R v Urwin [2012] NZHC 715 (17 April 2012)

Last Updated: 16 May 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI 2008-004-029179 [2012] NZHC 715

THE QUEEN

v

GARY KENNETH URWIN

Hearing: 17 April 2012

Appearances: B Dickey and T Molloy for Crown

D Reece and Mr Clark for Prisoner

Judgment: 17 April 2012

_{SENTENCING NOTES OF ANDREWS J}

Solicitor: Meredith Connell, PO Box 2213, Shortland Street, Auckland 1140 [e-mail] [e-mail]

Counsel: David Reece, PO Box 4208, Shortland Street, Auckland 1140

[e-mail]

R V URWIN HC AK CRI 2008-004-029179 [17 April 2012]

Charges

[1] Mr Urwin, you appear for sentencing today having pleaded guilty to ten charges laid under s 58 of the Securities Act 1978 (Counts 9 to 18 in the indictment), of distributing offer documents which contained untrue statements. The maximum penalty on each of those charges is imprisonment for five years, or a fine of up to

$300,000.

Relevant Facts

[2] It is necessary to set out the relevant facts, I do so not in extensive detail but I

do have to go through them. You were a non-executive director of Bridgecorp from

23 May 2003 and of Bridgecorp Investments Ltd from 3 September 2003, until the time that the Bridgecorp companies were put into receivership in July 2007. During that period you were Chair of the Credit Committee until January 2007, and you were a member of the Audit Committee.

[3] The charges to which you have pleaded guilty are in respect of untrue statements contained in prospectuses and investment statements issued by Bridgecorp and Bridgecorp Investments dated 21 December 2006 and distributed up until 6 July 2007, and extension certificates to the prospectuses dated 30 March

2007. The untrue statements were in four categories.

“Barcroft Holdings Ltd was not a related party.”

[4] The first was that the company Barcroft Holdings Limited was not a related party. A loan of approximately $76.7 million to Barcroft Holdings was represented in the offer documents as not being related party lending. In a note to the offer documents, it was stated that Barcroft was an unrelated party, and in the list of related parties that was in that document Barcroft was not referred to. In fact, Barcroft Holdings was a related party to Bridgecorp and Bridgecorp Investments, and the loan should have been disclosed as such. The failure to disclose the loan as related party lending significantly reduced Bridgecorp’s reported exposure to related parties, and of course significantly reduced the extent of overall exposure.

[5] I need to set out the circumstances relating to this in a little more detail. During the relevant period you had a controlling interest in Urwin Fernandez Pty Ltd, which was an Australian-based consultancy firm. You were also a director of the company Urwin Fernandez (NZ) Ltd, which held 18 million shares (which was about 25 per cent) in the ultimate parent company of Bridgecorp, Bridgecorp Holdings Ltd. Accordingly, interests associated with you held a substantial shareholding in Bridgecorp.

[6] In December 2003 Bridgecorp entered into a joint venture with Urwin Fernandez to source and develop hotel and resort projects. Bridgecorp was to arrange seed funding for projects, and Urwin Fernandez was responsible for accessing hotel operators and providing project management. The joint venture operated through a company initially called UFB Pacific, later called Real Estate Assets Ltd. The projects were in New Zealand, Australia, Guam, and Fiji, but of particular significance was the development at Momi Bay, Fiji

[7] Bridgecorp had a 50 percent interest in the joint venture. Your family interests held a 25 percent interest. As at 30 June 2006, seven loans of approximately $76 million had been made by Bridgecorp companies to the joint venture. They were related-party loans, and they were recorded as such in Bridgecorp’s financial statements.

[8] The Summary of Facts I have been given records that as at 30 June 2006 you and the other directors of Bridgecorp were aware that the loans did not, in several material aspects, comply with Bridgecorp’s lending rules. The deficiencies were detailed in reports provided to directors. Through your interest in Urwin Fernandez, you had a personal interest in the maintenance of the loans, and you would have been personally disadvantaged if the borrowers had been required to repay the loans. In the event, the borrowers were not required to repay the loans.

[9] Barcroft Holdings Ltd was incorporated on 30 June 2006. It was a $100 special purpose vehicle. In his reasons for verdicts relating to the charges against Mr Petricevic, Mr Roest, and Mr Steigrad, Venning J found that Barcroft was a related

party to Bridgecorp.1 It is noted that the director of Barcroft took instructions from you and Mr Roest.

