HILL v R [2017] NZCA 286

HILL v R [2017] NZCA 286 [6 July 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA397/2016[2017] NZCA 286BETWEEN RICHARD HENRY HILLAppellantAND THE QUEENRespondentHearing: 14 February 2017Court: Miller, Mallon and Peters JJCounsel: R B Squire QC for AppellantI R Murray for RespondentJudgment: 6 July 2017 at 10.30 amJUDGMENT OF THE COURTThe appeal against conviction is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Peters J)[1] The appellant, Mr Hill, appeals against his conviction on a representativecharge of criminal breach of trust.1 Mr Hill was convicted on 26 July 2016,following a judge-alone trial before Judge Crosbie in the District Court at Napier.2Mr Hill was sentenced to eight months' home detention and 100 hours communitywork.1 Crimes Act 1961, s 229.2 R v Hill [2016] NZDC 13909.Grounds of appeal[2] The appeal is brought pursuant to s 385(1) Crimes Act 1961, the prosecutionhaving been commenced prior to 1 July 2013.3 The grounds of appeal are, first, thatthe verdict was unreasonable and, secondly, that there has been a miscarriage ofjustice in that the Judge failed to properly apply the required burden and standard ofproof.[3] Section 385(1) provides:(1) On any appeal to which subsection (1AA) applies, the Court of Appealor the Supreme Court must allow the appeal if it is of opinion—(a) that the verdict of the jury should be set aside on the groundthat it is unreasonable or cannot be supported having regardto the evidence; or(b) that the judgment of the court before which the appellantwas convicted should be set aside on the ground of a wrongdecision on any question of law; or(c) that on any ground there was a miscarriage of justice; or(d) that the trial was a nullity—and in any other case shall dismiss the appeal:provided that the Court of Appeal or the Supreme Court may,notwithstanding that it is of opinion that the point raised in theappeal might be decided in favour of the appellant, dismiss theappeal if it considers that no substantial miscarriage of justice hasactually occurred.[4] On the face of the provision, only a jury verdict may be appealed as beingunreasonable. However, the Courts treat that ground as equally available for anappeal against a judge-alone verdict.43 Criminal Procedure Act 2011, s 397(2).4 R v Connell [1985] 2 NZLR 233 (CA) at 237; R v Eide [2005] 2 NZLR 504 (CA) at [19]–[21];and R v Slavich [2009] NZCA 188 at [30].Charge[5] The charge against Mr Hill was:5... that Richard Henry Hill between 1 October 2003 and 14 June 2005 at Napierbeing a trustee, dishonestly and contrary to the terms of the trust, convertedclient funds from the McKay Hill Lawyers Trust Account, of which he was atrustee, to a use not authorised by the said trust.[6] Accordingly, the Crown was required to prove that:(a) between 1 October 2003 and 14 June 2005, Mr Hill was a trustee ofclient funds in McKay Hill's (firm) trust account (trust account);(b) he "converted" those funds to a use not authorised by the clientsconcerned; and(c) he did so dishonestly.6[7] The act of conversion relied upon, being an act in derogation of the rights ofthe owner (or client in this case), was the repeated transfer of client funds in the trustaccount to the firm's office account ("office account"). These transfers were effectedby Ms Anne McAllister, the firm's trust account manager from January 2002onwards and the principal Crown witness. The issue at trial was whether Mr Hillhad authorised Ms McAllister to make the transfers and, if so, whether he had doneso "dishonestly", that is knowing that the transfers were of funds held for clients andnot for the firm.[8] The Judge's verdict largely turned on his assessment of the credibility ofMs McAllister and of Mr Hill.7 The Judge rejected Mr Hill's evidence and acceptedMs McAllister's.[9] Mr Squire QC submitted to us, on behalf of Mr Hill, that the Judge erred inboth respects, and that the verdict was the product of an unfair trial, resulting in a5 Crimes Act, s 229.6 As defined in s 217 of the Crimes Act 1961.7 R v Hill, above n 2, at [10].miscarriage of justice. He submitted that Mr Hill's conviction should be quashed,with "no room for the application of the proviso" to s 385(1).