R v Bublitz [2018] NZHC 373 (9 March 2018)

Last Updated: 22 March 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2014-004-002293 [2018] NZHC 373

THE QUEEN

v

PAUL NEVILLE BUBLITZ BRUCE ALEXANDER MCKAY RICHARD TIMOTHY BLACKWOOD LANCE DAVID MORRISON

Hearing:	28 February and 1 March 2018
Appearances:	B Horsley and D Johnstone for the Crown R Reed QC and H Ford for Mr Bublitz G Bradford and S Withers for Mr McKay S Kilian and F Hawkins for Mr Blackwood D O’Leary for Mr Morrison
Judgment:	9 March 2018

JUDGMENT OF WOOLFORD J

[As to Application for Costs]

This judgment was delivered by me on Friday, 9 March 2018 at 4:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Meredith Connell, Crown Solicitor, Auckland Ms R Reed QC, Barrister, Auckland

Mr G Bradford, Barrister, Auckland

Mr S Kilian, Kilian & Associates, Auckland Mr D O’Leary, Barrister, Wellington

R v BUBLITZ & ORS [2018] NZHC 373 [9 March 2018]

Introduction

[1] The four defendants were charged with various financial crimes. Twelve weeks were allocated for the trial. That allocation was grossly inadequate. The trial started on 8 August 2016. I aborted the trial nine months later, on 10 May 2017, because of late disclosure by the Crown. The Crown intends to continue the prosecution against Mr Bublitz, Mr McKay and Mr Blackwood. It offered no evidence against Mr Morrison and the charges against him were dismissed on 7 June 2017. The retrial is set down for 16 July 2018. Twenty-two weeks have been allocated.

[2] Mr Bublitz, Mr Blackwood and Mr Morrison apply for costs in relation to the first trial. They do so under the Costs in Criminal Cases Act 1967 and Criminal Procedure Act 2011. Mr McKay originally also applied for costs. He withdrew the application on 24 January 2018 without prejudice to bringing the same application again at a later time.

Background

[3] Following a lengthy investigation by the Financial Markets Authority (FMA), Mr Bublitz, Mr McKay, Mr Blackwood and Mr Morrison were charged with various financial crimes on 11 March 2014. This followed the collapse of two small finance companies, Viaduct Capital Limited (Viaduct) and Mutual Finance Limited (Mutual), in 2010.

[4] The original Crown charge notice contained 49 charges. Mr Bublitz faced all 49 charges. Mr McKay faced 41 charges. Mr Blackwood faced 28 and Mr Morrison faced seven. One hundred and twenty-five verdicts were therefore required on the original Crown charge notice. The defendants pleaded not guilty on 28 September 2014.

[5] The Crown’s case, in broad terms, is the defendants dealt with Viaduct’s and Mutual’s assets in a way that breached provisions in the companies’ trust deeds that prohibited related party transactions. Viaduct and Mutual had the benefit of Crown guarantees, which made them attractive options to the defendants. The Crown alleges the defendants completed these transactions to benefit Mr Bublitz’s group of
companies, collectively referred to as Hunter Capital, ahead of Viaduct, Mutual and the Crown.

[6] The Crown further alleges the defendants misled potential investors by making false statements in prospectuses and investment statements, and misled the Crown in relation to the Crown guarantee.

[7] The defence case appears to be the structures were put in place to operate lawfully and to pursue responsible business opportunities. Assets that were sold were not sold for unreasonable prices and they were not sold to extract cash for Hunter Capital.

[8] The trial eventually started on 8 August 2016. It surpassed the allocated 12 weeks by a significant margin.

[9] I discharged the defendants on a number of charges throughout the trial. The applications under the Costs in Criminal Cases Act relate to these charges. The details are as follows:

(a) 21 September 2016: I discharged the defendants on 12 charges on the Crown’s invitation. The Crown chose not to offer evidence on these charges because it said they were largely double ups, which charged the same transactions as being in breach of both the Mutual trust deed and the Crown guarantee. The defence points out this was after the Crown received and considered the expert evidence the defence proposed to call.

(b) 14 October 2016: I discharged Mr Bublitz, Mr McKay and Mr Blackwood on 22 charges on which they had been jointly charged with others, again at the Crown’s invitation. This was largely because they had been charged as parties with no direct role in the transactions, the subject of the charges. The number of charges remained at 37, but the number of verdicts required was reduced to 66. The Crown charge notice for these 37 charges was 86 pages in length.
(c) 23 November 2016: Because of the significant over-run of the allocated time for trial, I invited the Crown to identify the charges that represented the gravamen of the Crown case. The Crown did so and I dismissed the remainder of the charges not identified as the gravamen of the Crown case for case management reasons. This left 19 charges against the four defendants. Thirty-two verdicts were still required, as some of the charges were faced by more than one defendant.

(d) 3 March 2017: At the conclusion of the Crown case and on the application of the defence, I discharged Mr Bublitz on two charges, and Mr McKay and Mr Blackwood on one charge each. This was because I concluded the payments of funds on behalf of a borrower did not amount to a transaction for the purposes of the Viaduct trust deed or the Crown guarantee. These are the only charges which have been dismissed on their merits.

[10] The trial was still continuing in March 2017. At that time, Mr Bublitz faced 13 charges, Mr McKay faced seven charges, Mr Blackwood faced six charges and Mr Morrison faced two charges.

[11] On 23 March 2017, the Crown provided the defence with a list of documents from the files of Deloitte, investigative agents for the prosecuting agency, the FMA, which were not disclosed on various grounds such as irrelevancy or litigation privilege. The list identified 14,619 documents and should have been provided to the defence much earlier. By this time, the Crown had closed its case and Mr Bublitz was about to close his case, having called three witnesses to give evidence on his behalf. This late disclosure was an admitted breach of ss 13(2)(b) and (5) of the Criminal Disclosure Act 2008. The remaining three defendants had not yet been called on to make their elections whether to call evidence.

[12] I aborted the trial on 10 May 2017 because I considered the breaches of the Criminal Disclosure Act gave rise to a reasonable danger of a miscarriage of justice.
The events that led to the delay and my decision to abort the trial are set out in my judgment of 17 May 2017.¹ In brief, I did so for the following reasons:

[106] I am of the view, however, that a lengthy adjournment now would have a prejudicial impact on the defendants’ right to present an effective defence. The case cannot be rerun. Although the issues raised in the late disclosure were live in the trial, the defence is entitled to prepare and present its case with full knowledge of all relevant documentation that both helps and hinders its case. Strategic decisions as to priority and narrative are important in a judge-alone trial as much as a jury trial. Similarly, cross-examination of witnesses for the second or third time is of necessity disjointed and likely to be less effective. Witnesses who are recalled would need to be taken through their earlier evidence in some detail before being asked if that evidence would differ in light of the documents recently disclosed. There is no doubt that cross-examination would have been more direct and robust if the defence had the documents recently disclosed, such as the draft Viaduct report. More concessions could well have been made by Crown witnesses. They are less likely now. It is my view that the Crown breaches of the Criminal Disclosure Act have restricted the choices open to the defence in respect of the presentation their case, both in manner and extent.

Conclusion

[107] It was regrettable to have granted the application to abort the trial, but I am of the view that there was a real possibility of unfairness to the defendants if the trial was to proceed. The breaches of the Criminal Disclosure Act have given rise to a reasonable danger or apprehension of a miscarriage of justice in the circumstances.