[10] The offer documents stated that the Bridgecorp companies had sold the loans to Barcroft, for approximately $76.7 million. However, the Barcroft transaction was treated in Bridgecorp’s accounts as a loan, secured back to Bridgecorp. The Barcroft transaction was reported as a “third party mortgage” and not as a related party transaction. The result of course was to mask the true level of related party lending. Further, fees payable to Bridgecorp (which were in fact never recovered) were recorded as income. The Summary of Facts also records that legal advice was provided to you and other directors that the Board would need to give consideration to the impact of the transaction on Bridgecorp’s financial statements, and the proper treatment of the relationship between the parties.

[11] The result of the Barcroft transaction, and the way it was reported, was to significantly distort the Bridgecorp Group’s financial results. It hid the true nature of the underlying loans to the joint venture, and it inflated profits. It looked like new secured third party lending, when it was in fact a collection of bad related-party loans.

[12] I note that Venning J described Bridgecorp’s lending in relation to the Momi Bay development and other loans related to its joint ventures with the Urwin Fernandez group, as being among the principal reasons for Bridgecorp’s ultimate failure.

[13] Mr Reece has submitted that you accept that with proper diligence you would have understood the position as to the related party issue, but also submitted that for a large part of Bridgecorp’s administration of these loans you were kept in the dark. In supplementary submissions, he stressed that the Barcroft transaction was not devised at short notice for balance sheet purposes. Rather, he submitted, it took no less than five months to devise and structure, having been first discussed as a

_{concept as early as February 2006.}

1 R v Petricevic [2012] NZHC 665 at [305].

[14] Mr Reece also referred me to Venning J’s findings that the Crown had failed to prove that the Barcroft transaction was made otherwise than in accordance with good commercial practice,2 and that while the transaction did not comply with Bridgecorp’s internal lending policies, it was not in fact a loan to which those policies applied.3 He submitted that there was nothing in Venning J’s judgment to support the Crown’s contention that the original loans were bad or impaired, that the transaction masked the true position, or that you were being deliberately dishonest in promoting Barcroft as being commercially viable, due to your position on both sides of the joint venture. Mr Reece also submitted to me that the Barcroft transaction was beneficial to Bridgecorp’s security position and that you did not prefer your position to that of the joint venture.

[15] However, those submissions fail to take note of Venning J’s finding that the statement that “Barcroft was an unrelated party” was untrue.4 I am satisfied that you were substantially involved in devising and executing the Barcroft transaction, and you were fully aware of the parties to that transaction. In particular, I am satisfied that you were well aware, or should have been well aware, that Barcroft was a related party, and that the transaction should have been disclosed as a related party transaction.

[16] Mr Reece submitted today that calling Barcroft an unrelated party did not, and would not have influenced investors. In that respect though, I also note Venning J’s later observation that “a notional investor would have taken comfort from the fact that an unrelated party was prepared to pay $76 million for loans that Bridgecorp had previously advanced to its related parties. It would lend support to the investors’ reliance on Bridgecorp’s lending policy, and the value of its loan book. Venning J went on to say that the picture became quite different, however, once it is

disclosed that Barcroft is a related party.”5 That is the mischief of the Barcroft

_transaction.

2 _{At [280].}

3 _{At [289].}

4 At [316].

“Bridgecorp would not, and did not, provide credit, or advance loans, other than in

accordance with good commercial practice and internal credit approval policies.”

[17] The second group of untrue statements were to the effect that Bridgecorp would not, and did not, provide credit, or advance loans, other than in accordance with good commercial practice and internal credit approval policies. When you entered your guilty pleas you accepted the Summary of Facts presented to the Court at the time and it is stated in that Summary that Bridgecorp advanced loans and provided credit to borrowers other than in accordance with good commercial practice and internal credit approval polices. It is also stated that Bridgecorp failed to obtain sufficient documentation before advancing loans, it failed to obtain Credit Committee or Board approval for loans, it failed to obtain or maintain sufficient security for loans advanced, it failed to monitor loans properly, and it failed to record loan information properly. As a result, investors were led to believe that Bridgecorp was a prudent lender, when it was not, and significant funds were advanced with little if any adherence to proper, prudent commercial lending criteria.

[18] In his initial submissions, Mr Reece submitted that you acknowledge that Bridgecorp did not follow good commercial practices and internal credit approval policies when providing credit and advancing loans, and that you accepted that you were incorrect in believing that Bridgecorp did adhere to those requirements. You accepted that you should have been more attentive to those deficiencies.

