LUONI v NEW ZEALAND POLICE [2016] NZHC 695

LUONI v NEW ZEALAND POLICE [2016] NZHC 695 [15 April 2016]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCRI-2016-419-000007[2016] NZHC 695BETWEEN ELIZABETH MARY LUONIAppellantAND NEW ZEALAND POLICERespondentHearing: 12 April 2016Counsel: T Sutcliffe for AppellantS F Gilbert for RespondentJudgment: 15 April 2016JUDGMENT OF HEATH JThis judgment was delivered by me on 15 April 2016 at 10.00am pursuant toRule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:Crown Solicitor, HamiltonCounsel:T Sutcliffe, HamiltonThe appeal[1] Ms Luoni was charged with various offences involving dishonesty arising out of her actions as an employee of Ancor Loc New Zealand Ltd (the employer). The offending occurred between 2 May 2013 and 21 June 2014. On 20 October 2015, Ms Luoni entered pleas of guilty in the District Court at Te Awamutu to all charges.1She was sentenced on 27 January 2016. Judge Burnett imposed an effective end sentence of 11 months' home detention.2 Ms Luoni appeals against that sentence on the grounds that it is either inappropriate or manifestly excessive.[2] An order was made in the District Court that interim name suppression continue pending determination of the appeal. Mr Sutcliffe, for Ms Luoni, responsibly accepts that there is no basis on which continuation of name suppression can be supported. On delivery of this judgment, the interim order lapses and MsLuoni's name may be published.The facts[3] Ms Luoni entered guilty pleas to one representative charge of theft by a person in a special relationship,3 one representative charge of obtaining property by deception,4 one representative charge of false accounting,5 and one representative charge of dishonestly using a document with intent to obtain a pecuniary advantage.6There were two further charges of dishonestly using a document, both referable to specific incidents.[4] Ms Luoni was employed as an office administrator. She commenced her employment on 3 April 2013. Her salary was $48,000 per annum. Her duties included keeping accounting records and making direct transfers of funds from her employer to other bank accounts. Those payments were to be made pursuant to directions from duly authorised managers. Ms Luoni became an authorised cheque signatory on 5 July 2013.1 The charges are detailed at paras [3], and [6]–[10] below.2 New Zealand Police v Luoni [2016] NZDC 2665.3 Crimes Act 1961, s 220.4 Ibid, s 240(1)(a).5 Ibid, s 260(a).6 Ibid, s 228(b).[5] During her tenure, Ms Luoni was regarded as a good employee. While her duties remained unchanged, on or about 8 November 2013 her salary was increased to $53,000 per annum. Ms Luoni was dismissed on 10 July 2014, when her offending was detected.[6] Detection of the offending followed the engagement of a temporary office assistant to work for a period of 12 weeks while Ms Luoni was on maternity leave. That employee discovered irregularities in company payments, and drew them to the attention of management. An audit was undertaken, dating back to when Ms Luoni started to work for the company. Further irregularities came to light. A forensic accountant was contracted to investigate more thoroughly. Eventually, it was determined that, between 2 May 2013 and 21 June 2014, Ms Luoni had misappropriated a total of $41,010.027 from her employer. Investigative costs incurred by the employer, in the form of fees paid to the forensic accountant, totalled $9,995.80. Therefore, the total loss to the employer was $51,005.82.[7] Ms Luoni's misappropriations included:(a) $19,523.34, related to activities that amounted to the crime of theft in a special relationship, and formed the basis of that representative charge.(b) $19,449.93, taken as result of 52 separate transactions on which Ms Luoni obtained money by deception.[8] As part of her duties, Ms Luoni had ordered a number of fuel cards, for use at Z service stations. They were to be provided to chosen employees. She arranged for two additional cards to be ordered. They were subsequently used for her personal benefit. In the period between 27 March and 21 June 2014, Ms Luoni obtained fuel on 12 separate occasions, causing a loss to her employer of $1,306.75. These events gave rise to the representative charge of dishonestly using a document to obtain a pecuniary advantage.7 Made up of the amounts specified in paras [7], [8] and [10] below.[9] A number of false entries were made in the company's accounts to conceal Ms Luoni's dishonest conduct. They gave rise to the representative charge of falseaccounting.[10] On 3 February 2014 and 26 February 2014, Ms Luoni wrote out two cheques, on her employer's account, in favour of one of her personal creditors. They totalled $730. Those two transactions gave rise to the two additional charges of dishonestly using a document with intent to obtain a pecuniary advantage.Sentencing in the District Court[11] Judge Burnett took the charges of theft in a special relationship as the lead charges for sentencing purposes. She did so notwithstanding the fact that each carried a maximum penalty of seven years imprisonment, in contrast to the maximum of 10 years imprisonment available on the false accounting charge.