MICHAEL RICHARD SMITH v R [2021] NZCA 169

MICHAEL RICHARD SMITH v R [2021] NZCA 169 [6 May 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA481/2019CA482/2019[2021] NZCA 169BETWEEN MICHAEL RICHARD SMITHApplicantAND THE QUEENRespondentHearing: 22 March 2021Court: Miller, Brewer and Dunningham JJCounsel: M J English and JAS Thompson for ApplicantJ E Mildenhall for RespondentJudgment: 6 May 2021 at 3.00 pmJUDGMENT OF THE COURTThe application for an extension of time to appeal is declined.____________________________________________________________________REASONS OF THE COURT(Given by Dunningham J)Introduction[1] On 24 July 2015, the applicant, Michael Richard Smith, was sentenced tofive years' imprisonment after being found guilty at a judge-alone trial on 21 chargesof theft by a person in a special relationship.1 On the same day, Mr Smith sought a1 R v Smith [2015] NZDC 14227.sentence indication on the balance of the dishonesty offending charges he still faced.A sentence indication of two years' imprisonment, cumulative on the earlier sentence,was given. Mr Smith accepted the sentence indication, pleaded guilty and wassentenced accordingly.[2] Mr Smith now seeks to appeal his overall sentence on all charges onthe grounds that:(a) the starting point was too high in respect of both sentences;(b) there should have been a greater adjustment to reflect totality; and(c) insufficient discounts were applied for mitigating factors.Application to extend the time for filing the notice of appeal[3] The applicant filed an appeal against both conviction and sentence on20 September 2019, almost four years outside the permitted timeframe and has appliedto extend the time for filing the appeal.2[4] Mr Smith relies on an affidavit sworn on 21 May 2020 to support an applicationto adduce fresh evidence and a bail application, to explain the delay in filingthe appeal. In the affidavit he describes the pressures that led to him acceptingthe sentence indication, saying he felt "overwhelmed, and caved in underthe immense pressures". He then explains the difficulties he has faced in advancinghis conviction appeal from prison, noting in particular that some of the evidence hewished to rely on "simply can't be obtained from prison". However, there is noinformation which, on its face, explains why he could not file his sentence appeal untilalmost four years after the statutory timeframe for doing so.2 Criminal Procedure Act 2011, s 248(2).[5] That said, in determining applications to extend the time for filing,the touchstone is the interests of justice in the particular case.3 The factors which arerelevant to that issue were summarised in R v Lee as follows:4 factors of relevance to the balancing test include the wider interests ofsociety in the finality of decisions, the strength of the proposed appeal,whether the liberty of the subject is involved, the practical utility of anyremedy sought, the extent of the impact on others affected and onthe administration of justice, and any prejudice to the Crown.The decision in Lee also acknowledged that "the strongest factor favouring anextension of time to appeal being granted must be the strength of the appeal".5[6] Counsel for Mr Smith, Mr English, now submits that it is in the interests ofjustice to grant an extension of time for filing, particularly as all that remains isthe sentence appeal.6 He says, being a sentence appeal only, the finality of the decisionis not of such moment, there is no impact on the victims, no impact onthe administration of justice and no prejudice to the Crown.[7] Given the importance of the merits of the appeal to the decision on leave, we goon to consider them despite the lack of explanation for the delay.The offending[8] The first 21 charges7 relate to the period from 2003 to 2005 when Mr Smithheld himself out to be a property investment specialist and accountant and promotedhis services in the Rotorua area. He ran public property workshops and seminars withthe support of well-known public figures, including John Hawkesby andMartin Hawes. As a result of these promotions, and through other social connectionsincluding church, Mr Smith persuaded these people he could help them invest inproperty purchases or in developing properties they already owned. This is despitethe fact Mr Smith is not a qualified accountant, nor a property expert and has norelevant professional qualifications.3 R v Knight [1998] 1 NZLR 583 (CA) at 587.4 R v Lee [2006] 3 NZLR 42 (CA) at [99].5 At [108].6 The appeal against conviction was formally abandoned on 23 February 2021.7 We adopt the term "charges" throughout even though most of the charges pre-date the CriminalProcedure Act 2011 and are referred to as "counts" in the documents.[9] Mr Smith got his clients to pay in advance for services such as renovating andrelocating houses and arranging subdivisions of land. However, he did not usethe payments he received for the agreed purposes. Instead, he used the money for hisown purposes, including personal ventures and funding his own lifestyle with luxuryaccommodation and expensive vehicles. The victims of that offending weretwo individuals; Ms McDonald and Mr Ellis, and four couples; Mr and Mrs Heard,Mr and Mrs Walford, Mr and Mrs Fowler, and Mr and Mrs Bunn.