R v SCUTTS [2015] NZHC 1108 [21 May 2015]

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CRI-2013-004-9588

[2015] NZHC 1108

THE QUEEN

v

PETER JOHN SCUTTS

Hearing:

4 - 11 May 2015

Appearances:

R Reed and R R Parlane for Crown

J R Billington QC and A J Steel for Defendant

Judgment:

21 May 2015

REASONS FOR VERDICTS OF M PETERS J

This judgment was delivered by Justice M Peters on 21 May 2015 at 2 pm

pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

Counsel: J R Billington QC, Auckland R Reed, Auckland A J Steel, Auckland Copy for: Serious Fraud Office, Auckland

Introduction

[1] Peter John Scutts faces:

(a) one charge of receiving a secret reward for procuring a contract, being

an offence under s 8(1) Secret Commissions Act 1910 (“s 8(1)” and

“Secret Commissions Act”); and

(b) 16 charges of dishonest use of a document, being offences under

s 228(b) Crimes Act 1961 (“s 228(b)” and “Crimes Act”).

[2] Mr Scutts was charged by the Serious Fraud Office (“SFO”) on 20 August

2013.1 The Crown assumed responsibility for the prosecution of all charges on

3 June 2014.

[3] The matter proceeded as a Judge alone trial and I reserved my decision.

[4] I find Mr Scutts guilty of the offences with which he is charged and these are

my reasons.2

[5] These reasons comprise:

(a) a summary of the Crown’s case;

(b) the elements of each offence which the Crown must prove beyond

reasonable doubt before Mr Scutts may be found guilty of the

offences with which he is charged;

(c) a summary of the relevant evidence, including findings of fact where

necessary;

(d) my verdicts.

1 Section 12 Secret Commissions Act requires that the Attorney-General give leave to prosecute

for an offence under the Act. Leave was given on 19 August 2013. 2 Criminal Procedure Act 2011, s 106(2).

Summary of Crown case

[6] The Crown’s case under s 8(1) is that Mr Scutts advised New Zealand Wine

Company Limited (“NZWC”) to enter into a contract to supply wine to Liquor

Marketing Group Limited (“LMG”), and agreed to receive consideration, that is a

payment, from LMG as a reward for the giving of that advice, namely AUD$1 per

case of wine supplied by NZWC to LMG.3

[7] Although I find Mr Scutts guilty of this offence, the Crown’s description of

the reward is inaccurate. The reward was the payment of AUD$1 per case of wine

sold by LMG to its retail customers (“$1 per case”).

[8] The contract between NZWC and LMG was entered into on or about 2 March

2011 and its terms are recorded in an undated letter from Mr Robert White of NZWC

to Mr Douglas Finlay of LMG sent on or about 29 March 2011 (“NZWC/LMG

contract”).4

[9] The Crown’s case under s 228(b) is that, subsequent to the NZWC/LMG

contract, Mr Scutts submitted 16 invoices to LMG to obtain the $1 per case. The

Crown has charged Mr Scutts under s 228(b) in respect of each invoice.

[10] The invoices were rendered to LMG each month from May 2011 to

November 2012 inclusive, on the letterhead of Rochfort Rees Wine Company

Limited (“RRWC”), a company associated with Mr Scutts.

[11] There is no dispute that LMG paid the sums invoiced by direct credit to a

bank account in Mr Scutts’ name at Westpac, Sydney. The invoices/payments

totalled $53,574.21.

Statutory provisions

Section 8

[12] Section 8 Secret Commissions Act provides:

3 All sums are in Australian dollars unless I say otherwise.

4 Letter New Zealand Wine Company Ltd to Liquor Marketing Group undated, SFO54.

8 Receiving secret reward for procuring contracts an offence

(1) Every person is guilty of an offence who advises any person to enter

into a contract with a third person and receives or agrees to receive

from that third person, without the knowledge and consent of the

person so advised, any gift or consideration as an inducement or

reward for the giving of that advice or the procuring of that contract,

unless the person giving that advice himself acts as the agent of the

third person in entering into the contract, or is to the knowledge of

the person so advised the agent of that third person.

(2) For the purposes of this section a person shall be deemed to advise

another person to enter into a contract if he makes to that other

person any statement or suggestion with intent to induce him to enter

into the contract.

