Bell v R [2014] NZCA 210 (30 May 2014)

Last Updated: 4 June 2014

IN THE COURT OF APPEAL OF NEW ZEALAND
CA57/2014 [2014] NZCA 210
BETWEEN	STUART CRELLIN BELL Appellant
AND	THE QUEEN Respondent

Hearing:	6 May 2014
Court:	O’Regan P, Courtney and Clifford JJ
Counsel:	R Maze for Appellant J E Mildenhall for Respondent
Judgment:	30 May 2014 at 9.30 am

JUDGMENT OF THE COURT

The appeal against sentence is dismissed.
____________________________________________________________________

REASONS OF THE COURT

(Given by Clifford J)

Introduction

[1] The appellant, Stuart Crellin Bell, pleaded guilty to seven counts of fraud, involving the fraudulent obtaining of investments in his company of $390,000 and of false insurance pay-outs of around $713,000.
[2] On 22 January 2014 Mr Bell was sentenced by Judge Garland to a total of two years and three months’ imprisonment.^[1]
[3] Mr Bell now appeals that sentence as being manifestly excessive.

Factual background

[4] Mr Bell was the chief executive officer of Black Box Spatial Ltd (Black Box), a software development company. Black Box was developing a programme to calculate rebates for road user charges.
[5] Stephen and Jeremy McPhail were directors of Black Box. In May 2010, when Black Box required further capital investment, Mr Bell sent emails to Stephen McPhail, purporting to be either from Black Box customers or government agencies, which confirmed that the development of the road user charge rebate software was well advanced and had official approval. It subsequently transpired that the detail of those emails had been altered by Mr Bell to create that impression falsely.
[6] In early 2011, further funds were required for Black Box. At this point Mr Bell sent Stephen McPhail a scanned copy of a payment advice summary for the benefit of Black Box from a government agency for the sum of $707,166.46. Inquiries subsequently showed that document to be forged, and that no payments were in fact due to Black Box as recorded on it.
[7] The McPhails advanced debt funding to Black Box on the strength of that documentation.
[8] Following the Christchurch earthquakes Mr Bell, on behalf of Black Box, falsely asserted to the company’s insurer, Vero, that some seven Black Box clients were in the process of using the road user charge rebate software to process data and claim rebates. Six forged contracts were subsequently provided to Vero. The sum of $713,129 was fraudulently obtained from Vero in that way.

The challenged sentencing decision

[9] The Judge fixed a starting point of three years in respect of the Vero fraud, uplifted by one year for the fraud on the McPhails, giving an overall starting point of four years’ imprisonment. In determining that overall starting point, the Judge took into account the aggravating factors of the premeditation of the offending, the amount of the fraudulent benefit obtained (some $1.1 million) and the fact the Vero fraud was post-earthquake insurance fraud in Christchurch. Insurance companies were struggling to deal with the sheer volume of claims being made and were therefore, in the Judge’s assessment, more vulnerable to fraudulent claims than usual. Mr Bell’s offending against Vero involved a substantial breach of trust. The Judge also regarded as an aggravating factor the impact, both financial and emotional, of Mr Bell’s offending on the McPhails. The McPhails were family friends of Mr Bell and, particularly, his father. Mr Bell had breached the McPhails’ trust also.
[10] In terms of mitigating factors, the Judge acknowledged that Black Box’s business was legitimate, and not itself a fraud or scam. The only personal gain Mr Bell had received was the continuation of his salary and the funds obtained were used to keep the company operating until, finally, it was placed in liquidation.
[11] On that basis, the Judge saw Mr Bell’s fraud as being similar to that in R v Varjan.^[2]
[12] In terms of mitigating factors personal to Mr Bell, the Judge recognised Mr Bell’s guilty pleas and associated remorse: while the guilty pleas had not been entered at the earliest possible opportunity, a psychiatric report indicated that Mr Bell may not have recalled all the details of his offending. On that basis, the Judge allowed a full 25 per cent discount, or one year.
[13] The Judge then allowed a further discount of seven months on account of Mr Bell’s previous good character, his personal circumstances and his participation in a restorative justice meeting with the McPhails. He had apologised to the McPhails for what he had done. The Judge accepted that apology was genuine and clearly of some comfort to the McPhails. The Judge accepted that Mr Bell had a wife and two young children who needed his financial and emotional support, and that he was a man of previous good character.
[14] Moreover, as a result of these events Mr Bell and his immediate family had lost their modest assets and Mr Bell was facing bankruptcy. Mr Bell had taken steps to rehabilitate himself: he had obtained employment as an apprentice builder and had obtained counselling. The Judge was unable to accept, however, that Mr Bell’s identified dissociative disorder contributed in any material way to his dishonesty offending.
[15] The Judge calculated Mr Bell’s end sentence at that point as being one of two years and three months’ imprisonment.
[16] The Judge did not consider any further discount was called for on account of the reparation, some $80,000, that Mr Bell had paid to Vero as part of a settlement of Vero’s civil claim against Black Box and its directors, including the McPhails. The Judge reasoned, based on the information available to him, that although Vero had settled its civil claim, that simply reflected the fact Mr Bell did not have the means to pay any greater reparation than had been provided, rather than indicating that Vero was no longer out of pocket.

