R v Duthie

[2022] NZHC 2851

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CRI 2021-419-79

[2022] NZHC 2851

THE KING

v

RICHARD ALAN DUTHIE

Hearing:	21 October 2022
Appearances:	K Whyte for the Crown J Wall for the defendant
Judgment:	2 November 2022

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 2 November 2022 at 2.30 pm

Registrar/Deputy Registrar

R v DUTHIE [2022] NZHC 2851 [2 November 2022]

[1]                  The defendant, Mr Duthie, faced a charge of manufacturing methamphetamine,1  a charge of possession  of methamphetamine for supply,2  and    a charge of possession of equipment  for the  manufacture of  methamphetamine.3  He pleaded guilty to and was convicted of those charges on 9 February 2022.

[2]                  Under s 142N of the Sentencing Act 2002, a court may make an order that   an instrument of crime (or any part of it) be forfeited to the Crown (an instrument forfeiture order). The Crown says Mr Duthie used his home at 2511 State Highway 1, Lichfield (the Lichfield property) to commit the methamphetamine offences. The Crown applies  under s  142N for an instrument  forfeiture order over the entirety    of Mr Duthie’s interest in the Lichfield property.

[3]                  Mr Duthie accepts an instrument forfeiture order should be made. But he says it should be over only 50 per cent of his interest in the Lichfield property.

[4]                  Credit will be available against Mr Duthie’s provisional sentence for any forfeiture order. It is  therefore  appropriate  to  determine  the  application  before Mr Duthie is sentenced (currently scheduled for 11 November 2022).

[5]                  For the reasons that follow,  I consider there should  be an  order  forfeiting 50 per cent of Mr Duthie’s interest in the Lichfield property.

The offending

[6]                  Mr Duthie was charged following an investigation by the Waikato Police Organised Crime Squad.  The investigation started in December 2019.  It focused   on several  individuals   involved   in   the   organised   manufacture   and   supply   of methamphetamine.

[7]                  Upon termination of the covert phase of the investigation in July 2020, Police executed a search warrant  at  the Lichfield  property.  Police located the  following in a safe in Mr Duthie’s bedroom:

1      Misuse of Drugs Act 1975, s 6(1)(b). Maximum penalty life imprisonment.

2      Section 6(1)(f). Maximum penalty life imprisonment.

3      Section 12(2)(a). Maximum penalty five years’ imprisonment.

(a)A container holding 92 grams of methamphetamine;

(b)A case containing 17 zip-lock bags, each holding approximately

20.4 grams of methamphetamine (a total of 346.8 grams); and (c)           $41,510 cash.

[8]The total amount of methamphetamine found was 438.8 grams.

[9]Police also found the following in the kitchen:

(a)162 milligrams of methamphetamine hydrochloride dried on a glass baking dish;

(b)1,615 milligrams of methamphetamine hydrochloride within plastic containers;

(c)Various items of glassware; and

(d)Numerous indicia of supply, including unused zip-lock bags, NIK tests, a money counter and electronic scales.

[10]              ESR tested the property. Methamphetamine contamination was detected. Swabs   taken    in    the    kitchen    were    consistent    with    the    manufacture    of methamphetamine.

[11]              The agreed summary of facts records that Mr Duthie manufactured methamphetamine in the kitchen of the Lichfield property on at least one occasion. The quantity of methamphetamine manufactured cannot be determined.

Other factual background

[12]              Mr Duthie moved into the Lichfield property, as a tenant, in around June 2018. He purchased the property on 13 March 2019 for $300,000. The entire purchase price was financed by a loan from Avanti Finance Limited (Avanti).

[13]Mr Duthie is the sole registered owner of the property. Avanti’s loan is secured

by a registered mortgage. As at 28 April 2022, the amount owing on the loan was

$296,893.26. The current loan balance remains roughly the same.

[14]              The property is a lifestyle block of 5,142 square metres. It had one dwelling on it when Mr Duthie purchased it. He subsequently relocated a second dwelling onto it. He resided in the main dwelling.

[15]              The methamphetamine and cash were found in the bedroom of the main dwelling. The items used in the manufacture of methamphetamine were found in the kitchen of the main dwelling.

[16]              The Lichfield property has been subject to a restraining order under the Criminal Proceeds (Recovery) Act 2009 since 18 May 2021. It is in the custody and control of the Official Assignee.

[17]              Each party filed a valuation of the Lichfield property. The Official Assignee engaged a valuer who valued the property at $760,000 as at March 2022. A valuer engaged by Mr Duthie valued the property at $1,015,000 as at April 2022. Neither valuer was called to give evidence. I return to the competing valuations below.