[13] Accordingly, and taking into account the terms in which Mr Scutts is charged,

the Crown is required to prove beyond reasonable doubt:

(a) that Mr Scutts advised NZWC to enter into the NZWC/LMG contract;

(b) that Mr Scutts agreed to receive consideration from LMG as a reward

for the giving of the advice;

(c) that NZWC did not know of or consent to (b).

[14] There is no dispute that the elements of the offence referred to in (a) and (c)

are satisfied, and Mr Scutts was not LMG’s agent. The issue is as to (b), and

whether the Crown has proved the necessary agreement beyond reasonable doubt.

[15] There are no cases of assistance on s 8(1). In closing Crown counsel

submitted that it would be sufficient if, at the time of advising NZWC, Mr Scutts had

anticipated he would receive a reward from LMG. It is unnecessary for me address

that submission given the view I have reached.

Section 228(b)

[16] Section 228(b) Crimes Act provides:

228 Dishonestly taking or using document

Every one is liable to imprisonment for a term not exceeding 7 years who,

with intent to obtain any property, service, pecuniary advantage, or valuable

consideration,—

(a) …; or

(b) dishonestly and without claim of right, uses or attempts to use any

document.

[17] Accordingly, the Crown is required to prove beyond reasonable doubt that:

(a) Mr Scutts “used” documents, being the invoices from RRWC to

LMG;

(b) that Mr Scutts did so to obtain pecuniary advantage, specifically the

$1 per case;

(c) that Mr Scutts did so “dishonestly” and “without claim of right”.5

[18] The only element of this offence in dispute is (c).

[19] Counsel for Mr Scutts submitted, and I agree, that the verdict on the charge

under s 8(1) determines the verdict on the charges under s 228(b). That is, if

Mr Scutts is proved to be guilty under s 8(1) he is guilty under s 228(b) and vice

versa.

Rules of law and practice relevant to a criminal trial

[20] In reaching my verdicts I have had regard to the following rules of law.

[21] Mr Scutts is presumed innocent. Mr Scutts did not give evidence and he was

under no obligation to do so. It is for the Crown to prove Mr Scutts’ guilt and not for

Mr Scutts to prove his innocence.

[22] The Crown must prove Mr Scutts’ guilt beyond reasonable doubt. Proof

beyond reasonable doubt is a very high standard, which the Crown will have met

only if I am sure that Mr Scutts is guilty. It is not enough for the Crown to persuade

5 As defined in the Crimes Act 1961.

me that Mr Scutts is probably guilty or even that he is very likely to be guilty. A

reasonable doubt is an honest and reasonable uncertainty left in my mind about

Mr Scutts’ guilt, after I have given careful and impartial consideration to all of the

evidence.6

[23] To the extent evidence offered at trial suggests that Mr Scutts lied, either to

the Board of Directors of NZWC or to the SFO, I remind myself of the matters in

s 124(3) Evidence Act 2006 before placing any weight on that evidence.

[24] The Defence called evidence from Mr Douglas Finlay and Mr John Scott,

both of whom were employed by LMG at material times. I do not accept their

evidence and nor has it left me unsure on any count – had I done otherwise I would

have been left in reasonable doubt as to Mr Scutts’ guilt and the proper verdict would

have been acquittal. Given that view, I put their evidence to one side and decide

whether I am satisfied that the Crown has proved each element of the offences

beyond reasonable doubt. I must acquit Mr Scutts if I am not so satisfied.

Evidence

[25] Principal witnesses called by the Crown were Mr Alton Jamieson, the

Chairman of NZWC’s board at the material time; Mr White, NZWC’s CEO until

June 2011; Mr Oliver Scutts (Mr Scutts’ son who gave evidence pursuant to a

subpoena); Mr Simon Rowe and Mr David Gulliver of LMG; Mr Grant McCurrach,

Accountant (likewise pursuant to a subpoena); and Mr Reid Panaho, Forensic

Accountant with the SFO. Mr Scutts attended a voluntary interview with Mr Panaho

and Mr Tony Vercoe, also of the SFO, on 24 May 2013. A DVD of the interview

was played at the trial.

[26] As I have said, the Defence called evidence from Mr Finlay and Mr Scott.

Facts

[27] I find the facts to be as follows.

6 R v Wanhalla [2007] 2 NZLR 573 (CA) at [49]; Woolmington v Director of Public Prosecutions

[1935] AC 462 (HL) at 481; R v Hansen [2007] NZSC 7, [2007] 3 NZLR 1 at [30]; R v Harbour

[1995] 1 NZLR 440 (CA) at 448.

