ROSS v R [2019] NZCA 455

ROSS v R [2019] NZCA 455 [26 September 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA690/2018[2019] NZCA 455BETWEEN LEONARD JOHN ROSSAppellantAND THE QUEENRespondentHearing: 15 August 2019Court: Brown, Collins and Wild JJCounsel: R S Reed QC and A F Pilditch for AppellantD G Johnstone and K L Bannister for RespondentJudgment: 26 September 2019 at 9.00 amJUDGMENT OF THE COURTA The application for leave to appeal out of time is granted.B The appeal against sentence is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Collins J)Introduction[1] Mr Ross appeals a sentence of 4 years and 4 months' imprisonment imposedby Edwards J in the High Court at Auckland, following his convictions in relation tothree charges of obtaining a credit facility by deception and two representative chargesof using forged documents.11 R v Ross [2018] NZHC 2552; Crimes Act 1961, ss 240(1)(b) and 257(1)(b).[2] Ms Reed QC and Mr Pilditch, counsel for Mr Ross, accept a sentence ofimprisonment was inevitable because of the seriousness of Mr Ross' offending andbecause of sentences of imprisonment are usually imposed by courts in this country incases of serious fraud. They contend, however, that a sentence less than that imposedby Edwards J would serve the purposes and principles of the Sentencing Act 2002.[3] The deceptions and forgeries enabled Mr Ross and his co-offenders to gainaccess to a credit facility worth $41,150,000 from the ANZ Bank (ANZ). The bankdid not, however, suffer any financial loss but instead earned close to $8 million frominterest and fees that were charged as a result of transactions that were completed onthe basis of the deceptions and forgeries.[4] Mr Ross provided personal guarantees to ANZ and secured the credit facilitywith a mortgage over his family home. Counsel for Mr Ross informed us that hisassets that were secured to ANZ were valued at $14.5 million. Mr Ross told the authorof the pre-sentence report that his home needed to be sold in order to meet his ongoingobligations. Thus, as a result of his convictions, Mr Ross has lost not only hisreputation but also many millions of dollars worth of personal assets. In addition,Mr Ross' wife and two of his children live in Melbourne. This increases the stress tohim of being imprisoned in New Zealand.[5] It was submitted on behalf of Mr Ross that Edwards J focused too closely onthe "headline" number and that this led to the following erroneous consequences:(a) the starting point of 5 years and 6 months' imprisonment was too high;(b) inappropriate comparisons were made with another case, Serious FraudOffice v Huang;2(c) insufficient consideration was given to Mr Ross' personalcircumstances and the option of a shorter period of imprisonment.2 Serious Fraud Office v Huang [2018] NZHC 86.[6] Mr Ross' appeal was filed 12 days out of time. He has explainedthe circumstances that caused his delay in filing his notice of appeal. No prejudicehas been caused to the Crown by the delay and we grant leave in order to deal withthe merits of the appeal.The offending[7] It is necessary to set out Mr Ross' offending in order to gain a properappreciation of his culpability.[8] Mr Ross was a successful property developer in Auckland. In 2008 he becameinvolved in the development of the Waldorf Celestion Apartment Hotel(the Celestion), a twin tower development on the corner of Emily Place andAnzac Avenue in central Auckland. There are 127 apartments in this complex.[9] Mr Ross formed Emily Projects Ltd (Emily Projects) in July 2008 to developand sell apartments in the Celestion. He was the director and major shareholder ofEmily Projects, which was managed as part of the Tasman Cook group(Tasman Cook), Mr Ross' property development business.[10] Mr Slack, who was the lawyer for Emily Projects and Mr Wehipeihana, whowas described as Mr Ross' "right hand man", also held shares in Emily Projects.Mr Slack, Mr Foster and Mr Wehipeihana were subsequently charged with Mr Ross.Mr Foster was a contractor who assisted in the sale of the apartments. Mr Fosterformed a company, Financial Gain Solutions Ltd (FGS), with a Mr Rota in order tofacilitate sales of the apartments.[11] In August 2008, Emily Projects applied to ANZ for a finance facility tocomplete the development of the Celestion. The application said that contracts forsale either existed or were in the process of being completed in relation to120 apartments. Mr Ross, Mr Wehipeihana and Mr Rota met with ANZ and made apresentation about the pre-sold apartments. On 24 October 2008, ANZ offered EmilyProjects a credit facility of $40,400,000 subject to a number of conditions, including:(a) That the purchasers of the qualifying pre-sold apartments sign anacknowledgement reconfirming their sale and purchase agreements.Qualifying pre-sales were required to be to New Zealand or Australianresidents who had paid a 10 per cent deposit, had purchased no morethan two units and were arm's length transactions.(b) ANZ being "entirely satisfied" that there were a sufficient number ofacknowledgements from purchasers for apartments to cover the bank'sfacility.