Hardegger v Southland Regional Council
[2017] NZHC 469
•16 March 2017
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CRI-2016-425-000038
CRI-2016-425-000039 [2017] NZHC 469
BETWEEN ADOLF PUIS HARDEGGER
HARDEGGER TRUSTEES LIMITED Appellants
AND
SOUTHLAND REGIONAL COUNCIL Respondent
Hearing: 3 February 2017 Appearances:
R T Chapman & H J Copland for the Appellants
J L S Shaw for the RespondentJudgment:
16 March 2017
JUDGMENT OF NATION J
[1] Over about five months to November 2015, a contractor carried out extensive laning and subdivision work on a property in Southland, developing it as a dairy run- off block. He constructed a gravel bund on the bed of the Oreti River. It diverted the river away from the true right bank of the Oreti River, protecting farmland to its west. At the time the channel downstream from the wall was dry. The bund was washed away in a later fresh.
[2] Around the same time, a shipping container had been placed in the bed of Starvation Creek to provide a crossing for stock and vehicles. Starvation Creek was a small waterway that flowed through an adjacent property leased from the Department of Conservation.
[3] The contractor also straightened Starvation Creek by removing an ox-bow bend in the creek.
HARDEGGER v SOUTHLAND REGIONAL COUNCIL [2017] NZHC 469 [16 March 2017]
[4] The land in question is beneficially owned by two Hardegger family trusts of which Hardegger Trustees Limited (Hardegger Trustees) is the sole trustee.
[5] Both Mr Hardegger, as the person ultimately responsible for the actions giving rise to the offending, and Hardegger Trustees, as the registered proprietor of the land, pleaded guilty to charges under the Resource Management Act 1991 (RMA). These were for excavating or otherwise disturbing the bed of the Oreti River, placing a culvert on the bed of Starvation Creek and disturbing the bed of Starvation Creek when not expressly allowed to do so by a rule in a regional plan or a resource consent. Mr Hardegger and Hardegger Trustees thus each faced three charges.
[6] On 28 October 2016, on each charge, Judge Dwyer fined them $11,900, a total of $35,700 each. He also ordered them to pay Court costs of $130 on each charge plus solicitors costs in accordance with the costs in Criminal Cases Regulations 1987. They appeal against those sentences.
Principles on appeal
[7] This appeal is a general appeal from the District Court regarding sentence.
[8] Appeals against sentence are brought under s 244 of the Criminal Procedure Act 2011 and must be determined in accordance with s 250 of that Act. Specifically, this Court may only allow an appeal against sentence if it is satisfied that there has been an error in the imposition of the sentence and that, in the event, a different
sentence should be imposed.1
[9] If the sentence under appeal may be properly justified having regard to the relevant sentencing principles, it is not the place of this Court to intervene and substitute its own views for those of the sentencing Judge. It is only if the sentence is “manifestly excessive” that the Court should interfere with the exercise of the
Judge’s discretion. As Toogood J said in Larkin v Ministry of Development:2
1 Criminal Procedure Act 2011, ss 250(2) and 250(3).
2 Larkin v Ministry of Development [2015] NZHC 680, citing Ripia v R [2011] NZCA 101 at [15].
[26] The High Court will not intervene where the sentence is within the range that can properly be justified by accepted sentencing principles. Whether a sentence is manifestly excessive is to be examined in terms of the sentence given, rather than the process by which the sentence is reached.
[10] The focus on most appeals is thus on the end sentence. In Tutakangahau v R, the Court of Appeal held that:3
…the focus is on the sentence imposed rather than the process by which the sentence is reached. That encapsulation of the position will no doubt represent the position in the vast majority of cases.
The District Court decision
[11] The Judge determined that he would take a global approach to the sentence for each defendant, with one overall penalty starting point for the three offences.
[12] The Judge arrived at a starting point for the offending. In accordance with
High Court authority4, he considered the following matters: (a) nature of the environment affected;
(b) extent of damage inflicted;
(c) deliberateness of the offending;
(d) attitude of the offender and the extent of their attempts to comply; (e) position of the offender; and
(f) remorse/good character.
[13] The Judge noted that potential effects on the local environment included sedimentation, disruption of ecological processes and flows, habitat destruction and impacts on trout spawning habitat. The evidence was that Starvation Creek is the habitat of at least seven species of fish, including some threatened and nationally vulnerable species. He said the placing of the shipping container in the creek would have led to higher water velocities and shallower depths, adversely affecting the
habitat of the fauna in the creek.