[19] In his supplementary written submissions, Mr Reece noted that of the eight loans (including the Barcroft transaction) which the Crown submitted were made other than in accordance with good commercial practice and internal credit approval policies, Venning J found that only one, which is referred to as the “Victoria Quarter” loan, fell within that category.6 I bear that in mind, and the Judge’s later comments,7 that the non-disclosure was material to whether a notional investor would invest or not, but it is the case that you entered guilty pleas to the charges, and particulars, as

_{set out in the Summary of Facts.}

6 _{At [255].}

7 At [355] and [357].

“Bridgecorp had never missed an interest payment, or repayment of principal, when due”

[20] The third group of untrue statements was that Bridgecorp had never missed an interest payment, or repayment of principal when due. In fact, the companies began defaulting on principal and interest from 7 February 2007. The length of default varied between one and ten days. Some defaults after 20 June 2007 were not rectified before the receivership. Also, after 7 February 2007, Bridgecorp was selective in payments made to investors, with preferential payments made to particular investment brokers, or to investors who simply complained the most.

[21] Mr Reece submitted that at the time the prospectuses were signed, the statement made by Bridgecorp was true. He submitted that you did not become aware of Bridgecorp defaults until after an internal auditor’s report in May 2007. Mr Reece submitted that you made continuing enquiry of executive directors and management, and that you believed that the systems and processes for reporting to non-executive directors were robust and functional, but notwithstanding all of that Bridgecorp did miss payments of interest and principal. Mr Reece submitted that your reliance on other directors and management staff was misplaced.

[22] In that respect, I note a further comment of Venning J, which is that “directors have a non-delegable duty to form their own opinions on the issue as to whether a prospectus contains untrue statements. The directors have an obligation to review the material before them, including, in this case, the due diligence and management reports, other information known to them, and the prospectus to satisfy themselves whether the information in the prospectus would present to a notional investor an

accurate impression of the state of Bridgecorp at the relevant time.”8 (I add that that

comment is particularly relevant to the Barcroft transaction, as to which there was clearly other information known to you.)

“Bridgecorp’s financial position as at 21 December 2006 was as it had been set out in the audited accounts for the year ended 31 December 2006.”

[23] The fourth group of untrue statements was that Bridgecorp’s financial

position as at 21 December 2006 was as it had been set out in the audited accounts

for the year ended 30 June 2006. The Summary of Facts states that, in fact, Bridgecorp’s financial position had substantially deteriorated by December 2006, and it faced a liquidity crisis. There had been a decline in investment and reinvestment; an increase in loan impairment and non-performing assets; an inadequate provision for bad debts; Bridgecorp had advanced substantial funds to support the Australian operations; there was shrinking cash flow; and Bridgecorp had refinanced and borrowed on unfavourable terms. The extension certificates signed on 30 March 2007 also failed to refer to the deterioration in Bridgecorp’s financial position.

[24] In his initial submissions, Mr Reece submitted that the internal auditor’s report identified for the first time matters such as the administration fee relating to the Barcroft loans, and Bridgecorp’s failure to pay withholding tax on interest. He referred to a special meeting of directors held on 21 June 2007, at which you were told that Bridgecorp’s financial position was sound. Mr Reece outlined in his initial submissions what you said occurred after that. He said that two days later you were told that, on the contrary, the company was in default. You, along with the Chairman, embarked on an immediate enquiry, but did not receive a credible or rational response from other directors or Bridgecorp employees. On 3 or 4 July, the directors agreed that the appropriate authorities should be advised, and the Companies Office was advised.

[25] In his supplementary submissions, Mr Reece referred me to Venning J’s finding that the Crown had not proved this group of statements was untrue.9 Again, I bear that in mind, but, again, I am to sentence you on the Summary of Facts on which you entered your guilty pleas.

[26] All of the untrue statements led to investors being misled. After the misleading prospectuses, investment statements, and extension certificates were issued, about $25.3 million was invested, and $85.8 million was reinvested, in Bridgecorp or Bridgecorp Investments. When Bridgecorp went into receivership in July 2007, approximately $459 million of secured debenture stock was outstanding

to some 14,500 debenture holders, and Bridgecorp Investments Ltd had approximately $28.8 million outstanding to members of the public.