(c) That all deposits paid for the pre-sold apartments would be held inMr Slack's firm's trust account.[12] The offer was accepted on 28 October 2008 and the loan facility agreementsigned on 16 December 2008. The terms of the loan facility were subsequently variedon 5 February 2009, when ANZ made a $750,000 overdraft facility available to EmilyProjects.[13] ANZ instructed independent solicitors to verify that the conditions for the loanfacility had been satisfied before Emily Projects could draw down any part of the loanfacility. Those lawyers reviewed the correspondence received from Emily Projectsand were led to believe:(a) Forty-seven apartments had been pre-sold to New Zealand basedpurchasers through FGS.(b) Thirty-three apartments had been pre-sold to purchasers in Australiathrough a Melbourne-based entity.[14] When ANZ became concerned that the total number of pre-sold agreementswas less than had been previously represented, Mr Ross offered to sign 20 pre-saleagreements and to sell those apartments while Celestion was being constructed.ANZ agreed to this on the basis that these pre-sale agreements would not be treated asqualifying pre-sale agreements.[15] Emily Projects drew down the first part of the loan facility on 9 February 2009.[16] The construction of Celestion was completed during the course of 2010.None of the New Zealand or Australian pre-sale purchasers settled.Instead, Emily Projects arranged to on-sell the apartments that ANZ and its lawyershad been led to believe had been previously pre-sold to genuine New Zealand andAustralian purchasers.Obtaining by deception[17] Mr Ross and his co-offenders engaged in two discrete types of deception.[18] First, they deceived ANZ into believing that 80 apartments had been pre-soldto New Zealand and Australian purchasers. This deception was elaborate.It comprised a series of misrepresentations to ANZ and its solicitors that 47 pre-saleagreements had been signed in New Zealand and 33 in Australia.[19] The misrepresentations included a schedule dated 5 February 2009 fromEmily Projects that falsely said that the pre-sales were worth $56,607,049 and had ledto Emily Projects receiving deposits totalling $3,975,990.[20] Mr Ross signed each of the fictitious pre-sale agreements on behalf ofEmily Projects. There were, in addition, a series of false invoices purportedly fromsales agents and letters signed by Mr Ross confirming that commission payments hadbeen deferred.[21] In December 2008, Mr Ross provided a written undertaking to ANZ on behalfof Emily Projects, confirming that the qualifying pre-sale agreements were valid andbinding.[22] All of these representations were false. No apartments had been pre-sold togenuine purchasers and a number of the pre-sale agreements signed by Mr Ross wereforgeries.[23] The second general deception perpetrated by Mr Ross and his co-offendersconcerned their false representations to ANZ that deposits received from the pre-salepurchasers were held in Mr Slack's firm's trust account. None of the pre-salepurchasers paid deposits into Mr Slack's trust account.Forgeries[24] Mr Ross and his co-offenders faced two representative charges of using forgeddocuments. Those representative charges related to:(a) Forged sale and purchase agreements and letters of acknowledgementthat were prepared in order to satisfy ANZ that the relevantpre-conditions to the loan facility had been satisfied.(b) Forged deeds of arrangement and deeds of forfeiture that were createdas part of the process of on-selling the apartments to legitimatepurchasers. These deeds asserted that some pre-sale purchasers wishedto be released from their original agreements and that the newpurchasers would assume all the rights of the original purchasers.The forged deeds of forfeiture said that some pre-sale purchaserswished to be released from their pre-sale agreements and forfeit theirdeposit.Pleas and trial[25] Mr Slack and Mr Foster both pleaded guilty to one representative charge ofobtaining by deception. They were each sentenced to 10 months' home detention.3[26] Mr Ross and Mr Wehipeihana pleaded not guilty and elected trial by jury. Theirtrial commenced in the High Court at Auckland on 5 June 2018 and concluded almost9 weeks later.3 R v Slack [2017] NZHC 2330; and Serious Fraud Office v Foster [2018] NZHC 1422.Sentencing[27] Mr Ross and Mr Wehipeihana were sentenced at the same time.Mr Wehipeihana received a sentence of 4 years and 3 months' imprisonment.Edwards J adopted a starting point of 5 years' imprisonment for Mr Wehipeihana. Thisreflected her assessment that he was less culpable than Mr Ross.4 Mr Wehipeihanahas not appealed his sentence.Purposes and principles of sentencing[28] Edwards J recognised that the relevant sentencing purposes included holdingMr Ross accountable, promoting in him a sense of responsibility for the harm he hadcaused, denunciation, deterrence and assisting Mr Ross in his rehabilitation andreintegration into the community.5[29] The relevant principles of the Sentencing Act identified by the Judge, includedthe desirability of achieving consistency in sentencing, the effect of the offending onthe ANZ, Mr Ross' personal circumstances and the need to achieve the least restrictiveoutcome.6Starting point[30] Edwards J treated the obtaining by deception charges as the lead offences.The starting point of 5 years and 6 months' imprisonment reflected the Judge'sassessment of:(a) Mr Ross' role in the offending. She described him as the "architect" ofthe deception, a description she based upon all the evidence she heardduring the trial.7(b) The gravity of Mr Ross' offending, which she described as being"highly sophisticated".84 R v Ross, above n 1, at [52].5 At [18].6 At [19].7 At [35].8 At [23].