IN THE Court of appeal OF new Zealand

I TE KŌTI PĪRA O AOTEAROA	
 CA187/2019
 [2020] NZCA 504

	
BETWEEN	
RICHARD TIMOTHY BLACKWOOD
Appellant	
	
AND	
THE QUEEN
Respondent	

Court:	
Gilbert, Thomas and Wylie JJ	

Counsel:	
M A Corlett QC and J D Ryan for Appellant
D G Johnstone for Respondent	

Judgment:
(On the papers)	
16 October 2020 at 9.30 am	

JUDGMENT OF THE COURT

The application for costs is declined.
____________________________________________________________________

REASONS OF THE COURT

(Given by Gilbert J)
[1]	Following a lengthy Judge-alone trial in the High Court at Auckland, Mr Blackwood was convicted on four charges (charges 10–13) of theft by a person in a special relationship.  His appeal against these convictions was allowed by this Court in a judgment delivered on 16 August 2019.  Mr Blackwood now seeks indemnity costs for the appeal in the sum of $76,526.75.  The appeal occupied one day of hearing time.  Mr Blackwood contends that costs should be awarded in full as the prosecution ought never to have been brought against him, there being no evidence to prove one of the elements of the charges.  
[2]	The Crown opposes the making of any order for costs.
[3]	The relevant background is summarised in our judgment on the substantive appeal and need not be repeated here.  Briefly, Paul Bublitz, Bruce McKay and Mr Blackwood were all charged with theft by a person in a special relationship, an offence under s 220 of the Crimes Act 1961.  It was alleged that Mr Bublitz knowingly misappropriated funds raised from the public by Mutual Finance Ltd (Mutual), a company he controlled, in breach of related party restrictions in a deed of guarantee between Mutual and the Crown (the Crown guarantee).  Messrs McKay and Blackwood were charged as parties to this offending.  
[4]	Charges 10–12 arose out of the purchase by Mutual of loans made by Viaduct Capital Ltd (Viaduct) to various companies in the Hunter group of companies through which Mr Bublitz undertook various property development projects.  Charge 13 concerned advances made by Mutual to one of the Hunter group companies.  Toogood J was satisfied these were all related party transactions because Mr Bublitz controlled Mutual, Viaduct and Hunter for the purposes of the Crown guarantee at the relevant times.  The Judge was satisfied that Mr Bublitz knowingly breached the restrictions on related party transactions in the Crown guarantee when entering into these transactions.  
[5]	Messrs McKay and Blackwood were convicted as parties on these charges (save that Mr McKay did not face charge 13).  Mr McKay was a director and the chief financial officer of Viaduct and had a central role in the administration of both Viaduct and Mutual.  He also owned 51 per cent of the shares in Phoenix Finance Holdings Ltd (Phoenix) which wholly owned Viaduct.  Mr Blackwood played a lesser role.  He was engaged on contract as a loan originator for Viaduct and was paid fees on a success only basis.  Although he was appointed a director of Viaduct following the resignation of another director, he did not receive director’s fees and had little to do with the management of any of the relevant companies.  
[6]	Messrs Bublitz, McKay and Blackwood all appealed against their convictions on charges 10–13.  Only Mr Blackwood’s appeal succeeded.  While agreeing with Toogood J that charges 10–13 had been proved beyond reasonable doubt against Messrs Bublitz and McKay, this Court considered that Mr Blackwood was in a different category and the reasonable possibility that Mr Blackwood did not know the transactions were in breach of the restrictions in the Crown guarantee could not be excluded.  This Court summarised its conclusion on this aspect as follows:
[125]	We are acutely conscious of the major advantage the trial Judge had in hearing the evidence over several weeks and we hesitate before disagreeing with the factual findings of the experienced Judge.  However, we are not persuaded by the brief reasons he gave on this aspect of the case, namely that all knowledge elements were proved to the requisite standard against Mr Blackwood.  Although we set the relevant passage out at [70] above, for ease of reference, we set it out again:
	[291]	Bearing in mind the close working relationships, the roles of Mr McKay and Mr Blackwood in all of the steps taken to acquire the finance company, and the extent to which each of them was involved in the operation of both Mutual and Viaduct after Mutual’s acquisition, I am wholly satisfied that Mr McKay and Mr Blackwood were fully aware of the nature of the related party provisions in the Crown guarantee.
	(Emphasis added.)
[126]	We do not disagree with the Judge’s finding that Mr Blackwood knew of Mr Bublitz’s central role at Mutual and Viaduct at all material times.  However, as we have attempted to demonstrate, there was a remarkable lack of evidence to show that Mr Blackwood was “fully aware of the nature of the related party provisions in the Crown guarantee”.  It must be kept in mind that the Judge considered the Crown had not proved Mr Bublitz controlled Viaduct for the purposes of the Viaduct Trust Deed.  There was no particular change in the way Viaduct operated after Mr Bublitz purchased Mutual.  We cannot exclude the reasonable possibility that Mr Blackwood was not aware of the extended definition of “control” in the Mutual Crown guarantee which led to the Judge’s conclusion that Mr McKay’s presumptive control, as the holder of 51 per cent of the shares in Phoenix, was displaced for the purposes of the guarantee.
[7]	Section 8 of the Costs in Criminal Cases Act 1967 (the Act) empowers the Court to make an order for costs in criminal appeals brought under pt 6 of the Criminal Procedure Act 2011.  This section reads:

8	Costs on appeals
(1)	Where any appeal is made pursuant to any provision of Part 6 of the Criminal Procedure Act 2011 the court which determines the appeal may, subject to any regulations made under this Act, make such order as to costs as it thinks fit.
(2)	No defendant or convicted defendant shall be granted costs under this section by reason only of the fact that his appeal has been successful.
(3)	No defendant or convicted defendant shall be refused costs under this section by reason only of the fact that the appeal was reasonably brought and continued by another party to the proceedings.
(4)	No Judge, Justice, or Community Magistrate is liable to costs just because an appeal is filed against a determination by that judicial officer.
(5)	If the court which determines an appeal is of opinion that the appeal includes any frivolous or vexatious matter, it may, if it thinks fit, irrespective of the result of the appeal, order that the whole or any part of the costs of any party to the proceedings in disputing the frivolous or vexatious matter shall be paid by the party who raised the frivolous or vexatious matter.
(6)	If the court which determines an appeal is of opinion that the appeal involves a difficult or important point of law it may order that the costs of any part to the proceedings shall be paid by any other party to the proceedings irrespective of the result of the appeal.
[8]	Trial costs for a successful defendant are dealt with under s 5 of the Act which sets out relevant circumstances to which the court must have regard in considering whether to make an order.  These include: whether the prosecution acted in good faith in bringing and continuing proceedings; whether at the commencement of the proceedings the prosecution had sufficient evidence to support the conviction of the defendant in the absence of evidence to the contrary; whether the prosecution took proper steps to investigate any matter suggesting the defendant might not be guilty; whether the investigation into the offence was conducted in a reasonable and proper manner; whether the evidence as a whole would support a finding of guilt but the charge was dismissed on a technical point; and whether the defendant established by cross-examination of prosecution witnesses or otherwise that he was not guilty.  Also relevant is the behaviour of the defendant in relation to the acts or omissions on which the charge was based as well as the investigation and the proceedings.  
[9]	Unlike civil proceedings, costs in criminal cases do not follow the event and are seldom awarded.  This is because criminal proceedings are pursued by the prosecuting agency in the public interest.  Costs are not usually awarded in criminal cases unless the prosecution has acted improperly or unreasonably in the investigation or prosecution of the charge.  Nevertheless, there is no presumption for or against an award of costs.  The mere fact that the prosecution was properly brought and continued does not create a presumption that costs to a defendant should be refused.
[10]	While the considerations set out in s 5 apply to trial costs, they form part of the scheme of the legislation and provide guidance on the sorts of circumstances in which it may be appropriate for the court to exercise its discretion to award costs under s 8 on an appeal.
[11]	Section 13 of the Act provides for the making of regulations prescribing the maximum scales of costs that may be awarded under the Act.  The regulations were promulgated in 1987 and provide for a maximum fee on a conviction appeal of $226 for each half day or part half day in court.  These rates have not been updated in the last 33 years and are clearly no longer fit for purpose.  Section 13(3) of the Act permits the Court to depart from the scale if satisfied that the payment of greater costs is desirable having regard to the special difficulty, complexity, or importance of the case.
[12]	Mr Corlett QC, for Mr Blackwood, relies particularly on this Court’s observation in the Appeal judgment (quoted at [6] above) as to the lack of evidence showing that Mr Blackwood was fully aware of the related party provisions in the Crown guarantee.  Mr Corlett submits that this finding justifies not only an award of costs, but costs assessed on an indemnity basis.  He submits that the prosecution should never have been brought against Mr Blackwood because of the manifest absence of evidence against him to establish the mens rea element of the charges.  The consequences for Mr Blackwood have been significant.  He has not only incurred considerable expense in having the convictions overturned, but also served more than half of his sentence of home detention pending the appeal hearing and delivery of the Appeal judgment.  
[13]	For the reasons that follow, we do not consider this is an appropriate case for the Court to award costs for the appeal.
[14]	The first point to note is that we are not dealing with an application for costs for the trial in the High Court.  Any such application must be made to that Court.  We are solely concerned with costs on the appeal.  There was nothing out of the ordinary in the way the appeal was conducted that would attract the sanction of costs.  Mr Corlett does not submit otherwise.  
