Parkes v R
[2018] NZHC 2752
•24 October 2018
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE
CRI-2018-443-000022 [2018] NZHC 2752
BETWEEN WENDY MAY PARKES
Appellant
AND
THE QUEEN Respondent
CRI-2018-443-000023
BETWEEN STEPHEN PARKES Appellant
ANDTHE QUEEN Respondent
CRI-2018-443-000024
BETWEEN SUR LE MUR LIMITED Appellant
ANDTHE QUEEN Respondent
Hearing: 23 October 2018 Counsel:
J C Hannam for Appellants
J E Bourke for RespondentJudgment:
24 October 2018
JUDGMENT OF COLLINS J
PARKES v R [2018] NZHC 2752 [24 October 2018]
Introduction
[1] Mr and Mrs Parkes, and a related company Sur Le Mur Ltd, pleaded guilty to three charges of defrauding the revenue of customs,1 three charges of manufacturing excisable goods in an unlicensed area,2 and three charges of selling uncustomed goods.3 They were sentenced on 27 July 2018 by Judge Sygrove in the District Court at New Plymouth, who refused an application by Mr and Mrs Parkes for discharges without conviction, ordered them to pay reparations of the amount of defrauded revenue and fined them each $1,000. Sur Le Mur was fined $1,500.4
[2] Mr and Mrs Parkes appeal the decision to decline their application for discharges without conviction. They contend that their offending occurred because they relied on erroneous legal advice and that this mitigating factor should have resulted in them being discharged without conviction.
[3] Although the notice of appeal purports to encompass an appeal by Sur Le Mur Ltd, it is clear Judge Sygrove’s decision concerning the application for discharges without conviction by Mr and Mrs Parkes, did not extend to the company. Thus, this appeal is confined to the applications for discharge without conviction brought by
Mr and Mrs Parkes.
Background
[4] Mr and Mrs Parkes previously operated a cottage-sized winery at a Cross Road property in New Plymouth through a company called Sentry Hill Winery (2006) Ltd (Sentry Hill). Mr Parkes was the sole shareholder and director. Sentry Hill became insolvent in March 2012. At the time, Sentry Hill owed $281,858 to New Zealand Customs (Customs) for excise duty on the wine it had been producing and, in some cases, exporting.
[5] On 26 April 2016, Sentry Hill was placed into liquidation on the application of
Customs. Ms Fatupaito and Mr Hawkes of KPMG were appointed as liquidators.
1 Customs and Excise Act 1996, s 211(1)(a) and (2); maximum penalty six months’ imprisonment.
2 Section 200(1)(e) and (3); maximum penalty $5,000 fine (individual) or $25,000 fine (corporate).
3 Section 213(1) and (2); maximum penalty $10,000 fine (individual) or $50,000 fine (corporate).
4 R v Parkes [2018] NZDC 15463.
Mr Norman, an employee at KPMG, was instructed by the liquidators to investigate the company’s affairs.
[6] The liquidators decided to trade the business with the aim of selling it as a going concern. Part of this plan involved Sentry Hill continuing to lease a property from the SJ Parkes Trust No 1 (the Trust). Mr Norman subsequently ordered raw materials for the manufacture of wine worth $10,000. The liquidators paid this amount on the understanding that the proceeds of the finished product would be distributed to creditors. Mr Parkes agreed to manufacture the wine for this purpose and was entirely
co-operative with the liquidators. No agreement was made for his remuneration.
[7] On 16 May 2016, the liquidators received a letter from Mr Parkes’ lawyer, seeking to discuss payment for the lease to the Trust and payment for hourly wages to Mr Parkes. On 23 May 2016, Mr Parkes ceased manufacturing wine for the liquidators. On 3 June 2016, Mr Parkes notified the liquidators of the Trust’s intention to cancel the lease due to non-payment of rent. He also advised that any further work carried out by him would be charged at $50 per hour. Mr Norman responded that the liquidators could not pay him an hourly wage and were not willing to commit to manufacturing the wine without his support.
[8] On 1 July 2016, Mrs Parkes incorporated Sur Le Mur, and became its sole director and shareholder. Sur Le Mur was established to take over the wine manufacturing operation. The Trust leased the Cross Road property to Sur Le Mur. On 3 August 2016, Mrs Parkes applied to Customs for a Controlled Area Licence for Sur Le Mur, which was declined because the area was already licenced to Sentry Hill.
