MCHUGH v R [2020] NZCA 456

MCHUGH v R [2020] NZCA 456 [29 September 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA281/2020[2020] NZCA 456BETWEEN HEATHER COLLEEN MCHUGHAppellantAND THE QUEENRespondentHearing: 25 August 2020Court: Courtney, Wylie and Muir JJCounsel: M J Taylor-Cyphers for the AppellantB Tantrum and J T Parry for the RespondentJudgment: 29 September 2020 at 10 amJUDGMENT OF THE COURTA The appeal against conviction is dismissed.B The appeal against sentence is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Muir J)Introduction[1] Ms McHugh appeals her conviction in respect of one of 11 charges of falseaccounting1 of which she was found guilty following a jury trial. Simultaneously shewas convicted of 24 charges of theft by a person in a special relationship.2 She also1 Crimes Act 1961, s 260(a).2 Section 220.appeals the sentence of two years and nine months' imprisonment imposed in respectof all convictions.3Background[2] Ms McHugh was employed by the complainant Vertech Limited in an officemanager role in December 2015. The role included administrative and humanresource functions, budgetary management, processing payments to creditors and staffof the business, purchasing goods for the business and managing the payroll. Tofacilitate these functions, she was given access to the complainant's bank account (tomake authorised payments to the complainant's credit card), iPayroll and Xeroaccounts and its online accounts with Countdown and Warehouse Stationery.[3] Between January 2016 and June 2017, Ms McHugh fraudulentlymisappropriated company funds by accessing the complainant's accounting platformsand making unauthorised payments and purchases, including payments to her personalbank account and a creditor. Her dishonesty included falsely claiming 620.95 hoursin overtime, adding 48 non-taxable allowances to her salary and paying a total of$5,864.40 to her son (who had previously worked for the company), after his cessationof employment.[4] The total value of her defalcation was $53,743.92. In addition, the complainantincurred investigatory costs of $12,191.89. Its overall loss was therefore $65,935.81.None of this sum has been recovered.The conviction appealPreliminaries[5] Ms McHugh appeals her conviction on Charge 10.4 This was in terms:That Heather Colleen McHugh on or around 26 May 2017, at Auckland, withintent to deceive Vertech Limited, made a false entry in the Xero accountingsystem, the electronic ledger system for Vertech Limited.Particulars: By creating an invoice, and coded a payment as Fuji Xerox.3 R v McHugh [2020] NZDC 8119 [Sentencing decision].4 So identified in the Charge List. The charge is Charge 5 in the Crown Charge Notice.[6] The charge was under s 260(a) of the Crimes Act 1961 which provides:260 False accountingEvery one is liable to imprisonment for a term not exceeding 10 yearswho, with intent to obtain by deception any property, privilege,service, pecuniary advantage, benefit, or valuable consideration, or todeceive or cause loss to any other person,—(a) makes or causes to be made, or concurs in the making of, anyfalse entry in any book or account or other document requiredor used for accounting purposes [7] Ms McHugh's appeal falls to be determined under Part 6 of the CriminalProcedure Act 2011. Her notice of appeal against conviction includes multiplegrounds but not the singular point now advanced in submissions.[8] The point now taken is that the conviction in respect of Charge 10 represents amiscarriage of justice and/or that the jury's verdict in that respect was unreasonablebecause the Crown never established that Ms McHugh "create[d] [the relevantinvoice], and coded a payment as Fuji Xerox".The argument and the documents relied on[9] In her written submissions Ms Taylor-Cyphers focused on the fact that theCrown had not produced an "invoice". She accepted that the complainant's Xeroaccounting system identified an invoice from Fuji Xerox Printers for the month ofMay 2017 and in the amount of $931.15. She accepted also that on 26 May 2017 apayment in that amount was made to Ms McHugh's personal account, albeit identifiedin the company's bulk payments as having been paid to "Fuji Xerox Printers". Shenoted that the payment itself was the subject of Charge 11 (intentional payment ofproperty under her control other than in accordance with the requirements imposed onher). She submitted however, that absent production of the invoice itself, noreasonable jury could convict Ms McHugh of making or causing to be made any falseentry in terms of s 260(a).