[13] The Crown subsequently chose not to proceed against Mr Morrison. Moore J discharged him on the two charges he still faced on 7 June 2017. The Crown is proceeding against the other defendants. On 20 June 2017, the Crown filed an application for leave to amend the Crown charge notice by adding seven new charges, amending other charges and withdrawing one. I declined the application in large part on 5 March 2018.²

[14] The defendants applied to stay the proceedings. Lang J declined to stay the proceedings on 18 September 2017.³ He considered, among other things, it remained possible for the defendants to receive a fair trial.

¹ R v Bublitz [2017] NZHC 1059.

² R v Bublitz [2018] NZHC 323.

³ R v Bublitz [2017] NZHC 2251.

The defendants’ costs

Mr Bublitz

[15] Mr Bublitz privately retained counsel until December 2016, after which time his defence was funded by Legal Aid Services. He says he spent $1,527,283.49 on legal costs from the point at which the charges were laid until the end of the first trial. The details of the expenses incurred are set out in an affidavit sworn by Mr Bublitz on 2 February 2018. He recognises some of the work can be reused and makes an adjustment for that. Accordingly, he applies for costs totalling $1,284,493.57. Of that,
$200,000.00 is sought under the Costs in Criminal Cases Act and $1,084,493.57 under the Criminal Procedure Act.

[16] Legal Aid Services paid $245,086.93 of Mr Bublitz’s costs. He says that amount is to be treated as a debt due and he will be required to repay it out of any award made. He confirms Legal Aid Services, now part of the Ministry of Justice, has advised him it is entitled to recover the costs under s 36 of the Legal Services Act 2011.

Mr Blackwood

[17] Mr Blackwood’s defence has been funded by Legal Aid Services throughout. He applies for costs totalling $475,913.24 under s 364 of the Criminal Procedure Act. He breaks up the amount sought as follows:

(a) $281,421.10 for hearing time.

(b) $76,362.30 for preparation during the trial.

(c) $118,129.84 for pre-trial preparation. This represents 40 per cent of the actual costs spent on pre-trial preparation, which he has reduced as some of the preparation will be relevant to the retrial.

[18] He largely relies on the submissions made on behalf of Mr Bublitz. He also acknowledges any costs awarded will be payable to Legal Aid Services, who has also advised him in correspondence dated 7 February 2018 that s 36 of the Legal Services
Act applies. He further says Legal Aid Services has asked him to seek costs on its behalf.

Mr Morrison

[19] Mr Morrison privately retained counsel until October 2015, after which time he represented himself with the assistance of stand-by counsel appointed by the Court. He applies for costs totalling $212,992.90 under the Costs in Criminal Cases Act and Criminal Procedure Act. He does not specify how much is sought under each Act. While most of the amount sought consists of legal costs, Mr Morrison also seeks to recover some travel and accommodation costs in Auckland as his normal residence was in Palmerston North. As he is not being retried and none of the legal work undertaken on his behalf is to be reused, Mr Morrison seeks to recover all his costs.

Costs in Criminal Cases Act 1967

[20] The applications under the Costs in Criminal Cases Act are as follows:

(a) Mr Bublitz applies for an order for $200,000.00 in respect of the 36 charges that were dismissed against him in the first trial.

(b) As noted above, Mr Morrison applies for costs totalling $219,992.90 under the Costs in Criminal Cases Act and Criminal Procedure Act. He does not specify how much is sought under each Act.

The law

[21] Section 5 of the Costs in Criminal Cases Act provides:

5 Costs of successful defendant

(1) Where any defendant is acquitted of an offence or where the charge is dismissed or withdrawn, whether upon the merits or otherwise, the court may, subject to any regulations made under this Act, order that he be paid such sum as it thinks just and reasonable towards the costs of his defence.

(2) Without limiting or affecting the court’s discretion under subsection (1), it is hereby declared that the court, in deciding whether to grant

costs and the amount of any costs granted, shall have regard to all relevant circumstances and in particular (where appropriate) to—

(a) whether the prosecution acted in good faith in bringing and continuing the proceedings:

(b) whether at the commencement of the proceedings the prosecution had sufficient evidence to support the conviction of the defendant in the absence of contrary evidence:

(c) whether the prosecution took proper steps to investigate any matter coming into its hands which suggested that the defendant might not be guilty:

(d) whether generally the investigation into the offence was conducted in a reasonable and proper manner:

(e) whether the evidence as a whole would support a finding of guilt but the charge was dismissed on a technical point:

(f) whether the charge was dismissed because the defendant established (either by the evidence of witnesses called by him or by the cross-examination of witnesses for the prosecution or otherwise) that he was not guilty:

(g) whether the behaviour of the defendant in relation to the acts or omissions on which the charge was based and to the investigation and proceedings was such that a sum should be paid towards the costs of his defence.

(3) There shall be no presumption for or against the granting of costs in any case.

(4) No defendant shall be granted costs under this section by reason only of the fact that he has been acquitted or that any charge has been dismissed or withdrawn.

(5) No defendant shall be refused costs under this section by reason only of the fact that the proceedings were properly brought and continued.

[22] One of the events listed in s 5(1) must occur for the court to have jurisdiction to make an order under s 5. The defendant must either be acquitted or the charge must be dismissed or withdrawn.

[23] The court has a broad discretion once s 5(1) is satisfied.⁴ Section 5(2) states, without limiting or affecting that discretion, the court “shall have regard to” all relevant circumstances in deciding whether to grant costs and the amount of any costs

⁴ Solicitor-General v Moore [1999] NZCA 269; [2000] 1 NZLR 533 (CA) at [30] and Delamere v Serious Fraud Office

[2009] NZCA 142, [2009] 3 NZLR 94 at [27].

granted. That subsection includes a non-exhaustive list of circumstances the court shall have regard to, where appropriate.

[24] Hardie Boys J addressed s 5 in R v Margaritis:⁵

The various criteria in s 5 really come down to two questions: was the prosecution reasonably and properly brought and pursued; did the accused bring the charge on his own head.

[25] In R v Connolly, Fogarty J quoted Hardie Boys J and said:⁶

As the argument developed in this hearing the truth of Hardie Boys J’s propositions in Margaritis came home. Nonetheless, I do not read any of these authorities to displace the plain words of s 5(2), which impose a duty on the Court to have regard to the considerations set out in those paragraphs where appropriate. The case law emphasises that it is important for the Court not to lose sight of the fact that it is subs (1) of s 5 which gives the Court the power to make an order and provides that this power is discretionary. Before the Court can make the order the Court must be satisfied that any order be just and reasonable. The criteria in subs (2) follow a logical sequence. Broadly they proceed chronologically. They are intended to provide a structure of analysis to be adapted by the Court to the particular circumstances of the particular case.

[26] Fogarty J’s judgment was overturned by the Court of Appeal but restored by the Supreme Court. The Supreme Court said:⁷

In any event, Fogarty J applied the stipulated statutory criteria. What weight he may have given to any particular factor does not engage matters of principle affecting the validity of his statutory discretion.

...

... But, in any event, an appellate court cannot hope to capture the ephemeral but significant impressions which inform the assessments and discretions of the trial judge. That is why, of course, a challenge to the exercise of discretion must demonstrate what would be termed, generally, an error of principle.

[27] Section 5(3) makes it clear there shall be no presumption for or against awarding costs in any case. Section 5(4) provides a defendant shall not be granted costs only because they have been acquitted or a charge against them has been dismissed or withdrawn. As Heath J said in McLeod v R:⁸

⁵ R v Margaritis HC Christchurch T66/88, 15 July 1989.

⁶ R v Connolly (2006) 22 NZTC 19,844 (HC) at [7].

⁷ R v Reid [2007] NZSC 90, [2008] 1 NZLR 575 at [21]–[23].

⁸ McLeod v R [2016] NZHC 221 at [10].

