Howe v R [2016] NZHC 926 (9 May 2016)

Last Updated: 27 May 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2015-404-000308 [2016] NZHC 926

BETWEEN	STEPHEN HOWE Appellant
AND	THE QUEEN Respondent

Hearing:	7 December 2015
Appearances:	T Simmonds for Appellant R Willox for Respondent
Judgment:	9 May 2016

_{JUDGMENT OF HINTON J}

This judgment was delivered by me on 9 May 2016 at 9.00 am pursuant to Rule 11.5 of the High Court Rules

......................................................

Registrar / Deputy Registrar

Counsel/Solicitors:

T Simmonds, Barrister, Auckland

R Willox, Meredith Connell, Auckland

HOWE v R [2016] NZHC 926 [9 May 2016]

Introduction

[1] The appellant, Mr Howe, was convicted in the District Court at Auckland on

22 June 2015 following a four-day judge-alone trial before Judge Sinclair, on three charges of accessing a computer system for a dishonest purpose (charges 6, 8 and 10);¹ one charge of causing loss by deception (charge 12);² and four charges of

dishonest use of a document (charges 7, 9, 11 and 13).³ He was sentenced on

10 September 2015 to 12 months’ home detention, together with full reparation

($198,272.04) being paid within seven days.

[2] Mr Howe initially faced 15 charges. They all related to alleged over-charging for contract services that he, through JT Management Ltd (JTML), provided as Chief Financial Officer (CFO) to Buckley Systems Ltd (BSL). Seven of the charges were dismissed at trial. The eight charges on which Mr Howe was convicted related to four payments made in connection with an alleged racing sponsorship alignment with Mr Lightfoot, the then Chief Executive Officer (CEO) of BSL.

[3] Mr Howe appeals against his convictions on the primary ground that the Judge erred in her assessment of the evidence to such an extent that a miscarriage of justice occurred. In essence, Mr Howe argues that the Crown has not proved beyond reasonable doubt that he acted dishonestly and without claim of right.

Background

[4] During the relevant time, Mr Howe was a joint director of JTML, a company used (as he put it) for his consultant work for BSL. No issue was taken by Mr Howe over JTML being technically the contracting party.

[5] BSL is an engineering company and a leading manufacturer of parts for the semi-conductor, energy, research and medical industries. Mr Bill Buckley is the

_{founder and managing director of BSL.}

¹ _{Crimes Act 1961, s 249(1)(a); maximum penalty of seven years’ imprisonment.}

² _{Section 240(1)(d); maximum penalty of three years’ imprisonment.}

³ Section 228(b); maximum penalty of seven years’ imprisonment.

[6] In January 2010, JTML entered into a contract with BSL, pursuant to which Mr Howe was appointed cost management accountant at an hourly rate of $57.50. He submitted invoices on behalf of JTML on a weekly or monthly basis.

[7] In July/August 2010, Mr Howe was recommended by Mr Lightfoot, the CEO

of BSL, for the CFO position that had become vacant.

[8] On 30 August 2010, JTML entered into a further contract with BSL, pursuant to which Mr Howe was appointed CFO. That contract provided for payment at a daily rate of $766.28 plus GST, with a maximum annual payment of $200,000.

[9] In April and May 2011, Mr Howe entered into discussions and negotiations with BSL, for his remuneration to be aligned with Mr Lightfoot’s remuneration. This was agreed. The written contract between JTML and BSL was altered to reflect a new daily rate of $1,134.10 and a maximum annual payment of $296,000.

[10] The written contract resulting from the April/May 2011 discussions was retrospectively dated 27 September 2010. The contract was signed by Mr Lightfoot and Mr Howe.

[11] From 30 August 2010, Mr Howe invoiced BSL monthly in advance, according to the number of working days in the calendar month.

