Ink Media Limited v Ministry of Health HC Hamilton CRI 2006 419 67
[2007] NZHC 2020
•22 August 2007
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CRI.2006 419 67
IN THE MATTER OF of an appeal against conviction pursuant to s115 of the Summary Proceedings Act
1957
BETWEEN INK MEDIA LIMITED
INK ELECTRONIC MEDIA LIMITED IAIN WALLACE WAUGH
WALLACE LESLIE WAUGH STANDARD 304 LIMITED Appellants
ANDMINISTRY OF HEALTH Respondent
Hearing: 5 June 2007
Counsel: Peter F Gorringe for Iain Wallace Waugh
Warren Pyke for all other Appellants
Michael Heron and Ian Brookie for Respondent
Judgment: 22 August 2007 at 4:00pm
RESERVED JUDGMENT OF WILLIAMS J
This judgment was delivered by
Hon. Justice Williams on
22 August 2007 at 4:00pm
Pursuant to Rule 540(4) of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
Date:………………………
_
AAll the appeals against conviction by all appellants other than Mr I W Waugh are dismissed.
B Mr I W Waugh’s appeals against conviction are allowed and the
17 summonses against him dealt with in this judgment remitted to the
District Court in accordance with para [146].
INK MEDIA V MINISTRY OF HEALTH HC HAM CRI.2006 419 67 22 August 2007
TABLE OF CONTENTS
Paragraph
Issue [1] Facts [4] Pertinent statutory provisions [6]
Jurisdiction and Advertising Charges
(1) Judgment under appeal [17] (2) Submissions [18] (3) Discussion [35]
Agent Provocateur appeals
(1) Judgment under appeal [61]
(2) Submissions [62]
(3) Discussion [68]
Reasonable Excuse and Ventolin Possession and Sale appeals
(1) Judgment under appeal [72]
(2) Submissions [73]
(3) Discussion [75]
Reasonable Steps appeals
(1) Judgment under appeal [80]
(2) Submissions [82]
(3) Discussion [87]
Selling Medicines by Wholesale appeal
(1) Judgment under appeal [90]
(2) Submissions [91]
(3) Discussion [96]
Selling medicines by retail and “Medicines” appeals
(1) Judgment under appeal [99]
(2) Submissions [100]
(3) Discussion [103]
Mr I W Waugh’s appeal
(1) Introduction [106] (2) Facts [109] (3) Submissions [121] (4) Discussion [136]
Result [147]
Issue
[1] In a reserved decision delivered on 8 February 2006 after a lengthy defended hearing, Judge A N MacLean convicted the appellants of a total of 128 charges of breach of the Medicines Act 1981 (“the Act”) and on 8 May 2006 sentenced all appellants, other than Mr I W Waugh, to fines totalling $32,900 and costs.
[2] In very much a repeat of the arguments in the District Court, all appellants have appealed to this Court against their convictions on the basis that the District Court lacked jurisdiction to try them. Mr I W Waugh supported them. Charges alleging advertising in breach of Part IV of the Act were challenged on the basis that no advertisement was published within the meaning of s 56. Charges relating to possession of medicines and selling in breach of Part II were challenged on the basis that defences under s 43(2) and s 33 respectively were wrongly rejected and there was insufficient evidence of selling within the meaning of s 2. They assert that evidence on the sale charges involving a suggested agent provocateur, a Mr Irwin, should have been excluded and that should have resulted in dismissal of a number of the informations. And they say they had available a defence of taking reasonable steps under s 80 and the Judge made an error in that regard.
[3] Mr I W Waugh appeals on the basis that he was never served with the informations against him nor represented at the hearing, and accordingly should not have been convicted on the 25 informations he faced.
Facts
[4] Because there was no major challenge to the facts as found by Judge MacLean, it is pertinent to set the background by citing first from his description of the procedural and general background:
[1] The informant has charged all the above named defendants with a total of 128 charges alleging breach in various ways of sections of the Medicines Act 1981 (“the Act)”.
[2] Of those, seventeen charges were not the subject of the hearing before me because of the failure of the defendant Iain Wallace Waugh to appear
leaving his father Wallace Leslie Waugh to appear on behalf of himself and the three mentioned companies in respect of 111 remaining charges …
[3] I proceeded with the … charges … against Iain Wallace Waugh in his absence, leaving the remaining charges against him for disposition at another time if and when he either surrenders to the jurisdiction or is brought before the Court on an arrest warrant I issued some time ago. It emerged from the evidence of his father on the last day of the hearing that he was then apparently in China and that his father spoke to him on the evening of
3 November New Zealand time. I note also that at a post-trial telephone conference on 20 December 2005 that Mr P Morgan QC was in attendance, indicating that he had received some preliminary instructions as to the possibility of representing Mr Iain Waugh.
[4] Partly due to difficulties arising as a result of his non-appearance at hearing and from the earlier non-involvement of Iain Wallace Waugh and consequential related legal representation difficulties, the charges have taken a long time to get to hearing. An earlier hearing had to be rescheduled at the request of Wallace Leslie Waugh and the companies.
[5] Of the total of 111 charges that were the subject of the present hearing, there were two broad categories, namely:
• Sales of medicines to overseas retail purchasers via the Internet; and
• Advertising of medicines over the Internet.
[6] The alleged retail sales are further broken down into two categories:
• Sales to specifically named persons in the USA and England based on documentary information extracted by staff of the Informant from the Internet (“Overseas Retail Sales”) and
• Two sales of medicines to Brett Irwin, a principal investigator at the Therapeutic Goods Administration Australia (“TGA”), a comparable organisation to the Ministry of Health enforcement agency and engaged by the Informant to assist in this investigation (“Irwin Sales”).
[7] The advertising charges allege breach of relevant advertising restriction sections in the Act either as:
• Advertising before consent of the Minister of Health had been gazetted and/or
• Advertising in a way that was contrary to the Medicine Regulations
1984 (“the Regulations”).
[8] In addition, there are five sets of mirror charges being two against each of the five defendants relating to one specific batch of 100 Ventolin inhalers where the charges allege unlawful possession and sale by wholesale. These are the only charges which involve Standard 304 Limited.
[9] The allegations cover a period from November 2002 to 26 August 2003. The latter date being when the Informant, with Police assistance, executed a warrant against the defendants’ premises in Hamilton and seized both
documentary information and computer hardware, effectively shutting down operations.
Relevant background
[10] The circumstances lying behind these charges represent a further development in other proceedings between the same parties, excluding Ink Media Limited, the details of which are set out in a judgment of Cooper J in the High Court in Hamilton of 18 August 2004 (CRI 2004-419-000084) (The “High Court proceedings”). That judgment was a partially successful appeal by the informant against dismissal by Judge Maze in a no case submission. Her reserved decision was given on 12 December 2003 dismissing all charges (“the earlier District Court decision”). As at the time of the hearing before me, the final disposition of the earlier District Court decision, which had been in part remitted back to the District Court was pending. Since then the District Court has given a further decision discharging all remaining charges but this Court has been informed that an appeal by the informant has already been lodged against that.
[11] The High Court proceedings are relied on in part by both the informant and the defendants in respect of some matters of law arising in this case relevant to the question of the timing and place of sale and also provide some contextual background to some of the evidence adduced in the present case.
[12] In general terms the method of supply of medicines employed by the defendants as outlined in the High Court proceedings and the earlier District Court decision had been abandoned by the defendants, for a different method of operation essentially utilising the Internet but still involving dealing with “medicines” and, in some cases, more particularly “prescription medicines” as defined in the Act and Regulations or advertising the same through the Internet. The earlier District Court decision and the High Court proceedings had focussed on the question of alleged selling by retail. Accordingly, there is some overlap of legal analysis between the two cases. It was confirmed in the evidence of Wallace Waugh that the catalyst for that was the actions of the informant in bringing the earlier prosecution. Essentially the earlier operations involved obtaining a prescription from a pre-arranged doctor after orders had been received and despatching the medicines direct to purchasers from New Zealand. The broad outline of the new arrangement, the subject of scrutiny in this trial, will be elaborated on later.
[5] The Judge’s views on the evidence were:
Overall assessment of the evidence
[87] As it happened, the position after Mr Wallace Waugh had given his evidence made, although the informant was not to know that until then, much of the earlier evidence superfluous in that Mr Waugh frankly conceded and fleshed out many of the basic propositions that had been advanced by the informant’s witnesses. These included the following facts, which I find established beyond reasonable doubt as a result of the combination of his evidence and the relevant informant evidence.
• Iain Wallace Waugh and his father, Wallace Leslie Waugh decided in response to the difficulties arising out of the matters referred to in the High Court decision, to change the method of an already established operation to continue to supply medicines to persons overseas;
• Through Ink Electronic Media Limited and Ink Media Limited (essentially its successor) and using the Fijian Company [Scientific and Medical Supplies (Fiji) Ltd] the defendants caused medicines, including prescription and restricted medicines to be supplied to overseas consumers;
• An elaborate, complex and inter-connected network of websites was established into which a substantial and regularly updated flow of information by way of advertising and other information was loaded onto the websites at the direction of the defendants;
• Arrangements for obtaining medicines through New Zealand (in particular from a wholesaler known as ZZ Pharmacy) and other wholesalers was organised from the defendants’ Hamilton premises and then arrangements made for supply to the Fijian Company (of which Iain Wallace Waugh was a shareholder). The Hamilton offices of the defendant company also supplied packaging and ancillary equipment as required to the Fijian company which was essentially a warehousing and despatching facility, which communicated on a very regular basis with the staff at Hamilton in order to maintain appropriate stock levels and for communication of addresses to which medicines were to be despatched – with wholesale payment for those medicines being made by Ink Media Limited to the relevant wholesaler. There was no evidence of any payment being made from the Fijian company to any of the wholesalers.
• Ultimately a substantial proportion of the sale proceeds of items sold over the Internet, less processing fees and other charges, came into the bank accounts of the defendants for their benefit and use and indirectly benefiting another linked entity, Waugh Technology.
• The whole enterprise was extremely successful and in the period from approximately November 2001 to August 2003 had a turnover of over
$10 million.
• The information on the website was constantly updated, with the substantive input for that coming from the defendant companies and/or Mr Iain Waugh, although other contracted agencies handled the technical operations of that process.
• The role of Mr Wallace Waugh was, in his own words, “just to see that everything was operating” – transcript page 491.
• The essential brains and initiative behind the whole elaborate operation was that of Mr Iain Waugh who, as his father put it was “pulling the strings” so that he did “what my son tells me” – transcript page 482.
• Mr Wallace Waugh has invested substantial amounts of money – in his recollection, at least $800,000 into the business.
• In essence, as Wallace Waugh acknowledged (transcript page 494) “basically orders came through on the Internet. One person would take them down and …… process them. It’s a very simple process, it’s
….virtually instantaneous”.