3 Tutakangahau v R [2014] NZCA 279, [2014] 3 NZLR 482 at [36].
4 Machinery Movers Ltd v Auckland Regional Council [1994] 1 NZLR 492 (HC).
[14] The Judge said the Oreti River was an important breeding ground for black- billed gulls (a nationally critical species) and one of the best trophy brown trout areas in the world. It was subject to the Oreti Conservation Order. The offending involved undertaking substantial unconsented works in an important river environment which was the habitat of threatened and highly vulnerable aquatic and bird species.
[15] The defendants submitted that there was no actual proof of any damage to these species. The Judge considered this disingenuous as the only reason effects could not be accurately assessed was because no previous environmental assessment had been undertaken. This would have been done as part of any resource consent application. The Judge accepted that the works caused actual but unquantifiable damage to the water systems.
[16] The Judge determined that the work was undoubtedly done to improve farm productivity but acknowledged that the defendant intended to fence at least some of the waterways to avoid stock and vehicles crossing them, which might ultimately have served a protective purpose.
[17] The Judge said the failure of Mr Hardegger and the company to even consider the need for a resource consent for extensive works in and around sensitive waterways could only be described as reckless or involving a complete want of care. He said that people in business had to know the rules under which they have to operate and, with the extent of work involved around waterways, they should have sought advice as to whether what they were doing was permitted.
[18] The Judge referred to a submission that the contractor had been given a general mandate to do work on his own initiative but that Mr Hardegger might have checked up on the work every couple of weeks to see what was happening. He said:
This was a property owned by the trusts and managed by you for which you are responsible. The approach to the works of giving a general mandate to the contractor and very limited supervision again, in my view, involved recklessness on the part of both Defendants. Having let the contractor loose the Defendants must accept the consequences.
[19] The Judge then considered comparative cases to which he had been referred by counsel.5
[20] Finally, in assessing an appropriate starting point, he had regard to the principle of deterrence. He noted the offending involved “reckless intrusion into sensitive waterways which are a habitat of threatened fish and critically vulnerable bird species”. He said the conduct had to be denounced and deterred, particularly when, under s 6 of the RMA, issues of national importance were involved. The Judge determined that the appropriate overall starting point for each set of three charges should be the sum of $50,000, apportioned equally between those three charges.
[21] He then considered how that resulting penalty should be imposed, whether on each defendant separately or divided between them. On a global basis he said that, consistent with the High Court’s judgment in Calford Holdings Ltd v Waikato Regional Council, each offender had to be separately sentenced and it was not appropriate to take a global assessment and then apportion culpability between
defendants.6
[22] The Judge then noted that many of the prosecutions of this sort were brought against small family-held farming companies where the directors or shareholders were so closely related that, in reality, any fine was going to come out of the same pocket, such that defendants could be penalised twice. He did not consider that approach was relevant in this case because the company was a trustee of the two trusts which actually owned the property. He said that, unless trusts were shams, they had to be entities completely separate from those who settled them or who were entitled to receive benefits from them. On that basis, he said the appellants had to be separately sentenced. He could not distinguish the comparative culpability. Each had a responsibility to ensure that works undertaken were done legally and each
failed to do so. He adopted a starting point of $50,000 in each case, allowed a five
5 Otago Regional Council v Gibson [2016] NZDC 14362; R v Jefferies DC Wellington CRI-2010-
078-1173, 21 August 2014; R v Boyd [2016] NZDC 16558; Bay of Plenty Regional Council v Wilson DC Hamilton CRN-13047500178-82, 13 February 2015; Northland Regional Council v Clear Ridge Station Ltd DC Whangarei CRI-2013-088-2354, 21 May 2014.
6 Calford Holdings Ltd v Waikato Regional Council [2009] NZRMA 563 (HC).
per cent reduction to reflect past good character, neither having been convicted previously or subject to any enforcement procedures, and a further 25 per cent reduction for prompt guilty pleas.
Grounds of appeal
[23] Mr Chapman and Ms Copland, for Mr Hardegger and the company, by way of summary, argued the penalties imposed were manifestly excessive and/or wrong in principle due to:
(a) the inconsistency between the fines imposed and those imposed in other cases for comparable offending;
(b) an error by the Judge in assessing the level of culpability on the part of both Mr Hardegger and the company in arriving at the starting point for the offending; and
(c) the failure to make any adjustment to fines to recognise the inter- relationship between the company and Mr Hardegger so as to avoid any element of double punishment.
