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R v Sullivan [2014] NZHC 1105 (23 May 2014)

Last Updated: 26 May 2014


IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY



CRI 2011-076-1948 [2014] NZHC 1105

THE QUEEN



v



EDWARD ORAL SULLIVAN ROBERT ALEXANDER WHITE and LACHIE JOHN McLEOD


Hearing:
12, 13, 17, 18, 19, 21, 24, 25, 26, 27, 31 March 2014
1, 2, 3, 4, 7, 8, 9, 14, 15, 16, 28, 29, 30 April 2014
1, 2, 5, 6, 7, 8, 9, 13, 14, 15 and 22 May 2014
Counsel:
C R Carruthers QC, N F Flanagan, P W Gardyne and E Rutherford for Crown
P H B Hall QC, M A Corlett and K H Cook for Mr Sullivan
R B Squire QC for Mr White
J H M Eaton QC for Mr McLeod
H B Rennie QC and P O'Neil for Financial Markets Authority
Judgment:
23 May 2014




JUDGMENT (NO. 10) OF HEATH J



This judgment was delivered by me on 23 May 2014 at 10.00am pursuant to Rule

11.5 of the High Court Rules






Registrar/Deputy Registrar













R v SULLIVAN [2014] NZHC 1105 [23 May 2014]

The applications

[1] Mr Sullivan, Mr White and Mr McLeod are being tried on charges involving dishonesty arising out of the collapse of South Canterbury Finance Ltd (South Canterbury). Mr Sullivan and Mr White were, at material times, directors of that company. Mr McLeod was its Chief Executive Officer.

[2] On 15 May 2014, another question concerning disclosure was raised on behalf of the accused. Counsel expressed disquiet at an alleged failure of the Crown to disclose information that was available to the Financial Markets Authority (the Authority). There had been evidence that there was a degree of collaboration between the Serious Fraud Office (the agency that initiated charges against the accused) and the Authority, in relation to the former’s investigation.

[3] As a result of that development I adjourned the trial to enable counsel for the accused to apply under s 30 of the Criminal Disclosure Act 2008 (the Act) for additional disclosure against the Crown.1 Timetabling directions were made.2

[4] As the Crown took the view that it had no obligation to disclose information in the possession or control of the Authority, as distinct from the Serious Fraud Office, I directed that the accused could apply, in the alternative, for a non-party disclosure hearing to obtain documents from the Authority. On 19 May 2014, I made an order for a non-party disclosure hearing (the non-party application), to be held on

22 May 2014. Both applications were to be heard together.

Background

[5] On 14 May 2014, while South Canterbury’s auditor, Mr Pearson was giving evidence, it became apparent that he had previously been interviewed by the Authority. It seemed likely that this was done as part of the Serious Fraud Office’s investigation into the possibility of fraudulent behaviour by directors, executives and employees of South Canterbury. That conclusion was supported by earlier evidence

from Serious Fraud Office’s Case Manager, Ms Tierney. She said that Mr Loader, a


1 R v Sullivan (No 9) [2014] NZHC 1023.

2 Ibid, at para [12].

director of Ernst Young responsible for conducting a peer review of the audit for a particular financial year had also interviewed by the Authority, as part of the Serious Fraud Office’s investigation.

[6] Disclosure of relevant documents relating to Mr Pearson’s interview was not made by the Serious Fraud Office until after Mr Pearson referred to it in evidence. Likewise, a transcript of Mr Loader’s interview was made available around the same time.

[7] The accused’s disclosure applications encompassed a wide range of documents. Prior to the hearing, a considerable volume of them were provided by the Authority to the Serious Fraud Office, so that it could make disclosure. Some remained the subject of claims of privilege, or confidentiality. Others were said to be irrelevant.

The criminal disclosure regime

[8] I discussed the scheme of the disclosure regime, and the place of s 30 in it, in an earlier judgment, delivered on 6 May 2014.3 In order to make this judgment more comprehensible to those not involved directly in this case, I repeat what I said in that decision.

