R v Hamilton [2014] NZHC 1024 (16 May 2014)

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Hearing:	3 – 5, 10 – 14, 17 – 21, 24 – 28 and 31 March 1 – 4, 7, 8 and 14 – 16 April 2014
Counsel:	NR Williams, KC-M Chang and AJH Senior for Crown JG Robertson, DG Young and J McNamara for Defendant
_Date:	_{16 May 2014}

Introduction ..............................................................................................................[1] The counts .................................................................................................................[4] The position of the company-offenders ................................................................ [11] Discharge of defendant in respect of counts 17 and 18 .......................................[16] Amendment to count 19.........................................................................................[17] Judge alone trial .....................................................................................................[18]

The background facts ........................................................................................... [27] The defendant ..............................................................................................[42] Purchase of Belgrave....................................................................................[45] The loans to Schofield interests ...................................................................[93] The documents involved in the disclosure charges ......................................[94] Belgrave’s position at receivership ..............................................................[97] Distributions by receivers ..........................................................................[106]

Elements of the theft charges ............................................................................ [110] Elements in respect of principal theft offences .......................................... [114] Conviction certificates ............................................................................... [115] Secondary party elements in respect of theft charges ................................ [116] (a) Actus reus element.............................................. [117] (b) Mens rea element................................................ [118] (i) Knowledge .................................. ..............................[119]
(ii) Intention .............................................................................. [122]

The elements of the disclosure charges ........................................................ [128] Elements in respect of principal offence under s 242 ................................[131] Secondary party elements in respect of s 242 .................................[133] Common intention requirement ............... ........................ ............[133] Was false statement carried out as part of the common design......................... [136] (a) Defendant’s knowledge................................................... [137]

Elements in respect of principal offence under s 377(2) [138] Rules of law and practice.....................................................................................[143] Key facts and findings..........................................................................................[149]

^{Count 1 – The guarantee by Belgrave of the loan of
$3,175,000......................[149]}

Verdict ........................................................................................................[161]

Belgrave’s shareholder.........................................................................................[162]

Verdict ........................................................................................................[168]

Count 3 – The guarantee to MFS Pacific Ltd ....................................................[169] Verdict ........................................................................................................[176]

The balance of the theft counts – Counts 4 to 16 and 19 ..................................[177] Is Mr Schofield a related party to Belgrave? .............................................[178] Actual assistance ........................................................................................[189] Knowledge .................................................................................................[193] Intention .....................................................................................................[201] Verdict ........................................................................................................[204]

The disclosure charges .........................................................................................[205] Verdict ........................................................................................................[222]

Conclusion.............................................................................................................[223]

[1] This case arises from independent investigations undertaken by the Serious Fraud Office and the Financial Markets Authority into the affairs of Belgrave Finance Ltd (Belgrave).

1,268 individual investors $20,481,616. The debenture investors have received distributions representing 9.8 cents per dollar invested. Belgrave’s failure had serious consequences for those investors.

[3] The defendant was at the material times a solicitor. He took instructions from a Mr Schofield relating to the acquisition of all the shares in Belgrave. Those instructions later included Messrs Buckley and Smith. Further instructions were taken in relation to borrowing by Belgrave and then in relation to lending. The charges that I now consider arise from the defendant’s involvement with these matters. They include steps taken to solicit funds for investment from the public.

[4] The defendant faces the following charges on indictment as a party to the offending of his co-offenders:

(a) Seventeen charges under s 220 of the Crimes Act 1961 involving theft by a person in a special relationship;

(b) Eleven charges under s 242 of the Crimes Act 1961 alleging false statements by a promoter;

(c) Eleven charges under s 377 of the Companies Act 1993 and s 66 of the Crimes Act 1961 of making a false statement to a trustee.

[5] In respect of the counts pursuant to s 220 of the Crimes Act 1961, Mr Williams advised that the Crown relied on s 66(1)(b) to (d) of the Act. In

particular, he said the Crown alleges that Mr Hamilton gave Messrs Schofield, Buckley and Smith direct assistance:

(a) In respect of counts 1, 2 and 3 to enable them or his associated interests to purchase Belgrave and finance its operations; and

(b) In respect of counts 4 to 16, and 19, with each of the transactions that are the subject of these counts.

[6] The first three counts relate to monies raised either for the purchase of shares in Belgrave Finance Ltd, or to fund the company’s operation by the company which became the shareholder of Belgrave, namely Investment Enterprises Ltd (IEL). Those transactions were guaranteed by Belgrave. The guarantees are in breach of the Debenture Trust Deed between Belgrave and its trustee, Covenant Trustee Company Ltd.

[7] The remaining charges deal with loan advances made by Belgrave to borrowers. They also are in breach of the Debenture Trust Deed between Belgrave and Covenant Trustee Company Ltd.

[8] Mr Williams advised that in relation to the counts under s 242 of the Act (false statement by a promoter) and s 377(2) of the Companies Act 1993 (making a false statement to a trustee) the Crown relied on s 66(2). In this respect, in summary, the Crown case alleges that:

(a) Mr Hamilton, with Messrs Schofield, Smith and Buckley formed a common intention to structure Belgrave so that Mr Schofield’s financial interest in it was not revealed and to allow Belgrave to provide loans to Mr Schofield and entities associated with him in breach of the Debenture Trust Deed;

(b) In the course of implementing and giving effect to that plan, Mr Buckley and Mr Smith offended by issuing prospectuses

(c) Mr Hamilton knew it was probable that in the course of implementing and giving effect to the common intention Mr Buckley and Mr Smith would issue prospectuses with false statements, and would make false statements to the trustee.

[9] The charges under s 242 of the Crimes Act 1961 and s 377 of the Companies Act 1993 will be referred to in this judgment as the disclosure charges. They relate to the alleged offending committed in order to obtain funds from the public.

[10] The charges under s 220 of the Crimes Act 1961 are the theft charges and will be referred to as such in this judgment. They relate to the alleged dealing with money otherwise than in accordance with the requirements of persons other than the principal offenders and the defendant.

[11] Mr Buckley, one of the directors of Belgrave pleaded guilty to the charges against him pre-committal on 25 May 2012. Those charges were 19 charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961, four charges of false statement by a promoter under s 242 of the Crimes Act 1961, one charge of false statement to a trustee under s 377 of the Companies Act 1993 and one charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978.

(a) On the charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961 to one year’s imprisonment;

(d) On the charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978 to one year and six months imprisonment.

2012. The reason for the stay was that he was suffering from terminal cancer. The High Court granted leave to the Crown to apply for the stay to be lifted if there is a significant change in the relevant circumstances. At this stage, no advice indicating that such application has been, or is about to be, made has been given.

[14] Mr Buckley’s co-director, Mr Smith, pleaded guilty to the charges against him on 24 May 2013. Those charges were 19 charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961, four charges of false statement by a promoter under s 242 of the Crimes Act 1961, one charge of false statement to a trustee under s 377 of the Companies Act 1993 and one charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978.

(a) On the charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961 to four years imprisonment;

(d) On the charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978 to three years imprisonment.

[16] At the commencement of the trial, Mr Williams advised that no evidence would be advanced in respect of counts 17 and 18, which were originally part of the theft group of charges. Accordingly, and with counsel’s agreement, I discharged the defendant in respect of counts 17 and 18 pursuant to s 347 of the Crimes Act 1961.

[17] Mr Williams sought leave to amend the particulars of the amount of the transaction referred to in this count from $2,050,000 to $300,000. With the agreement of counsel, I granted such amendment.

[18] On an application filed by the defendant, Brewer J made an order on 24 April

2013 that the trial be heard by a judge alone. This matter proceeded on that basis.

[19] The informations were laid against Mr Hamilton on 20 November 2012. Accordingly, Part 4 of Subpart 1 of the Criminal Procedure Act 2011 containing the provisions applying to judge alone trials, do not apply to this case by the operation of s 397 of that Act.

[20] In R v Connell, the Court of Appeal stated that a judge hearing a criminal trial without a jury is required to deliver:¹

... a statement of the ingredients of each charge and any other particularly relevant rules of law or practice; a concise account of the facts; and a plain statement of the Judge's essential reasons for finding as he does. There should be enough to show that he has considered the main issues raised at the trial and to make clear in simple terms why he finds that the prosecution has proved or failed to prove the necessary ingredients beyond reasonable doubt. When the credibility of witnesses is involved and key evidence is definitely accepted or definitely rejected, it will almost always be advisable to say so explicitly.

[21] In R v Eide, the Court of Appeal confirmed this principle, but made the following additional observations in respect of fraud prosecutions:²

[21] The problems with short-form judgments are particularly acute in fraud prosecutions. The parties (ie the prosecutor and accused) are obviously entitled to know the key elements of the Judge’s reasoning. In a case of any complexity, this will not be possible unless the Judge provides an adequate survey of the facts. As well, in this context a Judge is addressing an audience which is wider than the prosecutor and accused. If the verdict is guilty, the Judge should explain clearly the features of the particular scheme which he or she finds to be dishonest. There is a legitimate public interest in having the details of such a scheme laid out in comprehensible form. Similar considerations apply if the verdict is not guilty. Further, some regard should be had to how the case will be addressed on appeal. A judgment which is so concise that some of the key facts in the case are required to be reconstructed by this Court on appeal is too concise.

[22] In Wenzel v R, the Court of Appeal endorsed the approach in R v Connell and affirmed the comments in R v Eide regarding fraud cases.³

[23] The 17 counts under the Crimes Act 1961 allege theft. The 11 charges under s 242 of the Crimes Act 1961 and the 11 charges under s 377 of the Companies Act

1993 allege a failure to disclose. Although fraud is not alleged I, for similar reasons to those expressed by Wylie J in R v Douglas, consider that it is appropriate to give relatively full reasons to explain the verdicts I have reached.⁴The charges arise out of a collapse of a finance company. It involves the actions undertaken by a lawyer:

(a) acting on behalf of the purchaser of shares in a finance company for the purpose of obtaining control of that finance company;

(b) assisting in the raising of finance for the operation of the finance company; and

[24] There will undoubtedly be public interest in the outcome having regard to the substantial loss that has occurred in this case. There will also be interest on the part of legal practitioners acting in this area of the law having regard to the fact that the charges flow initially from the fact that Mr Hamilton’s involvement commenced by the receipt of instructions from the principal parties who are involved.

