R v Palmer

[2007] NZCA 167

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA336/06
[2007] NZCA 167

THE QUEEN

v

KEVIN MICHAEL PALMER

Hearing:14 March 2007

Court:Robertson, Baragwanath and Venning JJ

Counsel:E M Thomas for Crown

G C Gotlieb and R Langton for Respondent

Judgment:2 May 2007 at 11 am

JUDGMENT OF THE COURT

A        THE SOLICITOR-GENERAL’S APPLICATION FOR LEAVE TO APPEAL IS GRANTED.

BThe sentences imposed in the District Court are quashed.

CMr Palmer is sentenced to three years’ imprisonment on each count (the terms to be served concurrently) together with a fine of $100,000.

DMr Palmer is required to present himself to the Registrar at the District Court at Manukau on Monday 7 May 2007 at 9am to continue serving the term of imprisonment imposed upon him.

____________________________________________________________________

REASONS OF THE COURT

(Given by Robertson J)

The issues

[1]       This is an application for leave to appeal against concurrent sentences of two years’ imprisonment with leave to apply for home detention, together with a $100,000 fine, imposed on Mr Palmer after he had pleaded guilty to one representative charge of importing the Class B controlled drug Gamma-butyrolactone (“GBL”), one representative charge of supplying GBL and one charge of possession of GBL for supply.

[2]       The Solicitor-General contends that the sentence was manifestly inadequate because:

(a)the starting point of five years’ imprisonment adopted by the Judge was too low having regard to decisions of this Court; and

(b)the 60% discount given in recognition of mitigating factors (including the preparedness to pay a fine) was unsustainably generous.

[3]       This case raises questions relating to sentence indications given prior to guilty pleas being entered and the processes to be adopted where there is serious divergence about essential factual matters.  There is also a defence claim that the change in status of the drug had not sufficiently been drawn to public attention.

Factual background

[4]       Over a number of years prior to 2002, Mr Palmer had been a user of GBL which he obtained from gymnasia in the Auckland area.

[5]       On 31 May 2002 GBL became a class B controlled drug and Mr Palmer could no longer source it in New Zealand.  Prior to that the drug had been free of controls.

[6]       In mid-2004, New Zealand Customs became aware of the importation of GBL into New Zealand from a fictitious company based in Israel that sold to foreign buyers over the Internet.  It transpired that of 170 consignments despatched by August 2004, 22 had been sent to Mr Palmer in New Zealand.

[7]       There was an interception of a suspicious package in October 2004.  It was labelled “hair tonic” but was found to contain 4.42 litres of GBL.  In a combined police and Customs operation, a controlled delivery of this package took place.

[8]       When the police executed a search warrant at Mr Palmer’s home later that day, they found:

(a)       the package that had been intercepted;

(b)a one litre bottle of GBL;

(c)a safe containing 20 tabs of ecstasy (MDMA) and $48,000 in cash; and

(d)a laptop computer.

[9]       When spoken to by the police, Mr Palmer admitted importing the two bottles that were located.  He said the GBL was for his own use.

[10]     Further inquiries revealed that over a seven month period Mr Palmer had received a total of 125 litres of GBL in the 22 consignments.  On the basis that it had a street value of $4 per millilitre, the police estimated it could be worth up to $2.5 million.  This was on the basis that it would be diluted 4 to 1 before supply.  The Crown accepted that Mr Palmer in fact sold the drug for only $3 per millilitre so on that assumption the value would have been more like $1.8 million.  Mr Palmer contended that he never diluted what he received so on that basis its value would be under $500,000. 

[11]     Mr Palmer contended that the basic importing was for his own use, although he accepted that he did supply some of the product.  A financial analysis showed that Mr Palmer had at least $100,000 of unexplained income during the relevant period.

[12]     In addition to the three charges mentioned at [1], Mr Palmer was also charged with supplying the Class B controlled drug MDMA (ecstasy) and being in possession of ecstasy for supply.

