Brazendale v R

[2011] NZCA 494

IN THE COURT OF APPEAL OF NEW ZEALAND

CA645/2010
[2011] NZCA 494

BETWEEN  DANIEL GEOFFREY BRAZENDALE
Appellant

AND  THE QUEEN
Respondent

CA646/2010

AND BETWEEN             EMILY-JADE BRAZENDALE, NICKI EVA BRAZENDALE AND MICHELLE GWENDOLYN BRAZENDALE
Appellants

AND  THE QUEEN
Respondent

Hearing:         2 August 2011

Court:             Ellen France, Heath and Lang JJ

Counsel:         P J Kaye for Appellants
D G Johnstone for Respondent

Judgment:      29 September 2011 at 2.30 pm

JUDGMENT OF THE COURT

A        The application for leave to admit further evidence is dismissed.

B        The appeals are dismissed.

REASONS OF THE COURT
(Given by Ellen France J)

Table of Contents

Para No.

Introduction  [1]
Background  [3]
The High Court decision  [7]
The statutory scheme  [13]
Issues on appeal  [18]
Finding that cultivation was for substantial commercial purpose                  [19]
         The Judge’s approach  [20]
         Discussion  [23]
Undue hardship to Mr Brazendale  [30]
Was the making of a forfeiture order a disproportionate response?              [37]
Effect of instrument forfeiture order on Mr Brazendale’s daughters            [41]
Partial forfeiture  [45]
Disposition  [51]

Introduction

1. Daniel Brazendale pleaded guilty to a charge of cultivating the class C drug cannabis.  As part of sentencing Mr Brazendale, Cooper J made an order under s 142N of the Sentencing Act 2002 forfeiting Mr Brazendale’s property at 4 Woodward Avenue, Mangere Bridge, Auckland.[1]  The Judge then convicted and discharged Mr Brazendale.  Without the instrument forefeiture order, Cooper J would have imposed a term of imprisonment of 18 months.

   [1]R v Brazendale HC Auckland CRI-2009-092-17133, 20 August 2010.  Mr Brazendale was sentenced in the High Court after the District Court declined jurisdiction.

2. Mr Brazendale appeals against the imposition of the forfeiture order.  Mr Brazendale’s three daughters also appeal against the Judge’s dismissal of their application for relief from the forfeiture order. The appeals raise issues about one aspect of Cooper J’s approach to the facts and whether forfeiture was unduly harsh to Mr Brazendale or to his daughters.

Background

1. The police executed search warrants at two properties on 16 October 2009.  The first property was 4 Woodward Avenue and the second 12 Waterfront Road, Mangere Bridge.  Mr Brazendale owns both properties together with Mr Charles Withers.  Both Mr Withers and Mr Brazendale are trustees of the D G Brazendale Family Trust.  According to Mr Brazendale, both properties have been trust property since 2000.

2. When the police searched the properties, Mr Brazendale was residing at the Woodward Avenue property.  Police found 30 cannabis plants growing hydroponically beneath grow lamps in one of the two bedrooms at Woodward Avenue.  A further 32 younger cannabis plants were found in the glasshouse at the property.  In addition, a variety of cannabis related equipment was found at Waterfront Road.

3. One of the two bedrooms in the Woodward Avenue property had been substantially altered for the purpose of cultivating cannabis.  Cooper J explained what had been done in this way:[2]

   One of the bedrooms had been substantially modified for the purpose of cultivating the cannabis.  There was plywood panelling covering the windows, the room was lined with polythene.  An automatic watering system had been installed, there was an air-conditioning unit to heat the room, a carbon air filter and a ducting system was attached and there was a system installed to add carbon dioxide to the air to assist the growing cycle.  Mr Brazendale occupied the only other bedroom in the house.  The glasshouse was at the rear of the property.  The glass had been painted with white paint.  It was set up as a nursery and contained a further 32 cannabis plants in pots.  These plants were smaller and less leafy than those located in the house.

   [2] At [3].

4. The property at Woodward Avenue had a capital value as at 1 September 2008 of $465,000.  Mr Brazendale purchased the property from his father in May 2000.  The property was unencumbered.  He acquired the Waterfront Road property in July 1997 from his former partner.