[25] There has been a significant amount of documentary evidence. There is a limit as to how far I can summarise the detail of that evidence.

(d) record an account of the important facts as they apply to the elements of each charge, including the matters raised in opposition by the defence, and the reasons for the findings I make.

[27] Belgrave carried on business as a finance company until it was placed into receivership on 28 May 2008. Its business involved primarily the advance of commercial loans from funds raised from the public.

[28] The charges must be considered having regard to the finance company regime under the Securities Act 1978. The Securities Act regulates the offer of securities to the public for subscription. It prohibits the offer to the public of debt securities unless the offer is made in an authorised advertisement, an investment statement or a prospectus. It requires that the issuer has appointed a trustee and

[29] The prospectus is a detailed document under which a company offers the securities to the public.

[30] A prospectus has a finite life of nine months. It can be extended if at least two directors of the issuer certify within nine months after the date of the financial statements contained in the prospectus, that after due inquiry by them:

(a) The financial position shown in the financial statements is not materially and adversely changed; and

(b) The prospectus is not false or misleading in a material particular, by reason of failing to refer, or give proper emphasis, to adverse circumstances.

[31] Such a certificate must be accompanied by the financial statements for the latest six-month period. They do not have to be audited. A certificate is deemed to form part of the prospectus by the operation of s 55(c) of the Securities Act 1978.

[32] The investment statement, which must be consistent with the company’s prospectus, has as its purpose the presentation of key information which is likely to assist a prudent, but non-expert, person to decide whether or not to subscribe for the securities. It will also advise other important information about the securities referred to in the prospectus. The investment statement is the document all investors must receive when they apply for debenture stock. It usually includes an application form.

[33] Section 33(2) of the Securities Act 1978 requires that before issuing any debt security, the issuer must appoint a trustee and sign a trust deed relating to the security. The trust deed must be registered with the Registrar of Companies.

[34] The trust deed is a contract between the issuer and the trustee. It sets out the finance company’s obligations with respect to the investor deposits. It records the restrictions on how the issuer may deal with funds received from the public. The trust deed gives powers to the trustee to look after the interests of investors. It will

require directors of the finance company to provide the trustee with regular information on the position of the company. That will include the nature of the company’s lending. It will require that the directors confirm that the company is complying with all the terms of the trust deed.

[36] For the purposes of this case, a number of its provisions are important and are now set out. The Debenture Trust Deed prevents the finance company, without the trustee’s consent, from entering:⁶

... into any Related Party Transaction (as defined in clause 5.3) except in the ordinary course of business and where the terms thereof are evidenced in writing and the consideration therefore is on the basis of an arms length transaction as between two unrelated parties contracting in an open market, provided however that in any twelve month period the aggregate value (as defined in clause 5.3) of Related Party Transactions entered into or remaining outstanding shall not exceed 2% of Adjusted Total Tangible Assets.

... the amount owing to the Charging Group under financing receivables by any one debtor to related group of debtors (the “Exposure Amount”) to exceed 10% of Adjusted Total Tangible Assets or $300,000 whichever is the greater, provided that where the Exposure Amount in respect of a debtor or related group of debtors will exceed 10% of Total Tangible Assets, but will not exceed $300,000, as a consequence of financial accommodation and/or financial services to be provided by the Charging Group to that debtor or debtors, such financial accommodation and/or financial services to be provided shall be in accordance with lending criteria agreed from time to time between the Trustee and the Charging Group.

Related Party Transaction means any transaction of any nature between the Company or Charging Subsidiary and a Related Party including, but not limited to

⁶Debenture Trust Deed, Financial Limitations and Special Covenants, Restriction on Related

(b) the investment by the Company or any Charging Subsidiary in the capital or equity of a Related Party,

(e) the giving of a guarantee, indemnity or other commitment by the Company or any Charging Subsidiary to, at the request of, or for the benefit of, a Related Party,

(a) a company, trust or other person of which any shares, units or other interests are beneficially owned by the Company or another Related Party,

(b) a person who has relevant interest (as defined in Section 5 of the Securities Amendment Act 1988) in any shares in the Company, a Subsidiary or any Charging Subsidiary,

(e) a company in which any of the following persons in aggregate own or hold more than 10% of the issued capital

(f) any trust of which any director or shareholder of the Company, any Subsidiary or any Charging Subsidiary or any Family Member of any such director or shareholder is a trustee, settlor or beneficiary.

(a) in respect of the provision of financial accommodation or the investment of capital or equity, the principal amount thereof,

(b) in respect of the transfer of assets or the provision of services, the consideration, or if the services are ongoing, the aggregate consideration during the relevant twelve month period,

(d) in respect of any other Related Party Transaction, the amount thereof or the consideration therefore paid or payable during the relevant twelve month period

References to any statute shall refer also to any regulations orders or notices made thereunder and in all cases include any statutory modification amendment or re-enactment thereof or provisions substituted therefor for the time being in force

[39] The Securities Amendment Act 1988 was renamed as the Securities Markets Act 1988 from 1 December 2002. The definition of “relevant interest” was amended with effect from 1 December 2002 and again in 2004. The operative definition of “relevant interest” in s 5(1) of the Securities Markets Act 1988 for the period from

(1) For the purposes of this Act a person has a relevant interest in a voting security [or other security] (whether or not that person is the registered holder of it) if that person—

(f) Under, or by virtue of, any trust, agreement, arrangement, or understanding relating to the ... security (whether or not that person is a party to it)—

(i) May at any time have the power to exercise any right to vote attached to the ... security; or

(ii) May at any time have the power to control the exercise of any right to vote attached to the ... security; or

(iv) May at any time have the power to control the acquisition or disposition of the ... security by another person.

(a) That person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of any other person in relation to—

(iv) The exercise of the power to control the acquisition or disposition of the ... security by another person; or

(b) Another person has the power to exercise the right to vote attached to 20 percent or more of the ... securities of that person; or

(c) Another person has the power to control the exercise of the right to vote attached to 20 percent or more of the ... securities of that person; or

(e) Another person has the power to control the acquisition or disposition of 20 percent or more of the ... securities of that person—

[40] The interpretation of the concept of power for the purposes of s 5(1) is clarified in ss 5(4), (5) and (6) which provide:

(4) A person who has, or may have, a power referred to in any of paragraphs (b) to (f) of subsection (1) of this section, has a relevant interest in a ... security regardless of whether the power—

(e) Is subject to restraint or restriction or is capable of being made subject to restraint or restriction:

(5) A power referred to in subsection (1) of this section exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.

(6) A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, arrangement, or understanding, or any of them, whether or not it is legally enforceable.

The Debenture Trust Deed further provides that the finance company covenants with the trustee that it will:

carry on and conduct its business in an efficient, prudent and businesslike manner,

duly and promptly comply with all laws, directives and consents the non- compliance with which might give rise to a Charge or have a material adverse effect on the Company or may adversely and materially affect the rights or security of the Trustee or any Stockholder under this Deed

[41] Clause 6 of the Debenture Trust Deed sets out the reporting requirement to the Debenture Trustee.¹⁰

[42] The defendant is now 62. He attained his first practising certificate to act as a barrister and solicitor in 1982. He joined the law firm of Davidson Armstrong & Campbell (DAC Legal). He became a partner in 1989. His particular work involved court work, general conveyancing and attending to the needs of rural clients in the vicinity of the firm’s offices in Waipukurau. Establishing family trusts for farming clients and attending to their financial requirements were significant parts of his legal practice.

[43] In approximately 2000, the defendant became the partner responsible for the firm’s trust account. The firm at one time had a significant solicitors’ nominee company with a substantial amount of funds lent to clients.

[44] The vehicle by which lending was undertaken later changed with the establishment of Midland Mortgage Trust Group Investment Fund which effectively combined the resources of several law firms, including DAC Legal.

[45] One of the firm’s substantial clients was Mr Raymond Schofield. Mr Armstrong, another partner at DAC Legal, had acted for Mr Schofield for many years.

[46] Mr Schofield approached Messrs Laywood and Rees in April 2005 with a view to acquiring Belgrave. The approach was unsolicited. Mr Schofield had been known to the directors of Belgrave from previous lending dealing they had whilst Mr Laywood was at United Pacific Corporation and MARAC Finance.

[47] Messrs Laywood and Rees were the directors of Belgrave. There were two companies which each owned 172,800 shares in Belgrave. The first was Salcombe Trading Ltd, which was the company that Mr Laywood was associated with. The second was Serge Investments Ltd, which was the company that Mr Rees was associated with.

[48] Messrs Schofield, Laywood and Rees met in a face-to-face meeting. Mr Laywood described how he explained the parameters of working around the Debenture Trust Deed, the financial limitations, the capital adequacy, related parties and matters of that nature.

[49] After that meeting, Mr Laywood received a communication from Mr Schofield in which Mr Schofield advised that he wanted to buy Belgrave. He asked Mr Laywood to advise how much the shareholders wanted for the shareholding in the company. Mr Laywood understood that Mr Schofield was acting on his own behalf in this approach. Mr Schofield advised that he had directors with experience in the industry who he would appoint to run the company.

[50] After some consideration, Messrs Laywood and Rees advised that the price for the shares that they required was $3.2 million. No formal valuations were obtained by them. The book value of the assets was $1,600,000.

[51] Mr Laywood then consulted his lawyers and a meeting was arranged with Mr Craig Alexander of the law firm Alexander Dorrington, and a lawyer and later partner in that firm, Ms Marsden, who was then known by her maiden name of Skewes.

[52] Mr Laywood gave instructions to Mr Alexander and Ms Marsden for the preparation of the appropriate sale and purchase contract. At this stage, it was not known who would be acting for Mr Schofield’s interests.

