Gao v R [2013] NZCA 173 (22 May 2013)

Last Updated: 29 May 2013

IN THE COURT OF APPEAL OF NEW ZEALAND

CA591/2012 [2013] NZCA 173

BETWEEN HUI “LEO” GAO Appellant

AND THE QUEEN Respondent

Hearing: 13 May 2013

Court: Randerson, Rodney Hansen and Lang JJ

Counsel: R M Mansfield for Appellant K A L Bicknell for Crown

Judgment: 22 May 2013 at 4:00pm

JUDGMENT OF THE COURT

The appeal against sentence is dismissed.

____________________________________________________________________

REASONS OF THE COURT

(Given by Lang J)

[1] Mr Gao pleaded guilty in the District Court at Rotorua to seven charges of theft. The charges related to the sum of $6.782 million that Mr Gao had stolen from the Westpac Banking Corporation Ltd (“Westpac”).
[2] On 24 August 2012, Judge Cooper sentenced Mr Gao to four years seven months imprisonment.[1] Mr Gao now appeals to this Court against sentence.

Facts

[3] Mr Gao and his mother were the sole shareholders of Heights Services Ltd (“the company”), which owned and operated a service station in Rotorua. Mr Gao was responsible for the day to day operation of the company’s business.
[4] Westpac had granted the company an informal and temporary overdraft facility that permitted it to withdraw funds up to a limit of $100,000. On 19 April 2009, Mr Gao applied to Westpac for that facility to become permanent. Westpac approved the application, and advised Mr Gao that the overdraft limit was permanently increased to the sum of $100,000.00.
[5] Westpac updated its computer database to reflect the new overdraft facility on 21 April 2013. At that point one of Westpac’s employees made a serious error. Instead of recording that the company had an overdraft facility of $100,000, the database showed that the company had an overdraft facility of $10,000,000.00.
[6] Mr Gao became aware of the bank’s error very quickly. Rather than advising Westpac of what had occurred, however, he immediately began transferring funds from the company’s account into other bank accounts in both New Zealand and overseas. Between 24 April 2009 and 4 May 2009, Mr Gao withdrew a total sum of $6,782,000.00 from the company’s account in 39 separate transactions. He arranged for most of that money to be transferred, often using remittance agencies based in New Zealand, into bank accounts in Hong Kong and China. Mr Gao also transferred funds into casino accounts in Macau.
[7] On 29 April 2009, Mr Gao left New Zealand and travelled to Hong Kong. His partner joined him there four days later. His parents had already travelled to Hong Kong on 27 April 2009.
[8] It would appear that it took Westpac approximately two weeks to become aware of the error that its employee had made. At that point it immediately began tracing and trying to recover the funds that Mr Gao had transferred out of the company’s account. Westpac also realised securities that it held over Mr Gao’s assets in New Zealand. Through these avenues it was able to recover the sum of approximately $3 million. It has not been able to recover the balance of approximately $3.7 million.
[9] Mr Gao was eventually arrested in Hong Kong in September 2011, after the New Zealand Government had made an extradition request to the Hong Kong authorities. After being held in custody for a period in Hong Kong, he consented to being extradited to New Zealand. He arrived back in New Zealand on 21 December 2011, at which point he was immediately arrested.
[10] After being committed for trial on 21 February 2012, Mr Gao pleaded guilty to the charges on 12 June 2012.

Structure of the sentence

[11] The Judge took into account several factors in fixing the starting point for the sentence to be imposed on Mr Gao. These included the very large amount stolen, and the fact that approximately $3.7 million had not been recovered. The Judge accepted that the offending could properly be described as opportunistic, and did not involve a breach of trust of the type commonly found in other cases involving the theft of large amounts of money. Nevertheless, he considered that it involved a “determined and very persistent effort” to transfer substantial sums of money out of the company’s account and overseas as quickly as possible.
[12] After comparing Mr Gao’s offending to that in other cases involving the theft of large sums of money, the Judge concluded that a starting point of six years six months imprisonment was appropriate to reflect Mr Gao’s culpability on all charges.
[13] The Judge then considered mitigating factors. He reduced the starting point by 15 months, or approximately 20 per cent, to reflect Mr Gao’s guilty pleas. He then reduced the sentence by a further eight months to reflect the time that Mr Gao had spent in custody in Hong Kong and on electronic bail. The Judge declined to reduce the sentence further to reflect remorse and absence of previous convictions. This led to the effective end sentence of four years seven months imprisonment.

