R v Sullivan [2014] NZHC 1312 (11 June 2014)

Last Updated: 16 October 2014

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CRI 2011-076-1948 [2014] NZHC 1312

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, 22, 26, 27, 28, 29, 30 May 2014 3, 4, 5, 10 and 11 June 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
Judgment:	11 June 2014

_{(ORAL) JUDGMENT (NO. 11) OF HEATH J}

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

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

_{M A Corlett, PO Box 4338, Shortland Street, Auckland}

R v SULLIVAN [2014] NZHC 1312 [11 June 2014]

[1] The Crown prosecutes Messrs Sullivan, White and McLeod on a series of discrete counts, all arising out of their participation in the management and affairs of South Canterbury Finance Ltd (South Canterbury). Messrs Sullivan and White are former directors of that company, while Mr McLeod was its Chief Executive Officer. The charges span a period from 19 November 2004 until 9 February 2010.

[2] Just before the conclusion of the Crown case, counsel for the Crown asked me for a ruling that it was permitted to rely on the so called co-conspirators’ rule. That common law rule has been expressly preserved by s 12A of the Evidence Act

2006. The expression is something of a misnomer as it extends beyond cases in which the crime of conspiracy is charged, to cases in which two or more alleged offenders are acting in furtherance of a common purpose.¹ There are no conspiracy charges in the indictment, so the latter is the basis on which the Crown puts its application.

[3] Because fair trial issues were engaged, the application was argued over three days; 5 and 10 June 2014, and today. By the time the Crown came to reply this morning, it became apparent that the rationale for making the application disappeared if a more direct ruling were given on the extent to which statements made by one accused that were either made in the presence of another or copied to that person in writing, might be admissible in evidence against the co-accused.

[4] As Mr Eaton QC, for Mr McLeod submitted yesterday, that issue turns on s 12A(b) of the Evidence Act, rather than on s 12A(a) which was the basis on which the admissibility under the co-conspirators’ rule was initially invoked.

[5] Mr Carruthers QC, for the Crown, advises that the Crown’s application for a ruling on the use of co-accused’s statements under the co-conspirators’ rule will be withdrawn if I confirm an indication that I gave in the course of argument as to the admissibility of such statements on the basis outlined in s 12A(b) of the Act. I do so by reference to a document that Mr Carruthers referred to in the course of

_submissions.

¹ R v Qiu [2007] NZSC 51; [2008] 1 NZLR 1 (SC) at paras [24]–[29] and R v Messenger [2011] 3 NZLR 779 (CA)

at para [8].

[6] That document has been produced as SFO 14761. It is a copy of a report prepared by Mr McLeod, as Chief Executive Officer of South Canterbury on 16

September 2009. It was in the form of an “update” to Mr Hubbard, the then chairman of South Canterbury, with a copy being sent to Mr Sullivan, one of the directors.

[7] In that memorandum, among other things, Mr McLeod addresses the issue of a bank facility which is the subject of one of the charges. In short, that charge alleges that statements in South Canterbury’s relevant prospectuses misrepresented the availability of a facility of some $150 million.

[8] The report states:

7) BANK

• Banks clearly want to withdraw bank lines

• However not fully cancelled as:

 currently undrawn

 Standard & Poors outcome if they do announce?

 New capital structure and long association with

South Canterbury Finance

• We are trying to push back until capital sorted

• Graeme Brown to fully update

• Conference Call today at 2pm with Gerard Seare, BNZ.

[9] That statement is admissible as against Mr McLeod on the basis that he is the author of the document. It may be used in respect of Mr Sullivan if he accepts what is said in the document. It is evidence of a state of knowledge in the absence of anything which would suggest that Mr Sullivan did not receive the document.

[10] Whether Mr Sullivan did or did not accept the content of the statement in relation to the bank facility will depend upon other contemporaneous knowledge that he acquired in relation to the transaction. That will assist me to determine what Mr Sullivan’s actual state of knowledge was at the time, and whether (in fact) he accepted its content.

[11] Taking that evidence into account with what is said in Mr McLeod’s memorandum might well lead to a conclusion that Mr Sullivan accepted the content. But, equally, if there were evidence the other way, a contrary conclusion could be reached. The point is put well by the authors of The Evidence Act 2006: Act and Analysis:²

EV12A.03 Acceptance of co-defendant’s statement

Section 12A(b) preserves the common law exception to the co-accused rule in situations where the co-defendant, by his or her words or conduct, accepts the truth of the out-of-court statement made by the defendant. By accepting the truth of the defendant’s statement, the co-defendant has in effect made the statement their own.

What may amount to accepting a defendant’s statement (or part of the statement – in which case only that part can be admissible against the co- defendant) will vary according to the circumstances, and such acceptance may take place pre-trial, in the course of police questioning, or when the co- defendant testifies, and directions as to use of the out-of-court statement will follow accordingly.

(footnotes omitted)

[12] I propose to deal with evidence such as this on the basis I have outlined. That being so, the Crown has withdrawn its application for the co-conspirators’ rule to apply.

[13] One of the issues that arose during argument concerned evidence to be led by counsel for Mr Sullivan from a witness who was involved in the management of South Canterbury. The issues that have been raised in relation to any (alleged) joint unlawful enterprise will be irrelevant in respect of that witness and no cross- examination may take place on that particular topic.

[14] Clearly, however, the Crown is entitled to cross-examine on questions of credit. If any issues arise on which I consider that the witness may be at risk of prosecution, I will give a self-incrimination warning to the witness and, if necessary,

_{will offer an opportunity for him to take independent legal advice at the time.}³

² Mahoney et al, The Evidence Act 2006: Act and Analysis (2^nd ed, 2010, Brookers Ltd) at para

_EV12A.03.

³ Generally, see Singh v R [2010] NZSC 161; [2011] 2 NZLR 322 (SC).

[15] A number of things have been said during argument that relate to topics such as “co-conspirators” and “joint unlawful enterprises”. The witness who is to be called by the defence was implicated by the Crown as an alleged unindicted conspirator, or participant in the asserted unlawful joint enterprise. Given that the Crown has now withdrawn its application, it would be wrong for detail of that to be published, especially as cross-examination on that topic will be impermissible.

[16] That being so, I make an order suppressing publication of what was said in argument and any reference to the co-conspirators’ rule or to the name of the person who will be giving evidence. All that may be published is that evidential issues have

_{been debated, have now been resolved, and the case is in a position to proceed.}

P R Heath J