McKay v R [2019] NZCA 493 (15 October 2019)

Last Updated: 22 October 2019

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA422/2019 [2019] NZCA 493

	BETWEEN	BRUCE ALEXANDER MCKAY Appellant
	AND	THE QUEEN Respondent

Hearing:	26 September 2019
Court:	Clifford, Ellis and Peters JJ
Counsel:	G N E Bradford and S D Withers for Appellant D G Johnstone for Respondent
Judgment:	15 October 2019 at 4 pm

JUDGMENT OF THE COURT

1. The appeal is allowed.
2. The sentence of 12 months’ home detention is quashed and a sentence of 10 months’ home detention substituted.

____________________________________________________________________

REASONS OF THE COURT

(Given by Ellis J)

[1] Mr McKay was convicted following a judge-alone trial before Toogood J on three charges of theft in a special relationship.^[1] He was sentenced on 27 March 2019 to 12 months’ home detention on each charge, to be served concurrently.^[2] He now appeals that sentence, essentially on the grounds that it is no longer on a par with that received by his co-offender, Mr Bublitz.
[2] Put simply, this Court has recently allowed Mr Bublitz’ sentence appeal and substituted a sentence of 11 months’ home detention for the sentence imposed by the trial Judge of three years and two months’ imprisonment.^[3] Mr McKay contends that parity demands a similar reduction in his sentence.
[3] The sentence appeal was filed out of time but an extension was not opposed by the Crown, and shortly after the appeal was filed Gilbert J granted the necessary extension.

Background

[4] It is not necessary to set out the details of the offending by Mr McKay and his co-offenders in any detail. They can be found in the trial Judge’s sentencing notes and in the earlier judgment of this Court, at [11]–[21].
[5] For present purposes it suffices to say that the Judge found Mr Bublitz (charges 10 to 13) and Mr McKay (charges 10 to 12) guilty of theft in a special relationship, arising from related party transactions intentionally entered into by a company controlled by Mr Bublitz in breach of its Crown guarantee.^[4] Mr Bublitz was also found guilty of two charges of making a false statement as a promoter of securities (charges 14 and 15).^[5]
[6] Mr Bublitz was regarded as the principal party to the offending. Mr McKay and Mr Richard Blackwood were charged as secondary parties for aiding, abetting or assisting him.^[6]

Sentencing in the High Court

[7] In sentencing the three men, the Judge began by assessing the scale of the offending overall. In doing that, he accepted the Crown submission that regard should be had to charges 1 to 9, notwithstanding the not guilty verdicts in relation to those charges, because the defendants’ conduct at the relevant times showed that they were operating at the “margins of legality”.^[7]
[8] In terms of Mr Bublitz’ and Mr McKay’s respective culpability, the Judge relevantly said:

[46] As to the culpability of each of you, relative to other cases and particularly to each other, it is clear to me that Mr Bublitz, as the person who stood to lose from the failure of the entities engaged in the projects being carried out by the Hunter Group, was the prime mover and instigator of the plan to use one or more finance companies to fund Hunter Group activities. I have found that you had real or effective control over Viaduct throughout, Mr Bublitz, even though it was not sufficient to make you and the other defendants guilty of the charges founded on the Viaduct trust deed. Although you did not give evidence, it is clear to me from the tone and content of the numerous memoranda and email exchanges I have read, that you have a strong and forceful personality. As I found, nothing was done that was contrary to your wishes or that was not, in most cases, approved by you. You stood to gain most from the successful use of the investor funds in both finance companies and, conversely, you were the most at risk if the scheme failed. I rate your culpability as significantly higher than that of the other defendants.

[47] Mr McKay, you were the principal architect of the scheme, being a knowledgeable and capable manager. You were the person, above all others, who was intimately acquainted with the often-precarious positions in which the Hunter entities, Viaduct and Mutual were placed from time to time during the relevant period. I accept that your engagement did not provide lucrative benefits for you, although you would have gained something if Mutual had operated successfully after it was acquired by Mr Bublitz. I accept also that you were subject to Mr Bublitz's dominant personality and to his effective control. I place your culpability, therefore, as being somewhat lower on the scale than that of Mr Bublitz.

