Police v Pure
[2020] NZHC 330
•28 February 2020
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CRI 2019-485-69
[2020] NZHC 330
BETWEEN NEW ZEALAND POLICE
Appellant
AND
GENESIS PURE
Respondent
Hearing: 17 December 2019 Counsel:
K L Kensington for Appellant B J Dawson for Respondent
Judgment:
28 February 2020
JUDGMENT OF MALLON J
Introduction
[1] The issue for determination is whether, on a charge of theft, the value of an item stolen from a retail store includes the GST charged on that item.
[2] The issue arises because Genesis Pure is charged with stealing an iPhone and SIM card pack from The Warehouse, which had a retail price of $1,004, inclusive of GST. He has been charged under ss 219 and 223(b) of the Crimes Act 1961 with theft of property where the value of the property stolen exceeds $1,000. This has a maximum penalty of imprisonment for a term not exceeding seven years. Mr Pure contends the correct charge is theft of property where the value stolen exceeds $500 but does not exceed $1,000 under ss 219 and 223(c), which has a maximum penalty of imprisonment for a term not exceeding one year.
POLICE v PURE [2020] NZHC 330 [28 February 2020]
[3] Although the sentence imposed should be the same whether the correct charge is s 223(b) or (c) given the aggravating features are the same, the issue is not entirely academic. For example, a charge under s 223(b) is sufficient to trigger the reverse onus provision in s 12 of the Bail Act 2000, whereas a charge under s 223(c) or (d) does not. Further, in the case of a person who holds a residence-class visa for between two and ten years, a conviction under s 223(b) will result in liability for deportation whereas the lesser charges will not.1
[4] The issue comes to this Court as an application for leave to appeal a pretrial ruling of the District Court.2 It held that the value of the items did not include the GST component. It amended the charge to one under s 223(c). Leave to appeal is not opposed. I grant leave accordingly.
The offence
[5]Section 219 creates the offence. It provides:
219 Theft or stealing
(1)Theft or stealing is the act of,-
(a) Dishonestly and without claim of right, taking any property with intent to deprive any owner permanently of that property or any interest in that property; …
[6]Section 223 sets out the various punishments for theft. It provides:
223 Punishment of theft
Every one who commits theft …is liable as follows:
(a)…
(b)if the value of property stolen exceeds $1,000, to imprisonment for a term not exceeding 7 years; or
(c)if the value of the property stolen exceeds $500 but does not exceed
$1,000, to imprisonment for a term not exceeding 1 year; or
(d)if the value of the property stolen does not exceed $500, to imprisonment for a term not exceeding 3 months.
1 Immigration Act 2009, s 161(1).
2 Police v Pure [2019] NZDC 19253; Criminal Procedure Act 2011, s 296.
District Court proceeding
[7] In the District Court the Police contended the value of property stolen is the retail selling price, which is GST inclusive. This submission relied on Canadian case law.3 Mr Pure contended the value was determined by the owner’s loss. As a retailer is only required to pay GST for goods “supplied”, the retailer’s loss is the retail value exclusive of GST. This submission relied on American case law.4
[8] The District Court Judge discussed that the charge of theft in its current form was introduced in 2003. The Explanatory Note did not refer directly to the meaning of value, but did discuss that the focus on the Part 10 provisions was the concept of being deprived of property rather than the concept of things capable of being stolen.5 The Judge considered this implied the focus was on the complainant’s loss, and “value” must be a proxy for loss caused to the complainant. The Judge considered that when the property is stolen from a retailer, the loss is the retail price less GST. This is because the retailer is not obligated to pay GST to Inland Revenue. If the value includes GST, there is the risk of overcompensating the victim and unfairly increasing the penalty to which the defendant is subject.
[9] The Judge concluded the “value” in this case was the retail price of the iPhone and SIM card pack exclusive of GST. He amended the charge accordingly.
Submissions on appeal
Appellant’s submissions
[10] The appellant submits value should be given its ordinary meaning, namely: “the amount of money … for which a thing can be exchanged or traded.” In New Zealand this includes the GST component. The value is how much money would be exchanged if the item were to be sold.
3 R v Wheeler [2012] AJ No. 1 1431; R v Belanger (1972) 6 CCC (2d) 210.
4 State v Alexander 12 Kan. App. 2d 1, 732 P.2d 814; People v Barbuto 106 Misc. 2d 542, 434
N.Y.S. 2d 120.
5 Police v Pure, above n 2, at [14], discussing the Explanatory Note to the Crimes Amendment Bill (No 6) 1999 (322-1).
[11] The appellant submits this meaning is consistent with the purpose of the offence. The purpose is to criminalise the taking of property “with intent to deprive any owner permanently of that property”.6 This is not focussed on an intent to cause loss and nor is it aimed at reparation to the owner. Rather, the focus is on the defendant’s conduct and intent. The conduct involves taking something from a retailer without paying for it and with the intent to deprive the owner of property. If the defendant had paid for the items, they would have paid the retail price inclusive of GST. The value of the item taken in the defendant’s hands is the retail price they have not had to incur.