(c) The magnitude of the offending which involved multiple ongoing falsemisrepresentations and forgeries.(d) The amount that was obtained which Edwards J described as a "solidmarker" of Mr Ross' culpability.9(e) The fact that although ANZ did not suffer financial loss, it neverthelesssuffered harm. The deception perpetrated in this case was described bythe Judge as threatening "the trust and confidence which is essential tocommercial deals" in New Zealand.10[31] Edwards J noted the differences inherent in cases concerning deceptiveconduct making it difficult to draw a "meaningful comparison" with other cases.11Nevertheless, she found Huang "to be the most comparable" case.12[32] In Huang, a starting point of 6 years was adopted. Edwards J recognised therewere differences between Mr Huang's offending and that engaged in by Mr Ross.In Huang, the amount involved was $52,498,000. Mr Huang's offending involvedmore than one financial institution and 57 separate applications for loans. All but twoof those loans were repaid. In Mr Huang's case there was a loss of $394,000.Edwards J considered Mr Ross' offending was less serious than that of Mr Huang, andtherefore justified a starting point 6 months lower than the starting point adopted whenMr Huang was sentenced.No uplift[33] Edwards J concluded no uplift was required to reflect the charges for the useof forged documents and that there were no personal aggravating factors whichrequired an uplift from the starting point.139 At [28].10 At [33].11 At [56].12 At [57].13 At [59] and [63].Discounts[34] Discounts were applied by the Judge to reflect the following fourconsiderations:(a) Mr Ross had expressed genuine remorse. Edwards J applied a discountof 5 months' imprisonment to reflect this factor.(b) Mr Ross' prior good character and his "fall from grace".14 A discountof 4 months' imprisonment was applied in relation to this consideration.(c) The time and money saved during the trial as a result of admissionsmade by Mr Ross, which avoided the necessity for the Crown to callapproximately 70 witnesses. A 2-month discount was given on accountof this factor.(d) Mr Ross suffers claustrophobia, a condition that will be exacerbatedwhile he is incarcerated, and he also suffers depression. These concernsresulted in a further 3-month discount.These discounts produced a provisional sentence of 4 years and 4 months'imprisonment.Alternative sentence[35] Consideration was given by Edwards J to Mr Ross serving part of his sentenceby undertaking charitable work. She noted however, that this option was notappropriate because of the need to ensure that "a strong message be sent that the typeof fraudulent behaviour [the offender] engaged in is entirely unacceptable in oursociety".1514 At [71].15 At [82], quoting from R v Xu [2018] NZHC 1971 at [28].Overall assessment[36] Edwards J assessed the overall appropriateness of a sentence of 4 years and4 months' imprisonment. She concluded that such a sentence met the purposes andprinciples of the Sentencing Act and was the least restrictive sentence inthe circumstances.16Grounds of appeal[37] The comprehensive submissions filed in support of Mr Ross' appeal can beconveniently distilled to four key points.[38] First, it was submitted that courts in this country have placed too much weighton the amount involved when sentencing defendants in fraud cases and that the searchfor consistency has resulted in a failure to properly balance all of the relevant purposesand principles set out in the Sentencing Act. It was contended that the sentencing ofMr Ross reflected these defects in New Zealand sentencing methodology.[39] Second, Huang was not really comparable to Mr Ross' offending.[40] Third, insufficient attention was given to the fact that ANZ did not sufferfinancial loss in this case and in fact, made a significant amount through interestcharges and fees.[41] Fourth, the purposes and principles of sentencing would be achieved in thiscase by a shorter term of imprisonment because of Mr Ross' previous good character,the low risk of reoffending and the effect of a sentence of imprisonment upon a personin his circumstances.AnalysisSentencing methodology in fraud cases[42] We do not accept the submission that the Taueki sentencing methodology whenapplied to fraud cases deflects sentencing Judges away from the purposes and16 R v Ross, above n 1, at [85].principles of the Sentencing Act.17 The sentencing of Mr Ross illustrates howthe relevant purposes and principles in the Sentencing Act are able to be integratedinto the Taueki sentencing methodology.