R v McKenzie

[2013] NZHC 3351

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CRI 2010-009-008952 [2013] NZHC 3351

REGINA

v

JOHN DOUGLAS McKENZIE

Hearing:                   13 December 2013

Counsel:                  B Hawes for Crown

JHM Eaton QC for Prisoner

Judgment:                13 December 2013

SENTENCING REMARKS OF WHATA J

[1]      Mr McKenzie you were charged and found guilty of one count of conspiracy to manufacture methamphetamine.  This attracts a maximum sentence of 14 years imprisonment.

[2]      A key factor in your sentencing is the extent of the role played by you in the conspiracy as any sentence I impose must be based on proven offending, that is proven beyond reasonable doubt.

Background

[3]      It is important first to set your activities within the wider context of the conspiracy  to  manufacture  which  I  am  satisfied  was  established  by  the  Crown beyond reasonable doubt.   I will address later the extent of your knowledge and

active involvement in the conspiracy.

R v McKENZIE [2013] NZHC 3351 [13 December 2013]

[4]      Mr  Newton  was  the  central  figure.    He  sourced  pseudoephedrine  based products and equipment, for example, from a Mr Situ.   Pseudoephedrine was extracted from these products by a Mr Linton, Mr Black and a Mr Box.  Mr Newton and Mr Box took the precursor substances to the cooks, including Mr Miles and Mr Lee. Mr Smith and Mr Harris were also cooks.   Methamphetamine was then manufactured by them at various locations including clandestine laboratories located at Cashel St, Main South Road, Maunsell Street and 7 Gregory Avenue.

[5]      Various types of substances containing pseudoephedrine were located at the addresses; the largest amount, 638 grams of ContactNT capsules and some 4,500 pseudoephedrine tablets  was  found  at  the Gregory Avenue address  occupied by Mr Lee.   This  level  of product  could  produce  between  136.35-314.61  grams  of methamphetamine.  Large amounts of cash were also found totalling $134,855.

[6]      The evidence of your connection to the conspiracy was relatively sparse, comprising an agreement to lend Mr Newton the sum of $180,000 at an interest rate of 80% over four months.  The police also seized $37,970 in cash, which was said to be the remainder of a $50,000 part payment to you from Mr Newton.  Relevantly the money found was wrapped in a similar manner to cash found at other addresses associated with the methamphetamine enterprise.

[7]      A note was also found at your address, written by Mr Newton, recording a payment of “50k” to you, to a loss of “436k,” to “900 gram” in the boot, and “1.2 kg payd for”.  The note also included reference to “Lance Lee” and to “60 x 20 Rits for you if you want”.  Relevantly, at the time Lance Lee’s premises had recently been raided with a large quantum of precursors seized, and a quantity of rits or ritalin was also subsequently found at your address.

[8]      A copy of this note will be attached to my sentencing given its central role in establishing your culpability.

[9]      As I found in my pretrial ruling, I consider that this combination of evidence provided a sufficient basis for a jury to infer that you were a party to the wider

conspiracy described above, and it transpired that you were found guilty by the jury of the conspiracy charge.

[10]     But I am not satisfied that there was sufficient evidence establishing that you had a detailed understanding of the scale of the methamphetamine manufacture undertaken at Mr Newton’s behest.  At best, on the evidence, it could be said that you were aware of some of the detail of Mr Newton’s methamphetamine enterprise sometime after the agreement to lend him money.  This might support the inference, combined with the scale of the loan and the rate of the return, that you were aware that Mr Newton was involved in a commercial scale methamphetamine enterprise.

[11]     I observe further that there is no direct evidence or other evidence that you were involved in the day to day operation of the enterprise.

[12]     On that basis, I am satisfied beyond reasonable doubt that you were aware that your loan was going to be used to fund, among other things, Mr Newton’s methamphetamine enterprise and that you knew it had a commercial quality.  I am not satisfied however that you had any greater knowledge or understanding of its scale.

Personal circumstances

[13]     As  to  your  personal  circumstances,  I  have  had  the  benefit  of  a  full pre-sentencing report and numerous supportive references.    I also have read  an assessment by Psychology Partners as to your mental health and a note from a GP.

[14]     Mr McKenzie you are a 65 year old male.  You have a partner, three children, and several grandchildren.  You own a rural property, from which you run a business breeding and selling horses.  You have no issues with alcohol or drug use and you are in reasonable health though I do understand that you have used unprescribed Ritalin in the past.  You have no prior convictions.

[15]     The   pre-sentencing   report   says   you   maintain   your   innocence   and therefore did  not  demonstrate  any  remorse  or  empathy.    The  report  writer  also observes  your  offending  was  assessed  as  the  result  of  your  involvement  with

offending-supportive associates.  It also states that your attitude and entitlement also contributed,  and  that  you  maintain  that  you  are ignorant  of the details  of  your investment and that meant you were not responsible for your offending.  The report says you are unwilling to accept that your actions contributed to a methamphetamine operation and that you have shifted responsibility to your co-offenders.