The High Court decision

1. There was a disputed facts hearing before Cooper J in the context of the Judge’s consideration of the application for an instrument forfeiture order.  The dispute related, first, to Mr Brazendale’s intended use of the cannabis he was cultivating. He said that all of the plants growing were for his own use; he had not sold cannabis, nor intended to do so. 

2. The other contested factual matter related to Mr Brazendale’s evidence that it was always his intention that the Woodward Avenue property be transferred to a family trust.  Cooper J said the trust deed had to be approached having regard to s 58 of the Criminal Proceeds (Recovery) Act 2009.  Under that section, the Court may, on application, order that property is to be treated as though the respondent had an interest in the property if satisfied the respondent has effective control over the property. 

3. After hearing evidence, Cooper J concluded that the cultivation was substantially for commercial purposes.  The Judge also decided that Mr Brazendale was to be treated as the person in effective control of 4 Woodward Avenue.  On this basis, Cooper J said, the existence of the trust should not influence the outcome.

4. Cooper J turned then to an evaluation of the forfeiture application in terms of s 142N of the Sentencing Act 2002.  The Judge did not see any basis upon which Mr Brazendale’s daughters were entitled to relief.  Nor did the Judge consider there would be undue hardship for Mr Brazendale. 

5. Cooper J explained he would place the offending at the lower end of band 2 in R v Terewi.[3]  A starting point of two years and three months would be appropriate.  The Judge said there would be no uplift for Mr Brazendale’s previous drug-related offending due to the dated nature of the more serious of these offences.  Cooper J recorded it was common ground that Mr Brazendale would be entitled to a discount of one third for his early guilty plea.  On this basis, putting the instrument forfeiture order issue to one side, a term of 18 months imprisonment would be appropriate.

   [3]      R v Terewi [1999] 3 NZLR 62 (CA).

6. Finally, the Judge considered whether making an instrument forfeiture order in the circumstances was a disproportionate response that would cause Mr Brazendale to suffer undue hardship.  Cooper J was not of that view.  The Judge accordingly made an instrument forfeiture order in relation to the Woodward Avenue property.  Mr Brazendale was otherwise convicted and discharged.

The statutory scheme

1. We discuss aspects of the statutory scheme in more detail in the context of the issues arising on the appeal. For present purposes, we note that the Criminal Proceeds (Recovery) Act and the Sentencing Amendment Act 2009 introduced a new regime for the forfeiture of property representing the proceeds of crime and property used to facilitate criminal activity (instruments).[4]  In this case, we are concerned with the latter.  The Criminal Proceeds (Recovery) Act focuses on the forfeiture of the proceeds of crime independently of any criminal proceedings[5] while the Sentencing Act provisions operate on conviction and form part of the sentencing process.[6]

   [4]The Explanatory Note to the Criminal Proceeds (Recovery) Bill, at 1, stated that the previous regime was seen as inadequate in allowing confiscation only where the owner of the property was convicted of an offence.

   [5] Criminal Proceeds (Recovery) Act 2009, ss 4(1) and 16.

   [6] Sentencing Amendment Act 2009, s 4 and Sentencing Act 2002, s 10B.

2. In terms of the Sentencing Act provisions, we note that under s 142B the prosecutor must give notice to the Court if a person is convicted of a qualifying instrument forfeiture offence.  On receipt of that notice, if the Court is of the opinion it should consider making an instrument forfeiture order, the procedures for that consideration are initiated.

3. Section 142N(1) of the Sentencing Act provides that the Court may, if satisfied the property involved is an instrument of crime, order that the instrument of crime or any part of it be forfeited to the Crown.  It is common ground that the property at Woodward Avenue is an instrument of crime.[7]

   [7]Defined in s 4(1) of the Sentencing Act as meaning “property used (wholly or in part) to commit, or to facilitate the commission of, a qualifying instrument forfeiture offence”. It is also common ground the offence here fits within the definition in s 4(1) of a “qualifying instrument forfeiture offence”.

4. The considerations applicable to the making of an instrument forfeiture order are set out in s 142N(2).  We come back later to the detail of this subsection.  We note at this point that one relevant consideration is any matter raised in an application for relief under s 142J.[8]  This provision is relied on by Mr Brazendale’s daughters.  The Court may grant relief under s 142M to a person who applies under s 142J for relief on the basis of undue hardship.

   [8]      Section 142N(2)(a).

