BLACKWOOD v R [2020] NZCA 504

BLACKWOOD v R [2020] NZCA 504 [16 October 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA187/2019[2020] NZCA 504BETWEEN RICHARD TIMOTHY BLACKWOODAppellantAND THE QUEENRespondentCourt: Gilbert, Thomas and Wylie JJCounsel: M A Corlett QC and J D Ryan for AppellantD G Johnstone for RespondentJudgment:(On the papers)16 October 2020 at 9.30 amJUDGMENT OF THE COURTThe application for costs is declined.____________________________________________________________________REASONS OF THE COURT(Given by Gilbert J)[1] Following a lengthy Judge-alone trial in the High Court at Auckland,Mr Blackwood was convicted on four charges (charges 10–13) of theft by a person ina special relationship.1 His appeal against these convictions was allowed by this Courtin a judgment delivered on 16 August 2019.2 Mr Blackwood now seeks indemnitycosts for the appeal in the sum of $76,526.75. The appeal occupied one day of hearingtime. Mr Blackwood contends that costs should be awarded in full as the prosecution1 R v Bublitz [2019] NZHC 222 [Verdicts judgment].2 Bublitz v R [2019] NZCA 364, [2019] 3 NZLR 533 [Appeal judgment].ought never to have been brought against him, there being no evidence to prove oneof the elements of the charges.[2] The Crown opposes the making of any order for costs.[3] The relevant background is summarised in our judgment on the substantiveappeal and need not be repeated here. Briefly, Paul Bublitz, Bruce McKay andMr Blackwood were all charged with theft by a person in a special relationship,an offence under s 220 of the Crimes Act 1961. It was alleged that Mr Bublitzknowingly misappropriated funds raised from the public by Mutual Finance Ltd(Mutual), a company he controlled, in breach of related party restrictions in a deed ofguarantee between Mutual and the Crown (the Crown guarantee). Messrs McKay andBlackwood were charged as parties to this offending.[4] Charges 10–12 arose out of the purchase by Mutual of loans made by ViaductCapital Ltd (Viaduct) to various companies in the Hunter group of companies throughwhich Mr Bublitz undertook various property development projects. Charge 13concerned advances made by Mutual to one of the Hunter group companies.Toogood J was satisfied these were all related party transactions because Mr Bublitzcontrolled Mutual, Viaduct and Hunter for the purposes of the Crown guarantee atthe relevant times.3 The Judge was satisfied that Mr Bublitz knowingly breachedthe restrictions on related party transactions in the Crown guarantee when enteringinto these transactions.4[5] Messrs McKay and Blackwood were convicted as parties on these charges(save that Mr McKay did not face charge 13). Mr McKay was a director andthe chief financial officer of Viaduct and had a central role in the administration ofboth Viaduct and Mutual. He also owned 51 per cent of the shares in Phoenix FinanceHoldings Ltd (Phoenix) which wholly owned Viaduct. Mr Blackwood played a lesserrole. He was engaged on contract as a loan originator for Viaduct and was paid feeson a success only basis. Although he was appointed a director of Viaduct following3 Verdicts judgment, above n 1, at [229]–[265].4 At [269]–[271] and [281]–[291].the resignation of another director, he did not receive director's fees and had little todo with the management of any of the relevant companies.[6] Messrs Bublitz, McKay and Blackwood all appealed against their convictionson charges 10–13. Only Mr Blackwood's appeal succeeded. While agreeing withToogood J that charges 10–13 had been proved beyond reasonable doubt againstMessrs Bublitz and McKay, this Court considered that Mr Blackwood was ina different category and the reasonable possibility that Mr Blackwood did not knowthe transactions were in breach of the restrictions in the Crown guarantee could not beexcluded. This Court summarised its conclusion on this aspect as follows:5[125] We are acutely conscious of the major advantage the trial Judge hadin hearing the evidence over several weeks and we hesitate before disagreeingwith the factual findings of the experienced Judge. However, we are notpersuaded by the brief reasons he gave on this aspect of the case, namely thatall knowledge elements were proved to the requisite standard againstMr Blackwood. Although we set the relevant passage out at [70] above, forease of reference, we set it out again:[291] Bearing in mind the close working relationships, the roles ofMr McKay and Mr Blackwood in all of the steps taken to acquire the financecompany, and the extent to which each of them was involved in the operationof both Mutual and Viaduct after Mutual's acquisition, I am wholly satisfiedthat Mr McKay and Mr Blackwood were fully aware of the nature ofthe related party provisions in the Crown guarantee.(Emphasis added.)[126] We do not disagree with the Judge's finding that Mr Blackwood knewof Mr Bublitz's central role at Mutual and Viaduct at all material times.However, as we have attempted to demonstrate, there was a remarkable lackof evidence to show that Mr Blackwood was "fully aware of the nature ofthe related party provisions in the Crown guarantee". It must be kept in mindthat the Judge considered the Crown had not proved Mr Bublitz controlledViaduct for the purposes of the Viaduct Trust Deed. There was no particularchange in the way Viaduct operated after Mr Bublitz purchased Mutual.We cannot exclude the reasonable possibility that Mr Blackwood was notaware of the extended definition of "control" in the Mutual Crown guaranteewhich led to the Judge's conclusion that Mr McKay's presumptive control, asthe holder of 51 per cent of the shares in Phoenix, was displaced forthe purposes of the guarantee.