[9] Customs subsequently discovered the Trust had invoiced Sur Le Mur $2,200 for bulk red wine product on 30 August 2016. A tax invoice dated 31 August 2016 showed that Sur Le Mur had on-sold 720 bottles of wine to Supervalue Parklands for
$9,360 (including GST).
[10] On 14 and 15 September 2016, there were communications between
Mr Parkes’ lawyer and the liquidators regarding the purchase of remaining viable wine products and the surrender of the Controlled Area Licence. No agreement was
reached. On 15 September 2016, Sur Le Mur sold 600 bottles of wine to Super Liquor
Waitara for $7,800.
[11] On 11 October 2016, a Customs officer noticed that Parklands Supervalue was advertising Sentry Hill wine for sale and advised the liquidators. When the liquidators confronted Mr Parkes about the sales, he claimed that the Trust held a lien over the wine due to the unpaid rent.
[12] An invoice dated 20 November 2016 also demonstrates that the Trust sold
$5,125.56 worth of fruit juice, fruit wine, cider, gin, kiwifruit wine, port and green cider to the Trust.
[13] On 22 November 2016, the liquidators informed Mr Parkes that the Trust did not have a lien over Sentry Hill’s product, and neither he, the Trust, or Sur Le Mur were entitled to take control of or use any assets belonging to Sentry Hill without the liquidators’ permission.
[14] On 6 December 2016, Mr Parkes advised the liquidators that he was now exercising a lien over all the assets of Sentry Hill due to unpaid lease and storage costs.
[15] The liquidators carried out two stocktakes of the Sentry Hill assets on 3 May
2016 and 5 January 2017. The following items were unaccounted for in the second stocktake:
(1) 150 litres of port;
(2) 25 litres of Green Ginger;
(3) 165 litres of gin;
(4) 444 litres of kiwifruit wine;
(5) 957 litres of cider; and
(6) 2,500 litres of wine.
[16] The appellants’ dealings with the unaccounted-for goods attracted excise duty totalling $13,676.25, which was not paid by the liquidators since they had not given permission for the transactions.
[17] When interviewed by Customs, Mr and Mrs Parkes accepted that the Trust had taken the product and sold it to Sur Le Mur, which bottled it and on-sold some of it to retailers. They accepted that they were personally involved in bottling the wine. Mrs Parkes said that some of the product remained unsold. Mr Parkes continued to claim that the Trust had the right to do this under the lien it held over the assets of Sentry Hill. When questioned about the excise duty, Mrs Parkes said that Sur Le Mur had a licence through the Ministry of Primary Industries and the bottling was done under the existing licence belonging to Sentry Hill. Mr Parkes said that the excise duty was the responsibility of the liquidators and not him.
[18] The appellants have no previous convictions.
District Court decision
[19] Judge Sygrove referred to and applied the test for discharge without conviction outlined by the Court of Appeal in R v Hughes.5 The Judge appears, at least implicitly, to have accepted a submission made by the Crown that the offending was moderately serious. The Judge then dismissed as relatively generic, the consequences of conviction referred to on behalf of Mr and Mrs Parkes, namely, difficulties with employment and travel. In the end, the Judge concluded that the consequences of conviction were not out of all proportion with the gravity of the offending.
[20] The main submission facing Judge Sygrove was that the appellants relied upon the erroneous legal advice that the Trust held a lien over the assets of Sentry Hill, and that this meant a conviction was not warranted, especially because the appellants chose to plead guilty to the offence rather than pursuing that defence at trial. The Judge relied upon the Court of Appeal decision in R v Sexton for the proposition that reliance
5 R v Hughes [2008] NZCA 546, [2009] 3 NZLR 222.
on improper advice or officially induced error is not determinative in considering whether to grant a discharge without conviction.6
[21] Judge Sygrove then concluded that the appellants’ reliance on the legal advice was not a sufficient reason to grant a discharge without conviction because they had been put on notice by the liquidators on multiple occasions that the lien was illegal and that Mr and Mrs Parkes would be held accountable.