• Although Wallace Waugh quibbled somewhat about the way in which monies from overseas purchasers came to the defendants, it is clear that, even though a substantial float was at times maintained by an overseas financial processing agency to cover problems of refunds etc, the monies resulting from the Internet transactions ultimately made its way into the bank account of Ink Media Limited.
Pertinent statutory provisions
[6] In order to set out the background against which these appeals are to be determined, it is pertinent first to set out some of the relevant statutory provisions.
[7] The first of those is the definition of “sell” in s 2:
Sell includes –
…
(b)Offering or attempting to sell, or having in possession for sale, or exposing for sale, or sending or delivering for sale, or causing or allowing to be sold, or offered or exposed for sale; …
and sale has a corresponding meaning
selling by wholesale, selling by retail, and selling in circumstances corresponding to retail sale have the meanings assigned to those terms by section 5
[8] Next, it is to be noted that the appellants were principally charged with offences under s 17 and 18 which relevantly read:
17 Manufacturers, wholesalers, packers of medicines, and operators of pharmacies to be licensed
(1)Except as provided in sections 25 to 34 of this Act, or as may be permitted by regulations made under this Act, no person shall, in the course of any business carried on by that person,—
…
(b) sell any medicine by wholesale; or
(c) pack or label any medicine; or
…
otherwise than in accordance with a licence issued under Part 3 of this Act.
…
18 Sale of medicines by retail
(1)Except as provided in sections 25, 27, and 30 to 33 of this Act, or as may be permitted by regulations made under this Act, no person shall, in the course of any business carried on by that person, sell by retail, … or in any other way,—
(a) any prescription medicine unless—
(i)the medicine is sold, supplied, or distributed by a pharmacist in a pharmacy or hospital; or
…
(b)any restricted medicine unless the medicine is sold, supplied, or distributed by a pharmacist in a pharmacy or hospital; or
(c)any pharmacy-only medicine unless the medicine is sold, supplied, or distributed by—
(i)a person under the supervision of a pharmacist in a pharmacy or a hospital; or
(ii) a person who sells, supplies, or distributes the medicine in any shop described in section 51(2) and in accordance with a licence issued under Part 3.
(2)No person may sell by retail any prescription medicine otherwise than under a prescription given by a practitioner, registered midwife, veterinarian, or designated prescriber.
(2A)No person may supply, in circumstances corresponding to retail sale, any prescription medicine otherwise than—
(a)Under a prescription given by a practitioner, registered midwife, veterinarian, or designated prescriber; or
(b) In accordance with a standing order.
(2B)Despite subsections (2) and (2A), a person may sell by retail, or supply, in circumstances corresponding to retail sale, any prescription medicine, where permitted by section 25 or section 30 or section 31 or section 69 or by regulations made under this Act.]
[9] The appellants also claim they are entitled to the pharmacists’ exemption in s 26 which reads:
26 Exemptions for pharmacists
(1)Notwithstanding section 17 of this Act, but subject to subsections (2) and (3) of this section and to the other provisions of this Act and to any regulations made under this Act, a pharmacist may manufacture, pack, label, sell, and supply any medicine.
(2) The authority conferred by subsection (1) of this section shall extend only to the manufacture, packing, labelling, selling, or supplying of medicines,—
(a)In the case of a pharmacist employed in a hospital, in the course of that pharmacist's employment as a pharmacist in that hospital:
(b) In any other case, by a pharmacist in a pharmacy. (3) Subsection (1) of this section shall not authorise—
(a) The sale or supply of any medicine, except—
(i)Pursuant to an order given or a request made by the person to whom the medicine is sold or supplied; or
(ii) In the ordinary course of business with reference to the needs expressed by that person; or
(b) The sale or supply of a prescription medicine otherwise than pursuant to a prescription.
(4)Subject to subsection (2) of this section, nothing in section 20 or section 24 of this Act shall apply in respect of the sale or supply by a pharmacist of a medicine compounded by that pharmacist to suit the needs of a particular person.
[10] On the selling charges, the appellants claim they were entitled to a defence under s 33 of the Act, which reads:
33 Exemptions in respect of procuring and exporting medicines
Notwithstanding sections 17 to 24 of this Act or anything in any licence, but subject to the other provisions of this Act and to any regulations made under this Act,—
(a)Any person may procure a medicine if the person from whom he procures that medicine is authorised by or under this Act to sell or supply the medicine to him:
(b)Any person may export, in the course or for the purpose of sale, any medicine that, at the time when it is exported, might lawfully be sold by a pharmacist to a person in New Zealand, whether pursuant to a prescription or otherwise.
[11] The Medicines Regulations 1984 Reg 44C reads:
44C No export of prescription medicines for retail sale without New
Zealand prescription
(3)No person may export a prescription medicine in the course or for the purpose of retail sale, otherwise than under a prescription given by a practitioner, a registered midwife, or a designated prescriber.
(4)The meaning of “retail sale” in subclause (1) must be determined by reference to section 5(2) of the Act.
(5)Subclause (1) is intended to limit the sale and supply of prescription medicines pursuant to section 33(b) of the Act.
[12] In relation to the possession of medicine charges, the appellants claimed they had available a defence under s 43 which relevantly reads:
43 Restrictions on possession of prescription medicines
(1)No person shall, without reasonable excuse, import, procure, receive, store, use, or otherwise have in his possession, any prescription medicine.
(2)Without limiting the meaning of the expression “reasonable excuse” in subsection (1), a person has a reasonable excuse for the purpose of that subsection if—
(a) The possession or act that might otherwise be a contravention of that subsection—
(i)Is that of a person, licensed or otherwise authorised under this Act or any regulations made under this Act, to manufacture, sell, supply, pack, or administer the medicine or to be in possession of it; and
(ii) Is necessary as incidental to the business, calling, or purpose for which the person is so licensed or otherwise authorised;
(b)The possession or act that might otherwise be a contravention of that subsection—
(i) Is that of a carrier, or an employee of a carrier; and
(ii) Is necessary or incidental to the business of that carrier; or
(c)The possession or act that might otherwise be a contravention of that subsection—
(i)Is that of a person to whom the medicine has been lawfully supplied for his or her use, or for use by
any other person, as a patient under the care of an authorised prescriber or in accordance with a standing order, and who does not have in his or her possession any other supplies of a prescription medicine prescribed or supplied for the same purpose by another authorised prescriber or in accordance with a standing order; and
(ii) Is necessary or incidental to such use; or
(d)The possession or act that might otherwise be a contravention of that subsection—
(i)Is that of a person who has possession of the medicine only for the purpose of administering it to the person for whom it has been prescribed; and
(ii) Is necessary or incidental to that purpose; or
(e)The possession or act that might otherwise be a contravention of that subsection—
(i) Is that of a person in the service of the Crown; and
(ii) Is necessary or incidental to the performance of that person's duties.]
(6)In any proceedings under this section against any person in which it is proved that that person procured, received, stored, used, or otherwise had in his possession any prescription medicine, the onus of proving that he had a reasonable excuse (whether by reason of the fact that one or more of the provisions of paragraphs (a) to (e) of subsection (2) of this section apply to his case or otherwise) shall lie on the defendant.
(4)In any proceedings under this section, the fact that the defendant did not know that the medicine that is the subject of the prosecution was a prescription medicine is not by itself a reasonable excuse.
(5)Every person commits an offence against this Act who contravenes subsection (1) of this section.
[13] In response to the advertising charges, the appellants claim they did not
“publish” any advertisement as that term is relevantly defined in s 56:
publish means—
(a)insert in any newspaper or other periodical publication printed or published in New Zealand; or
…
(c)deliver to any person or leave upon premises in the occupation of any person; or
(d) broadcast within the meaning of the Broadcasting Act 1976; or
(e)bring to the notice of the public in New Zealand in any other manner.
[14] Then the appellants assert that they took reasonable steps in relation to the charges of selling medicines and accordingly are entitled to a defence under s 80 which relevantly reads:
80 Strict liability
(1) In any prosecution for selling a medicine or medical device contrary to any provision of this Act or of any regulation made under this Act, it shall not be necessary for the prosecution to prove that the defendant intended to commit an offence.
(2)Subject to subsection (3) of this section, it shall be a good defence in any such prosecution if the defendant proves—
(a) That he did not intend to commit an offence against this Act or any regulations made under this Act; and
(b) That he took all reasonable steps to ensure that the sale of the article would not constitute any such offence.
(3)Except as provided in subsection (4) of this section, subsection (2) of this section shall not apply unless, within 7 days after the service of the summons, or within such further time as the Court may allow, the defendant has delivered to the prosecutor a written notice—
(a) Stating that he intends to rely on subsection (2) of this section; and
(b)Specifying the reasonable steps that he will claim to have taken.
(4)In any such prosecution, evidence that the defendant took a step not specified in the written notice required by subsection (3) of this section shall not, except with the leave of the Court, be admissible for the purpose of supporting a defence under subsection (2) of this section.
Jurisdiction and Advertising Charges
(1) Judgment under appeal
[15] The Judge dealt with the jurisdiction and advertising arguments in two stages.
[16] First, at the end of the prosecution case, the defendants submitted there was no case for them to answer. Judge MacLean dismissed that application in an oral decision delivered on 3 November 2005. Pertinent to the present appeals, the Judge held:
[10] The issue involves primarily the relationship and the proper way to interpret really three critical statutory provisions. One is the definition of “sale” or “sell”, in s2 Medicines Act which, (abbreviating) includes; “offering or attempting to sell or having in possession for sale or exposing for sale or sending or delivering for sale or causing or allowing to be sold or offered or exposed for sale.” That is in relation to the sale charges.
[11] Then s56 of the Medicines Act 1981, the interpretation in terms of advertisements and publishing thereof. In particular the definition of “publish” and in particular subsection (e) “bring to the notice of the public in New Zealand in any other manner”.
[12] The third particularly relevant and probably the key statute that needs to be considered is the Crimes Act 1961. In particular section 6 and in more particular, section 7 of the Crimes Act 1961 it being accepted through virtue of the relevant sections in the Summary Proceedings Act 1957 that those sections apply. Section 6 and 7 basically deal with a very longstanding and fundamental point of principle in both English and New Zealand criminal law that essentially the criminal law of a country and the criminal law of New Zealand is for local application and generally should not have extra territorial effect. Now of course that is subject to the other fundamental principle that Parliament can pass any law that it sees fit but the common law principles and the constitutional principles are now covered in our legislation, by section 7, to which section 6 is subject:
Place of Commission of Offence
For the purpose of jurisdiction where any act or omission forming part of any offence or any event necessary to the completion of any offence occurs in New Zealand, the offence shall be deemed to be committed in New Zealand whether the person charged with the offence was in New Zealand or not at the time of the act, omission or event.