15 April 2005, which had attached a draft agreement for the sale of shares in Belgrave to Mr Schofield. The email advised that the agreement was being reviewed by Belgrave and may need amendment. The email noted that they would have to agree on a timetable and indicated that the draft was merely a starting point.

[54] The parties to this draft agreement were the shareholders in Belgrave, namely Salcombe Trading Ltd and Serge Investments Ltd, as vendors. The purchaser was recorded as the Trustee of the Tractor Trust which was a trust related to

Mr Schofield. Mr Schofield is also recorded on the face page of the agreement. His precise position is not identified in the draft, save for one provision which I will refer to. No provision is made in the draft for him to sign.

[55] Ms Marsden confirmed that the instructions for the content of the draft agreement had come from Mr Laywood. The draft did contain a liability release provision, which refers to Mr Schofield and which provided as follows:

9.1 The purchaser shall procure the release of the Vendor and each of them from all guarantees indemnities and other personal covenants undertaking liability for the debts or liabilities of the Company and shall procure releases of all and every security given by the Vendor as security for such guarantees, indemnities and covenants and to that end will execute all documents and give all guarantees, indemnities, covenants or undertakings necessary to procure such release. To the extent that such release may not be able to be procured the Purchaser and Raymond Schofield will indemnify and save harmless the Vendor and each of them from and against all liabilities actions claims suits and demands arising from the debts or liabilities of the Company except to the extent that the same arises from a default of the Company prior to the Settlement Date.

John Armstrong and Hugh Hamilton are my legal men working on it for me, and there is a small list of questions as well as names, dates and convertible note queries

they will contact your Denise Skewes [Marsden] to make the agreement a bit more simple for me to understand with a few suggestions

[57] Exactly what transpired can only reliably be ascertained from the documents. The defendant’s position is that all he was doing was carrying out instructions received from Mr Schofield.

3. Parties – the references to Ray Schofield are retained for the moment in square brackets. We suggest as an alternative a separate deed of indemnity could be given by Ray ...

the indemnity what do you think, I want a new clean trust with discretionary beneficiaries with no reference to me.

[61] There followed emailed correspondence between Ms Marsden and the defendant. The defendant appeared to be awaiting instructions from Mr Schofield. One of the issues concerned convertible notes and the extent, if any, that they were to be included in the sale.

[62] The defendant records a file note on 11 May 2005 of telephone instructions from Mr Schofield as follows:

[64] Mr Young submitted that the reference to beneficiaries was intended to be blood relatives of the settler. I note that the words “blood relation” are crossed out in the defendant’s file note.

2005. It is entitled Plan For Purchase of Belgrave Finance Limited by Schofield and

June Hughes of Waipukurau, Married Woman to be settlor. The trustee to be John Lawrence Armstrong of Waipukurau, Solicitor and Kevin Brian Maurice of Auckland, Company Director. Beneficiaries to be the descendents of June Hughes. Trust to be IRD/GST registered (check).

3. Incorporate a company to be called Investment Enterprise Limited (IEL) with 1,000 shares divided into 2 classes. A shares being fully paid ordinary voting shares and B shares being fully paid non voting shares. Shares to be issued will be 150 B shares to Shane Joseph Buckley of 441 Queen Street, Auckland, 450 A shares to the trustees of the KBM Trust. Kevin Brian Maurice of 95 Point View Drive, Howick, Auckland to be the sole director. Register office and address for service also to be 95 Point View Drive, Howick, Auckland. Company to be IRD/GST (check) registered.

4. IEL purchases all shares in Belgrave Finance Ltd for $3,175,000 plus or minus any equity adjustment with the intention that equity at settlement is $1,600,000. Offer will be subject to due diligence to

(a) Eastern Equity Limited to advance $350,000.00 to Belgrave on settlement. Security for which will be subordinated 2 year capital notes at 10%.

60 days from settlement or until the consultancy is terminated at the option of Belgrave, whichever is sooner.

6. The purchaser of the shares in Belgrave to be funded by a loan from MFS. Security will be mortgages of the shares in Belgrave with a personal guarantee from RTS.

8. Formation of the Tourist Trust and incorporation of IEL by DAC Legal. Formation of KBM Trust by Gregg Walker.

10. As soon as IEL is incorporated, DAC Legal to prepare offer for the purchase of shares in the form attached. Note the first drafts of this document have been prepared by Belgrave’s solicitors, Alexander Dorrington (Denise Skewes acting).

[66] The defendant emailed the plan to Mr Schofield on 3 June 2005, together with a draft agreement, naming IEL as purchaser. Mr Schofield then forwarded it to Mr Michael King of MFS Finance on the same day. He took that step with a view to obtaining finance. That step is significant because it establishes that Mr Schofield intended that the acquisition of Belgrave would be achieved by 100 per cent borrowing of the purchase price.

2005. Mr Buckley’s directorship is confirmed. Mr Smith is recorded as being another director. Mr Smith and Mr Armstrong are recorded as to be the trustees of the Tourist Trust. Mr Maurice is no longer mentioned as being involved in the purchase.

[69] The sale and purchase agreement was signed. It is dated 15 June 2005. It records the sale of 345,600 fully paid ordinary shares from the two vendor companies to IEL as purchaser. They are the shares in Belgrave. It provides a purchase price of $3,175,000 with provision for adjustment, up or down, based on the actual equity. Equity is defined as being calculated by “adding issued capital, retained earnings and convertible notes” at the settlement date. It provides for a settlement date of 1 September 2005 or an earlier date by mutual agreement. It contains a number of provisions. I refer to several which are relevant for the purposes of this proceeding, namely:

(a) Clause 9.1 requires the purchaser to release the vendor from certain obligations, including guarantees and indemnities and the like;

(b) Clause 10 deals with the provision of a new prospectus which will record the change of directors and shareholders of Belgrave;

(c) Clause 12 provides, as a condition precedent, for due diligence to be carried out by the purchaser to be completed by 30 June 2005;

(e) Clause 20 contains an entire agreement provision and, in particular, records:

No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the parties to this Agreement.

[70] The agreement was signed by the respective directors of the two vendor companies, Messrs Laywood and Rees and by Mr Buckley on behalf of the purchaser, IEL.

[71] The vendors sought a variation. They wanted Mr Schofield to personally guarantee the purchase. That was rejected on the purchaser’s side because it would have resulted in Mr Schofield being involved in the agreement itself. The issue, however, was resolved by deleting all reference to Mr Schofield in the agreement

and variation, which covered a number of other matters, and by Mr Schofield executing a deed of guarantee as a separate document.

[72] The contractual position was therefore covered by the contract dated 15 June

2005 and a document which is dated 20 June 2005 and which provides for specific variations to the 15 June 2005 agreement, but makes no reference to Mr Schofield. That document does have some importance for this case because, by cl 10 the parties provide:

For the purposes of seeking consents under the Debenture Trust Deed the Purchaser shall also provide to the Vendor all information reasonably requested as to the shareholding, asset-backing and other details of the Purchaser.

[73] This variation was signed by the two directors of the vendor companies and by Mr Buckley on behalf of IEL.

[75] The defendant drafted the deed of guarantee. The deed was executed by the directors of the two vendor companies and by Mr Schofield. It records Mr Schofield’s guarantee of payment of the purchase price, and indemnifies the vendors against any loss that might be suffered should the agreement be unlawfully disclaimed or abandoned by any liquidator. It contained in cl 3 the following provision:

The existence of this deed and the contents of this deed shall be kept confidential to the parties up to the point where any litigation in respect of this guarantee is filed.

[76] The recitals to the deed are important because they record the sale and purchase contract of 15 June 2005, the variation of 20 June 2005 and the vendor company’s request that Mr Schofield enter into this deed for the purpose of guaranteeing the performance of the purchaser under the agreement.

[77] The Tourist Trust was formally settled by Mrs Hughes on 24 June 2005. She is Mr Schofield’s mother-in-law. The beneficiaries of the trust include the children of the settlor, that is, Mr Schofield’s wife, and the husband of each of the children, which includes Mr Schofield himself. Mr Schofield’s position is that of a discretionary beneficiary of the Tourist Trust. The defendant claims that Mr Schofield’s inclusion as a discretionary beneficiary in this trust was a mistake and, indeed, contrary to the instructions he had received from Mr Schofield. For reasons that I will later explain that is not critical to the outcome.

(a) Mr Smith and Mr Armstrong (as trustees of the Tourist Trust) – 800 shares. These were class A shares with a right to vote;

The Crown accordingly submits that the trustees of the Tourist Trust had effective control of IEL and, in turn, Belgrave.

[79] On 29 June 2005, the defendant emailed Mr Schofield and attached a document entitled Debenture Trust Deed – Belgrave Finance Ltd – Summary of Key Lending Restrictions. The email described the outstanding summary of the do’s and don’ts under the Debenture Trust Deed. The enclosure describes how the funds are comprised. It sets the formula for adjusted fund value and then records the rules. For the purposes of this case, three of the recorded rules are important, namely:

 Belgrave cannot lend to a related party (RP) which is basically defined as a company or a trust in which a shareholder or director of Belgrave has a controlling interest.

 Belgrave cannot lend more to one borrower if the total advanced to that borrower will thereby exceed 10% of the adjusted fund value (E less G).

[80] Mr Hamilton confirmed that this document was prepared in anticipation of a meeting with Mr Schofield in Auckland because he expected to be questioned by Mr Schofield about the provisions that are referred to. This does give some guidance as to what Mr Schofield’s intentions were in the future concerning borrowing from Belgrave and therefore what Mr Hamilton would have to advise on.

[81] The next step involved obtaining the approval of Covenant Trustee Company Ltd. Mr Laywood advised that the vendors gave the trustee the sale and purchase agreement. He said that they asked the trustee to approve the new directors. There was no disclosure to the trustee of the guarantee given by Mr Schofield. Mr Lockhart, who is an officer of the Covenant Trustee company and at the relevant time held a practising certificate as a barrister and solicitor, advised that in 2005

Covenant Trustee Company Ltd did not, as a matter of course, make inquiries as to exactly where the funds had come from for a purchase, such as the one that occurred in this case.

