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Court of Appeal of New Zealand |
Last Updated: 30 March 2015
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IN THE COURT OF APPEAL OF NEW ZEALAND
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BETWEEN
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Appellant |
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AND
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Respondent |
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Hearing: |
2 March 2015 |
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Court: |
French, Asher and Williams JJ |
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Counsel: |
R C Laurenson and L M McKeown for Appellant
J O Upton QC for Respondent |
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Judgment: |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Asher J)
Introduction
[1] The appellant, Ronald Peter Rosenberg, appeals against the sentence imposed upon him following his convictions on 41 charges of dishonestly using a document.[1] Each charge carries a maximum of seven years’ imprisonment. Judge Davidson found him guilty on each of the charges after a four week judge-alone trial.[2] He sentenced Mr Rosenberg to three years’ imprisonment and to pay $400,000 by way of reparation.[3]
[2] This appeal by Mr Rosenberg is against the sentence of $400,000 reparation only. Mr Rosenberg expressly does not appeal against the three year term of imprisonment and made it clear that, should the Court be minded to allow the appeal against the reparation sentence but increase the period of imprisonment, he would rather that the sentence of reparation remain unchanged.
The offending
[3] The details of Mr Rosenberg’s offending are set out in the reasons for verdicts of Judge Davidson of 4 April 2014. We do not propose repeating that detailed background.
[4] The charges related to the under-reporting of gas consumption by E-Gas Ltd and E-Gas 2000 Ltd (collectively E-Gas) between 4 May 2005 and 5 October 2008. E-Gas was involved in the retail supply of gas to end customers. Mr Rosenberg was the manager and chief executive of both companies.
[5] Early each month E-Gas, as a non-incumbent retailer, was required to file an allocation submission to a person called an “allocation agent”, who checked the allocation data and collected daily information on how much gas was being injected into the transmission network. This allocation data was invariably a mixture of actual and estimated data. The agent collated that data with that provided by other non-incumbent retailers and calculated the difference between that aggregated figure and the total gas gate load. The incumbent retailers were then assigned the difference with the effect that incumbent retailers bore the additional costs if non-incumbents’ reported gas usage was inaccurate, incomplete or dishonest.
[6] In his sentencing notes the Judge noted that over a three and a half year period Mr Rosenberg and his co-director and co-defendant, Sydney Hunt, would ensure that the allocation submissions involved a downward adjustment. As the Judge put it, if a supplier had received and paid for 100 units of gas worth $100 in a particular month, the practice would be to invoice 88 units of gas at $88.[4] The Judge explained: “The flow-on effects of this were dramatic, affecting costs and various industry penalties.”[5] It meant E-Gas received free gas by not paying the wholesaler for gas used but not declared and avoided the overrun fees and distribution charges which would otherwise have arisen in respect of this gas. Over the 2005–2008 period nearly one million gigajoules of gas was under-reported by E-Gas.
[7] The Crown claims there was a combined pecuniary advantage to E-Gas from under-reporting totalling approximately $17.4 million. The Judge did not work off this figure. He concluded that for sentencing purposes there was a fraud amounting to at least $9.75 million.[6] He held that most likely it was more, but the clear requisite proof of that was unavailable.[7] He sentenced on the basis of a $9.75 million fraud “with considerable reluctance”.[8]
Leave to adduce further evidence
[8] Mr Rosenberg applied for leave for the admission of further evidence in this appeal. That evidence is a settlement agreement Mr Rosenberg had reached with the liquidators of the E-Gas companies, which had been referred to at sentencing but not produced, and the eighth and ninth report on the liquidations of those companies dated 20 May 2014 and 13 November 2014 respectively.
[9] While the settlement agreement and eighth report were technically available at the time of sentencing, they had become available only shortly before the sentencing.[9] The ninth report is undoubtedly new. We see no prejudice to the Crown in granting leave, and do so.
Key issues
[10] Mr Laurenson for Mr Rosenberg submitted that the Judge did not properly consider the benefit of the settlement reached by Mr Rosenberg with the liquidators, in breach of the Sentencing Act 2002. He argued that the reparation order of $400,000 was manifestly excessive taking into account Mr Rosenberg’s personal estate. There was, he submitted, an unfair discrepancy of sentence between Mr Rosenberg and his co-offender, Mr Hunt. Mr Rosenberg was sentenced to three years’ imprisonment together with reparation of $400,000. He had reached a meaningful settlement with the liquidators. In contrast, Mr Hunt, who was bankrupt, had reached no such settlement, had not been ordered to pay any reparation, and had received a sentence of three and a half years’ imprisonment. Given that Judge Davidson had found their culpability to be the same or similar, the six month difference was unfair.
[11] There were also the mitigating factors of Mr Rosenberg being a first offender, a man who was aged 73, who had made an exceptional contribution to his community, and had made amends.