Accordingly, while “success” in the proceeding is a jurisdictional pre-requisite to an application, the fact of “success” is neutral when the discretion whether or not to award costs (and, if so, in what amount) is exercised.

[28] Section 5(5) provides no defendant shall be refused costs only because the criminal proceedings were properly brought and continued.

Is this the appropriate time to hear Mr Bublitz’s application under the Costs in Criminal Cases Act 1967?

[29] The Crown argues this is not the appropriate time to determine the costs application by Mr Bublitz under the Costs in Criminal Cases Act as significant charges remain outstanding against him. It says any award under the Costs in Criminal Cases Act should only be made after the final determination of all the charges, as the determination of the application is inextricably linked with the merits of the retrial.

[30] Counsel for the Crown says they are not aware of any cases where costs have been awarded under the Costs in Criminal Cases Act in respect of charges which have been dismissed, or acquittals entered, prior to the conclusion of all the charges.

[31] My own research has produced two Court of Appeal decisions that warrant discussion. However, I note these cases are of limited relevance given they were appeals and concerned vastly different circumstances.

[32] In Smith v R, the Court of Appeal dismissed Mr Smith’s application for his costs on appeal against the Crown under s 8.⁹ It had earlier allowed an appeal against conviction by Mr Smith and ordered a retrial. The Court primarily declined the application because it did not consider the grounds advanced by Mr Smith comprised good grounds for ordering costs in his favour. However, the Court also considered it was inappropriate to make an award of costs with the pending retrial:¹⁰

As the Crown points out, Mr Smith may yet be found guilty of tax evasion. An award of costs in his favour would sit uncomfortably with verdicts of guilty, if that is the ultimate outcome. In Rust, this Court dismissed Mr Rust’s application for costs in respect of the first two trials and the appeal to this Court. In the first trial the jury had been unable to reach a verdict. Mr Rust’s conviction following his second trial was quashed on appeal by this Court.

⁹ Smith v R [2013] NZCA 300.

¹⁰ At [9].

Mr Rust was found not guilty of all the charges he faced at his third trial. Thus, costs were sought after the ultimate outcome, which we consider is the appropriate time to consider any application.

[33] In reaching its decision, the Court also took into account that three of the four grounds of appeal advanced by Mr Smith failed and there was substance in the Crown’s point that Mr Smith’s own delays and non-compliance with directions likely increased his costs.

[34] Smith can be contrasted with an earlier case, Hancock v R.¹¹ The Court allowed Ms Hancock’s appeal against conviction and ordered a retrial. She then applied for costs in relation to her appeal under s 8. The Court considered the application and declined it on its merits. It did not refer to the pending retrial in its analysis.

[35] I consider the text of s 5 allows the court to determine costs while some charges are still pending, assuming the threshold in s 5(1) has been met. Whether it is appropriate to do so will depend on the circumstances. The two cases discussed above, while concerning different circumstances, illustrate this point.

[36] Given the unique circumstances of the present case, I am of the view it would be inappropriate at this stage to award costs to Mr Bublitz under the Costs in Criminal Cases Act on the charges which have been dismissed. As in Smith, I consider the appropriate time to consider Mr Bublitz’s application is after the ultimate outcome.

[37] Guilty verdicts on some or all of the remaining charges will not be determinative in relation to the dismissed charges, as s 5(3) makes clear there shall be no presumption for or against the granting of costs in any case. However, I consider whether Mr Bublitz is guilty on the remaining charges will be relevant to the s 5 analysis of the dismissed charges. That analysis should be completed at a time where the Court can engage in an assessment of the merits of the Crown’s case as a whole. I do not consider the Court can engage in such an assessment at this time. It would be inappropriate to do so given the pending retrial. It may also not be possible to do so, given the disclosure issues in the first trial.

¹¹ Hancock v R [2012] NZCA 397.

[38] The fact that only two of the 36 charges dismissed against Mr Bublitz were dismissed on their merits is key to my finding that a holistic assessment is required. The rest were double ups or alleged party liability or were dismissed for case management reasons. The 13 charges which remain are said to represent the gravamen of the Crown case against Mr Bublitz. In these circumstances, if the retrial resulted in any guilty verdicts, a costs award could “sit uncomfortably” with those verdicts.

[39] While there has no doubt been an element of wasted costs, it is very difficult to be precise. Mr Bublitz claims 20 per cent of the work undertaken for trial was wasted by virtue of the dismissed charges “based on counsel’s review of time records and knowledge of trial preparation”. That must mean 80 per cent of the work undertaken for trial was in respect of the 13 charges which remain against Mr Bublitz, which the Crown says represent the gravamen of the case against him. If Mr Bublitz were acquitted at retrial of the 13 charges which remain, then Mr Bublitz would have a stronger case for some sort of award under the Costs in Criminal Cases Act.

[40] However, if Mr Bublitz was convicted at retrial of the 13 charges which remain, then the charges which have been dismissed would be outweighed by the guilty verdicts. He would be unlikely to receive any award under the Costs in Criminal Cases Act. Most of the s 5(2) circumstances, and other relevant circumstances, would then point strongly against a costs award. Therefore, I consider Mr Bublitz’s claim under the Costs in Criminal Cases Act is premature and should not be determined at this time.

Mr Morrison’s application under the Costs in Criminal Cases Act 1967

[41] The application by Mr Morrison for costs under the Costs in Criminal Cases Act is in a different category to that of Mr Bublitz. All seven charges Mr Morrison originally faced have been dismissed and he is not subject to retrial. Two charges against him were dismissed at the Crown’s invitation on 21 September 2016. Three more were dismissed by me on 23 November 2016 for case management reasons. He therefore only faced two charges when the trial was aborted on 10 May 2017.

[42] In a memorandum dated 6 June 2017, the Crown advised the Court it had resolved not to offer evidence at Mr Morrison’s retrial on the basis of:

• (a) his lesser culpability compared to that of his co-defendants;

(b) his relative age and apparently somewhat poor health; and

(c) the personal inconvenience and pressures associated with facing lengthy criminal proceedings.

[43] When the matter was in call over in the High Court on 7 June 2017, Moore J therefore dismissed the remaining two charges against Mr Morrison.

[44] Given that all charges against Mr Morrison have been dismissed, there is no impediment to determining his application under the Costs in Criminal Cases Act now.

[45] I turn to consider each of the factors in s 5(2) of the Costs in Criminal Cases Act, where appropriate. In addressing each, I keep in mind the guidance provided by the cases discussed above.

(a) Whether the prosecution acted in good faith in bringing and continuing the proceedings

[46] It is not alleged the prosecution acted in bad faith. This factor does not require detailed analysis.

(c) Whether the prosecution took proper steps to investigate any matter coming into its hands which suggested the defendant might not be guilty

(d) Whether generally the investigation was conducted in a reasonable and proper manner

[47] These two factors can be considered together. Mr Morrison criticises three basic failures in the FMA investigatory process as it related to him. First, the charges against him were based on documentation never put to him at an interview. The chief investigator, Jason Weir of Deloitte, said he wanted to re-interview Mr Morrison and the other defendants, but the FMA declined to allow him to do so. Second, the FMA should have organised and managed the relevant documents in such a way as to enable its full and proper disclosure before the commencement of the trial. Third, Mr Weir
was not qualified to conduct the investigation as he was not an expert in trust or property matters and, most critically, was not an expert in related party transactions.

[48] As to the first alleged failure, I accept Mr Weir wanted to re-interview Mr Morrison, but I am of the view it was unnecessary. Mr Morrison was extensively interviewed by Mr Weir about his knowledge of Mr Bublitz’s role in Viaduct and his own role as a director of Mutual. Key documents were put to him and his comments sought.