[10] In response, the Crown's written submissions correctly identified that proof ofa stand-alone invoice was not a necessary ingredient of the charge and that all theCrown was required to prove was that the invoice had been created in the Xero system.[11] In oral argument Ms Taylor-Cyphers' position attempted to adapt accordingly.She pointed to documents which showed that the "invoice" from Fuji Xerox identifiedin the complainant's records was stated to be "generated from a repeating transaction".She submitted that no reasonable jury could conclude that Ms McHugh had createdthe transaction in the company's accounts, or alternatively, that a miscarriage of justicehad occurred.[12] In attempting to meet that argument the Crown referred to Ms McHugh'sevidence under cross-examination in terms of her role in coding all transactions.Counsel emphasised that Ms McHugh had never attempted to minimise her role, andthat her defence was based solely on the proposition that she had been instructed byher employer to make the false entries (and otherwise unauthorised purchases) in lieuof a salary increase. Such defence was rejected by the jury.[13] The relevant documentary material before the jury included:(a) a payment summary prepared by the prosecution for the jury's ease ofreference, identifying the following:PayeeNameDate AmountpaidDescriptiononpaymentXeroentryXerocodingAmountexcl.GSTFuji XeroxPrinters26.05.17 $931.15 Vertech IT √ INV######Page PackMay 2017$809.73(b) Bulk payment details showing individual payments authorised byMs McHugh on 26 May 2017 and including an amount to Fuji XeroxPrinters for the sum of $931.15 together with details of the bankaccount into which the payment was made (her own).(c) Associated records from within the Xero accounting system collated ina document which provided:Purchases > Bills >Bill INV ####### Page Pack May 2017This bill was generated from a repeating transaction. The originalrepeating transaction has been deleted.From Fuji Xerox Printers P O Box 6238Frenchs Forest DC2086NSWAUSTRALIA Edit AddressDate 7 May 2017Due Date June 2017Reference INV ####### Page Pack May 2017Total 931.15Amounts are Tax ExclusiveSubtotal 809.73Total GST 15%121.46Rounding (0.04)TOTAL 931.15HISTORY & NOTESChanges Date User DetailsPaid 30 May201712.00 pmHeatherStephens5Payment made to Fuji XeroxPrinters on 26 May 2017 for931.15. This bill has been fullypaid.Approved 19 May20179.28 amHeatherStephensINV####### Page Pack May2017 from Fuji Xerox Printers for931.15.Created 7 May201712.01 amSystemGeneratedCreated using repeating schedule.5 Heather Stephens is the former name of Ms McHugh.[14] Ms Taylor-Cyphers says that, on its face, the third of these documents indicatesthat the invoice coded into the system dated 7 May 2017, with a due date of paymentof 6 June 2017, was a recurrent invoice which Ms McHugh may have "approved" butwhich she did not "create". We note that the particulars of the charge against her donot allege "concurrence" in the making of any false entry, but rather "creation".Discussion[15] We agree that the document referred to at [13(c)] above contains some supportfor MsTaylor-Cyphers' submission. However, in the context of the evidence as awhole we are satisfied that the jury could reasonably have come to the conclusion itdid. Nor do we consider there to have been any miscarriage of justice consequent onher conviction. In particular we refer to the following exchanges which occurredduring Ms McHugh's cross-examination:Q So, in general, the transactions that have been evidenced, you'rehappy that they were made?A Correct.Q And that the coding that is set out in the documents we've seen is thecoding from the system?A If the coding was that then yes.Q So you're happy that the payments that the Crown have said have goneinto your accounts have actually gone into your accounts?A Yes, correct.Q You agree that you were the one who carried out all of thesetransactions?A Yes.Q And what you dispute is why you carried out these transactions?A Yes.Q You were the person who made these payments into your account,correct?A That's correct. With Daniel's approval.Q And you've entered the coding?A With Daniel's approval.