The cost of the fraud and the settlement agreement
[12] Mr Laurenson unsurprisingly did not contest the Judge’s assessment that he should sentence on the basis that the loss resulting from the fraud was $9.75 million and not a higher sum. We received detailed submissions from him and Mr Upton QC for the Crown on what the net loss was after taking into account the settlement reached between Mr Rosenberg, his associated companies and the liquidators of E-Gas.
[13] The settlement was in respect of civil proceedings issued by the liquidators of E-Gas on 26 March 2013 against Mr Rosenberg, Mr Hunt, and the other directors and shareholders of E-Gas. Concurrent with these proceedings was an application by the liquidators to set aside a general security agreement over the E-Gas companies held by Multi Gas (NZ) Limited, which secured a debt of $7.584 million. Mr Rosenberg was a director of the latter company and he controlled personally and through related interests 60 per cent of its shareholding.
[14] The settlement was complex and involved a number of parties. Without the settlement reached by Mr Rosenberg with the liquidators there would have been about $17.7 million worth of unsecured creditors of E-Gas and its associates, who would share a pool of $2.9 million, with a dividend resulting of about 16 per cent. With the settlement reached, the liquidators finalised the level of the unsecured creditors’ claims at $15.5 million. These unsecured creditors shared a pool of $10.5 million, which meant a dividend of approximately 67 per cent. There was, after the settlement, an effective loss of approximately $5 million. The settlement brought the litigation process to an end and enabled a distribution to creditors.
[15] It is accepted by the Crown that as part of the settlement Mr Rosenberg and his interests did not pursue claims of $4.55 million that they had been pursuing at that point. Mr Rosenberg made a further contribution himself of $120,000.
[16] On an overview Mr Rosenberg’s settlement reduced the shortfall from approximately $9.7 million to about half that amount. The Judge’s view that the settlement released around $5 million from the funds secured by the liquidator for distribution was correct.[10]
[17] We are also satisfied that the Judge was correct when he determined that during the period the fraud was carried out Mr Rosenberg and Mr Hunt’s E-Gas group of companies were able to remain in business and enhance their solvency, so that each of them could maintain their salary and other payments.[11]
Mr Rosenberg’s assets
[18] Mr Rosenberg filed a declaration of assets and liabilities prior to his sentencing. From the material available the Judge determined that Mr Rosenberg and his wife had joint assets of around $3.7 million.[12] The $3.7 million can be seen to be the total of the net assets of his personal estate of $383,170.50 and the rateable value of the residence he occupied with his wife, owned by the wife’s family trust, of $3.2 million (although the arithmetic is not exact). Mr Laurenson, without submitting that the Judge could not take into account the wife’s family trust, pointed out that Mr Rosenberg and his wife were beneficiaries as to income only.
[19] The Judge in the end did not make an exact finding of the value of the assets that were at Mr Rosenberg’s disposal. He was undoubtedly of the view that Mr Rosenberg was able to pay the sum of $400,000. On the basis of the information he had before him, we consider that to be a reasonable conclusion for the Judge to have reached. Mr Rosenberg has not, on appeal, contested his ability to pay the $400,000.
Did the Judge take the settlement into account?
[20] Section 10(1)(b) of the Sentencing Act 2002 provides that in sentencing or otherwise dealing with an offender the Court “must” take into account any agreement between the offender and the victim as to how the offender may remedy the loss or damage caused.
[21] The ultimate victim here can be seen to be the unsecured creditors of E-Gas. The settlement was with the liquidators of that group of companies, and we are satisfied that the Judge was obliged to take that settlement into account. It was brought to his attention prior to the sentencing, although a copy of the actual settlement agreement does not appear to have been given to him as at that stage there were perceived to be confidentiality considerations.
[22] In his sentencing notes the Judge referred to the settlement. He observed:[13]
I am told that those proceedings have been settled by you foregoing your shareholder entitlements. In essence, this releases around $5m from the funds secured by the liquidator for distribution to others, that is, others than you.
[23] Later the Judge observed that Mr Rosenberg had foregone certain entitlements which had substantially assisted in the settlement of civil proceedings.[14] He referred again to the settlement of the civil proceedings as a factor put forward on Mr Rosenberg’s behalf as a mitigating feature.[15] Finally in assessing a final sentence for Mr Rosenberg, the Judge observed that he had made significant amends by foregoing certain shareholder entitlements.[16]
[24] Thus, there can be no doubt that the Judge did take into account the settlement. He did not, however, specify the deduction that he made, if any, for the settlement. As we understand Mr Laurenson, he argues that there was no deduction or an insufficient deduction made in respect of this settlement.