[43] We have set out at [28] and [29] the purposes and principles of sentencingreferred to by Edwards J when sentencing Mr Ross. We agree, for the purposes of thiscase, they are the most relevant matters referred to in ss 7 and 8 of the Sentencing Act.We will now explain why we believe Edwards J incorporated these considerations intothe orthodox sentencing process that she followed.Starting point[44] In Mr Ross' case it was necessary to set the starting point by taking into accountthe following principles of sentencing:(a) his degree of culpability;(b) the gravity of his offending;(c) the seriousness of the offences compared with other types of offences;(d) the general desirability of consistency with similar offenderscommitting similar offences; and(e) the effect of the offending on ANZ.[45] In assessing Mr Ross' culpability the following factors were correctlyidentified by Edwards J:(a) Mr Ross' role as the "architect" of the deceptions perpetrated uponANZ. Mr Ross was the mastermind of the scheme. Without him therewould not have been any offending.17 R v Taueki [2005] 3 NZLR 372 (CA).(b) The offending involved an elaborate series of misrepresentations andthe use of numerous forged documents. It required careful planning.It also required persistent offending over a significant period of time.(c) Mr Ross abused his position as a respected businessman whom ANZexpected would act with honesty and integrity.(d) There was only one victim.[46] The first three of these factors are particularly significant. They are factorsreferred to by this Court in R v Varjan as being relevant when assessing a defendant'sculpability in fraud cases.18 They are also factors identified by the Sentencing Councilfor England and Wales when determining culpability in fraud cases.19 Our assessmentof these three factors leads us to conclude that Mr Ross was highly culpable.[47] Assessing the gravity of Mr Ross' offending requires consideration ofthe seriousness of the offences and the extent of the harm caused by his offending.In the present case, Edwards J correctly concluded that the deception charges, whichcarry a maximum penalty of 7 years' imprisonment, were the lead offences forsentencing purposes, even though the forgery charges carried a maximum penalty of10 years' imprisonment. Edwards J reasoned that the forgery offending formed partof the deceptions perpetrated by Mr Ross and his co-offenders and that thereforethe deception charges should be treated as the lead offences.20 We agree withthe Judge's approach.[48] Acknowledging the harm caused by the offending is a discrete principle ofsentencing. It is also a factor that is engaged when assessing the gravity of theoffending.[49] There are potentially four categories of harm that may arise in cases of fraud:(a) quantifiable actual loss;18 R v Varjan CA97/03, 26 June 2003.19 Sentencing Council Fraud (effective from 1 October 2014).20 R v Ross, above n 1, at [21].(b) quantifiable intended loss that does not materialise;(c) quantifiable potential loss which may not be intended; and(d) broader harm such as reputational loss.[50] In the present case, Mr Ross did not cause actual loss and it is clear he did notintend to cause any loss to ANZ when he embarked upon the scheme of deceptionsand forgery. His intention was that Emily Projects, and therefore he and hisco-offenders, would profit substantially from the Celestion project and that ANZwould also financially benefit from having lent money to Emily Projects.Nevertheless, the sums at risk were very high. While ANZ had security, the amountthat was at risk was significant. Had market conditions changed it is likely that ANZwould have lost many millions of dollars. It was for this reason that ANZ put in placea number of measures to ensure it was protected as best it could be. The existence ofpre-sale agreements for 80 apartments was an essential feature of the protections ANZrequired. It would not have risked lending to Emily Projects without the assurance ofthose pre-sale agreements.[51] Of significance in this case was the broader harm to ANZ caused bythe deceptions perpetrated by Mr Ross and his co-offenders. The banking industry isan integral component of the New Zealand economy and this country's reputation asa place where business and banking take place in an environment of honesty andintegrity. That broader reputation of ANZ was placed at risk by Mr Ross and hisco-offenders.[52] The harm suffered in this case falls into categories (c) and (d) we have set outat [49]. The harm suffered was not as serious as would have been the case if there hadbeen quantifiable actual loss, or quantifiable intended losses. Nevertheless,the potential losses were significant as was the broader harm suffered by ANZ that wehave referred to at [51].Comparisons[53] Ms Reed criticised the High Court Judge's reliance on Huang as being acomparable case.