Case on appeal

[17] For Mr Bell, Mr Maze’s general argument was that Mr Bell should have been sentenced to a term of imprisonment of two years or less. On that basis, home detention was available, and was the appropriate outcome. More specifically Mr Maze argued that in arriving at the sentence of two years and three months the Judge had erred in finding that Mr Bell had obtained $690,000 from the McPhails by deception. The Judge had also erred in finding that Vero had suffered losses. The argument was that the settlement of Vero’s civil claim meant Vero had recovered its losses, thereby reducing Mr Bell’s culpability. The Judge had also been wrong, Mr Maze argued, to conclude that Vero was vulnerable to Mr Bell’s offending.

Analysis

[18] We first consider the specific points made by Mr Maze. We then consider his more general submission.
[19] Mr Maze submitted the Judge had erroneously found that Mr Bell had dishonestly obtained $690,000 from the McPhails. Stephen McPhail stated in his victim impact statement that he and his brother had lent Black Box that amount of money between 2009 and 2011. That was accepted. But Mr Bell’s offending had not begun until 2010. Therefore, it was not correct to infer that all the money lent had, in fact, been advanced in reliance on Mr Bell’s fraud.
[20] On the facts, we acknowledge that it is possible that some of the $690,000 was lent by the McPhails to Black Box before Mr Bell’s fraud in 2010. Having said that, we do not think the Judge made any relevant error. The relevant passage from the Judge’s sentencing notes reads as follows:

[18] In relation to the directors, the McPhails, as a result of your dishonesty you enticed them to lend the company $690,000.00. At the time that Black Box went into liquidation they were still owed $390,000.00. That sum represents the loss occasioned to them as a result of your dishonesty.

[19] In relation to the insurance company, Vero, you obtained $713,129.00 by deception. Overall then the total amount obtained as a result of your dishonesty is in the region of $1.1 m.

[21] It was by reference to that overall amount of $1.1 million ($390,000 from the McPhails and $713,129 from Vero), that the Judge sentenced Mr Bell. It was by reference to that amount that the Judge had, some four months previously, provided Mr Bell with a sentencing indication. The Judge referred again to the amount of fraudulent benefit obtained by Mr Bell, being the sum of $1.1 million, when he assessed the criminality of Mr Bell’s offending. It seems reasonably clear that it is with reference to that amount, therefore, that the Judge sentenced Mr Bell.
[22] We do not think the Judge found that Vero was a vulnerable victim, in the sense that that term is used in the sentencing context. Rather, our assessment is that the Judge thought it was an aggravating feature that Mr Bell took advantage of the pressure that all insurers in Christchurch were under in dealing with claims in the period following the earthquakes. We do not think that assessment can be criticised.
[23] It was Mr Maze’s argument that the Judge failed to properly distinguish between the amount of money that Mr Bell obtained fraudulently, and the loss caused to Vero. Mr Maze argued that because there had been a civil settlement between – as we understand it – Vero, Black Box, Mr Bell, the McPhails and the McPhails’ insurers, it could not be said that Vero was “out of pocket” by over $600,000. As noted, the full details of that settlement had not been provided to the sentencing Judge, only that Mr Bell had himself paid some $80,000. Based on Mr Maze’s explanation to us, it would appear that the McPhails, their insurers or Black Box’s insurers may have contributed the balance of the sum of $550,000 that Mr Maze told us had been received by Vero. It was Mr Maze’s submission that that payment in some way reduced Mr Bell’s culpability for this offending by reducing the loss involved.
[24] We do not accept that submission. Given the civil settlement was not entirely paid by Mr Bell personally, all it meant was that the loss caused by Mr Bell was transferred away from Vero to another insurance company or companies and to some extent, to the McPhails personally. That does not reduce Mr Bell’s culpability. If anything, any need for the McPhails to contribute to the loss suffered by Vero, given that Mr Bell had also directly defrauded them, would make this offending worse.
[25] We do accept, however, that some credit was due to Mr Bell for the fact that he contributed around $80,000 to the settlement with Vero. But to allow this appeal, we must be persuaded that the end sentence of two years and three months was manifestly excessive, whether or not the Judge may have been in error in not providing a separate discount on account of that factor.
[26] In Varjan, this Court provided guidance as to relevant considerations when assessing culpability in fraud cases:^[3]

