Watson v R [2012] NZCA 17 (20 February 2012)

Last Updated: 1 March 2012

IN THE COURT OF APPEAL OF NEW ZEALAND

CA426/2011 [2012] NZCA 17

BETWEEN RICHARD ARTHUR WATSON Appellant

AND THE QUEEN Respondent

Hearing: 13 February 2012

Court: Stevens, Ronald Young and Andrews JJ

Counsel: S Tait and H Kim for Appellant J M Jelas for Respondent

Judgment: 20 February 2012 at 3.00 pm

JUDGMENT OF THE COURT

The appeal against sentence including the minimum period of imprisonment is dismissed.
____________________________________________________________________

REASONS OF THE COURT

(Given by Ronald Young J)

Introduction

[1] The appellant, Mr Watson, pleaded guilty to two counts of theft: one count of theft by a person in a special relationship (Crimes Act 1961, s 220), and the other count theft pursuant to s 219 of the Crimes Act. He was sentenced to six and a half years imprisonment with a minimum period of imprisonment of 50 per cent of that sentence by Judge Blackie in the District Court.[1]
[2] The appellant, in appealing against sentence, says that the sentence is manifestly excessive because the Judge failed to give proper recognition to mitigating factors. Secondly, the appellant says the imposition of any minimum period of imprisonment was unjust in the circumstances.

The facts

[3] Mr Watson was at the time of his offending the General Manager, Financial Controller/Adviser and Head Accountant of the Ross Group of Companies. He commenced working for the Ross Group in 1978. The Ross Group consists of 26 private companies and four trusts. The appellant had access to all Ross Group bank accounts.
[4] Between October 2000 and February 2009 he stole $5,495,217 from the Ross Group.
[5] The thefts occurred by the appellant either transferring money to a business called Premier Insulation (of which he was a shareholder) and then to his personal account or by transferring the money from a Ross Group Company directly to his personal bank account. The appellant said that most of the stolen money had been spent on slot machines at the Auckland Casino.
[6] The offending came to light when in March 2010 the Ross family decided that there should be an audit of the group accounts. Three months later in June 2010 the appellant confessed his offending, initially to his wife who in turn contacted Mr Ian Ross, one of the Ross family to alert him to the offending.
[7] The appellant initially admitted to having taken some $2.5 million. An audit was undertaken which revealed the theft was almost $5.5 million. Eventually the offending was reported to the police. The appellant first appeared in court in August 2010. The charges were laid indictably and proceeded through the committal process to committal. The appellant finally pleaded guilty at the first trial callover.

The decision appealed from

[8] The Judge at sentencing began by detailing the victim impact. He noted that it was substantial. The appellant had apparently told the shareholders that because of financial pressures on the Ross Group they had to inject shareholders’ funds. Some of the shareholders mortgaged their own homes to inject further money into the Group. The Group itself borrowed $2 million from overseas to finance its operation. The Judge emphasised the breach of trust of the appellant’s offending.
[9] The Judge saw as aggravating features the sheer amount of the theft and the fact that the offending continued for ten years by a person in a position of trust. While the Judge accepted the appellant had confessed his offending, this confession was tempered by the fact that it came only after it was decided to get an audit of the Group accounts which the Judge considered in all likelihood would have exposed the appellant’s offending.
[10] The Judge took into account that most of the money stolen by the appellant was gambled away. However, he said that the appellant also purchased expensive jewellery, a swimming pool, and a substantial portfolio of other assets including real estate. He had a number of bank accounts. The Judge concluded, therefore, that greed played a part in the offending.
[11] The Judge noted that Counsel for the appellant did not take issue with the starting point suggested by the Crown of between seven and a half years to eight and a half years imprisonment. The Judge concluded a proper starting point was eight years imprisonment.[2]
[12] The Judge did not consider that the appellant had any remorse for his offending, relying upon comments he had made to the probation officer. The Judge acknowledged that the appellant had initiated the investigation, although only after it was clear an audit would take place.
[13] The Judge noted that accountants had to be hired at considerable expense to the Ross Group to assess precisely what had been stolen. The appellant had been reluctant to make available the details of his bank accounts so that the full extent of the offending could be traced. He said the fact that there was overwhelming evidence counted against a generous discount for a guilty plea. The Judge refused to reduce the sentence by the appellant’s claim that he was addicted to gambling. He gave a 20 per cent discount for all mitigating factors, reducing the start sentence to six and a half years imprisonment.[3]
[14] As to a minimum period of imprisonment, the Judge considered that eligibility at one third of six and a half years was not sufficient to make the appellant properly accountable for the offending, for the harm done, especially given the effect on the victims. Nor did he consider the one third non-parole period would be sufficient deterrence for others. He set the minimum period of imprisonment at 50 per cent.[4]