[27] The Securities Act is designed to protect potential investors by prescribing what information must be provided to them. Debt securities must be offered to the public by way of an offer in an authorised advertisement, an investment statement, or a prospectus that satisfies the requirements of the Act. The purpose of an investment statement or prospectus is to give the potential investor information that will help prudent, but non-expert, people to decide whether to subscribe for securities. If information in these documents is not true, people who decide to invest will have based their decisions on incorrect information. An untrue statement is one that is actually not true, is misleading in the form or context in which it is made, or is misleading by virtue of the omission of a material particular.

Victim impact statements

[28] I have read victim impact statements from four of the many people who invested in the Bridgecorp companies thinking they were financially healthy, and lost their savings. The amount lost by these people ranged from $10,000 to more than

$2 million. For each of them, it was money invested for their retirement, and whatever the actual loss was, it is money that they simply could not afford to lose. They have all been severely affected. They have suffered from a breach of trust, it has resulted in the loss of their life savings. I have no doubt that the experience which is recorded in these four victim statements reflects that of most, if not all, of the people who invested in Bridgecorp.

Pre-sentence report

[29] I turn now to consider the pre-sentence report. You are 62 years old. You were born in New Zealand, and now hold dual New Zealand and Australian citizenship. You qualified as an accountant and worked in Wellington, Hamilton and Auckland before moving to Australia in 1989. You started your own business in

1999, and it was at that time that you first established connections with Bridgecorp. Your consultancy company, Urwin Fernandez, was involved in the administration of

hotel interests and in particular the development in Fiji. It was because of this that you were invited onto the board of Bridgecorp. You told the probation officer that you worked on auditing and reporting systems and concentrated on the venture’s functionality.

[30] You accepted responsibility for your failure to meet the requirements imposed on directors, and you expressed remorse for those failures. You believed your offending resulted from your believing what you were told, acting on insufficient legal and accounting advice, and failing to conduct sufficient due diligence or audits for yourself before signing documents. You described yourself as having “dropped the ball”.

[31] You were assessed as being at a very low risk of re-offending, and as being motivated to change. You have solid support from family members and no rehabilitative needs were identified.

Sentencing process

[32] I turn now to the process of sentencing. Sentencing of any offender in New Zealand is governed by the purposes and principles set out in ss 7 and 8 of the Sentencing Act 2002. Section 7 sets out the purposes of sentencing. The purposes which are particularly relevant in your sentencing are to hold you accountable to the community for your offending, to consider deterrence, not just of you but of other people, and to denounce the offending. The purpose of deterrence and denunciation in sentencing is to make it known to the community that a firm sanction will be imposed when people fail to perform their statutory functions as directors and cause significant loss to investors.

[33] The principles of sentencing are set out in s 8 of the Sentencing Act. Those which are relevant to your sentencing require me to have regard to the gravity of your offending, including your own culpability for that offending, the seriousness of your offending in comparison with other types of offences, and the general desirability of maintaining consistency in appropriate sentencing levels. I am also required to take into account any information provided to me about the effect of the

offending on the victims. Finally, I am directed to impose the least restrictive outcome that is appropriate in the circumstances. The court should not impose a sentence of imprisonment unless the purposes of sentencing cannot be achieved with a lesser sentence.

[34] The first step in any sentencing is to establish a starting point which properly reflects your culpability for your offending, and takes account of aggravating and mitigating features of the offending. Then I consider matters that relate to you, personally, and adjust the starting point as necessary to arrive at the appropriate sentence for your offending.

Comparable cases

[35] Mr Dickey and Mr Reece both referred in their submissions to the starting points adopted, and the end sentences imposed, in a number of cases. Both referred to and discussed the sentence I imposed on the Chairman of Bridgecorp, Mr Davidson, on 7 October 2011.10 In his case I adopted a starting point of three years three months imprisonment and the end sentence imposed was nine months home detention, together with 200 hours of community work and an order to pay

reparation of $500,000.

[36] I was also referred to the sentences imposed in the cases of the Nathans Finance directors. Those were Mr Hotchin,11 who received an end sentence of 11 months home detention, 200 hours of community work and an order to pay reparation of $200,000. Mr Moses received a sentence of two years two months imprisonment and an order to pay reparation of $425,000. Mr Doolan received an end sentence of two years four months imprisonment, and an order to pay reparation of $150,000. Mr Young,12 received an end sentence of nine months home detention, an order to complete 300 hours community work, and to pay reparation of $310,000.