[13] It is common ground that the background to these charges as revealed by the evidence adduced by the informant and for the purposes of this application is essentially this. That there is a plethora of evidence suggesting that the defendants were part of a reasonably complex operation whereby medicines as defined in the Medicines Act 1981 or Regulations were obtained either from New Zealand wholesalers or elsewhere. That through the agency of the defendants, information about those medicines with also related information of an informative nature about their function, their scope, possible hazards etc, was put on to the internet or as it is now known the World Wide Web. It is also common ground that that information was accessed on the date in question (the subject of the charges), by members of the staff of the Ministry of Health in Wellington. Was printed out and is part of the evidence before the Court. A lot of evidence to suggest that the
content of that information was provided through the agency of the defendants. There is a lot of evidence to suggest that people all over the world but, it should be noted, none on the evidence, in New Zealand responded and in due course put in orders through what perhaps could be described as a type of electronic supermarket type of arrangement akin to that used for book sales such as Amazon and the like. That payment was processed through the agency of the defendants and ended up banked in its Hamilton bank account and was thus available to the various entities. There is also evidence to suggest that the staff at the defendants’ companies and the defendants’ address in Princes Street had a material role in both processing that whole operation, monitoring it, updating website information, updating and amending website names and the like. Ensuring that instructions were then given to an entity in Fiji which was associated in some way with at least some of the defendants and then made its way ultimately via Fiji in most cases if not all cases to ultimate end purchasers.
…
[15] The first issue is essentially; does a New Zealand Court have jurisdiction. More particularly can it be said that there was evidence (bearing in mind this is a no case submission), that there is evidence, if accepted, which could amount to evidence of a sale in terms of the definition I earlier referred to, which involves the analysis of where the sale, where the transaction was completed i.e. was it in New Zealand or not. And then secondly, with regard to the advertising charges, whether essentially there was publication in New Zealand and, as a subset of that, whether the process on the evidence available to date advised by the informant amounts in terms of Section 56 to “bringing it to the notice of the public in New Zealand in any other manner”, it being common ground that there is no reference in the legislation, (perhaps not surprisingly noting that it was 1981), that there is no reference to the internet or e-mail or anything of that type.
…
[17] The prosecution, the informant submits that with relation to the question of sale there is, as it happens, clear authority, binding authority from the High Court in respect of or arising out of a decision of Cooper J in a decision involving the same defendants as, or virtually the same defendants as before the Court today. I know not much about that other than having read Cooper J’s decision but I am conscious even now, the final ramifications of those prosecutions have not been worked right through. But the informant’s point is that there is helpful and binding authority on what constitutes a sale or selling, in terms of the Medicines Act 1981, and that from that it is possible to conclude on a no case submission that there is evidence to suggest selling in New Zealand.
[18] On the question of advertising, Counsel indicated to me last night that there was a helpful High Court of Australia decision, the Dow Jones & Company Inc v Gutnick [2002] HCA 56 which was a defamation case where the issue before the Court, amongst other things, was, whether a defamatory comment put on the World Wide Web and read or readable by someone in the state of Victoria could give jurisdiction for a defamation claim in Victoria, notwithstanding that the alleged defamatory information was on the internet. I read that overnight and there is some helpful and interesting commentary by way of general observation about the world wide web, in
particular at paragraph 39. That was against a background of exploring the historical background and development of this medium and concluding in particular with a comment at paragraph 39:
“However broad may be the reach of any particular means of communication, those who make information available by a particular method do so knowing of the reach that their information may have. In particular, those who post information on the World Wide Web do so knowing that the information they make available is available to all and sundry without geographic restriction.”
[19] Now Mr Pyke makes the point that that is a defamation case. That arguably the focus of attention there is not so much on where the publication occurred, but on where the damage occurred and thus, there are different principles that apply to a defamation case in the context of publication and harm, than in the case of the present circumstances, where it is alleged that publication is in breach of s56 and s57 of the Medicines Act 1981.
[20] It emerged, and it was drawn to my attention this morning, that that case has been adopted and endorsed by the High Court in Wellington in the case of the University of Newlands v Nationwide News Property Ltd [2004]
17 PRNZ 206. Associate Justice [sic.] Gendall noted in paragraph 35:
“I agree with the position taken by the High Court of Australia. To my mind, if a defendant chooses to upload information on the internet, being aware of its reach, then they assume the associated risks including the risk of being sued for defamation. If it were held otherwise, namely that publication occurred of the place of uploading, defendants could potentially defame with impunity.”
[21] Then he notes in the following paragraph 36 that the act of publishing the defamatory material occurred in New Zealand once the allegedly defamatory information was downloaded from the defendant's website.
[22] Now the thrust of the evidence to date in this case is that the content that is said to infringe the Medicines Act and medicines regulations, in this case derived from, was downloaded to the internet and various websites from the defendant companies. Mr Pyke makes the point that against the restrictive concept of extra-territoriality encompassed by s6 and s7 of the Crimes Act 1961, there being no specific reference to extra-territorial application, that there is an argument that the advertising, which was arguably not intended for perusal by New Zealanders, nor is there any evidence of its accessing by New Zealanders, was not published in New Zealand but was held, so to speak, in cyberspace at an unknown server in an unknown country. Probably, on the evidence, somewhere in the United States or possibly, as one of the expert witnesses told us, on a number of mirror sites around the world.
[23] The logical point which the informant relies on is to say this. Yes, Dow Jones [supra] and the New Zealand case, University of Newlands v Nationwide News Pty Ltd [supra], are defamation cases but the fundamental concept is that the issue is publication. That those cases and, particularly the New Zealand case, is authority for the proposition of publication occurs, and in this case, the advertising occurs when the defendant companies or entities thereof put the information on to the world wide web.
[24] Mr Pyke says surely by analogy that cannot be right. … The issue is whether based on the Dow Jones and the University of Newlands v Nationwide News Pty Ltd [supra] authority, publication occurred in New Zealand, i.e. by being loaded or downloaded to the world wide web through the agencies of the defendant. In my view that is when publication and advertising occurs.
[25] The point is that this fits within the concept of being brought to the notice of the public in New Zealand in any other manner. As to the proposition that s7, read in conjunction with s6, means that it would be straining matters to make that interpretation, it is my view that based on the precedents cited to me and the facts as they are asserted before me that, as far as advertising is concerned, that has occurred in New Zealand so that as to that part of the application, the application is declined.
[26] Now turning to the sale question. As I have said, the informant's position is that, based on Cooper J's determination in the cases to which I have just referred, sale or selling basically occurs at or around the point of payment or the sale in terms of the definition section must be, as a minimum, completed by that point. Payment, the informant points out, is demonstrably on the evidence, occurring in New Zealand. It is banked in New Zealand. The informant's position is therefore that in terms of s7 of the Crimes Act
1961, there has been an act or event, an act forming part of the offence or an event necessary to the completion of the offence occurring in New Zealand.
In my view that must be right, so the applications are declined on that point as well. So the application as a whole is refused.
[17] In his reserved judgment, Judge MacLean dealt with the jurisdiction and advertising arguments in the following passage:
Jurisdiction
[17] A central issue raised at the close of the prosecution case on
3 November, as a no case submission, focussed on the question of jurisdiction. I had given an immediate oral ruling on the jurisdictional point briefly outlining the reasons why, in my view, there was at that stage a case to answer.
[18] In his final submission, Mr Pyke reiterated his earlier submissions, submitting that the issue now is whether the informant has proved beyond reasonable doubt that there was advertising and/or sales in New Zealand. He developed upon his earlier submissions, submitting that against the legislative framework of the Act and the Regulations as a whole and the Medsafe regime surrounding them, the Act can only be interpreted as having effect in New Zealand.
[19] Since then I have had the opportunity to consider in more detail the decision in the High Court proceedings. Although, of course, the jurisdictional argument was not before that Court, in my view the analysis of when a sale occurred is helpful in the context of ascertaining the jurisdiction question. In respect of sales in particular, I refer to paragraph 97 of Cooper J’s decision:
I also consider the appellant’s argument that a sale occurred on the transfer of funds from the would be purchasers to the respondents is correct. The former had by that stage placed orders for particular medicines and had paid for them.…the purchasers had in fact done everything that was required of them pursuant to what was in agreement for the sale of goods.….to conclude as the District Court Judge did that there was no sale until despatch of the medicine is, I think, to confuse performance of the contract with its formation.
[20] That decision and that particular citation were, of course, in the context of the particular fact situation, namely the involvement of a registered pharmacist and the obtaining of a prescription, but the method of arranging the sale is clearly the same and the clear outcome of that analysis is that a sale has occurred in New Zealand.
[21] Since receiving counsels’ submissions, I have become aware of the recent decision of the High Court of 21 December 2005, Batty v Choven High Court Auckland CRI 2005-404-313. That was a judgment of Allan J dealing with charges of possession and “making available” of objectionable publications in the context of the Films, Videos and Publications Classifications Act 1993. One of the issues dealt with was the question of jurisdiction and the following extract from the decision seems very much in point. In dealing with a submission that images on the appellant’s computer were not displayed or made available in New Zealand, His Honour observed [paras [26] and [27]]:
…that submission is based on the proposition that the appellant’s primary market was not in New Zealand but elsewhere, so that he had no particular interest in reaching viewers or web browsers in this country. I am unable to accept that submission. It is conceded by the appellant that he arranged that his website should display or make available certain images which would be available world-wide. So they would be available to persons in New Zealand who visited the appellant’s website. Accordingly, the images were displayed or made available to persons in New Zealand…. It is irrelevant that the appellant may have believed his primary market to lie elsewhere. It is likewise irrelevant that the server utilised by the appellant was situated in the USA. While in New Zealand, the appellant undertook certain steps to display or make available the images on his website. Those images were available to the respondents’ inspector when he browsed the appellant’s website from the inspector’s computer in Wellington. There is therefore evidence that the relevant images on the appellant’s website were in fact displayed in New Zealand. All of the acts making out the actus reus are established and all occurred in New Zealand.
[22] Further in the decision His Honour, when dealing with s 7 of the Crimes Act, which was the focus of the defendants’ submissions in the present case, he added at paragraph 90: [sic. Paras [30] and [31]]:
… His argument was to the effect that the displaying or making available occurred when those browsing the Internet gained access to the server situated in the USA. It was the server situated outside New Zealand which displayed or made available the images. There was a separation, so the argument went, between the appellant’s
preliminary actions in New Zealand which had the effect of placing the images on the server in the USA and the subsequent displaying or making available of those images by the USA server to those using their computers for that purpose…. That argument lacks substance. The evidence is to the effect that no separate step is necessary in the USA to enable the public to access the appellant’s website. It is all automatic. So it is the action of the appellant in placing the images on his website which constitutes the display or the making available, not the automatic transmission of those images by the US server to those browsing the Internet.
Paragraph 32:
S 7 catches the appellant in respect of his actions in facing the relevant images on his website which is available through the US server. Without the appellant’s actions, the images would not have been displayed or made available.
[23] It seems to me that the principle in Batty v Choven has analogous application to the situation here. Accordingly, so far as both advertising and sales are concerned, aside from the foregoing comments, there is nothing further I have to add in respect of my prima face case ruling and am satisfied this Court has jurisdiction in respect of the sales and advertising charges. In respect of all other issues, I will return to them later.