[82] He said that Covenant Trustee Company Ltd had been told that Messrs Buckley and Smith were able to meet the funds from their private means. He further said that he understood that the individuals behind the purchase were solely Messrs Smith and Buckley. He further said that he did not hear about Mr Schofield’s involvement in Belgrave until after the receivers were appointed on 28 May 2008.

[83] Emails were exchanged around 19 July 2005 which resulted, finally, in Mr Lockhart confirming approval of the new directors. He advised that he would be meeting them on 1 August 2005. On receipt of that advice, Mr Laywood made the suggestion to Mr Schofield that the settlement date be advanced to 1 August 2005.

[84] The purchase price under the agreement for sale and purchase was funded by an advance of $3,175,000 from MFS Nominee Slatyer Avenue Nomines Pty Ltd to Messrs Smith, Buckley and Armstrong. The loan from MFS was guaranteed by the Tourist Trust, IEL and Belgrave. Mr Buckley gave evidence that all of the funding

negotiations were carried out by Mr Schofield. That occurred having regard to a long-standing association that Mr Schofield had with Mr Michael King of MFS.

[85] Mr Schofield provided personal indemnities to Messrs Buckley and Smith for up to 80 per cent of the commitment entered into by them as guarantors for the loans and financial accommodation provided by MFS to IEL. That percentage is precisely the same as the shareholding held by the Tourist Trust in IEL. The indemnity documents were prepared by Mr Hamilton.

[86] The purchase of the Belgrave shares was settled on 2 August 2005. An advance was made by MFS’s solicitors to DAC Legal who, in turn, transferred settlement funds to Alexander Dorrington, who was acting for the vendors. On the day of settlement there was a shortfall of $10,968. That shortfall was paid by Mr Schofield through one of his companies, Blue Moki Holdings (No 3) Ltd.

[87] Following settlement there was a dispute about the treatment of convertible notes. Mr Schofield was involved in that matter. He emailed Mr Buckley, and copied Mr Hamilton, with the following email:

that’s not right I agreed to go half’s in the $350k and lifted my offer $175k with Ian that’s why the purchase price was $3,175m the $175k is half of the

as I said I didn’t want any notes at all we redid the contract to eliminate them

I talked to Gary about getting those people to leave that amount in as a separate over and above investment but I said we would discuss it after settlement and they had been paid out 1st

I most definitely agreed to these being repaid from the purchase price and our lawyer Hugh Hamilton was instructed to proceed only on that basis

[88] On 5 September 2005, the defendant sent an email to Mr Schofield asking for “comments and/or approval” of a draft letter addressed to Ms Marsden regarding the Belgrave convertible notes. Mr Schofield responded to the defendant:

[89] Mr Hamilton was involved with a restructuring of the shareholding in IEL in

2006. I will not detail the steps taken. Suffice to say, the email correspondence was sent to Mr Schofield in relation to documents to be signed by both Messrs Smith and Buckley, despite the fact that Mr Schofield was neither a shareholder nor director of IEL, in accordance with the documents. The restructure, obviously with Mr Schofield’s knowledge and approval, resulted in:

(a) SJ Buckley and JL Armstrong – 300 shares (b) SC Smith and JL Armstrong – 450 shares (c) SJ Buckley – 200 shares

[90] There was a further change in shareholding registered in the Companies Office shortly before the appointment of receivers. There is no evidence of any consideration passing in respect of the shareholding changes.

24 March 2006, MFS advanced a loan of $5,000,000 to IEL. The loan was guaranteed by Messrs Smith and Buckley in their personal capacities, the Tourist Trust and Belgrave.

[92] A further loan of $12,500,000, dated 25 June 2007, and varying the 24 March

2006 loan of $5,000,000, was entered into. Apart from the increase in the amount, the parties and the terms of the loan were on the same terms as for the 24 March

[93] The Crown alleges that there were advances by way of loans made by Belgrave to the following entities which were effectively controlled by Mr Schofield. The Crown further alleges that Mr Hamilton knew about this. Fiona Janet Reid, the

forensic accountant for the Serious Fraud Office, in her evidence sets out the loans as follows:

Count	Borrower Name	Total Advances from Belgrave
4	Nutsy Limited	2,467,252.87
5	Kiwi International Hotel Queen Street Limited	750,000.00
6	Judith Schofield as trustee of Strong No 5 Trust	745,000.00
7	Wedel Limited/Copperfield No 1 Limited	1,982,000.00
8	Authentic Limited	1,000,000.00
9	Blue Moki Holdings No 3 Limited	370,000.00
10	Hilton Hall Properties NZ Limited	2,192,000.00
11	Raymond Schofield	95,000.00
12	The Tourist Trust	350,000.00
13	Manchester Properties Pty Ltd	510,000.00
14	Rothwell Thomas Limited	400,000.00
15	European Property Holdings Limited	450,000.00
16	Ardsley Park Limited	971,893.93
19	KM Corporation Limited	300,000.00

(b) The issue of the 1 September 2006 investment statement; (c) The issue of the 8 October 2007 prospectus;

(d) The issue of an extension certificate relating to the 8 October 2007 prospectus;

(e) The issue of the 8 October 2007 investment statement; (f) The issue of a letter dated May 2006;

(g) The issue of a letter dated 4 October 2006; (h) The issue of a letter dated 4 December 2006; (i) The issue of a letter dated 5 July 2007;

[96] I note that the prospectuses and investment statements were prepared with the assistance of Alexander Dorrington.

[97] I next record the position of Belgrave at the time it was placed into receivership on 28 May 2008. That should be considered against the considerable grown in the level of customer deposits and its loan book. Belgrave’s total assets

had increased from $3,670,106 at 31 March 2003 to $7,923,978 at 31 March 2005 and to $32,647,762 at 31 March 2007.

[98] At the date of receivership its loan book consisted of 43 loans to a total value of $30,787,524. Of the 43 loans, five loans were fully or partly assigned to other lenders. Belgrave retained a second ranking interest in these assigned loans. Thirty- eight of Belgrave’s loans were directly property related. They accounted for 89 per cent ($27,400,430) of Belgrave’s loan book by value. The remaining five loans included two loans funding consumer finance books, two business loans and one loan over fishing vessels.

[99] Nineteen of Belgrave’s loans had matured and were overdue. A further 16 loans would mature on 31 July 2008. The balance of the loans had maturities out to

[100] Many loans had been subject to repeated short-term extension over the previous six to twelve months.

[101] Four of Belgrave’s forty-three loans were secured by first mortgage, although all of those loans had been partially assigned to other lenders who held the first portion of the debt. Twenty-six of the loans were secured by second or subsequent mortgage.

[102] Thirteen were principally secured by a general security agreement or security sharing arrangements with third parties.

[104] Only one of the 43 loans was subject to a formal repayment arrangement with monthly payments of principal or interest.

[105] There were 1,268 individual investors holding outstanding debenture securities totalling $20,481,616.

[106] On 20 February 2009, the receivers made a distribution to debenture investors of $1,250,000. A further distribution was made to them of $744,564 on

11 August 2009. Those distributions represented 9.8 cents per dollar invested by the debenture investors.

[107] The receivers were appointed liquidators by the High Court on 23 April 2010. They reported that as 27 May 2011, they had realised $3.47 million on behalf of debenture investors. They considered that there was little, if any, recovery still possible from the Belgrave loan book. They did not believe that any further distributions would be available for investors unless they were successful with other recovery actions.

[108] Belgrave’s loans and commercial affairs were managed by Belgrave Financial Services Ltd. That company employed all staff. It owned the computer hardware and software. It is not subject to the Debenture Trust Deed.

[109] The receivers/liquidators’ reported that they had instructed solicitors to file civil proceedings against Raymond Schofield, Belgrave’s directors Messrs Buckley and Smith, and the law firm, DAC Legal.

[110] Seventeen charges are laid under s 220 of the Crimes Act 1961. That section provides:

(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—

(a) to account to any other person for the property, or for any proceeds arising from the property; or

(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.

[111] As mentioned in [5], the Crown relies on s 66(1)(b) to (d), but with the principal emphasis on 66(1)(b) of the Crimes Act 1961. Section 66(1)(b) provides:

(b) Does or omits an act for the purpose of aiding any person to commit the offence;

[113] Before the defendant can be found guilty under either ss 66(1)(b), (c) or (d) the Crown must prove that the offence has been committed by anyone of Schofield, Buckley or Smith (the principal offenders).¹¹

[114] Accordingly, it is necessary to list the elements that the Crown must prove under s 220 in respect of the principal offender or offenders. They were listed by Wylie J in the Capital+Merchant Finance cases and have been approved by the Court of Appeal and Supreme Court.¹²Adapted to this case, they are:

(b) Was the property in the control of the principal offender/s, in circumstances that required him to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person?

(d) Did the principal offender/s intentionally deal with the property, or any proceeds of the property, otherwise than in accordance with those requirements?

[115] Conviction certificates for Messrs Smith and Buckley relating to theft in special relationship convictions have been entered in evidence. In accordance with s 49 of the Evidence Act 2006 this is conclusive proof that they committed the offences. Therefore, on this basis I am satisfied that the above elements of the principal offending have been established.

[116] The next inquiry concerns the liability of a secondary party and the application, in particular, of s 66(1)(b) of the Crimes Act 1961 to the defendant and to the charges laid.

[117] The actus reus of s 66(1)(b) is aiding. Aiding means “assisting, helping or giving support to”.¹³There must be proof of actual assistance, not just an act that is intended to assist.¹⁴

[118] The mens rea element of s 66(1)(b) requires two mental elements.¹⁵They are:

¹³_{Bruce Robertson (ed) Adams on Criminal Law
(looseleaf ed, Brookers) at [CA66.18].}

¹⁵Rameka v R [2011] NZCA 75, (2011) 26 CRNZ 1; R v Sharma [2009] NZCA 540; R v Hira

(a) That the secondary party had knowledge of the essential matters that constitute the offence committed by the principal party; and

(b) That the secondary party had an intention or purpose to help or encourage the principal party to do the acts that constitute the offence.