[49] As to the second alleged failure, the Crown accepts there were initial difficulties in accessing disclosure, but says by the commencement of the trial, access problems had been solved. Mr Morrison’s major complaint appears to relate to the massive volume of disclosure and the unnecessary duplication of documents. He sought a pre-trial stay on that basis, which I declined on 26 April 2016. The Crown does, however, acknowledge it breached the Criminal Disclosure Act during the trial, the breach was significant and there was no reasonable excuse for the breach.

[50] As to the third alleged failure, Mr Weir acknowledged at the outset he was not an expert in related party transactions. It was always the Crown’s intention to call one of Mr Weir’s colleagues, Barry Jordan, as an expert in related party transactions. Mr Weir’s role was limited to reconstructing the various transactions at issue, the sourcing of documentation that may explain the motivation behind the transactions, the construction of charts and diagrams to assist in understanding the transactions, interviewing key witnesses and reporting to the FMA. He was the lead investigator, not an expert.

(b) Whether at the commencement of the proceedings the prosecution had sufficient evidence to support a conviction in the absence of contrary evidence

(e) Whether the evidence as a whole would support a finding of guilty, but the charge was dismissed on a technical point
(f) Whether the charge was dismissed because the defendant established he was not guilty

[51] These three factors can be considered together. In broad terms, for Mr Morrison to be found guilty it was necessary for the Crown to prove the transactions at issue were related party transactions, Mr Morrison knew they were related party transactions and Mr Morrison intended through his actions to assist Mr Bublitz to breach the restrictions on related party transactions.

[52] At the commencement of the proceedings the Crown had a brief of evidence from Mr Jordan in which he expressed the opinion the transactions at issue were related party transactions. Because Mr Morrison was unrepresented at trial, the Crown also provided him with a 19 page memorandum, dated 9 February 2017, in which it outlined the evidence which it said established Mr Morrison’s knowledge. At no point prior to, or following, receipt of the memorandum did Mr Morrison seek a discharge from trial on the basis of evidential insufficiency.

[53] None of the seven charges against Mr Morrison were dismissed on their merits. The last two charges (Charges 29 and 49) had in fact been the subject of an application for discharge by Mr Bublitz. In a judgment dated 9 March 2017 I said:

I am, however, of the view that there is some evidence which, if accepted by me, is sufficient to make out Charges 29 and 49 in respect of the omission of related party transactions and their compliance with the Crown Deed of Guarantee.

[54] Nonetheless, the Crown elected not to offer evidence against Mr Morrison on these two remaining charges and they were accordingly dismissed.

(g) Whether the behaviour of the defendant in relation to the acts or omissions on which the charge was based and to the investigation and proceedings was such that a sum should be paid towards the costs of his defence

[55] Mr Morrison did not act improperly in relation to any of the dismissed charges. He was co-operative throughout the investigation and proceedings.

Other factors

[56] It has been said the various criteria in s 5 really come down to two questions: was the prosecution reasonably and properly brought and pursued; did the accused bring the charge on their own head.¹² While these two questions may be apposite to many trials, this trial was unique. I consider there are other inter-related factors which are relevant to the exercise of my discretion under s 5. These include:

(a) The breadth and complexity of the Crown charge notice. The original notice required 125 verdicts. Even after it was pared back by the dismissal of charges on 12 September 2016 and 14 October 2016, the notice at the time of the first application for a stay of proceedings in November 2016 was 86 pages in length because some of the charges contained up to three pages of particulars. In my judgment declining the application for a stay I disagreed with the Crown submission that the case had by then been pared back to its bare essentials.¹³ I was of the view there were charges which were superfluous. I also considered three pages of particulars to be excessive and was of the view the gravamen of the Crown’s allegations should be able to be expressed much more succinctly.

(b) The Crown made an application in December 2016 for the admission of hundreds of documents under the co-conspirator’s rule. In my judgment declining the application I expressed the view the Crown had failed to precisely define the nature and limits of the alleged conspiracy in pursuit of which the specific offences are said to have been committed.¹⁴ I also referred to the overreach of the Crown’s application.

(c) The unavailability of the expert, Mr Jordan. Mr Jordan’s brief of evidence was 255 pages in length and the essential documents to which he referred were contained in another volume of similar length.

¹² R v Margaritis HC Christchurch T66/88, 15 July 1989.

¹³ R v Bublitz [2017] NZHC 114.

¹⁴ R v Bublitz [2016] NZHC 3181.

Mr Jordan became unwell and in the end was unable to give evidence. An application was made to stay the proceedings in February 2017 on the grounds of his unavailability. Mr Morrison, in particular, argued because of Mr Jordan’s unavailability he had lost the opportunity to challenge his opinion of the related party nature of the transactions at issue and key aspects of his defence were significantly weakened. He submitted there had been a fundamental change in the way the Crown was presenting its case. While I declined this second application for a stay of proceedings, I directed the Crown to specify the particular accounting standards it relied on to establish the related party nature of the entities involved in each particular transaction, the subject of the charges. The Crown then called an alternative expert and changed the limb of the related party definition it relied on.

(d) The admitted breach by the Crown of the Criminal Disclosure Act and its acknowledgement it was significant and there was no reasonable excuse for the failure to comply. The trial came to a standstill on 27 March 2017 because of unresolved disclosure issues. At the hearing of the application to abort the trial on 4 to 9 May 2017, I was advised realistically it would take another two months to sort out the disclosure issues and numerous applications were likely to be made for orders to disclose documents which were being withheld by the Crown.

(e) The length of the trial. It commenced on 8 August 2016. I aborted it on 10 May 2017. In my judgment aborting the trial, I expressed the view even the most complicated trial should not exceed six months, except in the most exceptional circumstances.¹⁵

Quantum

[57] Section 13 of the Costs in Criminal Cases Act provides the Governor-General may from time to time, by Order in Council, make regulations prescribing the maximum scales of costs that may be ordered under the Act. The Costs in Criminal

¹⁵ R v Bublitz [2017] NZHC 936.

Cases Regulations 1987 sets out the heads and scale of costs. Under sch 1, each half day or part day in court can be awarded a maximum fee of $226.00. Other ancillary costs or disbursements can also be awarded.

[58] However, s 13(3) of the Act provides:

(3) Where any maximum scale of costs is prescribed by regulation, the court may nevertheless make an order for the payment of costs in excess of that scale if it is satisfied that, having regard to the special difficulty, complexity, or importance of the case, the payment of greater costs is desirable.

[59] Plainly, this case was of sufficient difficulty and complexity to make costs in excess of the scale desirable. Also, as Asher J noted in The Registrar of Companies v Feeney, the reality is the maximum scale of costs had not been regularly revised, and is hopelessly out of date.¹⁶ It appears to be common ground s 13(3) would apply if I were to make costs orders under the Costs in Criminal Cases Act.

[60] The question of quantum then becomes one of discretion and judgment. Section 5(1) gives the court the power to order a payment of such sum as it “thinks just and reasonable” towards the costs of the defence. Asher J described the factors relevant to that assessment in Feeney:¹⁷

Undoubtedly an obligation to pay costs approaching a million dollars will have an impact and be remembered when it comes to future prosecutions. Just as the inhibiting effect of very high costs awards was a factor in the introduction of the present civil scale, it is a factor to be recognised in assessing the correct approach. So too is the difficult position that persons accused of criminal offending take in defending themselves, when their liberty (albeit not in this case), reputation and pocket are, or may be, at risk. ...