The level of culpability
[24] As to the level of culpability, counsel described how the farm was a dairy run-off block, owned by the two family trusts, of which Hardegger Trustees was the sole trustee. Counsel said the farm was managed by Mr and Mrs Hardegger’s son and daughter but Mr Hardegger was heavily involved in the management of the property and provided regular oversight.
[25] Counsel highlighted the way in which the Hardeggers had improved the property since purchasing it approximately three years ago and the way this had benefits for the environment. They had fenced off from the Oreti River a 40 hectare paddock leased from the Department of Conservation. They had also undertaken significant development work to lane and re-fence the 400 hectare block, fencing off a number of smaller streams so that stock could no longer access those waterways. In connection with this, they said that Mr Hardegger had installed eleven 900
millimetre culverts and waterways that had been previously forded for access by vehicles and stock. They also referred to the way he had engaged with Environment Southland’s land sustainability department to complete a farm environmental plan for both his dairy farm and the run-off.
[26] Counsel submitted the three offending works to which the charges related were separate from and minor in comparison to the overall development of the farm, but that the overall aim of the development programme was environmental protection and not solely to improve the productive capacity of the property.
[27] The development work for which the contractor had been engaged was solely to lane and clear vegetation to facilitate the fencing of the property. Counsel submitted he was clearly under the supervision of Mr Hardegger, who had visited the property at least weekly to meet with the contractor to discuss the work to be completed. Mr Hardegger acknowledged he was involved with the decision to install the container culvert but said he at no time instructed the contractor to divert or excavate any waterways.
[28] Counsel said the bund in the Oreti River had been established so the contractor could access and retrieve a washed out section of fence (approximately 25 metres long), in order to reuse the posts in a new section of fence. They said construction of the bund was only about 800 millimetres high, one metre wide and six metres long, and would have taken approximately five minutes to construct. The bund was not intended to divert the river and it only affected a small runner of the braided river and was washed away in the first fresh that occurred afterwards.
[29] In relation to the Starvation Creek charges, counsel submitted that the contractor had been instructed to lane and facilitate fencing only by removing gorse, broom and vegetation, and had never been instructed to straighten Starvation Creek. He had just removed a fallen river willow tree and removed some material out of the channel to clean it out. Mr Hardegger had not been involved in this and was ignorant of the fact the work had been carried out.
[30] In relation to the culvert charges, Counsel said Mr Hardegger had not been aware that these particular works required a resource consent, the diameter of the culvert being of no more than 1,200 millimetres in length on any one side. They stressed how environmentally beneficial this culvert was, avoiding the need for stock and vehicles having to cross through the creek, which they would otherwise have had to do on a regular basis.
[31] For the Southland Regional Council, Mr Shaw argued that the culpability of Mr Hardegger and the company could not be any less than as assessed by the Judge on account of these arguments.
[32] I do not consider Mr Hardegger’s culpability should have been assessed as less on the basis the building of the bund on the Oreti Riverbed and the straightening of Starvation Creek had been carried out solely on the initiative of the contractor without any approval from Mr Hardegger.
[33] At the time of sentencing, the Judge had a letter from the contractor in which he endeavoured to take sole responsibility for what had happened with both the bund in the Oreti River and the straightening of Starvation Creek. The contractor also said the use of a shipping container as a culvert had been his suggestion. He had thought it would be a good way of avoiding the need for stock to cross the waterway. He regretted his actions and said he had “totally no idea of where legal regulations have come to in the later years”.
[34] Mr Shaw pointed out that the contractor’s assertion that he created the bund in the Oreti River to assist in the recovery of fence posts was at odds with the submission made at sentencing that:
the digger driver pulled in the damaged fence out of the riverbed and then, without any instruction from Mr Hardegger, took it upon himself to build up a small gravel bund before fixing and re-erecting the fence.
[35] The regional water plan for Southland contained detailed rules as to the design of culverts and how they could be installed to be a permitted activity. The culverts had to be less than 1,200 millimetres in diameter and had to be purpose-built
for the passage of water. Containers were expressly not part of a permitted activity. With the rule, there was an explanation as to why such controls were necessary.
[36] The remedial work required to rectify what happened with the container and the straightening of Starvation Creek, as reflected in the enforcement order made at the time of sentencing, is significant.
[37] The summary of facts which the Court had at the time of sentencing stated in relation to the bund on the Oreti Riverbed:
When later spoken to by the compliance officer, Mr Hardegger acknowledged that he had diverted the Oreti River as described, and that he had done so as it was cutting into his paddocks.
[38] In relation to the straightening of Starvation Creek, the summary said “when later spoken to by the compliance officer, Mr Hardegger acknowledged that he had straightened Starvation Creek to make fencing the waterway easier”.