Statutory framework

[18]              Under s 142N(1) of the Sentencing Act, the court may, if it is satisfied that property is an instrument of crime, order that the instrument of crime or any part     of it  be forfeited  to  the  Crown.  In  considering  whether to  make such  an  order,  s 142N(2) provides that the court may have regard to several factors. Relevantly, they include:

(a)The use that is ordinarily made of the instrument of crime;

(b)Any undue hardship that would be caused to any person by the operation of the order;

(c)The nature and extent of the defendant’s interest in the instrument

of crime; and

(d)Any other matter relating to the nature and circumstances of the offending or the offender, including the gravity of the offending.

[19]In the present case, s 142N requires the court to address three questions:4

(a)Is the property an instrument of crime?

(b)What interests do the defendant and others have in the property?

(c)Should the property (or a part of it) be forfeited, given the considerations in s 142N(2)?

[20]              If a court orders that property (other than money) be forfeited to the Crown,   s 142N(4) requires the court to specify in the order the amount that it considers to be the value of the property at the time the order is made.

The issues

[21]              Mr Duthie does not  dispute  that  the  Lichfield  property  is  an  instrument of crime. It is also common ground that Mr Duthie is the sole owner of the property, subject to the  mortgage  in  favour  of  Avanti.5  Further,  Mr  Duthie  accepts  that an instrument forfeiture order should be made.

[22]              The dispute is over the extent of the order. Mr Duthie says the order should be restricted to 50 per cent of his interest in the property. The Crown says there should be 100 per cent forfeiture.

4      R v Van de Ven [2013] NZHC 479 at [36].

5      The defendant’s former partner, Natasha Smedley, applied under s 142J of the Sentencing Act for relief from an instrument forfeiture order, on the basis she had an interest in the Lichfield property. She withdrew that application shortly before this hearing.

[23]              Resolution of that dispute depends in part on determining the value of the property (and of Mr Duthie’s interest in it). I also have to determine that value in order to specify, under s 142N(4), the value of the property that is to be forfeited.

[24]I therefore have to determine two issues:

(a)What is the value of the Lichfield property (and of Mr Duthie’s interest

in it)?

(b)How much of Mr Duthie’s interest in the Lichfield property should  be forfeited to the Crown?

What is the value of the Lichfield property (and of Mr Duthie’s interest in it)?

[25]I return now to the competing valuations that were filed.

[26]              The Official Assignee engaged a registered valuer at Quotable Value Ltd (QV). The valuer inspected the Lichfield property on 24 May 2021 and produced a valuation that month. However, that May 2021 valuation was not filed. Instead, the Crown filed a “desktop update of market value” by QV dated 17 March 2022. That updated valuation remained  based  on  the  May  2021  inspection  but  used  more  recent  (as at March 2022) sales data. The updated QV valuation was $760,000.

[27]              Mr Duthie filed a valuation completed by a registered valuer at Property Indepth. That valuer inspected the property on 28 April 2022 and provided a valuation as at that date. The Property Indepth valuation was $1,015,000.

[28]              As noted, the valuers were not called to give evidence. It is therefore difficult for me to understand all the reasons for the differences between the two valuations.

[29]                One thing, however, is apparent from the valuations themselves.6 The QV valuation is based on an inspection that occurred almost a year earlier than the Property Indepth inspection. The QV valuation records that at the time of the May 2021

6      I have not attempted to review the sales data used by each valuer to see which data are more comparable to the Lichfield property. Neither counsel explored that with me.

inspection the second dwelling had several items of renovation work to complete. This included completion of the bathroom and laundry, installation of a septic tank system and most of the plumbing, installation  of spouting,  exterior  painting,  installation  of barge boards and of a rail on the deck. The report also records that a building consent had been obtained for the relocation of the second dwelling but that the consent had at that time expired owing to a lack of progress in the work to be completed. It is apparent from the photographs in the Property Indepth valuation, and the description in that valuation of the second dwelling, that by April 2022 the outstanding work on the second dwelling had been completed.

[30]              The Property Indepth valuer explicitly assumed that all buildings on the property had all necessary consents and code compliance certificates.   I received   no evidence as to whether the further work was carried out with a current building consent or whether a code compliance certificate was obtained. However, the QV valuation records that council had (in May 2021) recently been contacted by a drain layer requesting an extension to the building consent. It is unlikely that a significant amount of work was subsequently carried out by builders, drain layers and plumbers without a current consent. It was also common ground that the second dwelling has been tenanted for some time, which would be unlikely in the absence of compliant work. In these circumstances, it is a reasonable inference (in the absence of any evidence to the contrary) that the further work was consented and certified.

[31]              I consider that the completion of this work accounts for a significant part of the difference between the two valuations. It does not account for all the difference. The assessed underlying land values are $60,000 apart.

