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Supreme Court: Lombard sentences too harsh

by Stephen on May 7th, 2014

7 May 2014

Supreme Court: Lombard sentences too harsh


The Supreme Court has just released its decision concluding that the sentences of home detention for former Justice Minister Sir Douglas Graham and three other Lombard Finance directors were too harsh.

Sir Douglas and three other directors were convicted of making untrue statements in company offer documents prior to Lombard’s failure. The four men sought to overturn their convictions in the Court of Appeal, while at the same time the FMA argued that the sentences of community work the men received were inadequate.

The Court of Appeal upheld the convictions and imposed tougher sentences of home detention after determining that the original sentences of Justice Dobson in the High Court did not reflect the gravity of offending and did not give sufficient weight to accountability, denunciation and general deterrence.

More detail

The appellant directors of Lombard Finance were found guilty on four counts laid under section 58 of the Securities Act, relating to untrue statements contained in a prospectus issued on 24 December 2007 and in advertisements distributed by Lombard. As a result, they were sentenced by Dobson J to community work and, in the case of Sir Douglas and another director, ordered to pay reparations of $100,000.

The Court of Appeal dismissed the directors appeals against their convictions but allowed the Crown’s appeal and considered that a starting point of imprisonment should have been adopted in the case of each of the directors (and sentences of home detention were ultimately imposed).

The key issue on appeal to the Supreme Court was whether the offending warranted sentences of imprisonment. It is only if sentences of imprisonment were otherwise appropriate that sentences of home detention could be imposed.

The Supreme Court has concluded that the appellants’ conduct did not warrant sentences of imprisonment and has unanimously allowed the appeal.

The Supreme Court has held that the reasons given by the Court of Appeal did not warrant their conclusion that sentences of imprisonment were appropriate for the offending of the appellants. On the findings of fact made by Dobson J the appellants were honest men who took their responsibilities seriously but nonetheless, by reason of misjudgements made in circumstances of pressure, were responsible for the issuing of a prospectus which was untrue as to liquidity. These findings of fact were not disturbed by the Court of Appeal. On this basis, the sentencing purposes of accountability, denunciation and deterrence had limited application. The considerable losses suffered by investors were less than those in other comparable cases and the principle of consistency supports the approach taken by Dobson J.

Accordingly, the sentences imposed by the Court of Appeal are set aside and the sentences imposed by Dobson J are restored.

Key point

Perhaps the key point in the Supreme Court judgment is the statement that:

“It is not easy to think of cases from any area of the criminal law in which imprisonment has been seen as an appropriate response to offending where culpability arises out of a misjudgement by people who took their responsibilities seriously and where the consequences have been economic and have not involved physical injury or death.”

I hope that this, much-needed, clarity is taken up not only in the context of the penalty regime under the Financial Markets Conduct Act 2013 – but also in the context of the Commerce Minister’s efforts to criminalise ‘egregious’ breaches of directors’ duties under the Companies and Limited Partnerships Amendment Bill which is currently before Parliament.

Further information

If you would like more information about any of the matters discussed in this note, please contact me.

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