PAUL NEVILLE BUBLITZ v R [2019] NZSC 138

PAUL NEVILLE BUBLITZ v R [2019] NZSC 138 [9 December 2019]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 91/2019[2019] NZSC 138BETWEEN PAUL NEVILLE BUBLITZApplicantAND THE QUEENRespondentSC 92/2019BETWEEN BRUCE ALEXANDER MCKAYApplicantAND THE QUEENRespondentCourt: Winkelmann CJ, Glazebrook and Ellen France JJCounsel: W P Jeffries for Applicant in SC 91/2019D H O'Leary for Applicant in SC 92/2019R K Thomson for RespondentJudgment: 9 December 2019JUDGMENT OF THE COURTThe applications for leave to appeal are dismissed.____________________________________________________________________REASONSIntroduction[1] The applicants, Mr Bublitz and Mr McKay, were convicted after a Judge-alonetrial before Toogood J of charges of theft by a person in a special relationship, anoffence under s 220 of the Crimes Act 1961.1 Mr Bublitz was convicted of fourcharges under s 220 (charges 10–13)2 and Mr McKay was convicted as a party to threecharges (charges 10–12). Their appeals against these convictions were dismissed bythe Court of Appeal.3 They seek leave to appeal to this Court.Background[2] The factual background is set out in detail in the Court of Appeal.4 Thesummary which follows of the key points from that material will suffice for presentpurposes.[3] Mr Bublitz had a property development business owned through variouscompanies which were part of a group known as the Hunter Capital Group (Hunter).The various arrangements at issue at trial were put in place to take advantage of marketconditions affecting commercial property developments in New Zealand after the2008 global financial crisis (GFC). In particular, Mr Bublitz sought to take advantageof the Crown Retail Deposit Guarantee scheme to make his portfolio more attractiveto investors. On the Crown case, the steps taken were a response to serious cashflowproblems being experienced by Mr Bublitz's ventures in the wake of the GFC.[4] The facts involve interaction between two companies which Mr Bublitz hadeffective control over during the period, Mutual Finance Ltd (Mutual) and ViaductCapital Ltd (Viaduct). The Crown case was that Mr Bublitz knowingly misappliedpublic funds raised by Mutual through a series of transactions between Mutual andViaduct which amounted to related party transactions under a deed of guarantee dated8 December 2009 between Mutual and the Crown (Mutual Crown guarantee).5 Therewere various requirements under the Mutual Crown guarantee relating to related partytransactions which Mr Bublitz did not comply with. Its case against Mr McKay, who1 R v Bublitz [2019] NZHC 222 [Verdicts judgment].2 Mr Bublitz was acquitted of a number of other charges.3 Bublitz v R [2019] NZCA 364 (Gilbert, Wylie and Thomas JJ) [CA judgment]. The Court allowedMr Bublitz's conviction appeal in part, setting aside convictions on charges 14 and 15 (making afalse statement as a promoter in a prospectus, an offence under s 242 of the Crimes Act 1961).Mr Bublitz's appeal against sentence was allowed.4 At [1]–[22].5 As matters transpired, Mr Bublitz maintained a Crown guarantee for Mutual, but not for Viaduct.was the Chief Financial Officer and Director of Viaduct at the relevant times, was thathe knew all of the relevant details.[5] The Court of Appeal explained that charges 10–12 related to a purchase byMutual:6 from a company associated with Mr Bublitz, Viaduct Capital Ltd (Viaduct),of loans Viaduct had made to companies in the Hunter group The Judgewas satisfied these loan purchases were related party transactions because hefound Mr Bublitz controlled both Mutual and Viaduct for the purposes of theMutual Crown guarantee at the relevant times. The Judge found that therestrictions on related party transactions in the Mutual Crown guarantee wereknowingly breached in respect of these transactions.[6] The other charge, charge 13, concerned advances Mutual made to one of theHunter group companies, Hilltop Ridge Farms Ltd. The Court of Appeal recorded thatToogood J was satisfied Mr Bublitz controlled both companies when "the advanceswere made and these also breached the related party transactions in the Mutual Crownguarantee".7[7] The Crown case relevantly required attention to be given to the definition of"control" in the Mutual Crown guarantee. That definition was as follows:(f) Control: a Person ("A") is "controlled" by another Person ("B") if:(i) A is a subsidiary of B under the law of incorporation of A orfor the purposes of GAAP [Generally Accepted AccountingPractice]; or(ii) B is able to exercise real or effective control, directly orindirectly, over A or over a material part of A's business oraffairs (whether pursuant to a contract, an arrangement or anunderstanding, as a result of the ownership or control ofsecurities or other interests in or issued by A, or otherwise)except where A is a natural person and B's control arisessolely under an enduring power of attorney granted by A infavour of B.