R v Bublitz and Others

• Jurisdiction: New Zealand
• Judge: Woolford J
• Judgment Date: 09 March 2018
• Neutral Citation: [2018] NZHC 373
• Court: High Court
• Docket Number: CRI-2014-004-002293
• Date: 09 March 2018

The Queen

and

Paul Neville Bublitz

Bruce Alexander McKay

Richard Timothy Blackwood

Lance David Morrison

[2018] NZHC 373

CRI-2014-004-002293

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Criminal Procedure — Application for costs under the Costs in Criminal Cases Act 1967 (“CCCA”) and Criminal Procedure Act 2011 (“CPA”) in relation to a trial subsequently aborted — the Crown intended to continue the against the four defendants — the defendants were discharged on a number of charges throughout the trial — whether costs under the CCCA would be dealt with under trial concluded — whether a costs order under s364 CPA was primarily intended to be compensatory or a penalty to ensure compliance

Appearances:

B Horsley and D Johnstone for the Crown

R Reed QC and H Ford for Mr Bublitz

G Bradford and S Withers for Mr McKay

S Kilian and F Hawkins for Mr Blackwood

D O'Leary for Mr Morrison

JUDGMENT OF Woolford J

[As to Application for Costs]

Introduction

1 The four defendants were charged with various financial crimes. Twelve weeks were allocated for the trial. That allocation was grossly inadequate. The trial started on 8 August 2016. I aborted the trial nine months later, on 10 May 2017, because of late disclosure by the Crown. The Crown intends to continue the prosecution against Mr Bublitz, Mr McKay and Mr Blackwood. It offered no evidence against Mr Morrison and the charges against him were dismissed on 7 June 2017. The retrial is set down for 16 July 2018. Twenty-two weeks have been allocated.

2 Mr Bublitz, Mr Blackwood and Mr Morrison apply for costs in relation to the first trial. They do so under the Costs in Criminal Cases Act 1967 and Criminal Procedure Act 2011. Mr McKay originally also applied for costs. He withdrew the application on 24 January 2018 without prejudice to bringing the same application again at a later time.

Background

3 Following a lengthy investigation by the Financial Markets Authority (FMA), Mr Bublitz, Mr McKay, Mr Blackwood and Mr Morrison were charged with various financial crimes on 11 March 2014. This followed the collapse of two small finance companies, Viaduct Capital Limited (Viaduct) and Mutual Finance Limited (Mutual), in 2010.

4 The original Crown charge notice contained 49 charges. Mr Bublitz faced all 49 charges. Mr McKay faced 41 charges. Mr Blackwood faced 28 and Mr Morrison faced seven. One hundred and twenty-five verdicts were therefore required on the original Crown charge notice. The defendants pleaded not guilty on 28 September 2014.

5 The Crown's case, in broad terms, is the defendants dealt with Viaduct's and Mutual's assets in a way that breached provisions in the companies' trust deeds that prohibited related party transactions. Viaduct and Mutual had the benefit of Crown guarantees, which made them attractive options to the defendants. The Crown alleges the defendants completed these transactions to benefit Mr Bublitz's group of companies, collectively referred to as Hunter Capital, ahead of Viaduct, Mutual and the Crown.

6 The Crown further alleges the defendants misled potential investors by making false statements in prospectuses and investment statements, and misled the Crown in relation to the Crown guarantee.

7 The defence case appears to be the structures were put in place to operate lawfully and to pursue responsible business opportunities. Assets that were sold were not sold for unreasonable prices and they were not sold to extract cash for Hunter Capital.

8 The trial eventually started on 8 August 2016. It surpassed the allocated 12 weeks by a significant margin.

9 I discharged the defendants on a number of charges throughout the trial. The applications under the Costs in Criminal Cases Act relate to these charges. The details are as follows:

• (a) 21 September 2016: I discharged the defendants on 12 charges on the Crown's invitation. The Crown chose not to offer evidence on these charges because it said they were largely double ups, which charged the same transactions as being in breach of both the Mutual trust deed and the Crown guarantee. The defence points out this was after the Crown received and considered the expert evidence the defence proposed to call.

• (b) 14 October 2016: I discharged Mr Bublitz, Mr McKay and Mr Blackwood on 22 charges on which they had been jointly charged with others, again at the Crown's invitation. This was largely because they had been charged as parties with no direct role in the transactions, the subject of the charges. The number of charges remained at 37, but the number of verdicts required was reduced to 66. The Crown charge notice for these 37 charges was 86 pages in length.