[10] The transaction involving Mr Ellis and the Bunns was the most complexarrangement and caused the greatest loss. It required the Bunns to sell their rural blockto Mr Smith, who would then contemporaneously onsell the property to a companyincorporated by Mr Ellis for more money. The property would then be subdivided anda two acre lot containing the house and curtilage would be sold back to the Bunns.The arrangement of onsales was intended to create a surplus of just over $300,000which was to be used to meet the cost of subdivision and property development work.Instead, Mr Smith diverted it for his own purpose. The outcome was that Mr Ellis wasleft with ownership of the property subject to a substantial mortgage to Westpac, whichhe was unable to service and which brought him close to bankruptcy. It also leftthe Bunns without a home or any means by which they could recover it.[11] Mr Smith was made bankrupt on 7 March 2005. Following bankruptcy,Mr Smith engaged in a number of dishonest transactions against a number of clients.[12] In 2007 he stole $42,276.62 in IRD family support payments that were due toKaren Conaglen. He had made the application to IRD without her knowledge orapproval.[13] In 2008 he diverted a GST return which was to be paid to a firm of accountantsto pay fees Mr Smith owed. Mr Smith cancelled the firm's authority to have the taxrefund paid to it and had it paid to himself. He then received an additional $3,241.92from the firm, being the balance between the refund it never received and its fee.[14] In 2010 Mr Smith committed a number of offences. He fraudulently obtained$14,000 from Joanne Southwick purportedly for accountancy work, but instead usedthe money for his own purposes. He dishonestly signed a Companies Office Consentof Director and Shareholder document for a new company in the name ofAdam Lambert, when Mr Lambert had instructed him he did not wish to incorporatea company. He was also engaged by Karl Dornan to advise him on tax-related matters.Mr Dornan suffered penalty fees of $7,000 for failing to file the tax returns which heunderstood Mr Smith would file for him. Mr Smith also advised Mr Dornan to placehis house in a shelf company of which Mr Smith was a director and then proposedother schemes by which the house would be sold to Mr Smith cheaply before beingrepurchased by a trust. When Mr Dornan refused to go through with any of theseproposals, Mr Smith placed a caveat over the property. Mr Dornan incurred costs inhaving the caveat removed. In respect of other clients, Tina Eden andGeoffrey Mauroa, Mr Smith dishonestly collected $6,781 from IRD and retained it forhimself. He also dishonestly applied to the Companies Office for a two per cent stakeholding in a company owned by Ms Eden and Mr Mauroa.[15] In 2011 he charged a client, Frian Wadia, for work registering a company.When ordered by the Disputes Tribunal to pay her $264, he did not do so. She alsodiscovered he had not paid for registration of her company and she had to pay thatsum again. In the same year Mr Smith also failed to pay wages to two of hisemployees. When Price Waterhouse Cooper was appointed as liquidators of one ofMr Smith's companies in November 2012, he deliberately destroyed documents hewas required to provide to the liquidators.[16] Mr Smith was arrested on these charges on 22 November 2012.[17] He subsequently incorporated two new companies. He supplied falseinformation to New Zealand Media and Entertainment to obtain a credit account withthem for one of the companies. He obtained advertising valued at $20,847.42, but didnot pay the invoices issued. In February 2015, he applied on behalf of the samecompany for a Z Energy fuel card. He accrued a debt of $4,627.27 on that fuel cardwhich was never paid.The first trial[18] Prior to the first trial in 2015, the defence applied to sever the 58 chargesrelating to the period from 2003 to 2012 so they could be heard over five separatetrials. That proposal was modified by agreement and the Judge accepted anappropriate distinction could be made between the charges which arose beforeMr Smith's bankruptcy and those which arose after. The 42 charges relating tothe pre-bankruptcy period were subsequently condensed to 26 charges. Those chargeswere heard in a Judge-alone trial which ran for more than a month. Mr Smith wasfound guilty of 21 of the 26 charges.The first sentencing decision[19] Sentencing proceeded on 24 July 2015. Judge Spear outlined the nature ofthe dishonest transactions. He acknowledged the amount of the loss was somewhatlower than the sum of $684,000 claimed by the Crown. Nevertheless, he said it wasat least $500,000. He added:8But it is not just the financial loss, there is the emotional harm that you havedone these people and, in particular, because of their age you have robbedthem [of] their nest egg for retirement and this is not one that they will be ableto recover. Your effect upon their lives has been devastating and for that youmust clearly be held to account.