McQuade v The Queen

[2010] NZCA 226

IN THE COURT OF APPEAL OF NEW ZEALAND

CA649/2009
[2010] NZCA 226

BETWEENALAN CLINTON MCQUADE

Appellant

ANDTHE QUEEN

Respondent

Hearing:25 May 2010

Court:Randerson, Wild and Rodney Hansen JJ

Counsel:M W Ryan for Appellant

M D Downs for Respondent

Judgment:2 June 2010 at 1.30 p.m.

JUDGMENT OF THE COURT

The appeal against the pecuniary penalty order is dismissed.

____________________________________________________________________

REASONS OF THE COURT

(Given by Randerson J)

[1]        In 2008, the appellant was convicted of 19 offences under the Misuse of Drugs Act 1975.  Eight of these involved the supply of methamphetamine between 10 and 31 October 2006.  Keane J found that the quantity involved was 1.5kg to a value of at least $624,000.  The appellant was sentenced by Keane J[1] to a term of 14 years’ imprisonment. 

[1]      R v McQuade HC Auckland CRI-2006-019-8458, 10 September 2008.

[2]        Then, on 18 September 2009, Winkelmann J imposed a pecuniary penalty order on the appellant under the Proceeds of Crimes Act 1991 (the “1991 Act”) of $94,000.[2]  That sum represented the appellant’s share of the net proceeds of sale (plus accumulated interest) after the sale of a property owned jointly by the appellant and his former wife.

[2]      Solicitor-General v McQuade HC Auckland CIV-2008-404-4161.

[3]        In the High Court, the appellant opposed the making of the pecuniary penalty order on the basis that the property had not been purchased with the proceeds of any criminal offending; it was not used for the purposes of crime; and that he did not derive any pecuniary benefits from the offending as he was merely a middle man.  Any reward he obtained was by way of supply of methamphetamine for his personal use.  Finally, he submitted that the making of the orders would cause him undue hardship and would hamper his rehabilitation when released from prison.

[4]        In this appeal, the appellant challenges the making of the pecuniary penalty order on two grounds:

(a)he did not obtain any benefits as that term is used in s 25(2) of the 1991 Act;

(b)the penalty breached s 9 of the New Zealand Bill of Rights Act 1990 in that it failed to allocate a portion of the net proceeds of sale to assist the appellant’s rehabilitation.

Did the appellant receive a benefit in terms of the 1991 Act?

[5]        There are two insurmountable difficulties facing the appellant in this limb of his argument.  First, a full Bench of this Court decided in R v Pedersen[3] that the whole price received for the supply of drugs is a benefit derived by the supplier.  The cost to the supplier of obtaining the drugs is irrelevant.  In other words, what matters is the revenue received.  It does not matter if the sale proceeds are passed on to the person from whom the offender obtained the drugs.  This is confirmed in the following passage from the joint judgment of Cooke P and Richardson J:[4]

… The case is concerned with three sales made by the respondent. From each the benefit that he received was the price paid to him, disregarding, as the Crown is content to accept for the purposes of this case, the extra $40 and the retained cannabis. In each the whole price charged and received by him was a benefit derived by him from the commission of the offence of selling, as demonstrated by the fact that he was able to use all or most of the moneys received to discharge what he saw as his obligations to his supplier. If in each instance he had simply pocketed the money, taking the risk of not paying his supplier, the benefit derived by him from the sale would have remained exactly the same: he would merely have utilised it in a different way. The Proceeds of Crime Act is not an income tax statute, nor is it concerned with lawful commercial operations. There is no reason to suppose that it is limited to assessing net gains or trading profits: such an approach to the Act would, we think, be based on considerations foreign to its purview.

[3]      R v Pedersen [1995] 2 NZLR 386.

[4]     At 389–390.

[6]        Pedersen has been consistently followed ever since.  Mr Ryan referred to two other decisions of this Court:  R v Brough[5] and R v Jury.[6]   However, as Winkelmann J pointed out, Brough preceded Pedersen and therefore could not signal a departure from it.  Nor did Brough address the meaning of “benefit” where that expression is used in s 25.  We also agree with the Judge that Jury (in referring to profits from criminal activity) did not expressly address the interpretation of s 25 and does not constitute a departure from the well-established principles laid down in Pedersen.  The pecuniary penalty order made by the trial Judge in Jury (and upheld on appeal) reflected a gross receipt approach as the Judge also pointed out.

[5]      R v Brough [1995] 1 NZLR 419, 423.

[6]      R v Jury [2004] 2 NZLR 457 at [27].

[7]        Although Mr Ryan invited us to depart from Pedersen, that would be entirely inappropriate for a divisional court.  In any event, we are satisfied that the approach in Pedersen is correct.