[10] Mr Squire's submissions as to the Judge's treatment of the evidence werevery detailed and there is force in the Crown's submission that they amounted to nomore than arguments as to why the Judge might have preferred Mr Hill's evidence.The Crown submitted that it was not "enough to show that the Judge could havereached a different conclusion, the appellant must satisfy the court that theconclusion reached was simply not an available one". Crown counsel also referredus to the Supreme Court's decision in R v Owen and the summary in the headnote ofthe task at hand:8A verdict would be unreasonable when it was a verdict which, having regardto all the evidence, no jury could reasonably have reached to the standard ofbeyond reasonable doubt. The appellate court had always to keep in mind,however, that its role was to perform a review function and not to substituteits own view of the evidence; it had to give appropriate weight to suchadvantages as the jury may have had over the appellate court, assessment ofthe honesty and reliability of witnesses being a classic example; the weightto be given to individual pieces of evidence was a jury function; reasonableminds could disagree on matters of fact; and appellate courts should notlightly interfere with the jury's findings of fact. An appellant invokings 385(1)(a) had to articulate clearly and precisely in what respect the verdictwas said to be unreasonable and why, after making proper allowance for thepoints made above, the verdict should nevertheless be set aside (see paras[13], [14]).Background[11] At all material times Mr Hill was an experienced commercial solicitorpractising in Napier.[12] Mr Hill graduated in 1970 and he became a partner in a firm in Hawkes Bayshortly thereafter.[13] Mr Hill and Mr Gerald McKay formed the firm in 1985. Mr Hill was thefirm's trust account partner from 1998 until 14 June 2005. Mr Hill retired from thefirm on 30 November 2006.8 See headnote for R v Owen [2007] NZSC 102, [2008] 2 NZLR 37.[14] The New Zealand Law Society ("NZLS") intervened in the firm in 2010, atwhich time the trust account was more than $1 million "overdrawn" in the sensereferred to below. Mr Hill and Mr McKay were both prosecuted, Mr McKay's trialtaking place shortly before Mr Hill's.Operation of trust account[15] As a general rule, a firm's trust account holds client and firm funds. Anyclient funds are held on trust for the client concerned.[16] The firm's own funds, referred to as "the firm's interest", are available as a"float", capable of being advanced to cover any deficiency in the trust account, forinstance to pay disbursements for a client for whom the firm does not hold money onaccount. The critical matter for any firm is to ensure that the balance of the trustaccount is sufficient to pay every client the sum due to them if all were to seekpayment at the same time.[17] The LAWBASE trust account software, which the firm installed inApril 2001, records movements in the firm's interest in the FIRMS.1 ledger. A debitbalance on the face of the ledger means that the firm's interest is overdrawn, whichin turn means that the firm has applied client funds in breach of trust. As Mr Hillsaid in evidence, and as every lawyer knows, "thou shalt not overdraw the trustaccount".[18] In this case, the firm's interest was first overdrawn in April 2001, whenMs Dorothy Traves, a long standing employee, was the trust account manager. Thefirm's interest was then overdrawn intermittently until February 2002, which is aboutthe time Ms McAllister became the trust account manager.[19] The firm's interest was never again in credit, at least for the period coveredby the charge. On 1 October 2003, being the opening date of the period covered bythe charge, the firm's interest was overdrawn by $15,471.60. It was overdrawn by$116,073.53 on the last date, 14 June 2005. The debit fluctuated between thesedates, being about $33,000 at its lowest on 12 October 2004 and more than $285,000at its highest on 15 May 2005.[20] The firm's interest and the bank statements record transfers, often weekly, ofwhat were inevitably client funds in the trust account to the firm's office account.From the office account the funds were applied to expenses such as rent, officeexpenses, wages and salaries (fortnightly), and also to pay partners' drawings (alsofortnightly).[21] By way of example, on 22 January 2004, $27,000 was transferred from thetrust account to the office account and from there applied to pay expenses, includingwages of $26,884.74. At the time of the transfer, the firm's interest was overdrawnby $54,347.84. The transfer increased the debit balance to $81,347.84.[22] Similarly, on 9 September 2004, $12,500 was transferred from the trustaccount to the office account and from there applied to pay expenses, as well aspartner drawings. At the time of the transfer, the firm's interest was overdrawn by$96,587.67. The transfer increased the deficit to $109,087.67.[23] There was no dispute as to the fact of these transfers or that Ms McAllistermade them, that is she went online and transferred the money from the trust accountto the office account. The Crown case, and her evidence, was that Mr Hillauthorised her to make the transfers, knowing that the firm's interest was insufficientand therefore the transfers had to be of funds belonging to clients.