Sentencing Act 2002 – dishonesty using a document – covid-19 wage subsidy – fraud against the state – Criminal Procedure Act 2011, s 250
Downey v Ministry of Social Development  NZHC 2589 per Harvey J.
The covid-19 wage subsidy was initiated by the government in March 2020 to help businesses suffering from revenue declines as a result of the nationwide lockdown.
Nathan Downey, the sole director and shareholder of Protective Systems Ltd (PSL), applied 19 times for the subsidy between March and August 2020. Thirteen of his applications were approved.
PSL had no actual employees though. Instead, Downey gave details of both fictitious and real individuals, claiming they were employees. Some were contractors who had previously completed work for PSL.
Downey received $196,076 from the approved applications and attempted to secure an additional $67,000 from the declined applications. About $57,000 went to contractors who did work for the company, but Downey used the majority for personal expenses including gambling, fast food, Uber rides, adult entertainment, and bars and clubs.
In the Manukau District Court, Downey was convicted of 14 charges of dishonestly using a document to fraudulently acquire the wage subsidy and for attempting to obtain an additional $66,781. The full amount taken was eventually repaid. On 25 August 2023, Downey was jailed for 20-and-a-half months.
Downey appealed the sentence on three grounds: a failure to consider personal mitigating factors, Judge Wharepouri’s emphasis on the purposes of denunciation and deterrence, and the court’s dismissal of his argument for community-based rehabilitation.
The Ministry of Social Development (MSD) opposed the appeal and sought confirmation of the starting point to help the District Court with future sentencing hearings for this type of offending.
The central issue in this appeal was whether the District Court judge was wrong in choosing a sentence of imprisonment rather than home detention.
Harvey J would intervene only if the sentence was manifestly excessive or wrong in principle. The judge said he needed to make a “considered and principled choice” between the two forms of sentence and identify which was the least restrictive, taking into account all the purposes of sentencing.
Harvey J found Judge Wharepouri correctly prioritised the need for denunciation and deterrence and had rightly considered the importance of protecting taxpayer money and the threat to community cohesion from this type of offending. Defrauding funds from a covid-19 emergency assistance fund was offensive and breached the government’s reliance on applicants to honestly access the scheme.
Judge Wharepouri was entitled to rely on cases where similar considerations led to stern sentences to deter such misconduct.
Applicable principles: statutory interpretation – sentencing principles – purpose of sentencing – denunciation and deterrence – abuse of special schemes – fraud against the State.
Held Harvey J declined the appeal, stating the sentence imposed was neither manifestly excessive nor wrong in principle. There was no error in Judge Wharepouri ’s approach.
In regard to the starting point of three years, 10 months’ imprisonment, Harvey J said there was no distinct approach for fraud against the state as compared to fraud against an individual. Offending against the state is not victimless. While the seriousness of offending is determined by the facts of a case, offences involving the abuse of special schemes, especially during emergencies, were considered aggravating.
Justice Harvey found the starting point was appropriate for this kind of offending, taking into account the relevant background circumstances, including the purpose of the scheme during an unprecedented national pandemic.
Vivian Mitchell is an LLB/BA graduate