[28] By contract dated 17 November 2009, NZWC engaged Mr Scutts as a

consultant to provide a range of services (“consultancy contract”).7 Mr Scutts is

highly experienced in the liquor industry in New Zealand and Australia and was well

placed to act in this role. The role was expected to occupy three days’ of Mr Scutts’

time each week. Because it may considered relevant, I record that NZWC’s

payments to Mr Scutts were paid into a New Zealand bank account in the name of

RRWC.

[29] NZWC was in financial difficulty at the time it engaged Mr Scutts. NZWC

wished to increase its sales in the Australian market urgently and assisting NZWC in

this regard was identified as one of Mr Scutts’ “immediate priorities”. In March

2010, NZWC’s board approved a strategy paper that Mr Scutts had prepared

regarding the Australian market and in August 2010 it was agreed that Mr Scutts

would relocate to Sydney. Mr Scutts remained in Sydney until mid-2011 when he

returned to New Zealand to become NZWC’s CEO.

[30] Mr Scutts sought opportunities to supply retailers such as Coles, Woolworths

and LMG. Mr Scutts contacted Mr Finlay of LMG, whom he knew from prior

experience in the industry and previous dealings with him. Mr Finlay himself was

experienced in the Australian liquor industry.8

LMG

[31] LMG was a “not for profit” corporate owned by various hotels, bars and

liquor stores. LMG acquired products – beer, “ready to drinks”, wines and spirits,

both locally produced and imported – and supplied them to its hotels etc.

[32] Two of LMG’s subsidiaries were Murray Bridge Wine Company Proprietary

Limited (“Murray Bridge”) and Hotel Liquor Wholesalers (“HLW”). Murray Bridge

imported and paid for product which was then stored in one or other of HLW’s

warehouses, before onward supply (at cost plus a margin) to LMG retailers

throughout Australia.

7 Consultancy Contract dated 17 November 2009, SFO001.

8 Evidence of D W Finlay, Notes of Evidence at 204.

[33] LMG’s retailers traded under a variety of “banners”. As of 2010, and until

late 2011, Mr Finlay was the General Manager of two such banners, “Harry Brown”

and “Down Under Cellars”.

[34] LMG had its own wine labels, such as “Rangitané”, “Swordfish Bay” and

“Lobster Bay”. LMG would purchase “juice”, that is wine, bottle, label and package

it under one of its own labels, and supply it to retailers in the manner to which I have

already referred.

[35] Towards the end of 2010 LMG was seeking to identify another supplier or

suppliers of New Zealand Sauvignon Blanc for its own label wines, LMG’s existing

sources of supply having proved unsatisfactory in some respects.

RRWC

[36] RRWC was incorporated on 21 July 2008. Oliver Scutts’ evidence was

RRWC was set up as a vehicle through which he would learn the industry under his

father’s guidance. RRWC itself purchased grapes and engaged contract winemakers

for its own wine labels. As I have said, Mr Scutts’ income from NZWC was paid

into RWC’s account in New Zealand

[37] At all material times the shares in RRWC were held jointly by Mr Scutts and

Oliver, or by Mr Scutts’ wife and Oliver. Mr Scutts was a director of RRWC

between July and December 2008 and again from July 2010.

[38] On a trip to New Zealand in 2008, Mr Scott and Mr Finlay met Mr Scutts and

Oliver and discussed the supply of RRWC wines to LMG.9 Mr Scott was a senior

LMG employee, with overall management of HLW and of LMG’s commercial and

financial affairs.10

[39] These discussions led to RRWC supplying its wine to LMG over one or two

vintages in about 2009 and 2010. The supply was not entirely successful with LMG

retailers for reasons I need not need address.

9 At 205.

10 Evidence of J W Scott, Notes of Evidence at 272.

Meetings

[40] Mr Scutts met Mr Finlay and other LMG employees several times in the

second half of 2010 and in 2011. These meetings are relevant because an important

factual issue which I am required to determine is whether a letter from Mr Finlay to

Mr Scutts, which on its face is dated 20 October 2010, was signed on or about that

date or much later, in January 2012, on the day Mr Finlay left LMG’s employment.

The Crown says the former, the defence through Mr Finlay says the latter. The

contents of the letter are set out in [78] below.