[12] As Judge Sinclair put it, as part of his employment agreement with BSL, the CEO, Mr Lightfoot, had negotiated an entitlement to an annual racing allowance. Mr Buckley had a close association with Western Springs Speedway and owned several racing cars. Mr Lightfoot set up Team BSL and approached BSL suppliers to sponsor the cars. Mr Lightfoot owned a racing car and advertised BSL on that car. Mr Howe administered the Team BSL account in his role as CFO. The BSL sponsorship fund was administered through a separate company, BSL Racing Ltd. Mr Lightfoot rendered invoices for his costs. The payments appear to have been very flexible because Mr Buckley said Mr Lightfoot was paid a lot more sponsorship than he would have received if he were the CFO.

[13] Between April 2012 and August 2012, Mr Howe received the four payments relevant to this appeal by the following means:

(a) On 27 April 2012, Mr Howe directed Mr Hunter, the Financial

Control Officer, to create a payment in HSBC to JTML for the sum of

$52,456.65. The payment was described as “bonus”. The payment

was authorised by Mr Howe. (Charge 6)

(b) On 4 May 2012, Mr Howe directed Ms Salas, a management consultant of BSL to create a payment in HSBC to JTML for the sum of $52,456.65. That payment was also described as “bonus”. Mr Howe authorised that payment. (Charge 8)

(c) On 6 July 2012, Mr Howe directed Ms Salas to create a payment in HSBC to JTML for the sum of $46,679.37. That payment was described as “fees equalisation”. Mr Howe authorised that payment. (Charge 10)

(d) On 10 August 2012, Mr Howe directed Ms Salas to create a payment in HSBC to JTML for the sum of $46,679.37. That payment was described as “differential”. That payment was authorised by Mr Hunter. Mr Howe acknowledged that he directed Mr Hunter to authorise that payment. (Charge 12)

[14] An invoice rendered by Mr Howe, unrelated to the payments at issue, triggered an investigation within BSL. The Board became seized of the issue of possible overpayments and the matter was discussed at a Board meeting. At the meeting, the Board asked Mr Howe for an explanation. Mr Howe provided a reconciliation report to BSL attached to an email sent on 2 April 2013. The accompanying email said:

I have reviewed all payments made to JT Management and am satisfied that they tie back to the intent of aligning the overall costs of Mike Lightfoot since starting, with JT Management’s remuneration, it has however highlighted an issue that cannot be easily incorporated into a day rate and needs to be manually calculated retrospectively, this issue is Holiday Pay and Sick Pay.

Mr Howe calculated that, after taking into account the unpaid leave days owed to him by BSL, he had overpaid JTML $9,273.85.

[15] In April 2013, Mr Howe’s services were terminated.

[16] In May 2013, Mr Howe was asked to provide invoices for the four payments at issue.

[17] The dishonest use of a document charges (charges 7, 9, 11 and 13) relate to the use of four invoices (numbers 74A, 74B, 77A, 77B) to allegedly justify the four payments detailed above.

[18] At trial, and on appeal, Mr Howe’s case was that he had a claim of right to the four payments which, in total, matched racing sponsorship payments made to Mr Lightfoot. It was accepted that Mr Buckley told him, more than once, words to the effect of, “[w]hatever Mike [Lightfoot] gets, you get”. Mr Howe says he believed this included Mr Lightfoot’s racing sponsorship payments. He says that he did not act dishonestly; the Crown has not disproved the claim of right, and he should not have been convicted of any of the charges.

District Court decision

[19] Much of the prosecution evidence was accepted by Mr Howe at trial, in particular the details of the payments made and the invoices rendered. What was primarily disputed by him was that he had acted dishonestly and without claim of right, which are requisite elements of all the present charges.

[20] The Judge recorded the legal test for the meaning of “dishonesty” and “claim of right” which, for completeness, I set out below in slightly adapted form:⁴

[20] ...

2. He did so dishonestly [means] he did so without a belief that there was express or implied consent or authority, from a person entitled to give such consent or authority.

⁴ R v Howe [2015] NZDC10935.

3. He did so without claim of right [means] Mr Howe believed at the time of [the act] that he had a proprietary or possessory right [in property in relation to which the offence is alleged to have been committed]. The belief does not need to be reasonable, but it must be genuine. It may be based on ignorance or mistake of fact. However, while the belief does not need to be reasonable, as stated in Hayes v R [[2008] NZSC 3], the reasonableness of the belief may be relevant in determining whether the defendant’s assertion of holding that belief was credible.