[12] The appellant submits that policy reasons support this interpretation. It means the value of the property taken is capable of being ascertained by the defendant at the time it is taken from a retailer. The variables that go into the price the retailer sets are not relevant. It does not matter what price the retailer paid for the product, what its operating costs are and what profit margin it hopes to achieve. Nor should it matter that the retailer will have to remit a portion of the GST to the Inland Revenue.
[13] The appellant submits the Judge’s approach in the District Court gives rise to a risk of anomalies. Had the defendant stolen from a person who had just purchased the items from the retailer for $1,004, rather than from the retailer, the value of the stolen property would be $1,004. The criminality involved is comparable, yet the maximum penalty would be different.
[14] The appellant submits the Judge was wrong to rely on the risk of over compensation. Reparation is directed at addressing the victim’s loss. It may be ordered if an offender has caused a person to suffer “loss”. A reparation report can be obtained to provide information on the “value of that loss” amongst other things. Any risk of overcompensation is able to be addressed at this stage.
Respondent’s submissions
[15] The respondent submits the purpose of the theft provisions is to criminalise the unlawful taking of property in circumstances that may cause financial loss to the owner
6 Crimes Act 1961, s 219.
of the property. Theft requires an intention to deprive the owner of the property. There need not be any benefit obtained by the thief. The thief may destroy the property or pass it on to someone else. It is the owner’s loss, and not the thief’s enrichment, that is punishable by the law. The respondent submits it must follow that a thief’s culpability is limited by the extent to which an owner may have been deprived of ownership. The value of the property must be quantifiable in dollar terms. The offence prohibited is the owner’s potential loss of ownership, quantified in dollar terms.
[16] The respondent refers to the following observations of Tipping J in Nicholls v Commissioner of Inland Revenue.7
[28] … [A] vendor of goods does not receive any part of the price as GST on behalf of the Crown. The vendor receives the whole price beneficially and as the price. The vendor’s liability to pay output tax in respect of the supply is an independent liability of the vendor. In short, no part of the price (whether fixed as GST inclusive of GST exclusive) comprises a payment of GST. The fact that the price may be fixed at say $80,000 plus GST, does not mean that the purchaser is paying a price of $80,000 plus GST of $10,000. It means the purchaser is paying a price of $90,000. Reference to GST is simply a method whereby the total price is assessed and is useful to avoid doubt as to the total payable in a situation where GST is relevant.
[17] The respondent notes that, regardless of how a price is determined or a contract structured, the law requires a supplier to account for output tax on every single transaction. GST is a tax on the final consumer, collected and payable to the IRD by the person supplying the goods. Section 8(1) of the Goods and Services Tax Act 1985 imposes the tax “by reference to the value of that supply.” Section 10 defines “value of supply” as the consideration paid less the GST. The value is easily established in this way with reference to the advertised price. Further, a customer is entitled to an invoice that will show the amount of GST on the supply.
[18] The respondent submits the value of the items to the retailer is their loss. As theft is not a supply, the retailer is not required to account to Inland Revenue for any value of the stolen item and their loss does not include GST. If the retailer purchases replacement items from a wholesaler, the wholesale price will include GST. However, the retailer will be able to claim a reimbursement of the input tax from Inland Revenue. The retailer’s loss from theft is therefore the retail price less GST.
7 Nicholls v Commissioner of Inland Revenue (1999) 19 NZTC 15,233.
[19] The respondent also notes that some purchasers (those who are registered for GST) will be able to claim the GST as an input. In those cases the net value of the item is also the retail price less the GST. The thief’s liability should be the same whether they are registered for GST or not.
[20] The respondent submits his approach does not give rise to the anomaly suggested by the appellant. The respondent accepts that a person who took these items from a store would be liable for a lesser maximum penalty than a person who took the same items from a customer just leaving the store having purchased them. The respondent submits this is not anomalous because the victim customer has been deprived of ownership rights to a greater value than the victim store. The extent of loss is an aggravating feature of the offence.
[21] Further, an anomaly can arise on either interpretation. The respondent compares a thief who steals an item valued at $1,000 from a customer leaving a store with another thief who snatches a similar item valued at $1,000.01 from another customer leaving another store. In both cases the criminality of the thief’s intent is the same but, because of the difference in value of one cent, the second thief is liable to a maximum penalty seven times greater than the other.
Overseas authorities
[22] The appellant’s and the respondent’s submissions discussed the case law from overseas jurisdictions.