[54] Deception may involve a wide spectrum of conduct and consequences.For this reason, it is likely that points of difference will be able to be drawn betweenany two cases.[55] We accept that there are differences between Mr Ross' offending and that ofMr Huang. For example, Huang involved more money, more victims and resulted ina quantifiable loss. Those differences do not mean, however, that Huang is not acomparable case when setting the starting point for Mr Ross. Both cases involvedelaborate deceptions upon financial institutions to facilitate property developmentwith the aim of making substantial profits. While in Mr Huang's case there was actualloss, that factor is adequately reflected in the lower starting point adopted byEdwards J. The comparisons made by Edwards J with Huang were appropriate andlent weight to the starting point of 5 years and 6 months' imprisonment she adopted.[56] Mr Ross' case presented some unusual features. His culpability was very high,but the consequences of his offending were less serious than the other cases involvingdeception. The only case referred to us involving high levels of culpability butultimately no financial loss to the victim was Ministry of Social Development vPatterson.21 In that case the offender received an end sentence of 8 years'imprisonment after he pleaded guilty to 10 representative charges following his use ofover 100 false identities to receive $3.4 million in benefit payments from the Ministryof Social Development. Mr Paterson invested some of that money and made a profit.His case is distinguishable from the present case, however, because extreme effortswere required to recover the money from Mr Paterson. In addition, he had priorconvictions and showed no remorse. It is understandable why Mr Paterson's caseresulted in an end sentence significantly longer than that imposed on Mr Ross.21 Ministry of Social Development v Patterson HC Auckland CRI-2006-090-10420, 12 October2007.Discounts[57] A central feature of Mr Ross' appeal was the contention that a shorter term ofimprisonment would adequately meet the purposes and principles ofthe Sentencing Act.[58] This submission was underpinned by the reasoning that Mr Ross has in allother respects been a respected member of society, who takes full responsibility forhis wrongdoing and is unlikely to offend again. Entwined with this submission isthe proposition that a shorter term of imprisonment will:(a) hold Mr Ross accountable for the harm he did to ANZ and society;(b) promote a sense of responsibility for, and an acknowledgement ofthe harm he did;(c) denounce his conduct; and(d) deter others from similar offending.[59] We accept Mr Ross has in all other respects been a worthwhile member ofsociety, that he is unlikely to reoffend and that for him, any period of imprisonmentwill be a salutary lesson.[60] It is, however, essential that the courts denounce offending of the kindcommitted by Mr Ross. Denunciation involves the Court marking society'scondemnation of the offending in issue. This is, in the circumstances of this case, aparticularly important principle. Mr Ross enjoyed a privileged position in hiscommunity and embarked upon an elaborate and sophisticated large-scale deceptionin the expectation that he would profit significantly from his offending.Society, through the courts, must denounce such behaviour.[61] It is also important that the courts endeavour to deter others from committingsimilar offences. A function of the significant period of imprisonment that wasimposed on Mr Ross is to discourage others from committing similar offences throughfear of suffering the same consequences as Mr Ross. Deterrence is an importantsentencing principle in many cases of fraud where potential offenders can understandand reflect upon the consequences of offending.[62] In our assessment, the principles of denunciation and deterrence outweigh allother features that were said to justify a lower sentence of imprisonment for Mr Ross.[63] We do not accept that the discounts made by Edwards J were inadequate.Nor do we accept that any other form of discount was reasonably available.Overall assessment[64] Before settling upon the end sentence, Edwards J made an overall assessmentof whether or not a term of 4 years and 4 months' imprisonment would properly reflectthe purposes and principles of the Sentencing Act.22 She was satisfied that it did andit was the least restrictive outcome that was appropriate in the circumstances.[65] We agree with the conclusions reached by Edwards J when making her overallassessment. In this case, no sentence short of imprisonment was realistically available.Result[66] We are satisfied that the sentence imposed by Edwards J was not manifestlyexcessive. There are no grounds upon which we can allow the appeal.[67] The application for leave to appeal out of time is granted.[68] The appeal against sentence is dismissed.Solicitors:Cook Morris Quinn, Auckland for AppellantCrown Law Office, Wellington for Respondent22 R v Ross, above n 1, at [85].