[21] Judge Sinclair was satisfied that there was an agreement and understanding between Mr Howe and BSL that Mr Howe’s remuneration would be aligned with Mr Lightfoot’s remuneration. She referred to Mr Buckley stating on a number of occasions that “the CFO and CEO were going to be on an equal footing”.⁵ She also referred to the evidence of both Mr Howe and Mr Buckley, that Mr Buckley said, “whatever Mike [Lightfoot] gets, you get”. The Judge said, “[w]hat is in contention are the details and specifics of the alignment.”⁶

[22] In relation to charges 6, 8, 10 and 12, the Judge found that the prosecution had proven beyond reasonable doubt that Mr Howe had acted dishonestly and without claim of right based on what she referred to as seven findings:⁷

(a) There was no reference to a racing sponsorship in the pre-contractual negotiation emails that referred to alignment of salaries.

(b) Mr Howe was not engaged in a racing sponsorship. He administered the accounts. Mr Lightfoot was clear the racing sponsorship was not part of his own “remuneration”.

(c) While Mr Buckley used several loose terms of phrase, the Judge was satisfied his intention was not to include the racing sponsorship in the alignment. Neither Mr Buckley nor Mr Howe said anything about that, but Mr Howe, in his capacity as CFO and experience in the accounting and business world, could not have plausibly considered that racing sponsorship would be a part of his remuneration package.

_{He would have known that sponsorship and remuneration are different}

⁵ _[56].

⁶ _[58].

⁷ At [102]-[111].

concepts. While there was ambiguity in the contract, there was no ambiguity that the alignment extended to the racing sponsorship.

(d) The payments were made under Mr Howe’s direction, and Mr Howe provided information from which the staff coded them. Two were coded as “bonus” which was inaccurate.

(e) Mr Howe was unconvincing in his explanation of why he excluded the racing payments in the April 2013 reconciliation email, and it was underhand for him to do so.

(f) When Mr Howe provided the recreated invoices in May 2013, there was no reference to sponsorship alignment, from which the Judge inferred that Mr Howe did not want to alert BSL to that purpose.

(g) When Mr Howe provided Mr Buckley and others with a schedule of Mr Lightfoot’s sponsorship payments, he did not mention his entitlement to claim the equivalent payments.

[23] The Judge found Mr Howe guilty on charges 6, 8, 10 and 12.

[24] On the invoice charges, (7, 9, 11 and 13), the Judge found that Mr Howe did not generate invoices for the four payments at the time they were made. She was therefore satisfied he used the recreated invoices without claim of right and she found him guilty on those charges.

Approach on appeal

[25] Section 229 of the Criminal Procedure Act 2011 sets out a person’s right to appeal against conviction. Under s 230 of that Act, this is a first appeal from a Judge-alone trial.

[26] Under s 232(2), the Court can only allow an appeal from a Judge-alone trial if it is satisfied that the District Court Judge “erred in his or her assessment of the

evidence to such an extent that a miscarriage of justice has occurred”, or that “a

miscarriage of justice has occurred for any reason”.

[27] “Miscarriage of justice” is defined as:

232 First appeal court to determine appeal

...

(4) In subsection (2), miscarriage of justice means any error, irregularity, or occurrence in or in relation to or affecting the trial that—

(a) has created a real risk that the outcome of the trial was affected; or

(b) has resulted in an unfair trial or a trial that was a nullity.

