R v Southern Boundary Wines Limited (in liquidation)
[2020] NZHC 514
•13 March 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CRI-2017-009-000443
[2020] NZHC 514
THE QUEEN v
SOUTHERN BOUNDARY WINES LIMITED (In Liquidation) SCOTT CHARLES BERRY
ANDREW RONALD MOORE REBECCA JUNELL COPE
Hearing: 13March 2020 Appearances:
K South for Crown
No appearance for Southern Boundary Wines Ltd A J Davis for Defendant Berry
S J Shamy for Defendant Moore K Basire for Defendant Cope
Judgment:
13 March 2020
SENTENCING NOTES OF DUNNINGHAM J
Suppression
[1] Judge O’Driscoll made interim suppression orders on 23 August 2017 in relation to persons or entities connected to the victims of the offending. I am satisfied it is appropriate to make these suppression orders permanent in relation to the following persons, wines, brands and vineyards:
[redacted]
R v SOUTHERN BOUNDARY WINES LIMITED (In Liquidation) [2020] NZHC 514 [13 March 2020]
[2] Ms Cope has also sought name suppression of her current employer. Such an order is available under s 202 of the Criminal Procedure Act. Again, I consider it is appropriate to suppress those details so that her employer is not tainted by association with this offending.
[3] Ms Joanne Eaton who was an employee at the company and alerted MPI to this offending, asks that the name suppression order previously made in relation to her now lapse. Given the order was made for her benefit, I have no difficulty with this and name suppression for Ms Eaton now lapses.
[4] Ms South also asked for name suppression of Ms Eaton’s current employer and I grant name suppression on the same grounds.
Sentencing
[5] Scott Berry, Andrew Moore and Rebecca Cope all appear for sentencing today having pleaded guilty to charges arising under the Wine Act 2003. The company, Southern Boundary Wines Ltd (In Liquidation) is also to be sentenced today, having been found guilty of charges under the same Act following a formal proof hearing held on 3 February 2020.1
[6] Mr Berry has pleaded guilty to 23 charges of offences under s 97 of the Wine Act involving deception, five of selling non-compliant wine under s 99 of the Act and eight of exporting non-compliant wine under s 100. Mr Moore faces four charges of offences involving deception under the Wine Act, four of selling non-compliant wine, and eight of exporting non-compliant wine, nine of which are representative charges. Rebecca Cope faces three representative charges; one of deception under the Wine Act, one of selling non-compliant wine and one of exporting non-compliant wine.
[7] The factual allegations which underpin these charges are complex and were only able to be established by an extensive investigation. Indeed, the summary of facts alone runs to 36 pages. I do not intend to give a full account of the factual details
1 R v Southern Boundary Wines Ltd (In Liquidation) [2020] NZHC 476.
supporting the 91 charges I am dealing with today, but rather to outline them in summary form.
The legislative framework governing the wine industry
[8] However, before I do that, it is necessary to briefly explain the statutory requirements of the Wine Act to provide some context.
[9] The wine industry and export market is regulated by this Act and by subordinate legislation which are designed to ensure that New Zealand meets international winemaking standards and can therefore export wine to overseas markets.
[10]The Wine Act required Mr Moore and Mr Berry to:
(a)ensure the operation of the company did not contravene the relevant requirements of the Wine Act and the requirements set out in its Wine Standards Management Plan;
(b)ensure that its Wine Standards Management Plan was consistent with the requirements of all regulations and notices in force under the Act;
(c)adequately implement and resource all operations under the Wine Standards Management Plan; and
(d)ensure its staff were appropriately instructed and supervised, to make wine that is “fit for its intended purpose” under the Act.
[11] One of the key requirements is that grape wine must not be associated with false or misleading labelling of any kind concerning:
(a)grape variety;
(b)vintage; or
(c)the area where the grapes are grown.2
[12] A specific requirement for wine label statements is what is known as the “85 per cent rule”. This provides that where grape wine label includes a statement regarding a single grape variety, vintage, or area of origin, at least 85 per cent of the wine to which the statement refers must be from the stated variety, vintage, or area of origin.