The appellant’s case and discussion

[15] The appellant’s case is that the 20 per cent reduction given for all mitigating factors was insufficient. The appellant says that there were four mitigating factors: the appellant’s co-operation; his remorse; his previous good character; and his offer of reparation (amends). These factors, together with the guilty plea, should have resulted in a 30 per cent reduction from the starting sentence.
[16] The appellant accepts that his guilty plea was not at the first reasonable opportunity and that there was a strong prosecution case. However, in fixing the discount for his guilty plea he submits the Judge should have taken into account that significant prosecutorial resources would have been required to prove the case against him if he had not pleaded guilty. The appellant submits that a discount in the region of 15 to 20 per cent should therefore have been given.
[17] The Judge at sentencing gave a total discount of 20 per cent. He did not specify how this discount was constituted. However, we consider it is clear from the Judge’s remarks that if he gave any discount for matters other than the appellant’s guilty plea that discount was modest. The Judge said:[5]

... so looking overall at the issues I can take into account, but primarily the guilty plea at the stage it was, I am prepared to give you a discount from that eight year starting point of 20 per cent ... .

[18] The appellant could not have expected the maximum guilty plea discount of 25 per cent in the circumstances of this case. His guilty plea was not entered early in the court process. The appellant first appeared in court in August 2010. He pleaded guilty on the 27 January 2011 after he had been committed for trial at the first callover for his trial. As the appellant properly conceded, the case against him was strong. In those circumstances a 20 per cent discount would have been generous and a 15 per cent discount well within the appropriate range. The Judge’s discount was, therefore, within the range available given the circumstances of the plea. We reject this ground of appeal.
[19] The appellant says a further ten per cent reduction in addition to the guilty plea discount should have been given for a range of further matters. We consider each in turn.

Offer to make amends to the victim

[20] Section 10 of the Sentencing Act 2002 requires the Court at sentencing to take into account (at subs (1)(a)) any offer of amends made by an offender to a victim. Relevantly subsection (2) provides as follows:

(2) In deciding whether and to what extent any matter referred to in subsection (1) should be taken into account, the court must take into account—

(a) whether or not it was genuine and capable of fulfilment; and

(b) whether or not it has been accepted by the victim as expiating or mitigating the wrong.

[21] The appellant says his offer of amends was made in an affidavit he filed in the District Court detailing his financial circumstances. He says this offer should have been, but was not taken into account by the sentencing Judge in mitigation of sentence.
[22] The Judge made no reparation order given, he said, such an order “would be in all likelihood an exercise in futility”.[6]
[23] The appellant’s case is that he had given the Ross Group his wife’s jewellery, valued at between $80,000–$120,000, and an approximately $100,000 credit he was entitled to as a shareholder in a company he co-owned with the Ross Group, as well as foregoing a travel voucher (valued at $20,000), and conceding holiday pay owed to him by the Ross Group.
[24] The appellant accepted he is insolvent and likely to be made bankrupt. His debts, including a substantial debt to the Inland Revenue Department ,exceed his assets by hundreds of thousands of dollars. He is not, therefore, in any position to offer reparation and thereby favour one creditor (the Ross Group) over his other creditors. The Judge was correct not to take into account any offer to make amends; it was not “capable of fulfilment”.[7]

Co-operation by the appellant

[25] The appellant says that the Judge wrongly gave no weight to his co-operation with the police and the Ross Group. The appellant submits the fact he made a full confession to one of the owners of the company and gave a full and detailed interview to the police about his offending entitled him to have this recognised as a mitigating factor.
[26] The Judge recognised the appellant had initially co-operated but said this was “short lived”.[8] The appellant’s initial admission must be seen in the context of the shareholders decision to audit the Ross Group of Companies accounts. Such an audit would inevitably have uncovered the appellant’s offending.
[27] As the Judge noted the appellant failed to give access to his bank accounts to the victims. Ultimately the victims had to engage an accountant to undertake at considerable expense an assessment of the full extent of the appellant’s dishonesty. We see no reason to differ from the Judge’s assessment. The Judge correctly gave a modest reduction for limited co-operation.

Remorse

[28] After considering the pre-sentence report and the psychological report the Judge concluded that there was little in the way of remorse from the appellant for his offending. The appellant says that his admission of offending illustrates his remorse and he has expressed remorse for his offending. The Supreme Court in Hessell v R observed that remorse will not be shown simply by pleading guilty.[9]
[29] There is no evidence of remorse in this case justifying a reduction in sentence. As the Judge noted, the appellant’s comments to the probation officer indicated he had a feeling of entitlement to the stolen funds arising from a (mistaken) sense he had been mistreated by the victims. We consider the Judge was correct not to give a discount for remorse.

Summary

[30] We are satisfied that the 20 per cent discount the Judge gave for all mitigation was appropriate. Other than the guilty plea there was little justification for any further discount. Within the 20 per cent given, the sentencing Judge properly gave a modest discount for the appellant’s limited co-operation beyond the guilty plea discount. For those reasons we reject this ground of appeal.