[28] A “real risk” that the outcome was affected exists when “there is a reasonable possibility that a not guilty (or more favourable) verdict might have been delivered if nothing had gone wrong.”⁸ This standard means that “an appellant does not have to establish a miscarriage in the sense that the verdict actually is unsafe” but that there is a real possibility the verdict would be unsafe.⁹

[29] When considering an appeal against conviction from a Judge-alone trial, this Court must be mindful of the trial Judge’s advantage in seeing and hearing the witnesses give evidence.¹⁰

Analysis

[30] Mr Simmonds, counsel for Mr Howe, took issue with a number of the Judge’s findings. He itemised these, his primary point being that the Judge omitted to take proper account in this context, as she did in the context of the charges she dismissed, of Mr Buckley’s acknowledgement that he told Mr Howe he was to receive the same

_{as Mr Lightfoot, or of the lack of clarity around the terms of Mr Howe’s contract.}

⁸ _{R v Sungsuwan [2005] NZSC 57; [2006] 1 NZLR 730 (SC) at [110] per Tipping J.}

⁹ _{R v Sungsuwan, above n 4, at [110].}

¹⁰ See Sullivan v Police HC Auckland CRI-2008-404-152, 2 October 2008 at [30].

[31] In her discussion about these matters in connection with the charges that were dismissed, the Judge said:

[62] However, given Mr Buckley’s directive and Ms Urlich’s tacit approval that Mr Howe would be remunerated on the same level as Mr Lightfoot, in my view there was room for ambiguity, confusion and misunderstanding as to whether Mr Howe could claim untaken leave.

[63] Mr Buckley struck me as a highly intelligent man, deeply passionate about his company and the products he was developing. The impression I gained from him was that he concentrated on this aspect of the company and relied on his other directors, particularly Ms Urlich and other employees, to deal with the legal, financial and day to day operation of the company. He was vague about some of the specific financial details and arrangements, and that was borne out by his misunderstanding that Mr Howe was an employee of BSL.

[64] Furthermore, after hearing the evidence of all the BSL witnesses, I gained the impression that there was a lack of organisation and direction at senior management level, and that there was a lack of clarity as to who was responsible for what. For example, there was some confusion as to who was responsible for preparing and finalising Mr Howe’s contract. Mr Buckley said he was not involved. Mr Lightfoot was of the understanding Ms Urlich had prepared it, and Ms Urlich was adamant Mr Lightfoot was responsible for it. There was inconsistency in the evidence from Mr Howe, Mr Buckley and Mr Lightfoot, and therefore I am unable to make a finding as to whom the CEO and CFO should have reported to and have documents signed by.

[65] Furthermore, although the contract is unequivocal in stating that Mr Howe would receive a daily rate of $1,134.10 and maximum annual payment of $296,000.00, many invoices presented by Mr Howe were accepted and charges have not been laid in respect to instances where the daily rate claimed by Mr Howe was higher than that set out in the contracts, to align with Mr Lightfoot’s pay rises. So, I infer from this that BSL accepted Mr Howe was exceeding the daily rate and maximum payment.

[66] In addition, Mr Lightfoot stated that while he was employed at BSL

he had had a dispute regarding his entitlement.

[67] All of this, in my view, fuelled the lack of clarity as to what

Mr Howe was actually entitled to claim.

[68] Finally, in relation to these charges, three of the invoices have been signed solely by Mr Howe. The fourth invoice has been signed by both Mr Howe and Mr Buckley. In fact, as stated by both Mr Howe and Mr Buckley, it was this invoice which instigated BSL’s investigation into Mr Howe’s payments.

[69] Mr Howe gave evidence that two signatures were not required for his invoices. He stated that if a purchase order or preapproved payment was presented only one signature would be required. Mr Howe contended that his situation was analogous because his was a preapproved contract.

[70] Mr Lightfoot, Ms Perry and Craig Hunter (Mr Hunter) all gave evidence that the company’s usual practice was for invoices to be signed by two accounts staff. Mr Hunter gave evidence that he had twice raised the issue with Mr Howe of only having his signature on the invoices. Jennifer Salas (Ms Salas) said there was an internal control policy requiring at least two signatures, and it would be unusual for a contractor to sign his own invoices. However, she stated that when she started working at BSL, a practice had developed whereby Mr Howe signed his own invoices. It was also acknowledged by Mr Lightfoot particularly, that there have been many instances and examples where Mr Howe’s invoices have been presented and paid with just one signature.

