loss cannot be measured only in dollars. The business and its staff have been subjected to a greatly increased workload, with resultant stress, as they seek both to identify the scale of the fraud and take any steps necessary to remedy it. Further, the company has experienced a cash flow crisis, and this has necessitated downsizing its staff by two positions. Restructuring of its Auckland business has also been required.
[12] The second area of contest is the extent to which the car purchasers can be treated as victims. We agree that circumstances will vary greatly and to describe some as victims may be a stretch. On the other hand it will undoubtedly be the case that many have been encouraged to take loans they cannot afford and cannot repay. This will have caused pressure and stress. Many have defaulted, and will suffer further credit downgrading as a consequence. For these reasons it is correct to view a substantial number of the purchasers as also being victims.
[13] The last of the considerations on which we comment is the extent to which there is a breach of trust. It is not a classic breach of trust case but there clearly was a relationship between Mr Tonga and Southern Finance. Further, it is undoubtedly the case that the lack of suspicion that enabled him to do this for more than two years was due, in part, to the fact that he was known to and trusted by Southern Finance.
[14] The six offences to which Mr Tonga pleaded guilty are each punishable by a maximum of ten years’ imprisonment. The charges actually cover 85 such offences, have resulted in losses of more than $100,000, and have caused considerable hardship to many people. On its face, unless the decided cases say otherwise, a starting point of three years would seem within the available range.
[15] The two cases most relied on by Mr Tomlinson were Ransom v R and R v Nandan.[3] Ransom involved benefit fraud spanning ten years and resulting in improper payments of $128,000. On 11 occasions over this ten year period, Ms Ransom falsely declared herself to be unattached when she was in fact married. The sentencing Judge took a starting point of two and a half years.
[16] The case is of limited assistance because the sole issue on appeal was whether home detention should have been imposed rather than the final sentence of 18 months. This Court was not required to comment on the starting point. However, we observe that whilst two and a half years was the sentencing Judge’s starting point, the Court of Appeal decision is not authority for the proposition that a higher figure was unavailable. Further, though the loss figures are comparable to the present case, the number of offences covered by the charges is but 10% of Mr Tonga’s offending. We do not, therefore, see Ransom as assisting the proposition that the present starting point was unavailable.
[17] Nandan involved the falsification of mortgage applications. The purchasers in whose name the applications were advanced were unaware of the deceit. The offending spanned a year or more and involved several properties. Various banks had advanced $720,000 as a consequence of the fraudulent applications but the case does not record them as having suffered loss. Mr Nandan’s personal gain was $17,000. The sentencing Judge took an 18 month starting point, and there was then a six month reduction for mitigating factors. This Court described the end outcome of 12 months as relatively lenient.
[18] Again the differences with the present case are sufficiently marked to mean we do not see Nandan as assisting the appellant. There are here many more offences over a longer time, greater personal gain and greater losses suffered by innocent victims.
[19] Ms Mildenhall referred us to R v Hii.[4] Mr Hii was a bank employee who used his knowledge and contacts within the bank to successfully apply for ten credit cards in the name of fictitious persons. The loss to the bank, and his gain, was $127,000. A starting point of three and a half years was upheld. There is in that case a much stronger breach of trust component, but again it does not suggest the present starting point of six months less is out of range.
[20] Finally we note that in Varjan, a three year starting point was taken. In similar vein to the present case, there the offender had submitted incorrect mortgage applications. The exact number is unclear but it seems to be at least 20. The offending occurred over a period of time, and the financial institutions suffered losses from the fraudulent transactions of $550,000. On its face the size of this loss seems to make the case more serious than the present offending. However, it is not clear how much of that loss was attributable to Mr Varjan, who was part of a group of offenders. The Court noted the sentence in Nandan but felt that a higher starting point was required for Mr Varjan because:[5]

there will be losses for the bank to which the appellant’s offending contributed.

[21] This observation suggests some care is needed when using the $550,000 for comparative purposes. Further, Mr Varjan’s personal gain was described as nil, and the Court appears to have had some doubt as to the extent to which he was a central offender. After careful consideration of this case, which initially appeared to us to be the best authority in support of the appeal, we do not consider it can be taken as meaning the present three year starting point for Mr Tonga was unavailable. Overall, our sense from the cases is that whilst the present starting point was towards the upper end of the range, it was not outside it.
[22] Mr Tomlinson also challenged the amount of credit given to Mr Tonga. The Judge had deducted 10% for general factors including reparation of $6,000[6] and then applied a further 10% for a guilty plea three weeks before trial. Mr Tomlinson submits there was insufficient credit for remorse, and previous good character.
[23] Judge Field recognised Mr Tonga’s remorse and included it in the initial 10%. We do not consider a higher figure would be appropriate. The Judge rightly noted that credit for remorse had to be considered within the context of a very belated acceptance of responsibility.
[24] Previous good character is always a difficult concept in cases such as this where there is prolonged offending over more than two years. It is certainly applicable at the time of the first offence, but can hardly be claimed by the time Mr Tonga filed his 10th or 20th or any of the numerous subsequent fraudulent applications.
[25] At the end of the day, the issue is whether 20% mitigation was insufficient. Given the very late plea and the fact that the reparation represents, at best, 5% of the losses, we are not persuaded a greater figure was required.

Result

[26] The appeal against sentence is dismissed.

Solicitors:
Crown Law Office, Wellington for Respondent

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[1] R v Tonga DC Auckland CRI-2010-004-012362, 16 November 2010.
[2] R v Varjan CA97/03, 26 June 2003 at [22].
[3] Ransom v R [2010] NZCA 390; R v Nandan CA136/98, 2 September 1998.
[4] R v Hii CA99/05, 10 April 2006.
[5] At [27].

[6] The sentencing Judge accepted this was the correct figure. The Crown on the appeal suggests that only half that figure has been paid. However, we do not consider the correct material has been provided for us to revisit the question and so we proceed on the same basis as Judge Field.