5. We also note s 142N(2)(c), which provides that the court may have regard to any undue hardship reasonably likely to be caused to any person by the operation of a forfeiture.

Issues on appeal

1. The matters raised on the appeal can conveniently be addressed under the following headings:

   (a)Did the Judge err in his conclusion that the cultivation had a substantial commercial purpose?

   (b)Was the making of the instrument forfeiture order reasonably likely to cause undue hardship to Mr Brazendale?

   (c)In all the circumstances, was the making of an instrument forfeiture order a disproportionate response to the gravity of the offending?

   (d)Was the making of the instrument forfeiture order reasonably likely to cause undue hardship to Mr Brazendale’s daughters? and

   (e)Was an order for forfeiture of part of the property appropriate?

We deal with each of these issues in turn.

Finding that cultivation was for substantial commercial purpose

1. It is helpful here to set out the detail of Cooper J’s reasoning on this issue.

The Judge’s approach

1. In finding that there was evidence on which to conclude that Mr Brazendale’s cannabis cultivation activity was carried out for a substantial commercial purpose, Cooper J emphasised two factors.  First, the Judge referred to the set up at the property with two crops being grown in different parts of the property.  The Judge continued:[9]

   It seems unlikely that the sophisticated system that had been installed in this case would have been installed if all that was intended was to provide for [Mr Brazendale’s] own personal needs.  The fact that the glasshouse was also devoted to growing cannabis further reduces the credibility of that claim. 

   [9] At [33].

2. The Judge rejected Mr Brazendale’s evidence that he intended only to cultivate the crop found growing inside the house together with that found in the glasshouse.  The Judge did not consider he would have gone to “the trouble and expense” of altering the bedroom “so substantially for a hydroponic growing operation were he not intending to derive the benefits of fast crop rotation that would afford”.[10]  Cooper J also noted that a significant amount of plant food was found and the indications were that the operation was efficiently run. 

   [10] Ibid.

3. The second factor emphasised by the Judge was that Mr Brazendale had no regular means of income apart from the rent derived from the Waterfront Road property.  That rental was in fact principally used to service the mortgage payments due on that property.  Cooper J considered this supported an inference that Mr Brazendale must have derived income from some other source which he had chosen not to disclose. 

Discussion

1. Mr Kaye makes three principal points in relation to this part of the Judge’s decision.  First, the Judge had to be satisfied of the commercial purpose beyond reasonable doubt but his Honour did not expressly direct himself as to that standard.  Secondly, Mr Kaye submits that there was insufficient evidence to support the conclusion of a commercial purpose, in particular, where there was no evidence of likely yield.  Mr Kaye contrasts the approach in this case with that in R v Elliot,[11] in which evidence of the value of the yield was provided and was important.  Finally, Mr Kaye says there was other evidence which the Judge did not take into account, for example, that the number of plants involved was not substantial and common indicia of commercial operations such as a “ticklist” were absent. 

   [11]R v Elliot HC Gisborne CRI-2009-016-3799, 19 August 2010; reversed in Elliot v R [2011] NZCA 386 on another ground.

2. There is no challenge to Cooper J’s specific findings which form the basis for the conclusion about the purpose of the cultivation.  For example, there is no challenge to the finding that Mr Brazendale had no other regular source of income.  Rather, the challenge is to the finding that these matters can found the conclusion the cultivation was substantially for commercial purposes. 

3. The Crown accepts that the applicable standard was proof beyond reasonable doubt.[12]  It would have been preferable for the Judge to expressly record the need to be satisfied to this standard.  However, we agree with the submissions for the Crown that the failure to do so is not material.  That is because it is plain that was the standard applied.  The combination of the nature of the operation and the absence of any other regular source of income lead inexorably to the conclusion the cultivation was substantially for a commercial purpose. 

   [12]      Sentencing Act 2002, s 24.

4. The extent of modification to the house and the installation of a sophisticated set up were obviously intended to increase the turnover and strength of the crop.  It is highly unlikely such steps would have been taken if all of the product was to be for Mr Brazendale’s own use.  It follows, as Mr Johnstone for the Crown put it, that this was not a case where there were two inferences of equal weight available.

5. It is important also to our assessment that Cooper J heard Mr Brazendale’s explanation that he used cannabis for pain relief[13] and was growing for his own use.  Mr Brazendale was cross-examined and the Judge rejected that explanation.  The Judge was plainly aware of the evidence about numbers of plants and the nature of the undertaking in reaching that conclusion.