Taking all those factors into account, in my view, certain factors are relevant and can be considered to assist in assessing a just and reasonable amount:

(a) The special difficulty, complexity, or importance of the case (the factors that are specifically relevant in s 13);

(b) The seven factors set out as relevant circumstances in s 5(2), if they arise;

(c) The actual costs incurred;

¹⁶ The Registrar of Companies v Feeney HC Auckland CRI-2011-404-14, 21 June 2011.

¹⁷ At [35]–[36].

(d) The costs incurred by the Crown;

(e) The costs that would have been incurred if the civil scale in the High Court Rules had applied; and

(f) Other costs awards.

[61] As to the costs incurred by the Crown, I am advised prosecuting counsel have not yet received full reimbursement for their costs in the present case because, in terms of the Crown Solicitor’s agreement with the funding agency, the Crown Law Office, the case has not yet been disposed of. They have, however, received $562,000.00 from the FMA as reimbursement of their costs prior to the Crown taking over the prosecution and the sum of $154,460.00 from a discretionary “flexi fund” administered by Crown Law Office for some of their trial costs.

[62] Counsel for Mr Bublitz has also conservatively estimated if the civil costs scale applied Mr Bublitz would be entitled to an award of $346,500.00 just for the days counsel spent in court without allowing for any preparation time.

[63] Although Mr Morrison has not established his innocence, all charges against him have been dismissed. Against his total costs of $212,992.90, I am of the view an award of $75,000.00 under the Costs in Criminal Costs Act is a just and reasonable amount to pay towards his costs. I consider this amount gives due weight to the factors for and against Mr Morrison’s application, as discussed above.

[64] I note in particular, the case was one of special difficulty, complexity and importance from the outset. The legal costs he incurred at the early stage of the proceedings would have included advice relating to the Crown charge notice, the allegations of conspiracy and the expert evidence as to the related party nature of the transactions at issue, all of which had shortcomings of one sort or another which significantly added to burden, faced by Mr Morrison. While not reaching the level of indemnity costs, a substantial award in Mr Morrison’s favour is clearly warranted.

Criminal Procedure Act 2011

[65] The applications under s 364(2) of the Criminal Procedure Act are as follows:

• (a) Mr Bublitz applies for two orders, totalling $1,084,493.57. He asks for

$245,086.93 to be awarded to Legal Aid Services, and the remainder to him personally.

(b) Mr Blackwood applies for an order for $475,913.24. He accepts any costs awarded to him will be payable to Legal Aid Services.

(c) Mr Morrison applies for costs totalling $219,992.90 under the Costs in Criminal Cases Act and Criminal Procedure Act. He does not specify how much is sought under each Act.

Section 364

[66] Section 364 of the Criminal Procedure Act provides:

364 Costs orders

(1) In this section,—

costs order means an order under subsection (2)

procedural failure means a failure, or refusal, to comply with a requirement imposed by or under this Act or any rules of court or regulations made under it, or the Criminal Disclosure Act 2008 or any regulations made under that Act

prosecution—

(a) means any proceedings commenced by the filing of a charging document; but

(b) does not include an appeal.

(2) A court may order the defendant, the defendant’s lawyer, or the prosecutor to pay a sum in respect of any procedural failure by that person in the course of a prosecution if the court is satisfied that the failure is significant and there is no reasonable excuse for that failure.

(3) The sum must be no more than is just and reasonable in the light of the costs incurred by the court, victims, witnesses, and any other person.

(4) A costs order may be made on the court’s own motion, or on application by the defendant, the defendant’s lawyer, or the prosecutor.

(5) Before making a costs order, the court must give the person against whom it is to be made a reasonable opportunity to be heard.
(6) A costs order may be made even if the defendant has not yet been convicted, or is eventually discharged, or the charge is dismissed.

(7) The court may make more than 1 costs order against the same person in the course of the same prosecution.

(8) The court may order that some or all of the amount ordered to be paid under a costs order be paid to any person connected with the prosecution.

(9) Subsections (2) to (8) do not limit or affect the Costs in Criminal Cases Act 1967.

[67] Section 364 has not been the subject of any significant judicial consideration.¹⁸ There has been an award in the District Court, in R v Walker. In that case Judge Johns awarded costs of $500.00 against defence counsel for failing to advise she was not proceeding with a half day pre-trial fixture. That case is of limited relevance as the circumstances were vastly different.

[68] I turn to the text of s 364 to determine the requirements for making a costs order under this section.

[69] First, for a costs order to be made under s 364, there must have been a “procedural failure” in the course of the prosecution. Procedural failure is defined in s 364(1) as a failure, or refusal, to comply with a requirement imposed by the Criminal Procedure Act or any rules of court or regulations made under it, or the Criminal Disclosure Act or any regulations made under that Act. Given the admitted breaches of the Criminal Disclosure Act, it is unsurprising everyone agrees there has been a procedural failure in the present case.

[70] Second, the procedural failure must be significant. Whether a procedural failure is significant will depend on the circumstances of the case. It will be a question of judgment but ultimately it will come down to whether the court considers the failure was severe enough to require sanction by way of monetary payment. The purpose of s 364 as a sanction is discussed in more detail below.

¹⁸ Section 364 has been briefly referred to in Beacon Media Group Ltd v Waititi [2014] NZHC 514; R v Walker [2016] NZDC 15474; Owen v District Court at Invercargill [2017] NZHC 1105 and Munro v R [2017] NZHC 1618.

[71] The effects and consequences of the failure will be relevant. If the failure resulted in delays or added costs, it will be more likely it will be considered significant. Similarly, whether the failure was inadvertent, in bad faith, or perhaps intended to gain an advantage, will inform whether it is significant. As more applications are brought, other factors that inform this inquiry will come to light.

[72] These orders should not be made lightly. The term significant indicates there will be procedural failures that do not warrant an award under s 364. However, the present case features an extreme example of a procedural failure. A failure of this severity is not required for an order under s 364. It should also be kept in mind the court is able to quantify any award in a way that reflects the significance of the underlying failure. In other words, a significant failure towards the bottom end of the scale will warrant a small award, and vice versa.

[73] Again, it is common ground the failure in the present case was significant. As I said in my judgment of 19 May 2017, the scope of non-compliance was extensive. The volume of late disclosure is seemingly unprecedented in New Zealand. Also, the fact the failure was a major factor in the trial being aborted indicates its significance.

[74] Third, there must be no reasonable excuse for the procedural failure. There is no requirement for the failure to be deliberate, motivated by bad faith, or to derive a benefit. In this case the failure was inadvertent and the result of oversight. It is agreed there was no reasonable excuse for this.

[75] Once these matters are established, s 364(2) and (3) provide the court may order the defendant, the defendant’s lawyer or the prosecutor to pay a sum that is no more than is just and reasonable in light of the costs incurred by the court, victims, witnesses and any other person.

[76] In this case, as outlined above, it is common ground the pre-requisites for costs orders under s 364 are met. In light of this, I consider orders should be made. There are, however, two important issues I need to address before determining the details of the orders:

• (a) What is the purpose of s 364? This has significant implications for quantum.

(b) Who is the “prosecutor” for the purpose of s 364(2)? In other words, against whom should the orders be made.

[77] I will then assess quantum.

The purpose of s 364

[78] The key issue is whether a costs order under s 364 is primarily intended to be compensatory in nature or should be viewed as a penalty to ensure compliance. Counsel for Mr Bublitz says it was intended to be compensatory and seeks costs orders under s 364 totalling $1,084,493.57. She draws an analogy to wasted costs orders.