[22] 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.

[23] It is in the assessment of culpability that comparison with other cases is to be undertaken. Matters of mitigation such as reparation, co-operation with investigators, plea, remorse and personal circumstances necessarily must be assessed in each particular case.

[27] As directed by Varjan, in determining Mr Bell’s culpability the Judge considered other cases. In addition to Varjan itself, the Judge considered D’Villiers v R,^[4] Allison v R^[5] and R v Adams.^[6]
[28] In our view, when considered in terms of the Varjan culpability criteria, and on a comparative basis with Varjan itself and the cases the Judge referred to, which we have reviewed, the starting point sentence of four years that the Judge arrived at was within range. We reach that conclusion on the basis of the amount of money dishonestly obtained and the breach of trust, particularly relating to the McPhails, involved. We also note that the offending occurred over an extended period of time, and that Mr Bell’s personal gain (the continuing receipt of his salary) was greater than that derived by the offender in Varjan.
[29] From that four year starting point, the Judge provided a generous 25 per cent guilty plea discount notwithstanding the lateness of the pleas (entered 15 months after depositions). The Judge then allowed a further seven month discount for Mr Bell’s previous good character. When actually calculating the discount, the Judge made an error and provided a nine month reduction on account of those factors, to reach his end point sentence of two years and three months.
[30] Therefore, taken overall, the Judge allowed a discount of 44 per cent off the starting point sentence identified.
[31] As Ms Mildenhall for the Crown pointed out, there were two errors in the methodology the Judge used to calculate Mr Bell’s end sentence. First, and in terms of Hessell,^[7] the Judge should have reduced the starting point sentence for personal mitigating factors before calculating the guilty plea discount. Deducting the seven month personal circumstances discount from the starting point sentence would have resulted in a pre-guilty plea sentence of three years and five months’ imprisonment. Allowing a 25 per cent discount for the guilty plea and associated remorse would have further reduced that sentence to two years and (rounded) seven months’ imprisonment. That compares with the end sentence of two years and three months’ imprisonment actually imposed by the Judge.
[32] The Judge’s errors provided an additional discount of some four months to Mr Bell. Those four months equate to eight per cent of Mr Bell’s starting sentence. His payment of $80,000 equates to just seven per cent of the total loss of $1.1 million. In those circumstances, we do not think any further discount on account of the payment made in reparation is required from this Court on appeal. In our view, the end point sentence was within range, and was not manifestly excessive.
[33] Mr Bell’s appeal is dismissed.

Solicitors:
R A Fraser & Associates, Christchurch for Appellant
Crown Law Office, Wellington for Respondent

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^[1] R v Bell DC Christchurch CRI-2012-009-2408, 22 January 2014.

^[2] R v Varjan CA97/03, 26 June 2003.

^[3] R v Varjan, above n 2.

^[4] D’Villiers v R [2010] NZCA 85.

^[5] Allison v R [2013] NZCA 244.

^[6] R v Adams (2006) 22 NZTC 19,872 (CA).

^[7] Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607.