• (c) 23 November 2016: Because of the significant over-run of the allocated time for trial, I invited the Crown to identify the charges that represented the gravamen of the Crown case. The Crown did so and I dismissed the remainder of the charges not identified as the gravamen of the Crown case for case management reasons. This left 19 charges against the four defendants. Thirty-two verdicts were still required, as some of the charges were faced by more than one defendant.

• (d) 3 March 2017: At the conclusion of the Crown case and on the application of the defence, I discharged Mr Bublitz on two charges, and Mr McKay and Mr Blackwood on one charge each. This was because I concluded the payments of funds on behalf of a borrower did not amount to a transaction for the purposes of the Viaduct trust deed or the Crown guarantee. These are the only charges which have been dismissed on their merits.

10 The trial was still continuing in March 2017. At that time, Mr Bublitz faced 13 charges, Mr McKay faced seven charges, Mr Blackwood faced six charges and Mr Morrison faced two charges.

11 On 23 March 2017, the Crown provided the defence with a list of documents from the files of Deloitte, investigative agents for the prosecuting agency, the FMA, which were not disclosed on various grounds such as irrelevancy or litigation privilege. The list identified 14,619 documents and should have been provided to the defence much earlier. By this time, the Crown had closed its case and Mr Bublitz was about to close his case, having called three witnesses to give evidence on his behalf. This late disclosure was an admitted breach of ss 13(2)(b) and (5) of the Criminal Disclosure Act 2008. The remaining three defendants had not yet been called on to make their elections whether to call evidence.

12 I aborted the trial on 10 May 2017 because I considered the breaches of the Criminal Disclosure Act gave rise to a reasonable danger of a miscarriage of justice. The events that led to the delay and my decision to abort the trial are set out in my judgment of 17 May 2017. 1 In brief, I did so for the following reasons:

[106] I am of the view, however, that a lengthy adjournment now would have a prejudicial impact on the defendants' right to present an effective defence. The case cannot be rerun. Although the issues raised in the late disclosure were live in the trial, the defence is entitled to prepare and present its case with full knowledge of all relevant documentation that both helps and hinders its case. Strategic decisions as to priority and narrative are important in a judge-alone trial as much as a jury trial. Similarly, cross-examination of witnesses for the second or third time is of necessity disjointed and likely to be less effective. Witnesses who are recalled would need to be taken through their earlier evidence in some detail before being asked if that evidence would differ in light of the documents recently disclosed. There is no doubt that cross-examination would have been more direct and robust if the defence had the documents recently disclosed, such as the draft Viaduct report. More concessions could well have been made by Crown witnesses. They are less likely now. It is my view that the Crown breaches of the Criminal Disclosure Act have restricted the choices open to the defence in respect of the presentation their case, both in manner and extent.

Conclusion

[107] It was regrettable to have granted the application to abort the trial, but I am of the view that there was a real possibility of unfairness to the defendants if the trial was to proceed. The breaches of the Criminal Disclosure Act have given rise to a reasonable danger or apprehension of a miscarriage of justice in the circumstances.

13 The Crown subsequently chose not to proceed against Mr Morrison. Moore J discharged him on the two charges he still faced on 7 June 2017. The Crown is proceeding against the other defendants. On 20 June 2017, the Crown filed an application for leave to amend the Crown charge notice by adding seven new charges, amending other charges and withdrawing one. I declined the application in large part on 5 March 2018. 2

14 The defendants applied to stay the proceedings. Lang J declined to stay the proceedings on 18 September 2017. 3 He considered, among other things, it remained possible for the defendants to receive a fair trial.

The defendants' costs

Mr Bublitz

15 Mr Bublitz privately retained counsel until December 2016, after which time his defence was funded by Legal Aid Services. He says he spent $1,527,283.49 on legal costs from the point at which the charges were laid until the end of the first trial. The details of the expenses incurred are set out in an affidavit sworn by Mr Bublitz on 2 February 2018. He recognises some of the work can be reused and makes an adjustment for that. Accordingly, he applies for costs totalling $1,284,493.57. Of that, $200,000.00 is sought under the Costs in Criminal Cases Act and $1,084,493.57 under the Criminal Procedure Act.

16 ...