[79] On the other hand, the Deputy Solicitor-General, Mr Horsley, says a costs order under s 364 should be viewed as a penalty and submits a costs order against the FMA of no more than a few thousand dollars (which need not necessarily be paid to Mr Bublitz) is all that could be considered necessary and appropriate.

[80] The opposing positions are quite stark. There could of course be a middle ground, that a costs order under s 364 was intended to be both compensatory in nature and to be a penalty to ensure compliance. Neither party advocated that position.

[81] I consider a comparison with the Costs in Criminal Cases Act assists in determining the purpose of s 364. To do so, I turn first to the text of the relevant sections.

[82] The wording of the Costs in Criminal Cases Act and the Criminal Procedure Act is quite different. Section 5 of the Costs in Criminal Cases Act states the court may “order that he [any defendant] be paid such sum as it thinks just and reasonable towards the costs of his defence”. Section 7 provides for the payment of such costs “out of money appropriated by Parliament for the purpose” unless the prosecutor “acted negligently or in bad faith”, in which case the defendant’s costs shall be paid by the entity on whose behalf the prosecutor was acting.
[83] Section 364 of the Criminal Procedure Act states the court may “order the defendant, the defendant’s lawyer or the prosecutor to pay a sum in respect of any procedural failure ...”. The sum “must be no more than is just and reasonable in the light of the costs incurred by the court, victims, witnesses, and any other person”. There is no provision for the payment of a costs order “out of money appropriated by Parliament for the purpose”.

[84] The first major difference is s 5 uses the language “he be paid” while s 364 uses the language “[he] pay a sum”. The former focuses on payment to the defendant. The latter focuses on payment by a prosecutor (or defendant or defendant’s counsel), presumably personally. The focus is on the person making the payment, not the one receiving it.

[85] The second major difference is in the use of the phrase “just and reasonable”. Section 5 refers to the payment of “such sum as [the Court] thinks just and reasonable towards the costs of his defence”, while s 364 provides that “the sum [of the costs order] must be no more than is just and reasonable in light of the costs incurred”.

[86] Counsel for Mr Bublitz argues because s 364 referred to what was just and reasonable in light of the costs incurred, the section was intended to be compensatory in a similar manner to the Costs in Criminal Cases Act. They are complementary. Costs orders under the Criminal Procedure Act could be used at any time to compensate defendants for procedural failures and costs orders under the Costs in Criminal Cases Act could be used to compensate successful defendants when charges had been dismissed against them. I do not accept this submission for the reasons that follow.

[87] Section 5 expressly connects the order to the costs of the defendant. This is similar to s 19 of the Prosecution of Offences Act 1985 (UK), which also draws that connection.¹⁹ While that section deals with costs resulting from unnecessary or improper acts, it is compensatory.²⁰ Similarly, I consider the express link between the

19. See also Costs in Criminal Cases (General) Regulations 1986 (UK), reg 3 and Criminal Procedure Rules 2015 (UK), r 45.9.

²⁰ R v Evans (No 2) [2015] EWHC 263 (QB), [2015] 1 WLR 3595 at [148] and R v Cornish [2016]

EWHC 779 (QB) at [16].

order and the defendant’s costs indicates the Costs in Criminal Cases Act is primarily compensatory in nature.

[88] Section 364 does not draw such a connection. Rather, as noted above, it says the sum must be no more than is just and reasonable in light of the costs incurred. The costs of the defendant are not specifically mentioned in s 364. It refers to the costs incurred by the court, victims, witnesses and “any other person”. Similarly, s 364(8) also provides the court may order some or all of the amount be paid to “any person connected with the prosecution”. Again, the defendant is not listed.

[89] I consider, as Crown counsel argued, the reference to “no more than is just and reasonable in light of the costs incurred” in s 364 was intended to be a limiting provision. Any costs orders must not exceed what is just and reasonable. I interpret this as indicating where a failure has led to significant costs being incurred by other parties, a larger award may be appropriate, and vice versa. It did not mean costs orders under s 364 were primarily intended to compensate those who had incurred losses through the procedural failure by reflecting their actual costs.

[90] I further consider if Parliament intended s 364 to be primarily compensatory, it would have specifically referred to defendants and their costs. After all, defendants are in the prime position to suffer significant loss because of procedural failures.

[91] Various reports from the Law Commission, and other aspects of the legislative history, are also relevant to determining the purpose of the Costs in Criminal Cases Act, and more significantly, the purpose of s 364. Counsel for Mr Bublitz submits there is no need to look at the legislative history of s 364 because its meaning was clear on its face. I am, however, of the view more light will be shed on the purpose of s 364 if reference is made to its legislative history. In any event, I do not accept the interpretation for which she argues is clear on the face of s 364.

[92] In May 2000, the Law Commission published a report on the Costs in Criminal Cases Act in which it recommended the Act be amended to permit costs to be paid to a defendant following a stay and the Legal Services Board should be able to receive an award of costs. Neither recommendation has been adopted.
[93] In its report, the Law Commission said:²¹

We have concluded that the structure of the current scheme in relation to defendants who have not been convicted should be retained. We believe that the scheme achieves, for the most part, an appropriate balance between competing interests. It serves to provide a level of reimbursement to innocent defendants and a means to censure improper prosecution conduct, while not impeding the proper functioning of the prosecution system.

[94] The Law Commission therefore saw the Costs in Criminal Cases Act as primarily compensatory in nature, but also as a penalty to ensure compliance. It considered there was no need to amend the Act to provide for total indemnity in special circumstances as the jurisdiction existed and its exercise should be left to judicial discretion.

[95] The Law Commission also referred to “wasted costs” orders. It said:²²

Another related matter is the inherent jurisdiction of the Court to award costs against solicitors or counsel who, through a serious dereliction of duty, cause extra costs to be incurred. This is sometimes referred to as a “wasted costs” order and may be made in both criminal and civil cases. As this is a matter of inherent jurisdiction rather than an award under the Act, it was not dealt with in the issues paper. Recent English developments have brought the jurisdiction into attention there, and it has also been recently discussed and affirmed by the New Zealand Court of Appeal in Harley v McDonald. But as this report is limited to a review of the Act rather than any wider jurisdiction, we shall not take this point further.

[96] In June 2005, the Law Commission published a report entitled “Criminal Pre- Trial Processes: Justice Through Efficiency”, which was the genesis of the Criminal Procedure Act.²³ In chapter 11, entitled “Changing the culture of non-compliance”, the Law Commission said:²⁴

Ultimately, the success of our recommendations depends on two things: the appropriate allocation of resources ... and capturing the hearts and minds of criminal justice system participants (or at least ensuring that non-compliance is no longer worth their while). The latter is the subject of this chapter. Legislative change in itself does not guarantee the buy-in of those who must implement the processes: to motivate all participants to depart from entrenched practices and accept a significantly altered approach to the process, other drivers are required.

²¹ Law Commission Costs in Criminal Cases (NZLC R60, 2000) at [4].

²² At [6].

²³ Law Commission Criminal Pre-trial Processes: Justice Through Efficiency (NZLC R89, 2005).

²⁴ At [379].

[97] The Law Commission’s stated preference was for carrots rather than sticks. Sanctions were seen as an important part of their reform package, and the Law Commission recommended their more regular use, but they were of the view they should also be regarded as a last resort. The Law Commission placed emphasis on other initiatives recommended in the report, which they believed would prompt more effective participation in a pre-trial process, including matters such as a requirement for prosecution and defence counsel to discuss the case, and record the outcome of their discussions by filing a completed case management memorandum and a corresponding requirement on defendants to instruct their counsel about case management matters.