[39] The summary referred to ways in which Mr Hardegger had been slow in responding to Environment Southland’s concerns over what had happened and their request for him to attend a formal interview with them on 27 November 2015. This led to a meeting on 15 January 2016 when a compliance officer met with Mr Hardegger to explain the seriousness of the offending. The summary of facts referred to the compliance officer informing Mr Hardegger that enforcement action could be taken and that his response from that point on would be relevant to the decision. The summary said that, during that meeting, Mr Hardegger stated that he had diverted Oreti River as it was coming into his paddocks, but he diverted Starvation Creek to make fencing the waterway easier and he installed the culvert so stock did not have to walk through Starvation Creek. Mr Hardegger did not seek to explain then what had happened by saying some of the work had been carried out entirely on the contractor’s initiative and contrary to Mr Hardegger’s instructions.
[40] There then followed delays in Mr Hardegger filing a retrospective application for resource consent with all the necessary information. At 4 July 2016 the retrospective application for a resource consent which had been filed remained
incomplete, despite Environment Southland’s efforts to have him address their
concerns.
[41] The submissions for Mr Hardegger on the appeal emphasised his careful oversight of what the contractor was doing, obviously to challenge the Judge’s observation that he had “let loose” the contractor in an environmentally sensitive area. This submission was at odds with the statements by the contractor in his letter that he had done the work in creating the bund and straightening up Starvation Creek entirely on his own initiative.
[42] The Judge did have a significant amount of information to show what good farmers the Hardeggers were. This included a testimonial from a rural estate agent who had seen the way they had improved farms in Southland after moving there in
2003. He rated the Hardeggers amongst the “best Southland farmers, conscientious, environmentally aware and never intentionally reckless in any aspect of their life or farming business”. The ways in which they were fencing and laning the run-off block adjoining the Oreti River did have significant environmental benefits although that work was obviously also done for economic reasons, facilitating the easier management of the block and increasing stock-carrying capacity. The Hardeggers were also permitting the public to have access through their property by way of the “around the mountain cycle trail”, an indication that they were willing to expose their property to public scrutiny.
[43] The fact remained that, in failing to ensure the contractor did not interfere with either the Oreti waterbed or the course of Starvation Creek, and in agreeing to the contractor installing the container culvert, Mr Hardegger failed to recognise the importance of RMA controls over a sensitive river environment. These failings were surprising given that the Southland Regional Council had, in earlier years, required him to deal with issues relating to the management of two other properties purchased in June 2006 and 2008, although there had been no recorded incident in relation to those properties since April 2012.
[44] Mr Hardegger’s failings to recognise the importance of RMA controls were
consistent with the way he responded to the Southland Regional Council when they
first notified him of their concerns, although it was explained to me that this was partly the fault of the consultant he had engaged at the time. I was told there had been a marked improvement with the engagement of a new consultant. Consistent with that, at the time of sentencing, Mr Hardegger and the company had agreed to the terms of an enforcement order requiring them to engage consultants to work with Environment Southland in preparing a rehabilitation plan, associated with the replacement of the container culvert and the straightening of Starvation Creek.
[45] The Judge was fair to the appellants in concluding that some of the fencing and laneway work did provide protection for the waterways but also being about productivity and expedience. He recognised the way in which the Hardeggers’ management of their farms had been of benefit to the environment, through the five per cent discount on the starting point sentence he gave both Mr Hardegger and Hardegger Trustees for this and remedial work they would be carrying out in accordance with the enforcement order.
[46] There is no dispute as to the Judge’s characterisation of the environment affected by the contravening works. Counsel for the appellants sought to emphasise the dynamic nature of the waterways concerned and the fact that fluvial alteration occurs naturally and comparatively frequently in the area. It was consistent with this that the bund on the Oreti River soon disappeared as a result of a fresh. Environment Southland responded fairly with the point that potential interference by natural processes should not absolve offenders from the consequences of unlawful and deliberate human intervention. As was submitted for Environment Southland, the fact that the waterway and underlying habitat could be susceptible to natural forces, meant there was a greater need for human intervention to be controlled.
[47] I do not consider there was any error in the way the Judge generally assessed the seriousness of the offending.
Consistency with other sentences
[48] Neither counsel for the Southland Regional Council nor counsel for the appellants seriously challenged the way in which the Judge assessed the seriousness of this offending by reference to other cases to which he had referred.
[49] The Judge referred to three cases where he thought the offending was more serious than in the instant case.
