MCKAY v R [2019] NZCA 493

MCKAY v R [2019] NZCA 493 [15 October 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA422/2019[2019] NZCA 493BETWEEN BRUCE ALEXANDER MCKAYAppellantAND THE QUEENRespondentHearing: 26 September 2019Court: Clifford, Ellis and Peters JJCounsel: G N E Bradford and S D Withers for AppellantD G Johnstone for RespondentJudgment: 15 October 2019 at 4 pmJUDGMENT OF THE COURTA The appeal is allowed.B The sentence of 12 months' home detention is quashed and a sentence of homedetention ending on 27 January 2020 is substituted in accordance with [34].____________________________________________________________________REASONS OF THE COURT(Given by Ellis J)[1] Mr McKay was convicted following a judge-alone trial before Toogood J onthree charges of theft in a special relationship.1 He was sentenced on 27 March 2019to 12 months' home detention on each charge, to be served concurrently.2 He now1 Crimes Act 1961, ss 220 and 223(a) (maximum sentence of 7 years' imprisonment); R v McKay[2019] NZHC 222.2 R v McKay [2019] NZHC 592 at [108].appeals that sentence, essentially on the grounds that it is no longer on a par with thatreceived by his co-offender, Mr Bublitz.[2] Put simply, this Court has recently allowed Mr Bublitz' sentence appeal andsubstituted a sentence of 11 months' home detention for the sentence imposed by thetrial Judge of three years and two months' imprisonment.3 Mr McKay contends thatparity demands a similar reduction in his sentence.[3] The sentence appeal was filed out of time but an extension was not opposed bythe Crown, and shortly after the appeal was filed Gilbert J granted the necessaryextension.Background[4] It is not necessary to set out the details of the offending by Mr McKay and hisco-offenders in any detail. They can be found in the trial Judge's sentencing notes andin the earlier judgment of this Court, at [11]–[21].[5] For present purposes it suffices to say that the Judge found Mr Bublitz (charges10 to 13) and Mr McKay (charges 10 to 12) guilty of theft in a special relationship,arising from related party transactions intentionally entered into by a companycontrolled by Mr Bublitz in breach of its Crown guarantee.4 Mr Bublitz was also foundguilty of two charges of making a false statement as a promoter of securities (charges14 and 15).5[6] Mr Bublitz was regarded as the principal party to the offending. Mr McKayand Mr Richard Blackwood were charged as secondary parties for aiding, abetting orassisting him.63 Bublitz v R [2019] NZCA 364. In that decision, the Court of Appeal also partially allowedMr Bublitz' appeals against conviction and dismissed Mr McKay's appeal against conviction.4 A guarantee under the Crown Retail Deposit Guarantee Scheme established by the government inthe wake of the 2007–2008 global financial crisis and the ensuing recession.5 Mr Bublitz was acquitted on six other charges of theft by a person in a special relationshipinvolving a different company and Mr McKay was acquitted on one charge of making a falsestatement as a promoter and on one charge of making a false statement to a trustee for debentureholders.6 Another co-offender, Mr Peter Chevin pleaded guilty at an earlier stage. Mr Blackwood had hisconvictions quashed on appeal in Bublitz v R, above n 3, at [144].Sentencing in the High Court[7] In sentencing the three men, the Judge began by assessing the scale of theoffending overall. In doing that, he accepted the Crown submission that regard shouldbe had to charges 1 to 9, notwithstanding the not guilty verdicts in relation to thosecharges, because the defendants' conduct at the relevant times showed that they wereoperating at the "margins of legality".7[8] In terms of Mr Bublitz' and Mr McKay's respective culpability, the Judgerelevantly said:[46] As to the culpability of each of you, relative to other cases andparticularly to each other, it is clear to me that Mr Bublitz, as the person whostood to lose from the failure of the entities engaged in the projects beingcarried out by the Hunter Group, was the prime mover and instigator of theplan to use one or more finance companies to fund Hunter Group activities.I have found that you had real or effective control over Viaduct throughout,Mr Bublitz, even though it was not sufficient to make you and the otherdefendants guilty of the charges founded on the Viaduct trust deed. Althoughyou did not give evidence, it is clear to me from the tone and content of thenumerous memoranda and email exchanges I have read, that you have a strongand forceful personality. As I found, nothing was done that was contrary toyour wishes or that was not, in most cases, approved by you. You stood togain most from the successful use of the investor funds in both financecompanies and, conversely, you were the most at risk if the scheme failed.I rate your culpability as significantly higher than that of the other defendants.