[98] The Law Commission went on to say:²⁵

In addition to encouraging and requiring compliance with the proposed new processes, there need to be sanctions available for non-compliance; this temptation will remain, given the numerous drivers for delay outlined in chapter 1, and the difficulty of breaking entrenched habits. We propose two sanctions: more robust monitoring and enforcement of professional standards; and provision for costs orders on counsel.

[99] The Law Commission then considered the monitoring and enforcement of professional standards before moving on to proposed costs orders on counsel or prosecution agencies. It then said:²⁶

Even if these proposals for improvements in the complaint notification and disciplinary process are adopted, disciplinary proceedings are likely to be undertaken only in the worst cases. In addition, we therefore recommend provision for costs orders, for failures without reasonable excuse to comply with procedural obligations. Costs orders can be tailored case by case, and can be expected to have an immediate impact.

This will require legislative provision for costs orders against either defence counsel or the prosecutor. Costs against defendants may also be appropriate when the failure to comply with obligations is attributable to them; however, this can already occur. Many defendants will have no ability to pay costs, but there will be value in the symbolism of even a small costs order where that is feasible.

A costs order on a prosecutor, who is employed a state agency, might be colloquially described as a money-go-round: money given by the government with one hand (in the budget process) is then taken with the other (a costs order to the benefit of the consolidated fund). The agency is a trustee of

²⁵ At [383].

²⁶ At [398]–[400].

money on behalf of the state and ultimately the taxpayer. If the agency is fined to the detriment of whatever other service it is supposed to be providing, it is embarrassing for the agency and its responsible Minister, but the taxpayer rather than the agency is the ultimate loser. However, costs orders on government agencies are still salutary and we consider that they should be imposed if appropriate. Not only do they promote accountability by making performance failure explicit and public, but their impact on the budget of the agency concerned is likely to be sheeted home to the individual in their performance assessment, and therefore modify their behaviour, and the behaviour of their colleagues, in the future.

[100] It is clear from the Law Commission report costs orders were primarily intended as a penalty to ensure compliance. There is no reference to issues of compensation or wasted costs.

[101] A Bill was then drafted entitled the Criminal Procedure (Reform and Modernisation) Bill 2010.²⁷ Public submissions were called for and, in due course, a Departmental Report was provided for the Justice and Electoral Committee. That report is dated 16 May 2011.²⁸

[102] Under the heading “Incentives and Sanctions” the report said:²⁹

The Bill provides incentives and sanctions on the defendant, the defendant’s lawyer and the prosecutor to fulfil their obligations to progress cases (and facilitate the significant change in behaviour that will be necessary to implement the proposed reform).

The Bill includes provisions that:

193.1 allow the court to impose cost orders against a defendant, defence counsel, or the prosecution if satisfied that he or she failed without reasonable excuse to comply with a procedural requirement (clause 361);

...

[103] And then under the sub-heading “Comment”, the report said:³⁰

The District Court Judges (26), who conduct the bulk of criminal cases, support costs orders, and are of the view that the ability to impose these would incentivise compliance. Costs orders will be one of a range of options available, in addition to existing mechanisms such as contempt and

²⁷ Criminal Procedure (Report and Modernisation) Bill 2010 (243-1).

28. Criminal Procedure (Report and Modernisation) Bill 2010 (departmental report for the Justice and Electoral Committee) 16 May 2011.

²⁹ At [192]–[193].

³⁰ At [222], [224], [225] and [226].

professional disciplinary proceedings. Further, the ability and impartiality of judges to make such determinations is not considered to be an issue, given that they already deal with unacceptable behaviour (including of counsel) using their contempt powers.

...

Costs orders would not be covered by legal aid ... Nor could counsel bill clients for costs ordered against counsel...

This situation is appropriate, as costs orders are a sanction and therefore the personal responsibility of the person against whom the order is made. Because they are a sanction and not related to the defendant’s culpability for the alleged offending, it is also appropriate that costs orders stand even if the case is dismissed or the accused is not convicted or is discharged.

The expectation is that such orders will not be made lightly or often. As some submitters themselves note, this expectation is supported by the experience from comparable overseas jurisdictions. However, this does not negate their incentive effect. For example, counsel seeking to avoid potential liability are likely to develop better standard letters to their clients and accurately record their instructions.

[104] The report writers recommended the Bill be amended to permit costs to be paid to anyone who had incurred loss. Under the sub-heading “Persons to whom payment can be made”, the report stated:³¹

Clause 361(3) indicates that the amount imposed needs to reflect costs incurred by the court, victims, witnesses and any other person. However, there is no requirement that payment received for those costs must be passed on to those persons. Consistent with the principles of reparation, this oversight should be addressed.

Therefore, advisers recommend that clause 361 should be amended to provide that, when a costs order is made that is intended to reflect costs incurred by any person connected with the proceedings, the court may order that some or all of the amount is to be paid to [sic] the affected person(s).

[105] Subsequently, the Justice and Electoral Committee agreed with that recommendation and s 361(8) was amended to delete the words “any other person referred to in sub-section (2)” to substitute the words “any person connected with the prosecution”.

³¹ At [229]–[230].

[106] Having reviewed the legislative history, I consider all relevant materials clearly indicate s 364 was intended to primarily serve as a means of sanction. This supports the conclusion I arrived at based on the text of s 364.

[107] To summarise, looking at the text and all other relevant materials, I consider the Costs in Criminal Cases Act is primarily intended to compensate innocent defendants but will also act as a sanction. Section 364 of the Criminal Procedure Act, on the other hand, is primarily intended to serve as a means of sanction, but may well offer some compensation to defendants and others who have incurred loss.

Who is the prosecutor?

[108] As outlined above, s 364(2) provides the court may order a prosecutor to pay costs in respect of any procedural failure by that person in the course of a prosecution. There is disagreement in this case as to whom the prosecutor is for the purpose of s 364 and accordingly against whom any order should be made.

[109] Counsel for Mr Bublitz submits the Solicitor-General is the prosecutor. She supports her submission using various sections of the Criminal Procedure Act. Her reasoning is as follows:

(a) Prosecutor is defined in s 5 as the person who is, for the time being, conducting the case against the defendant in accordance with s 10.

(b) If the Solicitor-General or a Crown prosecutor has assumed responsibility under section 187 for a Crown prosecution, only the Solicitor-General or a Crown prosecutor may conduct the proceedings against the defendant: s 10(2).

(c) The Solicitor-General must assume responsibility for and conduct every Crown prosecution from the time or stage in the proceedings prescribed in regulations: s 187(1). The relevant regulations are the Criminal Prosecution Regulations 2013.
(d) Under reg 5 of the Criminal Prosecution Regulations, as it applies to the present case, the Solicitor-General assumed responsibility for and conducted the prosecution from the time the proceeding was adjourned after the entry of pleas.

[110] However, she says ultimately Mr Bublitz, and accordingly the other defendants as they adopt her submissions, has no particular interest in whom the costs orders are made against and it should be a matter in which the Crown assists the Court to identify the right party as respondent.

[111] The Crown submits the FMA is the prosecutor for the purpose of s 364, as it was the prosecutor for the purpose of the obligations that were breached. The Crown characterises the defence submission as seeking to make the Solicitor-General personally liable. It highlights, in contrast to the Costs in Criminal Cases Act, there is no provision for payment of s 364 costs awards against prosecutors to be met from Government appropriation. It says public prosecutors are not indemnified for s 364 orders made against them.