R v Boyd7
[50] Mr Boyd was sentenced after he had been convicted by a jury. Seven charges involved the damaging of habitats in or on the bed of a river, discharging silt and sediment into water, reclaiming the bed of a river, disturbing the bed of a river, diverting water draining the bed of a river and depositing substances in the bed of a river. The eighth charge was for contravening an enforcement order requiring works to cease, sediment and silt discharge to cease and the installation of silt and sediment controls.
[51] The offences arose out of Mr Boyd’s cutting of a channel 430 metres long in a direct line to transact the strongly meandering pattern of a stream that crossed his farm. Some parts of the former part of the stream had been dammed to divert water into the channel. The banks that had been cut vertically had not been armoured and so were eroding at points. Two drainage channels had been cut to direct storm-water from adjacent paddocks into the new channel. Erosion had occurred there also. The net effect of the works was that an 830 metre long section of the stream had been diverted. An Enforcement Order had been issued but subsequently breached, resulting in an eighth charge against Mr Boyd.
[52] As in the present case, Mr Boyd had made significant improvements to the farm over the years he had owned it from a farming point of view. The Judge arrived at a starting point of $60,000 for this offending, dividing it equally between the eight charges.
Bay of Plenty Regional Council v Wilson8
[53] Mr Wilson was found guilty on five charges of unlawfully undertaking earthworks in and around the river and, in doing so, contravening an abatement
7 R v Boyd, above n 5.
8 Bay of Plenty Regional Council v Wilson, above n 5.
notice. The Judge highlighted the ways in which the river and the harbour two kilometres downstream from it were environmentally important.
[54] The offending related to work done over six sites, spanned a total length of
480 metres and involved the removal of approximately 5,300 cubic metres of soil and sand, the straightening of a river, the removal of material from banks and placing it in the middle of the river channel and on the opposite bank, the construction of bunds, and the excavation of a 225 metre channel to divert some of the water from its naturally curved path into a new straight channel. The works were carried out to prevent further erosion of the Wilson farmland during flooding and high rainfall events.
[55] The Judge accepted the offending created adverse environmental effects which were serious given the nature of the environment affected. She noted the way in which the RMA seeks to avoid man-made activities that add to the consequences which flood events creating sediment discharges have on the environment. The Judge had some regard to Mr Wilson having been motivated to prevent further erosion of the farmland, in part because the risks of damage had been increased by the council’s removal of vegetation from the area in previous years. She said a starting point of $80,000 for the offending would have been appropriate but reduced it to $65,000 to achieve “general fairness” and to take account of the council’s removal of vegetation. Mr Wilson agreed to pay the council $14,500 for emergency remedial work carried out in 2013. The Judge ordered him to pay a further $43,517 towards further remediation costs. The Judge accepted there should be a 15 per cent deduction to reflect the defendant’s offer to make amends, leading to an ultimate fine of $52,487.50, divided between each of five charges.
Northland Regional Council v Clear Ridge Station Ltd9
[56] Judge Dwyer, who sentenced Mr Hardegger in this case, had been the sentencing Judge. He considered the offending there, in totality, was probably more serious than in the instant case. The Judge said it involved more substantial
earthworks but a remarkably similar cavalier attitude to the need for resource
9 Northland Regional Council v Clear Ridge Station Ltd, above n 5.
consents. There the company and Mr Webster each faced three mirror charges relating to works undertaken over an 18 month period in the course of converting a property from an intensive beef farming operation into a dairy farm. A low gradient meandering river ran through the farm with a number of tributaries or drains and wetlands. Extensive earthworks were carried out involving some 30,000 cubic metres of soil. Four causeways were constructed across the water bodies on the farm. There was excavation and filling of farm tracks, together with diversion and reclamation of the river. No resource consents were obtained. Either no or inadequate sediment controls were put in place as part of the works, leading to the discharge of sediment into the water bodies concerned. Mr Webster faced an additional charge of disturbing the river bed.
[57] The Judge noted the extent or significance of the works could not be accurately appraised because they had gone on for some 18 months before the council became aware of them. The Judge regarded the offending as moderately serious. He adopted a global starting point for the offending of $70,000, discounted that by 15 per cent for somewhat belated guilty pleas and 10 per cent for previous good record, resulting in a final penalty outcome of $53,550, which he then apportioned between seven charges, leading to each defendant being fined $7,650 on each charge they faced.