[9] The purpose of the Act “is to promote fair, effective, and efficient disclosure of relevant information between the prosecution and the defence, and by non-parties, for the purposes of criminal proceedings”.4 Disclosure is required to promote an accused person’s rights to a fair trial, and equality of arms. Those objectives are affirmed by the New Zealand Bill of Rights Act 1990.5 As the Law Commission made clear in a report that was partially responsible for introduction of the regime:6

A person accused of a crime must be made aware of the nature and extent of the allegation; without adequate disclosure, a defendant will be unable to prepare their defence properly. The extent to which defendants should be entitled to disclosure of information from the prosecution depends upon a fair balance between the general public interest and the important personal

3 R v Sullivan (No. 7) [2014] NZHC 925.

4 Criminal Disclosure Act, s 3(1).

5 New Zealand Bill of Rights Act 1990, ss 25(a) and 24(d) respectively.

6 Criminal Prosecution (NZLC R 66, 2000) chapter 8, para 193.

rights of individual citizens. Defendants should not be handicapped by a lack of relevant information and by an imbalance of resources available to them in preparing a case compared with those resources at the disposal of the State. ...

[10] In seeking to achieve the correct balance, Parliament created two distinct regimes. One requires the prosecution to disclose information in its possession, or under its control. The other is concerned with disclosure required from non-parties to the criminal proceeding. The former puts an affirmative obligation on a prosecutor to disclose certain types of documents within stipulated times. The latter requires the Court to be satisfied that it is appropriate to force an outsider to the prosecution process to provide information in its possession or under its control. In both types of case, the Act specifies grounds on which relevant information may be

withheld, as part of the balancing exercise to which the Law Commission referred.7

[11] Disclosure by a prosecutor has two stages; “initial disclosure”,8 and “full disclosure”.9 If a defendant believes that a prosecutor has not disclosed all relevant information, or has wrongfully withheld information on one or more of the grounds set out in ss 16, 17 and 18 of the Act, he or she may request “additional disclosure”.10 When considering an application for additional disclosure the Court exercises a supervisory function to ensure that information that has been wrongfully withheld is disclosed.11

[12] The regime for non-party disclosure is different. The Court is involved from the outset. The starting point is an application to the Court for a non-party disclosure hearing.12 If the application for a non-party disclosure hearing were granted,13 service of the application and a summons for the non-party to produce the information would be required.14 The non-party is summoned to attend at the court

on a specified day and to bring the information requested.15 At that time, a non-party


  1. Criminal Disclosure Act 2008, ss 15, 16, 17 and 18 (in respect of prosecution disclosure) and 29 (in respect of a non party).

8 Section 12.

9 Section 13.

10 Section 14.

11 Section 30.

12 Section 24.

13 Section 25.

14 Section 26.

15 Section 26(3).

disclosure hearing (at which the non-party is entitled to be heard)16 takes place. After that hearing, a judicial determination is made about whether a non-party disclosure order should be made.17 A variety of factors, designed to balance competing public and private interests, are taken into account in conducting that exercise.18

The s 30 application

(a) Jurisdiction

[13] Section 30 of the Act provides:

30 Court order for disclosure of information

(1) The defendant may apply to the Court for an order that a particular item of information or type of information in the possession or control of the prosecutor be disclosed on the grounds that—

(a) the defendant is entitled to the information under section 12,

13, or 14, as the case may be, and—

(i) the prosecutor failed to disclose the information; or

(ii) the prosecutor refused under section 14, 16, 17, or

18 to disclose the information, and—

(A) none of the reasons described in section 16,

17, or 18 for which information could be withheld applies to the information; or

(B) in the case of a refusal under section 17, the information ought to have been disclosed under section 17(3); or

(C) in the case of a refusal under section 18, the information ought to have been disclosed under section 18(2); or

(b) even though the information may be withheld under this Act, the interests protected by the withholding of that information are outweighed by other considerations that make it desirable, in the public interest, to disclose the information.

(2) If the Court is satisfied, on an application made under this section, that the defendant is entitled to the disclosure of any particular item of information or type of information, or that any particular item of

16 Section 27.

17 Section 29.

18 For example, see s 29(1)(b), (2) and (3).

information or type of information should be disclosed to the defendant under subsection (1)(b), the Court may order that the item or type of information be disclosed to the defendant.

(3) An order made under this section may be made subject to any conditions that the Court considers appropriate.