[23] The respondent refers to the New York cases of People v Medjdoubi and People v Barbuto.8 These cases held that sales tax charged on retail goods was not to be included when determining the value of the dishonestly obtained goods. The legislation under which the sales tax was imposed required the vendor to collect the tax from each customer when collecting the price charged. The courts reasoned that the sales tax increased the cost of an object but not its value. The vendor established value by the freely negotiated price and in addition collected the tax.
8 People v Medjdoubi 173 Misc. 2d 259, 661 N.Y.S.2d 502; People v Barbuto, above n 4.
[24] The same view was taken in the Kansas case of State v Alexander.9 The Court reasoned that the vendor was not the “owner” of the tax and, because the item was stolen, no tax had been imposed and so no tax had been stolen.
[25] A different position was taken in California. In People v Seals the Court said it was a longstanding principle in California that the retailer is the taxpayer, not the consumer.10 The sales tax is imposed on retailers for the privilege of selling the retail property. The tax relationship is between the taxpayer and the state. Retailers are permitted, but not required to, obtain reimbursement from the consumer for their tax liability. It is a matter of contract between the retailer and the consumer. However, it is always recognised that the ultimate burden of sales tax, as in the case of all taxes paid in the course of production, will be shifted to the consumer.
[26] The Court in Seals held that “reasonable and fair market value” is the test for theft crimes that contain a value threshold. This is determined by “a willing buyer and willing seller” transaction in the open market. The Court in Seals further explained:11
… [i]n a retail context, absent proof that the price charged by a retail store from which merchandise is stolen does not accurately reflect the value of the merchandise in the retail market, that price is sufficient to establish the value of the merchandise within the meaning of [the Criminal Code].
[27] The appellant submits the New York and Kansas case law is distinguishable. The advertised retail price of an item in a store is exclusive of tax. The sales tax (whether local, state or both) is added at the point of sale. In contrast, the advertised retail price in a New Zealand store is always inclusive of GST. The appellant also suggests the decisions in the United States may have been driven by a desire to categorise the offence as a misdemeanour rather than a felony because of the associated mandatory minimum sentence that applied to a felony. Here the sentence will inevitably be tailored to the circumstances.
[28]The appellant relies on the Canadian cases of R v Wheeler and R v Belanger.12
In these cases the issue was whether the value of an item stolen from a retailer store
9 State v Alexander, above n 4.
10 People v Seals 14 Cal. App. 5th 1210, 222 Cal. Rptr. 3d 589.
11 At 1216.
12 R v Wheeler and R v Belanger, above n 3.
was the retail price or the price at which the retailer had obtained the items or could replace it. As explained in R v Wheeler:
36 In the context of the criminal law, as it relates to the theft of property, it would seem most appropriate that the value is determined by the monetary worth of the property to the owner. In the context of a retail operation, this value would be the retail price, as the value is the price that a seller is willing to accept and a buyer is willing to pay on the open market in an arms length transaction. In the case at bar I therefore find the value of the equipment stolen by Mr. Wheeler is its retail value of $35,685.07 ...
[29]These Canadian cases do not specifically address the issue of tax.
[30] Counsel found no case law of assistance from the United Kingdom or Australia.13
Assessment of appeal
[31]Section 219 defines the offence of theft. It requires:
(1)a dishonest and without claim of right taking of property
(2)with an intent to deprive the owner permanently of the property.
[32] It is aimed at protecting property rights. In other words, the mischief the offence addresses is focussed on the owner’s property rights. However, it does not follow that the seriousness of the offence is determined by the loss suffered by the owner. Section 223 sets the maximum penalties to which the offence is subject. It does so by the monetary value of the property taken. This is a test of “value” not a test of “loss caused”.
[33] Sections 219 and 223 can be contrasted with ss 240 and 241. Section 240 creates the offence of obtaining property (amongst other things) by deception or causing loss by deception. Section 241 sets out the penalty for the offence depending on the “loss caused or the value of what is obtained”. The “loss caused” correlates to
13 Counsel understand the reason for the absence of useful United Kingdom authority is that, since the 1960s, monetary thresholds have not been used to determine the maximum penalties for theft.
the offence of causing loss by deception. The “value of [the property] obtained” correlates to the offence of obtaining the property.
[34] The Shorter Oxford English Dictionary provides the following definition of “value”:14
1a That amount of a commodity, medium of exchange, etc., considered to be an equivalent for something else; a fair or satisfactory equivalent or return. Freq. in value for money below. ME. b Orig., a standard of valuation or exchange; an amount or sum reckoned in terms of this. Later (now US), a thing regarded as worth having. LME. 2 The material or monetary worth of a thing; the amount of money, goods, etc., for which a thing can be exchanged or traded. ME. 3 The extent or amount of a specified standard or measure of length, quantity, etc.