[8] We interpolate here that the trial before Toogood J was the second trial for thismatter, an earlier trial having been aborted on 10 May 2017 after nine months of6 At [2] (footnotes omitted).7 At [3].hearing.8 After that trial, having considered expert evidence proposed to be called bythe defence, the Crown elected not to call evidence on other charges relating to thesame transactions. These other charges alleged breaches of the related party lendingrestrictions in a separate trust deed put in place by Mutual to protect its investors (theMutual Trust Deed).9 The applicants were acquitted on charges based on a breach ofrestrictions on related party transactions in another deed, the Viaduct Trust Deed.[9] At trial, the Crown succeeded on just one of the two definitions of "control"relied on under the Mutual Crown guarantee, namely, that under (f)(ii) dealing with"real or effective control". Toogood J was not satisfied beyond reasonable doubt thatMr Bublitz had control of Viaduct in the sense of the first definition phrased in termsof GAAP.10 The Judge considered the question under the second of the definitionswas simply whether Mr Bublitz "actually exercised control" at the relevant times.11 Itwas on this basis that Toogood J found that he did exercise control over Viaduct.[10] As the Court of Appeal observed, these outcomes (including the dismissal ofthe charges relating to the Mutual Trust deed concerning the same transactions) were"explicable only on the basis that the definition of 'control' in the Mutual Crownguarantee was wider" than that in the Viaduct and Mutual Trust Deeds.12 The Courtcontinued:13Whether the appellants understood the breadth of the restrictions on relatedparty lending in the Mutual Crown guarantee arising out of the extendeddefinition of "control", and whether they participated in the transactionsknowing they breached those restrictions, are issues lying at the heart of theseappeals against their convictions.[11] In the Court of Appeal the applicants argued the approach taken in the HighCourt to control was too vague and uncertain to amount to a requirement for s 220.8 A judgment to be delivered contemporaneously with this judgment deals with an application forleave to appeal by Mr Bublitz and one of the other defendants, Mr Morrison, in relation to variouscosts decisions concerning the aborted trial: Bublitz v R [2019] NZSC 139.9 These charges were dismissed on 21 September 2016.10 Verdicts judgment, above n 1, at [220]. Mr Bublitz was neither a shareholder nor director ofViaduct at the relevant times.11 At [225].12 At [10].13 At [10].Counsel for Mr Bublitz argued that the risk was that the approach taken led touncertainty as to when someone might be found to be criminally liable.[12] The Court of Appeal rejected this argument. It referred to R v Whale in whichit was accepted a person must be able to identify readily the nature and scope of theobligation, the breach of which would amount to a criminal offence.14 However, theCourt of Appeal considered the concept of "control" in the Crown Mutual guaranteehad an "absolute character" and was "sufficiently hard-edged to qualify as arequirement for the purposes of s 220".15 Indeed, s 220 itself used the very word"control".16[13] As to proof of Mr McKay's knowledge, the Court of Appeal noted his"important role in the acquisition of both Viaduct and Mutual and the subsequentadministration of their operations".17 The Court made the point that Mr McKay "tookthe lead throughout in considering related party issues under the applicable TrustDeeds and Crown guarantees for Viaduct and Mutual".18 It found that Mr McKay"must have appreciated the breadth of the provision and its significance in the contextof the proposed transactions between Viaduct and Mutual".19[14] Further, the Court said that Mr McKay must have known from his workingrelationship with Mr Bublitz that he exercised "effective overall control by the time ofthe transactions" at the relevant