[58] Despite the way the Judge categorised the offending in R v Boyd, Bay of Plenty Regional Council v Wilson and Northland Regional Council v Clear Ridge Station Ltd, the total fines imposed in this case and those can be summarised in a table as follows:
Case
Starting Points
Discount
End fines
R v Boyd $60,000 Nil $60,000 Northland Regional Council v Clear
Ridge Station Ltd
$70,000 25 per cent $53,550 Bay of Plenty Regional Council v
Wilson
$65,000 15 per cent $52,487.50 Present case $100,000 30 per cent $71,400
[59] On that basis, the ultimate penalties imposed for the offending appear to be at odds with the Judge’s assessment as to the seriousness of the offending and the penalties imposed in comparative cases. The difference in the end result and the increased penalties in this case can be explained by the fact that, in this case, Hardegger Trustees was charged as the owner of the land on which the offending work was done and Mr Hardegger was separately charged as the person managing the land. The Judge adopted a starting point for each party’s offending by way of a
$50,000 fine. He did not discount it in any way because of the relationship between
Mr Hardegger and Hardegger Trustees.
[60] This requires me to consider the third ground of the appeal.
The failure to make any adjustment to the fines to recognise the inter- relationship between the company and Mr Hardegger so as to avoid any element of double punishment
[61] In an affidavit for Southern Regional Council, Mr James Dare said he was aware Hardegger Trustees owned the property in question, located on Centre Hill Road, Mossburn, Southland, and that it was farmed by Mr Hardegger. Counsel for the appellants described how Hardegger Trustees was the sole trustee of the two family trusts that owned the farm. Mr Hardegger was the settlor of one trust and Mrs Hardegger the settlor of the other. Mr and Mrs Hardegger were the two directors of Hardegger Trustees. The discretionary beneficiaries of both trusts were Mr and Mrs Hardegger, their children, grandchildren and great-grandchildren. Under the trust deeds, the trustee had a discretion as to how the income or capital of each trust would be distributed but, in doing so, the needs of Mr and Mrs Hardegger were to be considered first.
[62] The Judge noted, as had been observed by Judge Whiting in Otago Regional Council v Iona Dairy Ltd10 and by himself, a common feature of many of the prosecutions which came before the Court in the Otago Region, was that the charges were brought against small family-held farming owning companies whose directors
or shareholders were so closely related that, in reality, any fine imposed was coming
10 Otago Regional Council v Iona Dairy Ltd DC Dunedin CRI-2009-005-157, 16 September 2009.
out of the same pocket. In those circumstances, defendants were being penalised twice.
[63] The Judge refused to adopt that rationale of avoiding double penalty by altering the approach in this instance, because the company was trustee of the two trusts which owned the property.
[64] I consider there were errors in the approach which the Judge took in this regard.
[65] A company is also a separate legal entity. There are benefits to the directors and shareholders in a company owning land. In the same way, there can be benefits in a trustee, either personally or as a company, owning land as a separate legal entity. The fining of a company may impact on the losses or profits to be attributed to shareholders and thus affect their current accounts. It may result in a loss of capital within the company. The extent to which the fines will immediately impact on shareholders will depend on decisions to be made by the company’s directors. There will be much the same situation when the fine is imposed on a trustee, whether a personal trustee or a trustee company. Just how the fine will impact on beneficiaries will depend on decisions that are to be made by the trustee.
[66] It has been accepted by the High Court and by Environment Court Judges in the District Court that, in assessing culpability and to avoid double-penalising the people closely associated with a small family-based farming company, it is appropriate to lift the corporate veil in identifying who was responsible for the
offending and how the penalties for that offending will be borne.11
[67] R v Kiwi Drilling Company Ltd involved sentences for offending under the
RMA. The Court of Appeal said:12
It can be seen that the total penalty imposed on the appellants in this case greatly exceeds that which has been imposed in any earlier case. And whilst
11 Otago Regional Council v Dobbie Farms Ltd DC Dunedin CRI-2009-005-244, 16 September
2009; R v Spencer HC Wellington T285/00, 20 September 2000; East Bay Heli Services Ltd v R HC Rotorua AP53/03, 13 November 2003; Department of Labour v Hanham & Philp Contractors Ltd (2008) 6 NZELR 79 (HC); R v Kiwi Drilling Co Ltd (1997) 4 ELRNZ 23 (CA).
12 R v Kiwi Drilling Company Ltd, above n 11, at 28.
the creation of a separate criminal liability for company directors makes it appropriate to separately fine both Kiwi Drilling and Mr Smith, they are one and the same for practical fiscal purposes, so that the total penalty imposed must be tailored accordingly.