_{I note that in a judgment of the Court of Appeal those sentences were upheld.}13

10 _{R v Davidson HC Auckland CRI 2008-004-29179, 7 October 2011.}

11 _{R v Hotchin HC Auckland CRI 2009-092-20927, 4 March 2011.}

12 _{R v Moses, Doolan & Young HC Auckland CRI 2009-004-1388, 2 September 2011.}

13 Doolan & Moses v R [2011] NZCA 511.

[37] More recently, I have been referred to the sentencing of the directors of Lombard Finance by Dobson J.14 I note that in that case Dobson J saw what he described as “the Nathans and Bridgecorp offending” as involving “substantially greater culpability” than the offending on which he was passing sentence.15

[38] Mr Davidson’s sentencing is particularly important, of course, because it was in relation to the same offending, concerning Bridgecorp. You and Mr Davidson were, of course, in somewhat different positions, and your sentencing must reflect your position rather than Mr Davidson’s. Mr Dickey submitted that you are more culpable than Mr Davidson, and that a higher starting point is justified. He set out four reasons for this.

[39] The first was that you were involved on both sides of the Barcroft transaction and you knew, or you were reckless as to the fact, that it was between related parties, and that investors were misled by not having that disclosed. Knowledge of both sides of a transaction was considered an aggravating factor in the sentences of Messrs Moses, Doolan, and Young. Mr Dickey submitted that you were in the best position of anyone to know that Barcroft was a related party and he submitted that that places you in the top tier of the non-disclosure cases.

[40] Mr Dickey’s second submission was that it has become clear since Mr Davidson’s sentencing that you were either grossly negligent, or were likely to have known, of Bridgecorp’s negative liquidity position, and that Bridgecorp had missed payments of interest and principal. He referred to a liquidity graph which was included in the board papers for a meeting on 24 May 2007, which showed negative liquidity, and he also referred to regular emails to directors of cash flow forecasts which should have put you and in fact other directors on notice that Bridgecorp was not producing significant cash to meet its liabilities. Mr Dickey submitted that those were matters that were not before me at the earlier sentencing, as the Crown case has

_{been refined since then.}

14 _{R v Graham, Reeves, Jeffries & Bryant [2012] NZHC 575.}

15 At [36].

[41] Thirdly, Mr Dickey submitted that Mr Davidson was entitled to the benefit of a greater discount for a guilty plea that was indicated much earlier than was yours. He also submitted that the mitigating factors that applied to Mr Davidson, in particular his genuine remorse, the assistance he gave the Crown, and his offer to pay reparation, were not available to you.

[42] Finally, Mr Dickey referred to the scale of the offending. He noted the total loss to investors was around $490 million at the time of receivership. There is likely to be a return of no more than ten cents in the dollar for secured debenture holders, and nothing for unsecured investors. It appears that the Bridgecorp failure is one of the largest, if not the largest, of the finance company failures.

[43] Mr Reece submitted that your culpability was less than that of Mr Davidson, and that a lower starting point should be adopted for you. He submitted that this was because you were a non-executive director, with no direct managerial involvement, and your active role was to deal with managing the joint venture developments and loans relating to the Barcroft transaction. He submitted that Momi Bay was a major project and that over the period from when it was initiated you were completely committed to it being successful.

[44] He submitted that there was nothing in the evidence that was presented in Court to suggest that you were ever intentionally trying to deceive investors. He submitted that there was no evidence that you preferred your own position to that of the joint venture. Regarding the other categories of untrue statements, Mr Reece submitted that you were not in control of the financial affairs of Bridgecorp, as were the executive directors, and you were not in the position of leadership, as was Mr Davidson. Mr Reece, today, talked about a breakdown, or as he called it a “canyon” between you and the executive directors.

[45] Then in relation to the starting points adopted in the sentencing of the Nathans Finance directors, and I note for Mr Hotchin it was three years imprisonment, it was three years three months imprisonment for Mr Moses, it was three years four months for Mr Doolan, and for Mr Young (considered to be the least culpable of the group), the starting point was two years nine months. Mr Dickey

submitted that because of the much higher losses to the investors of Bridgecorp, and your knowledge of the state of affairs at Bridgecorp, in particular the Barcroft transaction, the starting point for your sentencing should he higher than those adopted for the Nathans sentencing.