[13] The Act and subordinate legislation also place obligations on winemakers and operators to keep and maintain records to demonstrate compliance with the Wine Act. These records must enable:
(a)individual wines to be separately and clearly identified;
(b)all winemaking inputs to be identified and traced back to the suppliers of these inputs; and tracked forward to the wine or wines in which they were used; and
(c)all wines to be tracked to the next person or company in the supply chain.
[14] The key reasons for maintaining records for wine and winemaking inputs are to enable:
(a)grapes used to make that wine to be tracked from their vineyard of origin through to the sale of wine; and
(b)wine in a particular package to be traced back to the source vineyards of the grapes in which the wine was made; and
(c)the truthfulness and accuracy of any label statements on packaged wine regarding grape variety, vintage, area of origin, and country of origin to be determined.
2 The Wine Regulations 2006.
[15] I also need to say something briefly about the export process. All operators who export wine must have had their wine produced and bottled under a Wine Standards Management Plan. A sample of the wine produced must then be submitted for sensory evaluation to the Wine Export Certification Service (WECS). This is to allow MPI to be satisfied that the wine:
(a)is free from obvious fault; and
(b)has a related set of audited winemaking records that enable full traceability of the wine.
[16] The samples of wine that are submitted to WECS must relate to a homogenous amount of wine that is ready to be exported without further winemaking adjustments. This is to ensure that what is sampled represents the entire volume which is exported. An export eligibility statement is then required by the New Zealand Customs Service before any wine can be exported from New Zealand and, to gain access to the European Union, an exporter also needs a VI1 certificate for export. This is an official government to government assurance which provides confirmation that any wine export complies with all export eligibility requirements.
The offending
[17] During the period in question, Scott Berry and Andrew Moore were both directors of the defendant company, Southern Boundary Wines Ltd (Southern Boundary). Mr Berry held the role of production manager and was involved in the day to day operations of the winemaking and bottling business and was also a director and shareholder. Mr Moore held the role of CEO, was operations, sales and export manager and was also a director and shareholder.
[18] Rebecca Cope was employed as a winemaker and winery manager, but was neither a shareholder nor a director. She was, however, directly involved in many of the winemaking activities that are the subject of the charges.
Client wine
[19] During the period in question, Southern Boundary, through Mr Berry in particular, offered winemaking services to third party grape growers. It was either a specific contractual term or an implied term as between Southern Boundary and the client, that the client’s wine would at all times remain separate from other wines and would be returned to the client in a condition fit for sale and export. In other words, it would meet the requirements of Part 2 of the Wine Act. However, three clients’ wine was knowingly substituted and adulterated during 2012 and 2013.
[20] The J and D families ran E Ltd. That company provided Southern Boundary with grapes from its vineyard and 8,400 litres of grape juice was initially produced for their single vineyard label. However, this wine was added to another 32,000 litres of other wine, containing untraceable additions, without client authority. This meant all the wine was rendered untraceable and the single vineyard claim was invalidated.
[21] While almost all of the wine was sold, the negative reviews of the wine were directly linked by the J and D families to the failure of their business. Southern Boundary and Mr Berry were also party to the export of the non-compliant wine.
[22] Southern Boundary was also engaged by G, through its director, F, to make its 2013 Waipara Sauvignon Blanc. It is unclear what volume was initially produced from the client’s grapes because of a lack of records, but the initial volume was between 32,000 and 37,000 litres. This volume was then intermingled with other wine leading to a total tank volume of 44,800 litres. Because untraceable additions were made, all of this wine was rendered non-compliant and unsaleable. The company and Mr Moore arranged the sale of 20,700 litres of this wine knowing it did not meet the requirements of the Wine Act.
[23] The third client was C which contracted Southern Boundary to make its 2012 B Sauvignon Blanc.