(Emphasis added)

[14] The s 30 application is made against the Crown, as “prosecutor”. The first question is: who is the “prosecutor”, for the purposes of the Act? That term is defined by s 6(1) of the Act. In the form in which it was expressed before the Criminal Procedure Act 2011 came into force,19 s 6(1) stated:

prosecutor means the person who is for the time being in charge of the file or files relating to a criminal proceeding; and includes—

(a) any other employee of the person or agency by whom the prosecutor is employed who has responsibilities for any matter directly connected with the proceedings; and

(b) any counsel representing the person who laid the information in the proceedings; and

(c) in the case of a private prosecution, the person who laid the information and any counsel representing that person

[15] Adams on Criminal Law20 refers to the Solicitor-General’s Prosecution Guidelines (the Guidelines). A copy of the Guidelines in force as at 1 July 2013 was made available to me. While not having force in law, they are of assistance in understanding the Crown’s perception of its disclosure obligations. Clause 16.1 provides:21

16.1 Proper disclosure is central to preventing wrongful convictions.

Under the Criminal Disclosure Act 2008 a “prosecutor” is the person in charge of the file or files relating to a criminal prosecution. Where the proceeding is a Crown prosecution, a Crown prosecutor will have custody of the trial file but the person in charge of the files is the person designated by the enforcement agency as the officer or employee responsible for the file. The Crown prosecutor should not be considered the “prosecutor” for the purposes of the Act. In any other prosecution (whether conducted by a Crown prosecutor or not)

19 On 1 July 2013; see s 8 of the Criminal Disclosure Amendment Act 2011 and cl 2 of the Criminal Disclosure Amendment Act 2011 Commencement Order 2013. The informations in this proceeding were laid before that date, so the old law applies: s 397 of the Criminal Procedure Act 2011.

20 Adams on Criminal Law (looseleaf ed) para CD6.01.

21 The Serious Fraud Office is an enforcement agency to which the Guidelines apply.

the prosecutor as well as the officer or employee designed by the relevant government agency as the person responsible for the file is relevantly a “prosecutor” in terms of the Act.

[16] The preponderance of evidence satisfies me that the Authority was not a “prosecutor”. It was not “the person who is for the time being in charge of the file or files relating to a criminal proceeding”. That was a designated officer of the Serious Fraud Office.

[17] As I see it, the real issue is whether the Authority generated or received disclosable information while undertaking investigative functions on behalf of the Serious Fraud Office. If it did, then the Serious Fraud Office, (as principal) had the ability to call for that information from the Authority (as its agent). When the respective roles of the two law enforcement agencies are analysed in terms of one acting as the agent of the other, it becomes easier to resolve the present issue. The same principle will apply in any case where one law enforcement agency undertakes investigative work on behalf of another.

[18] My approach is consistent with the definition of “prosecutor” in s 6(1) of the Act.22 It envisages one person having responsibility for disclosure on behalf of the prosecuting agency. Other than in the case of a private prosecution,23 the legislative intent is to ensure that relevant information held on behalf of the “prosecutor” is disclosed, under the authority of the “officer in charge”, by whatever name he or she

is called.

[19] Information24 that is physically held (whether in electronic or paper form) is in the “possession” of the “prosecutor”. Any information that is in the possession of a third party (normally another enforcement agency) that has been asked to undertake inquiries for the purpose of the prosecution remains under the “control” of the “prosecutor”.

[20] However, any information that comes into the possession of the agent (in this case, the Authority) as a result of inquiries undertaken for purposes other than the

22 Set out at para [10] above.

23 To which para (c) of the definition of prosecutor expressly refers.

24 Defined by s 6(2) of the Criminal Disclosure Act 2008.

prosecution does not fall within the ambit of the prosecutor’s obligations of discovery. An example, in the context of the present case, is a transcript of an interview with a Crown witness in this proceeding that the Authority undertook to determine whether to exercise its powers to bring civil proceedings against persons associated with South Canterbury. Disclosure of any such documents must remain the subject of the non-party disclosure provisions of the Act.

(b) Disclosure issues

[21] Mr Rennie QC, for the Authority, made it clear that documents held by the Authority that had come into existence following inquiries made on behalf of the Serious Fraud Office would be passed to the Serious Fraud Office for it to make disclosure to the accused. Mr Rennie submitted that the Authority could only be viewed as a “non-party” for the purposes of a disclosure application.

[22] Mr Hall QC, on behalf of all accused, indicated some concern at the absence of disclosure of notices issued by the Authority under s 25 of the Financial Markets Act 2011. During the course of the hearing, I granted a short adjournment so that Mr Rennie could make copies available to Mr Hall. On resumption, Mr Hall indicated that disclosure had been helpful and, save for one particular issue, was content to discuss matters further with Mr Rennie in an endeavour to resolve concerns.