[47] Mr McKay, you were the principal architect of the scheme, being aknowledgeable and capable manager. You were the person, above all others,who was intimately acquainted with the often-precarious positions in whichthe Hunter entities, Viaduct and Mutual were placed from time to time duringthe relevant period. I accept that your engagement did not provide lucrativebenefits for you, although you would have gained something if Mutual hadoperated successfully after it was acquired by Mr Bublitz. I accept also thatyou were subject to Mr Bublitz's dominant personality and to his effectivecontrol. I place your culpability, therefore, as being somewhat lower on thescale than that of Mr Bublitz.[9] Turning to the question of starting points, the Judge noted the scale of theoffending (adopting the Crown calculation of $3.9 million in relation to charges 10 to12) and the breach of trust involved in the offending.8 He also referred to the planningand premeditation, the wider effect on financial markets and the defendants' desire forpersonal gain. Following a review of several analogous cases, reference to the7 R v McKay, above n 2, at [32] and [45].8 At [53]–[55].sentencing of another co-offender who had pleaded guilty and counsel's submissions,the Judge settled on an overall starting point for Mr Bublitz of five years and threemonths' imprisonment, which comprised:9(a) four years and six months' imprisonment on the theft charges; and(b) an uplift of nine months' imprisonment for the convictions on theprospectus charges (because they involved offending of a differentnature).[10] Turning, next, to Mr McKay, he said:[79] Mr McKay, you were a secondary party to Mr Bublitz's offending and[acted] under his influence and direction; but you were the architect of theplan devised at Pauanui and closely involved on a daily basis. I accept thatthere was no real personal gain for you and that you were convicted on onlythree charges. Your case has some similarity to that of Mr Hamilton, but hewas a lawyer and the losses in that case were greater. Accordingly, I fix astarting point for you of three years and three months' imprisonment.[11] Toogood J then turned to consider the issue of delay, which he regarded as a"significant mitigating factor".10 He noted that:11(a) the defendants were charged on 11 March 2014 and first appeared inthe District Court on 7 May 2014, around four years after the collapse;(b) a 12 week trial was set down for February 2016 but it was adjourned atMr Bublitz' request in November 2015;(c) the trial eventually commenced in August 2016 but, nine months intothe trial, it was aborted by Woolford J in May 2017 due to Crownbreaches of the Criminal Disclosure Act 2008;9 At [78].10 At [81].11 At [82]–[84].(d) an application for stay was denied by Lang J on 18 September 2017 anda new trial was set down for July 2018 (to last 19 weeks) but thendelayed to August 2018; and(e) verdicts were delivered on 5 February 2019 with reasons following on21 February 2019.[12] Toogood J recorded that the Crown had acknowledged undue pre-trial delayshould be met with a reasonable and proportionate reduction in sentence.12 The Crownsubmission was that the reduction should be no more than 15 per cent, noting the delaycaused by the disclosure-related breaches delayed the trial's conclusion by one yearand 11 months at most. The fact that each defendant had been remanded at largemilitated against (the Crown said) any greater reduction, but a further modestreduction was appropriate because of the steps taken by the defendants to expeditematters after the first trial was aborted.13[13] The Judge acknowledged that the defendants had spent 1,825 days with theprospect of imprisonment hanging over their heads, which he accepted would havebeen "a constant and draining burden".14 Referring to the original (aborted) ninemonth criminal trial he said "I do not think the harmful psychological effect of such along and intense criminal fraud trial should be underestimated."15 He concluded thatthere had been a "significant punitive element" in the way the prosecution was carriedout and saw it appropriate to reduce all three sentences by 30 per cent from the startingpoints.16[14] He also considered that for each defendant there should be a modest reduction(10 per cent) for good character, which appears to have included remorse andcooperation.1712 At [85].13 At [86].14 At [90].15 At [91].16 At [93].17 At [101].[15] Ultimately, the following sentences were arrived at:18(a) Mr Bublitz: three years and two months' imprisonment; and(b) Mr McKay: 23 months' imprisonment.[16] Mr McKay's sentence of imprisonment was then converted to 12 months'home detention.19The earlier conviction and sentence appeal[17] All three defendants appealed their convictions. This Court:20(a) allowed Mr Bublitz' appeal against conviction on charges 14 and 15;(b) dismissed Mr McKay's appeal against conviction; and(c) allowed Mr Blackwood's appeal against conviction.