[41] Mr Scutts met Mr Scott on 14 June and 26 August 2010. Although Mr Scott

was not asked about this meeting in evidence, Mr Finlay’s evidence was that the

meeting would have concerned the earlier supply from RRWC to which I have

referred.

[42] Mr Scutts had lunch or dinner with Mr Finlay on 28 September 2010 and a

meeting with him on 19 November 2010. The Crown case is that the letter referred

to in [40] above was written between these two meetings. Mr Finlay’s evidence is

that during these meetings he and Mr Scutts discussed the supply of a substantial

quantity of Sauvignon Blanc from NZWC to LMG, for LMG’s own label wines.

[43] There was a further meeting between Mr Scutts, Mr Finlay and Mr Greg

Heron, who was responsible for fixing LMG’s trading terms, on 23 November 2010.

Mr Scutts had another meeting with Mr Finlay on 2 February 2011 and dinner with

Mr Misener, CEO of LMG on 16 February 2011.

[44] Mr Finlay travelled to NZWC’s premises in Blenheim on 2 March 2011,

being the date of the NZWC/LMG contract. Mr Finlay and Mr Scutts had previously

negotiated, and LMG and NZWC had approved, the terms of the proposed supply

from NZWC to LMG.

NZWC/LMG contract

[45] Whilst at NZWC’s premises on 2 March 2011, Mr Finlay met its winemaker

(Mr Dave Pearce), NZWC’s then CEO Mr White and several of NZWC’s Board of

Directors.

[46] The NZWC/LMG contract required NZWC to supply a minimum of 60,000

cases of Sauvignon Blanc per annum at $38 per case to LMG in Queensland and

Western Australia. This Sauvignon Blanc became LMG’s own label wine. The

contract also provided for LMG to design the packaging, with NZWC to produce all

packaging “components”, that is the wine would be shipped to Australia ready for

sale. The price of $38 per case was to apply for the first 12 months, and be subject

to annual review thereafter.

[47] The deal was attractive to NZWC. The quantity – 60,000 cases – was

substantial and the price acceptable in the prevailing conditions, because it would be

supplemented by a substantial rebate available to the company in the Australian

market. As I have said, the terms of the NZWC/LMG contract were subsequently

reduced to writing. NZWC’s first shipment was made in May 2011.

Marketing

[48] In April 2011, LMG requested assistance from NZWC to market the wine.

LMG wished to publish the name of the winemaker on the back label of the bottle

and to publish a photo of the winemaker in its marketing catalogues.11

Although

provision of such support is said to be “standard practice”, it was not expressly

provided for in the NZWC/LMG contract and Mr Pearce, NZWC’s winemaker,

refused to allow his name or photo to be used.

[49] Mr Finlay’s evidence was that, given the refusal, he proposed to Mr Scutts

that Oliver Scutts be portrayed as the winemaker, and that LMG would pay $1 per

case of wine that LMG sold to its retailers for provision of this assistance.

11

Evidence of D W Finlay, Notes of Evidence at 245.

[50] In cross-examination Mr Finlay said that the fee was also to pay for other

consultancy services provided by Mr Scutts. Mr Finlay’s evidence was that he

tended to seek Mr Scutts’ advice on the New Zealand market, that he doubted

NZWC would survive its financial difficulties and that Mr Scutts was likely to be of

more use to LMG than NZWC in the future, hence his willingness to “invest” in

Mr Scutts.

[51] Mr Finlay was adamant that he and Mr Scutts agreed on the fee of $1 per

case after the NZWC/LMG contract was entered into and not before, and that the fee

was not a reward to Mr Scutts for advising NZWC to enter into the NZWC/LMG

contract.

[52] Mr Scott’s evidence was consistent with Mr Finlay’s evidence, in that he

believed the $1 per case to be a payment for the marketing assistance and an

arrangement entered into after the NZWC/LMG contract had been agreed. I bear in

mind however that Mr Scott was not a party to the discussions.

[53] One issue at trial was when LMG commenced using Oliver’s name and

photograph to promote its own label wines. The evidence includes emails between

Mr Scutts and Oliver in May 2011 regarding provision of a photograph to LMG, but

these were in response to a request by LMG for Oliver’s photograph to market

RRWC’s wines, not NZWC’s.

[54] By email dated 9 May 2011, Mr Scutts wrote to Oliver:12

… Doug Finlay needs a photo [of] you looking like a wine company

owner/winemaker etc asap.