Approach on appeal
[22] If a discharge without conviction should have been granted, then there will have been a material error by the sentencing Judge, or a miscarriage of justice will have occurred for any other reason, and so the appeal against conviction must be allowed.7
Discharge without conviction
[23] The Court may grant a discharge without conviction under s 106 of the Sentencing Act 2002 only if it is satisfied that the direct and indirect consequences of a conviction would be out of all proportion to the gravity of the offending.8
[24] The Court of Appeal has outlined the following approach, which is to be used to determine an application for a discharge without conviction:9
(1)consider all the aggravating and mitigating factors relevant to the offending and the offender;
(2)identify the direct and indirect consequences of the conviction for the offender;
(3)consider whether those consequences are out of all proportion to the gravity of the offence; and
6 R v Sexton [2009] NZCA 282.
7 Criminal Procedure Act 2011, s 232(2)(b) or (c); and Jackson v R [2016] NZCA 627 at [12].
8 Section 107.
9 Z v R [2012] NZCA 599, [2013] NZAR 142 at [27].
(4)consider whether the Court should exercise its discretion to grant a discharge.
Appellants’ submissions
[25] Mr Hannam, counsel for the appellants, submitted that the erroneous legal advice was a complete explanation for the offending, and that without it the offending would not have occurred. He submitted that this must have a significant impact on the culpability of the appellants. They did not brazenly offend, but rather took careful legal advice, which they then followed.
[26] Mr Hannam submitted that Judge Sygrove erred by taking into account the fact that the appellants had been put on notice by the refutation of that legal advice by the liquidator’s solicitors. He submitted a client should be entitled to rely on their own legal advice in the face of disagreement by opposing lawyers.
[27] Mr Hannam submitted that R v Sexton is distinguishable because that case involved a misunderstanding over the subject matter. Mr Hannam also submitted that the Judge mischaracterised the appellants’ argument in saying that R v Sexton shows that erroneous advice does not “automatically mean a s 106 application should be granted”. He submitted that the erroneous advice was an important consideration going to the gravity of the offence, which is part of the test to grant a discharge without conviction.
[28] Alternatively, Mr Hannam submitted that advice given in a solicitor-client relationship is distinguishable from advice given by a police officer, as occurred in Sexton, because of the duty of care and professional responsibility attached to such a relationship.
[29] Finally, the appellants have each filed an affidavit on appeal outlining the consequences of convictions on their employment in more detail. Mr Parkes is employed by Fonterra as a process manager and has to travel overseas as part of his job. He has travelled to several destinations in the past, and anticipates travelling to Australia, the United States, Germany and China in the near future.
[30] Mrs Parkes is employed by a pharmacy as a pharmacy assistant. She explains in her affidavit that a conviction for dishonesty offending falls within the definition of serious misconduct under her employment agreement and jeopardises her employment with the pharmacy. Mrs Parkes also attaches a letter from her employer requesting further information about her convictions, highlighting the serious misconduct provision and referring to media attention suggesting she was convicted of fraud.
Analysis
[31] The central issue on appeal is whether the fact Mr and Mrs Parkes relied upon erroneous legal advice sufficiently reduces the seriousness of their offending, such that the consequences of conviction are out of all proportion with the seriousness of the offending.
[32] In considering the erroneous legal advice, I start by referring to s 25 of the Crimes Act 1961, which states that “the fact that an offender is ignorant of the law is not an excuse for any offence committed by him or her.” This provision reflects a long-standing principle of the common law, described in Broom’s Legal Maxims in the following way:10
… every man is presumed to be cognisant of the statute law of this realm, and to construe it aright; and if an individual infringe it through ignorance, he must, nevertheless, abide by the consequences of his error: it is not competent to him, to aver, in a Court of justice, that he has mistaken the law, this being a plea which no Court of justice is at liberty to receive …
[33] There has been some discussion in New Zealand case law surrounding the so- called doctrine of “officially induced error of law”.11 The accepted position is that it is best treated as a relevant consideration in an application for discharge without conviction.12 However, it seems that where it is made out, it is a highly convincing
10 H Broom and R H Kersley (ed) A Selection of Legal Maxims Classified and Illustrated (10th ed, Sweet and Maxwell, London, 1939) at 180.
11 See Tipple v Police [1994] 2 NZLR 362 (HC); Diriye v Police [2007] NZAR 717 (HC); Crafar v
Waikato Regional Council HC Hamilton CRI-2009-419-67, 13 September 2010; Wilson v
Auckland City Council [2007] NZAR 705 (HC); MacRae v Buller District Council HC Greymouth
CRI-2005-418-1, 12 December 2005.
12 Crafar v Waikato Regional Council, above n 11, at [115]; and Wilson v Auckland City Council, above n 11, at [34].
factor.13 That is appropriate because underpinning the doctrine is the idea that it would not be just to punish citizens for relying on advice given, or representations made, by an official.