Grounds of appeal

[14] Counsel for Mr Gao contends that the six year six months starting point was too high. He also submits that the Judge should have reduced the starting point further to reflect Mr Gao’s previous good character. He does not, however, take issue with the discounts that the Judge applied to reflect Mr Gao’s guilty pleas and the periods he had spent in custody in Hong Kong and on electronic bail.

Was the starting point too high?

[15] As the Judge recognised, there is no tariff or benchmark for the starting point to be selected in cases involving dishonesty or fraud.[2] Culpability is to be assessed having regard to all the relevant circumstances of the offending. These may include the nature of the offending, its magnitude and sophistication, the type and number of victims and the period over which the offending occurred. Breach of trust may be a relevant factor, as may be the effect of the offending on victims.[3]
[16] We agree that all of the factors that the Judge identified were relevant to the exercise of fixing the starting point in the present case. The fact that Mr Gao initially stole the sum of approximately $6.7 million was obviously a significant factor. That was a very large sum by any standard.
[17] Although Westpacs’s loss was ultimately reduced to approximately $3.7 million when it reversed some of the transfers and realised securities that it held over Mr Gao’s assets, Mr Gao did not contribute to either of those exercises. Westpac was required to undertake them without his assistance, and at its own considerable expense. If the bank had not taken those steps, Mr Gao would have retained the benefit of the entire amount that he transferred out of the company’s account.
[18] Like the Judge, we accept that Mr Gao’s offending was opportunistic in the sense that he did not create the opportunity for the theft to occur. Westpac’s error provided that opportunity. To that extent his offending can be distinguished from that which occurs in many cases involving the theft of large sums of money. As we discuss below, many such cases involve premeditated offending over a significant period, often in circumstances involving a significant breach of trust.[4] Mr Gao’s offending does not fall within that category. Importantly, however, it did not comprise a single, or “one-off,” instance of Mr Gao opportunistically taking advantage of Westpac’s error. Rather, Mr Gao systematically arranged for numerous transfers to be made to overseas bank accounts over a period of approximately 10 days.
[19] One example is sufficient to demonstrate the nature of Mr Gao’s offending. This is taken from the agreed summary of facts in relation to Count 4 in the indictment. The summary records that on 28 April 2009 Mr Gao transferred the sum of $500,000 from the company’s Westpac account into a remittance company’s bank account. Acting on Mr Gao’s instructions, the remittance company then transferred those funds to several bank accounts in Hong Kong and mainland China. Three of those accounts were in the name of Mr Gao’s mother. Of these funds, the sum of NZD$347,460.80 was converted into Hong Kong dollars on 4 and 5 May 2009, and transferred into a player’s account in the name of Mr Gao’s partner at a casino in Macau.
[20] This example, which is reasonably typical of the transactions surrounding the remaining charges, demonstrates that it would not have been a simple matter for Westpac to track down the ultimate destination and recipient of the funds that Mr Gao transferred out of the country. It also shows that Mr Gao used reasonably sophisticated methods that were obviously designed to achieve that object. They clearly succeeded, because Westpac has been prevented from tracing and recovering the sum of approximately $3.7 million. For this reason we reject Mr Mansfield’s submission that Mr Gao’s offending can properly be described as simplistic or naive.
[21] The weight to be given to the fact that such a significant sum remains outstanding was a point of difference between counsel. The Crown contended that it was highly relevant to the assessment of Mr Gao’s overall culpability. Counsel for Mr Gao disagreed. He argued that, because Mr Gao has not offered to pay reparation, he cannot rely upon the payment of reparation as a mitigating factor. He submitted that it was therefore a neutral factor, and did not aggravate the seriousness of the offending. He resisted our suggestion that we should proceed on the basis that Mr Gao still had control of the outstanding funds.
[22] On this point we uphold the Crown’s submission, and reject those advanced for Mr Gao. If Mr Gao wished the Court to proceed on the assumption that he no longer has the funds, it was incumbent on him to offer an explanation as to what has happened to them. To date he has not done so. The Court is therefore entitled to proceed on the basis that Mr Gao has retained control of the funds, and will have access to them once he is released from prison. We consider the sentence needed to reflect this factor.
[23] We also consider that the sentence needed to reflect the fact that, having transferred the money out of New Zealand, Mr Gao then deliberately placed himself outside the jurisdiction of the New Zealand authorities. In doing so, he made it more difficult for the authorities in this country to interview and arrest him.
[24] In assessing the starting point for any sentence, the starting points selected in other broadly comparable cases will almost always provide assistance. Having said that, the circumstances of the present case are probably unique for sentencing purposes. Counsel have been unable to find any other case in which an offender has taken the advantage of a bank’s error to steal a very large sum of money.
[25] The authorities of greatest assistance are Pickett v Serious Fraud Office,[5] Serious Fraud Office v Baylis[6] and Fitzsimons v Serious Fraud Office.[7] In Pickett, an accountant in a rural area defrauded more than 200 clients of approximately $3.77 million over a period of approximately 20 years. He had also stolen investors’ funds totalling approximately $470,000, and had used these for his own purposes. The length and scale of the offending, coupled with the extent to which it involved repeated breaches of trust, were significant features of the case. A starting point of nine and a half years imprisonment was not disturbed on appeal.
[26] In Baylis, the offender and an associate had used investors’ funds totalling approximately $5.8 million for their own purposes. The offending had occurred over approximately 21 months, and involved hundreds of victims. The sentencing Judge in the District Court had described the offending as having been “carefully planned and executed.”[8] As in the present case, a starting point of six years six months imprisonment was selected. On a Crown appeal, a Full Court of the High Court observed that an appropriate starting point would have been between seven and eight years imprisonment. The Court was not, however, prepared to find that the sentence was manifestly inadequate.
[27] In Fitzsimons, the offender had stolen approximately $4 million from a company of which he was the General Manager. He had committed the thefts over a period of approximately 18 months by writing cheques drawn on the company’s bank account, and by using forged documents. The ultimate loss to the company was approximately $3.5 million. The sentencing Judge described the offending as a gross breach of trust in respect of a company over which the offender had virtual control. A starting point of seven years imprisonment was selected and this was not challenged on appeal.
[28] We consider Mr Gao’s offending to be less serious than that in Pickett because of the length of time over which the offending in that case occurred, and the number of victims. The sum that Mr Gao stole is, however, broadly similar to the amounts stolen in both Baylis and Fitzsimon. Although we have accepted that Mr Gao’s offending did not involve a breach of trust of the type that was a feature in those cases, we consider that financial institutions such as Westpac are entitled to proceed on the basis that their customers will deal with them honestly. When an error occurs, they are therefore justified in expecting that the customer will not try to take advantage of it. When large sums of money are stolen as a result of a customer dishonestly taking advantage of a bank’s error, the sentence imposed on the offender should reflect the need to deter such offending.
[29] Taking those factors into account, we are satisfied that a starting point of six years six months imprisonment was within the range available to the Judge.