[25] We will return to this submission when we assess the overall effect of sentencing. However, we record that, as these statements we have quoted show, the settlement was in the mind of the Judge.
Reparation
[26] Orders for reparation are compensatory in nature and are designed to recompense victims for loss or harm suffered as a result of criminal offending.[17] Reparation is a sentence, and sits at the same tier as fines in the hierarchy of sentences and orders set out in s 10A of the Sentencing Act. Although subject to the particular considerations that must be taken into account under the Sentencing Act before reparation is ordered, reparation must be considered as a part of the overall sentencing package imposed on the offender.
[27] Sections 32(1) and 12(1) of the Sentencing Act provide:
32 Sentence of reparation
(1) A court may impose a sentence of reparation if an offender has, through or by means of an offence of which the offender is convicted, caused a person to suffer—
(a) loss of or damage to property; or
(b) emotional harm; or
(c) loss or damage consequential on any emotional or physical harm or loss of, or damage to, property.
...
12 Reparation
(1) If a court is lawfully entitled under Part 2 to impose a sentence or order of reparation, it must impose it unless it is satisfied that the sentence or order would result in undue hardship for the offender or the dependants of the offender, or that any other special circumstances would make it inappropriate.
[28] Since Mr Rosenberg caused loss of property by under-reporting the use of gas by E-Gas, the Court was entitled under s 32(1)(a) to impose reparation, and had to do so unless it would have caused undue hardship or there were special circumstances that would have made it inappropriate.
[29] Sections 32(3) and (4) further provide that, in determining whether a sentence of reparation is appropriate, the rights available to a person who has suffered loss to bring proceedings or make applications in respect of that loss or damage must be taken into account. Section 32(6) of the Act provides that when determining the amount of reparation to be made, the court must take into account any offer, agreement, response, measure or action as described in s 10.
[30] Reparation was very much an issue during the sentencing. The Judge was bound to consider it under s 32(1) and did so. He called for a reparation report, although it does not appear a report was filed. Mr Rosenberg filed a declaration of assets and liabilities. Mr Hunt did not do so, but he was a bankrupt and the sentencing appears to have proceeded on the basis that he had no funds available for reparation. Counsel for Mr Rosenberg at the sentencing does not appear to have made detailed submissions on reparation. Mr Laurenson submitted that Mr Rosenberg was entitled to the full credit of the settlement of the civil claims, while the Crown left the issue to the Judge.
[31] The Judge, in making a reparation order of $400,000, did not set out the specific basis for the calculation. He did, however, refer to the difference in the end sentence between that imposed on Mr Hunt and that imposed on Mr Rosenberg who he had found to bear the same culpability, saying:[18]
It saddens me that there is a 6 month difference in the end sentence imposed upon you, but it comes about because of Mr Rosenberg’s ability to meet and pay reparation as he has. It is not justified, in my mind, on any other basis at all.
The sentencing decision
[32] The Judge identified various aggravating features of the offending, including the extent of the fraud ($9.75 million), its duration, its sustained, deliberate and systematic nature, the obvious degree of premeditation, and the associated damage to industry functionality that resulted in the breakdown of a system that depended on trust.[19]
[33] He considered Mr Rosenberg’s circumstances.[20] He had been married for over 50 years with three independent children and had no previous convictions whatsoever. His health was problematic given that he had major heart surgery approximately 17 years ago, and his wife, who suffers from a chronic autoimmune condition, relied heavily on him for her daily support. He referred very positively to Mr Rosenberg’s good work in the community.
[34] Against this background, the Judge proceeded to consider the starting point, focusing on the culpability of the offending. The Judge noted the limited nature of personal benefits arising from the fraud, and Mr Rosenberg’s settlement of the civil proceedings.[21] He determined that at the very least a starting point of five and a half years was appropriate, applying to both Mr Rosenberg and Mr Hunt.[22] In this section of the judgment determining the starting point, the Judge referred to the settlement.[23] Although he did not do so specifically, we infer that he took that settlement into account in assessing the overall culpability of both Mr Rosenberg and Mr Hunt. This follows from the fact that the effect of the settlement was to considerably reduce the overall net loss and therefore the culpability of the offending.
[35] We agree with Mr Upton’s submission that the five and a half year starting point, given the amount and duration of the fraud, was very much at the bottom end of the acceptable range.
[36] We also consider that the discount provided by the Judge to Mr Rosenberg of 45 per cent for mitigating factors, bringing his sentence down to three years’ imprisonment, was a significant discount and could be regarded as merciful. It is to be recorded that Mr Rosenberg has made over the years an outstanding contribution to his community, in particular his professional and religious groups. His record of achievements and the testimonials provided go to emphasise the spectacular nature of his fall from grace and that his fraudulent behaviour is in total contrast to the good work he has done. He undoubtedly deserved an unusually significant credit for good character as well as recognition of his age, ill-health and remorse (although sometimes focused more on regret than remorse) for what he had done.
