Downey v Ministry of Social Development [2024] NZCA 53 (11 March 2024)

Last Updated: 18 March 2024

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

CA579/2023 [2024] NZCA 53

	BETWEEN	NATHAN PETER IRVINE DOWNEY Applicant
	AND	MINISTRY OF SOCIAL DEVELOPMENT Respondent

Hearing:	14 February 2024
Court:	Collins, Woolford and Mander JJ
Counsel:	N P Chisnall KC and C G Farquhar for Applicant T R Simpson for Respondent
Judgment:	11 March 2024 at 2.30 pm

JUDGMENT OF THE COURT

The application for leave to bring a second appeal against sentence is declined.

REASONS OF THE COURT

(Given by Mander J)

• [1] Nathan Downey was charged with making fraudulent claims against a wage subsidy scheme established to support businesses and employers during the COVID‑19 pandemic. He pleaded guilty to 14 charges of dishonestly using a document and was sentenced by Judge Wharepouri to 20 and a half months’ imprisonment in the Manukau District Court.^[1]
• [2] Harvey J dismissed an appeal based on whether the sentencing Judge had erred by imposing a sentence of imprisonment rather than home detention.^[2] Mr Downey now seeks leave to bring a second appeal.

Background

• [3] In response to the COVID-19 pandemic, a wage subsidy scheme was established by the Government to support businesses and employers who were expected to suffer a decline in revenue as a result of the pandemic and the subsequent lockdowns.
• [4] Between 23 March 2020 and 24 August 2020, Mr Downey submitted 19 applications for the wage subsidy using the details of a company of which he was the sole director and shareholder. The company was not a registered employer, nor did it have any employees. Mr Downey used the names of people who had formerly done contracting work for the company and other individuals he knew. He also made up fictitious names to list as employees on the applications.
• [5] The Ministry of Social Development paid $196,076 to the company’s bank account, over which Mr Downey had sole access and control. Six of the applications that claimed a further $66,781.20 were declined. Of the money received, $74,363.73 was paid to contractors for work completed on behalf of the company. The remaining $121,712.27 was spent by Mr Downey on company and personal expenses that included online gambling, adult entertainment clubs, and fast food.

District Court sentencing

• [6] In sentencing Mr Downey, the District Court Judge adopted a starting point of three years and 10 months’ imprisonment to which he applied a 25 per cent discount for Mr Downey’s guilty pleas, a 15 per cent credit for remorse and the payment of reparation, and a further 15 per cent deduction in recognition of Mr Downey’s addiction issues and rehabilitative efforts. The Judge declined to commute the resulting short-term sentence of imprisonment to one of home detention. He considered that denunciation and deterrence were the key sentencing purposes and that they would not be adequately served by a sentence of home detention.^[3]

The High Court appeal

• [7] Harvey J held there were no material errors in the sentence imposed that required a different sentence to be substituted and consequently dismissed the appeal. The High Court Judge considered the sentencing Court had been “entitled to find that deterrence and denunciation weighed heavily”.^[4] The Judge observed the offending involved “repeated dishonesty of a system designed to help those most in need during that unprecedented time”.^[5] He acknowledged Mr Downey’s lack of serious previous offending that was unrelated to the index offending diminished the need for personal deterrence, and the concerns raised regarding the lack of rehabilitative opportunities available in prison. However, those considerations did not displace the correct priority afforded to denunciation and general deterrence that were required to be met by a sentence of imprisonment.^[6]

The application

• [8] The application for leave is based on a submission that the approach taken by the High Court treats offending in relation to the wage subsidy as a special species of fraud, whereby mitigating considerations such as rehabilitative prospects are subordinate to the “determinative” sentencing purposes of denunciation and deterrence. It was argued it was wrong to create a “carve out” for wage subsidy fraud which made imprisonment a presumptive sentence.
• [9] Mr Chisnall KC argued the High Court had repeated the error made by the sentencing Court of failing to have regard to the requirements of s 16 of the Sentencing Act 2002. This provision directs that a sentence of imprisonment must not be imposed unless the purposes of sentencing,^[7] including those of deterrence and denunciation, cannot otherwise be achieved by a less restrictive sentence.^[8] Mr Chisnall submitted in this case, particularly because specific deterrence was of limited relevance in the context of a formerly addicted but now rehabilitated offender who had made good the loss caused by his fraud, home detention was the most appropriate sentence.
• [10] In response, Ms Simpson argued on behalf of the Crown that neither court’s approach created a “special species of fraud” to which a presumption of imprisonment applied. Ms Simpson submitted the aggravating features of the offending and the particular need for deterrence and denunciation meant a short term sentence of imprisonment was appropriate in this case. The sentence therefore gave rise to no error.^[9]

