Bublitz v R

• Jurisdiction: New Zealand
• Judge: Gilbert J
• Judgment Date: 16 August 2019
• Neutral Citation: [2019] NZCA 364
• Court: Court of Appeal
• Docket Number: CA186/2019 CA187/2019
• Date: 16 August 2019

Between

Paul Neville Bublitz

Appellant

and

The Queen

Respondent

Between

Bruce Alexander Mckay

Appellant

and

The Queen

Respondent

Between

Richard Timothy Blackwood

Appellant

and

The Queen

Respondent

[2019] NZCA 364

Court:

Gilbert, Wylie and Thomas JJ

CA186/2019

CA149/2019

CA187/2019

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Criminal, Companies — appeal against convictions under the Crimes Act 1961 and Companies Act 1993 — appeal against sentence — theft by person in special relationship — false statements in prospectus — collapse of finance companies — breach of Crown guarantees — second trial — delay

Counsel:

R S Reed QC for Bublitz

G N E Bradford and S D Withers for McKay

M A Corlett QC and H M Z Ford for Blackwood

D G Johnstone and S A Rankin for Respondent

• A Mr Bublitz's appeal against conviction is allowed in part. The convictions on charges 14 and 15 are set aside. We direct that a judgment of acquittal be entered on those charges. Mr Bublitz's appeal against conviction on charges 10–13 is dismissed.

• B Mr Bublitz's appeal against sentence is allowed. His sentence of three years and two months' imprisonment is set aside and a sentence of 11 months' home detention is substituted on each of charges 10–13 to be served concurrently. This sentence is to commence immediately upon release. Following his release, Mr Bublitz is to travel directly to the address stated in the memorandum dated 9 July 2019 from the Department of Corrections and await the arrival of a security officer. Mr Bubltiz is to comply with the special conditions set out in that memorandum.

• C Mr McKay's appeal against conviction is dismissed.

• D Mr Blackwood's appeal against conviction is allowed. The convictions on charges 10–13 are set aside. We direct that a judgment of acquittal be entered on those charges.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Gilbert J)

Table of Contents

Introduction	[1]
Background	[11]
Hunter group	[13]
Viaduct Capital Ltd	[14]
Mutual Finance Ltd	[17]
The charges
Charges 10–12	[19]
Charge 13	[21]
Charges 14 and 15	[22]
Grounds of conviction appeals	[23]
Should the prosecution have been stayed?
Background	[24]
Submissions	[38]
Analysis	[42]
Was the definition of “control” in the Mutual Crown guarantee sufficiently specific to found a “requirement” for the purposes of s 220 of the Crimes Act?	[45]
Definition of “control”	[47]
High Court judgment	[49]
Submissions	[51]
Analysis	[55]
Did the Crown need to prove the transactions were not conducted on arm's length terms?	[58]
Did the Judge make the requisite finding that Mr Bublitz entered into the transactions knowing they were in breach of the related party restrictions in the Mutual Crown guarantee?	[60]
Did the Judge give adequate reasons for finding that Mr Blackwood and Mr McKay acted with the necessary intent?
The Judge's reasons	[65]
Submissions	[71]
Analysis	[75]
Was the evidence sufficient to prove the appellants acted with the necessary knowledge and intent?
Crown submissions	[78]
Mr Bublitz controlled Viaduct	[79]
Mr Bublitz controlled Mutual	[82]
Involvement in purchase of Mutual	[84]
Letter to the Treasury dated 9 November 2009	[86]
Viaduct credit submissions prepared in August 2009	[89]
Finance company with Crown guarantee targeted	[90]
Credit submission for Homebush loan 5 February 2010	[91]
Ms Groom's concern about inter-company transactions	[92]
Email from Mr McKay on 29 March 2010	[93]
Meeting with KiwiBank on 1 April 2010	[95]
Credit submissions relating to Hilltop	[96]
Mr Bublitz	[102]
Mr McKay	[117]
Mr Blackwood	[122]
Were the statements about the Crown guarantee in Mutual's prospectuses materially false?	[127]
Did the Judge make the required finding of intent?	[131]
Were Mr McKay's fair trial rights breached?	[136]
Conclusion on conviction appeals	[144]
Mr Bublitz's sentence appeal
Sentencing judgment	[145]
Was the starting point for charges 10–13 too high?	[150]
Uplift for other offending	[163]
Discount for delay	[164]
Conclusion on sentence appeal	[166]
Result	[167]