[9] Turning to the question of starting points, the Judge noted the scale of the offending (adopting the Crown calculation of $3.9 million in relation to charges 10 to 12) and the breach of trust involved in the offending.^[8] He also referred to the planning and premeditation, the wider effect on financial markets and the defendants’ desire for personal gain. Following a review of several analogous cases, reference to the sentencing of another co-offender who had pleaded guilty and counsel’s submissions, the Judge settled on an overall starting point for Mr Bublitz of five years and three months’ imprisonment, which comprised:^[9]

• (a) four years and six months’ imprisonment on the theft charges; and
• (b) an uplift of nine months’ imprisonment for the convictions on the prospectus charges (because they involved offending of a different nature).

[10] Turning, next, to Mr McKay, he said:

[79] Mr McKay, you were a secondary party to Mr Bublitz’s offending and [acted] under his influence and direction; but you were the architect of the plan devised at Pauanui and closely involved on a daily basis. I accept that there was no real personal gain for you and that you were convicted on only three charges. Your case has some similarity to that of Mr Hamilton, but he was a lawyer and the losses in that case were greater. Accordingly, I fix a starting point for you of three years and three months’ imprisonment.

[11] Toogood J then turned to consider the issue of delay, which he regarded as a “significant mitigating factor”.^[10] He noted that:^[11]

• (a) the defendants were charged on 11 March 2014 and first appeared in the District Court on 7 May 2014, around four years after the collapse;
• (b) a 12 week trial was set down for February 2016 but it was adjourned at Mr Bublitz’ request in November 2015;
• (c) the trial eventually commenced in August 2016 but, nine months into the trial, it was aborted by Woolford J in May 2017 due to Crown breaches of the Criminal Disclosure Act 2008;
• (d) an application for stay was denied by Lang J on 18 September 2017 and a new trial was set down for July 2018 (to last 19 weeks) but then delayed to August 2018; and
• (e) verdicts were delivered on 5 February 2019 with reasons following on 21 February 2019.

[12] Toogood J recorded that the Crown had acknowledged undue pre-trial delay should be met with a reasonable and proportionate reduction in sentence.^[12] The Crown submission was that the reduction should be no more than 15 per cent, noting the delay caused by the disclosure-related breaches delayed the trial’s conclusion by one year and 11 months at most. The fact that each defendant had been remanded at large militated against (the Crown said) any greater reduction, but a further modest reduction was appropriate because of the steps taken by the defendants to expedite matters after the first trial was aborted.^[13]
[13] The Judge acknowledged that the defendants had spent 1,825 days with the prospect of imprisonment hanging over their heads, which he accepted would have been “a constant and draining burden”.^[14] Referring to the original (aborted) nine month criminal trial he said “I do not think the harmful psychological effect of such a long and intense criminal fraud trial should be underestimated.”^[15] He concluded that there had been a “significant punitive element” in the way the prosecution was carried out and saw it appropriate to reduce all three sentences by 30 per cent from the starting points.^[16]
[14] He also considered that for each defendant there should be a modest reduction (10 per cent) for good character, which appears to have included remorse and cooperation.^[17]
[15] Ultimately, the following sentences were arrived at:^[18]

• (a) Mr Bublitz: three years and two months’ imprisonment; and
• (b) Mr McKay: 23 months’ imprisonment.

[16] Mr McKay’s sentence of imprisonment was then converted to 12 months’ home detention.^[19]

The earlier conviction and sentence appeal

[17] All three defendants appealed their convictions. This Court:^[20]

• (a) allowed Mr Bublitz’ appeal against conviction on charges 14 and 15;
• (b) dismissed Mr McKay’s appeal against conviction; and
• (c) allowed Mr Blackwood’s appeal against conviction.

[18] The Court also allowed Mr Bublitz’ appeal against sentence. Put simply, the Court found that the starting point on charges 10–13 adopted by the trial Judge was too high because:

• (a) he had erred in taking into account the transactions which did not result in convictions;
• (b) he had erred in his assessment of the losses in relation to those charges (and had overstated them); and
• (c) the offending in some of the cases relied on when setting the starting point was not comparable with (and more serious than) Mr Bublitz’ offending.^[21]

[19] The Court concluded that “the appropriate starting point for Mr Bublitz should have been no more than four years’ imprisonment”.^[22] In reaching that view, the Court agreed with a submission made by Mr Bublitz’ counsel that the four years and six months adopted by the trial Judge did not appropriately reflect his apparent assessment of the relative seriousness of Mr Bublitz’ offending by comparison with his co‑offenders. The Court said:

[160] Ms Reed also submits the starting point of four years and six months’ imprisonment on charges 10–13 adopted for Mr Bublitz cannot be justified as having reasonable parity with those of his co-offenders. Mr McKay, who the Judge described as “the principal architect of the scheme”, was convicted of charges 10–12, for which a starting point of three years and three months’ imprisonment was adopted yielding an end sentence of 12 months’ home detention. ...