[7] Section 8 of the Costs in Criminal Cases Act 1967 (the Act) empowersthe Court to make an order for costs in criminal appeals brought under pt 6 ofthe Criminal Procedure Act 2011. This section reads:5 Appeal judgment, above n 2.8 Costs on appeals(1) Where any appeal is made pursuant to any provision of Part 6 ofthe Criminal Procedure Act 2011 the court which determinesthe appeal may, subject to any regulations made under this Act, makesuch order as to costs as it thinks fit.(2) No defendant or convicted defendant shall be granted costs underthis section by reason only of the fact that his appeal has beensuccessful.(3) No defendant or convicted defendant shall be refused costs underthis section by reason only of the fact that the appeal was reasonablybrought and continued by another party to the proceedings.(4) No Judge, Justice, or Community Magistrate is liable to costs justbecause an appeal is filed against a determination by that judicialofficer.(5) If the court which determines an appeal is of opinion that the appealincludes any frivolous or vexatious matter, it may, if it thinks fit,irrespective of the result of the appeal, order that the whole or any partof the costs of any party to the proceedings in disputing the frivolousor vexatious matter shall be paid by the party who raised the frivolousor vexatious matter.(6) If the court which determines an appeal is of opinion that the appealinvolves a difficult or important point of law it may order that the costsof any part to the proceedings shall be paid by any other party tothe proceedings irrespective of the result of the appeal.[8] Trial costs for a successful defendant are dealt with under s 5 of the Act whichsets out relevant circumstances to which the court must have regard in consideringwhether to make an order. These include: whether the prosecution acted in good faithin bringing and continuing proceedings; whether at the commencement ofthe proceedings the prosecution had sufficient evidence to support the conviction ofthe defendant in the absence of evidence to the contrary; whether the prosecution tookproper steps to investigate any matter suggesting the defendant might not be guilty;whether the investigation into the offence was conducted in a reasonable and propermanner; whether the evidence as a whole would support a finding of guilt butthe charge was dismissed on a technical point; and whether the defendant establishedby cross-examination of prosecution witnesses or otherwise that he was not guilty.66 Costs in Criminal Cases Act 1967, s 5(2).Also relevant is the behaviour of the defendant in relation to the acts or omissions onwhich the charge was based as well as the investigation and the proceedings.7[9] Unlike civil proceedings, costs in criminal cases do not follow the event andare seldom awarded. This is because criminal proceedings are pursued bythe prosecuting agency in the public interest. Costs are not usually awarded incriminal cases unless the prosecution has acted improperly or unreasonably inthe investigation or prosecution of the charge.8 Nevertheless, there is no presumptionfor or against an award of costs. The mere fact that the prosecution was properlybrought and continued does not create a presumption that costs to a defendant shouldbe refused.9[10] While the considerations set out in s 5 apply to trial costs, they form part ofthe scheme of the legislation and provide guidance on the sorts of circumstances inwhich it may be appropriate for the court to exercise its discretion to award costs unders 8 on an appeal.10[11] Section 13 of the Act provides for the making of regulations prescribingthe maximum scales of costs that may be awarded under the Act. The regulations werepromulgated in 1987 and provide for a maximum fee on a conviction appeal of $226for each half day or part half day in court. These rates have not been updated in the last33 years and are clearly no longer fit for purpose.11 Section 13(3) of the Act permitsthe Court to depart from the scale if satisfied that the payment of greater costs isdesirable having regard to the special difficulty, complexity, or importance of the case.[12] Mr Corlett QC, for Mr Blackwood, relies particularly on this Court'sobservation in the Appeal judgment (quoted at [6] above) as to the lack of evidenceshowing that Mr Blackwood was fully aware of the related party provisions inthe Crown guarantee. Mr Corlett submits that this finding justifies not only an awardof costs, but costs assessed on an indemnity basis. He submits that the prosecution7 Section 5(2)(g).8 R v Margaritis HC Christchurch T66/88, 14 July 1989 at 8; R v Connolly (2006) 22 NZTC 19,844(HC) at [6]–[7]; and W (CA447/2017) v R [2020] NZCA 283 at [15].9 Costs in Criminal Cases Act, s 5(5).10 W (CA447/2017) v R, above n 5, at [15].11 Costs in Criminal Cases Regulations 1987, sch 1 pt 1 sub-pt C(1).should never have been brought against Mr Blackwood because of the manifestabsence of evidence against him to establish the mens rea element of the charges.The consequences for Mr Blackwood have been significant. He has not only incurredconsiderable expense in having the convictions overturned, but also served more thanhalf of his sentence of home detention pending the appeal hearing and delivery ofthe Appeal judgment.[13] For the reasons that follow, we do not consider this is an appropriate case forthe Court to award costs for the appeal.