[13]     Prior to the proposed trial date, a s 347 application was filed in respect of all counts.  The defence filed a memorandum of agreed facts in which Mr Palmer admitted importing and selling GBL, but it was noted:

(a)GBL had been a legal substance until 31 May 2002 and was commonly sold in stores throughout the country up to that time;

(b)Mr Palmer was aware that at some point the drug had been removed from easy sale in stores and had become “scheduled”;

(c)Mr Palmer may have thought that “scheduled” meant that GBL was unable to be imported without a licence; and

(d)Mr Palmer may not have known that “scheduled” meant that GBL was a “controlled drug” in terms of the Misuse of Drugs Act 1975.  He may not have known the true situation, that GBL was in fact a Class B drug of which the maximum penalty for importing or supplying was 14 years’ imprisonment.

It was contended at the hearing of the s 347 application that Mr Palmer lacked the requisite intent in relation to the charges involving GBL and that there was insufficient evidence to support convictions in relation to the ecstasy charges. 

[14]     The s 347 application was dismissed. 

[15] There were then a series of telephone conferences following a request by Mr Palmer’s counsel for a sentence indication. In the course of discussion, Mr Palmer indicated he would be willing to pay a fine of $100,000 under s 38 of the Misuse of Drugs Amendment Act 1978 if the Solicitor-General ceased proceedings under the Proceeds of Crime Act 1991. This was agreed to, as was the withdrawal of the charges relating to ecstasy. We were told by Mr Gotlieb the withdrawal was because an essential Crown witness was unwilling to give evidence. Normal practice is for such people to be summonsed to see what in fact their position is when confronted with their legal obligation rather than simply flagging away charges because of that type of pre-indication.

[16]     Despite Crown submissions urging a very different approach to the case, on 30 June Judge Clapham (who had been seized of the matter throughout) indicated a sentence of two years’ imprisonment with leave to apply for home detention and a fine of $100,000.  The Judge said this was on the basis of a starting point of five years’ imprisonment with a 60% discount in respect of the mitigating factors.

[17]     On 3 July pleas of guilty were entered in reliance on that sentencing indication. 

[18]     Preparatory to sentencing, the Crown, in written submissions, argued further that the indicated sentence was not within the available range.  Notwithstanding those submissions, on 18 August the Judge sentenced as he had indicated he would, making it clear that he had some “understanding and sympathy” for Mr Palmer given the change in status of GBL in 2002.  He found that this “uniqueness” coupled with the “personal circumstances” of the appellant warranted a sentence at the bottom of the available range.  The Judge cited as other mitigating factors:

(a)       age;

(b)guilty pleas;

(c)previous good conduct and character;

(d)remorse;

(e)family support; and

(f)the positive pre-sentence report.

The process

[19]     One of the difficulties which emerged in the hearing of this appeal arises from the position taken by the prosecution and the defence in the District Court prior to sentence. 

[20]     Mr Gotlieb submitted that pleas of guilty were entered on the basis of the agreed factual concessions which had been made for the s 347 application. Although it was by then acknowledged that, in terms of s 25 of the Crimes Act 1961, ignorance of the law could be no defence, counsel argued there was a legal status where although technically guilty, a person’s culpability was greatly reduced by reason of their appreciation or understanding of both the factual and legal significance of the drug.

[21]     It is not necessary to determine whether such an area exists, or what its metes and bounds might be in the context of this case.  There are major issues of principle and serious practical applications in its adoption.  But have no doubt that, if such an exercise is ever to be contemplated, it would require the clearest and most unequivocal agreement as to a factual position, or an evidential hearing leading to unambiguous findings of fact.

[22]     In the present case, some open-ended and arguably ambiguous generalisations were agreed upon for the purposes of determining whether there was legal liability.  In an extraordinarily short timeframe (and in what appears to have been a series of telephone conferences) this was treated by the defence (and it seems the Judge) as a general concessional stance with regard to moral responsibility.