[46] Mr Reece submitted that your culpability was much less than that of Mr Hotchin. He acknowledged that you have pleaded guilty to a greater number of charges, and that there is a greater loss to investors. However, Mr Reece submitted that your culpability was less because you had no involvement in preparing the prospectus, and when you became aware of Bridgecorp’s lack of liquidity you reported the situation to the Companies Office.

[47] Regarding the other Nathans Finance directors, Mr Reece submitted that Mr Moses’ intimate knowledge of the company’s position, and Mr Doolan’s direct managerial involvement, suggested that they should be considered significantly more culpable than you. He submitted that a key distinguishing feature in your case was your lack of knowledge as compared with Messrs Hotchin, Moses, and Doolan.

[48] Your offending is distinguishable from that of the Nathans directors by virtue of the significantly greater losses suffered by the investors. I do not accept that your culpability is significantly less than that of Mr Hotchin, Mr Moses, and Mr Doolan – that is because you had direct knowledge of the Barcroft transaction, and information that Bridgecorp’s liquidity.

[49] I note also that I was referred to the sentences, imposed in the cases of the directors of Five Star Consumer Finance. They were, Messrs Macdonald, Bowden, and Kirk.16 They each pleaded guilty to charges of offending that included material untrue, false, or misleading statements in a prospectus that had the effect of misrepresenting the quality and risk of investing in the company. The starting points adopted for the charges under the Securities Act were three years six months imprisonment for Mr Bowden, four years for Mr Kirk, and three years four months

_{for Mr Macdonald.}

16 R v Kirk, Macdonald & Bowden DC Auckland CRI 2009-004-24026, 21 December 2010.

Starting point

[50] Mr Dickey submitted that the starting point for your sentencing should be four years imprisonment. Mr Reece submitted that the starting point should be in the area of 18 months to two years imprisonment. Mr Reece’s submission made particular reference to the sentencing of the Lombard Finance directors.

[51] I do not accept that the Lombard Finance sentencing is a useful comparator for your sentencing. As Dobson J observed, the offending in that case involved a substantially lower culpability.

[52] I have concluded that the starting point for your sentencing should be the same as that for Mr Davidson. This is for the following reasons. The first is that you had knowledge of both sides of the Barcroft transaction. You had intimate knowledge of the loans that were transferred as a result of that transaction. This is confirmed by your saying that the Barcroft transaction took no less than five months to devise and structure. You had personal knowledge of the fact that Barcroft was a related party. I accept Mr Dickey’s submission that it because of your interest in the companies to which the loans had been made, that Barcroft was a related party. I also accept Mr Dickey’s submission that through your interest in Urwin Fernandez and its interest in the joint venture, you had a significant personal interest in the maintenance of the loans. Further I do not accept that you were let down by poor financial or legal advice. It is also significant in setting a starting point that your offending caused a significant loss to many, many people.

[53] The second reason is that it is apparent from the Summary of Facts that you were either grossly negligent, or were likely to have known, of Bridgecorp’s negative liquidity position, and that it had missed payments of interest and principal. I have referred to the duty that directors have to review material put before them, to consider other information known to them, to satisfy themselves as to information presented in a prospectus. Directors are required to exercise judgment, and to test the competence of management.

[54] I take into account Mr Reece’s submission that you did not have the leadership role of Chairman of the Board, and you were not an executive director. I also note his submission that it has not been shown that you were pursuing a sham, or as he put is “feathering your own nest” in the Barcroft transaction. But against that, you were in the position of having direct knowledge of the very significant Barcroft transaction and you had a personal interest in it. Further, you were Chairman of the Credit Committee, and a member of the Audit Committee.

[55] I have concluded, therefore, that the appropriate starting point for your sentencing is three years and three months imprisonment.

Personal factors

[56] I turn now to consider mitigating factors that relate to you, personally. Mr Reece submitted that your previous good character should be taken into account. You have had a distinguished and successful career, and you are highly regarded by the business community. I have read the letters of support annexed to Mr Reece’s submissions testifying to that submission. Against that, Mr Dickey submitted that you and your co-accused relied on your good character to persuade investors to invest in Bridgecorp, and that your experience, business credentials and professional qualifications were selling points. He submitted that you have badly, and criminally, abused the investing public’s trust by misleading investors as to the true nature of their investments.