Advertising
[132] The basic tenor of this Court’s approach to advertising has been already set out in my comments on the jurisdiction question. Essentially the proposition taken a stage further with respect to advertising is that there was no such advertising in New Zealand.
[133] However, my view, and based on the reasons I gave in the earlier prima face case ruling, I am satisfied that because information was downloaded from New Zealand at the direction of the defendants and was accessible to New Zealand residents, including the Ministry staff and there being no evidence of any block or restriction on New Zealand access, I am satisfied that this Court has jurisdiction
(2) Submissions
[18] For all appellants other than Mr I W Waugh, Mr Pyke largely repeated the submissions made, unsuccessfully, to the District Court.
[19] He submitted the criminal jurisdiction of New Zealand courts is territorial unless statutorily extended by provisions such as the Crimes Act 1961 ss 6 and 7. The Act does not regulate or restrict sales of medicines or advertising to persons outside the country and because the Act does not expressly create extra-territorial
jurisdiction, Mr Pyke submitted that sales or advertising to persons outside the country, as occurred, he suggested, in all the sales the subject of these proceedings, were outside the statutory scope and purpose. Allegedly criminal conduct outside the country is only caught if it is clearly within the statutory ambit (Interpretation Act 1999 s 5(2), R v Darwish [2006] 1 NZLR 688, 695 para [22]). Unlike the Medicines Act, Darwish dealt with charges under the Misuse of Drugs Act 1975 which contains express extra-territorial provisions.
[20] He accordingly submitted that Parliament only intended to legislate and regulate the sale of medicines and advertising within New Zealand, drawing attention to a number of provisions in the Act which he submitted were to that effect.
[21] Mr Pyke emphasised that the appeal on the advertising charges revolved largely around the jurisdiction point. However, in relation to those charges, he also suggested there was no publication within the meaning of the definition of “publish” in s 56 which, as it applies to this case, defined the term as bringing “to the notice of the public in New Zealand in any other manner” than printing in New Zealand publications or sending or delivering to any persons. Mr Pyke said that in the District Court the prosecution maintained that publication over the internet included publication within New Zealand though, in his submission, s 56 required an intention to bring the information to the public at large in this country. He submitted that Batty, though of some assistance in this instance, was not as relevant as Judge MacLean found because of factual and legal differences between the cases. He also made the point that University of Newlands on which Judge MacLean relied had been reversed by the Court of Appeal (and leave to appeal to the Supreme Court had been refused). (Nationwide News Pty Ltd v University of Newlands (CA202/04
9 December 2005); University of Newlands Ltd v Nationwide News Pty Ltd (2006)
18 PRNZ 70.
[22] University of Newlands was a claim by the plaintiff, and persons associated with it, of defamation by Nationwide News, the publisher of “The Australian” newspaper. The defamation in this country was alleged to have occurred because the item was published in the on-line version of “The Australian” and was thus capable of being downloaded in New Zealand. The claim was struck out on the basis that the
plaintiff could not prove that the article in New Zealand had been downloaded by any person other than the plaintiff and accordingly there was no proof of publication of the item in this country. The Court of Appeal struck out the proceeding on the basis that no good arguable case had been demonstrated.
[23] Mr Pyke stressed there was no evidence in the District Court in this case of the downloading of website material by any member of the public in New Zealand sufficient to prove the appellants’ advertising had been brought to the “notice of the public in New Zealand” as opposed to Ministry of Health officials who deliberately sought the material. He submitted that although people in New Zealand might elect to view the website – as with any overseas publication on the web – that did not amount to bringing material to the notice of the public in New Zealand in terms of s 56. Were that not the case, he submitted, pharmaceutical advertisements in overseas magazines sold in this country could breach the restrictions on medical advertisements in ss 57 and 58.
[24] For the respondent Ministry, Mr Heron introduced his submissions by a general overview of the appellants’ business. It was, he said, a sophisticated retail operation involving a vast range of medicines and with very considerable turnover, though, when the search warrant was executed on the appellants’ premises, little documentation remained.
[25] He illustrated that by reference to the appellants’ modus operandi. Having received orders through the internet, Mr W L Waugh ordered medicines from ZZ Pharmacy, a licensed wholesaler sometimes in quantities too large to package. He then repackaged them and sent them to a customs broker for forwarding to the Fiji company run by the appellants, Scientific and Medical Supplies (Fiji) Ltd, for forwarding on to buyers. The Ministry, he said, accepted the ultimate delivery and packaging of the medicines occurred in and from Fiji but, he submitted, their “sale” occurred in New Zealand with the Fiji company being used only for warehousing. Ink Media’s Hamilton premises were the nerve centre of the retail sales
operation. It ran the websites, acquired the wholesale medicines, dealt with
customers’ queries, refunds and relations, processed orders and received payments. Credit card transactions relating to purchases by internet buyers all over
the world were processed in Hamilton. Receipts and payments were made to and by a New Zealand bank. The website material was, he said, written in Hamilton and paid for by the appellants’ companies or by Mr W L Waugh. After payment, appellants sent email confirmations and advice as to the availability of the medicines, following which the orders were filled by the Fijian company.
[26] All of that, he submitted, amounted to “conduct in New Zealand” for the purpose of the Crimes Act 1961 s 7. The fact the sales may have been to overseas buyers was not, he submitted, the critical question. That question was whether the Ministry could demonstrate “conduct in New Zealand” for the purpose of s 7. Even if the whole of the offence did not take place within this country, New Zealand courts were clearly given jurisdiction over the offence by s 7 in that acts or omissions forming part of the offence took place in this country, or events necessary to the completion of the offence took place here. Were the Act concerned with the destination of medicines sold, as the appellants contended, s 33(b) would be superfluous.
[27] That arrangement, he submitted, satisfied the discussion by the learned authors of Robertson et al Adams on Criminal Law (para CA7.03, CA7.04, p1-105):
… In cases where the whole of the offence did not take place in New Zealand, the New Zealand Courts have jurisdiction over an offence if either or both of the tests in s 7 are met, that is, either an “act or omission forming part of any offence” took place in this country, or “any event necessary to compete the offence” took place here. …
The first test in s 7 applies to all forms of “conduct” offences, whether or not a particular result is a part of the actus reus of the offence: Tipple v Pain [1983] NZLR 247; Collector of Customs v Kozanic (1983) 1 CRNZ 135, cited with approval in Walsh v R [2006] NZSC 111, para 22. It will be sufficient if there is conduct in New Zealand which is a sufficient cause of the later occurrence of the actus reus: Batty v Choven [2006] NZAR 127.
[28] Mr Heron also relied on Batty, especially Allan J’s conclusion there was jurisdiction in that either the actus reus was in New Zealand because the processes involved with the USA servers were automatic, or the steps taken in New Zealand amounted to an act forming part of an offence and accordingly were caught by the Crimes Act 1961 s 7.
[29] Mr Heron pointed out that jurisdiction was not challenged in the first Ink Media case but in that matter the medicines were handled by the New Zealand-based defendants and sent from New Zealand direct to overseas buyers after prescriptions from a New Zealand-based doctor were obtained and with a New Zealand pharmacist dispensing the medicines after checking.
[30] To meet the appellant’s submission that the Act did not intend to regulate the sales of medicines to persons outside the country, Mr Heron suggested the appellants’ approach unduly focused on buyers rather than the conduct of the appellant vendors within New Zealand. The Act regulates the manufacture, sale and supply of medicines in New Zealand from Ministerial consent to possession, to packaging, to the sale of the medicines themselves and contemplates, in s 33(b), the sending of medicines off-shore. He pointed to the fact that the offence sections, principally ss 17 to
24, contain no exception concerning off-shore sales. That particularly
applied to s 18. Subs (2) and (2A) empower sale by retail of prescription medicines except pursuant to prescriptions (though subject to subs (2B)).
[31] Mr Heron analysed the elements of ss 18(1), 57(1)(d) and 20(2)(c), those invoked by the Ministry, to make the point they debarred the sale by retail of prescription medicines otherwise than under prescription and the publishing or causing to be published of medical advertisements which failed to include statements required by Regulations or advertising the availability of new medicines before Ministerial consent. None of those sections, he noted, was principally concerned with purchasers’ actions: the nub of each is the action of the person charged with the relevant offence.
[32] He made the point that s 33(b), empowering the export for the purposes of sale of medicines that at the time of export might lawfully be sold by a pharmacist in New Zealand whether pursuant to a prescription or otherwise, was expressly subject to the other provisions of the Medicines Act and Regulations made under it, principally Reg 44C.
[33] Section 33(b) was the provision on which the present appellants principally relied before Cooper J in the earlier prosecution. The Judge held that the sale in that case occurred on the transfer of funds not on the despatch of medicines by the Fiji company to the purchaser. Shifting the medicine despatching limb of the operation to Fiji from Hamilton as a result of that decision did not, Mr Heron submitted, affect jurisdiction.
[34] Ink Media was the vendor of the medicines under the system described and its actions came within the definition of “sell” in s 2. Mr Heron also submitted the appellants’ modus operandi brought their actions within Cooper J’s finding as to when a medicine sale occurred.
(3) Discussion
[35] Despite the length of the District Court hearing and the numerous issues raised before Judge MacLean and despite the comprehensive nature of the submissions made on appeal, in this Court’s view the jurisdictional issues raised on behalf of the appellants are relatively straightforward.
[36] To recapitulate, the appellants advertised medicines over the internet. They created and controlled the contents of their websites including upgrades from time to time from their Hamilton premises. The websites did not forbid New Zealanders from accessing them or from downloading them or from placing orders although the only evidence on that score was the downloading of items from the internet by Ministry officials in this country.
[37] When the appellants received orders over the internet from those who had accessed their websites and wished to purchase the advertised medicines, the orders they received were via the internet and payment made through the same route or similarly. When payment had been received, the appellants, from their Hamilton premises, ordered the required quantities of the advertised medicines from ZZ Pharmacy, a licensed New Zealand wholesaler of medicines. ZZ Pharmacy sent the medicines to the appellants’ Hamilton premises where they were repackaged and forwarded to the appellants’ Fiji company whence they were despatched to buyers.
Although there was little evidence of individual transactions which the Ministry was able to obtain, it asked Mr Irwin, an officer of its counterpart in Australia, to order medicines through an assumed name and in due course his orders were filled in the way described.
[38] There can be no doubt that, had the appellants done what they did but were proved to have sold medicines within New Zealand, they would have offended in the way alleged. They were not licensed wholesalers nor pharmacists nor authorised in any way to sell prescription medicines. The agency argument they endeavoured to advance was rejected, rightly, by the Judge: their relationship with ZZ Pharmacy was, whatever the lucrative scale of it, a vendor/purchaser relationship with, so far as ZZ Pharmacy was concerned, the appellants being able to do as they chose with the medicines supplied pursuant to their sale and purchase contract. This Court adopts Cooper J’s description of the agreement for sale and purchase of the goods as cited by Judge MacLean.
