Update, 17 September 2002: Justice O’Regan has granted the Crown leave to appeal to the Court of Appeal.
Decision reserved on Crown appeal over Moses & Stevens charges
Question of whether court should be asked to do Parliament’s work
Justice Mark O’Regan reserved his decision today on whether to grant the Crown leave to appeal to the Court of Appeal over dismissal of some securities law charges against former Reeves Moses directors Roger Moses & Gary Stevens.
The whole case seems to me increasingly absurd, but my understanding of today’s proceedings was hampered by a desire of lawyers for all parties not to part with copies of their written submissions.
It seemed, from Mr Stevens’ lawyer Chris Morris, that I’d jumbled things in a past story by writing about appeals which weren’t being appealed, etcetera, so they weren’t going to be helpful. My surprise at the particular accusation, and my suggestion that if I make an error it would help if somebody told me about it so I could correct it, didn’t improve anything.
On my way to the keyboard, it seemed I was being landed with absolute liability of the kind Mr Morris and Mr Moses’ lawyer, Raynor Asher QC, argued their clients shouldn’t be subjected to in their former control of mortgage businesses which, in 1999, were promoted very heavily — and very successfully, with the mortgage book soaring by tens of millions of dollars — but at least in some instances (the loans which landed the directors and their employee in court) were managed very shoddily.
This accusation by Mr Morris made no sense to me, especially after I referred back to my last story: Next court date set for Reeves Moses securities charges, written on 2 August.
And, of course, not having the documentation of what these lawyers think they’re talking about often makes it harder to assess what they actually say in court. They seem to think that because they almost understand what they’re talking about (although occasional mumbling or a wayward sentence structure tend to tell a listener otherwise), an audience lacking documentation will understand them perfectly.
Often a point expressed in part or perhaps phrased slightly wrongly in oral submissions becomes clearer from reading of the written case.
Conduct couldn’t be impugned
Mr Asher raised a point during his submissions — partly from his written submissions & partly in speaking to them — that in the original district court case Judge John Hole had found that in employing mortgage manager Peter van Nieuwkoop and in monitoring subsequent performance, “the defendants’ conduct could not be impugned.”
Without being in court every day of both the directors’ and the employee’s trials, it’s been hard to establish how the directors’ failure (in hindsight) to monitor events adequately could not have been in breach of securities law which stipulates what they are required to do. This is the point of law, concerning regulation 41 of the Securities Act (Contributory Mortgage) Regulations, which is at the heart of assessing the directors’ behaviour in monitoring development loans at Reeves Moses Hudig Mortgage Brokers Ltd (since sold 3 times & renamed).
No case to answer
Judge Hole found no case to answer on charges laid under the regulations because the regulation didn’t impose criminal liability on directors of a broker when it was the broker which contravened the regulations, not the directors themselves. Regulation 41 says: “A broker or a director of a broker who contravenes, or fails to comply with, any provision of these regulations commits an offence, and is liable on summary conviction to a fine not exceeding $5000.”
To me, the district court judge’s rejection of the reference to “who” as meaning a person, instead deciding the legislature really meant “which,” is a contrived elimination of responsibility for directors in a law written to exact responsibility. Nevertheless, Justice O’Regan worked carefully through the language in his judgment on the Crown appeal in May, approaching it from different viewpoints, before concluding this regulation doesn’t impose criminal liability on directors for contraventions of the regulations by brokers.
Judge suggests legislative fix
Justice O’Regan went on to suggest the outcome of this case might lead “to some reconsideration of the ambit of regulation 41. If it is intended to impose obligations on directors for breaches of brokers, then it may be considered appropriate to include suitable exceptions along the lines of those contained in sections 58(2) & 58(4) or 59(2).
All along, Crown counsel Brian Dickey has argued the ability to impose a penalty under this regulation is highly important to the contributory mortgage industry. The case led by the Crown has therefore taken on the shape of a modest crusade to repair an ambiguously phrased law by picking on a couple of directors who, while hindsight suggests they ought to have done a lot better, seem not to have set out to do anything criminal or wrong.
Mr Dickey raised the issue of legislative reform in his oral submission, suggesting it should follow the Appeal Court stage. It was “a narrow neat piece of business law.” He said “the effect on the regulatory scheme if there is no change will be enormous. It will effectively mean there is no regulation until there is a law change.”
At this point, the judge put 1 question and I thought of another, which he didn’t address. “The Crown could already have done that [begun a legislative change] as an insurance policy,” Justice O’Regan put to Mr Dickey.
Mr Dickey: “As I understand it, those schemes take a long time to formulate and are not done (mumble) a 1-off case. The consultation process needs to be gone through. But it’s available and that’s what will be looked at next.”
Judge: “I would have thought the Crown would be doing that anyway.”
Mr Asher said a judgment overturning accepted use of police radar was followed by a legislative fix within 2 months. Mr Dickey said the contributory mortgage regulation wasn’t necessarily wrong, which is why the Crown has been pursuing the court case.
I note that, if the Crown did move to fix the law, that would tell everybody it shouldn’t be applied in its present form, nullifying the prosecution. The question the judge didn’t quite reach was that, if the Crown is thinking of clarifying the law, as both the judge & Mr Dickey suggested ought to happen, isn’t that acknowledgment that the law as it stands most probably can’t be applied?
Mr Dickey went on to argue the general & public importance of the case. True, the issue of keeping directors on the straight & narrow is important, but again it needs to be based on meaningful legislation. Mr Asher said neither side in the court battle could find the degree of absolute liability sought by the Crown duplicated in any other regime, but if there was a change, it was more appropriate that it be made by Parliament, not the Appeal Court.