[32]              Both valuations are, to the extent they take account of sales data, now six months out of date. It has not escaped my attention that there has been extensive reporting of a downturn in the property market in that time.

[33]              Taking all these matters into account, I find that at the date of this judgment the value of the property is $950,000. The Avanti loan is approximately $300,000. Mr Duthie’s equity in the property is therefore currently about $650,000.

How much of Mr Duthie’s interest in the Lichfield property should be forfeited to the Crown?

[34]              The Court of Appeal has said that determining the extent of an instrument forfeiture order involves an exercise in proportionality.7 The forfeiture, for instance, should not be out of proportion to the seriousness of the offending and the offender’s personal circumstances.8  It follows that determining the extent of an order requires   a factual assessment rather than the application of any legal principle.9

[35]              I consider that  several  factors  point  firmly  to  forfeiture  of  50  per  cent  of Mr Duthie’s interest in the Lichfield property being a proportionate response.

[36]              First,  while I acknowledge that  Mr Duthie’s  offending  was  very serious,    I cannot  be  satisfied  that   Mr  Duthie  undertook   more  than  one   manufacture  of methamphetamine at the property. Mr Whyte, for the Crown, properly accepted this. This is not a case where the property has been used repeatedly or over a lengthy period as an instrument of crime. Further, it is far from a case of the property being used solely for crime. The property’s primary use was as a residence for Mr Duthie.10

[37]              Secondly, it was common ground that Mr Duthie purchased the property with legitimate funds. He financed the purchase through the loan from Avanti. Mr Whyte acknowledged that I should regard that as a legitimate source.11  The current  value  of the Lichfield property also reflects Mr Duthie’s purchase of the second dwelling and the work carried out on that dwelling. Mr Whyte accepted that there was no evidence that funds from illegitimate sources had paid for that dwelling or for the improvements.  He said I should put those matters to one side. I treat them as neutral.

[38]              Thirdly, the value of Mr Duthie’s interest in the Lichfield property is many times greater than the value that Mr Duthie has been shown to have obtained from his

7      Mackie v R [2012] NZCA 588 at [17].

8      At [21]; Macpherson v R [2012] NZCA 552 at [63].

9 At [17].

10 The extent to which the property is connected to the commission of the offence is a relevant consideration: Stanton v Solicitor-General [2007] NZCA 434 at [16].

11 This is not to say that funds obtained from a third-party lender will always be legitimate. An offender might obtain a loan by showing the lender that they have a regular source of income (derived from offending) or by putting up other assets (derived from offending) as security. There was no evidence of Mr Duthie having done anything like this.

offending. Mr Wall, for Mr Duthie, submitted that a conservative estimate of the value of the methamphetamine found at the property was approximately $90,000. I consider that is an underestimate.  It assumes that Mr Duthie sold bulk (one kilogram)  lots   of methamphetamine. It is clear from the zip-lock bags (containing 20.4 grams each) found at the property that Mr Duthie was not a bulk seller. I consider that the total value of methamphetamine found at Mr Duthie’s property is in the region of $150,000. There was also cash of $41,510 found. But there is no evidence of Mr Duthie having other assets from unexplained sources. Mr Whyte told me that there is a civil forfeiture proceeding against Mr Duthie, in which the only assets of Mr Duthie that have been identified and restrained are the Lichfield property and the cash found at it.

[39]              Fourthly, the Lichfield property is Mr Duthie’s only significant asset. As noted, the Crown has not identified any other assets (other than the cash, which I infer will be forfeited in the civil proceeding). Mr Duthie is 56 years old. If his entire interest in the Lichfield property were forfeited,  he would have a severely limited ability    to re-establish himself. I consider that this, combined with the other factors to which I have already referred, would constitute undue hardship.

[40]              For these reasons, I consider that forfeiture of 50 per cent of Mr Duthie’s interest in the Lichfield property is the appropriate order.

Result

[41]I make an instrument forfeiture order in the following terms:12

(a)This order relates to the property at 2511 State Highway 1, Lichfield, being Lot 1 on Deposited Plan South Auckland 942, registered in the name of Richard Alan Duthie.

(b)The Court considers the present value of the property to be $950,000.

(c)One half of Richard Alan Duthie’s interest in the property is forfeited

to the Crown.

12     Adopting the form of order proposed by the Court of Appeal in Elliot v R [2011] NZCA 386, [2011] 3 NZLR 811 at [50].

(d)The property is vested in the Crown absolutely and is to be in the custody and control of the Official Assignee.

(e)After repayment of the moneys secured by the Avanti Finance Limited mortgage, the Crown is to account to Richard Alan Duthie for one-half of the moneys paid to it by the Official Assignee pursuant to s 85(d) of the Criminal Proceeds (Recovery) Act 2009.

Campbell J