Can you send it to him asap at …

[55] The next day Oliver asked “what photo” and Mr Scutts replied that

Mr Finlay:13

… just needs a photo of you to promote RR in his catalogues. …

12

Email P J Scutts to O R Scutts dated 9 May 2011, SFO1583. 13

Email P J Scutts to O R Scutts dated 10 May 2011, SFO1583.

[56] On 11 May 2011, Jessica Whiddon sent an email to Mr Scutts, copied to

Mr Finlay, saying:14

Hi Peter,

Douglas has advised me to use Oliver as the “winemaker” for Rochfort Rees.

Would you please be able to send through a high res image of him to use in

the catalogue? I need it fairly urgently as we are going to print with it today.

Thanks,

Jess

[57] These emails are not evidence of the supply of a photo to market NZWC

produced wine. Down Under Cellars’ marketing catalogue dated June 2011 did

include a photo of Oliver, but it was associated with an RRWC wine.15

But the first

occasion on which Oliver’s photo was used to promote LMG’s own label wine in the

catalogue for September 2011 (and in the catalogues for several months thereafter),16

and this was some four months after Mr Scutts submitted the first invoice in dispute.

Invoices

[58] The “documents” underlying the “dishonest use” charges are the invoices that

Mr Scutts submitted to LMG, on RRWC letterhead, from May 2011 to November

2012.17

[59] At the end of each month Mr Finlay’s assistant would send Mr Scutts a report

recording the number of cases of NZWC wine sold to LMG retailers. Mr Scutts

would then submit an invoice, which LMG would check and pay if in order.18

This

process was stipulated in an email by Mr Garry Phipps of LMG in July 2011

“regarding the calculations and process for P Scutts rebates via Murray Bridge”.19

14

Email J Whiddon to P J Scutts dated 11 May 2011, SFO1581. 15

Down Under Cellars Catalogue No 48 June 2011, SFO1817 16

Down Under Cellars Catalogue No 45, September 2011, SFO1784, and Down Under Cellars

Catalogue Nos 30, 58, 43, 44, 48, 49, 34, SFO1751, 1759, 1702, 1726, 1718, 1710 and 1677. 17

Invoices Rochfort Rees Wine Company Ltd to Liquor Marketing Group dated May 2011 to

14 November 2012, SFO787, 609 to 623 and 971. 18

Evidence of D W Finlay, Notes of Evidence at 211. 19

Email G Phipps to M Frances dated 22 July 2011, Exhibit J.

[60] Mr Sean Hogan, LMG’s General Manager of Marketing, approved payment

of the majority of the invoices, with Mr Finlay or Mr Rowe approving the balance. I

accept that Mr Hogan was a senior person in LMG but I do not consider that

anything turns on the fact of his approval of the invoices. I do not know what Mr

Hogan knew as to why payments were being made.

[61] The Crown submitted Mr Phipps’ use of the word “rebate” was consistent

with payment of a reward based on volume. It may be but I do not consider anything

can be drawn from the use of the word in this email.

[62] The invoices, which are handwritten, are said to be for “Marketing Services

in [month/year]”, provide details of (Mr Scutts’ personal) bank account, and, with

one or two exceptions, each purports to be signed by Oliver Scutts. In his interview

with the SFO, Mr Scutts denied that the handwriting on the invoices was his and

either denied or said that he did not recall whether he had signed Oliver’s name.

However, by letter dated 27 May 2013, Mr Scutts advised the SFO that he had

become confused in the interview and that he had handwritten the invoices and had

signed Oliver’s name.20

[63] The appearance of RRWC’s letterhead on the invoices and on others issued

by Mr Scutts, for instance in respect of his expense claims, is different from invoices

issued by Oliver or RRWC’s accountant. Nothing turns on those differences. In

addition, Mr Scutts consistently used an incorrect GST number on invoices he issued

but, again, nothing turns on this point. I am satisfied that the error derives from a

“mock-up” RRWC invoice prepared by a graphic designer.

June 2011

[64] In June 2011 Mr White relocated to Australia and Mr Scutts accepted the role

of NZWC’s CEO. Mr Jamieson confirmed Mr Scutts’ appointment by letter dated

7 June 2011 and the terms of Mr Scutts’ employment were recorded in a signed

contract dated 24 June 2011. 21

20

Letter P J Scutts to Serious Fraud Office dated 27 May 2013, SFO608 21

Letter New Zealand Wine Company Ltd to P J Scutts dated 7 June 2011, SFO111 and Individual

Employment Agreement for P J Scutts dated 24 June 2011, SFO005.