[119] The secondary party must know that the principal party intends or contemplates doing such acts that constitute the offence. The secondary party will not need to have particularised knowledge of the details of the offence, but must know the type of offence intended and committed.¹⁶It will be sufficient if the offence that was committed was one of a number of offences that the principal party was likely to commit.¹⁷

[120] With respect to knowledge, wilful blindness will be sufficient. In R v Martin the Court of Appeal was of the view the knowledge would be proved if it is shown beyond reasonable doubt that the defendant had his suspicion aroused but deliberately refrained from making further inquiries or confirming the suspicion because he wanted to remain in ignorance.¹⁸Knowledge may be inferred from the surrounding circumstances.

[121] The defendant concedes that he knew that Messrs Smith and Buckley had control over the investor funds. That concession is properly made having regard to the authorities that were referred to in the Crown’s opening.¹⁹The particular inquiry, therefore, that needs to be made is whether the defendant knew that either Mr Schofield, Mr Smith or Mr Buckley was causing Belgrave to breach its obligations under the Debenture Trust Deed. That question can be considered in light of the defendant’s knowledge of:

¹⁷_{Director of Public Prosecutions for Northern Ireland v
Maxwell [1978] 1 WLR 1350 (HL)..}

¹⁹R v Bowden [2012] NZHC 1249; R v Douglas, above n 4, at [108]; R v Whale [2013] NZHC

(b) The degree of control and interest that Mr Schofield had, or possessed, in Belgrave;

(e) Mr Schofield’s control and interest in the borrowing entities. (ii) Intention

Knowledge that one’s conduct is likely to encourage the commission of a crime is not sufficient. That is because it does not automatically mean that the secondary party intended to encourage the principal party in the commission of the crime.²¹

[123] Although the term ‘purpose’ is used in s 66(1)(b), intention is relevant. Intention includes both a direct intention and an oblique intention. Fisher J stated in R v Wentworth that:²²

In a legal context “intention” is normally taken to embrace both ultimate (desired) consequences and incidental (undesired but foreseen) consequences so long as the latter are foreseen with sufficient certainty when the course of action is deliberately embarked upon. “Direct intention” may be used to refer to the former and “oblique intention” the latter. There is room for argument as to the degree of certainty with which the accused must predict the incidental consequence (Orchard “Criminal Intention” [1986] NZLJ 208: “virtual” or “moral” certainty is sufficient; query anything less) but in principle both types of intention qualify. Contract killers usually want money, not the death of their victims per se. Receipt of money is the ultimate, desired, consequence. Death of the victim is the incidental, perhaps regretted, consequence. If it is clear that the intended course of action will result in both, both are said to be intended.

[124] It was held in R v Wentworth that either form of intention would be sufficient to meet the requirement that the defendant did the act “for the purpose of aiding...” Fisher J went on to say:²³

Suppose in the contract killer case I referred to earlier the killer purchases the gun from a vendor who at the time of sale knows exactly what it is to be used for and by his act facilitates the crime. Certainly, foresight, voluntary action, and causation are all satisfied as against the vendor. The ultimate consequence wanted and intended by the vendor may be nothing more than to make a financial profit on the sale of the gun. That in itself should not give him immunity. To hold otherwise would be to confuse purpose with motive. Financial motivation, and the fact that in all other respects an act would be lawful, have never been enough. If the vendor really did know exactly what the gun would be used for, and intentionally facilitated the crime by supplying it in order to gain a profit, all the usual reasons for imposing criminal liability would be present. The public would have an interest in deterring the vendor, and others of a like mind, from acting in the same way on future occasions. The vendor would share in the moral responsibility for the crime.

[125] Therefore the argument that a defendant must desire the commission of the crime, or his own assistance in the commission of the crime as an end in itself, was rejected. It is sufficient that the defendant saw the crime, or his assistance, as a means to some other desired end.

[126] What is required is a consideration of whether the defendant intended to assist in the crime, or whether he was simply following instructions as advanced by the defence. The defendant will have the required intention if the Crown proves that he intended to assist the primary parties, even for some other purpose, for example financial gain.

[127] There will usually be no direct evidence of intention. The Crown will need to rely on inferences drawn from evidence of words and conduct, bearing in mind that it is usual that a person intends the natural and probable consequences of his or her actions.²⁴If the evidence discloses that a defendant knew, or was wilfully blind as to whether he was breaching the relevant obligation when he acted, the inference of intention is irresistible. A claim of lack of awareness may be rejected as

[128] Eleven charges are laid under s 242 of the Crimes Act 1961. That section provides:

(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—

(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—

(b) is reckless as to the whether the statement is false in a material particular.

[129] As mentioned in [8], the Crown relies on s 66(2) of the Crimes Act 1961. That section provides:

(2) Where 2 or more persons form a common intention to prosecute any unlawful purpose, and to assist each other therein, each of them is a party to every offence committed by any one of them in the prosecution of the common purpose if the commission of that offence was known to be a probable consequence of the prosecution of the common purpose.

[130] Section 66(2) has particular application to the disclosure charges. It is raised to cover the situation where the Crown alleges that there was a plan to commit theft in the areas referred to dealing with the theft charges, but where a different or collateral offence has occurred in carrying out the plan, namely the making of false

statements by a promoter, the s 242 Crimes Act charges, and the making of a false statement to a trustee, the s 377 of Companies Act charges.

[131] Once again, before the defendant can be found guilty under s 66(2), the Crown must prove beyond reasonable doubt that Messrs Schofield, Buckley and Smith, or at least one of them, committed the offence under s 242. That requires proof that they, or one of them:

(a) Made, concurred in making, or published the relevant statements; (b) That the statements were false in a material particular;

(c) That when they made, concurred in the making or publishing of the statements they intended that the statements would induce people to subscribe to a security; and

(d) When they made, concurred in the making or the publishing of the statement they either:

[132] Based on the conviction certificates of Messrs Smith and Buckley pertaining to convictions for false statements to a promoter, I am satisfied the above elements have been established.

[133] The next inquiry is whether there is proof that the defendant formed a common intent with Messrs Schofield, Buckley and Smith, or one of them, to prosecute an unlawful purpose. This requires a consideration in two parts.

[134] The first requires proof of an unlawful purpose. In this case the question is, has the Crown proved an intention to prosecute an unlawful purpose, ie, that Belgrave would provide loans to Mr Schofield or interests associated with him in breach of the Debenture Trust Deed. This is, essentially, a factual inquiry.

[135] The second requires proof of a common intention, to which the defendant was a party.²⁵Common intention is often established by reference to the concerted conduct of the parties.²⁶There is no need for the Crown to establish that the parties actually sat down and reached an express agreement. There must be proof that the defendant and at least one of the principal parties shared a common intention to provide loans from Belgrave to Mr Schofield, or entities associated with him, in

breach of the terms of the Debenture Trust Deed and to assist each other to do this. In short, there must be at least an understanding of this position.

[136] The next inquiry is whether the Crown has established that the false statements made by the promoters were carried out as part of the common design to obtain finance so that loans could be made by Belgrave to Mr Schofield.

[137] Finally, the defendant must know that the probable consequence of the common design to obtain finance so that loans could be made to Mr Schofield was the making of false statements by the promoter so that the funds could be obtained from the public. Wilful blindness is sufficient to meet this requirement of

knowledge.²⁷The term “probable” means that the defendant is required to have

known that the commission of the offence was a real risk²⁸or an event which could well happen.²⁹

[138] Eleven charges are laid under s 377(2) of the Companies Act 1993. That section provides:

(2) Every director or employee of a company who makes or furnishes, or authorises or permits the making or furnishing of, a statement or report that relates to the affairs of the company and that is false or misleading in a material particular, to—

(a) A director, employee, auditor, shareholder, debenture holder, or trustee for debenture holders of the company; or

knowing it to be false or misleading, commits an offence, and is liable on conviction to the penalties set out in section 373(4) of this Act.

[139] What I have set out in [131] – [132] dealing with the s 242 disclosure charges applies to this set of charges.

[140] Liability under s 66(2) requires proof of the same elements which I have set out in that section of this judgment dealing with the disclosure charges s 242, but with the exception that the elements of the principal offence are:

(a) The party must, while acting as a director or employee of the company, make a statement to the trustee, related to the affairs of the company;

[141] This requires evidence that Messrs Smith and Buckley, while acting as directors of Belgrave, made a statement related to the affairs of the company to the trustees, that was false and that they knew to be false.

[142] Messrs Smith and Buckley’s conviction certificates pertaining to false statements under s 377 of the Companies Act 1993 were entered in evidence and on this basis, I find the elements of this principal offence made out.

[143] This is a criminal trial. The starting point is the presumption of innocence. The Crown must prove each element of each count beyond reasonable doubt before I may enter a guilty verdict on that count. That is a very high standard of proof. It requires more than proof that the accused is probably guilty or even that he is very likely guilty. Having said that, it is recognised that it is virtually impossible to prove everything to an absolute certainty when dealing with the construction of past events. Proof beyond reasonable doubt requires that I am left with no honest and reasonable uncertainty after giving careful and impartial consideration to all the evidence before

[144] The defendant did not give evidence. I have mentioned the presumption of innocence. That means that the defendant does not have to give evidence³¹and does not have to establish his innocence.³²

[145] Expert evidence was called in this case. Section 25 of the Evidence Act 2006 outlines the requirements for admissibility of expert opinion evidence. It is admissible if it is the opinion of the expert and it offers substantial help to me when understanding other evidence or ascertaining any facts in the proceeding.³³

[146] This is a trial by judge alone. Whilst I must have regard to the qualifications and experience of the experts I am not required to accept their evidence uncritically simply because they are experts. Whether I accept their evidence in whole or in part

_{is a matter for me to determine having regard to all the evidence that I
have heard.}³⁴

[147] The Crown invites me to draw an inference as to the intention of the defendant. That is a matter for me as a judge of the facts. An inference is a conclusion drawn from the facts that I accept are reliably established. It is not a guess.