[20] In terms of the aggravating features the Judge observed the offending wascarefully planned, saying "[i]t was deliberate and it involved you deceiving thesepeople time and time again."9 He noted the total amount involved and he also notedthe number of victims and the effect on them as evidenced by the victim impactstatements. He also pointed out that those aggravating features:10 really pale in comparison to the breach of trust that was involved in thisoffending. Each of these people placed in you a high degree of trust and thatwas because of the way that you sought them out and presented yourself tothem.He then added:118 R v Smith, above n 1, at [16].9 At [17].10 At [20].11 At [20]. the reason you were able to continue as long as you did was because youwent out and found more potential victims, obtained funds from them, andused that to keep other clients (as it were) content even though you wererobbing them blind.The Judge concluded it was in effect a "Ponzi scheme" and "[i]t was as dishonest ascheme as can be imagined".12[21] The Judge identified no mitigating circumstances of the offending and he sawno realistic potential for recovery. He discounted any suggestion of remorse and heconsidered Mr Smith was at high risk of reoffending, noting that further charges hadbeen laid earlier that year. While he acknowledged Mr Smith had a troubled familylife, some personal tragedies, and a "raging problem with alcohol and drugs for someyears", he determined a sentence of five years' imprisonment was warranted havingregard to the principle of accountability.13 He declined to impose a minimum periodof imprisonment, noting Mr Smith had little in the way of previous convictions.14Sentencing on the balance of the charges[22] As soon as he was sentenced on the first tranche of charges, Mr Smith soughta sentence indication on the remaining charges. An amended summary of facts wasprepared for the sentence indication. The 16 existing charges were condensed into 10.In addition, he faced three additional charges relating to the 2015 offending.[23] In giving his sentence indication on the remaining 13 charges, the Judge saidthe facts suggested a three-year sentence might be justified, but he accepted the Crownsubmission that an additional two-year sentence would reflect the totality ofthe offending and recognise the guilty pleas which came at a relatively late stage.It was also said to take into account Mr Smith's agreement to participate in restorativejustice in respect of all matters. The Judge also indicated that, as part of the sentenceindication, he would not impose a minimum non-parole period but, if the appellanthad gone to trial and been found guilty of those additional charges, the Court wouldgive serious consideration to a minimum non-parole period.12 At [20].13 At [25].14 At [26].[24] The Judge encouraged Mr Smith to take time to reflect on the indication but,after speaking with his lawyer, Mr Smith confirmed he wished to accept it.[25] In the period between the sentence indication and sentencing itself, Mr Smithparticipated in a restorative justice conference with one of the victims, Ms Southwick.We assume she was the only victim prepared to participate.[26] When sentencing Mr Smith, the Judge briefly described the offending,saying:15What occurred of course by these new charges was a continuation of your oldpractice of gaining the confidence of others and effectively stealing fromthem. Again, it was relatively sophisticated in some respects but demonstratedyour plausibility and your ability to gain the confidence of people quitequickly and that of course was the hallmark of all the offences in the trial thatwent to hearing earlier this year.[27] The Judge noted Mr Smith's positive participation in a restorative justiceconference, as well as his statement that he wished to pay everyone back when he gotout of prison, but said "no one could have any confidence that you will have the abilityto do so on your release".16 The Judge also acknowledged the statement from counselthat Mr Smith was remorseful and that he accepted he had "certain psychologicaldifficulties" which he was willing to address.17 The Judge expressed the hope that thatresolve was maintained. The indicated sentence of two years' imprisonment wasimposed.18The sentence appeal[28] Mr English acknowledges there is no tariff as such for dishonesty offending.However, there are a number of relevant factors to consider, including:19 the nature of the offending, its magnitude and sophistication; the type,circumstances and number of the victims; the motivation for the offending;the amounts involved; the losses; the period over which the offendingoccurred; the seriousness of breaches of trust involved; and the impact onvictims.15 At [8].16 At [7].17 At [11].18 At [10].19 R v Varjan CA97/03, 26 June 2003 at [22].[29] Mr English relies on what he describes as four "broadly comparable cases" tosay the sentence in this case was excessive, particularly when the Judge did notarticulate the starting point which inevitably must have been higher than the endsentence imposed.[30] In McGregor v R, Mrs McGregor pleaded guilty to 10 charges of theft by aperson in a special relationship.20 She was employed by Perpetual Trust Ltd whereshe had responsibility for the management of estates, trusts and personal affairs ofclients. The offending involved 12 different victims where, using a variety of methodsto use client funds, she took for her own purpose and without authority $472,917.20.The offending spanned most of the five-and-a-half-year period of her employment.There was no loss to the victims in that case as Perpetual Trust indemnified them.The Judge adopted a starting point of five years' imprisonment which was upheld onappeal.