[23]     With respect to all involved, the fact that the Crown so consistently maintained that the sentencing indication was beyond the Judge’s sentencing discretion should have provided the clearest warning that the parties were not in agreement about the factual context.  There had been no evidence and therefore no adjudicative findings could be made.  This lack of synchronisation of position was not grasped or dealt with.  The sentencing Judge acknowledged its existence and the possibility of this appeal, but that has not been helpful for anyone.

[24]     The consequence is that this Court is even now being invited to adopt a view of the facts which lacks a precise and proper factual foundation.

[25]     Both counsel have been provided with an opportunity to file further information as to the steps taken to promulgate the fact that GBL had become a class B controlled drug and therefore dealing with it rendered any person liable to 14 years’ imprisonment.  The Hansard report of Parliamentary debate records that on 16 April 2002 reference was made to the fact that a drug that had been legal for dietary purposes was being declared to be one whose possession could lead to 14 years’ imprisonment.  The need for reclassification arose from New Zealand’s obligation to conform with UN criteria for dangerous drugs.  An Order in Council effecting the reclassification was made the same day.  The Ministry of Health issued a pamphlet warning of its effects.  The factual and legal consequences of the reclassification were posted on the National Drug Policy website.

[26]     The procedure in the District Court of sentencing on the basis of the brief summary agreed for the s 347 application was quite unsatisfactory.  Either the facts should have been agreed in substantial detail or there should have been a disputed facts hearing directed to the knowledge and appreciation of Mr Palmer.  We are not unmindful of a video interview with the police, but the necessary probing, challenging and confronting which would have occurred had he given evidence and been cross-examined is not available. 

[27]     The offending came to light in October 2004.  Mr Gotlieb told us that he engaged the services of a university professor and the author of a text on the Misuse of Drugs Act to provide him with assistance as to the possibility of a defence on the basis of his client’s claimed lack of knowledge about the status of GBL. 

[28]     It was over 20 months before the pleas were entered. Apparently there was conflicting advice provided by the two experts.  It was only after the unfavourable s 347 ruling and the sentencing indications were given that Mr Palmer entered pleas of guilty. 

[29]     Mr Palmer was sentenced in August 2006 to two years’ imprisonment.  Although granted leave to apply for home detention, he served over three months in prison before he was in fact granted leave.  We have received material from his probation officer and others who have been involved in the intervening period with regard to the change which has occurred in Mr Palmer’s life.  None of this makes the Court’s role and responsibility easy.

[30]     A sentencing indication of the type given was never appropriate.  The decisions of this Court as to the limited way in which that mechanism can be engaged were certainly not met.  Importantly, the Judge should have been conscious that there was a fundamental divergence of view as to culpability and legal responsibility which could not be resolved without evidence. 

[31]     The s 347 concessionary provision may, to a degree, have been confusing but there was never a sufficient degree of precision about what was agreed.  There had been no formal adjudication for the Court to find that a particular set of circumstances existed from which the proposed sentencing consequences could flow.

The appeal

[32]     This case is not assisted by the absence of a complete record of Judge Clapham’s sentencing remarks.  We know the Judge took the starting point of five years he had used in the sentencing indication.  That is the bottom of the Wallace second band which is 5-8 years.  This is only explicable on the basis that the Judge made a concession or allowance for Mr Palmer’s state of mind about the change in the legal classification of GBL.  It was an error to do so at that part of the equation and aggravated by a further allowance for the same issue in the discount which he subsequently gave.

[33]     Starting points reflect the Court’s assessment of the degree of culpability which attaches to the offence.  Bearing in mind that a minimum of $500,000 worth of a class B drug was imported over a period of more than nine months, with distribution to known and unknown persons providing an income stream in excess of $100,000, the offence called for a minimum of seven years’ imprisonment as a starting point even if the operation lacked sophistication.

[34]     This is what the Crown was consistently saying to Judge Clapham in memoranda of 30 June and 10 August 2000.  There was no established basis to deviate from that position or sufficient articulation as to why it occurred.

Uniqueness

[35]     This aspect, which was so influential with the Judge, relates to the fact that there had been a change of classification of GBL two years previously. 