[71] Given the consistent evidence of Ms Perry, Mr Lightfoot and Ms Salas, I find Mr Howe’s practice of signing his own invoices and not obtaining a second signature was contrary to company policy. Mr Howe was the CFO of BSL and ultimately in charge of the accounts section. However, it seems that a culture had developed and I infer, it had been accepted by BSL that invoices with just one signature would be approved, given many of Mr Howe’s invoices signed only by him were accepted and paid and this did not give rise to any charges.

[32] For the same reasons given by the Judge in the quoted paragraphs, I consider it is not fair to conclude that there was no ambiguity that the alignment extended to the racing sponsorship. It seems to me that, in material respects, matters operated outside the written contract and even contrary to it. On the basis of the language Mr Buckley used with Mr Howe, it was possible that the alignment could have gone as far as the racing sponsorship payments. I also do not consider reliance can be placed on the difference between “sponsorship” and “remuneration”. In light of the loose agreement that was reached, it could have been that Mr Howe and Mr Lightfoot would “get the same”, rather than be “remunerated” the same.

[33] For the same reasons, I also do not consider any weight can reliably be placed on Mr Lightfoot being clear as to what his own “remuneration” included, or on Mr Buckley’s being adamant at the hearing as to what was intended to be aligned. Mr Buckley’s statements to Mr Howe were not clear, nor was the detail of the

contractual arrangements. Further, as the Judge recorded,¹¹ Mr Buckley took issue

even with the existence and status of the contract. He said he was not aware of it, and believed Mr Howe was an employee of BSL.

[34] I agree with the Judge that there was no reference to the racing sponsorship in the pre-contractual emails or in the April 2013 reconciliation statement, but there

¹¹ [43].

was also no reference in these documents to bonuses. It seems Mr Howe directed very substantial payments to himself by way of alignment bonuses, in addition to the racing payments, and he did not face charges in respect of the bonus payments. It is possible that Mr Howe’s focus in the reconciliation statement was on matters that required detailed calculation. Bonus and sponsorship payments did not require such calculation, as in Mr Howe’s contention, they matched payments already made to Mr Lightfoot.

[35] I agree with the Judge that Mr Howe was not wanting to draw attention to the racing sponsorship alignment payments. However, he did not hide them either, in the sense that he instructed responsible accounts staff to make what were substantial payments which were transparently made to JML. I do not think much turns on the fact that two of the payments were coded by the staff as “bonus”. It was clear Mr Howe did not do the coding himself, and the other two payments were broadly, but not inaccurately, described as “fees equalisation” and “differential”.

[36] Viewing the evidence overall, and in particular, taking into account Mr Buckley’s telling Mr Howe, on more than one occasion that, “[w]hat Mike [Lightfoot] gets, you get”, as well as the lack of clarity around the contractual and payment arrangements, I am not satisfied beyond reasonable doubt that the Crown has shown Mr Howe acted dishonestly and without claim of right in respect of charges 6, 8, 10 and 12. I consider Mr Howe had no entitlement to the racing sponsorship payments, but I am not satisfied to the requisite standard that he believed his actions were unlawful.

[37] Charges 7, 9, 11 and 13 require the Crown to prove beyond reasonable doubt that Mr Howe used the invoices that were recreated in May 2013 dishonestly, without claim of right and with an intent to obtain a pecuniary advantage.

[38] For the same reasons I have given in relation to charges 6, 8, 10 and 12, I find that the Crown has not proved beyond reasonable doubt the charges related to the invoices issued after the payments were made. Whether Mr Howe rendered invoices at the time the payments were made or not, the invoices he said he recreated later,

could have been used to retain a pecuniary advantage, to which he believed he was entitled.

Conclusion

[38] While I agree with the Judge that many aspects of the way in which Mr Howe conducted himself were very concerning, and in fact suspicious, I have reached the view that the Crown has not discharged the high standard of proof, with the result that a miscarriage of justice has occurred. Consequently, the eight convictions entered in the District Court are all quashed.

––––––––––––––––––––––––––––––––––––––- Hinton J