[39] The question therefore, as correctly posed by Judge MacLean, was whether the arrangement described amounted to the various appellants selling prescription medicines by retail otherwise than under a prescription or doing so in the course of their business and whether those arrangements resulted in the Courts having no jurisdiction over their actions.
[40] There is a broad and a narrower approach to the resolution of that question.
[41] The broad approach begins by considering the Crimes Act 1961. Section 5 applies to all offences for which an offender may be tried in New Zealand and “applies to all acts done or omitted in New Zealand”. The appellants could plainly be tried, as they were, in this country, and plainly undertook acts and, possibly, omissions in New Zealand as well.
[42] That notwithstanding, s 6 provides that “no act done or omitted outside New Zealand is an offence” other than under the Crimes Act 1961 or other enactment. So, it follows, that any actions done by, say, Mr I W Waugh in China and other
actions done by the appellants when outside this country could not constitute an offence.
[43] Section 6 is, however, subject to s 7 earlier cited but repeated for convenience:
7. Place of commission of offence
For the purpose of jurisdiction, where any act or omission forming part of any offence, or any event necessary to the completion of any offence, occurs in New Zealand, the offence shall be deemed to be committed in New Zealand, whether the person charged with the offence was in New Zealand or not at the time of the act, omission, or event.
[44] Several observations are to be made about the form of s 7.
[45] The first is that it expressly confers jurisdiction on New Zealand courts in
circumstances which satisfy the requirements of the section.
[46] Secondly, it deems offences to have been committed in this country irrespective of whether the accused was in the country or not at the time of the “act, omission or event”.
[47] And thirdly, and most importantly, the particular offence is deemed to have been committed in this country “where any act or omission forming part of the offence or any event necessary to the completion of the offence occurs in New Zealand”. All the actions by the appellants in setting up the websites, receiving orders and payment, receiving the medicines and repackaging and forwarding them took place in this country.
[48] When the appellants were charged with the sale of prescription medicines otherwise than pursuant to prescription, the fact that the buyers were overseas and responded to a global resource would not appear to have provided the appellants with a defence to the actions charged. The internet so far as it relates to these appeals is an unparalleled source of global information, a source of information which has grown up over not much more than a decade and which is unprecedented in its scope and reach. But, so far as is relevant to these appeals, it should be seen
for what it is, namely nothing more than a worldwide source of information and contacts. In principle, had the appellants conducted their business in the way they did with the sole exception of arranging from Hamilton for the printing overseas and distribution of an advertising catalogue, it would have reached very many fewer potential buyers (though some may have been in New Zealand) but that method of business would, in essence, be no different. And there could be little doubt that they would have offended against the Act had they chosen to run their business in that fashion.
[49] In addition to the terms of s 7, there are two additional reasons for taking that view. The first is that “sell” is the subject of the inclusionary definition in the Act and the manner in which the appellants managed their business included “offering” the medicines, attempting to sell them by means of the internet, having them in their possession for sale on their receipt from ZZ Pharmacy for despatch to Fiji, possibly exposing for sale over the internet, “sending or delivering for sale” by forwarding the prescription medicines to Fiji for onward despatch and “allowing to be sold or offered or exposed for sale” by the Fiji subsidiary or by their control of their websites.
[50] The second reason for taking that view is that it accords with the decision in Batty, a case with some obvious parallels with the present appeals. In that case, too, it was argued that there was no activity by the appellant in New Zealand. That argument was rejected by Allan J in the passages earlier cited from Judge MacLean’s judgment to which could be added:
[33] In my view therefore, the appellant is fixed with criminal liability:
(3)Because all of the relevant acts and omissions constituting the actus reus of the offence under s 131 took place in New Zealand;
(4) Alternatively, because the steps taken by him in New Zealand amounted to an act forming part of the offence with the result that s 7 deems the offence to have been committed in New Zealand. That result is consistent with the judgments of this Court in Tipple v Pain [1983] NZLR 257 and Collector of Customs v Kozanic (1983) 1 CRNZ 135.
Leave to appeal was refused (Batty v Choven HC AKL CRI.2005 404 313, 2 May
2006).
[51] This Court agrees and notes also that if this Court is able by way of injunction, as it is, to compel a New Zealand resident to alter websites on servers outside this country but which are within his control (New Zealand Post Ltd v Leng [1999] 3 NZLR 219) that adds to the view expressed in Batty that where persons in New Zealand undertake actions or omissions to set up and alter the content of websites hosted overseas which they control and if their actions or omissions result in, here, a sale of prescription medicines without a prescription the ensuing offence is deemed to have been committed in this country.
[52] Do the provisions of the Act affect that view? [53] The answer must be “No”.
[54] The appellants were, in the main, charged under ss 17 and 18 earlier cited and claimed the exception under s 33.
[55] On its face, s 33 might have exempted the appellants from criminal liability under ss 17-24 were it not for the fact that s 33 is relevantly subject to other provisions in the Act and to Regulations made under it.
[56] The other provision of the Act which might be relevant is s 43, the reasonable excuse section, but that excuse was rejected on the facts (and the reverse onus) by Judge MacLean and no basis has been made out by the appellants for this Court to alter his findings. That limb of the argument accordingly fails.
[57] The relevant regulation is Reg 44C which debars the export of prescription medicines for the purpose of retail sale other than under a prescription. The appellants’ actions clearly amount to a “retail sale” as that phrase is defined is 5(2) and accordingly what the appellants were doing was exporting prescription medicine for the purpose of retail sale either by themselves or via their Fiji subsidiary. There being no suggestion that the medicines were supplied under prescription, what might
have been an exemption provided by s 33 was trumped by Reg 44C. It is an unusual technique of statutory draftstmanship to have a Regulation - subsidiary or delegated legislation at best - supervene over a section in the Act under which the Regulation has been made, but no argument was directed to that question and there are several other examples in the Act. Accordingly the appropriate conclusion is that any possible exemption provided for the appellants in way they ran their business by s 33 is nullified by Reg 44C. They were not exporting medicines for sale under prescription.
[58] Therefore, by whatever route is adopted, it follows that, much for the reasons which persuaded Judge MacLean that the Court had jurisdiction to deal with these appellants, this Court finds itself in the same position.
[59] Accordingly, the argument that the District Court lacked jurisdiction to deal with the charges brought against the appellants is dismissed.
[60] The same conclusion must be reached in relation to the submission that the appellants did not advertise in New Zealand. Their websites, as with any other website, were available to be viewed and downloaded in this country. There was no restriction in the websites on the appellants doing business with persons placing orders with them from within New Zealand. Their advertisements were accordingly brought to the notice of the public in New Zealand in the same manner as the contents of any other website and the fact the Ministry could not demonstrate access to the appellants’ websites from persons in this country is therefore not to the point. That aspect of the appeals also fails.
Agent Provocateur appeals
(1) Judgment under appeal
[61] The Judge’s findings on these matters were:
Charges relating to Brent Irwin - 023, 024, 025, 049, 050, 051 – Proscar.
028, 029 – Xenical. Ventolin 054, 055
(a) There is a further proposition advanced for the defendants over and above the jurisdictional challenge, that the evidence of Mr Irwin as to sales should be excluded as unfairly obtained or, alternatively, the information dismissed for abuse of process, or because admission of the evidence is an affront to public conscience. Reference has been made to R v Kitapa (1986)
2NZLR 131 CA and to R v Karalus CA 420/04 CA96/05 7 June
2005.
[114] The points made in support of that proposition by Mr Pyke include –
• Mr Irwin was not acting in pursuance of any powers under the Therapeutic Goods Act 1989 or any other relevant Australian legislation.
• Mr Irwin accepted that the importation of the medicines was technically in breach of the relevant Australian legislation and he did not inquire as to whether or not it was illegal to make such a purchase from New Zealand.
• Effectively, he was acting as a private investigator under an informal arrangement with the Ministry of Health.
• His conduct was misleading and false in so far as United
Pharmacies was concerned as to his true identity.
• That there were no protocols established for this type of activity.
• That it could be concluded that the sales to him would not have occurred but for the alleged unlawful activity.
• There is no evidence that the alleged selling would have been committed by the defendants but for the activity of Mr Irwin.
• That it is an affront to public conscience and abuse of the Court’s process for the Ministry of Health without protocols and in breach of Australian and New Zealand law to establish an undercover operation that not only makes Mr Irwin a party to the very offences alleged, but makes him an offender against Australian law.
• There was no necessity for him to be engaged as agent provocateur.
[115] The informant’s response to that is that on the evidence it is clear the defendants were in the business of selling medicines to overseas purchasers, that being the very purpose for which the whole elaborate structure was created so that it can hardly be said that the Defendants carried out their actions solely at the instigation of the Informant:
•That in the circumstances, the operation was more akin to a police undercover operation in that he gathered the evidence using his investigative expertise at the direction of Ms Scott from the Ministry of Health;
•It is in the public interest that the Ministry of Health co- operates with the equivalent international organisations where part of the offending occurs outside New Zealand.
[116] My conclusion on that is the factual scenario is quite different from that sort of arrangements that in the past have been of concern to Courts. I am quite satisfied – notwithstanding the technical breach of both New Zealand and Australian law – that they were appropriate steps to be taken in light of the concern that had been expressed by the United States Food and Drug Administration and the very real concerns that emerged, particularly in the expert evidence.
[117] Accordingly I conclude there is no basis for the exclusion of his evidence.
(2) Submissions
[62] Mr Pyke repeated his submissions that the evidence of Mr Irwin should have been excluded as unfairly obtained or the informations should have been dismissed for abuse of process because the evidence was an affront to public conscience, relying on R v Karalus (2005) 21 CRNZ 728. There the appellant’s employer had retained an undercover investigator, a Mr Smith, to investigate pilfering and cannabis use by staff and the investigator purchased cannabis from him. After reviewing decisions in Commonwealth jurisdictions as to entrapment, the Court of Appeal, in holding the evidence of the investigator relating to admissions by an employee admissible, observed (at 741 para [52]):
[52] In our view the legal principles to be applied are as follows:
(a) The fact that Mr Smith is a private individual and not an agent of the State is not inconsistent with the jurisdiction to exclude his evidence if a prosecution based on that evidence could fairly be described as being an abuse of process or an affront to public conscience. It is not correct to see a Judge as approbating the possibly criminal conduct of an agent provocateur if he or she treats the resulting evidence as admissible. But the reality is that if such evidence is held to be inadmissible, there would be little or no incentive to deploy agents provocateurs. Similarly, when the police prosecute based on the evidence derived by a private agent provocateur there is, in a sense at least, some element of State adoption of the conduct of the agent provocateur. Given that the powers of the State are necessarily engaged by the criminal process, it is not desirable for the courts to adopt a completely hands-off approach. Conduct which would be unacceptable in the case of a police informant or undercover officer (eg the entrapment of someone who was not predisposed
to commit the offence in question) would be equally unacceptable if carried out by a private agent provocateur.