[65] The minutes of NZWC’s board meeting on 28 July 2011 (which are agreed to

be accurate) record the following disclosure by Mr Scutts:22

... Peter Scutts Re LMG – Declaration of Interest

Peter explained that he was contacted by Douglas Finlay from LMG and

asked if [RRWC] could provide consulting services to LMG in terms of

selling the wine that NZWC sells to LMG. Peter explained that his son and

wife are the shareholders of [RRWC] and that his son Oliver would provide

the advice. NZWC to supply the wine.

Board comfortable with this situation. …

[66] This disclosure was inaccurate. As of July 2011, Mr Scutts and Oliver were

joint shareholders of 98 per cent of the shares in RRWC and Mr Scutts was a director

of the company. Moreover, Mr Finlay’s evidence was that Oliver did not provide

any consultancy services to LMG.23

Late 2011/2012

[67] Mr Finlay ceased to be General Manager of Harry Brown and Down Under

Cellars in October 2011. Mr Rowe became the General Manager of Down Under

Cellars at that time.

[68] Mr Finlay retained responsibility for the management of LMG’s own label

wines until he left the company on or about 9 January 2012. As I understood it his

departure was by mutual agreement but, quite aside from that, Mr Finlay was

seriously ill and required urgent surgery and treatment.

[69] Mr Rowe assumed responsibility for LMG’s own label wines after

Mr Finlay’s departure. Mr Scutts and Mr Rowe met in early February 2012, and

Mr Scutts followed up with an email to Mr Rowe on 14 February 2012, in which he

referred to “opportunities for building on our existing relationship”.24

[70] Mr Rowe’s evidence was that he believed that Mr Scutts was a wine broker

who facilitated LMG’s relationship with NZWC, that he contacted Mr Scutts if he

22

Minutes of Meeting of New Zealand Wine Company Directors dated 28 July 2011, SFO043 and

Admission of Fact dated 7 May 2015. 23

Evidence of D W Finlay, Notes of Evidence at 228. 24

Email P J Scutts to S F Rowe dated 14 February 2012, SFO648.

had any queries about stock or other matters, that Mr Scutts would make enquiries

and come back to him and that they communicated using a “gmail” address for

Mr Scutts.25

The email to which I have referred in [69] above was sent from that

gmail address.

[71] After Mr Finlay’s departure, Mr Scott took steps to document LMG’s

contractual commitments with suppliers, including Mr Scutts.26

Attending to such

matters was not Mr Finlay’s strong suit. On Mr Scott’s recollection, Mr Finlay told

him that LMG’s arrangement with Mr Scutts for consultancy services had not been

documented.27

[72] Mr Scott instructed Mr Gulliver, LMG’s company secretary, to prepare a first

draft of an appropriate agreement. On 16 March 2012, Mr Scutts (again from his

gmail address) asked Mr Scott whether any progress on the draft agreement had been

made because he wished:28

… to start putting in place some supply agreements for 2012 wine. Having a

formal agreement will help with negotiations and give some comfort to my

bank if we need to secure juice now.

[73] Mr Scott responded that he would ensure LMG provided a draft that week.29

Mr Gulliver sent a draft on 22 March 2012 and Mr Scutts replied on 10 April 2012.

It is apparent from that response that the supplier of the service under that agreement

was to be RRWC.

[74] Of course, Mr Scutts was NZWC’s CEO at the time he was in negotiations

with LMG on the terms of the draft. It is apparent from the evidence however, that a

company by the name of Foley Family Wines was in negotiation to merge with

NZWC. Mr Scutts knew that if such a merger eventuated he would not have long

term future with NZWC. This in fact proved to be the case. NZWC merged with

Foley Family Wines in August 2012, Mr Scutts’ position became redundant and he

left NZWC on 9 September 2012.

25

Evidence of S F Rowe, Notes of Evidence at 75. 26

Evidence of J W Scott, Notes of Evidence at 274. 27

At 274 and 275. 28

Email P J Scutts to J W Scott dated 16 March 2012, SFO753. 29

Email J W Scott to P J Scutts dated 19 March 2012, SFO753.