[16] Ms McHugh's position was therefore that, to the extent any of the chargesfaced by her involved coding, this was undertaken by her. Although the evidence wasthat there was an existing business relationship between Vertech and Fuji Xerox, it didnot involve a fixed monthly payment and, in respect of the payment in question, noinvoice number was coded, consistent with the account for $931.15 having never beenlegitimately raised.6 In any event, the invoice was shown (or coded) in Xero as paidto Fuji Xerox when it was not. On her own evidence the Ms McHugh was responsible.This was a "false entry in any book or account". The ingredients of the charge areaccordingly made out.The sentence appealThe District Court sentence[17] Judge Dawson considered that, in terms of s 7(1) of the Sentencing Act 2002,the requirement to hold the offender accountable for the harm done to the victim wasthe sentencing purpose most relevantly engaged.7 Having regard to the duration of theoffending and sum stolen he considered the offending to be of medium gravity buthigh culpability.8 He emphasised the very significant impact on the complainant andin particular that the company had, as a result, fallen into default with the InlandRevenue Department (IRD), attracting penalties and interest.9 He noted that theoffending had a considerable financial impact on the proprietor of the business whohad been required to reduce personal drawings and that it had likewise affected himpsychologically.10 He regarded the level of premeditation as high in that it was"repetitive offending of over 200 unauthorised transactions and it continued over a15 month period".11 He noted an absence of remorse, but that the defendant wasassessed as being of low to medium risk of re-offending given her minimal previoushistory of dishonesty.126 In the Company's Creditor Bulk Payment Details there was evidence of a legitimate Fuji Xeroxpayment which included a "Reference" number and "Internal Ref". Both were absent in respectof the $931.15 payment.7 Sentencing Decision, above n 3, at [11].8 At [12].9 At [13].10 At [14].11 At [16[.12 At [17].[18] He noted an offer to pay reparation but concluded that the defendant had "noforeseeable possibility of paying anything".13 He concluded that her actions werecynical, had nearly driven her employer to the point of liquidation and that, havingregard to the many cases cited to him, an appropriate starting point was three years'imprisonment.14 No uplift was applied on account of Ms McHugh's previousoffending and a deduction of three months (8.3%) was made on account of her health.15[19] The final sentence was therefore two years and nine months' imprisonment.Submissions[20] Ms McHugh submits that the sentence was manifestly excessive because:(a) the starting point was too high;(b) (a related submission) the sentence was inconsistent with marginallyhigher sentences in case involving "loss in the millions"; and(c) insufficient consideration was given to the defendant's personalcircumstances and the option of a short term of imprisonment and/or acommunity-based sentence.[21] Ms Taylor-Cyphers acknowledged that the starting point was appropriatelyassessed having regard to the defendant's culpability which in turn involved anassessment of motivation for the offending, the amounts involved, the loss caused, theperiod over which the offending took place, the seriousness of the breach of trustinvolved and the impact on the victims of the offending.[22] She submitted that the motivation was needs-based as Ms McHugh was thesingle mother of a teenage son with mental health issues who was unable to work. Sheacknowledged the quantifiable losses attributable to the offending as being$65,935.81. She submitted that although Ms McHugh was in a position of trust "many13 At [22]14 At [18]–[20].15 At [20]–[21].of the transactions could not have threatened the trust and competence of the employerbecause of the circumstances". That comment appears to invoke the 'behest ofemployer' defence which the jury clearly rejected. She questioned the extent to whichthe company's tax problems could be attributed to the offending saying that they"cannot sensibly be attributed to Ms McHugh in isolation".[23] In support of her 'comparability' argument, Ms Taylor-Cyphers has referred toSerious Fraud Office v Ellis,16 R v Davis17 and R v Colosimo.18 In Ellis a starting pointof five years' imprisonment was adopted for deception charges relating toovercharging by senior executives at Wilson Parking over a period of two yearsresulting in losses of $460,000. In Davis a starting point of four years' imprisonmentwas upheld for theft of around $280,000 by an office manager over a five-year period.Colosimo involved forgery of a document to show inflated business profits resultingin a loss to the purchaser of the business of $433,000. A starting point of three yearswas upheld.[24] In the context of these cases Ms Taylor-Cyphers suggested a starting point oftwo years and two months to two years and four months would have been appropriate.[25] From that starting point she submitted that a further "modest" deduction shouldhave been made on account of the fact that Ms McHugh's son lived with her, issupported by her and cannot work due to his mental health issues. She also submittedthat a "small discount" should have been made on account of Ms McHugh's offer ofreparation — despite her current circumstances — because there was a reasonableprospect of her being able to obtain employment on her release from custody.