[161] We consider there is some force in Ms Reed’s parity complaint. The Judge described Mr McKay’s culpability as being only “somewhat lower” than Mr Bublitz. We agree with that assessment. Both stood to benefit. Neither did. Unlike Mr McKay who the Judge found was the principal architect of the scheme and lost nothing, Mr Bublitz lost well over $2 million of his own money. We consider the disparity — more than one third — between the starting point of four years and six months’ imprisonment adopted for Mr Bublitz and three years and three months’ imprisonment for Mr McKay is hard to justify.

(Footnotes omitted.)

[20] As far as the discount for delay was concerned, the Court said:

[164] We consider the discount allowed by the Judge for delay, effectively 19 months, was appropriate. However, we disagree that it should be calculated as a percentage. To illustrate the point, Mr Bublitz’s starting point would have been considerably greater had he been convicted of all 15 charges. It would have been greater again if he had been convicted of all 49 charges he originally faced. If the discount for delay is calculated as a percentage, the allowance would vary considerably depending on the number of convictions. Equally, if Mr Bublitz had been convicted of only one charge, he would receive little credit for the consequences of the delay if this is calculated as a percentage of the starting point. The consequences of the delay for Mr Bublitz are the same in each of these examples. He spent nine months of his life and over $1 million of his own money in a High Court trial that had to be aborted due entirely to failings for which the Crown must take sole responsibility. He has suffered considerably in consequence of this. We can see no principled basis for calculating the allowance as a percentage of the eventual sentencing starting point. The remedy is for the breach of Mr Bublitz’s right to be tried without undue delay and this has no necessary correlation to the starting point adopted at sentencing to reflect his culpability for the offending.

[165] For these reasons, we make no adjustment to the allowance afforded by the Judge of 19 months’ imprisonment.

[21] The Court also maintained the further original discount of five months for personal mitigating factors.^[23]

Mr McKay’s sentence appeal

[22] As noted earlier, Mr McKay’s sentence appeal is essentially brought on the grounds of parity with Mr Bublitz’ now reduced sentence. More specifically, Mr Bradford submitted that:

• (a) this Court should reduce Mr McKay’s starting point by six months as it did Mr Bublitz’;
• (b) because this Court has held that it is inappropriate to calculate a discount for delay in percentage terms, the 12 month discount received by Mr McKay was too low and he should receive the same discount in temporal terms as Mr Bublitz, namely 19 months; and
• (c) the original discount of 10 per cent (3.3 months)^[24] for personal factors, remorse and cooperation should be maintained.

[23] By Mr Bradford’s calculations, this would result in a reduced sentence of 10.7 months’ imprisonment which (he says) should be converted to 5.35 months’ home detention.
[24] Mr McKay’s position is simple. But Mr Johnstone for the Crown submitted that:

• (a) when this Court reduced Mr Bublitz’ starting point by six months it was “excessive” and “went too far”;
• (b) given Mr McKay’s role as the “principal architect” of the offending, the appropriate starting point was higher than that adopted by Toogood J;
• (c) this Court’s confirmation of the 19 month reduction for delay was “unduly generous” and in any event, Mr McKay’s position in relation to delay is different from that of Mr Bublitz and there is no injustice in the apparent disparity between the 12 and 19 month discounts;
• (d) Mr McKay should never have received the same 10 per cent discount for personal circumstances, remorse and cooperation that Mr Bublitz did;^[25] and
• (e) overall, any absence of parity between Mr Bublitz’ reduced sentence and the sentence imposed on Mr McKay by Toogood J is not such that a different sentence should be imposed.

Relevant law

[25] In cases where a sentence appeal is advanced on parity grounds, the Court will interfere “only when the disparity appears unjustifiable and is gross”.^[26]
[26] In R v Lawson, this Court articulated the test as being:^[27]

... whether a reasonably minded independent observer aware of all the circumstances of the offence and of the offenders would think that something had gone wrong with the administration of justice.