[75] Shortly after that, LMG, Murray Bridge and RRWC entered into a “Supply

Agreement” dated 11 September 2012.30

The recitals to the agreement record that

LMG and Murray Bridge wished to appoint RRWC as a non-exclusive supplier of

“exclusive label bottled wine products”. The terms of the agreement provided that

LMG might ask RRWC to produce product, for which:31

LMG will pay RRWC a Marketing Allowance of AUD1.00 per case for

withdrawals from the wholesale warehouse nominated by LMG.

[76] In November 2012, NZWC learned of LMG’s payments to Mr Scutts. Foley

Family Wines made a complaint to the SFO in April 2013. As I have said, Mr Scutts

agreed to be interviewed. Mr Finlay also made himself available for an interview

and that took place on 30 May 2013. It transpired that RRWC had not accounted for

the income from LMG in its financial statements or tax returns. The necessary

amendments and disclosures were made and no issue arises on that score.

Letter dated 20 October 2010

[77] In [40] above, I referred to a letter from Mr Finlay to Mr Scutts, on its face

dated 20 October 2010. The Crown relies on this letter as evidence of the alleged

agreement between LMG and Mr Scutts for payment of the reward under s 8(1).

[78] The letter is as follows:32

20th October 2010

Peter Scutts

Consultant

Rochfort Rees Wine Company

PO Box 37-643

Parnell 1015

Auckland

New Zealand

Peter

LMG wish Rochfort Rees Wine Company to be their provider of house

controlled labels sourced for New Zealand wines.

30

Supply Agreement dated 11 September 2012, SFO800. 31

At SFO806. 32

Letter Down Under Cellars to Rochfort Rees Wine Company Ltd dated 20 October 2010,

SFO798.

The agreement is subject to LMG and Rochfort Rees Wine Company

agreeing by 1st July each year the terms of supply for the coming 12 months,

1st July – 30

th June. If an agreement of these terms cannot be reached, LMG

can terminate with 3 months notice and without penalty. During this notice

period supply will continue at the previous year’s terms.

Rochfort Rees may during the period of agreement subcontract the supply of

product to LMG. At all times Rochfort Rees is responsible for the quality of

the products supplied including packaging and for third party adherence to

the commercial terms agreed at the time.

As consideration for providing this service and for providing ongoing market

support LMG agrees to pay Rochfort Rees $A1.00 per case sold to its retail

customers via LMG’s national warehouse distributors.

Yours sincerely

Douglas Finlay

GM Harry Brown Merchant Trader,

Down Under Cellars.

[79] The Crown case is that this letter was written and signed on or about

20 October 2010. Mr Finlay’s evidence was that it was signed on or about 9 January

2012.

[80] The Crown case on this point is that NZWC’s supply to LMG was

“subcontracted” supply by RRWC to LMG, as the third paragraph of the letter

anticipates might occur, and that LMG paid the $1 per case in accordance with the

final paragraph of the letter, such being an agreement to pay consideration as a

reward within the meaning of s 8(1).

[81] Mr Finlay’s evidence was quite different. It was that Mr Scutts wished to

have a basis on which to negotiate an agreement with LMG after Mr Finlay’s

departure. His evidence was that Mr Scutts emailed the draft letter to him in early

January 2012 and that he, Mr Finlay, printed, signed and returned the letter without

paying the date or “sign off” any attention given his state of health. Mr Finlay had

no objection to signing the letter, given that it did not commit LMG to any future

course of action.

[82] I reject Mr Finlay’s evidence on this matter. I find as a fact that the letter was

written on or about 20 October 2010. That date is consistent with the fact that

Mr Scutts and Mr Finlay were in discussion at that time regarding the supply of

wine. The subsequent payment of the $1 per case is consistent with the final

paragraph of the letter. As at 20 October 2010 the letter is accurate in recording that

Mr Finlay was the General Manager of Harry Brown and Down Under Cellars. The

letter would not be accurate as of January 2012, Mr Finlay having ceased to be

general manager of the two banners in October 2011, some three or four months

earlier.

[83] Moreover, there would be no good reason for Mr Scutts to “backdate” the

letter. Mr Finlay’s evidence requires me to accept that Mr Scutts sent Mr Finlay a

draft letter in January 2012 which was dated some 15 months earlier in October

2010.

Decision

[84] For the following reasons, I am satisfied the Crown has proved the existence

of the agreement between LMG and Mr Scutts that is necessary to establish the

offence under s 8(1).

[85] First, the letter of 20 October 2010 is compelling evidence of such an

agreement.