[26] In response, the Crown emphasised the quantum of the complainant's loss andthe impact which the thefts have had on its business (including threatened liquidationby IRD). The Crown described this fraud as "highly premeditated and sophisticated"albeit "hidden in plain sight". It submitted the unauthorised payments weresophisticated in that they occurred through the use of different accounting or online16 Serious Fraud Office v Ellis HC Auckland CRI-2005-404-15827, 18 July 2006.17 R v Davis [2009] NZCA 26.18 R v Colosimo [2012] NZCA 60.platforms, most of which were accompanied by false entries in Xero. It argued thatMs McHugh's motivations were personal gain and that the offending was notneeds-based having regard to Ms McHugh's legitimate salary of $67,000 and the factthat among the items funded by her dishonesty were a suit for her son's school balland leisure items. The Crown emphasised that there was a gross breach of trustbecause her employer was a small company and the offender was entrusted withalmost complete access and control over its finances.[27] Against this background the Crown submitted that the starting point was wellwithin range, particularly having regard to what it submitted are the most relevantcomparable authorities.19 Counsel further submitted that no discount was appropriateon account of the offer of reparation, which needed to have some reasonable prospectof fulfilment before being relevantly taken into account.20 Given the fact that thedefendant had never expressed remorse, maintained her innocence and had no currentability to pay any sum at all, the Crown effectively invited the conclusion that the offerwas hollow.[28] Nor, submitted Mr Parry, was there any error in the District Court Judgedeclining a discount on account of the circumstances involving Ms McHugh's son.Although Ms McHugh had advised the pre-sentence report writer that her son wasunable to work, the Crown pointed to evidence, adduced at trial, demonstrating thatthe son had, at least in the past, been capable of doing so.Discussion[29] This Court must allow the appeal against sentence if satisfied that, for anyreason, there is an error in the sentence imposed and a different sentence isappropriate.21 In the absence of an identifiable error, the appeal must be dismissed.22As this Court has repeatedly emphasised, where a sentence is within the range which19 Luoni v Police [2016] NZHC 695; Kerwin v Police [2014] NZHC 2415; Kerwin v Police [2014]NZHC 3106, Wilton v Police [2015] NZHC 427, Mackley v Police [2014] NZHC 1561.20 Sentencing Act 2002, s 10(2)(a).21 Criminal Procedure Act 2011, s 250(2).22 Section 250(3).can be justified by accepted sentencing principles, an appellate court will typically notintervene.23[30] This was prolonged, serious, sophisticated and multi-faceted offending againsta small company and had very significant consequences. The breach of trust wasserious given the level of autonomy possessed by Ms McHugh. Her offending startedalmost immediately after commencement of employment. It continued unabated untildiscovered. The consequences continue to reverberate in terms of ongoing cashflowproblems within the company, consequent default in its IRD obligations andrequirements to reduce staff. They also reverberate in terms of the personal stresscaused to the company's proprietor.[31] Ultimately the starting point for dishonesty offending is dictated by anassessment of culpability. In R v Varjan this Court held that the circumstances andculpability of offences of dishonesty vary widely but that: 24[22] Culpability is to be assessed by reference to the circumstances andsuch factors as the nature of the offending, its magnitude and sophistication;the type, circumstances and number of the victims; the motivation for theoffending; the amounts involved; the losses; the period over which theoffending occurred; the seriousness of breaches of trust involved; and theimpact on victims.[32] We agree with the Crown that, having regard to these criteria, the Judge'sstarting point was within range. The amount of the loss was significant in the contextof a small company's operations. The offending was indeed premeditated andsophisticated involving multiple accounting platforms and was not, at least in someidentified respects, needs-based. It also continued for an extended period.