[34] I note that Judge Sygrove referred to R v Sexton as authority for the proposition that an officially induced error of law is not a determinative consideration.14 The facts of that case involved a father and son who detained a neighbour on their farm and were convicted for assault arising from attempts to prevent the neighbour leaving the property. There had been a history of ill-will between the neighbours. The sentencing Judge accepted that the son had been told by the police that he could detain poachers found on their property until police arrived. The son appealed on the basis that he should have been granted a discharge without conviction because he relied on the police’s advice in detaining the neighbour. The Court of Appeal rejected the appeal on the facts, as it was clear that the son did not genuinely believe that the neighbour was a poacher. There is nothing in the Court of Appeal’s judgment to suggest it was making a general point about the conclusiveness of an officially induced error of law when deciding whether to grant a discharge without conviction. That was simply a case where there was no factual basis for the doctrine to apply.
[35] There are several problems, however, with Mr and Mrs Parkes’ attempt to rely on the doctrine of officially induced error of law in the circumstances of this case, which can be distilled to the following points:
(1)the advice was given by a privately instructed lawyer and not an official or other representative of the state;
(2)the advice they received appears to have concerned the legality of taking the product from Sentry Hill, not the excise and licensing implications of bottling and selling that product; and
13 In every case referred to above where the Court found a factual basis for the doctrine, a discharge without conviction was granted.
14 R v Sexton, above n 6.
(3)even if they had received advice in relation to the excise and licensing implications, it would not have been reasonable to rely on it in their circumstances.
Advice from a private lawyer
[36] With respect to the first point, Mr Hannam submitted that this makes the error even more relevant to the appellants’ lack of culpability. However, in the case of Tipple v Police, upon which Mr Hannam relied, Holland J was clear that the relevance of an officially induced error was the public interest involved in not punishing citizens for “acting in accord with practices specifically approved by the police”, which of course form part of the executive branch of government.15 Professor Briggs has explained the reasoning behind the doctrine, and the decision in Tipple, in the following way:16
The issue is not whether the mistake was unavoidable in a strict physical sense, but rather whether it was unavoidable in a normative sense. The assessment would depend upon whether the individual could fairly and reasonably be expected to have been more conscientious or dutiful. Such an assessment would reflect the normative standpoint that the individual ought not to be blamed for making a good-faith mistake in reliance on the pronouncement of those whom the state has permitted to speak on its behalf. Aside from being unfair to the individual, to deny the excusatory effect of a mistake in such a case would also run counter to the general expectation that the criminal law is based on an “incontrovertible minimum of political decency”. Political decency demands that when the state chooses to advise its citizens about the law, it should do so accurately. Viewed practically, to deny responsibility for such pronouncements would also undermine social confidence in the authority of those whom the state has designated to speak for it, and whose pronouncements it must wish to be respected. The risk is that “the law abiding attitude of the good citizen would weaken as the notion of settled law upon which his attitude depends is eroded”. These considerations of individual justice and fair play suggest an exception to the criminal law’s general embargo on mistake of law in cases of officially induced error.
[37] Furthermore, as the doctrine arises from Canadian jurisprudence, it is helpful to consider how it has developed in that jurisdiction. In City of Lévis v Tétreault, the Supreme Court of Canada adopted the six elements of the defence identified by Lamer CJ in his earlier judgment in R v Jorgensen.17 Crucially for present purposes,
15 Tipple v Police, above n 11, at 366.
16 Margaret Briggs “Officially Induced Error of Law” (1995) 16 NZULR 403 at 405–406.
17 City of Lévis v Tétreault 2006 SCC 12, [2006] 1 SCR 420 at [26], citing R v Jorgensen [1995] 4
SCR 55 at [28]–[35] per Lamer CJ.
those elements include “that the advice obtained came from an appropriate official”, “that the advice was reasonable” and “that the person relied on the advice in committing the act”.
[38] Allowing an excuse for advice obtained from another private citizen, even if that occurred within a solicitor-client relationship, would significantly undermine the long-standing principle underpinning s 25 of the Crimes Act, to which I have already referred. The same is true for the weight the Court will afford to such a claim in the context of an application under s 106. Naturally, if there is a proper factual basis to establish that a defendant reasonably and in good faith relied upon erroneous legal advice from their lawyer, then that will go to the seriousness of the offending. However, because the same public policy rationales are not present, this factor is unlikely to be as conclusive as the officially induced error of law doctrine.