Introduction

1 Following a Judge-alone trial in the High Court at Auckland before Toogood J, Mr Bublitz was convicted of four charges of theft by a person in a special relationship, an offence under s 220 of the Crimes Act 1961 (charges 10–13). 1 These charges alleged Mr Bublitz knowingly misapplied funds raised from the public by Mutual Finance Ltd (Mutual), a company Mr Bublitz controlled, in breach of the restrictions on related party transactions contained in a deed of guarantee dated 8 December 2009 between Mutual and the Crown (Mutual Crown guarantee). 2

2 Charges 10–12 concerned the purchase by Mutual from a company associated with Mr Bublitz, Viaduct Capital Ltd (Viaduct), of loans Viaduct had made to companies in the Hunter group through which Mr Bublitz undertook various property development projects. The Judge was satisfied these loan purchases were related party transactions because he found Mr Bublitz controlled both Mutual and Viaduct for the purposes of the Mutual Crown guarantee at the relevant times. 3 The Judge found that the restrictions on related party transactions in the Mutual Crown guarantee were knowingly breached in respect of these transactions. 4

3 Charge 13 arose out of advances made by Mutual to Hilltop Ridge Farms Ltd (Hilltop), one of the Hunter group companies. The Judge was satisfied Mr Bublitz controlled both Mutual and Hilltop at the time these advances were made and these also breached the related party restrictions in the Mutual Crown guarantee. 5

4 Messrs McKay and Blackwood were convicted as parties to these offences (save that Mr McKay did not face charge 13).

5 Mr Bublitz was also convicted of two charges of making a false statement as a promoter in a prospectus, an offence under s 242 of the Crimes Act (charges 14

and 15). Mutual's prospectuses issued in March and April 2010 referred to the benefit of the Crown guarantee but did not disclose the risk it could be withdrawn at short notice because of the alleged breaches founding charges 10–13

6 Mr Bublitz was acquitted on six other charges alleging related party transactions between Viaduct and companies controlled by Mr Bublitz which transactions were alleged to be contrary to the terms of Viaduct's Debt Security Trust Deed (Viaduct Trust Deed) (charges 1–3 and 5–7). The Judge was not satisfied these were related party transactions because the Crown had not proved that Mr Bublitz “controlled” Viaduct in terms of the Viaduct Trust Deed. 6 It followed from this conclusion that Mr McKay and Mr Blackwood had to be acquitted on the other charges they faced. These were: charge 4 (Mr McKay), which alleged statements in Viaduct's prospectus were false because of the related party lending giving rise to charges 1–3; charge 8 (Mr McKay and Mr Blackwood), which alleged statements in Viaduct's later prospectus were also false because of related party lending giving rise to charges 1–3 and 5–7; and charge 9 (Mr McKay and Mr Blackwood), which alleged false statements in the directors' quarterly report to the trustee by reason of the alleged related party transactions founding charges 1–3 and 5–7. 7

7 As we discuss in more detail later, this was the second trial for this matter. An earlier trial, which commenced on 8 August 2016, was aborted on 10 May 2017 after nine months of hearing. At the commencement of the first trial, the Crown charge notice listed 49 charges. These included 11 charges alleging breaches of the related party lending restrictions in a separate trust deed dated 14 August 2002 Mutual had in place to protect its investors (Mutual Trust Deed), including the transactions supporting charges 10–13. Having considered the expert evidence proposed to be called by the defence, the Crown elected not to offer evidence on these charges and they were dismissed on 21 September 2016. 8

8 As will be apparent, the essence of the Crown case from the outset was that the appellants engaged in related party transactions on behalf of Viaduct and Mutual

knowing this was in breach of their obligations pursuant to the Viaduct Trust Deed, the Mutual Trust Deed or the Mutual Crown guarantee (as applicable). The appellants were never charged with breaching the Viaduct Crown guarantee. The appellants were acquitted on the charges based on a breach of the restrictions on related party transactions in the Viaduct Trust Deed. The charges alleging breach of the restrictions on related party transactions in the Mutual Trust Deed were dismissed. However, the appellants were convicted on the charges arising out of the same transactions but alleging a breach of the restrictions on related party transactions in the Mutual Crown guarantee. Even then, the Crown succeeded on only one of the two definitions of “control” relied on under the Mutual Crown guarantee

9 In summary:

• (a) the Judge was satisfied Mr Bublitz controlled Viaduct in terms of one of the definitions in the Mutual Crown guarantee at the time of the transactions giving rise to charges 10–12;

• (b) the Judge was not satisfied Mr Bublitz controlled Viaduct in terms of the alternative definition in the Mutual Crown guarantee relied on by the Crown for those same charges;

• (c) the Crown elected not to offer evidence that Mr Bublitz controlled Viaduct in terms of the Mutual Trust Deed at the time of those same transactions and those charges were dismissed;

• (d) the Judge was not satisfied Mr Bublitz controlled Viaduct in terms...