times.20 And, Mr McKay "must have been aware"that the transactions breached the terms of the Guarantee because he "more thananyone" had a "clear understanding of the exact financial position of the relevantentities" at the relevant times.21[15] Finally, the Court of Appeal dismissed the appeal against the decision not togrant a stay of the proceedings.14 R v Whale [2013] NZHC 731 at [489].15 CA judgment, above n 3, at [57].16 At [57].17 At [120].18 At [120].19 At [120].20 At [121].21 At [121].Proposed grounds of appeal[16] In this Court, Mr Bublitz and Mr McKay seek to argue first that in determiningwhich of the two possible definitions of "control" to adopt in the Mutual Crownguarantee, the Court should have applied the principle of strict construction applicableto penal statutes.22 On this basis, the applicants would argue that the GAAP definitionof control should have been adopted. As matters stood, it is said the application of thecriminal law was too uncertain. The applicants also challenge the respondent'ssubmission that the proposed appeal would seek to re-open a point not challenged inthe Courts below, namely, that Mr Bublitz had "real or effective control" of Viaduct atthe relevant time. They maintain this remained a live issue.[17] Second, the applicants wish to argue the Court of Appeal erred by not orderinga stay of proceedings given the delays involved.[18] Finally, Mr McKay seeks to challenge the decision of the Court of Appealupholding the Judge's findings he had the requisite knowledge.Assessment[19] The proposed appeal does not raise any question of general or publicimportance.23 Putting to one side the strength or otherwise today of the presumptionof statutory interpretation relied on by the applicants, the exercise here is not one ofstatutory interpretation but rather one of the construction of the Mutual Crownguarantee.24 That is a question confined to the particular facts. Further, there is realforce in the respondent's submission that leave to appeal should be declined on thebasis the argument that the use of the word "or" in the definition in the Mutual Crownguarantee deed should be read as "and" has insufficient prospects of success. (It is notnecessary to resolve the difference between the parties as to the scope of challengebrought in the Court of Appeal given these views.) Finally, the arguments based on a22 The applicants rely on Sweet v Parsley [1970] AC 132 (HL) at 149 per Lord Reid: "it is a universalprinciple that if a penal provision is reasonably capable of two interpretations, that interpretationwhich is most favourable to the accused must be adopted". See also Civil Aviation Department vMacKenzie [1983] NZLR 78 (CA) at 81.23 Senior Courts Act 2016, s 74(2)(a).24 See discussion of the principle in Ross Carter Burrows and Carter Statute Law in New Zealand(5th ed, LexisNexis, Wellington, 2015) at 336.lack of certainty were all evaluated by the Court of Appeal and nothing raised by theapplicants calls into question that careful assessment.[20] Whether a stay of proceedings should have been ordered is also a fact-specificinquiry. The Court of Appeal applied the principles in Wilson v R.25 There is nochallenge to those principles. The Court of Appeal noted there was no direct challengeto the correctness of the decision of Lang J declining to grant a stay prior to thebeginning of the second trial.26 Counsel for Mr Bublitz also acknowledged the secondtrial was a fair trial. It was against that background that the Court of Appeal foundthere was "no material change of circumstance" justifying revisiting the decision ofLang J.27 Nothing raised by the applicants casts doubt on that conclusion. In addition,Mr Bublitz received a significant sentence discount because of the delay.[21] Finally, in terms of Mr McKay's knowledge, as the respondent observes, thereare concurrent factual findings on this point. Nothing raised by Mr McKay suggeststhis Court need revisit the point.[22] For the same reasons, nothing raised by the applicants gives rise to theappearance of a miscarriage of justice.28[23] The applications for leave to appeal are accordingly dismissed.Solicitors:Beca & Co, Auckland for Applicant in SC 91/2019High Street Consultancy, Auckland for Applicant in SC 92/2019Crown Law Office, Wellington for Respondent25 Wilson v R [2015] NZSC 189, [2016] 1 NZLR 705.26 CA judgment, above n 3, at [43]. See R v Bublitz [2017] NZHC 2251.27 At [44].28 Senior Courts Act, s 74(2)(b).