[24] Approximately 170,000 litres of grape juice was made from the grapes C supplied from the Awatere Valley in Marlborough. The last 92,000 litres remained with Southern Boundary longer than expected and when Southern Boundary ran out
of its own 2012 Marlborough Sauvignon Blanc, Scott Berry and the company authorised approximately 38,500 litres of the B wine to be used for Southern Boundary’s purposes, later replacing B’s 2012 wine with untraceable 2013 wine, thus irreversibly tainting it. The 92,000 litres could not be sold at all, resulting in a very significant loss to C as is described by its group chief executive officer, A, in the victim impact statement.
Southern Boundary Wine
[25] Southern Boundary also grew its own grapes and made its own wine labelled under a variety of labels for both export and domestic sale, and the remaining charges relate to the company’s own wine.
[26] In 2013 Southern Boundary produced a total of 93,200 litres of pinot noir. A small volume, about four per cent of the total production, was rendered non-compliant because:
(a)2,605 litres of 2013 Marlborough Pinot Noir was mislabelled and sold as “The Springs” Waipara Pinot Noir;
(b)1,553 litres of 2013 The Springs Waipara Pinot Noir Blend 2 was mislabelled as “H” Marlborough Pinot Noir.
[27] Although the volumes were small, there was deliberate dishonest mislabelling where the company and its directors did not have stock on hand, but needed to meet an order. There are also sale and export charges which relate to selling this mislabelled, and therefore non-compliant, pinot noir wine.
[28] The primary offending relates to the company’s production of sauvignon blanc. Sauvignon blanc was a large part of Southern Boundary’s production. For example, in 2013, the company produced 344,073 litres of sauvignon blanc which was just under 60 per cent of its total production, and similar proportions were produced in other years.
[29] There are a number of charges which arise out of blending, mislabelling and then selling and exporting the resultant non-compliant wine.
[30] Five hundred and four litres of the company’s 2011 Waipara Sauvignon Blanc was sold as 2010 Sauvignon Blanc and this is an example of the defendants simply labelling to fill orders, despite stock having run out, and therefore exporting non-compliant wine.
[31] The company’s 2013 Waipara Sauvignon Blanc had 1,674 litres labelled as 2012 Sauvignon Blanc when orders were received for 2012 wine but there was no stock on hand for that vintage. The wine was then exported even though it did not have export eligibility approval because it had not been submitted for testing. Some of the same wine was also exported to the United Kingdom and needed an official assurance, known as a VI1 certificate to go to the importing company to provide assurance that the wine complied with the requirements of the EU. That certificate was applied for and granted when the wine had not been tested or approved as required.
[32] On 24 February 2014, Southern Boundary created a blend of Waipara Sauvignon Blanc and Marlborough Sauvignon Blanc, but where the Marlborough contribution included untraceable additions. The resulting blend was therefore a combination of Marlborough grapes, Waipara grapes and unknown grapes. Although neither a Waipara nor a Marlborough area of origin claim was valid, 657 litres of the blend was bottled and sold as Waipara wine and 441 litres was bottled and labelled as Marlborough wine.
[33] The next bottling of 20,723 litres of the 2013 Waipara Sauvignon Blanc is untraceable due to a 4,000 litre untraceable addition being made on 13 June 2013. This wine was then sold on both the domestic market and exported overseas. The export eligibility application submitted falsely declared 20,970 litres had been bottled and packaged when in fact only just over 1,000 litres had been bottled at that stage. This meant that the remaining volume could continue to be modified and would not be tested by WECS. Between 24 July 2013 and 26 June 2014, the equivalent of
nine different batches were created, many of which resulted in exports being made of untested and unapproved wine.
[34] In 2012 Southern Boundary made a variety of Marlborough Sauvignon Blanc wine from its grapes. All of this wine is non-compliant because of untraceable editions. Southern Boundary then applied for an export eligibility approval for 11,520 litres of this wine identified as 2012 Marlborough Sauvignon Blanc, although this wine was untraceable and had no related set of winemaking records. Despite that, the company falsely represented that the wine did have the required winemaking records and met the requirements of the Wine Act. There were then the associated actions of making a false application for export eligibility approval and for exporting the non-compliant wine.