[36]     Ignorance of the law is not a legal defence although it may in some circumstances bear on penalty.  We need not consider the case of failure to promulgate change because that was done both by both the Hansard record and the website entry.  In R v Rimmington [2006] 1 AC 459 Lord Bingham referred at [33] to an earlier statement of the principle that elementary justice is achieved if:

… the rules of which the citizen is to be bound [are] ascertainable by him (or more realistically by a competent lawyer advising him) by reference to identifiable sources that are publicly accessible.

That standard was met.

[37]     Moreover, the subterfuge of mis-labelling which was adopted is hardly consistent with a person believing what they were doing might only have breached some importing regulations.  The comments made to the police on arrest are equivocal.  At no stage had Mr Palmer been directly misled by anyone in authority with regard to the status of the material.  He later admitted having been told by a colleague that what he was doing was illegal.

[38]     The only contention to the contrary was that some of the shipments which Mr Palmer received were marked “opened and inspected by Customs”.  Mr Gotlieb argued this could be seen as an indication to Mr Palmer that what he was doing was not unlawful.

[39]     The ingenuity of Mr Gotlieb’s argument is commendable, but for this to have been a matter of influence or direct relevance it required a proper evidential foundation and either agreement of the parties or a probing and testing of the contention in the traditional method.  There was neither.

[40]     Again we are led into the meaning to be attributed to the factual concessions made for the s 347 application.  Mr Gotlieb submitted the Crown must always prove beyond reasonable doubt the full moral culpability of a person in respect an offence to which they plead guilty.  That is not the law.  If there is ever to be the possibility of reduced culpability because of lack of knowledge or appreciation, it could only arise in a case where a defendant raises a credible evidential basis for its consideration.  It did not occur here.

[41] The sentencing Judge made the allowance of 60% for mitigation generally. This included the aspect of “uniqueness”, the fine to which we will return, and the other mitigating factors which are catalogued at [18].

[42]     As we subsequently conclude, the $100,000 fine is neutral.  In a drug case the matters which are listed as mitigating are anything but out of the ordinary.  In an area in which deterrence and condemnation are of prime importance they cannot be given much weight.  It is impossible to avoid the conclusion that the Judge, having already reduced the starting point because of his sympathy for Mr Palmer, then made an allowance which must be approaching half the sentence on that basis of this “uniqueness”.

[43]     Guidelines and appellate indications are not inflexible, but they respond to the clear public interest in consistency and uniformity of approach which are fundamental factors in any sentencing exercise.  They received insufficient attention in this case.

The $100,000 fine

[44] Mr Gotlieb placed considerable emphasis on the fact that his client had willingly agreed that the penalty imposed should include this substantial fine. Payment of it was part of a deal in which the Crown agreed not to pursue Mr Palmer under the Proceeds of Crime Act 1991.

[45]     Section 38 of the Misuse of Drugs Amendment Act 1978 provides:

38Fine may reflect illicit gains

In any case where any person is convicted of a drug dealing offence and the Court by which he is convicted is satisfied on the balance of probabilities that any money or assets owned by the offender at the date of his trial has or have been acquired by him directly or indirectly from the offence, the Court may, having regard to the amount of such money or the value of such assets, impose a fine greater than it would otherwise have imposed on the offender for the offence.

[46] Section 38 empowers the Court to impose a fine as well as a prison sentence. This is an express exception to s 19 of the Sentencing Act 2002. Under s 38 the imposition of a fine operates not as a sanction on an offender but aims to remove the profits from drug offending. In this way it may be used as a legitimate alternative to the Proceeds of Crime Act 1991.