(b) In cases in which the agent provocateur is not an agent of the State, the principles developed in the entrapment cases ought to be applied with special focus on the risks associated with the private nature of the actions of the agent provocateur and in particular, where applicable, the absence of police supervision
…
(c) The risk of abuse should be addressed not by a general rule that evidence associated with the actions of a private agent provocateur is inadmissible but rather by an inquiry focused on the circumstances of the case as to whether continuation of the prosecution would be an abuse of process or an affront to public conscience. A broad exclusionary rule would necessarily be uncertain at its margin (eg as to the use of private investigators to investigate licensing breaches) …
[63] Mr Pyke submitted Mr Irwin was the agent of the Ministerial officer in charge of the inquiry and there would be no evidence of selling or exporting to Australia had he not been involved. The transactions would not have occurred had the Ministry not arranged for Mr Irwin to order the medicines over the website (using a pseudonym). In doing so, he was not acting pursuant to any powers under Australian legislation, particularly the Therapeutic Goods Act 1989 (C’th) and the Therapeutic Goods Regulations 1990 (C’th) under each of which he was an authorised officer. Mr Irwin may also have committed offences under Australian law by importing the medicines without Customs approval.
[64] Mr Pyke also pointed to evidence that the officer in charge of the inquiry in
New Zealand was not acting pursuant to any powers under the Act.
[65] In those circumstances, he said Mr Irwin’s evidence should have been ruled inadmissible. That, he said, made it an affront to public conscience for the Ministry to rely on Mr Irwin’s evidence.
[66] Unsurprisingly, Mr Heron submitted there was nothing about Mr Irwin’s evidence to make its admission an affront to justice as that phrase is discussed in Karalus.
[67] Mr Heron particularly pointed to the passage cited where the Court of Appeal found no distinction between informers, undercover agents and private investigators as far as the law on agents provocateurs is concerned. The Court of Appeal’s observations, he suggested, needed also to be linked to Judge MacLean’s finding that there was little difference between the way Mr Irwin obtained his evidence and an undercover police operation. Mr Heron pointed to evidence of a Memorandum of Understanding between the trans-Tasman authorities and the fact that when Mr Irwin was recruited by the Ministry to investigate whether the appellants were selling medicine overseas from New Zealand he obtained evidence by making two purchases using his skills as an investigator. The fact he used an incorrect name and may have broken Australian law on importing medicines into that country were not issues of such moment as to warrant ruling his evidence inadmissible. Whatever view was taken of Mr Irwin’s actions, Mr Heron submitted they fell far short of entrapment. He suggested there was simply no basis for concluding that the appellants’ offending would not have happened but for Mr Irwin’s intervention given the scale of the appellants’ business, the unrestricted nature of the websites, the size of the appellants’ Hamilton operations and the system established by them for supplying medicines. The true measure of Mr Irwin’s evidence was, he submitted, that a New Zealand investigator in Australia may have been able to do exactly as Mr Irwin did and there could have been little, if any, objection that such evidence was inadmissible.
(3 ) Discussion
[68] It is critical to this aspect of the appeals to bear in mind that Mr Irwin’s actions, apart from doing what he did at the request of New Zealand Ministerial officials, were precisely those actions which would be – and, for all the evidence showed, might have been – undertaken by any Australian who wished to purchase medicines from the appellants. Whilst he may have committed offences by purchasing the medicines as he did, that comment applies equally to any other purchaser. The only reason the Ministry asked Mr Irwin to undertake the sales was because it would have only been a matter of extreme luck for them to have happened on an Australian who bought medicines from the appellants in the manner Mr Irwin did. It could not possibly be suggested that the modus operandi of the appellants and
their actions differed one iota from the actions they would have undertaken had the Australian purchaser been a genuine buyer. Given the size and scale of the appellants’ operation, there is no basis for concluding that no sales to Australians would have occurred had Mr Irwin not been involved. This was not a case of entrapment but a case of obtaining evidence, even if illegally, which would have mirrored any sales to Australians other than Mr Irwin. The appellants appear to have treated him as just another Australian customer.
[69] New Zealand has an interest, and the Ministry an obligation, under the Act to ensure that the manufacture, sale and supply of medicines complies with statutory requirements. There is a public interest in achieving that end.
[70] In those circumstances, there is no basis to take the view that the Judge was in error in declining to rule Mr Irwin’s evidence inadmissible on the basis that it was an abuse of process or an affront to public conscience.
[71] This ground of appeal is likewise dismissed.
Reasonable excuse and Ventolin possession and sale appeals
(1) Judgment under appeal
[72] Judge MacLean’s findings on this aspect of the matter were:
Determination of charges
Possession and sale of Ventolin charges
033, 034 Iain Waugh
026, 027 Wallace Waugh
043, 044 Standard 304 Limited
047, 048 Ink Electronic Media Limited
052, 053 Ink Media Limited
[97] As mentioned earlier, these charges are five sets of similar two sets of mirror charges against each of the five defendants. The allegation is that there has been a breach firstly of s 43(1) of the Act that the defendant had in his possession a prescription medicine without reasonable excuse and secondly of s 17(1)(b) of the Act, namely selling a medicine by wholesale “otherwise than in accordance with a licence issued under Part 111 of this Act” and All five defendants have been charged based on the informant’s assertion that, in respect of 1000 Ventolin inhalers seized destined for the Fiji company, which had been purchased from ZZ Pharmacy Limited and
paid for by Ink Media Limited that the five defendants were involved variously as either
• In the case of Wallace and Iain Waugh, making arrangements generally
• In respect of Standard 304 Limited, because it was the designated exporter and shipper trading as Ink Electronic Media Limited and in the case of Ink Electronic Media Limited, also making initial payments and subsequently that responsibility being taken over by Ink Media Limited.
[98] It is not in contest that at the relevant time no wholesale license under
Part III of the Act was held by any of the defendants.
[99] It is also not contested the bulky consignment of Ventolin was sent by ZZ Pharmacy to Hamilton, repackaged and sent forward to the Fijian company. Mr Wallace Waugh accepts this, saying he did not think there was anything wrong with that because he knew that ZZ Pharmacy had a wholesale licence and understood the Fijian company had whatever was required by the Fijian authorities, if anything, and that all he was doing was acting as an assistant to ZZ Pharmacy Limited.
Possession without reasonable excuse
[100] Mr Pyke referred to s 43(2) of the Act. The relevant parts of that section provide: [cited earlier in this judgment] …
[101] The section goes on to make it clear that a carrier or employer of a carrier acting as such, does not transgress this section.
[102] Sub-section 3 provides: … [cited earlier]
[103] Against the background of those provisions, Mr Pyke submitted that on Mr Waugh’s evidence, because it was a case of “repacking to avoid it being damaged” and “he did not think there was anything wrong about that because he knew that ZZ Pharmacy had a licence and the Fijian company had a licence” and was simply in an assistant’s role, there is no breach.
[104] The informant’s position is that the reasonable excuse defence is not made out, bearing in mind the onus is on the defendant and on the evidence, the relationship between ZZ Pharmacy and the defendants was one of a purchaser and vendor, not an agency relationship and the Act, in particular s
31(3)(a) makes it clear that packaging can only be done on licensed premises and there is no evidence that the premises in Hamilton were so licensed. Nor that the requirements in the Regulations (particularly Reg 29) were complied with.
[105] I accept the factual proposition asserted by the informant and consider that the assertions made by Mr Waugh, whilst accepting they may have been genuinely held, do not amount to a reasonable excuse. Essentially, it is a mistake of law, which is not a defence.
[106] Accordingly, I find those charges proven as the defendants have not discharged the onus upon them.
(2) Submissions
[73] Concerning these aspects of the appeals Mr Pyke emphasised the Judge’s finding (at para [105]) that Mr W L Waugh’s genuinely held belief did not amount to reasonable excuse as it was a mistake of law. The Ventolin was sent to the appellant’s office in Hamilton by ZZ Pharmacy Ltd, a licensed wholesaler. Mr W L Waugh repackaged the product and forwarded it. He claimed he was merely “assisting the people in Auckland to send what they should be sending properly”. Mr Pyke relied on the observations of Hammond J in Grey v Police (HC Hamilton AP65/012, 31 October 2001 p6 para [18]) where the Judge, dealing with an appeal following conviction on a charge of being found without reasonable excuse in a building, observed:
[124] Further, there is no evidence of receipt of items by the alleged specific purchasers.
[125] The informant’s position on this is that the evidence abundantly shows the real relationship of the defendants with the Fiji entity and thence with the ultimate purchasers so that the practical reality is that – in light of the overall structure and the very close relationship the interposing of the Fiji entity is “incidental and irrelevant” and that the true picture is that Ink, being the owner and operator of both the Hamilton business entities and the Fiji operation, in reality was the owner and vendor of the medicines up to the point of each retail sale.
[126] I accept on the evidence, that is the true position. The practical reality is that Ink paid the wholesalers, Ink placed the orders with the wholesalers, Ink ultimately received the money in response to advertisements on the web, posted by Ink.
[127] Regardless of that, I also accept the alternative proposition of the informant that even if Ink were to be viewed as acting as the Fiji entity’s agent, the defendants are deemed to be the vendor under s 7 of the Medicines Act:
For the purposes of this Act…every person shall be deemed to … sell, supply, pack or label any medicine, whether he does so on his own account or as the agent or employee of any other person and any reference to things done by a person in the course of his business shall be deemed to include reference to things done by an agent or employee of that person in the course of that business.
[128] Section 7(2) provides that the deeming provision does not apply to agents acting as agents or employee authorised under the Act to deal with medicines, and that the various exemptions set out in s 31 relate to persons licensed under the Act to deal with medicines.
[129] As to whether there is adequate proof on the evidence as a whole that the medicines named were in fact supplied, I accept the informant’s view of the evidence from which a conclusion can be drawn establishing that beyond reasonable doubt, based on the following:
• There is ample evidence from the material generally that the whole operation was based on supply of genuine medicines;
• Follow up inquiries show that there were regular checks from time to time on the authenticity of transactions;
• The evidence of Mr Wallace Waugh, who accepts the operation involved the sending of medicines, not only initially to Fiji, but ultimately to the end purchaser.
(2) Submissions
[100] Mr Pyke detailed aspects of the evidence in which he said there were lacunae but stressed that the sole challenge on this aspect of the appeals was to the sufficiency of proof that what were supplied were “medicines” under the Act.
[101] In dealing with the appellants’ submission of insufficiency of proof of any of the medicines named in the informations being sold (other than to Mr Irwin), Mr Heron accepted there was no evidence of actual sales (other than those to Mr Irwin), He acknowledged that the Ministry was therefore obliged to rely on the extended definition of “sell” and “sale by retail”.