[12] The sentencing Judge took into account that Ms Luoni offered to pay reparation, both in respect of the amounts misappropriated and the forensic investigation costs. An initial payment of $3,000 was to be made, followed by payments of not less than $50 per fortnight thereafter. Ms Gilbert, for the Police, has calculated that, at that rate, it would take approximately 36 years to repay that sum.[13] The Judge was faced with a recommendation by the pre-sentence report writer for home detention, while her counsel sought a sentence of community detention. Community detention was sought so that Ms Luoni could work on a farm and undertake some work as a nanny to assist in payment of reparation.[14] Judge Burnett assessed Ms Luoni's culpability by reference to "a clear breach of trust",8 the duration of the offending and the amount of money taken for her personal benefit.9 A starting point of three to three and a half years imprisonment was chosen. A full credit of 25% was given for early guilty pleas. That brought the provisional starting point down to between two years three months' and two years seven months' imprisonment.8 New Zealand Police v Luoni [2016] NZDC 2665 at para [6].9 Ibid, at para [7].[15] The Judge recorded that Ms Luoni had no prior convictions, and that she was willing to pay reparation. Those factors, coupled with the fact that Ms Luoni suffers from a medical disorder and was motivated not to offend again, resulted in a further credit that reduced the provisional end sentence (before home detention wasconsidered) to between 1 year 10 months' and two years' imprisonment.10[16] The Judge was not persuaded that a sentence of community detention was a sufficient response to the offending. Taking into account the need to impose the least restrictive sentence. Judge Burnett sentenced Ms Luoni to 11 months' home detention should be imposed. Consistent with Ms Luoni's offer, the Judge orderedthat she pay reparation in the sum of $51,005.82.11The competing contentions[17] Mr Sutcliffe submitted that the sentence imposed was inappropriate, and that the sentencing Judge erred in considering that community detention was not sufficient to mark the offending. Alternatively, he contended that the sentence was manifestly excessive. He submitted that the starting point taken by the Judge was too high and that inadequate credit had been given for mitigating circumstances.[18] Ms Gilbert, for the Police, submitted that a community based sentence was not an adequate means by which Ms Luoni could be held accountable for her actions. She added that such a sentence could not meet the sentencing goals of denunciation, deterrence and holding the offender accountable for her actions.[19] Ms Gilbert reminded me that the question whether the sentence was manifestly excessive should be approached by reference to the end sentence, as opposed to a discrete analysis of whether the starting point and credits were each within range. As the Court of Appeal said, in Tutakangahau v R,12 "an appellatecourt will not intervene where the sentence is within the range that can properly bejustified by accepted sentencing principles".13 While that is correct, a review of the10 Ibid, at para [8].11 Ibid, at para [8] and [9].12 Tutakangahau v R [2015] 3 NZLR 482 (CA) at para [36].13 Adopting what had been said by Brown J on the first tier appeal in Tutakangahau v R [2014] NZHC 556.starting point and allowances for aggravating and mitigating factors is a useful methodology to determine whether a sentence is or is not within an appropriate range.Analysis(a) Should community detention have been imposed?[20] The modern approach to sentencing requires the Court to take a starting point that incorporates aggravating and mitigating features of the offending before considering aggravating and mitigating factors relating to the offender. The object ofthe sentencing exercise is to impose a sentence that is "considered appropriate for the particular offending after a defended trial".14[21] The maximum penalty for the lead offence was seven years imprisonment.15In my view, whether or not the Judge's starting point was too high, a sentence ofimprisonment or home detention was needed to respond to this offending. In a similar case, to which I shall return in the context of the submission that the starting point was too high, the Court of Appeal made it clear that a community based sentence was inappropriate when sentencing an offender for dishonest behaviour of this type.16 Community detention is regarded as a community based sentence.17[22] In my view, the type of sentence imposed was not inappropriate.(b) Was the sentence manifestly excessive?(i) The starting point[23] Judge Burnett was imprecise as to the starting point that she took. She considered that one of three to three and a half years imprisonment' was appropriate.18 For the purpose of my own analysis, I work on the assumption that the Judge's starting point was the lower end of that range.14 R v Taueki [2005] 3 NZLR 372 (CA) at para [8].15 See para [11] above.16 R v Price [2009] NZCA 600 at paras [17] and [18]. See also, paras [27]–[31] below.17 Sentencing Act 2002, s 10A(2)(d).18 New Zealand Police v Luoni [2016] NZDC 2665 at para [7].