[31] In Robertson v R, Mr Robertson was convicted of 23 charges of theft by aperson in a special relationship, 11 charges of obtaining by deception and four chargesof dishonest use of a document.21 Mr Robertson sold software packages intended toassist his customers to trade on share, foreign exchange and commodities markets.As the programmes were not easy to use, leading to complaints, Mr Robertson thenoffered to invest for the victims, representing himself as an expert trader. However,he did not invest the money but used it for his own purposes to fund a lavish lifestyle.The net loss to victims from his offending over the six-year period was assessed to beapproximately $1,200,000 plus AUD 271,200. There were 22 victims, mostly retiredor approaching retirement age. The Judge's starting point of seven years'imprisonment was upheld on appeal.[32] In Cherry v R, Mr Cherry pleaded guilty to two charges of making falsestatements by a promoter, one charge of theft by misappropriation and one charge oftheft by a person in a special relationship.22 Mr Cherry was an independent financialadviser who undertook to invest clients' funds on a professional basis. Over a20 McGregor v R [2015] NZCA 565.21 Robertson v R [2020] NZCA 218.22 Cherry v R [2013] NZCA 636.five-year period he received over $9,000,000 of which he dishonestly misappropriatedor stole $4,700,000. On the collapse of his business the victims collectively lost over$5,000,000. The investing clients were predominantly of modest means and thecollapse of his business had a catastrophic impact on their retirement. An aggravatingfeature of the offending was that Mr Cherry induced his clients to take out mortgagesagainst equity in their homes to invest with him. On appeal the eight-year startingpoint was held to be within range.[33] Finally, in Kiro v R, Mr Kiro pleaded guilty to 10 charges of theft by a personin a special relationship, 10 charges of forgery-related offending, one charge ofobtaining by deception and one charge of dishonestly using a document.23 Mr Kiropresented himself as a highly qualified investment adviser and provided falsedocuments to support this claim. Over a period of 16 months he defrauded his victimsin the total sum of $249,765, although he made repayments of $62,000. In theDistrict Court, the Judge adopted a starting point of four years' imprisonment on thelead charges of theft by a person in a special relationship and uplifted it by a further18 months for the other dishonesty-related offences. The Court held that afive-and-a-half-year starting point for the totality of the appellant's offending was"stern, but not beyond the pale".24[34] Having regard to these cases, Mr English submits a starting point of four anda half to five years would have been appropriate. While acknowledging that theoffending was on a fairly large scale and not unsophisticated, it did not involve themagnitude of fraud in Robertson or Cherry. While there were a significant number ofvictims in this case, Mr English considered none were especially vulnerable, whereasin McGregor the victims were very vulnerable, being people unable to manage theirown affairs.[35] The fact the offending was motivated by greed was not a distinguishing feature.All the cases involved an element of greed. In terms of the amounts involved the lossof $610,0000 is only a little above McGregor and Kiro, but well below eitherRobertson or Cherry. While acknowledging the span of the offending was great,23 Kiro v R [2016] NZHC 1550.24 At [47].Mr English says the majority of the offending took place between 2003 and 2005 andin all the comparable cases, the offending took place over a number of years.[36] Mr English acknowledges there was a significant breach of trust in this casebut considers that all the cases involve a breach of trust and the breach in McGregorwas far greater. He also acknowledges there was a significant impact on the victims.However, Mr English submits the financial losses were reduced to some extent as insome cases properties were able to be sold for more than they were purchased for and,in the case of Mr Ellis, Mr Smith assisted him to negotiate reducing the bank debt from$300,000 to around $31,000. Overall, Mr English submits there is nothing in thisfactor which distinguishes it from the other cases.[37] Mr English points out that as the sentence took into account mitigating factorssuch as guilty pleas on the later charges and participation in restorative justice,the starting point must have been more than seven years. This would place it in a moreserious category than Robertson, which he submits is in error.[38] Mr English also submits there were mitigating factors which should have,but did not, attract a discount. Mr Smith was given no discrete discount for histroubled background, his issues with alcohol and drugs, and the steps he had takenprior to sentencing to address these issues. This is contrary to Zhang v R, wherethe Court of Appeal recognised that pre-existing addiction and efforts by defendantsto address the underlying causes of offending are relevant mitigating factors forsentencing.25 Mr English also queries what discount was actually given for the guiltyplea and Mr Smith's participation in restorative justice.[39] Given the starting point should have been five years, and there should havebeen discounts applied for those factors, Mr English says the end sentence should havebeen less than five years and the seven-year sentence is manifestly excessive.25 Zhang v R [2019] NZCA 507, [2019] 3 NZLR 648 at [139]–[150].Discussion[40] As both counsel accept, there is no guideline judgment for fraud offending andthe culpability of a particular offender must be undertaken by reference tothe aggravating features of fraud offending as set out in [28] above.