[16]     No  rehabilitative  needs  were  identified.    Your  risk  of  reoffending  was assessed as low, since you have suffered significant stress and financial loss. Although the harm caused to the public by your offending was high, your risk of harm in the future was assessed as low.

[17]     No community-based sentences were considered due to the seriousness of your offending.  A long term of imprisonment was recommended.

[18]     The  numerous  supportive  references  attest  to,  among  other  things,  your honesty, dedication to your family and friends, your passion for horses and harness racing  and  the  positive  contribution  you  have  made  to  the  local  community, including local youth rugby and the local school.

Crown submissions

[19]     The Crown refers to my starting point for Mr Newton of ten  years and suggests  a  similar  starting  point  for  you.    Reference  is  made  to  the  case  of Macfarlane v R1  where it is said the appellant had the discrete role as principal financier to the sum of $120,000.   He was sentenced on the basis that he was an essential  player  and  of  broadly  equal  culpability  as  the  principal  offender  case (Mr Clifton) in that case.

[20]     I am unable to accept that that case is apposite.   While it might be that financiers should carry greater culpability than say a cook or a distributor, I am not able to accept that you are as culpable as Mr Newton.  Mr Newton was plainly the CEO   of   a   complex   enterprise   (as   the   literally   thousands   of   transcribed

communications revealed), and with the most to gain from it.  Further he skilfully

1      Macfarlane v R [2012] NZCA 317.

isolated the various members of the conspiracy from each other, with the result that no other member, including you, had the complete picture of its scale.  It is therefore not available to me to find, on the evidence, equivalent culpability by dint of the investment you made, and the note, cash and Ritalin found on your premises.  I will return to the significance of this below.

[21]   Mr Hawes accepts that there is in fact no probative evidence of your appreciation  of scale  though  Mr Hawes  endorsed  the view that  it  is  naïve and counter-intuitive to think that you did not appreciate that Mr Newton was engaged in a commercial methamphetamine enterprise.

[22]     Mr Hawes accepts that your unblemished record is a mitigating factor and that there are no personal aggravating factors, but that your ongoing denial precludes any discount for remorse.

Submissions for you

[23]     Mr Eaton QC calls for an exacting examination of the evidence of your culpability.  He highlights factors which he says shows that you must have had little if any knowledge of Mr Newton’s enterprise when you recorded your agreement to lend him money and then paid the money to a third person, Mr Mao, of unknown relevance or significance to the enterprise.   He further highlights that there is no evidence that you knew whether or how the monies you paid to Mr Mao supported the methamphetamine enterprise.  He accepts that I must proceed on the basis that you had some knowledge of Mr Newton’s intentions, but that there is no basis to conclude that you had any interest or specific knowledge of the enterprise.

[24]     Rather he says that key to the assessment was that your lending was part of a pattern of dealings with Mr Newton and importantly his father.  There was therefore, he says, a sufficient basis for you to be confident of the return that you sought on the money that you lent to Mr Newton quite independently of the methamphetamine enterprise.

[25]     I accept the primary thrust of Mr Eaton’s submission, namely that there is

insufficient evidence of direct knowledge or active involvement in terms of the

precise  scale  of  Mr  Newton’s  enterprise.    But  the  evidence  was  sufficient  to conclude,  as  the  jury  must  have  done,  that  you  were  aware  of  Mr  Newton’s enterprise and that this enterprise was one of the means by which you would obtain a very significant return on your loan.  I also think that the commercial tenor of your relationship is a strong indicator that you were aware that Mr Newton was involved in commercial level methamphetamine production.

[26]     Mr Eaton also emphasises a number of personal factors said to favour a considerable discount.  He refers to your lack of prior convictions, and an exemplary life with a very positive contribution to the community.

[27]     He also highlights the following factors:

(a)       Your age (65) and the difficulties this will cause in prison, especially in light of your mental and emotional state;

(b)      Your previous good character;

(c)       Your vulnerability,  referring to  your  use  of Ritalin  - a factor  that

Mr Newton used to further his commercial objectives;

(d)Your expectation that you will not be found guilty and the lengthy delay to resolution;

(e)       Your financial loss.

[28]     As to these factors I accept that age and previous good character are relevant. I am  unable to  accept  that  your  alleged  vulnerability,  expectations  as  to  result, procedural delay and financial loss are mitigating factors.  Each of those factors are linked to decisions you have made and are part of the consequences of engaging in a conspiracy to manufacture methamphetamine.

[29]     Mr Eaton distinguishes Macfarlane, noting findings that Mr Macfarlane was

involved in two separate fundings and “knew well what he was doing”.  As I have

indicated, I accept his analysis of Macfarlane. Mr Eaton therefore seeks a starting point for you that should be no higher than 50% of Mr Newton’s.