[57] Mr Dickey pointed, in his written submissions, to your profile, included in the Bridgecorp prospectuses. It sets out your qualifications, and experience. It says that you have “30 years experience in the analysis, management and reconstruction of businesses with a focus on property related matters”. I accept that it is possible that investors may have invested on the strength of the profile, but none of the four people who wrote victim impact statements has said that this was the case. In the circumstances I intend to apply a discount for good character, as I did in the case of Mr Davidson.

[58] I also accept Mr Reece’s submission that you have demonstrated remorse,

and that you are at a very low risk of re-offending.

[59] You will be aware that Mr Davidson’s offer of a substantial payment in reparation was a significant factor in his sentencing. Your own financial position does not enable you to make an offer of reparation. I accept Mr Reece’s submission that that should not count against you, but neither can I apply the discount that might otherwise have been available.

[60] Mr Reece submitted that a further discount should be applied for assistance you have provided, or offered to provide, to the authorities. He outlines this as assistance to the liquidators and receivers, and assistance to the Financial Markets Authority. I accept Mr Reece’s submission that you have given that assistance, and that you are entitled to credit for that, but I also note Mr Dickey’s submission that your assistance did not extend to giving an evidential statement.

[61] In any sentencing, a discount for personal factors such as I have discussed is considered in a global sense. It is seldom possible to apply a discrete discount for every matter considered. In Mr Davidson’s case I allowed a discount of 35 per cent, to take account of the personal mitigating factors that were relevant in his sentencing. In your case, I cannot conclude that the discount should be to that extent. I have concluded that the appropriate discount is 12 months, leading to an adjusted starting point of two years three months imprisonment, before considering your guilty plea.

Guilty plea

[62] The Supreme Court in Hessell v R17 confirmed that the discount to be given for a guilty plea is to be considered separately from other discounts to be given for personal mitigating factors. The Court held that the discount should be determined by evaluating all of the circumstances in which the plea was entered in each case.

_{One of the factors to be considered, but it is only one, is when the plea was entered.}

17 Hessell v R [2011] NZSC 135; [2011] 1 NZLR 607.

[63] Mr Dickey submitted that your plea was entered some two years and eight months after your first appearance on these charges, and after the Crown had opened its case in your trial. There had been no prior indication from you that a guilty plea would be entered. So Mr Dickey submitted that your plea came at a very late stage, particularly in light of the fact that the start date of the trial had been delayed several times.

[64] Mr Reece acknowledged the lateness of your plea, but I also accept his submission that your former counsel withdrew in June of last year, and your plea was entered within a reasonably short time of Mr Reece being assigned and being in a position to take full instructions.

[65] I allowed a discount of 20 percent for Mr Davidson’s guilty plea which came before the trial started, but had been signalled well before that. I accept that your change of counsel is a circumstance to be considered when considering the timing of your guilty plea. Having considered all the circumstances, I have concluded that the appropriate discount for your guilty plea is three months. That leads to final adjusted sentence of two years imprisonment.

[66] That brings me to consider whether imprisonment would in fact be the appropriate sentence or whether a less restrictive sentence would meet the purposes and principles of sentencing.

Home detention

[67] On behalf of the Crown, Mr Dickey has acknowledged that the Court has jurisdiction to impose a sentence of home detention rather than imprisonment. In your case, he submitted home detention would not be the appropriate sentence as it would not adequately address the sentencing principles of denunciation and deterrence, particularly given the severity of the offending.

[68] Mr Reece submitted that the punitive nature of a sentence of home detention would be consistent with the purposes and principles of sentencing.

[69] A sentence of home detention can only be imposed for a maximum of 12 months, where the sentence that would otherwise be imposed is up to two years imprisonment. I have come to the conclusion that a sentence of home detention would not be appropriate for your offending. You had direct knowledge from both sides of the transaction, and through your interests in Urwin Fernandez you had a personal interest in the Barcroft transaction, and you also had information as to Bridgecorp’s negative liquidity. The amount lost by investors in Bridgecorp was significant, and certainly far more than was lost by the investors in the Nathans case. In the circumstances, a sentence of home detention would not, in your case, meet the purposes of denunciation and deterrence particularly where you had personal knowledge of the transaction which was a significant component of Bridgecorp’s failure.

[70] I have concluded that the purposes of sentencing would not be met by a sentence which is less restrictive than imprisonment. I therefore decline to order a sentence of home detention.

[71] Would you please stand.

Sentence

[72] On each of the charges on which you have entered pleas of guilty, you are sentenced to two years imprisonment. All sentences are to be served concurrently.

_{[73] Would you please stand down.}

Andrews J