[35] Finally, the company’s 2013 Marlborough Sauvignon Blanc also contravened the requirements of the Wine Act in a number of ways. For example, it labelled and marketed wine under the 2013 Bascand Estate Single Vineyard Sauvignon Blanc label, when in fact this wine was made from the same grapes and wine as all other 2013 Marlborough Sauvignon Blanc labels that the company produced and there was no special treatment or separation of the grapes from the Bascand Vineyard. Furthermore, the defendants made repeated additions of other wine from various sources to its own 2013 Sauvignon Blanc. For example, on various dates in 2013 it made additions of 2,151 litres of 2013 Southern Boundary Waipara Reisling, 4,000 litres of 2013 K Marlborough Sauvignon Blanc, and 13,387 litres of F Waipara Sauvignon Blanc.
[36] Furthermore, while Southern Boundary only ever produced 40,723 litres of Marlborough Sauvignon Blanc, it bottled 70,150 litres and exported 63,686 litres of that wine. There were then false applications made for export eligibility approval, false applications for export eligibility statements, and then exports of this non-compliant wine. As the Crown notes, all of this wine was non-compliant due to a lack of traceability.
Consequences of the offending
[37] The offending has had a wide range of effects, both specific and general. The specific effects of the offending can be seen in the victim impact statements from D of E and from A of the C group of companies.
[38] D explains the devastating effect this offending had on their small family held company. The business began well, with its first vintage in 2009 winning multiple awards. However, the company’s sales declined from 2012, when customers raised concerns about the quality of their wine. Now D knows why the wine was deficient D feels devastated by the deceit that has been perpetrated on D and D’s family. The consequences of this have been both financial and psychological damage for D and D’s family, and D has not been able to continue the business. D says the direct consequential loss to their company for wine they have been unable to sell, is $28,392, plus the company has suffered consequential losses of at least an additional $83,660 from the loss of future sales. D has simply not been able to quantify in dollar terms what the loss of the business and the emotional damage on D would be.
[39] A, from C explains the impact this has had on the company’s cashflow, reputation and employees. The company has 125,867 bottles of wine which has had to be destroyed because it is in breach of the Wine Act and this wine had an estimated book value of $1,300,000. The company has also had to store wine as a result of complying with MPI notices, and the total cost of storage has been approximately
$40,000 per annum. The cost of disposal of the unsaleable wine is about $63,000. It is not yet known whether C’s loss is covered by insurance, as C is suing its insurers who have declined their claim. In any event, insurance would only meet a maximum of $800,000 of this loss.
[40] A also says that C has suffered reputational damage, noting that customers from China had remarked that the wine that was affected by the offending tasted inferior to what they were used to. A explains that it caused a delay in their plans for further overseas expansion and was disruptive to C’s momentum as a growing business. A also says that the offending has had effects on the business and on staff. The
investigation has created significant compliance costs. It has also absorbed countless hours of A’s own time and that of senior staff.
[41] There is also a statement from Jeffrey Clark who is general counsel for the organisation, New Zealand Wine Growers. He speaks on behalf of the industry and outlines the effect such offending has on it. He notes wine growing’s importance to New Zealand’s export revenue bringing in nearly $2 billion in 2019.
[42] He explains why the Wine Act and the associated regulations were introduced. They were designed to underpin the faith that consumers have in the identity, truthfulness in labelling, and safety of the New Zealand wine product. He explains that New Zealand has a global reputation for being a high quality, distinctive and innovative wine producer and New Zealand wines can command a premium price for that. However, that reputation is fragile and at risk of being tainted by this type of offending. He notes that when the offending first became public, some of New Zealand’s larger wineries had inquiries from overseas customers asking them to provide an explanation and a reassurance that the prosecution was not indicative of broader problems in the New Zealand industry. He asks that in sentencing, I make it clear that, despite these breaches, the affected wine was safe to consume as being one way to mitigate some of the reputational damage done by this offending.
[43] Finally, he notes that such prosecutions have a deterrent effect as there have been a significant increase in queries from wine makers seeking to ensure that they now understand their compliance obligations.
