R v Hamilton

• Jurisdiction: New Zealand
• Judge: Faire J
• Judgment Date: 16 May 2014
• Neutral Citation: [2014] NZHC 1024
• Docket Number: CRI-2013-004-1722
• Court: High Court
• Date: 16 May 2014

The Queen

and

Hugh Edward Staples Hamilton

[2014] NZHC 1024

CRI-2013-004-1722

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Reasons for verdict following judge alone trial — defendant faced charges under s220 Crimes Act 1961 (“CrA”) (theft by a person in a special relationship), s242 CrA (false statements by a promoter), s377 Companies Act 1993 (false statements) and s66(1)(b) CrA 1961 (parties to offences — does or omits an act for the purpose of aiding any person to commit the offence) — defendant was a solicitor — charges related to failed finance company — defendant acted on instructions of director — counts related to lending and giving guarantees of loans by company, false statements and lack of disclosure in the prospectus issued to the public — loans were made in breach of trust deed — finance company stated it did not engage in related party offending — whether director had a relevant interest under s5 Securities Markets Act 1988 (relevant interests in securities)— whether the defendant had known that any of the directors were causing the finance company to breach its obligations — whether defendant had known that his legal assistance was resulting in related party lending.

Counsel:

NR Williams, KC-M Chang and AJH Senior for Crown

JG Robertson, DG Young and J McNamara for Defendant

REASONS FOR VERDICT OF Faire J

Table of Contents

Introduction	[1]
The counts	[4]
The position of the company-offenders	[11]
Discharge of defendant in respect of counts 17 and 18	[16]
Amendment to count 19	[17]
Judge alone trial	[18]
The background facts	[27]
The defendant	[42]
Purchase of Belgrave	[45]
The loans to Schofield interests	[93]
The documents involved in the disclosure charges	[94]
Belgrave's position at receivership	[97]
Distributions by receivers	[106]
Elements of the theft charges	[110]
Elements in respect of principal theft offences	[114]
Conviction certificates	[115]
Secondary party elements in respect of theft charges	[116]
(a) Actus reus element	[117]
(b) Mens rea element	[118]
(i) Knowledge	[119]
(ii) Intention	[122]
The elements of the disclosure charges	[128]
Elements in respect of principal offence under s 242	[131]
Secondary party elements in respect of s 242	[133]
Common intention requirement	[133]
Was false statement carried out as part of the common	[136]
a) Defendant's knowledge	[137]
Elements in respect of principal offence under s 377(2)	[138]
Rules of law and practice	[143]
Key facts and findings	[149]
Count 1 – The guarantee by Belgrave of the loan of $3,175,000	[149]
Verdict	[161]
Count 2 – The guarantee by Belgrave of the loan of $5,000,000 to IEL, Belgrave's shareholder	162]
Verdict	[168]
Count 3 – The guarantee to MFS Pacific Ltd	[169]
Verdict	[176]
The balance of the theft counts — Counts 4 to 16 and 19	[177]
Is Mr Schofield a related party to Belgrave?	178
Actual assistance	[189]
Knowledge	[193]
Intention	[201]
Verdict	[204]
The disclosure charges	[205]
Verdict	[222]
Conclusion	[223]

Introduction

1 This case arises from independent investigations undertaken by the Serious Fraud Office and the Financial Markets Authority into the affairs of Belgrave Finance Ltd (Belgrave).

2 Belgrave was placed into receivership on 28 May 2008. At that time it owed

1 ,268 individual investors $20,481,616. The debenture investors have received distributions representing 9.8 cents per dollar invested. Belgrave's failure had serious consequences for those investors.

3 The defendant was at the material times a solicitor. He took instructions from a Mr Schofield relating to the acquisition of all the shares in Belgrave. Those instructions later included Messrs Buckley and Smith. Further instructions were taken in relation to borrowing by Belgrave and then in relation to lending. The charges that I now consider arise from the defendant's involvement with these matters. They include steps taken to solicit funds for investment from the public.

The counts

4 The defendant faces the following charges on indictment as a party to the offending of his co-offenders:

• (a) Seventeen charges under s 220 of the Crimes Act 1961 involving theft by a person in a special relationship;

• (b) Eleven charges under s 242 of the Crimes Act 1961 alleging false statements by a promoter;

• (c) Eleven charges under s 377 of the Companies Act 1993 and s 66 of the Crimes Act 1961 of making a false statement to a trustee.