Minimum period of imprisonment

[31] The Judge imposed a minimum period of imprisonment of 50 per cent of the sentence of six and a half years imprisonment. The appellant says that such an imposition was “unjust in the circumstances”. The appellant submits that similar cases dealing with substantial fraud have not resulted in a minimum period of imprisonment being imposed; the risk of reoffending for white collar offenders is not high, and in the case of the appellant the risk of reoffending was at the low end; the need to assist the appellant’s rehabilitation and reintegration was relevant and not taken into account; and that deterrence and denunciation (especially with white collar crime) can be achieved by imprisonment itself.
[32] Finally, the appellant points out a jurisdictional issue relating to the imposition of a minimum period of imprisonment with respect to offending prior to 30 June 2002. We will deal with this at [39]–[42] below.
[33] We are satisfied that the Judge was entitled to impose a minimum period of imprisonment and that he made no error in doing so. The Judge said in imposing the minimum period of imprisonment:[10]

That is because I do not consider the minimum parole period, should it be granted to you, sufficient to make you properly accountable for the offending and for the harm done and the effects that you have brought about on the victims. Neither would I consider the minimum parole period, as laid down by the statute, to recognise sufficient deterrent from others in relation to this type of offending. I accept that a minimum parole period is appropriate, and set that minimum parole period at 50 percent of this sentence.

[34] Section 86(1) and (2) of the Sentencing Act 2002 provide as follows:

86 Imposition of minimum period of imprisonment in relation to determinate sentence of imprisonment

(1) If a court sentences an offender to a determinate sentence of imprisonment of more than 2 years for a particular offence, it may, at the same time as it sentences the offender, order that the offender serve a minimum period of imprisonment in relation to that particular sentence.

(2) The court may impose a minimum period of imprisonment that is longer than the period otherwise applicable under section 84(1) of the Parole Act 2002 if it is satisfied that that period is insufficient for all or any of the following purposes:—

(a) holding the offender accountable for the harm done to the victim and the community by the offending:

(b) denouncing the conduct in which the offender was involved:

(c) deterring the offender or other persons from committing the same or a similar offence:

(d) protecting the community from the offender.

[35] As can be seen, therefore, the Judge’s remarks regarding a minimum period of imprisonment took into account the need to hold the appellant accountable for the harm done, the denunciation of the conduct and deterrence. These are the statutory factors which the Judge was required to take into account. Nor can it be said in our view that imposing a minimum period of imprisonment in this case was out of line with other such serious offending.
[36] This offending was extremely serious. It spanned ten years and involved many millions of dollars. Two examples will suffice to illustrate why this sentence is not out of line with other very serious fraud offending. In R v Swann[11] Mr Swan and another were found guilty of representative counts of fraud. The amount involved was $16.9 million spread out over six years. A minimum period of imprisonment was imposed of just under half the nine year and six month sentence of imprisonment. The amount of the theft in Swann was significantly greater than in the current case but as the Crown point out the period of dishonestly was greater here.
[37] The facts in R v Patterson[12] involved a $3.4 million fraud relating to the Ministry of Social Development over three years. An eight year sentence was combined with a five year, or 60 per cent, minimum period of imprisonment.
[38] We are satisfied that the Judge correctly applied s 86 of the Sentencing Act and was clearly correct to impose a minimum period of imprisonment in the circumstances of this case.

Error correction

[39] Section 152 of the Sentencing Act 2002 came into force on 30 June 2002. It provides as follows:

152 Section 86 not to apply to offender convicted of offence committed before commencement date except for serious violent offender

(1) Except as provided in subsection (2), nothing in section 86 applies to an offender who is sentenced on or after the commencement date for an offence committed before that date.

(2) If an offender is sentenced on or after the commencement date for an offence committed before that date that is a serious violent offence as defined in section 2 of the Criminal Justice Act 1985, section 86 applies.

[40] The Crown accept that the Court would not have had jurisdiction to impose a minimum period of imprisonment with respect to the offending covering the period 30 October 2000 to 30 June 2002. Count one covered the period 29 October 2000 to 30 September 2003. Much of this occurred prior to the law change. The amount involved in count one was approximately $1.6 million.
[41] The appropriate course is to quash the order for a minimum period of imprisonment with regard to count one. We do so. We do not consider this change affects the overall sentence including the minimum period of imprisonment.
[42] The need for deterrence and denunciation and the need to hold the appellant accountable remains as powerful, even setting aside the amount stolen in count one. The remaining offending involves close to $4 million over approximately six years. The minimum period of imprisonment at 50 per cent is fully justified for this very serious offending.

Summary

[43] We are satisfied the sentence of six and a half years’ imprisonment is not manifestly excessive. Despite the jurisdictional error (which we have corrected) the minimum period of imprisonment was appropriate.
[44] For the reasons given, the appeal will be dismissed.

Solicitors:
Crown Law Office, Wellington for Respondent

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[1] R v Watson DC Manukau CRI-2010-092-12755, 27 May 2011.
[2] At [15].
[3] At [21].
[4] At [23].
[5] At [21].
[6] At [25].
[7] Sentencing Act 2002, s 10(2)(a).
[8] At [19].
[9] Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607 at [64].
[10] At [23].
[11] R v Swann HC Dunedin CRI-2007-012-4181, 11 March 2009.
[12] R v Patterson [2008] NZCA 75.