[18] The Court also allowed Mr Bublitz' appeal against sentence. Put simply,the Court found that the starting point on charges 10–13 adopted by the trial Judge wastoo high because:(a) he had erred in taking into account the transactions which did not resultin convictions;(b) he had erred in his assessment of the losses in relation to those charges(and had overstated them); and(c) the offending in some of the cases relied on when setting the startingpoint was not comparable with (and more serious than) Mr Bublitz'offending.2118 At [103]–[104].19 At [108].20 Bublitz v R, above n 3.21 As well, Mr Bublitz' success on appeal in relation to his convictions on charges 14 and 15 meantthat there could be no uplift on their account.[19] The Court concluded that "the appropriate starting point for Mr Bublitz shouldhave been no more than four years' imprisonment".22 In reaching that view, the Courtagreed with a submission made by Mr Bublitz' counsel that the four years and sixmonths adopted by the trial Judge did not appropriately reflect his apparent assessmentof the relative seriousness of Mr Bublitz' offending by comparison with hisco-offenders. The Court said:[160] Ms Reed also submits the starting point of four years and six months'imprisonment on charges 10–13 adopted for Mr Bublitz cannot be justified ashaving reasonable parity with those of his co-offenders. Mr McKay, who theJudge described as "the principal architect of the scheme", was convicted ofcharges 10–12, for which a starting point of three years and three months'imprisonment was adopted yielding an end sentence of 12 months' homedetention. [161] We consider there is some force in Ms Reed's parity complaint.The Judge described Mr McKay's culpability as being only "somewhatlower" than Mr Bublitz. We agree with that assessment. Both stood to benefit.Neither did. Unlike Mr McKay who the Judge found was the principalarchitect of the scheme and lost nothing, Mr Bublitz lost well over $2 millionof his own money. We consider the disparity — more than one third —between the starting point of four years and six months' imprisonment adoptedfor Mr Bublitz and three years and three months' imprisonment for Mr McKayis hard to justify.(Footnotes omitted.)[20] As far as the discount for delay was concerned, the Court said:[164] We consider the discount allowed by the Judge for delay, effectively19 months, was appropriate. However, we disagree that it should be calculatedas a percentage. To illustrate the point, Mr Bublitz's starting point would havebeen considerably greater had he been convicted of all 15 charges. It wouldhave been greater again if he had been convicted of all 49 charges he originallyfaced. If the discount for delay is calculated as a percentage, the allowancewould vary considerably depending on the number of convictions. Equally, ifMr Bublitz had been convicted of only one charge, he would receive littlecredit for the consequences of the delay if this is calculated as a percentage ofthe starting point. The consequences of the delay for Mr Bublitz are the samein each of these examples. He spent nine months of his life and over $1 millionof his own money in a High Court trial that had to be aborted due entirely tofailings for which the Crown must take sole responsibility. He has sufferedconsiderably in consequence of this. We can see no principled basis forcalculating the allowance as a percentage of the eventual sentencing startingpoint. The remedy is for the breach of Mr Bublitz's right to be tried withoutundue delay and this has no necessary correlation to the starting point adoptedat sentencing to reflect his culpability for the offending.22 Bublitz v R, above n 3, at [162].[165] For these reasons, we make no adjustment to the allowance affordedby the Judge of 19 months' imprisonment.[21] The Court also maintained the further original discount of five months forpersonal mitigating factors.23Mr McKay's sentence appeal[22] As noted earlier, Mr McKay's sentence appeal is essentially brought on thegrounds of parity with Mr Bublitz' now reduced sentence. More specifically,Mr Bradford submitted that:(a) this Court should reduce Mr McKay's starting point by six months asit did Mr Bublitz';(b) because this Court has held that it is inappropriate to calculate adiscount for delay in percentage terms, the 12 month discount receivedby Mr McKay was too low and he should receive the same discount intemporal terms as Mr Bublitz, namely 19 months; and(c) the original discount of 10 per cent (3.3 months)24 for personal factors,remorse and cooperation should be maintained.[23] By Mr Bradford's calculations, this would result in a reduced sentence of10.7 months' imprisonment which (he says) should be converted to 5.35 months' homedetention.