Sentence approach

[30]     I turn then to my sentencing approach.  I must be guided by the purposes and principles of the Sentencing Act 2002.  Particularly relevant to you and the alleged offending, is the need for denunciation and deterrence.  But I must also be conscious of the need to secure your rehabilitation and that any sentence  I impose should reflect   the   circumstances   of   your   specific   offending   and   your   personal circumstances.

[31]     Helpfully there is the guideline judgment of R v Fatu2  on sentencing for offences  relating to methamphetamine.    Fatu established four bands for sale or supply of methamphetamine, namely:

(a)       Band one – low-level supply (less than 5 g) – starting point 2-4 years imprisonment.

(b)      Band two – supplying commercial quantities (5 g to 250 g) – starting point 3-9 years imprisonment.

(c)       Band   three – supplying   large   commercial   quantities   (250 g   to

500 g) – starting point 8-11 years imprisonment.

(d)      Band four – supplying very large commercial quantities (500 g or more) – starting point 10 years to life imprisonment.

[32]     Fatu also established bands for the manufacture of methamphetamine:

(a)       Band     one    –     not     applicable    because    manufacture    of methamphetamine almost always involves significant commerciality.

(b)      Band two – manufacture of up to 250 grams - starting point 4-11 years imprisonment.

(c)       Band three – manufacture of large commercial quantities (250-500 grams) - starting point 10-15 years imprisonment.

(d)      Band four – manufacture of very large commercial quantities (500 grams or more) - starting point 13 years to life imprisonment.

2      R v Fatu [2006] 2 NZLR 72 (CA).

[33]     The Court in R v Te Rure3  however noted that conspiracy involves lesser criminality than supply and manufacture and I take that into account.

[34]   I have also examined a range of cases dealing with methamphetamine conspiracy, manufacture and supply, and I have now had the opportunity to sentence your co-offenders.   I do not propose to burden this sentence by reciting them, but they include  low  end  culpability  for  performing  the  role  of  a  real  estate  gofer attracting a sentence of eight months home detention but a starting point of two years, low to moderate level culpability for a confined precursor supply type role and a starting point of three years six months (Mr Situ), middle order culpability for active involvement in the enterprise with a starting point of seven years (Mr Linton), and then high end culpability for Mr Newton, and a starting point of ten years uplifted to 11 years to reflect the totality of Mr Newton’s offending.

Assessment

[35]     As to your offending, as signalled above, the jury found and I am satisfied there was a proper basis for finding that you were aware that Mr Newton was involved in the commercial level manufacture of methamphetamine, and that you knew that your substantial loan would assist Mr Newton in that enterprise.  You also stood to gain significantly from that loan – perhaps as much as $144,000.  I am not satisfied, however, that you were aware of the exact scale of the enterprise, or for that matter that your return on investment would be solely derived from it.   The bands do not therefore greatly assist with providing guidance in terms of where you sit in the spectrum.  Indeed there is a risk of speculation, or were I to rely solely on the Note, exaggeration in terms of your culpability.   In this regard, it cannot be suggested that the Note is definitive proof of the scale of your involvement, only that you were involved.   Indeed the Court of Appeal found that that the Note was not

produced as proof of the truth of what it asserts.4

[36]     Overall therefore I assess your culpability as opportunistic, motivated by

greed   but   without   a  clear  appreciation   of  the  full   scale  of  Mr  Newton’s

methamphetamine business.

3      R v Te Rure [2008] 3 NZLR 627 (CA).

4      McKenzie and Miles v R [2013] NZCA 378 at [39].

[37]     I therefore propose, as a first step, to reject Mr Newton’s starting point of ten years, for the reasons I have already given above. I then commence with Mr Linton’s starting point of seven years, as he was actively involved in most aspects of the conspiracy, and this is an appropriate general reference point for the scale of the conspiracy to manufacture.  But as you were not actively involved in the day to day operation,  I  consider  that  this  starting  point  should  be  reduced  to  reflect  your different more focused culpability.   Having said that, financing methamphetamine carries a special type of culpability, because it is the genesis of such activity.   In short, without it, the methamphetamine production cannot occur.  I therefore propose to reduce the starting point by 18 months from Mr Linton’s with the result that your starting point is properly five years and six months.

[38]   In terms of your personal circumstances, I broadly accept Mr Eaton’s submissions that you are entitled to a substantial discount for your prior good record, and in line with authority a discount is warranted of 20%.   I also accept that a lengthy prison sentence may have a disproportionate impact on you, in light of your age and emotional condition, and a further 10% discount is warranted.

[39]     A minimum period of imprisonment has not been sought and in any event I

would not impose one.

[40]    Accordingly Mr McKenzie, please stand, on one count of conspiring to manufacture methamphetamine, I sentence you to three years ten months imprisonment.

[41]     I understand that the application for forfeiture is not opposed and accordingly is granted.

[42]     Mr McKenzie please stand down.

Solicitors:

Raymond Donnelly & Co, Christchurch

JHM Eaton QC, Christchurch