[102] Mr Heron submitted there was ample evidence to support the Judge’s finding summarised in para [129] of the decision. This, he said, was an operation selling real medicines which it obtained by spending over $100,000 monthly with ZZ Pharmacy and it was simply implausible in the extreme to suggest the appellants were not sending or delivering medicines to a very large number of buyers around the world who selected the medicines they wanted from the range available on the appellants’ websites, ordered them and paid the appellants for them. It was clearly, he suggested, a “business” within the meaning of the Act as being an “activity carried on for reward” by the appellants. He noted Mr W L Waugh accepted that the appellants’ operation involved sending medicines to the Fiji company for despatch and never suggested anything other than that the advertised and genuine articles were sent.
(3) Discussion
[103] This, in this Court’s view, is a purely factual matter.
[104] Mr Heron’s submissions as to the evidence underpinning the Judge’s decision are compelling. Had the appellants not been delivering medicines which accorded with their internet advertisements to those for whom the appellants were purchasing
$100,000 worth of medicines by wholesale from ZZ Pharmacy monthly, there was every expectation that, despite the few documents which the Ministry was able to uplift on executing the search warrant, the appellants’ complaints department would have had a plethora of objections by dissatisfied buyers. The fact there were so few documents able to be uplifted, suggests that those ordering medicines over the internet from the appellants were satisfied they received the medicines they ordered.
[105] There is, therefore, no basis whatever to intervene in Judge MacLean’s decision on this point and it, too, is dismissed.
Mr I W Waugh’s appeal
(1) Introduction
[106] Though supporting and associating himself with the points taken on appeal by other appellants, Mr Gorringe for Mr I W Waugh also raised whether it was open for the District Court to convict him as he was never served with the informations against him.
[107] As Judge MacLean said at the outset of his judgment, of the 128 informations brought against the appellants 17 were not heard because of Mr I W Waugh’s failure to appear and in relation to Mr I W Waugh it was only the 25 listed at the commencement of the judgment directly affecting him which proceeded.
[108] The entituling to Judge MacLean’s judgment recorded that there was no appearance on Mr I W Waugh’s part. His involvement, if such it may be called, in the hearing was summarised by the Judge in para [3]. Nothing further eventuated as far as his appearance, either personally or by counsel, was concerned and accordingly the question on Mr I W Waugh’s appeal is whether he was duly served with the informations and chose not to participate in the hearing and instruct solicitors or counsel to appear on his behalf or whether he was in fact not properly served.
(2) Facts
[109] As a result of evidence now before the Court – most of it adduced on appeal
– the position appears to be as follows.
[110] On 25 August 2003 a search warrant relating to this matter was issued for the
“residential addresses of Iain Wallace Waugh and Wallace Leslie Waugh situated at
RD 1 River Road North, Hamilton”. It was endorsed “executed at Iain Waugh’s address at 1617 hours” and signed. In an affidavit admitted on appeal, Mr W L Waugh said he and his family had lived at 2037B River Road, RD1 Hamilton since
1981 and Mr I W Waugh lived there as a child and young adult. He said about five years ago he and his wife bought the adjoining property at 2037A River Road. Mr I W Waugh moved into the house on that property and refurbished it.
[111] Though they both have separate mailboxes, Mr W L Waugh said that “normally all mail for both properties is delivered to 2037B” because he handles mail for all members of the family including those overseas.
[112] The informations against all appellants other than Mr I W Waugh were served at the company’s premises in 1 April and July 2004. Mr I W Waugh was absent in China. Mr W L Waugh told the process server that and indicated his son would return to New Zealand for several weeks in the 2004/2005 Christmas period. That occurred and he remained in Hamilton for some five to six weeks but was not personally served during that period.
[113] The position concerning Mr I W Waugh’s absence from the appellants’ premises in 11 April 2004 and the information conveyed as to his return to New Zealand over the ensuing Christmas period was confirmed by an affidavit of service filed in the District Court.
[114] Service of the informations against Mr I W Waugh by way of registered letter pursuant to the procedure set out in the Summary Proceedings Act 1957 s 24(1)(c) was decided upon and asserted in an affidavit of service filed in the District Court by a legal secretary at Mr Heron’s office who said she served Mr I W Waugh by posting the 41 summonses in his name to him by registered letter on 9 July 2004 addressed to 2037B River Road, Hamilton. The registered letter and enclosed summonses have never been returned to Meredith Connell. However, Mr W L Waugh said:
I say with certainty that neither in July 2004 or any other time did the registered letter and summonses sent by Ms Fleming arrive at, be delivered to or be received at my home i.e. 2037B River Road. I can also assert that no registered letter with Summonses was ever delivered to the letterbox for
2037A River Road. Nor have I seen or been told of any NZ Post card advising of an attempted delivery by it for either property.
[115] The case was first called before a community magistrate on 16 August 2004 and, it was suggested, that Mr Ingram, then a Hamilton barrister, appeared for all accused including Mr I W Waugh.
[116] On 20 October 2004 Meredith Connell sent Mr Ingram a bundle of disclosed documents under the heading “Ministry of Health v Ink Media Ltd & Ors” and on
5 November 2004 Mr Ingram responded under the heading “I & W Waugh & Ink Media” saying that “I act for the abovenamed” and calling for significantly wider disclosure than that given to date plus ongoing disclosure until completion of the prosecution. He advised that “My clients are being advised on the basis of the documents disclosed to me”.
[117] The prosecution was case managed by Judge MacLean from 18 November
2004 at the latest. On that date he convened a telephone conference with counsel. The entituling only mentioned “Ink Electronic Media Ltd” as the defendant and recorded “Mr Ingram for the defendant” but there is nothing in the routine case management exchanges recorded during the conference as to disclosure, trial duration, possible settlement and the like to suggest Mr Ingram was not acting for all defendants.
[118] None of the informations in Mr I W Waugh’s name contain any endorsements about counsel appearing, but that is of little assistance since there is also no endorsement concerning counsel on any other information.
[119] When the prosecution was called on 12 April 2005 Judge MacLean issued a warrant for Mr I W Waugh’s arrest in view of his non-appearance. That warrant was based on Ms Fleming’s affidavit of service and resulted from informant’s counsel wishing to proceed in Mr I W Waugh’s absence. The fact the Judge decided to issue a warrant to arrest in lieu of summons indicates he was then of the view that Mr I W Waugh had not been served and was in doubt as to whether counsel then instructed was acting for him.
[120] It remains to add:
a) That since Mr Pyke was instructed on Judge Ingram’s appointment it is accepted that he has always acted only for the appellants other than Mr I W Waugh.
b)In a ruling issued by Judge MacLean on 25 October 2005, the scheduled first day of trial, the Judge recorded Mr I W Waugh’s absence and said that:
“in the process of case managing this matter over some months, it has become apparent that for some time now he has ceased to have any contact with solicitors that were originally involved”.
The Judge decided to proceed in Mr I W Waugh’s absence, acting under the Summary Proceedings Act 1957 s 61.
c) There is evidence that Mr I W Waugh, irrespective of whether he was properly tried in his absence, maintained a close interest in the prosecution. Mr W L Waugh said that he was “pulling the strings” and was “always on the phone” and “would tell me what to do” concerning the business. He in fact spoke to his son in China overnight whilst giving evidence in the District Court.
(3) Submissions
[121] Mr Gorringe submitted it was not open to the Judge to invoke s 61 because the powers contained in that section only came into operation if a “summons has been served on the defendant a reasonable time before the hearing”. Such had not occurred. He submitted Mr I W Waugh was entitled to be present throughout the trial (absent misconduct by interruption: Crimes Act 1961 s 376(1) applied in summary proceedings by the Summary Proceedings Act 1957 s 3(1)(l)) and although this Court has power to proceed in an accused’s absence, resort to such is exceptional (R v McFall (2005) 21 CRNZ 717). He submitted proceeding in Mr I W Waugh’s absence might arguably infringe the New Zealand Bill of Rights Act 1990 including ss 24 and s 27.
[122] Service of District Court summonses was governed, he submitted, by the Summary Proceedings Act s 24(1). That section requires personal service, service by leaving the summons at the defendant’s place of residence where a member of the family appearing to be over 18 years of age or service by registered letter “addressed to him at his last known or usual place of residence or at his place of business”. Mr Gorringe drew a distinction between service under s 25(1) where documents “may be served” by various persons and service under s 25(2) where summonses or documents “shall” be served in accordance with the subsection’s requirements. However, service by registered or ordinary letter requires the service to be “by an officer of the Court posting the summons or document to the defendant”.
[123] Mr Gorringe made the obvious point that the registered letter in Mr I W Waugh’s case was not posted by an officer of the Court but by Ms Fleming of Meredith Connell. He accordingly submitted the purported service was a nullity and could not be saved by the Summary Proceedings Act 1957 s 204. That section reads:
204 Proceedings not to be questioned for want of form
No information, complaint, summons, conviction, sentence, order, bond, warrant, or other document, and no process or proceeding shall be quashed, set aside, or held invalid by any District Court or by any other Court by reason only of any defect, irregularity, omission, or want of form unless the Court is satisfied that there has been a miscarriage of justice.
[124] Mr Gorringe submitted that service effected other than with statutory compliance was not service at all since service is so fundamental to the criminal justice process.
[125] Mr Gorringe submitted the Judge’s judgment should have been postponed awaiting clarification of instructions on receipt of Mr Morgan QC’s memorandum and it was no substitute for service that the Judge observed that Mr I W Waugh was aware of the proceeding. Knowledge of a proceeding, he said, should not be equated with knowledge of the charges, the evidence, available defences and when the trial is to be heard.
[126] Though his submissions appear to have been prepared before the filing of some of the later affidavit evidence, Mr Gorringe also submitted there was insufficient proof that 2037B River Road was Mr I W Waugh’s correct address.
[127] Mr Brookie, who argued this part of the appeal for the Ministry, accepted that the mode of service adopted for the summonses did not accord with s 25(2) as Ms Fleming was not an officer of the Court. Nonetheless, he submitted, no miscarriage of justice could be said to have occurred since Mr I W Waugh waived service by instructing, with the other defendants, Mr Ingram to appear on behalf of all. He emphasised the records show no complaint as to service on the part of Mr I W Waugh.
[128] That, he submitted, satisfied s 37 which gives any defendant at a hearing to “appear personally or by a barrister or a solicitor of the High Court”. Even if such were not accepted, Mr Brookie submitted any defect in service was cured by s 204, relying on Herewini v Ministry of Transport [1992] 3 NZLR 482, 490, 491 that where general appeals are brought on a procedural deficiency, they will only be allowed where the deficiency “has been of real consequence” and that appellants must show a “nexus between the alleged procedural deficiency and the conviction … that … raises a real risk that the appellant was wrongly convicted”.