[15]	Mr Corlett’s contention is that Mr Blackwood should not have been charged in the first place and indemnity costs should therefore be ordered.  This submission faces considerable difficulty having regard to the extensive background, which we briefly summarise below.  In summary, despite considerable scrutiny (including judicial) over a five-year period of the appropriateness of the charges being pursued further, it was never suggested that these particular charges lacked a sufficient evidential foundation to justify them being brought against Mr Blackwood in the first place.   
[16]	Messrs Bublitz, McKay, Blackwood and Lance Morrison (the charges against whom were subsequently dismissed), were initially charged on 11 March 2014.  The first trial commenced on 8 August 2016.  In late November 2016, Messrs Bublitz, McKay and Morrison (but not Mr Blackwood) applied for a stay of proceedings on the grounds of abuse of process, largely because of the length of the trial.  That application was dismissed by Woolford J.  However, the Judge dismissed 18 of the charges pursuant to s 147 of the Criminal Procedure Act (and one further charge against Mr Morrison) on the grounds that a trial on these charges would be unreasonably burdensome on the defendants.  
[17]	In late January 2017, Messrs Bublitz and McKay (but not Mr Blackwood) brought further applications for a stay of the proceedings and for an order discharging them pursuant to s 147.  Mr Morrison also applied in early February 2017 for the trial to be stayed or aborted.    Woolford J declined these applications.
[18]	In early May 2017, all four defendants applied to abort the trial because voluminous late disclosure by the Crown had prejudiced their right to present an effective defence.  These applications were granted by Woolford J.
[19]	The Crown elected not to proceed further against Mr Morrison but determined to proceed with most of the existing charges against the other three defendants.  In September 2017, Messrs Bublitz, McKay and Blackwood brought a further application for an order that the proceedings be stayed.  This application was dismissed by Lang J.  The Judge observed that the Crown’s disclosure breaches were merely inadvertent and had not been committed deliberately or in bad faith.  The Judge noted there was no suggestion the prosecution had been pursued for inappropriate purposes or in a manner designed to be oppressive or unduly burdensome on the defendants.  
[20]	Despite three and a half years having passed since charges were first laid, including nine months of trial, Mr Blackwood did not at any stage suggest that there was no evidence from which an inference could be drawn on the mens rea element such as to justify further pursuit of the charges against him.  Further, Woolford J scrutinised the sufficiency of the evidence and the appropriateness of the charges proceeding against the defendants.  The Judge dismissed a significant number of the charges, but not charges 10–13.
[21]	The second trial commenced on 13 August 2018 and concluded on 5 September 2018.  Mr Blackwood still did not make any application for dismissal under s 147.  He elected not to give evidence, as was his right.  His strategy was to put the Crown to proof, not to demonstrate his innocence. 
[22]	In a careful and comprehensive judgment (comprising 315 paragraphs) delivered in February 2019, Toogood J delivered not guilty verdicts on nine of the 15 charges and guilty verdicts on the others.  Mr Blackwood faced six of these charges.  He was found not guilty on two of them, but guilty of the other four (charges 10–13).
[23]	While Mr Blackwood succeeded with his conviction appeal, this was solely because this Court took a different view from that reached by Toogood J that the Crown had proved one of the elements of the charges against Mr Blackwood beyond all reasonable doubt.  This Court did not find Mr Blackwood innocent, only that it could not exclude the reasonable possibility that he did not know at the relevant times that the transactions were in breach of the related party restrictions in the Crown guarantee.  Proof of this element of the charge was always going to be a matter of inference from proved facts.  That this Court came to a different conclusion to that reached by Toogood J does not suggest prosecutorial overreach or misconduct.  Rather, it suggests the opposite, that the proper inference to draw from proven facts was one on which reasonable minds might differ, particularly applying the very high standard of proof required.  
[24]	In summary, we do not accept that there was no proper basis for the charges to have been brought against Mr Blackwood.  The underlying premise of his costs application is not made out.  We do not consider there is anything out of the ordinary that could justify an award of costs for the appeal.
Result
[25]	The application for costs is declined.

Solicitors: 
Claymore Partners Limited, Auckland for Appellant
Crown Solicitor, Auckland for Respondent