[37] The reparation payment of $400,000 was very much part of the sentencing scheme created by the Judge for Mr Rosenberg, and the differential feature of his sentence from that of Mr Hunt. Mr Laurenson was critical of the Judge for awarding a sentence of reparation that was ultimately to be paid to the liquidators of the EGas companies when a settlement had been reached with those liquidators before settlement. The settlement had meant that the liquidators could make no further claims against him, yet they got the benefit of the reparation.
[38] However, there is no jurisdictional barrier to a Judge ordering a sentence of reparation even when a defendant has reached a settlement with the victim. Section 10 requires no more than that the settlement be taken into account. For the reasons that we have given we consider that the Judge, in reaching the low starting point that he reached, took that settlement into account. The settlement was not in the nature of a payment of cash from savings by a remorseful defendant, but rather the settlement of contested litigation claims. If the claims had proceeded and not been settled the result could have been worse for Mr Rosenberg, in that he may have had to sacrifice or pay more.
[39] The Judge ordered reparation as part of a sentencing process in which he adopted a very lenient approach and was able to give Mr Rosenberg a light custodial sentence. Reparation was properly used as a tool which enabled the Judge to achieve a fair sentencing outcome. It involved Mr Rosenberg using resources at his disposal to atone financially for his wrongdoing. The Judge rightly considered Mr Rosenberg’s ability to meet and pay the reparation. He concluded that Mr Rosenberg could pay it.
[40] A judge must be able to determine a fair sentence without being bound by arrangements made by a defendant even when those arrangements are with the victim. There may of course be circumstances where it would be unfair to make an order of reparation when there had already been an agreement reached to settle a victim’s claim. We do not consider this case to be one of those. A commercial compromise had been reached which was relevant but not determinative. Although the Judge did not specifically mention the settlement in relation to reparation, we are satisfied that it was part of his overall reasoning in the sentencing process.
[41] The end sentence before reparation of three and a half years’ imprisonment was right at the bottom of that range, even taking into account the mitigating factors including the settlement agreement. The reparation order itself was an order that Mr Rosenberg was able to pay. It was a significant sum of money, but the Judge’s assessment that it was the preferable sentencing option to a longer sentence appears to be borne out by the fact that Mr Rosenberg has expressed a preference to pay the reparation rather than to have any sentence increased as a consequence of the reparation order being cancelled.
[42] We conclude that the Judge made no error in his decision to order reparation. We have no doubt that he was putting together the most lenient package that he could for Mr Rosenberg, given his understandable sympathy for him. On an overview, we consider the end sentence of three years’ imprisonment together with the payment of $400,000 to be within range. The amount of reparation ordered was high, but when the sentence is looked at as a whole it was not manifestly excessive.
Parity
[43] Mr Laurenson has raised the question of parity with the sentence of Mr Hunt, who has made no settlement and paid nothing but has ended up with a sentence six months longer of three and a half years’ imprisonment.
[44] Mr Hunt, like Mr Rosenberg, has had the benefit of a lenient sentencing assessment by the Judge. To an extent, Mr Hunt has been the beneficiary of the settlement reached by Mr Rosenberg, in that the settlement has considerably reduced the net loss resulting from their fraud.
[45] The Judge was understandably concerned that because of Mr Rosenberg’s ability to meet and pay reparation he received a lesser sentence than Mr Hunt while having the same culpability. There must be caution when fixing discounts when a defendant’s financial position permits a significant payment that an impecunious defendant cannot make. The six month differential between their sentences on account of reparation seems to us in those circumstances to be appropriately restrained, but meaningful. We conclude that there is no significant inconsistency between the two sentences.
Result
[46] The appeal against sentence is dismissed.
Solicitors:
Johnston Lawrence
Lawyers, Wellington for Appellant
Crown Law, Wellington for Respondent
[1] Crimes Act 1961, s 228.
[2] R v Rosenberg DC Wellington CRI-2012-085-2862, 4 April 2014.
[3] R v Rosenberg DC Wellington CRI-2012-085-2862, 29 May 2014.
[4] At [8].
[5] At [4].
[6] At [12].
[7] Ibid.
[8] At [13].
[9] The settlement agreement was signed on 28 May 2014, the day before Mr Rosenberg was sentenced.
[10] At [31].
[11] At [20].
[12] At [31].
[13] At [31].
[14] At [38].
[15] At [49].
[16] At [55].
[17] Whitehead v R [2014] NZCA 573 at [49].
[18] At [61].
[19] At [28].
[20] At [25].
[21] At [38].
[22] At [53].
[23] At [38] and [49].
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URL: http://www.nzlii.org/nz/cases/NZCA/2015/97.html