[33] We do not consider the authorities cited by Ms Taylor-Cyphers decisive. Ellisand Davis both involved significantly larger losses and commensurately higherstarting points. We reject the submission that in comparing the starting point in Davis(four years) with that in this case (three years) the fact that Ms McHugh's theftamounted to 22 per cent only of that in Davis suggests the starting point was excessive.Quantum of loss is one factor only. The impact on a small company may be just as23 Tutakangahau v R [2014] NZCA 279, [2014] 3 NZLR 482 at [36].24 R v Varjan CA97/03, 26 June 2003.important. Nor is Colosimo a useful comparator. It was not an employee case and didnot involve the same gross breach of trust.[34] By contrast the authorities cited by the Crown support the starting pointadopted. In Luoni the offending was by an office administrator over a 13-month periodand involved a total loss of $51,005.82. The starting point was three to three-and-a-half years' imprisonment. On appeal Heath J took no issue in that respect. In Kerwinthe employee stole $90,637 to support a methamphetamine addiction. The offendingoccurred over a 24-month period involving 141 separate defalcations. His employeradditionally incurred investigatory costs of over $30,000. On appeal Goddard Jconsidered the appropriate starting point was three years' imprisonment. In Wilton theoffending was against the defendant's sick father. On 63 occasions money wastransferred under power of attorney to her own accounts. In addition, $21,000 waswithdrawn in EFTPOS transactions. The Judge adopted a starting point of three-and-a-half years' imprisonment based on the aggravating factors of the significant sumtaken, premeditation, serious breach of trust and the effect on the defendant's father.On appeal Clifford J regarded a starting point of two years and nine months'imprisonment appropriate. In Mackley the defendant wrote out 86 cheques on heremployer's bank account for herself, friends and other businesses for personalproducts she had purchased. The amount stolen was $173,318.95 which was used tosupport her lifestyle. A small recovery was made. At sentencing the Judge adopted athree-and-a-half year starting point which was upheld by Gendall J on appeal.His Honour noted Ms Mackley's culpability was reasonably high.[35] In our assessment the starting point adopted in this case was towards the upperend of that indicated by the comparable authorities but nevertheless within range,particularly having regard to the duration of what we consider to be insidious andreasonably sophisticated offending.[36] As to discounts, we are not satisfied that a discrete discount was appropriate inrespect of the son's circumstances. The pre-sentence report records that Ms McHugh's27-year-old son resides with her as he suffers from anxiety and panic attacks, that heis on a supported living benefit and Ms McHugh takes care of him "as he has not beenable to work in over a year". There is no independent corroboration of his mentalhealth position. We accept also that he has, in the past, held at least one position ofpaid employment.[37] It is an unfortunate feature of most sentences of imprisonment that they haveimplications for third parties. As Ms McHugh herself recognises, the most she couldhave expected was "some small discount". In the absence of better evidence about herson's dependence we cannot identify any error in the Judge's approach. Indeed, it isnot even apparent that this issue was raised at sentencing.[38] As to the offer of reparation, this was necessarily considered in the context of:(a) Ms McHugh's inability to make any immediate payment and heruncertain future ability, and(b) her ongoing denial of the offending and adherence to the discrediteddefence that she was acting on her employer's instruction.[39] An offer of amends must be capable of fulfilment. Typically also it will onlybe given significant weight to the extent it represents a genuine effort by the offenderto accept responsibility for the offence and to put things right.25 Absent an acceptanceof responsibility, the Court's concern will always be whether, whatever offer is made,there will be consistent performance in discharge of the commitment. We are nottherefore persuaded that the Judge erred in this respect either.[40] For completeness we add that our decision would not have been different if theconviction appeal in respect of Charge 10 had been allowed.Result[41] The appeal against conviction is dismissed.[42] The appeal against sentence is dismissed.25 In R v Singh (2003) 20 CRNZ 158 (CA) an offer was rejected as the Court was unconvinced of itsgenuineness. Also in Price v Police [2017] NZHC 2523 at [26], a genuine offer was made, but itwas unrealistic, so no credit was given.Solicitors:Crown Solicitor, Auckland for Respondent