[24] Mr McKay's position is simple. But Mr Johnstone for the Crown submittedthat:(a) when this Court reduced Mr Bublitz' starting point by six months it was"excessive" and "went too far";23 At [166].24 Which Mr Bradford understandably calculated on the basis of the substituted, rather than theoriginal, starting point.(b) given Mr McKay's role as the "principal architect" of the offending,the appropriate starting point was higher than that adopted byToogood J;(c) this Court's confirmation of the 19 month reduction for delay was"unduly generous" and in any event, Mr McKay's position in relationto delay is different from that of Mr Bublitz and there is no injustice inthe apparent disparity between the 12 and 19 month discounts;(d) Mr McKay should never have received the same 10 per cent discountfor personal circumstances, remorse and cooperation that Mr Bublitzdid;25 and(e) overall, any absence of parity between Mr Bublitz' reduced sentenceand the sentence imposed on Mr McKay by Toogood J is not such thata different sentence should be imposed.Relevant law[25] In cases where a sentence appeal is advanced on parity grounds, the Court willinterfere "only when the disparity appears unjustifiable and is gross".26[26] In R v Lawson, this Court articulated the test as being:27 whether a reasonably minded independent observer aware of all thecircumstances of the offence and of the offenders would think that somethinghad gone wrong with the administration of justice.[27] A lenient or unusually merciful sentence extended to one offender cannotcreate an expectation other offenders will receive the same indulgence.2825 A position the Crown has always maintained.26 R v Rameka [1973] 2 NZLR 592 (CA) at 594.27 R v Lawson [1982] 2 NZLR 219 (CA) at 223.28 Macfarlane v R [2012] NZCA 317 at [24].This case[28] We begin by recording that we have put to one side the Crown's suggestion inwritten submissions that we should differ or disagree with the conclusions reached bythis Court in Mr Bublitz' appeal. In saying that we note that in oral argument MrJohnstone accepted no material change or other good reason that might justify usrevisiting that decision had been identified.[29] Although we would not go so far as Mr Bradford suggests, we consider someadjustment to Mr McKay's sentence is required as a result of Mr Bublitz' successfulappeal. More particularly, we agree that an adjustment to the starting point iswarranted, to take account of the errors identified and summarised above at [18].But in light of what this Court said at [161] of the earlier judgment,29 we do not thinkthat parity requires a reduction of the full six months. If a perceived lack of parity atfirst instance influenced that reduction (which it plainly did) it would be wrong inprinciple to reintroduce, by adopting the same reduction, a lack of parity in this appeal.In our view a reduction of no more than three months is warranted, which gives areduced starting point of three years' imprisonment.[30] We do not propose to adjust the discount for delay. Although this Court hasnow made it clear that such a discount should not be assessed on a percentage basis,Toogood J clearly considered that a lesser reduction for delay was appropriate inMr McKay's case. And there is a clear basis for differentiating between the impact ofthe delay on him and the impact on Mr Bublitz. While many of the adverse effects ofdelay would have been experienced equally by all defendants, Toogood J noted theparticular and severe economic consequences suffered by Mr Bublitz, who spentsomething in the order of $1 million defending himself. By contrast (as we understandit) Mr McKay has, at all times, been legally aided. In our view, the 12-month discountafforded to Mr McKay by Toogood J for delay continues to be appropriate.[31] Nor do we intend to interfere with the 10 per cent discount for personalmitigating factors, as Mr Johnstone invited us to. In light of the approach previously29 See [19] above.adopted to this aspect of Mr Bublitz' sentence,30 the 10 per cent reduction is to becalculated by reference to the (now reduced) starting point and before the applicationof the discount for delay. In Mr McKay's case that would result in a reduction of threeand a half months.[32] In summary, then, we recalculate Mr McKay's sentence as follows:(a) a starting point of three years' imprisonment; less(b) a discount of three and a half months for personal mitigating factors;less(c) a discount of 12 months for delay.[33] The end result is a sentence of a little over 20 months' imprisonment, whichwe convert to 10 months' home detention.Result[34] Mr McKay's appeal against sentence is allowed, on parity grounds,accordingly. The sentence of 12 months' home detention is quashed and a sentence ofhome detention ending on 27 January 2020 is substituted, on the basis that pursuant tos 80X of the Sentencing Act 2002 that substituted sentence will commence on the dateof this judgment.Solicitors:Crown Solicitor, Auckland for Respondent30 See n 16 above.