[23] The outstanding issue concerned disclosure of information requested about the interview of Mr Pearson by the Authority. It is clear from the opening part of the transcript of his interview (which is all I have seen at present) that it was being conducted on behalf of the Serious Fraud Office, for the purposes of the prosecution. At the time of the interview, on 29 March 2012, the prosecution was already on foot, informations having been filed in December 2011.

[24] In the s 30 application, the documents which were asserted to fall into this category were described as follows:25

(vii) a copy of all correspondence between the [Authority] and Mr Byron

Pearson concerning his draft brief of evidence and amendments,

including copies of all correspondence copied to [Serious Fraud

Office] and Meredith Connell concerning this brief of evidence.

(viii) copies of all documents sent to Mr Pearson and documents received by the [Authority] from Mr Pearson.

[25] Mr Lunjevich holds the position as “Manager, Evidence” in the Enforcement Team at the Authority. He is responsible for managing the investigating and forensic accounting team. He gave evidence in relation to the various categories of documents requested under both the s 30 and non-party applications. In relation to the classes of documents that remain in issue, he deposed:

(vii) A copy of all correspondence between [the Authority] and Mr Byron Pearson concerning his draft brief of evidence and amendments, including copies of all correspondence copied to [Serious Fraud Office] and Meredith Connell concerning this brief of evidence;

25 [The Authority] holds some correspondence concerning Mr Pearson’s draft brief of evidence. However, this is privileged and in my view does not appear to relate to the credibility of Mr Pearson and is not relevant. [The Authority] does not waive privilege in that material.

(viii) Copies of all documents sent to Mr Pearson and document received by [the Authority] from Mr Pearson

26 No documents were sent to or received from Mr Pearson other than correspondence and draft statements which are privileged and not relevant. [The Authority] has obtained some personal information from Mr Pearson in the course of its civil claim inquiries, which are not relevant to the criminal proceedings.

[26] Mr Rennie indicated that litigation privilege26 was claimed in respect of these documents. He indicated that the Authority was prepared to make them available to the Serious Fraud Office on the basis that the documents were held on its behalf.

[27] I asked Mr Flanagan, for the Crown, whether there was any objection by the “prosecutor” to waiver of privilege and disclosure of these documents to the accused. Mr Flanagan confirmed that the documents could be disclosed. That being so, it is unnecessary to make an order at this stage.

[28] I record that Mr Rennie indicated that the documents may not necessarily provide the information required by the accused, in relation to an alleged substantial change to Mr Pearson’s evidence between the time at which he provided an amended brief to the Authority and the time that he signed the final version of his brief. Be that as it may, the documents held by the Authority are to be disclosed and Mr Flanagan has assured me there are no others in existence that have not been disclosed by the Serious Fraud Office previously.

[29] On that basis, given the need for further communication among counsel in respect of the documents disclosed (and to be disclosed) as a result of the s 30 application, that application is adjourned to be brought on at 24 hours notice if necessary.

The non-party application

[30] Mr Hall accepted that, having regard to the stance taken by the Authority and to the ruling I had indicated I would make on jurisdictional issues, he did not propose to press the non-party disclosure application at this stage. He was content to deal directly with Mr Rennie, should any difficulties arise.

[31] That being so, it is unnecessary for me to consider this aspect further. The non-party disclosure application is adjourned on the same basis as the s 30 application.

Additional comments

[32] I expressed some frustration during the course of the disclosure hearing about the way in which additional documents seemed to have been coming to light, following the evidence given by Ms Tierney and Mr Pearson. I do not propose to ascribe blame. That would be a pointless exercise, at this stage. Counsel for the Crown have provided an explanation as to why disclosure had not been made previously. I accept their assurances, as officers of the Court.

[33] I do wish to make some general comments about the nature of disclosure obligations, in case they become relevant later in this trial.

[34] First, as I understand the Crown to acknowledge, its role is not as an adversary party but, rather, as a “minister of justice” with the obligation of disclosing all relevant information to the accused. Disclosure issues must always be considered on the basis that information in the possession or control of the Crown is not something held by it for the purpose of securing a conviction. Rather, as Sopinka J

aptly put it in R v Stinchcombe:27

I would add that the fruits of the investigation which are in the possession of counsel for the Crown are not the property of the Crown for use in securing a conviction but the property of the public to be used to ensure that justice is done. ...