[148] I am required to determine the charges solely on the basis of the evidence adduced during the trial.

[149] This count relates to the guarantee by Belgrave of a loan of $3,175,000. That loan is recorded in a loan agreement dated 1 August 2005. The lender is the MFS Nominee Slatyer Avenue Nominees Pty Ltd. The borrowers are Messrs Smith, Buckley and Armstrong, personally. The loan agreement records the guarantors as the trustees of the Tourist Trust, Investment Enterprises Ltd and Belgrave Finance Ltd.

[150] The guarantee is given by a separate deed dated on 1 August 2005, which is executed by the guarantors, the trustees of the Tourist Trust, Messrs Smith and Armstrong and by Messrs Buckley and Smith signing as directors of Belgrave, and by Mr Buckley on behalf of IEL.

[151] The defendant did not draft the loan agreement or the guarantee. The loan agreement was drafted by Hickey Lawyers for the lender in Brisbane, and the guarantee was drafted by the New Zealand lawyers, Chapman Tripp.

[152] There is virtually no information on what was discussed or what examination of documents took place relative to the issue of a guarantee by Belgrave of its directors’ in relation to the loan.

[153] In regard to the liability of Mr Hamilton, counsel agreed that the key issue is whether he had the requisite intention. This requires an analysis of his knowledge to ascertain whether he was aware of all the essential elements of the principal offending.

[154] Mr Williams referred to a number of passages in the evidence where reference is made to Mr Hamilton having examined the Debenture Trust Deed.

[156] Mr Williams next pointed to the fact that Mr Hamilton was well aware of the significant role played by MFS in the financing of the purchase of Belgrave. It is noted in point 6 of Mr Hamilton’s file note of 2 June 2005. Mr Hamilton acknowledged in his interview on 12 August 2012 that he knew that MFS put up all the money to buy the business. When Mr Hamilton was asked at his second interview as to his experience with trust deeds in relation to finance companies, he responded:

I didn’t have, its I had never looked at a Trust Deed for a finance company before, but as a person who was doing a lot, on behalf of the nominee company doing a lot of the due diligence on borrowers and things like that, I knew what, who we could talk to and who we might respectively lend to and I wasn’t surprised to see those sort, and when I’m look, as a matter of common knowledge I knew that there were those sorts of rules, in, in those Trust Deeds. I knew the basic structure how finance companies operated. I mean that’s just common knowledge within the legal fraternity ...

[157] What is significant, however, is that there is no documentary evidence where there is a discussion which remotely suggests that the giving of a guarantee in respect of a loan to Belgrave’s directors is a breach of the related party provision having regard to the definition contained in cl 5.3 of the Debenture Trust Deed. That must be contrasted with the position in relation to related party lending. Another document that has a bearing on this, is Mr Hamilton’s email to Mr Schofield of

29 June 2005 where he describes the outstanding summary of the “do’s and don’ts" under the Debenture Trust Deed. The description in that document is all about lending to related parties. No mention is made of restrictions on securities to be offered to any lenders in respect of the raising of funds to purchase the shares in Belgrave or to increase its capital.

[158] In R v Whale, Lang J noted that proof of knowledge is a question of fact that can be inferred from the surrounding circumstances.³⁵Knowledge of the terms of the Debenture Trust Deed is a question of fact that must be determined on the evidence.

[159] There is nothing in the evidence before me that satisfies me that Mr Hamilton directly turned his mind to the question of whether a guarantee by Belgrave or a loan to Belgrave’s new directors was a breach of the Debenture Trust Deed. That leads me to the conclusion that the Crown has not satisfied me beyond reasonable doubt in respect of this essential element of this count.

[160] I am not satisfied that cl 5.4(b) or (g) of the Debenture Trust Deed has any application to the guarantees. This argument was not advanced at trial by counsel.

[162] This count relates to a loan of $5,000,000, dated 24 March 2006 from MFS to IEL. It was guaranteed by Messrs Smith and Buckley in their personal capacities, and by the trustees of the Tourist Trust and Belgrave. The count relates specifically to the guarantee of this loan by Belgrave. The Crown’s allegation is that it is a related party transaction.

[163] Once again, the relevant loan and guarantee documentation was not drafted by Mr Hamilton or his firm. I have already referred to Mr Hamilton’s knowledge of the role that MFS or its subsidiary was to play in the financing of Belgrave. In his second interview with Mr Harris, Mr Hamilton referred to his knowledge of the

_{recapitalisation undertaken by Belgrave for the purpose of increasing
its liquidity.}

[164] Mr Williams drew attention to the fact that Mr Hamilton’s firm opened a file “Investment Enterprises Ltd – subject MFS Pacific Ltd 2006” with the date of opening of the file of 24 March 2006. He submitted that it can be inferred that the new file must have related to the further advance of $5,000,000.

[165] The evidence discloses that there was email correspondence from Mr Collins of Chapman Tripp to Mr Hamilton regarding this loan, and responses from Mr Hamilton’s secretary, Ms Brown, on his behalf. A security agreement and a deed of guarantee and indemnity were executed on 24 March 2006 as part of the loan transaction. Mr Hamilton was present during their execution. He witnessed Mr Armstrong’s signature in respect of the guarantee. The loan was not formally transacted through DAC Legal’s trust account. It was paid directly to IEL’s bank account.

[166] The passages from the evidence that I have referred to under count 1 apply equally to this count.

[167] Mr Young submitted that there is no evidence that Mr Hamilton considered the definition of related party transaction, particularly in relation to guarantees. His knowledge of that restriction is one of the essential elements that the Crown must prove. I am not satisfied that this element have been proved beyond reasonable doubt.

[169] This count relates to a re-financing up to $12,500,000 dated 25 June 2007 and varied the loan of 24 March 2006 of $5,000,000. There appears to be a mistake in the indictment which refers to 2006 as the year of the variation. Nothing turns on the mistake. I amend this count to record the variation as 27 June 2007. Aside from the increase in amount, the parties were the same as the loan considered in count 2,

dated 24 March 2006, including the guarantees. The Crown’s allegation is that the

granting of a guarantee of this loan by Belgrave was a related party transaction.

[170] As with counts 1 and 2, Mr Hamilton and his firm were not involved in the drafting of the documents. I have referred already to Mr Hamilton’s response at the second interview to the fact that he had knowledge of recapitalisation being undertaken by Belgrave to increase its liquidity.

[171] There is evidence of a DAC Legal file entitled “Investment Enterprises Ltd” and “Subject MFS 2007” having been opened on 25 June 2007. Mr Hamilton is shown as the partner instructed in relation to the file.

[172] The Crown invites the court to infer that this file relates to the work carried out by Mr Hamilton in respect of the $12,500,000 loan facility. There are documents and correspondence that show that Mr Hamilton had some involvement in assisting with the transaction. The evidence of this is not great.

[173] I note Mr Young’s submission that Mr Hamilton had no involvement whatsoever in this transaction. I would not go that far. There is no evidence to suggest there is any change in the position regarding knowledge of the position set out in the Debenture Trust Deed relating to the giving of guarantees from that analysed in counts 1 and 2.

[174] I am therefore led to the conclusion that, by the time of the 2007 transaction, there was no new information that had been analysed by Mr Hamilton or that would show he had turned his mind specifically to the Debenture Trust Deed provisions relating to guarantees, or that he had been specifically asked by the directors of IEL to turn his mind to that question.

[175] That, as with the first two counts, leads me to the conclusion that the Crown has not proved beyond reasonable doubt one of the essential elements of this count.

[177] The balance of the theft charges relate to loans made by Belgrave to the parties identified in [93]. It will be recalled that the Crown alleges that the defendant aided the principal offenders in respect of the charges of theft by a person in a special relationship pursuant to s 220 of the Crimes Act 1961 in respect of these loans.

[178] An issue which applies to each of these counts is whether Mr Schofield is a related party to Belgrave. If Mr Schofield is a related party to Belgrave and he, or his interests associated with him, are the borrowers from Belgrave there would exist a primary basis for the proposition that the loan transaction is barred by the operation of cl 5 2(b) of the Debenture Trust Deed. The effect of that conclusion would be that the element recorded in [114]b) is satisfied. This element is satisfied as a result of the conviction certificates of Messrs Smith and Buckley entered in evidence. However, it is necessary to determine in what manner Mr Schofield is a related party as this affects what knowledge was required by Mr Hamilton.

[179] Accordingly, I consider whether Mr Schofield is a related party to Belgrave.

[180] The Crown submits that Mr Schofield had a relevant interest for the purposes of cl 5.3(b), as defined in s 5 of the Securities Markets Act 1988. In determining what a ‘relevant interest’ is under the definition it is useful to consider the context of the Act. The Act ensures disclosure of relevant interest in public companies creating an informed market. This results in participants in such markets having access to relevant information, including the identity of persons who are entitled to control or influence the exercise of voting rights in a public issuer. This allows participants to make informed investment decisions.

[181] Knowledge of related party transactions are crucial to ensuring investors are informed as it reflects the governance of the finance company and the quality of the loan book. As a result the definition of a related party is very broad and takes a more

... a relevant interest is very broadly defined in s 5 to encompass not only beneficial ownership of securities but situations where, in practice, a person has a right or power to control what happens in relation to the security.... The policy behind s 5(2) would appear to be that the provision of an informed market requires an ability to look behind the person who holds the relevant interest to a person who exercises de-facto control over the security. Section 5(2) therefore, gives an ability to look at substance over form.

[182] The Crown submits that under this broad approach to the definition of relevant interest, Mr Schofield has a relevant interest as a discretionary beneficiary of the Tourist Trust. The Crown contends that as a discretionary beneficiary Mr Schofield has beneficial ownership of shares in Belgrave. The defence obtained expert evidence from Mr Jordan on the point of whether a discretionary beneficiary has beneficial ownership of the assets of the trust. Mr Jordan gave clear evidence that in his opinion as a discretionary beneficiary Mr Schofield did not have beneficial ownership of shares in Belgrave.