[24] The defence, as Mr Squire put it in his submissions, was that:[Mr Hill's] defence to the charge, as indicated by the evidence he gave, wasthat at no point while he was the trust account partner up until his resignationfrom that position on 14 June 2005, was he aware the Firms1 Account wasoverdrawn and any authority he might have given, implicitly or otherwise,for funds to be transferred from that account to the office or general accountaccordingly did not amount to conversion of the funds.(footnotes omitted)[25] The Judge rejected Mr Hill's evidence on the basis that it was"implausible, unreliable and not credible".9 Having done so, the Judge put that9 R v Hill, above n 2, at [193].evidence to one side and considered whether the evidence adduced by the Crownwas sufficient to prove the elements of the offence.10 He held it was.Evidence[26] We now summarise Ms McAllister's evidence and that of and for Mr Hill, toput Mr Squire's submissions in context.Ms McAllister[27] Ms McAllister confirmed that she and her assistant alone were able to entertransactions in the firm's LAWBASE system and to transfer funds from one bankaccount to another.[28] Ms McAllister confirmed that she had effected the transfers in issue, eventhough she knew the firm's interest in the trust account was overdrawn. In thisMs McAllister said she was doing as Ms Traves had done before her.[29] We should mention here that there was also evidence before the Judge oftransfers on several days when Ms McAllister was away from the office, suggestingthat someone — Mr McKay or Mr Hill — had asked the assistant to make them.[30] For instance, on 1 October 2003, when Ms McAllister was on leave, $10,000was transferred from the trust account to the office account, increasing the debitbalance in the firm's interest to $18,098.44.[31] Ms McAllister was also away on 15 July 2004, when $25,500 was transferredincreasing the debit balance to more than $87,000. Similar transfers occurred whenshe was away on 5 August and 20 and 23 September 2004.[32] Ms McAllister said that Mr Hill knew the firm's interest was overdrawn fortwo reasons.10 At [197].[33] First, Ms McAllister continued a practice that Ms Traves had initiated ofmeeting Mr Hill and Mr McKay every Monday to discuss the firm's financialposition. Ms McAllister's evidence was that she would have the balances of the trustand office accounts, interest bearing deposits, and the payments that the firm wasrequired to make that week, and that she would also have the balance of the firm'sinterest.[34] Ms McAllister's evidence was that Mr Hill would authorise her to makepayments and tell her what bills to pay, and that he would authorise a transfer fromthe firm's interest to the office account and, before the office account was on directcredit (essentially online banking), Mr Hill would sign a cheque drawn on the trustaccount. Ms McAllister said that she provided the balance of the firm's interest inthe trust account each week.[35] Mr Squire cross-examined Ms McAllister about this evidence and herevidence at Mr McKay's trial several weeks earlier. In particular, he questionedMs McAllister about corrections she was required to make to her evidence in chief atthat trial regarding the Monday meetings and whether she had presented the firm'sinterest in writing. However, whatever Ms McAllister may have said or had tocorrect at that trial, she was adamant in her evidence at trial that Mr Hill hadauthorised transfers from the trust account to the office account knowing the firm'sinterest was overdrawn.[36] Mr Hill denied this evidence from Ms McAllister. His recollection was theMonday meetings were brief and were to establish the expenses to be paid that weekand the amount to be earned to meet those expenses. A significant proportion of thefirm's work was conveyancing, with the firm's fees deducted on settlement. Thismeant that the number of settlements to take place that week and the fees payablewere discussed. Mr Hill said that Ms Traves had never informed the partners of thebalance of the firm's interest at those meetings and nor did Ms McAllister. Mr Hillalso said that Mr McKay usually attended those meetings but he, Mr Hill, wasfrequently absent because he was late back from lunch or had another commitment.[37] The second matter that Ms McAllister referred to was the "Solicitors MonthlyTrust Account Certificate" that was required to be filed with the NZLS. By way ofbackground, at the relevant time a law firm's operation of a trust account wasgoverned by the Law Practitioners Act 1982, the Solicitors Trust AccountRegulations 1998 and the Solicitors Trust Account Rules 1996. By r 16, each firmwas required to appoint a trust account partner who was responsible foradministering the trust account and who was required to "take appropriate measuresto verify the correctness of, and sign, all reports required by these Rules".