   [13]      Mr Brazendale had been injured in a motorcycle accident in 1997.

6. Finally, on the question of the value of the yield, Mr Johnstone’s submission is that there was some evidence about that.  The issue arose when, in cross-examination, Mr Brazendale was asked about how much cannabis each plant would produce and the number of crops (three) produced each year.  He was also asked about the cost of buying the ounce of product he expected that each of the 62 plants would produce ($300).  On the figures given by Mr Brazendale, Mr Johnstone says the expected three crops would produce $55,800 per annum clearly putting the matter within band 2 of Terewi.[14] 

   [14]Small-scale cultivation for a commercial purpose warranting starting points generally between two and four years, Terewi at [4].

7. While we accept there was some evidence about likely yield, Cooper J did not make any finding on this.  Evidence as to likely yield may well have assisted in reaching a conclusion on commerciality in this case.  However, given the other evidence, its absence was not fatal.

Undue hardship to Mr Brazendale

1. The criticism made under this heading is that the Judge did not approach the matter by addressing the factors enumerated in other cases.[15]  Those factors include the following: the value of the property to be forfeited; the value of the drugs or the size of the crop involved; whether the property was acquired with the proceeds of the offending; the extent of the offender’s interest in the property; the utility of the property to the offender; the length of ownership; the extent to which the property is connected with the commission of the offence; the fact that forfeiture is intended as a deterrent; and the likely consequences of the forfeiture order on both the offender and third parties.

   [15]In Stanton v Solicitor-General [2007] NZCA 434 at [16], this Court noted that a “useful non-exclusive list of factors that would weigh” can be found in Taylor v Attorney-General for the State of South Australia (1991) 55 SASR 462 (SC).  Taylor has been cited with approval in Solicitor-General v Sanders (1994) 2 HRNZ 24 (HC), and in Solicitor-General v Wong (1997) 14 CRNZ 624 (HC).

2. In this context, Mr Kaye emphasises the value of the property and Mr Brazendale’s equity in it as compared with the paucity of evidence about crop and yield.  Mr Kaye also stresses the fact that the property has been in the family for more than one generation.[16] 

   [16]The certificate of title indicates that the property has been owned by a member of the Brazendale family since 1955.

3. Section 142N of the Sentencing Act sets out the factors to which the Court may have regard in considering whether to make an instrument forfeiture order.  Those factors are as follows:

   (a)       any matter raised in an application for relief under section 142J; and

   (b)the use that is ordinarily made, or was intended to be made, of the instrument of crime; and

   (c)any undue hardship that is reasonably likely to be caused to any person by the operation of such an order; and

   (d)the nature and extent of the offender’s interest in the instrument of crime (if any), and the nature and extent of any other person’s interest in it (if any); and

   (e)in addition to the matters referred to in section 77(1) of the Criminal Proceeds (Recovery) Act 2009, any other matter relating to the nature and circumstances of the qualifying instrument forfeiture offence or the offender, including the gravity of the qualifying instrument forfeiture offence.

4. The Judge carefully worked through each of those factors.[17]  We note in particular Cooper J’s discussion of s 142N(2)(b) and (c).  In terms of the use ordinarily made, or intended to be made, of the instrument of crime,  Cooper J said:[18]

   In this case, it is clear that the property was in use as Mr Brazendale’s residence and, equally, it was the place where he cultivated cannabis.  There is another property in which he can reside, namely the property at 12 Waterfront Road.  I do not see any basis in the circumstances on which the Court should conclude that an instrument forfeiture order should not be made.  On the contrary, the substantial use of the property for the growing of cannabis favours the making of an order. 

   [17]      At [42]–[55].

   [18] At [48].

5. On s 142N(2)(c), the question of undue hardship, the Judge  said this:[19]

   While the consequences of his offending would be severe in terms of the loss of the Woodward Avenue property, he would be able to reside at Waterfront Road.  Having regard to the gravity of the offending ... , the forfeiture would I think be sufficient penalty and would substitute for a sentence of imprisonment that might otherwise have been imposed.

   [19] At [50].

