McLeod v R

• Jurisdiction: New Zealand
• Judge: HEATH J
• Judgment Date: 19 February 2016
• Neutral Citation: [2016] NZHC 221
• Docket Number: CIV 2011-076-1148
• Court: High Court
• Date: 19 February 2016

Between

Lachie John Mcleod

Applicant

and

The Queen

Respondent

[2016] NZHC 221

Heath J

CIV 2011-076-1148

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

Application for costs from the Crown under s5 Costs in Criminal Cases Act 1967 (costs of successful defendant) — the application was made in the aftermath of a lengthy and complex trial arising out of the financial demise of finance company South Canterbury — the plaintiff had failed on a s347 Crimes Act 1961 (power to discharge accused) application to be discharged on all counts before trial — he was discharged on all counts at trial — the Court was critical of the prosecution's standard of investigation in respect of two charges and in particular of its failure to interview a key witness when this interview might have changed the decision to prosecute him on this charge — the plaintiff sought costs of $1.3 million — whether the decision to allow the case to continue after the s347 application was relevant — whether the plaintiff was entitled to costs.

Counsel:

J H M Eaton QC for Mr McLeod, Christchurch

C R Carruthers QC and P W Gardyne for Crown

This judgment was delivered by me on 19 February 2016 at 12 noon pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

JUDGMENT OF HEATH J

CONTENTS

The application	[1]
Context	[2]
Costs in criminal cases: legal principles	[8]
The investigation and the prosecution
(a) Introduction	[12]
(b) The investigation	[15]
(c) The prosecution	[32]
The charges
(a) The Crown theory of the case	[39]
(b) Count 11	[41]
(c) Count 10	[44]
(d) Count 7	[47]
(e) Count 8	[51]
(f) Count 12	[56]
Relevance of dismissal of s 347 application	[63]
My approach to the costs application	[67]
Category A charges
(a) Count 11	[70]
(b) Count 7	[81]
(c) Category A charges: should costs be ordered?	[87]
Category B charges
(a) Count 8	[91]
(b) Count 12	[93]
(c) Category B charges: should costs be ordered?	[98]
Category C charge: Count 10	[104]
Quantum	[114]
Result	[125]

The application

1 Mr Lachie McLeod, the former Chief Executive Officer of South Canterbury Finance Ltd (South Canterbury), seeks costs from the Crown, under s 5 of the Costs in Criminal Cases Act 1967 (the Act). 1 The application is made in the aftermath of a lengthy and complex trial arising out of the financial demise of South Canterbury. Mr McLead was acquitted on all charges following a Judge-alone trial over which I presided in 2014. 2

Context

2 From 1 October 2003 until December 2009, Mr McLeod was employed as Chief Executive Officer of South Canterbury. The company was placed in

receivership on 31 August 2010. At that time, there was a deficiency to investors of about $1.6 billion. Those investors were paid 100 cents in the dollar out of taxpayers' funds. The payments were made to meet the Crown's obligations under a deed (the Guarantee Deed) by which certain deposits were guaranteed under the Non-Bank Retail Deposit Takers' Scheme (the Guarantee Scheme) established in October 2008. 3

3 South Canterbury's collapse was followed by an investigation by the Serious Fraud Office. Although incorporating the conduct of other officers and employees, it is fair to say that, at least initially, the investigation was focussed primarily on the activities of Mr Allan Hubbard, the chairman of directors. After Mr Hubbard died in a motor vehicle accident on 2 September 2011, the investigation continued.

4 Mr Adam Feeley, the then Director of the Serious Fraud Office (the Director), decided to charge two directors (Mr Edward Sullivan and Mr Robert White) and three executives (Mr McLeod, Mr Terence Hutton and Mr Graeme Brown) of South Canterbury. On 7 December 2011, each was charged with offences involving dishonesty, arising out of their participation in the management and affairs of South Canterbury. 4 On 6 August 2013 and 2 December 2013 respectively, the charges against Mr Brown, Chief Financial Officer, and Mr Hutton, Group Accountant, were withdrawn. 5

5 The trial took place before me in the High Court at Timaru, over 71 sitting days, between 12 March and 18 August 2014. 6 On 14 October 2014, I delivered verdicts in open Court and read out a summary of my reasons for them. 7 Separately, I handed down full reasons for those verdicts. 8 I found Mr McLeod not guilty on each of the five charges brought against him; two of theft by a person in a special

relationship, one of obtaining a benefit by deception, and two of false accounting. Mr McLeod was discharged on all counts