[41] While, of course, the courts must take into account the general desirability ofconsistency in sentencing in respect of similar offenders committing similar offencesin similar circumstances,26 the ultimate question for us is whether the starting pointadopted is within an acceptable range. We must have regard to all the relevantprinciples of sentencing, including the gravity of the offending in the particular case,the degree of culpability of the offender and the maximum penalties which areprescribed for the offences.27 This approach was articulated in Arnott v R, where thisCourt said:28 there is questionable utility in applying a rigid comparative analysisbetween sentences imposed in circumstances which inevitably differ in at leastone material respect. Consistency is a necessary value but it does not imposeabsolutes. In an area of offending like serious fraud, the leading authoritiesset the applicable parameters. The question is always whether the startingpoint adopted is within an acceptable range by reference to the Judge'sassessment of the particular culpability factors.[42] In our view, there were a number of aggravating features of this offending.In terms of the nature and magnitude of the offending, we accept the Crownsubmission that Mr Smith committed multiple categories of deceit spanning well overa decade and involving a very large number of transactions. Mr Smith was ultimatelysentenced on 34 charges. This is many more charges than in the majority of casesreferred to despite the Crown condensing the charges to Mr Smith's advantage.29Indeed, this case was remarkable for the number and variety of methods by whichMr Smith took money and used it for his own purposes.[43] In terms of the type of circumstances and the number of victims, there weremore than 20 victims, most of whom were individuals who looked on Mr Smith as26 Sentencing Act 2002, s 8(e).27 Sections 8(a) and (b).28 Arnott v R [2015] NZCA 236 at [12].29 Mr Robertson was sentenced on 38 charges but offended over a shorter period: Robertson v R,above n 21.both a friend and trusted adviser. There was, as is so often the case, a significantbreach of trust involved in almost all the offences.[44] The motivation for the offending was for personal gain and to fund a lifestylewhich Mr Smith could not otherwise afford.[45] The amount of the fraud was in excess of $610,000, with no hope of recovery.[46] The particularly aggravating features of this offending are the period overwhich it occurred and the fact Mr Smith was not dissuaded by his bankruptcy in 2003from returning to investment activities. More importantly, he continued to offend afterhe was arrested and charged in 2012. This factor goes to both his culpability and theweight which can be placed on any expressed remorse.[47] We do not agree that the five-year starting point imposed on the first 21 chargesof theft by a person in a special relationship was excessive. Each charge has amaximum seven-year sentence and there can be no criticism of a five-year startingpoint having regard to the gravity of the offending. There were also no relevantpersonal mitigating factors raised which justified reducing that sentence.[48] When sentencing Mr Smith for the further offending, beingthe post-bankruptcy offending and the post-arrest offending, the latter of whichspanned a nine-year period from 2007 to 2015, the Judge considered a starting pointof three years, but reduced it to two years, taking into account considerations oftotality, Mr Smith's participation in restorative justice and a modicum of remorse andrehabilitative potential. Thus, the sentence did take into account those mitigatingfactors.[49] We do not consider there was a basis for giving a further discount forMr Smith's troubled background, his issue with alcohol and drugs, and the steps hehad taken prior to sentencing to address these issues. It is clear the Judge did haveregard to Mr Smith's rehabilitative potential, as demonstrated by his efforts to addresshis drug and alcohol issues. However, there was no basis on which to give him adiscount for his issues with alcohol and drugs. This is because there was no link drawnwhatsoever between those issues and the offending. Notwithstanding any issues withdrugs or alcohol, it seems Mr Smith was a highly functioning individual who wascapable of maintaining a professional front with all the people he was dealing with,and there was no suggestion these issues led to his offending.[50] Overall the starting point must have been somewhere between seven andeight years (noting that the sentence was reduced from eight years in part to reflecttotality). That places it as roughly equivalent offending to Robertson and Cherry.While those cases both involved more money, in this case, there were many charges,over a longer period of time, and there was offending which continued after bothMr Smith's bankruptcy and arrest.[51] In our view, taking those factors into account, we cannot say that the startingpoint of the sentence was too high and, more importantly, we cannot say the endsentence of seven years was manifestly excessive such that a different sentence shouldbe imposed.[52] Given we do not consider the appeal has merit, and the four-year delay in filingthe appeal is not explained, we decline the application for an extension of time.Result[53] The application for an extension of time to appeal is declined.Solicitors:Crown Law Office, Wellington for Respondent