[24] Mr Sutcliffe contended that the approach taken by Goddard and Clifford JJ respectively in Kerwin v Police19 and Wilton v Police20 demonstrated that a starting point of three years imprisonment was too high.[25] In Kerwin, Goddard J took a starting point of three years imprisonmentfollowing Mr Kerwin's conviction in the District Court on one representative charge of theft by a person in a special relationship. In doing so, the Judge considered that the starting point taken by the District Court Judge, of three years and three months imprisonment was too high.21 The offending in Kerwin involved 141 transactions between July 2007 and December 2013. A total sum of $90,637.20 was stolen fromMr Kerwin's employer.22 Goddard J considered that the method of defalcation was sophisticated. On occasion, Mr Kerwin had altered his employer's computer systemto conceal his offending.23[26] In Wilton, pleas of guilty were entered to two representative charges of theft by a person in a special relationship, and one of dishonestly using a document to obtain a pecuniary advantage. Between October 2012 and December 2013, MsWilton had transferred a total of $62,528 from her elderly father's accounts to herown. That transfer was achieved through 63 separate transactions. She also used herfather's EFTPOS card on 112 occasions to withdraw $21,000 in cash from ATMmachines, in order to feed a gambling habit. In total, taking into account an amount of $7,490 obtained from a bonus bond redemption drawdown payable to her father, the total amount stolen was $91,148.24 In the District Court, a starting point of three years and six months' was taken, having regard to relevant aggravating factors.25Clifford J, considered that an appropriate starting point was two years and six months' to three years' imprisonment. He indicated that he would have taken a starting point of two years and nine months imprisonment.2619 Kerwin v Police [2014] NZHC 2415 (interim judgment) and [2014] NZHC 3106 (final judgment).20 Wilton v Police [2015] 427.21 Kerwin v Police [2014] NZHC 2415 at para [13].22 Ibid, at para [4].23 Ibid, at para [5].24 Ibid.25 Wilton v Police [2015] NZHC 427, at para [9].26 Ibid, at para [38].[27] The third case to which I refer is the judgment of the Court of Appeal in R v Price.27 This was not mentioned in argument.[28] Mr Price had been employed as a travel consultant, and was paid on commission. He received 40% of the net profit on any customer files that he organised, with the remaining 60% being paid to his employer. On the other hand, he was liable for 100% of any loss on a customer file which was in deficit. During a period of just over two years, Mr Price continually transferred money from customer accounts in profit to customer accounts in deficit to avoid any personal liability for losses.28 The transfers were effected for relatively small amounts, which werefalsely described in the employer's records as "customer refunds".29[29] Between 12 July 2004 and 31 July 2006, Mr Price transferred $72,240 from customer accounts to his personal credit card through the use of 55 fictitioustransactions. Almost $7,000 was paid to his partner's personal visa card account.When Mr Price left his employment, he arranged for most of the $78,971 to be repaid into the accounts of various other customers.30 Because of the complexity of the transactions, it took over 500 hours for another employee to ascertain what Mr Price had done.31 By the time Mr Price was charged, a shortfall of $7,492 existed in respect of funds that he had misapplied. A reparation order was made to cover that shortfall, together with an additional sum of $32,547.80 to meet legal, accountancy and internal costs incurred by the employer in reconstructing its accounts.32[30] Mr Price endeavoured to justify what he had done by saying that he had a civil dispute with the company. The sentencing Judge rejected that explanation, finding that at least some of the money was used for gambling activities before being repaid into the loss-making customer accounts.33 The Court of Appeal endorsed thesentencing Judge's observation that the fact that there had been "immediate27 R v Price [2009] NZCA 600.28 Ibid, at para [2].29 Ibid, at para [3].30 Ibid.31 Ibid, at para [4].32 Ibid, at para [8].33 Ibid, at para [9].repayment did not necessarily mean that no sentence of imprisonment would beimposed".34[31] In the District Court, Judge Farish adopted a starting point of two years'imprisonment.35 After rejecting the submission that a community based sentence was inadequate to respond to the offending, the Court of Appeal, in dismissing the appeal against the effective end sentence, continued:[19] We accept that the appellant was a capable and well-respected member of the travel industry. It is clear that his colleagues and customers placed a good deal of trust in him. Further, the convictions have effectivelyended the appellant's career as a travel agent, so that he has paid a high price for his wrongdoing. We also accept that the appellant was a knowledgeable and successful gambler who ultimately returned most of the funds that he had taken to the company.