[47]     The imposition of a fine in accordance with s 38 does not, therefore, necessarily need to be taken into account in considering the totality principle.  The Court of Appeal stated in R v Brough [1995] 1 NZLR 419 at 424:

It is our conclusion, having regard to the scheme of the [Proceeds of Crime] Act that as a general proposition, confiscation orders under the Act should not be taken into account when assessing sentencing, subject to two qualifications.  First, there may be exceptional or unusual circumstances where orders are made, particularly orders to forfeit valuable property used in the commission of an offence, may have a disproportionate or exceptional affect on the offender, sufficient for some regard to be had to it when imposing sentence.  Secondly, recognising that one of the purposes of the sentence to be imposed is to deter others who may be minded to commit like offences, if forfeiture orders of property used in the commission of offences are particularly severe, some adjustment to the sentence may be appropriate because the deterrent effect of the forfeiture orders may lessen the need for the deterrent element in the sentence.  But it is difficult to conceive of circumstances where orders to forfeit the proceeds of the offence or for a pecuniary penalty order reflecting the benefit derived from the commission of an offence, should have any relevance to an appropriate sentence.  These reflect the offender’s ill-gotten gains which, in accordance with the policy of the Act, and irrespective of sentencing for offences, the offender should be required to disgorge.

[48]     We do not overlook what this Court said in R v Jury CA148/02 3 October 2002 about the combination of penalty, but in the circumstances of this case the agreement to pay the $100,000 fine in return for no action under the Proceeds of Crime Act 1991 must be seen as neutral. The fine was elevated to an unrealistic level. There was powerful evidence which would have supported forfeiture and confiscation. The financial arrangement avoided that occurring, but it was not an additional detriment for Mr Palmer.

Conclusion

[49]     Even allowing for the high threshold which the Solicitor-General must reach to obtain leave to challenge a sentence, we are unable to avoid concluding that an effective sentence of two years’ imprisonment, even together with the fine, was never available.  If the Judge had been provided with an evidential foundation that there had been a failure to promulgate the change in status of GBL as adequately as might have been the case and Mr Palmer had a genuinely held but mistaken belief that he was still dealing in a substance which was unlawful only in some bureaucratic regulatory sense, there was still a problem.  The size, scale and nature of the operation meant that an effective sentence of at least four years could not be avoided.

Consequences

[50]     We discussed with counsel the effect of such a finding. 

[51]     In terms of the reasoning of the Supreme Court in R v Sipa and Edwards [2006] NZSC 52 at [8] and [9] there is clear evidence that Mr Palmer made his decisions to plead guilty on the basis of the sentencing indications. There should have been an affidavit to that effect, but the Crown responsibly acknowledged the inter-relationship. It is in the extreme circumstances self-evident.

[52]     In these circumstances Mr Palmer had to be given the opportunity to withdraw his pleas and the whole issue of culpability and legal responsibility reconsidered from scratch.

[53]     Mr Gotlieb took instructions during an adjournment.  He advised that now, more than two and a half years after the last of the offending and his client’s arrest, Mr Palmer was anxious to get the matter behind him.  He acknowledged his right to withdraw his guilty pleas, but confirmed that he did not wish to do so.

[54]     We appreciate that human reaction, but it provides additional complication because in what can only be described as a quite inappropriate use of the sentencing indication tool, Mr Palmer at this late stage now finds himself in a precarious position.

[55]     We are satisfied that this is one of those extraordinary cases in which to recognise all that has gone wrong in the process (the responsibility for which cannot be laid at the feet of Mr Palmer) it is appropriate to impose a sentence markedly less severe than otherwise would have been justified.  In doing so the Court declares the proper approach for the future, but recognises the fundamental problems which have occurred.

Result

[56]     The Solicitor-General is granted leave to appeal.  The sentences of imprisonment imposed are quashed.  Mr Palmer is sentenced to three years’ imprisonment on each of the charges.  In our view any lesser penalty is simply not available even in the circumstances as they have developed, even allowing for the $100,000 fine which remains.

[57]     Issues of home detention which arose in respect of the two year sentence (and which we suspect were a major influence in tailoring of length of the term) do not arise.

[58]     Accordingly Mr Palmer is required to present himself to the Registrar at the District Court at Manukau on Monday 7 May 2007 at 9am so he can continue serving the term of imprisonment imposed upon him.

Solicitors:
Crown Law Office, Wellington