[38] Rule 17(1) made provision for the monthly certificate as follows:17 Periodic reporting(1) Every trust account partner must certify to the Executive Director inwriting, by the 10th working day of each month (or in January, the20th working day), whether as at the end of the preceding month:(a) The trust ledger was correctly reconciled with thecorresponding trust bank accounts for both the general trustaccount and interest bearing deposit accounts;(b) The trust account records were a complete and accuraterecord of transactions during the month and of each client'sposition;and whether he or she is satisfied that during the month concerned -(c) Trust account transactions during the month have been inaccordance with client instructions and where completed,properly accounted for to clients;(d) The solicitor or firm, as the case may be, complied with theRegulations, these Rules, and the Solicitors NomineeCompany Rules 1996 –and, if not, the reasons why.[39] The prescribed certificate listed several statements, including as to the matterreferred to in r 17(1)(c), with boxes to be ticked or crossed as the case might be. MsMcAllister's evidence was that, on Mr Hill's instructions, she would present thecertificate for signing with all the boxes ticked "Yes". Mr Hill denied giving anysuch instructions.[40] Ms McAllister's evidence was that, at the time she presented the certificatefor signing, she would also provide Mr Hill with supporting information thatcomprised a "Bank Reconciliation" sheet, a list of unpresented cheques, a "LedgerControl Summary Report" — all of which were single page documents — and then a15 or so page "Ledger Account Balance Report" which listed the balances of eachledger in the trust account. The one page Ledger Control Summary Report showedthe overdrawn nature of the firm's interest clearly, in three places, and the word"Imbalance" appeared twice in two places in the right hand column of the page."Imbalance" was the only entry in that column. No one looking at the page couldmiss it.[41] Ms McAllister's evidence was that Mr Hill would sign the certificate andinitial the supporting documents. She would then submit the signed certificate to theNZLS and retain a copy with the supporting information.[42] In all, nine sets of the supporting information were produced at trial, allexcept one preceding the date range in the charge. Mr Hill had initialled all pages onsome, none on others, and one or more pages on others. That said, Mr Hill also saidin evidence that he had more sets in his possession, 10 of which had been initialledand five which had not, but he did not produce these and nor did the prosecutor askhim to do so.[43] Mr Hill's evidence in response was that Ms McAllister always gave him thecertificate and information just before it was due to be filed with the NZLS, that hewas always under pressure to sign as a result and that he did not look at thesupporting documents other than the Bank Reconciliation sheet, to satisfy himselfthat the trust account was in credit. His evidence was that he lifted up the corner ofeach page after that, initialled the bottom right hand corner and then handed thedocuments back to Ms McAllister.[44] Mr Squire questioned Ms McAllister about aspects of her own conduct.First, Ms McAllister admitted that she knew that it was wrong to effect transfers ofclient funds as she did over so many years, and likewise to tick Yes on the monthlyNZLS certificates as she did, when the correct answer was No. Despite variousinspections by NZLS personnel, Ms McAllister had never once raised the issue ofthe overdrawn account. Her explanation for this was that she wished to keep her job.Although Ms McAllister denied being given any assurance that she would not beprosecuted, she said that she did not expect to be charged if she gave evidence forthe Crown.[45] Secondly, serious issues were raised as to payments Ms McAllister hadreceived herself. In the latter part of 2009 two "bonuses" of $5,000 each had beenpaid to Ms McAllister, or she had paid them to herself. Ms McAllister's evidencewas that Mr McKay and/or the firm's business manager, Mr Wood (a charteredaccountant who had assisted the firm since 1999), had authorised these payments.Although Mr Wood denied giving such authority, the Judge considered otherevidence suggested that Mr McKay had done so.[46] Regardless, at the time of the first bonus payment the firm's interest wasoverdrawn by more than $900,000 and by the second it was overdrawn by more than$1 million. That was the extent of the shortfall in client funds in the trust account.Ms McAllister knew that the money she was receiving belonged to clients, not to thefirm. That point could be made as to her salary generally, but the bonuses wereentirely gratuitous.