[68] In Northland Regional Council v Clear Ridge Station Ltd, Judge Dwyer adopted a global starting point for the offending of both the company and its director in the sum of $70,000.13 He considered in that case it was appropriate to adopt a global approach where the offending was looked at overall. It was appropriate to lift the corporate veil, consistent with the provisions of s 40 of the Sentencing Act 2002 which require the Court to have regard to an offender’s financial capacity and the principle that a party ought not to be penalised twice. He then apportioned that between the company and its director to recognise that Mr Webster had the higher
degree of culpability as between the two.
[69] In Otago Regional Council v Gibson, Judge Dwyer had to sentence a farm- owning company, Oliverburn Farm Ltd, its shareholder and director Mr Gibson, Weir Contracting Limited, and its principal Mr Weir, each on a single charge of disturbing a riverbed contrary to the provisions of s 13(1)(b) RMA.14 The charges arose as a result of the contracting company using a digger to remove vegetation from a waterway of 1.3 kilometres, leaving an exposed and muddy bed and
mobilising sediment. Judge Dwyer adopted a starting point fine of $30,000 for the offending of Oliverburn Farm Limited and Mr Gibson, and $20,000 for that of Weir Contracting Ltd and Mr Weir. After 30 per cent discounts for their good record and guilty pleas, the end sentences were apportioned equally as between each pair of offenders.
[70] In Otago Regional Council v Iona Dairy Ltd, Judge Whiting referred to the decisions of R v Taueki and Calford Holdings Ltd v Waikato Regional Council when sentencing a company and its director for discharging dairy herd effluent and silage leachate onto land where it might enter waterways.15 Mr Roy was a director of the company. The shareholding was 95 per cent owned by his family trust and the
balance by himself personally. The Judge said that the third step in the sentencing
13 Northland Regional Council v Clear Ridge Station Ltd, above n 5.
14 Otago Regional Council v Gibson, above n 5.
15 Otago Regional Council v Iona Dairy Ltd, above n 10, referring to R v Taueki [2005] 3 NZLR
372 (CA) and Calford Holdings Ltd v Waikato Regional Council, above n 6.
process was to ensure that double punishment was avoided, recognising that any fine imposed on the company would flow onto Mr Roy as a shareholder. He adopted a fine of $17,000 as the starting point for the offending, but then stated:16
As your company is vicariously liable for your level of culpability, under the Taueki principle it should have the same starting point, but the company being a family company, and you being virtually the total shareholder either personally or through your family trust, means you would be bearing a large amount of the fine.
The Judge decided to divide the $17,000 between Mr Roy and the company. Because of Mr Roy’s greater culpability personally, the starting point adopted for him was $12,000. For the company it was $5,000.
[71] In Calford Holdings Ltd v Waikato Regional Council, Allan J in the High Court upheld the approach taken by Judge Harland in the Environment Court in sentencing the land owning company, the contractor Tirau Earthmovers Ltd and Mr Park who had supervised the offending earthworks. The offending occurred in the conversion of a property from forestry land to pasture for dairy cows. Allan J
stated:17
Criminal culpability is assessed by reference to the role played by each individual offender; even where a number of persons acting together commit a criminal offence, the Court is required to assess the culpability of each offender separately and to impose on each a penalty that reflects the gravity of that offender’s criminality.
[72] Judge Harland had set out the applicable sentencing principles as follows:18
[50] I think the correct approach in terms of principle is for a global starting point to be adopted, taking into account all relevant aspects relating to the offending. Whilst matters such as the effect on the environment will be the same for each defendant, there is still a need to consider each defendant’s culpability in setting the starting point. In this case a separate starting point must therefore be identified for each defendant. In some cases where defendants are closely related that may not be the appropriate approach and a starting point which is then allocated to each defendant may be required.
(citations omitted)
16 At [33].
17 Calford Holdings Ltd v Waikato Regional Council, above n 6, at [32].
18 Waikato Regional Council v Calford Holdings Ltd DC Hamilton CRI-2008-077-90, 11
November 2008.
[73] On some occasions, the close relationship between two defendants has been recognised through arriving at a separate starting point for each but making some adjustment in the starting points to take account of the relationship and to achieve fairness. I was referred to cases where that approach had been adopted.19
[74] The approach adopted with companies and closely related defendants has not been dependent on the director having any particular shareholding in the company. In Northland Regional Council v Clear Ridge Station Ltd, Mr Webster was a director only and not a shareholder, except indirectly. On sentencing, there was no mention as to the nature or extent of his interest in the company as a shareholder.