[14] The first point to note is that we are not dealing with an application for costsfor the trial in the High Court. Any such application must be made to that Court.We are solely concerned with costs on the appeal. There was nothing out ofthe ordinary in the way the appeal was conducted that would attract the sanction ofcosts. Mr Corlett does not submit otherwise.[15] Mr Corlett's contention is that Mr Blackwood should not have been charged inthe first place and indemnity costs should therefore be ordered. This submission facesconsiderable difficulty having regard to the extensive background, which we brieflysummarise below. In summary, despite considerable scrutiny (including judicial) overa five-year period of the appropriateness of the charges being pursued further, it wasnever suggested that these particular charges lacked a sufficient evidential foundationto justify them being brought against Mr Blackwood in the first place.[16] Messrs Bublitz, McKay, Blackwood and Lance Morrison (the charges againstwhom were subsequently dismissed), were initially charged on 11 March 2014.The first trial commenced on 8 August 2016. In late November 2016, Messrs Bublitz,McKay and Morrison (but not Mr Blackwood) applied for a stay of proceedings onthe grounds of abuse of process, largely because of the length of the trial.That application was dismissed by Woolford J.12 However, the Judge dismissed 18 ofthe charges pursuant to s 147 of the Criminal Procedure Act (and one further charge12 R v Bublitz [2016] NZHC 2863 [First stay decision].against Mr Morrison) on the grounds that a trial on these charges would beunreasonably burdensome on the defendants.13[17] In late January 2017, Messrs Bublitz and McKay (but not Mr Blackwood)brought further applications for a stay of the proceedings and for an order dischargingthem pursuant to s 147. Mr Morrison also applied in early February 2017 for the trialto be stayed or aborted. Woolford J declined these applications.14[18] In early May 2017, all four defendants applied to abort the trial becausevoluminous late disclosure by the Crown had prejudiced their right to present aneffective defence. These applications were granted by Woolford J.15[19] The Crown elected not to proceed further against Mr Morrison but determinedto proceed with most of the existing charges against the other three defendants.In September 2017, Messrs Bublitz, McKay and Blackwood brought a furtherapplication for an order that the proceedings be stayed. This application was dismissedby Lang J.16 The Judge observed that the Crown's disclosure breaches were merelyinadvertent and had not been committed deliberately or in bad faith.17 The Judge notedthere was no suggestion the prosecution had been pursued for inappropriate purposesor in a manner designed to be oppressive or unduly burdensome on the defendants.18[20] Despite three and a half years having passed since charges were first laid,including nine months of trial, Mr Blackwood did not at any stage suggest that therewas no evidence from which an inference could be drawn on the mens rea elementsuch as to justify further pursuit of the charges against him. Further, Woolford Jscrutinised the sufficiency of the evidence and the appropriateness of the chargesproceeding against the defendants. The Judge dismissed a significant number ofthe charges, but not charges 10–13.13 At [55].14 R v Bublitz [2017] NZHC 114 [Second stay decision].15 R v Bublitz [2017] NZHC 1059 [Decision to abort trial].16 R v Bublitz [2017] NZHC 2251 [Third stay decision].17 At [63].18 At [64].[21] The second trial commenced on 13 August 2018 and concluded on5 September 2018. Mr Blackwood still did not make any application for dismissalunder s 147. He elected not to give evidence, as was his right. His strategy was to putthe Crown to proof, not to demonstrate his innocence.[22] In a careful and comprehensive judgment (comprising 315 paragraphs)delivered in February 2019, Toogood J delivered not guilty verdicts on nine ofthe 15 charges and guilty verdicts on the others. Mr Blackwood faced six of thesecharges. He was found not guilty on two of them, but guilty of the other four(charges 10–13).19[23] While Mr Blackwood succeeded with his conviction appeal, this was solelybecause this Court took a different view from that reached by Toogood J thatthe Crown had proved one of the elements of the charges against Mr Blackwoodbeyond all reasonable doubt. This Court did not find Mr Blackwood innocent, onlythat it could not exclude the reasonable possibility that he did not know at the relevanttimes that the transactions were in breach of the related party restrictions in the Crownguarantee. Proof of this element of the charge was always going to be a matter ofinference from proved facts. That this Court came to a different conclusion to thatreached by Toogood J does not suggest prosecutorial overreach or misconduct. Rather,it suggests the opposite, that the proper inference to draw from proven facts was oneon which reasonable minds might differ, particularly applying the very high standardof proof required.[24] In summary, we do not accept that there was no proper basis for the charges tohave been brought against Mr Blackwood. The underlying premise of his costsapplication is not made out. We do not consider there is anything out of the ordinarythat could justify an award of costs for the appeal.Result[25] The application for costs is declined.19 Verdicts judgment, above n 1, at [6].Solicitors:Claymore Partners Limited, Auckland for AppellantCrown Solicitor, Auckland for Respondent