[47] Also, in 2004/2005 Ms McAlister herself had overdrawn her trust accountledger and from August 2009 onwards she had received fortnightly payments of$192.31. These were separate from her salary and were also said to have beenauthorised by Mr McKay. The payments were funded by transfers of client fundsfrom the trust account. Moreover, although Ms McAllister said these were salary,she had coded them to appear as "sundry payments" in her own bank statements.Mr Squire sought to cross-examine Ms McAllister as to why she had described thepayments in this way and also whether she had returned either the bonuses or theadditional fortnightly payments in PAYE returns, as she was required to do.Ms McAllister declined to answer Mr Squire's questions on the grounds that heranswers might incriminate her.Mr Hill[48] Other than the matters we have mentioned above, Mr Hill's evidence was thathe was never informed, whether by Ms McAllister or otherwise, that the firm'sinterest in the trust account was overdrawn. Mr Hill said that he relied on his staffand Ms McAllister to tell him if there were any problems. Had he known of theoverdrawing, Mr Hill said he would have addressed the matter immediately. Mr Hillcharacterised his behaviour as negligent but not dishonest. Mr Hill also relied onevidence given by Mr Wood, who said that he too was unaware that the firm'sinterest was ever overdrawn and that client funds were being used to support thefirm.Character witnesses[49] Mr Hill's character witnesses had all dealt with him professionally. In fact,one such witness, a Mr Lunn, had been appointed by the NZLS to assist with thewinding up of the firm's affairs in 2010. Mr Lunn had since engaged Mr Hill towork in Mr Lunn's firm — clearly a vote of considerable confidence in Mr Hill.[50] As the Judge said generally regarding the character evidence:[198] The individuals who provided good character evidence for Mr Hillall appeared to be upstanding members of the community. Their evidencewas to the effect that Mr Hill was honest, trustworthy, had a high level ofintegrity and good commercial judgement. All considered that their positiveview of him was unaltered by their knowledge of the charge.Submissions[51] The Judge considered Mr Hill's evidence in the first instance, as he wasrequired to decide whether it negatived or raised a reasonable doubt as to his guilt.The Judge gave lengthy reasons as to why it did neither, and why he did not considerMr Hill's evidence credible or reliable on the issue of his knowledge and operationof the trust account. The following is a summary of the Judge's reasons andMr Squire's submissions.[52] First, the Judge found Mr Hill's evidence of complete ignorance of theoverdrawn balance of the firm's interest inconsistent with his receipt and initiallingof the Ledger Control Summary Report which clearly showed the deficit in thefirm's interest.11 Mr Squire submitted that to draw such an inference from the act ofinitialling was to determine Mr Hill's knowledge objectively rather than subjectively.We do not accept that submission. It was open to the Judge to infer that Mr Hillwould have looked at the documents before he initialled them, whatever he said attrial.[53] Secondly, the Judge considered that Mr Hill had given his evidence in amanner designed to cast himself in the most favourable light and that he made few ifany concessions. The Judge gave as an example the fact that Mr Hill would notadmit to knowing the firm's interest was overdrawn at any time covered by thecharge. The Judge thought that point-blank denial implausible, given the volumeand quantum of transactions in the trust account. The Judge considered itinconceivable that Mr Hill would not have enquired — whether of Ms McAllister orof any other staff member — as to the balance of the firm's interest in that 21 monthperiod.12[54] Mr Squire submitted that this was unfair because it amounted to criticisms ofMr Hill because he did not concede guilty knowledge.[55] We do not accept that submission. The point the Judge was making was thathe considered the evidence of complete ignorance to be implausible. Moreover, weagree with the Judge. The effect of Mr Hill's evidence was that he never once foundout for himself, in a 21 month period, what the balance of the firm's interest was andwhether the firm had a sufficient float on hand to, say, pay client disbursements or tocover the non arrival of an anticipated payment from or for a client or to check thatthe firm could pay the partners' drawings that month.