Nature of the legal advice
[39] In relation to the second point, Mr and Mrs Parkes have not provided any evidence to suggest that the legal advice they received from their lawyer expressly addressed the excise and licencing implications of bottling and selling the product. The letters attached to the joint affidavit filed by the appellants in the District Court primarily relate to the alleged right of the Trust to exercise a lien over the product. For instance, in a letter to the liquidators’ solicitors dated 25 August 2016, Mr and Mrs Parkes’ lawyer said:18
If you client does not enter into an agreement with my client before the close of business tomorrow, then my client will proceed to exercise a lien over the wine product in possession of the Trust property. My client can then proceed to bottle the wine and make it available for sale. The proceeds of sale will be used to off-set my client’s outstanding rent account together with a fee for bottling and selling the wine product. Any remaining proceeds from sale will be forwarded to your client’s company in liquidation.
[40] The legal position with respect to any potential lien as between the Trust and the liquidators is an entirely separate question of law from the appellants’ legal obligations to Customs. It is difficult to reach any firm conclusions on the basis of the
18 I note the response of the liquidators’ solicitors to this letter: “A fundamental problem with what is being proposed is that neither Mr Parkes nor the trustees of the Trust have a licence entitling them to produce and sell the wine.”
affidavit evidence as to the exact nature of the advice provided by Mr and Mrs Parkes’ lawyer, because the Court has only been provided with the communications between the lawyers and not any of the communications with Mr and Mrs Parkes. Nothing in Mr and Mrs Parkes’ joint affidavit sheds any light on this issue. Although it is possible to read into the passages referred to above that the lawyer condoned all aspects of bottling and selling the product, that passage could equally be read as referring only to the legal position as between the Trust and the liquidators. I am not prepared on that basis alone to assume the lawyer gave incorrect advice in relation to Mr and Mrs Parkes’ obligations to Customs.
Reliance on the legal advice
[41] Finally, in relation to the third point, I accept in principle that a client should generally be entitled to rely on the advice of their own lawyer to the exclusion of contrary suggestions. However, Mr and Mrs Parkes had been operating a winery business for some time before the liquidation of Sentry Hill. They required, and obtained, a Controlled Area Licence for that business. It is clear that they were aware of this requirement because, as mentioned earlier, Mrs Parkes (unsuccessfully) attempted to apply for such a licence for Sur Le Mur on 3 August 2016.
[42] They must also have been aware of the requirement to pay excise duty on any product sold from their experience working in the industry. This is confirmed by the communications on 14 September 2016 regarding Mr Parkes’ proposal to purchase the product from the liquidators for $4,456.66. In the letter sent to the liquidators’ solicitors on behalf of Mr Parkes, his lawyer communicates Mr Parkes’ proposal that he would pay for the excise duty on the product. That letter also contained a request from Mr Parkes that the liquidators surrender the Controlled Area Licence, further indicating his awareness of this requirement.
[43] It follows from this that Mr and Mrs Parkes cannot demonstrate that they relied upon any representation that might have been made by their lawyer in relation to their obligations under the Customs and Excise Act, or alternatively, if they did, that such reliance was unreasonable in their circumstances because of their background knowledge of their obligations to Customs.
Fresh evidence
[44] Given the conclusion I have reached in relation to the appellants’ primary ground of appeal it is unnecessary to linger on the further affidavits filed on appeal. In terms of the test for fresh evidence outlined by the Privy Council in Lundy v R, the affidavits are probably not admissible.19 Mr Bourke, counsel for the Crown, did not, however, ardently oppose the admission of the new affidavits. Even if the affidavits are admissible, there is nothing compelling in the affidavits concerning the potential risk to the appellants’ employment that is out of all proportion with the seriousness of their offending. Mr Parkes’ employment does not appear to be in jeopardy, it just appears that international travel as part of that employment will become more difficult. Mrs Parkes’ employment appears to be at greater risk, however, her employer does not appear to have reached a firm decision on her future employment status.
Summary
[45] Having reviewed all of the evidence and applied the principles governing applications for a discharge without conviction, I have reached the same conclusion as Judge Sygrove. This is not a case in which the consequences of conviction were out of proportion to the gravity of the offending. Nor is it a case that justifies the Court in exercising its discretion to discharge Mr and Mrs Parkes without conviction.
Result
[46] The appeals are dismissed.
D B Collins J
Solicitors:
Hannam & Co Lawyers Ltd, New Plymouth
Crown Solicitor, New Plymouth
19 Lundy v R [2013] UKPC 28, [2014] 2 NZLR 273 at [120].
3
3
0