[20] But by acting as he did, the appellant betrayed the trust that his employer, his colleagues and his customers had placed in him. The Judge gave weight to this, as she was entitled to do. She was also entitled to give weight to the other aggravating factors which she identified, namely thelength of time over which the appellant's offending occurred (two years), the obvious planning and sophistication of his scheme (many small transactions, effected in different ways and identified as customer refunds) and the fact that he tended to minimise the significance of what he had done (by saying that, because he had returned the money, he did not really think that he had committed any offence).[23] In light of these various considerations the Judge was well entitled to conclude that a sentence of imprisonment was necessary to mark theseriousness of the appellant's conduct and to deter others. The appellant wasin a position of special responsibility in relation to the customer accounts to which he had access and abused that position in a carefully planned and sophisticated way.[32] In my view, relevant aggravating factors in relation to Ms Luoni's offendingwere:(a) A gross breach of the trust owed by an employee to an employer.(b) Persistent offending; involving transactions between 2 May 2013 and 21 June 2014.34 Ibid, at para [11].35 Ibid, at para [16].(c) A degree of sophistication in the way in which the misappropriations occurred.(d) False accounting records were made to conceal the offending.(e) No steps were taken to repay any of the misappropriated funds untilafter detection of the offending and Ms Luoni's dismissal from heremployment.[33] The amount taken for personal use was not insignificant. The effect on the employer can best be judged by comparing the combined amount misappropriated and the cost of investigations to ascertain the scope of the fraud ($51,005.82) with the salary paid to Ms Luoni, initially $48,000 per annum, and later $53,000 per annum.36 In effect, the loss equates to the salary the employer needed to pay to an employee undertaking faithfully the work that Ms Luoni was engaged to perform.[34] In those circumstances, I do not consider that a starting point of three years'imprisonment was out of range. While it can be described as stern, it is not one that should be treated as excessive on appeal. The combination of aggravating factors disclosed in both Kerwin37 and Wilton38 are sufficiently similar to justify a startingpoint of three years' imprisonment. Although a lesser starting point was taken inPrice, the fact that most of the money had been repaid distinguishes that case from the present.[35] There are no aggravating factors personal to Ms Luoni.(ii) Mitigating factors[36] There were no mitigating factors in relation to the offending.[37] The next step in the sentencing exercise was to assess whether there were any mitigating factors personal to Ms Luoni.36 See paras [4] and [5] above.37 Kerwin v Police [2014] NZHC 2415 (interim judgment) and [2014] NZHC 3106 (final judgment). See also para [25] above.38 Wilton v Police [2015] NZHC 427. See also para [26] above.[38] There are a number of mitigating factors. I shall describe some of them in arelatively bland way, not to diminish their significance but to protect Ms Luoni'sprivacy. The full extent of the information does not need to be in the public domain.[39] It is clear that Ms Luoni's offending was out of character. The references that were given to the sentencing Judge describe the offending as aberrant behaviour. In my view, Ms Luoni was entitled to a credit for prior good character.[40] Ms Luoni's expressed remorse was genuine. The extent of the remorse, when judged in the context of a medical issue to which I will refer, is sufficient to enable a discrete credit to be provided.39[41] Although, in her interview with the pre-sentence report writer, Ms Luoni did not seek to excuse her conduct by reference to her difficult personal circumstances,their effect can be regarded properly as diminishing Ms Luoni's culpability for theoffending. During most of the period of offending, Ms Luoni was pregnant but, because of a pre-existing medical condition from which she suffered, the pregnancy was difficult. While that condition must have impacted on her ability to work to some degree, the fact that she presented to her employer as someone competent to carry out her role is evidenced by the increase in salary that was provided in November 2013. So, while those medical concerns must be given weight, they do not require a significant credit to be given for those personal circumstances.[42] Ms Luoni's offer to make amends by paying reparation is something to be taken into account as a mitigating factor. For reasons that will become apparent, I consider that the reparation order made was unrealistic and wrong in principle. It will be replaced.40 The fact that the amount of reparation to be paid will be reduced is a factor to be taken into account in determining the credit to be given for mitigating factors.