6. We agree.  Further, there is nothing in any of the Sanders factors here which would alter that assessment.  The high point from the perspective of Mr Brazendale is that he has considerable equity in a property which has been in his family for some time.  In considering this issue, the Judge referred to the discussion in Lyall v Solicitor-General where, discussing the predecessor to the current Act, this Court said: [20]

   The policy of the Act is to strip an offender of his or her interests in the property used to commit the crime.  The reason for committing those crimes will ordinarily be immaterial.  The property was not bought using tainted money but it was largely dedicated by its owners to drug dealing.  Those who establish drug houses and commit serious offences in or from them can normally expect to lose them unless there is gross or severe disproportion between the gravity of the offending and the value of the property sought to be forfeited coupled with the other punishment inflicted on the offender.

   [20]      Lyall v Solicitor-General [1997] 2 NZLR 641 at 647.

1. It is not suggested that the observation in that case puts the test too highly.  When the current factual circumstances are considered in light of that test, the Judge was correct to conclude that the making of an instrument forfeiture order would not cause undue hardship to Mr Brazendale.

Was the making of a forfeiture order a disproportionate response?

1. The submission is that the making of a forfeiture order was disproportionate given this was a single instance of cultivation.  Mr Kaye submits that, if used in this way, the forfeiture regime is a very blunt instrument.  Further, he says that application to this type of case would narrow the class of offenders who would be deterred from offending.  His submission is that a term of imprisonment should remain the key means of ensuring general deterrence. 

2. The first point to note is that, although Mr Brazendale was convicted of one instance of cultivation, the alterations to the property demonstrate that the set up was designed to be used well beyond the offending for which he was prosecuted.  Further, it is plain that the forfeiture regime was intended as a deterrent.  Section 3(2) of the Criminal Proceeds (Recovery) Act states that the regime for the forfeiture of property proposes to deter “significant criminal activity”.  The current offending is within the definition of significant criminal activity, which means offending involving one or more offences punishable by a maximum of five years imprisonment or more or from which the property proceeds gained are more than $30,000.[21] 

   [21]      Criminal Proceeds (Recovery) Act 2009, s 6.

3. In addition, in determining whether the hardship is disproportionately severe, it is relevant that the sentence imposed can be adjusted to take account of the financial impact of the forfeiture order.[22]  This provides a means of ameliorating any risk that an offender is more severely punished simply because he or she owns a substantial asset.  Finally, the gravity of the offending is only one factor to be weighed in the balance. 

   [22]This was a point made in the Explanatory Note to the introductory version of the Criminal Proceeds (Recovery) Bill, at 4–5.

4. When these factors are considered along with the use made of the house, the making of the forfeiture order was not disproportionate in all the circumstances.

Effect of instrument forfeiture order on Mr Brazendale’s daughters

1. Mr Brazendale’s daughters made an application for relief from an instrument forfeiture order under s 142J of the Sentencing Act.  They brought their application on the basis that making a forfeiture order in relation to the property was, in all of the circumstances, reasonably likely to cause undue hardship.[23] 

   [23]Criminal Proceeds (Recovery) Act 2009, s 77(1).  Section 142J of the Sentencing Act provides that a person other than the offender may make an application for relief on either of the grounds set out in s 77(1).  The other ground relates to an asserted interest in the property.

2. The submission made under this heading is that the Judge did not take into account that, upon Mr Brazendale’s death, his daughters would be entitled to an interest in the properties.  Mr Kaye says that the loss of an inheritance must give rise to undue hardship especially where none of the daughters have made any contribution to the offending. 

3. This aspect of the appeal is answered by the Judge’s factual findings which are, in our view, unimpeachable.  As Cooper J said, the facts on which the daughters relied are not strong.  The Judge dealt with the position in relation to each of the daughters in turn as follows:

   [43]     The youngest [daughter] ... is currently aged 15.  In her affidavit she records that her mother lives in Whangarei, and that she attends school in Whangarei.  I infer, although she does not say so expressly, that she lives with her mother.  Her connection to the property at 4 Woodward Avenue is based on the fact that Mr Brazendale lives there and she is “very close” to him.  She states that she regards the house as the family home because it has been in the family for a long period of time.  She says that during the break up of her parents’ relationship she would “continuously come down on the bus to Auckland to see her father and stay at the house” and that she regards it as her “home in every sense of the word”.  She also asserts that she is a beneficiary under the trust.