[112] Statutory definitions aside, the defendants are being prosecuted by the Crown. As senior Law Officer of the Crown, the Attorney-General is responsible for prosecutions carried out by or on behalf of the Crown. However, in practice the prosecution process is superintended by the Solicitor-General, the junior Law Officer of the Crown and Chief Executive Officer of Crown Law. Section 9A of the Constitution Act 1986 provides the Solicitor-General may perform a function or duty imposed, or exercise a power conferred, on the Attorney-General. Section 187(1) of the Criminal Procedure Act reinforces this by saying the Solicitor-General must assume responsibility for and conduct every Crown prosecution from the time or stage prescribed in regulations.

[113] The Solicitor-General, as an officer of the Crown, is therefore ultimately responsible for conducting prosecutions, and was responsible for this prosecution under the Criminal Procedure Act from the time at which not guilty pleas were entered. I consider the defendants seek an order against the Solicitor-General in that capacity. In effect, they seek a costs order against the Crown.
[114] In its 2000 Report, Criminal Prosecution, the Law Commission recommended:³²

There should also be a provision analogous to section 7 of the Costs in Criminal Cases Act 1967, so that where a prosecution is conducted by or on behalf of the Crown, the costs shall be paid out of money appropriated by Parliament for that purpose or, if the court is of the opinion that the failure to disclose arises from negligence or bad faith, by the prosecuting agency itself.

[115] It is unfortunate this recommendation was apparently not carried through. It is conceivable costs orders could be made against the Crown, perhaps against the Solicitor-General on its behalf. There needs to be a mechanism for payment to occur in these circumstances.

[116] Returning to the Crown’s submission, I agree an order should be made against the prosecutor or agency responsible for the procedural failure. The text of s 364(2) requires this interpretation: “a court may order ... the prosecutor to pay a sum in respect of any procedural failure by that person ...”. I interpret this as requiring the order to be made against the prosecutor, or prosecuting agency, responsible for the failure on a practical level, not simply the Solicitor-General because she is ultimately responsible for a prosecution.

[117] This interpretation is consistent with incentivising compliance, the principal purpose behind s 364. The agency, or other person, that had the responsibility to comply, and the ability to prevent the procedural failure, should be the one sanctioned for non-compliance.

[118] As we know what the procedural failures were in this case, the question under this heading is really: who is responsible for these failures? The answer is either the Crown, or the FMA as the prosecuting agency. The Law Commission reports show this type of costs award was intended to be paid by either the Crown or the relevant agency. While I am not ruling out the possibility of a case in which it is appropriate to make an order against the prosecutor personally, this is not such a case.

³² Law Commission Criminal Prosecution (NZLC R66, 2000) at [215].

[119] The procedural failure, or failures, in this case is a breach of the Criminal Disclosure Act. Section 13(1) provides the prosecutor must disclose to the defendant the information described in subsection (2) as soon as is reasonably practicable after a defendant has pleaded not guilty. This did not happen.

[120] Section 5 of the Criminal Procedure Act provides the definitions in that section apply unless the context otherwise requires. As the obligation breached is contained in the Criminal Disclosure Act, the Crown says the context requires the definition of prosecutor in the Criminal Disclosure Act to apply, not the one in the Criminal Procedure Act. The definition of prosecutor in the Criminal Disclosure Act is as follows:

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 filed the charging document in the proceedings; and

(c) in the case of a private prosecution, the person who filed the charging document and any counsel representing that person

[121] The Crown further points to the Solicitor-General’s Prosecution Guidelines. While not law, these are useful as they show how the Crown views its disclosure obligations, and they inform which agency is in the position to make disclosure. The Guidelines provide:³³

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

³³ Crown Law Solicitor-General’s Prosecution Guidelines (1 July 2003) at [16.1].

[122] I agree with the Crown that the obligations under s 13 attached to the FMA as the enforcement agency. It carried out the investigation, and initiated the prosecution. It, or its agents, were in charge of the files. It was in the best position to ensure appropriate disclosure was made. It failed to do so. The orders under s 364 should be made against it, to sanction that failure.

Quantum

[123] Mr Bublitz seeks an order in excess of $1 million for the procedural failure, being the failure to provide the defence earlier with a list of documents from the files of Deloitte. His motivation for doing so, prior to the retrial, is clearly his wish to be able to retain and pay for counsel of his choice at the retrial. He exhausted his funds in the fifth month of the first trial and had to accept a legal aid grant to fund his continued representation by counsel. Counsel for Mr Bublitz has, however, now advised him she cannot act for him at the retrial on legal aid. A number of other experienced counsel have also been approached. All have declined to act on legal aid.

[124] The other two defendants, Mr McKay and Mr Blackwood, have been on legal aid throughout. The Manager, Legal Aid Services, has advised the Crown if Mr Bublitz is unable to find counsel of his choice to act on legal aid, then Legal Aid Services can assign a suitable provider by rotation. Mr Bublitz does not, however, wish to have counsel assigned to him by rotation.

[125] Here, I agree with the Crown. The legal aid system is the means chosen by Parliament to fulfil the Crown’s obligations under s 24(4) of the New Zealand Bill of Rights Act 1990 to provide legal assistance without cost if the interests of justice so require and the person does not have sufficient means to provide for that assistance. I therefore do not give primacy to Mr Bublitz’s wish to be represented by counsel of choice in assessing quantum.

[126] I accept the Crown’s failure to provide a list of withheld documents from the Deloitte files until after the conclusion of the Crown case was significant. There was also no reasonable excuse for the failure. But it was inadvertent. Timing was also important. During the course of my judgment aborting the trial I expressed the view if the Deloitte and FMA’s lists had been disclosed to defence within the first three
months of trial while Mr Weir was still giving evidence, then any prejudice could have been cured by an adjournment at that time.

[127] I also referred to factors other than the breach of the Criminal Disclosure Act in aborting the trial. I referred to the breadth and complexity of the original Crown charge notice. I commented on the length of time which was unnecessarily burdensome on all concerned. I recorded counsel’s submissions about the difficulties which arose from the Crown’s decision to substitute expert evidence. I said the breach of the Criminal Disclosure Act had to be seen in the context of all these issues.

[128] I accept Mr Bublitz’s costs are actual and reasonable, as are Mr Blackwood’s and Mr Morrison’s. However, s 364 was not primarily intended to compensate defendants for their actual and reasonable costs. It was primarily intended as a sanction for non-compliance, which may well have to be met personally by counsel. Given this, I consider an award in excess of $1 million would be completely outside the realm of what Parliament intended. If an inadvertent error on the part of defence counsel, or one of the defendants, resulted in the trial being aborted, it would be unthinkable to suggest they should then compensate the Crown for its actual costs.

[129] Standing back and looking at the global position, I am of the view an overall costs order of $50,000.00 is appropriate to censure the FMA for its non-compliance, which should be paid to each of the four defendants and to the Court equally. While not anywhere near what the defendants sought, a large sum is warranted to sanction the failure. As the Solicitor-General’s Prosecution Guidelines say, proper disclosure is central to preventing wrongful convictions.

[130] There will, therefore be an order under s 364 of the Criminal Procedure Act for the FMA to pay $10,000.00 each to Mr Bublitz, Mr McKay, Mr Blackwood, Mr Morrison and the Ministry of Justice.

Formal Orders

[131] The following formal orders are made:

• (a) Mr Morrison is to be paid $75,000.00 towards the costs of his defence under s 5 of the Costs in Criminal Cases Act 1967.

(b) The Financial Markets Authority is to pay the following sums in respect of the procedural failure in the course of the prosecution to the named persons or entity under s 364 of the Criminal Procedure Act 2011:

(i) $10,000.00 to Mr Bublitz.

(ii) $10,000.00 to Mr McKay.

(iii) $10,000.00 to Mr Blackwood.

(iv) $10,000.00 to Mr Morrison.

(v) $10,000.00 to the Ministry of Justice.








Woolford J