Relevant principles

• [11] This Court has consistently stated that there is no presumption in the Sentencing Act for or against the commutation of a short-term sentence of imprisonment to one of home detention, either generally or in respect of particular types of offences.^[10] What is required of the sentencing Court is an exercise of judgment against the statutory principles and purposes of sentencing which may point in opposing directions.^[11] A “considered and principled choice” between imprisonment and home detention is required, recognising both sentences serve the principles of denunciation and deterrence.^[12]
• [12] A sentencing Court is required to identify which sentence “better qualifies as the least restrictive sentence to impose taking into account all the purposes of sentencing”.^[13] However, when assessing whether home detention can respond adequately to the seriousness of the offending, denunciation and deterrence may be important sentencing considerations that when weighed together with other relevant sentencing principles and purposes may make home detention an inappropriate outcome. Because of the array of considerations that require evaluation, such decisions call for the exercise of judgment on a case by case basis and a significant margin of appreciation is extended to sentencing Judges.^[14]

Analysis

• [13] It is well established that a sentencing court cannot fetter its discretion to convert a sentence of imprisonment to home detention because of the particular type of offence.^[15] However, we do not consider either court in this case placed wage subsidy fraud into its own special category with a presumption of imprisonment. Nor do we consider the emphasis placed on denunciation and deterrence was to the exclusion of other considerations, including the circumstances of the offender and countervailing purposes of sentencing.
• [14] Mr Downey’s personal circumstances were extensively considered by the sentencing Judge and a total discount of 55 per cent was provided which included credits for remorse, reparation, addiction difficulties that were considered to have contributed to his offending, and rehabilitative efforts. There is no reason to consider the Judge was not cognisant of these personal mitigating factors when he came to assess the question of home detention. While the sentencing Judge’s reference to deterrence and denunciation as being “paramount” could be interpreted as being to the exclusion of other considerations, we consider the Judge was entitled to conclude they were key sentencing purposes. In the circumstances of this case they were engaged to a significant degree because of the seriousness of the offending.
• [15] Aggravating features of Mr Downey’s fraud included the repetitive nature of the offending that occurred over some five months; the high degree of premeditation involved in the commission of the fraud; the significant amount of money obtained that was largely used for Mr Downey’s personal benefit; and the gross breach of trust that went beyond simply defrauding the taxpayer but involved the exploitation of a fund established at a time of national crisis that depended on the honesty of those who sought to utilise the financial support it offered.
• [16] We do not consider the identification of this last significant aggravating feature illegitimately elevated wage subsidy fraud to a species of offending where imprisonment was the only available outcome. As Harvey J recognised, the theft of public funds does not fall into a special category of its own.^[16] However, it is an aspect of the fraud which renders the offending particularly serious and, as a result, plainly engages the purposes of deterrence and denunciation which were required to be achieved by the sentence imposed.
• [17] The applicant placed considerable reliance on s 16 of the Sentencing Act and that both home detention and imprisonment have been recognised as deterrent sentences. Mr Chisnall was critical of the High Court not referring to s 16 when articulating why imprisonment was not a commensurate outcome. We do not consider that criticism is valid. Section 16(2) provides:

(2) The court must not impose a sentence of imprisonment unless it is satisfied that,—

(a) a sentence is being imposed for all or any of the purposes in section 7(1)(a) to (c), (e), (f), or (g); and

(b) those purposes cannot be achieved by a sentence other than imprisonment; and

(c) no other sentence would be consistent with the application of the principles in section 8 to the particular case.