[27] A lenient or unusually merciful sentence extended to one offender cannot create an expectation other offenders will receive the same indulgence.^[28]

This case

[28] We begin by recording that we have put to one side the Crown’s suggestion in written submissions that we should differ or disagree with the conclusions reached by this Court in Mr Bublitz’ appeal. In saying that we note that in oral argument Mr Johnstone accepted no material change or other good reason that might justify us revisiting that decision had been identified.
[29] Although we would not go so far as Mr Bradford suggests, we consider some adjustment to Mr McKay’s sentence is required as a result of Mr Bublitz’ successful appeal. More particularly, we agree that an adjustment to the starting point is warranted, to take account of the errors identified and summarised above at [18]. But in light of what this Court said at [161] of the earlier judgment,^[29] we do not think that parity requires a reduction of the full six months. If a perceived lack of parity at first instance influenced that reduction (which it plainly did) it would be wrong in principle to reintroduce, by adopting the same reduction, a lack of parity in this appeal. In our view a reduction of no more than three months is warranted, which gives a reduced starting point of three years’ imprisonment.
[30] We do not propose to adjust the discount for delay. Although this Court has now made it clear that such a discount should not be assessed on a percentage basis, Toogood J clearly considered that a lesser reduction for delay was appropriate in Mr McKay’s case. And there is a clear basis for differentiating between the impact of the delay on him and the impact on Mr Bublitz. While many of the adverse effects of delay would have been experienced equally by all defendants, Toogood J noted the particular and severe economic consequences suffered by Mr Bublitz, who spent something in the order of $1 million defending himself. By contrast (as we understand it) Mr McKay has, at all times, been legally aided. In our view, the 12-month discount afforded to Mr McKay by Toogood J for delay continues to be appropriate.
[31] Nor do we intend to interfere with the 10 per cent discount for personal mitigating factors, as Mr Johnstone invited us to. In light of the approach previously adopted to this aspect of Mr Bublitz’ sentence,^[30] the 10 per cent reduction is to be calculated by reference to the (now reduced) starting point and before the application of the discount for delay. In Mr McKay’s case that would result in a reduction of three and a half months.
[32] In summary, then, we recalculate Mr McKay’s sentence as follows:

• (a) a starting point of three years’ imprisonment; less
• (b) a discount of three and a half months for personal mitigating factors; less
• (c) a discount of 12 months for delay.

[33] The end result is a sentence of a little over 20 months’ imprisonment, which we convert to 10 months’ home detention.

Result

[34] Mr McKay’s appeal against sentence is allowed, on parity grounds, accordingly. The sentence of 12 months’ home detention is quashed and a sentence of 10 months’ home detention substituted.

Solicitors:
Crown Solicitor, Auckland for Respondent

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^[1] Crimes Act 1961, ss 220 and 223(a) (maximum sentence of 7 years’ imprisonment); R v McKay [2019] NZHC 222.

^[2] R v McKay [2019] NZHC 592 at [108].

^[3] Bublitz v R [2019] NZCA 364. In that decision, the Court of Appeal also partially allowed Mr Bublitz’ appeals against conviction and dismissed Mr McKay’s appeal against conviction.

^[4] A guarantee under the Crown Retail Deposit Guarantee Scheme established by the government in the wake of the 2007–2008 global financial crisis and the ensuing recession.

^[5] Mr Bublitz was acquitted on six other charges of theft by a person in a special relationship involving a different company and Mr McKay was acquitted on one charge of making a false statement as a promoter and on one charge of making a false statement to a trustee for debenture holders.

^[6] Another co-offender, Mr Peter Chevin pleaded guilty at an earlier stage. Mr Blackwood had his convictions quashed on appeal in Bublitz v R, above n 3, at [144].

^[7] R v McKay, above n 2, at [32] and [45].

^[8] At [53]–[55].

^[9] At [78].

^[10] At [81].

^[11] At [82]–[84].

^[12] At [85].

^[13] At [86].

^[14] At [90].

^[15] At [91].

^[16] At [93].

^[17] At [101].

^[18] At [103]–[104].

^[19] At [108].

^[20] Bublitz v R, above n 3.

^[21] As well, Mr Bublitz’ success on appeal in relation to his convictions on charges 14 and 15 meant that there could be no uplift on their account.

^[22] Bublitz v R, above n 3, at [162].

^[23] At [166].

^[24] Which Mr Bradford understandably calculated on the basis of the substituted, rather than the original, starting point.

^[25] A position the Crown has always maintained.

^[26] R v Rameka [1973] 2 NZLR 592 (CA) at 594.

^[27] R v Lawson [1982] NZCA 67; [1982] 2 NZLR 219 (CA) at 223.

^[28] Macfarlane v R [2012] NZCA 317 at [24].

^[29] See [19] above.

^[30] See n 16 above.