[75] In all the circumstances of this case, I consider the approach adopted by the Judge has resulted in double punishment and unfairness in that it has resulted in penalties out of proportion to the seriousness of the offending as assessed by the Judge. Lifting the corporate veil and considering the terms of the trust deeds for the husband and wife’s mirror trusts that held the shares in the company, this offending occurred on a family owned farm, the beneficial owners of which were Mr and Mrs Hardegger and their family.
[76] Mr Hardegger was managing the farm for Hardegger Trustees and for the potential beneficiaries. The offending for which Mr Hardegger was to be sentenced was thus also the offending of Hardegger Trustees. It was thus unfair to penalise them as if Hardegger Trustees and Mr Hardegger were two unrelated entities.
[77] I accept that when unrelated parties have separate and distinct roles in the offending, it will normally be appropriate and necessary to arrive at separate starting points for each of them and, in doing so, to assess their respective culpability and the seriousness of their offending on a separate basis, as Allan J said was necessary and appropriate in Calford Holdings Ltd v Waikato Regional Council. That would have been appropriate if, in this instance, the contractor who did the work on the Oreti
Riverbed and on Starvation Creek had been separately charged.
19 Otago Regional Council v Dobbie Farms Ltd, above n 11; Otago Regional Council v
McGlachlan DC Dunedin CRI-2012-005-228, 4 September 2012.
[78] Consistent with the approach adopted by Judge Dwyer and Judge Whiting in other cases and as Judge Harland suggested could be appropriate, I consider this was an occasion where it was appropriate to adopt one global starting point for offending involving two defendants where they were closely related. The courts have adopted such an approach where the defendants are a company and a director acting on behalf of the company. I cannot see any rationale for refusing to make a similar adjustment just because one of the defendants is a trustee.
[79] I do accept that, if one of the defendants is charged as the owner of the land in question, the obligations which that party has, as a landowner, should be taken into account in arriving at either the global starting point for both defendants or in arriving at a separate starting point for that defendant.
[80] In this instance, having regard to the penalties imposed in other cases to which the Judge was referred, I consider the starting point for the offending of
$50,000 was appropriate, having regard to all the circumstances of the offending, including the obligations which the trustee company had as a landowner. The approach taken by the Judge in refusing to make any adjustment on account of the close relationship between Mr Hardegger and the company has resulted in a penalty which is excessive for the offending, given the assessment which the Judge made as to the seriousness of the offending and with which I otherwise concur.
[81] Mr Hardegger had the primary responsibility for ensuring Hardegger Trustees met its obligations. Through his management of the farm, he should have ensured the contractor did not carry out any of the offending work. He should have considered the rules in the regional water plan governing the placement of culverts in waterways. He should therefore bear the greater portion of the penalty. I thus apportion the penalty starting point at $35,000 to Mr Hardegger and $15,000 to Hardegger Trustees. For the reasons articulated by Judge Dwyer, there should be a discount of five per cent for each party’s good record, ultimate acceptance of responsibility and willingness to make amends as reflected in the agreed terms of the
enforcement order. From the reduced starting points of $33,250 and $14,250, there should be a discount of 25 per cent for guilty pleas.20
[82] On that basis, the penalty to be imposed on Mr Hardegger is $24,937.50, apportioned between his three charges, that is $8,312 each. The penalty to be imposed on Hardegger Trustees is $10,687.50, apportioned on the three charges, that is $3,562.50.each.
End result
[83] The sentences imposed in the District Court are quashed. In place of those sentences:
· On each of the sentences contained in charging documents ending 0236,
0237 and 0239, Mr Hardegger is fined the sum of $8,312.
· On each of the sentences in charging documents ending 0240, 0241 and
0242, Hardegger Trustees Ltd is fined the sum of $3,562.50 each.
· Both appellants will pay Court costs for the proceedings in the District Court of $130 on each charge plus solicitor costs in accordance with the Costs in Criminal Cases Regulations 1987 (to be fixed by the Registrar in the event of any dispute). Pursuant to s 342 RMA, the fines, less 10 per cent Crown deduction, are to be paid to Southland Regional Council.
· The enforcement order made against both appellants remains in effect.
· All parties will bear their own costs in relation to this appeal.
Solicitors:
Cruickshank Pryde, Invercargill
Wynn Williams, Christchurch.
20 Applying the discount for guilty pleas in this way is consistent with the Supreme Court statement in Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607 at [73] that the reduction for guilty pleas is to be applied “once all other relevant matters have been evaluated and a provisional sentence reflecting them has been decided on”. See also Simon France (ed) Adams on Criminal Law, (online looseleaf ed, Brookers) at [SA9.18(3)].
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