• [18] After endorsing observations regarding the particularly shameful and exploitative nature of offending that defrauds financial programmes designed to ameliorate personal hardship caused by a national emergency, Harvey J correctly noted the relevance of such considerations when assessing the requirements of s 16(2).^[17] The Court must be satisfied before imposing a sentence of imprisonment that the particular purposes of sentencing referred to in s 16(2)(a), including deterrence and denunciation, cannot otherwise be achieved by any other sentence and that no other sentence would be consistent with applicable sentencing principles. We do not consider the Judge’s assessment that these purposes of sentencing were determinative in this case when weighing the type of sentence that needed to be imposed involved erroneous reasoning. To the contrary, both Courts adopted an orthodox approach to that assessment before concluding that imprisonment was necessary.
• [19] We accept that a sentencing court is required to consider and articulate why a sentence other than imprisonment could not have achieved the relevant purposes of sentencing. We do not consider such reasoning was absent in this particular case. In plain terms, the circumstances of this offending were considered too serious to be met with any other sanction but imprisonment. We agree. There were mitigating features that included the role of Mr Downey’s drug, alcohol and gambling addictions, the rehabilitation he has undertaken to address those issues, his remorse and full reparation. However, we are not brought to the conclusion that these countervailing considerations displaced other factors relating to the commission of these offences, or sufficiently did so, to conclude a sentence less than imprisonment would achieve the purposes of denunciation and general deterrence.

Conclusion

• [20] On an application for leave to bring a second appeal, leave must not be granted unless the Court is satisfied the appeal involves a matter of general or public importance, or a miscarriage of justice may have occurred, or may occur, unless the appeal is heard.^[18] We are not satisfied the issues raised have broad application beyond the circumstances of this particular case.^[19] Nor, moreover, do we consider there is an argument reasonably available that the court below was in error.^[20]
• [21] The assessment of whether to commute a sentence of imprisonment to home detention is an evaluative assessment that, as with sentencing more generally, requires consideration of the individual facts of the particular case and the circumstances of the offender. We do not consider the sentencing Court’s determination of Mr Downey’s culpability and the seriousness of the offending, as endorsed by the High Court, led either Judge into error when they concluded that the requirements of deterrence and denunciation meant no sentence other than a term of imprisonment was appropriate in the circumstances.

Result

• [22] The application for leave to bring a second appeal against sentence is declined.

Solicitors:
Tucker & Co, Auckland for Applicant
Crown Law Office | Te Tari Ture o te Karauna, Wellington for Respondent

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^[1] Ministry of Social Development v Downey [2023] NZDC 18670 [Sentencing notes].

^[2] Downey v Ministry of Social Development [2023] NZHC 2589 [High Court judgment].

^[3] Sentencing notes, above n 1, at [53]–[54].

^[4] High Court judgment, above n 2, at [40].

^[5] At [42].

^[6] At [44].

^[7] Excluding “to provide reparation for harm done by the offending” (Sentencing Act 2002, s 7(1)(a)) and “to assist in the offender’s rehabilitation and reintegration (Sentencing Act, s 7(1)(b)): Sentencing Act, s 16(2)(a).

^[8] Sentencing Act, ss 16(2)(c) and 8(g).

^[9] Criminal Procedure Act 2011, s 250(2).

^[10] R v Vhavha [2009] NZCA 588 at [29] per William Young P (dissenting), adopted in Osman v R [2010] NZCA 199 at [20] and see also [23]; Doolan v R [2011] NZCA 542 at [37–[38]; Palmer v R [2016] NZCA 541 at [19]; Twomey v R [2018] NZCA 206 at [12]; and Aupouri v R [2019] NZCA 216 at [18].

^[11] Twomey v R, above n 10, at [12]; and Palmer v R, above n 10, at [19].

^[12] Fairbrother v R [2013] NZCA 340 at [30].

^[13] At [30].

^[14] At [31]; Aupouri v R, above n 10, at [18]; and Palmer v R, above n 10, at [19].

^[15] Palmer v R, above n 10, at [19]; and Twomey v R, above n 10, at [12].

^[16] High Court judgment, above n 2, at [45].

^[17] At [38] and [45] citing Burns v Police [2016] NZHC 2116 at [11].

^[18] Criminal Procedure Act, s 253(3).

^[19] McAllister v R [2014] NZCA 175, [2014] 2 NZLR 764 at [36].

^[20] At [37].