[8]        The second major difficulty with the argument put forward on behalf of the appellant is the language employed in the 1991 Act.  It is plain that a broad approach to the interpretation of the expression “benefit” was intended in order to achieve the statutory purpose of deterring serious crime.  Section 2(3) of the 1991 Act refers to any benefit derived, directly or indirectly, by the offender or by another person at the request or direction of the offender.  Secondly, s 24(1) of the 1991 Act provides that pecuniary penalty orders may relate to benefits provided to or derived by a person whether inside or outside New Zealand and whether before or after the commencement of the 1991 Act.[7]  The 1991 Act also makes it clear that it is not necessary for the relevant property even to come into the possession of the person against whom the order is made.  It is sufficient if the property comes under the control of that person.[8]

[7]      Section 24(1)(a) Proceeds of Crimes Act 1991.

[8] Section 24(1)(b) of Proceeds of Crime Act 1991.

[9]        Thirdly, s 27(2) provides that the value of the benefits derived by a person from the commission of an offence may include money, the value of property other than money, and any other benefit.[9]  Although Cooke P (as he then was) and Richardson J in Pedersen[10] doubted that the purchase costs amounted to an expense or outgoing within s 27(3), this provision nevertheless demonstrates that the 1991 Act is concerned with gross value, not net profit. Significantly, s 27(2) focuses on money, money’s worth or other benefits derived from the commission of the offence.  There is nothing in s 27 limiting its application to profits made from the transaction.  In fact, s 27(3) is explicit in excluding any expenses or outgoings when assessing the value of benefits derived.

[9]      Section 27(3)(a) and (b).

[10]      At 390.

[10]       Applying the statute as interpreted in Pedersen to the facts of the present case, the value of the benefits derived by the appellant from the sale of methamphetamine is the gross value of the funds received from his sales of that drug to others.  The fact that he may have used all or most of the funds received to discharge his obligations to his supplier is beside the point.  The benefit to the appellant lies in the receipt of the proceeds of sale.  Without those funds, he could not discharge his obligations to his supplier. The first ground of appeal therefore fails.

Did the pecuniary penalty order breach s 9 of the New Zealand Bill of Rights Act?

[11]       Section 9 of the New Zealand Bill of Rights Act provides:

Everyone has the right not to be subjected to torture or to cruel, degrading or disproportionately severe treatment or punishment.

[12]       It is submitted on behalf of the appellant that the pecuniary penalty order would constitute punishment or treatment which is disproportionately severe.  Counsel referred to the decisions of this Court in R v Crombie[11] and Stanton v Solicitor-General.[12]  Both of these cases related to the forfeiture of property in consequence of drug offending.

[11]      R v Crombie CA453/05, 29 June 2006.

[12]      Stanton v Solicitor-General [2007] NZCA 434.

[13]       Counsel accepted that a pecuniary penalty order is a discretionary decision, but submitted that the discretion must be exercised taking into account the New Zealand Bill of Rights Act including s 9.  While acknowledging that a pecuniary penalty order could constitute treatment or a penalty which would engage s 9, this Court has also recognised that the threshold is necessarily a high one.[13]

[13]      R v Crombie at [16].

[14]       The response of the Judge to a submission made to her along similar lines was:[14]

A more significant issue arises in relation to the level at which a pecuniary penalty order should be set, given Mr McQuade’s evidence that the $94,000 is the only money he has.  The offender’s ability to pay any pecuniary penalty is a relevant consideration.  Where, as here, there is no suggestion that the respondent has secreted away proceeds of his offending, there is no reason to impose a penalty greater than the amount the respondent can pay.  I see no point in fixing a pecuniary penalty order that Mr McQuade will not be able to pay when he is to serve a lengthy sentence of imprisonment.  It is highly undesirable that Mr McQuade face a substantial penalty on his release from prison, many years in the future, that he must then set about paying.  That is likely to hinder his rehabilitation and therefore will not be in the public interest.  I record, however, that if there were any suggestion that Mr McQuade had funds hidden away, the attitude I would take on this issue would most likely be different.

[14] At [23].

[15]       It is clear that the Judge took into account both the appellant’s ability to pay any order and the consequences for him if, upon his release from prison, he was required to commence payment of a much larger order than he could afford to pay at the time the order was made.  The Judge could have made an order up to a maximum of $624,000 being the amount of the benefits derived.  Instead, she made an order for $94,000 which represented only about 15 per cent of the total benefits derived.

[16]       We are satisfied that the amount of the order was entirely appropriate and could not possibly be regarded as disproportionately severe.  As Mr Downs pointed out for the Crown, the appellant dealt in a substantial quantity of a dangerous drug and it is entirely appropriate that he should be obliged to meet a pecuniary penalty order in the sum directed.

[17]       This ground of appeal also fails.

Solicitors:

Crown Law Office, Wellington, for Respondent.