6 In seeking costs, Mr Eaton QC, for Mr McLeod, submits that there was “never any proper basis upon which the five charges should have been laid and a competent and objective investigation would have surely revealed as much”. I am invited to fix and an appropriate amount for costs. Mr Eaton relies, primarily, on s 5(2)(b), (c) and (d) of the Act. 9

7 Mr Carruthers QC, for the Crown, resists the application. While accepting that the charges were found not to have been proved beyond reasonable doubt, Mr Carruthers argues that the investigation was conducted in a competent manner, and there was a proper basis to charge Mr McLeod. To support the latter submission, Mr Carruthers reminded me that Mr McLeod had failed on an application to be discharged on all counts before trial. 10

Costs in criminal cases: legal principles

8 The circumstances in which a successful prosecutor or defendant may obtain an award of costs in criminal proceedings are set out in ss 4 and 5 of the Act. It is instructive to compare the respective tests:

4 Costs of the prosecutor

• (1) Where any defendant is convicted by any court of any offence, the court may, subject to any regulations made under this Act, order him to pay such sum as it thinks just and reasonable towards the costs of the prosecution.

• (2) Where on the arrest of that person any money was taken from him the court may in its discretion order the whole or any part of the money to be applied to any such payment.

• (3) Where the court convicts any person and the prosecutor has not prepaid any fees of court, the court may order the person convicted to pay the fees of court.

• (4) Any costs allowed under this section shall be specified in the conviction and may be recovered in the same manner as a fine.

• (5) If subsection (1) or subsection (3) applies and the defendant or person convicted is a Crown organisation convicted of an offence against the Building Act 1991, the Building Act 2004, the Health and Safety in Employment Act 1992, or the Resource Management Act 1991, any costs and fees awarded must be paid from the funds of that organisation.

5 Costs of successful defendant

• (1) Where any defendant is acquitted of an offence or where the charge is dismissed or withdrawn, whether upon the merits or otherwise, the court may, subject to any regulations made under this Act, order that he be paid such sum as it thinks just and reasonable towards the costs of his defence.

• (2) Without limiting or affecting the court's discretion under subsection (1), it is hereby declared that the court, in deciding whether to grant costs and the amount of any costs granted, shall have regard to all relevant circumstances and in particular (where appropriate) to—

  • (a) whether the prosecution acted in good faith in bringing and continuing the proceedings:

  • (b) whether at the commencement of the proceedings the prosecution had sufficient evidence to support the conviction of the defendant in the absence of contrary evidence:

  • (c) whether the prosecution took proper steps to investigate any matter coming into its hands which suggested that the defendant might not be guilty:

  • (d) whether generally the investigation into the offence was conducted in a reasonable and proper manner:

  • (e) whether the evidence as a whole would support a finding of guilt but the charge was dismissed on a technical point:

  • (f) whether the charge was dismissed because the defendant established (either by the evidence of witnesses called by him or by the cross-examination of witnesses for the prosecution or otherwise) that he was not guilty:

  • (g) whether the behaviour of the defendant in relation to the acts or omissions on which the charge was based and to the investigation and proceedings was such that a sum should be paid towards the costs of his defence.

• (3) There shall be no presumption for or against the granting of costs in any case.

• (4) No defendant shall be granted costs under this section by reason only of the fact that he has been acquitted or that any charge has been dismissed or withdrawn.

• (5) No defendant shall be refused costs under this section by reason only of the fact that the proceedings were properly brought and continued.

  (Emphasis added)

9 The broad discretion conferred by s 4 (in favour of a successful prosecutor) can be contrasted with s 5(1) and (2) of the Act, which applies when an acquitted defendant applies for costs. Section 5(2) requires a balancing of relevant factors, when determining whether to make an order in favour of an acquitted person.

10 Section 5(4) and (5) assumes some importance. No accused may be granted costs by reason only of the fact that he or she has been acquitted or discharged. Conversely, no accused shall be refused costs by reason only of the fact that criminal proceedings were properly brought and continued. Accordingly, while “success” in the proceeding is a jurisdictional pre-requisite to an application, the fact of “success” is neutral when the discretion whether or not to award costs (and, if so, in what amount) is exercised.

11 The broad nature of the s 5(1) discretion was emphasised by the Court...