[183] I agree that the law does not normally recognise a beneficial interest in a discretionary beneficiary until a resolution has been made to vest the proprietary interest in the beneficiary. It is well established that a discretionary beneficiary only has mere hope in the interest in a trust. I am not satisfied that a discretionary beneficiary can be described as a beneficial owner even under the wide definition of s 5 of the Securities Markets Act 1988.

[184] This technical determination is not pivotal to a finding under s 5 that Mr Schofield had a relevant interest. It remains possible that Mr Schofield had an interest under s 5(2) of the Act. This relates to a situation where the trustees of a trust are accustomed to act in accordance with the wishes of any person in relation to the voting shares of the trust. In such a situation the ‘other person’ will also have a relevant interest in the shares by virtue of s 5(2)(a). The power wielded by the influential other person does not have to be legally enforceable. To satisfy the elements of s 5(2) a person must have a relevant interest in a voting security by

_{virtue of subsection 1. In the current situation IEL as 100 per cent
shareholder of}

³⁶Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA) at [12].

Belgrave has a relevant interest in Belgrave for the purposes of s 5(1). The second and final element that must be established under s 5(2) is that Messrs Smith and Buckley are accustomed, or under an obligation, whether legally enforceable or not, to act in accordance with directions, instructions, or wishes of any other person in relation to the exercise of the right to vote as set out in s 5(2)(a). The control does

Section 5(2) of the Securities Markets Act is concerned not only with directions and instructions, words with mandatory effect, but is phrased in wider terms as including ‘wishes’ as word with a more voluntary or less compellable connotation. This may mean that a lesser degree of subservience, even than that set out in Devell and AS Nominees would be appropriate in this context.

[185] The Crown submits that as a result of the control that Mr Schofield exercised over the trustees of Belgrave, he is a related party under s 5(2). Even if s 5(2) was found not to apply it is submitted that cl 5.3 and cl 1.8 of the Debenture Trust Deed are relevant. Clause 1.8 imports the definitions from the Companies Act 1993. Under s 126 of the Companies Act, the definition of a director extends to a shadow director. Clause 5.3 of the Debenture Trust Deed states that a director is a related party. Therefore, it is the Crown’s submission that the control exercised by Mr Schofield would make him a shadow director and thus a related party under cl 5.3.

[186] In establishing that Messrs Smith and Buckley were effectively controlled by

(a) Mr Schofield was in essence the creator of the Tourist Trust which was created for the sole purpose of holding shares in IEL and therefore Belgrave.

(b) Mr Schofield negotiated the acquisition of Belgrave, arranged for 100 per cent of its funding, provided a personal guarantee of the obligations of the purchases to the vendor, developed the structure for

(c) The settlor of the Tourist Trust, Mrs June Hughes, had little knowledge of the Tourist Trust and did not make any decisions in relation to it. She is Mr Schofield’s mother-in-law.

(d) Mr Smith gave evidence that he trusted Mr Schofield and effectively signed whatever was put in front of him.

(f) Mr Schofield indemnified Messrs Smith and Buckley for up to 80 per cent of the commitment entered into by them as guarantor for loans and financial accommodation provided by MFS and its associated companies to IEL.

(g) Messrs Smith and Buckley consulted Mr Schofield on a range of matters concerning the operation of Belgrave; including backing out of an agreement with People Limited due to Mr Schofield’s disapproval and employment matters.

[187] On the balance on this evidence I am satisfied that Messrs Smith and Buckley, at the very least, were accustomed to act in accordance with Mr Schofield’s wishes. As a result Mr Schofield is a related party for the purpose of s 5 of the Securities Markets Act 1988, and therefore for the purpose of the Debenture Trust Deed.

[188] I am not satisfied however, that Mr Schofield, as a shadow director, would be considered a related party. Section 1.8 states that the definitions of the Companies Act only apply if a term is not otherwise defined in the Debenture Trust Deed. The term “Directors” is specifically defined at cl 1.2 and, therefore, the expansive Companies Act definition, which includes a shadow director, does not apply. As Mr Schofield was not a director for the purposes of cl 1.2 he cannot be a related party under cl 5.3 on this basis.

[189] Having established that the loans breached the Debenture Trust Deed, it is now necessary to establish whether Mr Hamilton assisted, helped or gave support to said breaches. The main allegation in respect of this element is that Mr Hamilton assisted by receipting a portion of the funds into DAC Legal’s Trust account. The defence’s argument is that Mr Hamilton was doing no more than following instructions, which at times were minimal and vague. The instructions came in during the morning with the requirement that they be paid out the same day and contained minimal information. No information was given as to what the payments were for, the instructions simply stated that the money was coming from Belgrave and needed to be paid into a certain account. Further Mr Hamilton made his concerns known about the insufficiency of his instructions.

[190] The Crown also contends that Mr Hamilton assisted the breaches by backdating documents at the request of the directors. The defence refers to Mr Buckley’s evidence which states that the monies were advanced to Mr Schofield and Schofield entities prior to the execution of the paperwork. The defence contends that Mr Hamilton was then put in a difficult position by the directors to ensure that the appropriate paperwork was in place.

[191] The defence also highlights that Mr Hamilton was not involved in the loan approval process.

[192] While I accept that Mr Hamilton was not involved in the loan approval process, it is clear that Mr Hamilton was involved in carrying out the instructions for the execution of the loan advances. In providing this legal work Mr Hamilton assisted with the offending. The defence’s argument that Mr Hamilton was merely following instructions goes to the issue of intention, not whether actual assistance was given.

[193] The key consideration is whether Mr Hamilton had the requisite mens rea to act as a party to the breaches of the Debenture Trust Deed. As aforementioned the

first element of mens rea under s 66(1)(b) requires proof of knowledge of the essential elements of the offending. The essential elements of the offending are:

(b) Knowledge that the principal offenders had control (conceded); (c) Knowledge that Mr Schofield was a related party;

[194] Therefore firstly I consider evidence of Mr Hamilton’s knowledge about the related party provisions in the Debenture Trust Deed. Mr Hamilton described this document as a “very, very importance document” in his first SFO interview. It is clear that he reviewed the document as evidenced by an undated file note which states “Analysis of Debenture Trust Deed, especially RPT provisions.” Another file

note considers whether “Knutsy”³⁸is a related party clearly demonstrating that

Mr Hamilton had considered what the related party provisions were. Finally on the

29 June 2005, Mr Hamilton emailed Mr Schofield a summary of ‘Dos’ and ‘Don’ts’ under the Debenture Trust Deed that he had created. This included the following summary:

Belgrave cannot lend to a related party (RP) which is basically defined as a company or a trust in which a shareholder or director of Belgrave has a controlling interest...

[195] It is clear on this evidence that Mr Hamilton made a careful study of the related party provisions of the Debenture Trust Deed. His purpose was to ascertain

_{what restriction existed in relation to lending. It can therefore be
inferred that he was}

aware of the provisions of s 5 of the Securities Markets Act 1988 and therefore had knowledge that a legally unenforceable power wielded by an influential person could amount to that person being a related party under the Debenture Trust Deed.

[196] The second requisite component of knowledge is that Mr Schofield was a related party. This requires knowledge of Mr Schofield’s control of Belgrave. The Crown refers to the following evidence to establish this:

(a) Mr Hamilton drafted the personal deed of guarantee by Mr Schofield for the purchase of Belgrave.

(b) Mr Hamilton acted as solicitor in the purchase of Belgrave and was aware that Mr Schofield paid the shortfall in the purchase price of

(c) Mr Hamilton’s knowledge of the Tourist Trust and IEL structure. It is noteworthy that the Tourist Trust is similar to the set up of Phoenix Trust, another Schofield related trust, which Mr Hamilton describes as being in “a form of a family trust so that effective control is vested in Mr Schofield through his connection to Mrs Hughes and for the benefit of his children.” The Phoenix Trust held shares in a company and of that Mr Hamilton said “this means that effective control of the company is vested in Mr Schofield.” Even though, as I have found, a discretionary beneficiary does not in law have a beneficial interest, this analysis still demonstrates that Mr Hamilton was aware of how Mr Schofield operated and it is incongruous to say he could not have assumed that in a trust of a similar structure that Mr Schofield was not in reality in control.

(d) Mr Hamilton wrote Mr Schofield a letter on the 8 June 2006 relating to the shareholding in IEL and the nomination deeds that Mr Smith had to sign.

(e) Mr Hamilton’s knowledge that Mr Schofield selected the directors and shareholders of Belgrave.

(g) All documents regarding the change in shareholding in IEL were sent by Mr Hamilton to Mr Schofield, rather than the people who had a legal interest in IEL.

(h) Mr Hamilton drafted the indemnities provided by Mr Schofield to Messrs Smith and Buckley, indemnifying them for up to 80 per cent of the commitment entered into by them as guarantors for loans and financial accommodation provided by MFS to IEL. The logical inference from these indemnities is that the 80 per cent represented the 80 per cent holding of the Tourist Trust in IEL.

[197] Relying on the above evidence I am satisfied beyond reasonable doubt that Mr Hamilton was fully aware that Mr Schofield was in charge of or possessed considerable influence over the Tourist Trust, IEL and thus Belgrave and that Messrs Smith and Buckley acted in accordance with the wishes of Mr Schofield. As a result of this knowledge, and his knowledge of the Debenture Trust Deed and its related party provisions as they related particularly to borrowing from Belgrave, I find that Mr Hamilton knew that Mr Schofield was a related party under the Debenture Trust Deed.

[198] Following from this finding, it is then necessary to establish that Mr Hamilton knew that the borrowing entities were related to Mr Schofield. Mr Hamilton explicitly acknowledged that he was aware that all the borrowing entities were related to Mr Schofield in his interview of the 17 August 2012. He

explains that this is the reason that DAC Legal was used in the transactions, as the borrower nominated the firm.