[43] The way in which the District Court Judge assessed credits for mitigating factors (other than the guilty pleas) makes it difficult to be precise about the credit39 Hessell v R [2011] 1 NZLR 607 (SC) at para [75].40 See para [46] below.given for them. It appears, from the end point reached, that the overall credit was between one year and two months' and two years and four months' imprisonment. Itappears that is how the end period of imprisonment of one year and 10 months'imprisonment and two years' imprisonment was calculated.41[44] I would have thought that a credit for personal factors of at least one year would have been available, thereby reducing the adjusted starting point to one of two years' imprisonment. That is before taking account of the undoubted full credit required for the early guilty pleas. Applying a further credit of 25% reduces the provisional end sentence by six months, leaving an end sentence of imprisonment of one year and six months. In that context, the end sentence calculated by the Judge on the basis of a presumptive sentence of imprisonment was manifestly excessive.(iii) Reparation[45] An order for payment of reparation in the sum of $51,005.82 was unrealistic,notwithstanding Ms Luoni's willingness to pay over a considerable period of time. As I have already mentioned, Ms Gilbert calculated that it would take about 36 years to pay off the debt. A small to medium sized enterprise incorporated as a limited liability company might well go out of business in that time.[46] In my view, despite the fact that Mr Sutcliffe put forward Ms Luoni's desireto offer to pay between $25,000 and $30,000, the better course is to treat her proposal as an offer to make amends for the purposes of assessing personal mitigating factors, and to make a reparation order in the sum of $9,000. That will take account of the $3,000 already paid.[47] I have been told that Ms Luoni has the ability to borrow funds from a family member to meet that payment immediately.42 The District Court Judge was not advised of that possibility.41 See para [15] above.42 See para [54] below.Home detention[48] The circumstances, in my view, justified the Judge commuting the sentence of imprisonment to one of home detention. However, on the basis of my analysis, I consider that the end sentence was too long. Given the end period of imprisonment that ought to have been reached, I reduce the period of home detention to one of eight months.Changed circumstances[49] Mr Sutcliffe drew to my attention a problem with the suitability of the address at which Ms Luoni is serving home detention. While the property was initially assessed as suitable for electronic monitoring from a technical perspective, it has become apparent that is not so, even after the installation of a bolster device. I understand that an application to cancel or vary the sentence of home detention has been filed in the District Court.[50] I indicated to Mr Sutcliffe that I was not prepared to embark upon a consideration of whether a different sentence should be imposed. That is more properly addressed on an application under s 80F of the Sentencing Act 2002. That provision enables either an offender subject to a sentence of home detention or a probation officer to apply to vary or cancel such a sentence. Section 80F(1)(c) and (4) provides:80F Application for variation or cancellation of sentence of home detention(1) An offender who is subject to a sentence of home detention, or a probation officer, may apply for an order under subsection (4) on the grounds that—(c) the home detention residence is no longer available or suitable because of a change in circumstances:(4) On an application under subsection (1), (2), or (3), the court may, if it is satisfied that the grounds on which the application is based have been established,—(a) remit, suspend, or vary any special conditions imposed by the court, or impose additional special conditions; or(b) vary the home detention residence; or(c) cancel the sentence; or(d) cancel the sentence and substitute any other sentence (including another sentence of home detention) that could have been imposed on the offender at the time that the offender was convicted of the offence for which the sentence was imposed.[51] The s 80F jurisdiction is broad. It will be open to the District Court, having regard to the reasons why home detention may no longer be available and the time already served, to impose any other available sentence.43[52] I leave that issue to be addressed in the District Court. Because a sentence of home detention can only be imposed if the sentencing Court would otherwise impose a short term sentence of imprisonment, namely one of two years or less,44 a cancelled home detention sentence will usually revert to one of imprisonment. The circumstances of this case may persuade a District Court Judge that would be an inappropriate response. But that is for him or her to decide.Result[53] For those reasons, the appeal is allowed. The sentences of 11 months' home detention and payment of reparation in the sum of $51,005.82 are set aside.[54] In substitution, the following sentences are imposed on each charge, concurrently:(a) Ms Luoni is sentenced to a term of eight months' home detention.(b) Ms Luoni is ordered to pay reparation in the sum of $9,000, of which $3,000 has already been paid. The sum of $6,000 shall be paid into Court by 4pm on Wednesday 20 April 2016. On receipt, the Registrar shall arrange for that sum to be paid to the employer.43 Sentencing Act 2002, s 80F(4)(d).44 Ibid, s 15A(1)(b).[55] I thank counsel for their assistance._____________________________P R Heath JDelivered at 10.00am on 15 April 2016