[35] In the present context, the second meaning is most apt. The ordinary meaning of “value” of property assessed in monetary terms is the monetary worth of the property. A measure of that value is the amount for which the property can be exchanged or traded. This provides an objective measure for determining the value of the property. Such a measure can be the subject of evidence and determination by a judge if necessary.
[36] An example is provided by O’Brien v R.15 This case concerned s 240. The defendants were found to have obtained a licence to operate gaming machines by deception. The deception involved concealing from Internal Affairs the fact that Mr O’Brien had significant influence over the management of the entity which held the licence. Internal Affairs would not have granted the licence if it had been aware of this.
[37] The prosecution alleged the value of the benefit obtained (the licence) exceeded $1,000. Under s 241, this would mean the maximum penalty was a term of imprisonment exceeding seven years. The Court of Appeal agreed with the trial Judge that this had been established. In doing so it said “[as] a starting point, the value of the benefit … in question is what prospective … operators are prepared to pay for
14 Lesley Brown, The New Shorter Oxford English Dictionary on Historical Principles (4th ed, Oxford University Press, Oxford, 1993) at 3542.
15 O’Brien v R [2019] NZCA 83.
one.” The defendants had paid $9,148 to obtain the licence. The Court considered this plainly established the licence was worth at least $1,000.
[38] That case is different from the present one. Section 240 creates an offence of obtaining a benefit by deception and s 241 reflects this. The prosecution must prove “the value of what is obtained” exceeds the specified monetary threshold. This puts the focus on the value to the defendant of what has been obtained. Under s 223, the prosecutor must prove the “value of the property stolen.” It does not say the “value to the defendant of the property stolen”. Nor does it say the “value of the stolen property to the owner”. In my view this indicates a legislative intent to assess value objectively and not from either the point of view of the owner or the thief where they are different.
[39] The evidence that establishes the objective value will depend on the context. For example, when a thief steals an item of property from a private residence that is also available in the open market, the value of the property will be its market replacement value assessed at the time it was taken. Where the property is taken from a retail store, the retail price provides an obvious source of evidence for its value.
[40] It may be that a retail store has set the price of an item of property too high relative to the market and the store would not have been able to sell the property at the advertised price. In such a case, I see no reason why a defendant could not adduce evidence about this if it wished to do so. It is likely this would be relatively unusual. This is partly because retailers, at least in a competitive market, will usually set market prices. It is also because in most cases it will not be necessary to establish the precise value of the property. The advertised retail price will provide sufficient evidence of which monetary threshold the value of the property falls into.
[41] The retail price is the price the customer would pay to purchase the item. As explained in Nicholls v Commissioner of Inland Revenue, no part of the price (whether fixed as GST inclusive or GST exclusive) comprises a payment of GST.16 The customer pays the price set by or negotiated with the vendor and, from that price, the vendor accounts for GST. That is, the vendor has an independent obligation to account for GST arising from that transaction and the amount of GST depends on the price the
16 Nicholls v Commissioner of Inland Revenue, above n 7.
customer has paid. I agree with the appellant that the position in New Zealand is therefore distinguishable from that in New York and Kansas and is more similar to the position in California. I consider the definition of “value” in the Goods and Services Tax Act 1985 does not assist. It is the meaning of “value” in the Crimes Act 1961 that must be determined.
[42] In my view it is irrelevant to determining the value of property stolen from a retailer that the retailer will have no obligation to account for GST on that stolen item. It would be relevant if the monetary thresholds in s 223 were set with reference to the loss caused to the owner. But they are not. They are set by value (meaning its monetary worth) and that will (usually) be the amount a customer would have paid for the item (that is, the retail price inclusive of GST).
[43] Because the legislature has adopted bright line monetary thresholds for determining which maximum penalty the offence is subject to, it is inevitable that there will be some cases that fall just under or just over a particular threshold. Those that fall just over a threshold might be regarded as unlucky and those that fall just under a threshold might be regarded as lucky. As the respondent pointed out, there is the potential for adverse consequences when the property stolen by a thief falls just over the monetary threshold. However, in some cases there may be scope for debate as to whether a monetary threshold has or has not been met and the charge can be brought under the lesser threshold to avoid potentially unfair or disproportionate consequences.
[44] Importantly, it will usually be the sentence imposed on a thief that is the primary consequence. No unfairness should arise in that. That is because all features of the offending and the offender will ultimately determine its seriousness. All other features being equal, a similar sentence will be imposed on an offender who takes property that falls just under one threshold and on the offender who takes property that falls just over the threshold.
[45] Lastly, I agree any risk of overcompensating retailers who are victims of theft is addressed by the reparation regime.
Result
[46] The appeal is allowed. I am not amending the charge back to s 223(b). That is a matter for the prosecution to pursue in the District Court if it remains of the view that the value of the items stolen exceeds $1,000 in light of my decision and it considers it appropriate in all the circumstances to seek the amendment.
Mallon J
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