[35] Second, all statements, or notes of interview, from persons who have provided relevant information to the prosecutor, irrespective of whether that person is to be called as a Crown witness. It is not for the Crown to determine whether such statements may or may not be relevant. In Stinchcombe,28 the Supreme Court of Canada addressed this point. For the Court, Sopinka J said:29

I am of the opinion that, subject to the discretion to which I have referred above, all statements obtained from persons who have provided relevant information to the authorities should be produced notwithstanding that they are not proposed as Crown witnesses. Where statements are not in existence, other information such as notes should be produced, and, if there are no notes, then in addition to the name, address and occupation of the witness, all information in the possession of the prosecution relating to any relevant evidence that the person could give should be supplied. I do not find the comments of the Commission in its 1984 Report persuasive. If the information is of no use then presumably it is irrelevant and will be excluded in the exercise of the discretion of the Crown. If the information is of some use then it is relevant and the determination as to whether it is sufficiently useful to put into evidence should be made by the defence and not the prosecutor. Moreover, I do not understand the Commission’s statement that “[t]heir statements are not evidence”. That is true of all witness statements. They themselves are not evidence but are produced not because they will be put in evidence in that form but will enable the evidence to be called viva voce. That prosecutors are reluctant to disclose statements because use of them in cross-examination is thereby rendered less effective is








27 R v Stinchcombe [1991] 3 SCR 326 (SCC) at 333.

28 Ibid.

29 Ibid, at 345–346. The Court was referring to a report by the Law Reform Commission of

Canada which, in a 1984 report considered criminal disclosure issues.

understandable. That is an objection to all forms of discovery and disclosure. Tactical advantage must be sacrificed in the interests of fairness and the ascertainment of the true facts of the case.

(Emphasis added)

[36] That approach is not inconsistent with s 16(1)(o) of the Act, which entitles the prosecutor to withhold information that reflects on the credibility of a witness who is not to be called by the prosecutor to give evidence but who may be called by the defendant, provided it is not relevant for any other purpose. That exception to the general rule on disclosure is designed to enable the prosecutor to challenge the credibility of a witness whom it has decided not to call by reference to information in the possession or control of the prosecutor that does not need to be disclosed to the accused for any other reason.

[37] Third, it is important to bear in mind the difference between fair trial concerns (which the Act is designed to promote) and questions of trial strategy. This point was well made by Dobson J in R v Graham.30 His Honour said that it was “inadequate for an accused to pursue ... an application [for disclosure] on the basis that he or she considers that disclosure is relevant, but is not prepared to reveal why in order to maintain [the accused’s] right to silence”.

[38] In an example debated at the hearing of the present applications, there was an attempt made to obtain information about whether Mr Graham (the forensic accountant to be called as a Crown witness) had relied on the transcript of Mr Loader’s interview with the Authority, a document which Mr Lunjevich gave evidence had been made available to him.

[39] It is unnecessary for an expert witness to list all documents considered by him or her in the process of forming an opinion; only those on which reliance is placed. If the accused wish to challenge the expert on whether he ought to have relied on opinions expressed in Mr Loader’s transcribed interview, it is open for their counsel to do so through cross-examination. If they intend to call an expert witness

to rebut Mr Graham’s testimony (and I do not know if they will) his or her views will



30 R v Graham HC Wellington CRI-2010-085-2538, 10 May 2011 at para [16].

need to be put to Mr Graham. The point raised on behalf of the accused is not a disclosure issue. Nor is it a fair trial issue. It is a trial strategy issue.

Result

[40] The application under s 30 of the Act, and the application for non-party disclosure are each adjourned for further consideration, if necessary. They may be brought on at 24 hours’ notice if any issues arise that require reconsideration of the

disclosure issues raised by the accused’s applications.





P R Heath J


Delivered at 10.00am on 23 May 2014

Solicitors:

Serious Fraud Office, PO Box 7124, Wellesley Street, Auckland

Meredith Connell, PO Box 2213, Auckland

Gresson Dorman & Co, PO Box 244, Timaru

Rhodes & Co, PO Box 13444, Armagh, Christchurch

Duncan Cotterill, PO Box 5, Christchurch

Financial Markets Authority, 2 Takutai Square, Auckland

Counsel:

C Carruthers QC, PO Box 305, Wellington 6140

P H B Hall QC, PO Box 3750, Christchurch

R B Squire QC, PO Box 10157, Wellington

J H M Eaton QC, PO Box 13868, Armagh, Christchurch

H B Rennie QC, PO Box 10242, Wellington

M Corlett, PO Box 4338, Shortland Street, Auckland


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