[86] Secondly, I consider Mr Finlay’s evidence of the arrangement he said he

proposed in April 2011 to be implausible. The emails exchanged in May 2011 relate

to provision of a photograph of Oliver Scutts to promote RRWC wines, not

NZWC’s. If I were to accept Mr Finlay’s evidence, I would have to accept that

LMG had paid invoices in each of May, June, July and August 2011 even though it

had not used Oliver’s photograph to promote NZWC wines. I bear in mind that

Mr Finlay also said the payments were for Mr Scutts’ consultancy services and were

made with a view to a long term relationship. However, it is illogical to determine a

fee for consultancy services and/or marketing assistance by reference to sales by

LMG to its retailers.

[87] For the sake of completeness I record Crown counsel’s submission that LMG

would have renegotiated the price per case with NZWC if it were truly required to

pay separately for marketing assistance. I do not put any weight on that submission.

The NZWC/LMG contract was silent on the issue and it would be a matter for LMG

whether it sought some reduction in price.

Other matters

[88] The Crown relied on other circumstantial evidence as supporting its case. It

is correct that Mr Scutts’ actions to further RRWC’s business were inconsistent with

his obligations to NZWC as its CEO. I put that matter to one side, however, as it

immaterial to the factual issues I am required to determine.

[89] I am satisfied that Mr Scutts lied to and/or withheld information from

NZWC’s Board at its July 2011 meeting in the respects to which I have already

referred. I am also satisfied that Mr Scutts’ actions in signing Oliver’s signature to

the invoices was in essence a lie. It is apparent that Oliver was not involved in the

arrangement.

[90] I am also satisfied that Mr Scutts lied in his interview with the SFO on

24 May 2013. For instance, Mr Scutts was asked whether the handwriting on the

June 2011 invoice was his and his response was that he did not believe so, he did not

recall.33

Mr Scutts denied seeing the invoice for July 2011 prior to the interview.34

Likewise in respect of the invoice for August 2011. Mr Scutts was asked whose

signature appeared on the invoice rendered for services in December 2011 and

particularly whether he had signed Oliver’s signature. Mr Scutts said that he had not

done so.35

Mr Scutts also told the SFO personnel that Oliver had prepared the

RRWC invoices in question, when he had not.36

[91] I have reminded myself of the matters referred to in s 124(3) Evidence Act

2006. I am conscious also that Mr Scutts advised the SFO of the correct position on

27 May 2013, being the first working day after the interview. I do, however, attach

weight to these lies to the SFO in reaching my verdicts. There would be no reason

for Mr Scutts to lie to the SFO regarding these matters if the agreement to pay the

$1 per case had been reached in May 2011, for the reasons that Mr Finlay gave.

33

Transcript of Serious Fraud Office Interview of P J Scutts dated 24 May 2014 at 27. 34

At 28. 35

At 21. 36

At 22.

[92] For the reasons given I find the Crown had proved the offence under s 8(1)

Secret Commissions Act beyond reasonable doubt.

Dishonest use of documents

[93] I referred above to counsel’s acknowledgment that, if Mr Scutts were guilty

of the offence under s 8(1) Secret Commissions Act, he would also be guilty under

s 228(b) Crimes Act.

[94] I would have found Mr Scutts guilty of these offences in any event. To do so

I would be required to be satisfied that Mr Scutts submitted the invoices

“dishonestly” and without “claim of right”. The (current) definitions of those terms

in the Crimes Act 1961 are as follows:37

dishonestly, in relation to an act or omission, means done or omitted without

a belief that there was express or implied consent to, or authority for, the act

or omission from a person entitled to give such consent or authority.

claim of right, in relation to any act, means a belief at the time of the act in

a proprietary or possessory right in property in relation to which the offence

is alleged to have been committed, although that belief may be based on

ignorance or mistake of fact or of any matter of law other than the enactment

against which the offence is alleged to have been committed.

[95] The definition of “claim of right” was amended as from 19 March 2012, and

accordingly within the period spanned by the charges. The definition prior to the

amendment was:

Claim of right, in relation to any act, means a belief that the act is lawful,

although that belief may be based on ignorance or mistake of fact or any

matter of law other than the enactment against which the offence is alleged

to have been committed.

[96] The requirements of those provisions would be met on the facts as I have

found them to be.

37

Crimes Act 1961, ss 2 and 217.

Verdicts

[97] For the reasons given, I find Mr Scutts guilty on all counts.

..................................................................

M Peters J