   [44]     I do not consider any of the matters which she has raised could possibly amount to “undue hardship” for the purpose of s 77(1)(b) ... .  Whatever her connection to the property, she does not live there and it would appear, has only stayed from to time.  She is not reliant on it as being a place to live.  For reasons I have already given, I also discount any reliance on her part on any interest under the deed of trust.

   [45]     Similar conclusions must be expressed in relation to Mr Brazendale’s other daughters, [the second and third daughters].  [The second daughter] is Mr Brazendale’s daughter, but her mother is not the same person as [the other daughters’] mother.  She says that she visits the Woodward Avenue property regularly, and regards it as her family home.  She asserts family ties to the property, but it is plain that she does not live there.  She is almost 32 years of age.

   [46]     [The third daughter] resides with her husband in Whangarei.  She also asserts family ties to the property, although in her case she acknowledges that she was raised in her early years at 12 Waterfront Road.  As with her sisters, she purports to rely on the terms of the deed of trust which I have already discussed.

   [47]     I am not persuaded that there is any basis upon which the [daughters] are properly entitled to relief under s 77(1)(b) ... .

4. The reality is that none of the daughters has any proprietary interest in the property nor any legal expectation of an interest.  The daughters are beneficiaries in terms of the trust deed but so is Mr Brazendale.[24]  The Judge found that there was nothing to prevent the trustees from deciding that Mr Brazendale should receive the trust’s income or that the capital should be distributed to him.  The co-trustee is Mr Brazendale’s friend.  Cooper J said there was no reason to assume he would assume an independent role.  There is no challenge to the Judge’s findings in this respect.  Nor is there any challenge to the Judge’s finding that Mr Brazendale is in effective control of the property.[25]  Further, the daughters could still enjoy the benefit of the Waterfront Road property.

Partial forfeiture

[24]      See cl 4 of the trust deed as to the trustees’ discretion to apply the trust funds.

[25]      Criminal Proceeds (Recovery) Act 2009, s 58(1).

1. Cooper J said that it was not possible to make an order forfeiting the property in part.  Heath J reached the same conclusion in Elliot.  An appeal from the decision in Elliot was heard prior to the hearing of this appeal and judgment was delivered after we heard this appeal.  This Court in Elliot concluded that it was possible to order partial forfeiture of the property which was an instrument of crime.[26]  Given Heath J’s comment that he would have been minded to make an order for partial forfeiture if there was jurisdiction, the appeal was allowed and the issue of forfeiture was referred back to the High Court for reconsideration.  Re-sentencing has not yet occurred.  

   [26]      Elliot v R [2011] NZCA 386 at [54].

2. We gave the parties the opportunity to make further submissions on the issue of partial forfeiture.

3. Mr Kaye for Mr Brazendale submits that this case is very like Elliot in terms of the value of the property and nature of offending, although in this case there is no evidence of yield.  Accordingly, it is submitted in the alternative that an order for partial forfeiture would be appropriate in this case as well. 

4. The Crown submission is that an instrument forfeiture order in respect of all of the Woodward Avenue property is an entirely proportionate sentencing response.

5. There are similarities between the two cases.  The property in Elliot involved a house valued at $480,000.  The charges faced by Mr Elliot related to cultivation and sale of cannabis.  However, in Elliot Heath J made it plain that he would have considered partial forfeiture so that Mr Elliot (at 53 years of age) was not left without any capital to provide income.[27]  He also found that Mr Elliot’s partner had an interest in the property.

   [27] At [73].

6. The present case does not appear to have proceeded before Cooper J on the basis that while an instrument forfeiture order was not appropriate, a partial one would have been.  Rather, the matter seems to have been argued on an all or nothing basis.  More importantly, the absence of any third parties with an interest in the property and the fact that Mr Brazendale has another property means the concerns facing Heath J in Elliot are not present here.  We do not consider there is a basis for partial forfeiture.

Disposition

1. For these reasons the appeals are dismissed.  

2. We add that Mr Brazendale made an application for leave to introduce, as new evidence on the appeal, an affidavit from a solicitor about instructions he had received from Mr Brazendale about the formation of a family trust.  At the hearing, Mr Kaye said he was not pursuing the application because of the finding of effective control.  The application is dismissed.

Solicitors:
Crown Solicitor, Auckland for Respondent