5 In respect of the counts pursuant to s 220 of the Crimes Act 1961, Mr Williams advised that the Crown relied on s 66(1)(b) to (d) of the Act. In particular, he said the Crown alleges that Mr Hamilton gave Messrs Schofield, Buckley and Smith direct assistance:

• (a) In respect of counts 1, 2 and 3 to enable them or his associated interests to purchase Belgrave and finance its operations; and

• (b) In respect of counts 4 to 16, and 19, with each of the transactions that are the subject of these counts.

6 The first three counts relate to monies raised either for the purchase of shares in Belgrave Finance Ltd, or to fund the company's operation by the company which became the shareholder of Belgrave, namely Investment Enterprises Ltd (IEL). Those transactions were guaranteed by Belgrave. The guarantees are in breach of the Debenture Trust Deed between Belgrave and its trustee, Covenant Trustee Company Ltd.

7 The remaining charges deal with loan advances made by Belgrave to borrowers. They also are in breach of the Debenture Trust Deed between Belgrave and Covenant Trustee Company Ltd.

8 Mr Williams advised that in relation to the counts under s 242 of the Act (false statement by a promoter) and s 377(2) of the Companies Act 1993 (making a false statement to a trustee) the Crown relied on s 66(2). In this respect, in summary, the Crown case alleges that:

• (a) Mr Hamilton, with Messrs Schofield, Smith and Buckley formed a common intention to structure Belgrave so that Mr Schofield's financial interest in it was not revealed and to allow Belgrave to provide loans to Mr Schofield and entities associated with him in breach of the Debenture Trust Deed;

• (b) In the course of implementing and giving effect to that plan, Mr Buckley and Mr Smith offended by issuing prospectuses containing false statements and making false statements to the trustee;

• and

• (c) Mr Hamilton knew it was probable that in the course of implementing and giving effect to the common intention Mr Buckley and Mr Smith would issue prospectuses with false statements, and would make false statements to the trustee.

9 The charges under s 242 of the Crimes Act 1961 and s 377 of the Companies Act 1993 will be referred to in this judgment as the disclosure charges. They relate to the alleged offending committed in order to obtain funds from the public.

10 The charges under s 220 of the Crimes Act 1961 are the theft charges and will be referred to as such in this judgment. They relate to the alleged dealing with money otherwise than in accordance with the requirements of persons other than the principal offenders and the defendant.

The position of the co-offenders

11 Mr Buckley, one of the directors of Belgrave pleaded guilty to the charges against him pre-committal on 25 May 2012. Those charges were 19 charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961, four charges of false statement by a promoter under s 242 of the Crimes Act 1961, one charge of false statement to a trustee under s 377 of the Companies Act 1993 and one charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978.

12 He was sentenced in the District Court on 30 August 2012 as follows:

• (a) On the charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961 to one year's imprisonment;

• (b) On the charges of a false statement by a promoter under s 242 of the

• Crimes Act 1961to three years imprisonment;

• (c) On the charge of a false statement to a trustee under s 377 of the

• Companies Act 1993 to one year and six months imprisonment;

• (d) On the charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978 to one year and six months imprisonment.

13 Mr Schofield was granted a conditional stay of proceedings on 17 December 2012. The reason for the stay was that he was suffering from terminal cancer. The High Court granted leave to the Crown to apply for the stay to be lifted if there is a significant change in the relevant circumstances. At this stage, no advice indicating that such application has been, or is about to be, made has been given.

14 Mr Buckley's co-director, Mr Smith, pleaded guilty to the charges against him on 24 May 2013. Those charges were 19 charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961, four charges of false statement by a promoter under s 242 of the Crimes Act 1961, one charge of false statement to a trustee under s 377 of the Companies Act 1993 and one charge of an untrue statement in a prospectus or advertisement under s 58(1) of the Securities Act 1978.

15 He was sentenced in the High Court on 7 June 2013 as follows:

• (a) On the charges of theft by a person in a special relationship under ss 220 and 223(a) of the Crimes Act 1961 to four years imprisonment;

• (b) On the charges of a false statement by a promoter under s 242 of the

• Crimes Act 1961 to four years imprisonment;

• (c) On the charge of a false statement to a trustee under s 377 of the

• Companies Act 1993 to three years imprisonment;

• (d) On the charge of an untrue statement...