[56] Thirdly, the Judge did not accept that Mr Hill would have abdicated hisresponsibilities to Ms McAllister as his evidence portrayed, or that he would haveallowed her to rush him with the monthly certificates, or that he would have just11 R v Hill, above n 2, at [194(a)].12 At [194(c)] and [194(d)].signed "where indicated".13 The correctness of the supporting information thatMs McAllister provided to Mr Hill was not challenged. Also, there was evidencethat the trust account balances, including the firm's interest, were always accessibleon the office computers. The Judge did not accept Mr Hill's evidence that he did notuse or know how to use the LAWBASE system, which other evidence suggested waseasy software to master.14 But even if Mr Hill did not make a point of accessing thesystem, anyone else could have done so for him. The Judge also consideredMr Hill's portrayal of himself as someone able to be rushed by an employee wasinconsistent with his character evidence, which was to the effect that he conductedhimself in a careful and professional manner.15[57] It follows that we do not consider there is any substance in Mr Squire'ssubmissions as to errors by the Judge in his assessment of Mr Hill's evidence, withthe exception of the following point. The Judge referred to Mr Hill having a "directinterest" in the outcome of the case and that, as a result, it was "unsurprising that hisevidence sought to be entirely exculpatory".16 Mr Squire referred us to R v Leef inwhich this Court ordered a retrial because the Judge had said to the jury that theaccused had a motive to lie simply because he was on trial.17 A similar issue arose inR v Stewart with the same result.18 We accept Mr Squire's submission that thisshould have formed no part in the Judge's reasoning. However, it does not detractfrom the other reasons the Judge gave.[58] The Judge then turned to the character evidence, saying it was something hehad "considered and attributed some weight to".19 However, the Judge also said:[204] ... However, in the circumstances of this case such evidence isrebutted by cogent, reliable and credible evidence from the Crown, togetherwith the matters Mr Hill admitted to as outlined earlier. The evidence ofMessrs Lunn and Pedlar that Mr Hill is unlikely to have acted in the manneris rebutted by Mr Hill's own evidence about his actions and inaction. As aresult, the character evidence does not satisfy me that Mr Hill is unlikely tohave committed the offence for which he is charged.13 At [194(f)–(g)].14 At [194(i)].15 At [194(g)–(h)].16 At [194(j)].17 R v Leef CA14/06, 24 August 2006.18 R v Stewart [2009] NZSC 53, [2009] 3 NZLR 425.19 R v Hill, above n 2, at [204].[59] Mr Squire was critical of the reasons the Judge gave for discounting thecharacter evidence in this way. Again, the criticisms are misplaced. The fact wasthat the witnesses' portrayal of Mr Hill could not be reconciled with Mr Hill's ownevidence. That was the fundamental difficulty with the character evidence.[60] The Judge then turned to the Crown case. He accepted Ms McAllister'sevidence that Mr Hill knew that the firm's interest in the trust account wasoverdrawn as a result of the Monday meetings and by the information supplied withthe monthly NZLS certificate.20[61] The Judge's assessment of Ms McAllister's credibility and reliability wasunaffected by the matters on which Mr Squire had cross-examined her. The Judgeaddressed each of those matters in some detail. He considered Ms McAllister tohave been "open and forthright" about her culpability in perpetrating theoverdrawing and he did not attribute any dishonesty to her receipt of the bonuspayments or the additional payments referred to at [45] and [47] above.21 The Judgealso said that these matters were outside the relevant period.22 This latter point is notcompelling. It was for the Judge to assess Ms McAllister's credibility and reliabilityat the time she gave evidence. The matters Mr Squire raised in cross-examinationwere relevant to that assessment.[62] In his submissions, Mr Squire traversed in detail errors that he contended theJudge made in his analysis of Ms McAllister's evidence. We do not consider thesesubmissions detract from Ms McAllister's evidence that Mr Hill knew that the trustaccount was overdrawn. Whether Ms McAllister noted the information for theMonday meetings on a pad or on some different form, or simply informed thepartners, does not much matter. Ms McAllister was adamant that they wereinformed and she never resiled from that evidence. It was for the Judge to accept orreject that evidence as he saw fit.20 At [229]–[230] and [233].21 At [212].22 At [214].[63] It follows that in our view the Judge's findings were open to him and indeedunremarkable. We agree with the Judge that Mr Hill's evidence was inherentlyimplausible.Result[64] It follows from the above that we dismiss this appeal.Solicitors:Crown Law Office, Wellington for Respondent