Should the sentence have been reduced further?

[30] Counsel for Mr Gao submitted that the Judge should have reduced the starting point by a further three months to reflect the fact that Mr Gao had previously been a person who had worked hard and contributed to the community. Although Mr Gao has convictions for traffic offences, his counsel submitted that these should not have prevented the Judge from giving Mr Gao a small discount to reflect his previous good character.
[31] We agree that it would have been open to the Judge to apply a further discount to reflect this factor if he had thought it appropriate to do so. In the end, however, the Judge was not required to provide the discount that Mr Gao’s counsel sought. Discounts of this type are very much a matter of sentencing discretion. In a case that falls close to the line, it would be inappropriate for this Court to disturb the Judge’s decision without good cause. We are not prepared to say that he erred in failing to provide Mr Gao with a further discount to recognise his previous good character.

Result

[32] The appeal against sentence is dismissed.

Solicitors:
Crown Law Office, Wellington for Respondent

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[1] R v Gao DC Rotorua CRI-2010-063-753, 24 August 2012.
[2] At [6], where the Judge cited R v Varjan CA 97/03, 26 June 2003 in support.
[3] Ibid, at [22].
[4] At [26]–[28].
[5] Pickett v Serious Fraud Office HC Napier CRI-2009-441-24, 5 November 2009.
[6] Serious Fraud Office v Baylis HC Wellington AP242/01, 24 October 2001.
[7] Fitzsimons v Serious Fraud Office HC Napier CRI-2008-441-37, 9 March 2009.
[8] Serious Fraud Office v Baylis, above n 7, at [7].