[199] Having determined that Mr Hamilton knew that Mr Schofield was a related party and that the borrowing entities were related to Mr Schofield, the final element of knowledge is that the loans were in breach of the related party provisions. The Debenture Trust Deed allows related party lending if it is in the ordinary course of business, an arm’s length transaction as between two unrelated parties contracting in an open market and does not exceed two per cent of the adjusted total tangible assets. As Mr Hamilton knew that Mr Schofield’s interest in Belgrave was concealed, I am satisfied that he was aware that this was not an arm’s length transaction as between two unrelated parties in an open market. Mr Hamilton described the Schofield loans as a ‘dogs breakfast’. Security documentation was often lacking, unregistered or not in place. This again is not consistent with a transaction between two unrelated parties on the open market. Finally, another inconsistency that Mr Hamilton was aware of, or wilfully blind to, was that payments from Belgrave were being received into the DAC Legal trust account and then being recirculated back to Belgrave as interest payments. The size of the lending substantially exceeds the two percent limit.

[200] As a result I am satisfied that Mr Hamilton was aware of the essential elements of the offending, namely theft in a special relationship. It is conceded that he knew that the principal offenders had control of the property. I am satisfied that he knew of the related party provisions and was aware that Mr Schofield was a related party. Further it is clear that he knew of the relationship between Mr Schofield and the borrowing entities and that the loans were not arms length transactions. Based on this I am satisfied that Mr Hamilton had knowledge that Mr Schofield, Mr Smith or Mr Buckley through the borrowing, were causing Belgrave to be in breach of the Debenture Trust Deed. The surrounding circumstances make it entirely implausible that Mr Hamilton was not aware of the offending. On the evidence there is no doubt that at the very least, Mr Hamilton was wilfully blind to the relevant elements of the offending.

[201] The second element of the mens rea is whether the assistance was given for the purpose of aiding the offender. The final issue therefore is whether Mr Hamilton intended his assistance. Having found that Mr Hamilton had the relevant knowledge of the offending, I am satisfied beyond reasonable doubt that he intended to assist in the offending. As aforementioned, it is usual that a person intends the natural and probable consequences of their actions. In light of his knowledge Mr Hamilton knew that his legal assistance was resulting in related party lending. There is no evidence that he took steps to attempt to avoid the inevitable third party lending. Rather, he acted in accordance with Mr Schofield’s control of all of those involved. This creates an irresistible inference that he intended to assist. I am not satisfied that any of the evidence before me contradicts this inference.

[202] Earlier, I referred at [124] to Fisher J’s example of the gun vendor in a contract killer situation. Like the gun vendor, foresight, voluntary action and causation are all satisfied in this case. It is possible, even likely, that Mr Hamilton did not desire the ultimate consequence of related party lending. His motive may have been financial in the form of legal fees, or to appease an important client. Whatever his motive, Mr Hamilton was aware of what the legal documents and trust account were being used for, and intentionally facilitated the crime by providing such legal assistance.

[203] The defence questioned whether there had been proof that money which was advanced to the Schofield interests was in fact secured by Belgrave debenture stock. In short, the defence asked, were the loans made from funds advanced by investors. This is an element of the principal offending which, for the reasons set out in [115] has been established beyond reasonable doubt by the conviction certificates.

[205] It will be recalled that the disclosure charges relate to the documents prepared by Belgrave for the purpose of soliciting funds from the public. They are listed in [94] and [95].

1 September 2006 prospectus which is the first of a number of offer documents that contain statements to the effect that Belgrave maintained a policy of no related party lending and had no related party lending.

[207] It is important to consider such statements in the context of the New Zealand investor market at the time. National Finance 2000, Provincial Finance, Bridgecorp Finance, Nathans Finance and Capital+Merchant Finance had failed.

[208] The Crown’s case is that Belgrave sought to distinguish itself from other finance companies by publicly announcing a policy of no related party lending so as to reassure investors and encourage investment. The evidence adduced to the court was that this, in fact, had the desired effect. Mr Pert, an investor who gave evidence, said:

These statements and particularly the last one about Belgrave not entering into related party transactions were very important to me. I was aware that there are risks associated with related party transactions and had the company been involved in such transactions I would have had second thoughts about investing in Belgrave.

[209] There are no additional facts relating to counts 21–41 that are relevant to Mr Hamilton’s knowledge and state of mind for the purpose of his liability. Therefore the analysis that I now undertake applies equally to all disclosure charges.

[210] In relation to the disclosure charges, Mr Hamilton is charged as a party under s 66(2). The central issue is whether the defendant formed a common intent with either Mr Schofield, Mr Buckley or Mr Smith, or any one of them, to prosecute a plan whereby funds would be solicited from the public to make loans to Mr Schofield and entities associated with him in breach of the Debenture Trust Deed.

[211] The Crown alleges that the defendant’s role involved the preparation of a plan and the completion of documentation which disguised Mr Schofield’s involvement in Belgrave. The Crown asserts that the unlawful purpose was the concealment of Mr Schofield’s involvement in the prohibited related party loans.

[212] The analysis requires concentration on the evidence to see if it is appropriate to draw any inference of common intention from the conduct of the parties. There is no direct evidence of a meeting between the defendant and one or more of Messrs Schofield, Buckley and Smith to discuss how they would implement any plan to run the finance company and, in particular, to disguise loans to be made to Mr Schofield. The focus of this analysis is the knowledge of Mr Hamilton.

[213] This analysis, then, requires me to go to the starting point. That occurred with the approach by Mr Schofield to the directors of Belgrave, as they then were: namely Messrs Laywood and Rees. That was made by Mr Schofield without any involvement of Messrs Buckley, Smith or the defendant. It was made clear to Mr Schofield after a meeting with Mr Rees that he was unable to both purchase and

... we told him that under trust deed that we operate under you couldn't do that, you couldn't lend money to yourself, if you were part of the finance company.

[214] The defendant, after that initial approach, received a number of instructions. That included preparing sale and purchase contracts. It also included who would be the appropriate parties in the case of any purchase. Mr Schofield’s instructions to the defendant were precise. They included the formation of the Tourist Trust. The structure of the Tourist Trust is not distinct from previous Schofield related trusts. The instructions stipulated who would be the settlor, the trustees and the beneficiaries. The instructions also included the registration of IEL and the shareholding of that company. The Crown invites the inference that Mr Hamilton was told by Mr Schofield his objective and that Mr Hamilton advised how to achieve this, thus forming a common plan. I am not satisfied beyond reasonable doubt that

_{Mr Hamilton was involved in this manner. The evidence leaves open the
possibility}

that after the discussions with Messrs Laywood and Rees, Mr Schofield on his own initiative instructed Mr Hamilton to create a trust that would replace him on the purchase agreement.

[215] The Crown refers to the plan, which is contained in a document dated 2 June

2005, and to which I have made reference at [65]. The only reference in that document to Mr Schofield is to his provision of a guarantee in respect of the purchase of the shares in Belgrave in paragraph 6. The plan document speaks about how ownership of Belgrave would be structured. It does not discuss the future work of the finance company and how its lending would be undertaken. On its face it does not disclose an unlawful plan. Against this it must be considered that it was made clear to Mr Hamilton that Mr Schofield did not want to be caught in the related party definition of the Debenture Trust Deed. Further, Mr Hamilton said that he suspected Mr Schofield intended to borrow from Belgrave. In his first SFO interview he stated:

... I suspected that Ray and people associated with him would be a borrower, and he couldn’t be on both sides.

[216] Although Mr Hamilton may have had suspicions, or even knowledge, of the overall plan, that is insufficient to amount to a mutual understanding or common intention between Mr Schofield and Mr Hamilton. The evidence suggests that Mr Schofield himself was the architect of the ownership model. He was not prone to seek advice from anyone. Mr Armstrong made reference in his evidence to special

There are two things about Mr Schofield really was he never asked for or took advice from anyone and he never took any notice of any advice anybody gave him. Even though he hadn’t asked for it. If you told him, I mean I told him several times about his airport motels that he’s got to keep his foot on throat of management and he just totally let them go so that they were not successful in the end.

[217] Mr Armstrong went on to say that Mr Schofield simply ignored him. He repeated that Mr Schofield never asked him for advice and went on to add that, in the

[218] There does not appear to be any evidence of the defendant receiving additional instructions until mid-June 2005 from Mr Schofield.

[219] Mr Buckley did refer to the defendant as being one of the four involved, but his evidence did not point to any discussion or plan involving himself and the defendant that could be classed as adopting or, at least, suggesting a plan for future specific action.

[220] As I have already recorded, I am not required to find a specific agreement. There may be something less than a formal meeting of minds. However, there must be some foundation in the evidence for a finding that the parties have an understanding which is common to each, or at least common to the defendant and at least one of them. I accept the Crown’s submission that Mr Hamilton was familiar with the terms of the Tourist Trust and the Belgrave Debenture Trust Deed. Further, I accept that Mr Hamilton knew that Mr Schofield did not want to be caught under the related party definition and that he intended to, and did, borrow from Belgrave. I also accept knowledge of Mr Schofield’s control and influence. However, I do not accept that this knowledge equates to conclusive evidence that Mr Schofield and Mr Hamilton formed a common intention. Knowledge is one part of circumstantial evidence that proves intent, but it is not determinative. I cannot infer from this alone that there was a mutual understanding as to the unlawful plan. It remains open on the evidence that Mr Schofield was acting alone and that Mr Hamilton was simply following instructions and had his suspicions aroused as to an unlawful plan, but no mutual agreement existed. I am not satisfied that the Crown has proved beyond reasonable doubt that there was such common intention to carry out the plan that I have referred to.

[221] The conclusion that I have reached in relation to count 20 therefore applies to each of these additional counts.

_{[223] These are my reasons for the verdicts which I delivered on 16
May 2014.}

High Court of New Zealand Decisions

R v Hamilton [2014] NZHC 1024 (16 May 2014)