[129] He drew attention to the decision of the Court of Appeal in Dowey v Ministry of Agriculture and Fisheries (CA355 and 356/91, 11 May 1992) which turned on a District Court Judge’s refusal of an adjournment and proceeding to hearing and conviction in the absence of the defendants or their counsel. The appeal was based on asserted breach of the New Zealand Bill of Rights Act 1990 s 25. Refusing leave to appeal, the Court of Appeal observed (pp 7-8):
It is beyond question that the rights invoked in this case, indeed all those affirmed in s 25, are accorded to defendants by the procedural provisions of the Summary Proceedings Act. In particular, the power under s 61 to proceed in the absence of the defendant is exercisable only where the defendant has had reasonable notice of the hearing, and where there is no liability on conviction to a sentence of imprisonment. Further, the Judge has an overriding discretion to adjourn, which in accordance with recognised principles must be exercised judicially.
…
The rights affirmed in the Bill of Rights Act are not absolutes, for they are to be balanced against the rights of others and the rights of society in the due administration of justice. And they will be lost to one who does not exercise reasonable diligence on his own behalf. Thus an accused who absconds has been held to have waived his right to be present at his trial: R v Czuczman (1986) 27 DLR (4th) 694, R v Tzimopoulos (1987) 54 CR 1. That of course is a more extreme circumstance than in the present case, but there are other Canadian cases in which it has been held that an accused who without good excuse fails to attend and to avail himself of the right to be present at his trial cannot be heard to say he has been deprived of that right if the trial proceeds in his absence: R v Tarrant (1984) 10 DLR (4th) 751; R v Rogers [1984]
6 WWR 89. Both good sense and the due administration of justice require the same principle to be applied in this country …
[130] He submitted any defect was saved by s 204 because there had been no miscarriage of justice relying on Police v Thomas [1977] 1 NZLR 109, 121 where Cooke J - though only for himself – observed:
If a notice considered as a whole is defective, s 204 will apply unless there has been a miscarriage of justice. No doubt s 204 is unavailable if a defence is so serious as to result in what should be stigmatised as a nullity. But nullity or otherwise is apt to be a question of degree: compare Broome v Chenoweth (1946) 73 CLR 583, 601, per Dixon J; New Zealand Institute of Agricultural Science Inc v Ellesmere County [1976] 1 NZLR 630, 636, and the authorities there cited. In practice the questions of miscarriage of justice and nullity will often tend to merge.
[131] Mr Brookie also relied on Rural Timber Ltd v Hughes [1989] 3 NZLR 178,
184, a case concerned with the validity of a search warrant, where Cooke P – on this occasion speaking for the Court of Appeal – held:
None of the defects can be regarded as so radical as to require the warrant to be treated as a nullity: compare New Zealand Institute of Agricultural Science Inc v Ellesmere County [1976] 1 NZLR 630, 636. That is a question of degree, answerable only by trying to apply a commonsense judgment against the statutory background; …
[132] On those authorities, Mr Brookie submitted the sole purpose of the service provisions in the Summary Proceedings Act was to ensure defendants were made aware of their obligations in relation to Court proceedings. In Mr I W Waugh’s case, the Court records showed he was aware of the proceedings and instructed counsel to appear in the early stages without protest as to service. That he discontinued his instructions to counsel prior to the hearing was his choice. Accordingly no miscarriage of justice had occurred in relation to Mr I W Waugh.
[133] Mr Brookie next submitted an alternative argument to that under s 204 was that Mr I W Waugh waived personal appearance and appeared by counsel when no objection was taken to service (R v Hughes (1879) 4 QBD 614, 622).
[134] Counsel’s diligence failed to locate any New Zealand cases directly in point though the Court’s attention was directed to Spence v Police (HC ChCh AP98/88,
30 August 1988, Williamson J). In that case one of the grounds of appeal – though not one pursued on appeal – was that service of a summons was defective for lack of execution of the memorandum required by the Summary Proceedings Act 1957 s 28(2) that a solicitor accepted service on behalf of the defendant. It was argued that the breach did not prejudice the appellant because strict compliance had been waived. Williamson J observed (at p 8):
Just as concessions may be made by an accused through his counsel so as to dispense with proof of a fact by the prosecution, it is reasonable that counsel for an accused may also waive proof of a procedural requirement. In this case the conduct and intentions of counsel for the accused was to dispense with proof of that requirement under s 28(2) of the Summary Proceedings Act 1957.
[135] In reliance on those authorities, Mr Brookie submitted that Mr I W Waugh, by permitting Mr Ingram to appear, apparently for all defendants, and discuss case management and other issues necessarily preparatory to a hearing, had answered the summonses and waived the necessity for strict compliance with statutory requirements.
(4) Discussion
[136] Mr W L Waugh gave the constable 2037B River Road, Hamilton as his son’s address when the search warrant was executed at the appellants’ offices. Personal service of the summonses on him was not thereafter attempted when he could not be served with his co-defendants. The registered letter containing the summonses was correctly addressed to Mr I W Waugh’s last known place of residence, the address given to the constable.
[137] But the registered letter service procedure was deficient in the sense that it is acknowledged it was not sent by an “officer of the Court” as required by s 25(2)(a).
Had the summonses been proved to have been received by Mr I W Waugh, that point would be of little consequence and easily curable under s 204 by applying a “common sense judgment against the statutory background” and s 24(3) of the Summary Proceedings Act 1957 which reads:
24 Mode of service of documents on defendant
…
(3) Where service is effected in accordance with … paragraph (d) of subsection (1) [registered letter service], then, unless the contrary is shown, service shall be deemed to have been effected on the person to whom the letter is addressed at the time when the letter would have been delivered in the ordinary course of post, and in proving service it shall be sufficient to prove that the letter was properly addressed and posted.
[138] Had it not been for Mr W L Waugh’s affidavit, s 24(3) may have been fatal to the submissions made on Mr I W Waugh’s behalf. However, in its terms, s 24(3) only operates “unless the contrary is shown” and in this case not only is there no evidence Mr I W Waugh ever received the summonses in his name, there is sworn evidence from his father that the registered letter never arrived either at 2037A or
2037B River Road. Mr W L Waugh was not cross-examined on that evidence. It must follow there is no satisfactory proof that the summonses addressed to him were ever served on Mr I W Waugh. Accordingly the case against him should not have proceeded and the convictions, costs and fines require to be set aside unless it is shown that Mr Ingram appeared on Mr I W Waugh‘s behalf, waived the strict requirements of service and thus justified the order for the hearing to proceed in his absence.
[139] As to waiver, it must be said that the evidence is equivocal. The nature of the charges were such that there would appear to have been no professional reason why one counsel could not have appeared for all defendants and the few minutes and letters in evidence tend to suggest that Mr Ingram was instructed for all. However, notably, though significant additional evidence was put before this Court, no party put in an affidavit from the Judge which, even allowing for matters of privilege, might have made clear for whom he acted in this prosecution.
[140] Further, the summonses faced by Mr I W Waugh and the other appellants were numerous and, by contrast with many another summons issued out of the District Court, complex in their terms. As the Court file and the nine day hearing before Judge MacLean demonstrate, the case was a complex one involving very considerable disclosure and a detailed lengthy hearing. The result of the hearing had the capacity to impact significantly on the appellants’ livelihoods and business. This was a case, too, where trial strategy, possible witnesses (including the defendants), and lines of inquiry necessitated continuing close consultation between counsel and client from service to the end of trial (including any sentencing).
[141] In all those circumstances, caution was necessary in the run up to the hearing and in the hearing itself to check whether Mr I W Waugh’s lack of participation over the months beforehand represented a deliberate decision made to withdraw instructions he had given counsel and absent himself from the hearing. Although the Judge plainly regarded Mr I W Waugh’s withdrawal from the proceedings as deliberate, as he was entitled to do having case-managed the prosecution for a lengthy period, he knew that, following Judge Ingram’s appointment and Mr Pyke being instructed for all other defendants, for a lengthy period no counsel had been representing Mr I W Waugh in a matter of complexity and seriousness for all parties. The warrant for Mr I W Waugh’s arrest issued some six months previously remained unexecuted.
[142] Of course it would be both artificial and unrealistic to contend Mr I W Waugh was unaware of these proceedings and their progress. The defendants had been in dispute and litigation with the Ministry as to whether the way they carried on their business breached the Act for several years before the hearing before Judge MacLean. They had continued in business in very much the same way although took a number of business decisions to reconfigure their modus operandi in an endeavour to ensure compliance, or at least immunity from prosecution. The corporate defendants before Judge MacLean were companies Mr I W Waugh directed or by which he was employed and from which he derived his income. The only other personal defendant was his father and next-door neighbour. Throughout the matter,
particularly throughout the hearing, as his father said, Mr I W Waugh was “pulling the strings” and “always on the phone” and would “tell me what to do”. As a matter of fact, therefore, there could be no basis whatever for an appellate court to disturb Judge MacLean’s finding that Mr I W Waugh was well aware of the matters before the Court.
[143] But that is not the point. The point is whether it was proved in the District Court that Mr I W Waugh was duly served with the summonses to him or, having been served, deliberately did not instruct counsel or having instructed counsel to appear, withdrew his instructions before the hearing. Not only is there no proof of such service, there was positive evidence in this Court that such had not occurred. The registered letter may not have been returned to Meredith Connell, but that only goes a certain distance in assisting the respondent on this appeal.
[144] The evidence is unclear as to whether Mr I W Waugh ever instructed counsel on his behalf but, even so, it is clear he did not have solicitors or counsel acting for him for a number of months before the hearing began. Preparation for a prosecution and management of the prosecution itself was an ongoing process requiring detailed and continuing consultation between defendants and their solicitors and counsel. Even if Mr Ingram were acting for all defendants in the early part of the process, in this Court’s view insufficient was done to ensure, once Mr Ingram withdrew, that Mr I W Waugh had either waived the requirement for service through instructing Mr Ingram or, having originally instructed counsel, made a deliberate decision to absent himself from the hearing such as to justify the order under s 61.
[145] The only conclusion open is that such did not occur and accordingly the convictions entered against Mr I W Waugh had no foundation and they and the later fines and costs must be quashed.
[146] That leaves Mr I W Waugh with unheard summonses issued against him and a warrant out for his arrest in relation to them. The appropriate course is accordingly to remit to the District Court the 17 charges on which Mr I W Waugh was convicted for trial, if the Ministry is able to comply with the service requirements, along with the unheard charges.
Result
[147] In the result:
a) All the appeals against conviction by all appellants other than Mr I W Waugh are dismissed.
b) Mr I W Waugh’s appeals against conviction are allowed and the
17 summonses against him dealt with in this judgment are remitted to the District Court in accordance with para [146].
………………………………..
WILLIAMS J.
Solicitors:
Meredith Connell, Crown Solicitor, Auckland
Counsel:
Peter F Gorringe, P O Box 7098 Hamilton, for Mr I W Waugh
Warren Pyke, P O Box 19 271 Hamilton, for all other Appellants
Copy for:
Judge A N MacLean
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