[44] There is one further victim of the offending I need to refer to. That is, Joanne Eaton, the employee, who raised her concerns about what was going on in the company with MPI. Her involvement has taken a significant toll on her despite the fact her concerns were entirely justified and have resulted in this prosecution.
[45] She has incurred costs in engaging a lawyer to assist her in dealing with MPI and with her employers. She then says that she has been blacklisted from employment in the local wine industry. This has forced her to retrain in a new career, starting on lower pay than she had received as a winemaker. She says that as a result, primarily
of misinformation that was communicated within the industry, her reputation has suffered. Understandably she feels that the dishonesty of Southern Boundary wines and her employers has cost her her good reputation in an industry that she loved.
[46] She also outlines the emotional toll the last six years have taken on her, causing her sleeplessness, depression and anxiety. It has led to her avoiding wine-related functions for fear of coming into contact with the company representatives. She also felt frustrated at being unable to defend her reputation due to MPI’s request not to discuss the case openly. She says that her experience over the past six years has made her sure she would never take on the role of whistle blower again, and that is profoundly concerning to me.
Purposes and principles of sentencing
[47] Having described the offending in general terms, and the direct and indirect consequences of it, I now want to turn to the sentencing exercise. I accept, as the Crown says, that the purposes of sentencing which are most engaged today are:3
(a)the need to hold the defendants accountable for the harm done to the community by the offending; and
(b)to promote in the defendants a sense of responsibility for, and an acknowledgement of, that harm; and
(c)to denounce the conduct in which the defendants were involved; and
(d)to deter the defendants or others from committing the same or similar offences.
[48]I also have to take into account various sentencing principles.4 These include:
(a)the need to assess the gravity of the offending, and the degree of culpability of each offender;
3 Sentencing Act 2002, s 7.
4 Section 8.
(b)the need to take into account the seriousness of the type of offence in comparison with other types of offences as indicated by the maximum penalties prescribed for the offences;
(c)the need to impose a penalty near to the maximum prescribed for the offence if the offending is near to the most serious of cases, unless circumstances relating to the defendants make that inappropriate;
(d)the need to take into account the general desirability of consistency with the sentences imposed on similar offenders, committing similar offences, in similar circumstances;
(e)the requirement to impose the least restrictive outcome that is appropriate in the circumstances; and
(f)the need to take into account any particular circumstance of the offender that would make a sentence which would otherwise be appropriate, in the particular circumstance, disproportionately severe.
[49] In this case, a large number of the charges arise under s 97 of the Wine Act, being offences involving dishonesty. These carry the highest penalties under the Act being a maximum fine of $500,000 for a company and, for individuals, a maximum of five years imprisonment and a $100,000 fine.
[50] The offences of selling non-compliant wine or exporting non-compliant wine attract a maximum penalty of $250,000 for the company or a $50,000 fine for an individual.5
[51] I also accept that in setting a penalty I must have regard to the objects of the Wine Act and these include to:
…
5 Under ss 99 and 100 Wine Act 2003 respectively.
(c)facilitate the entry of wine into overseas markets by providing the controls and mechanisms needed to give and safeguard official assurances issued for the purpose of enabling entry into those markets:
(d)enable the setting of export eligibility requirements to safeguard the reputation of New Zealand wine in overseas markets:
Aggravating factors of the offending
[52] Before turning to the sentencing of the individual defendants, whose circumstances differ greatly, I propose to make some general comments about the gravity of the offending, both in and of itself and in comparison to other similar offending.
[53]The Crown identifies the aggravating features of the offending is as follows:
(a)There was a high degree of pre-meditation in this offending. When the company ran out of volume, the defendants simply bottled and labelled more wine regardless of the accuracy of the vintage or regional claims. It put sales and financial returns ahead of truthful labels.
(b)There was a breach of trust. Ms South submits that the wine export regime relies upon the honest inputting of winemaking-related data by industry participants. The reliability of the system is undermined for the whole industry where deliberately false statements are made to bypass the testing regime to obtain certification.
(c)There was a multiplicity of offending. Ms South pointed out that the offending occurred on multiple occasions in relation to both client and company wine and in relation to different varieties of wine from three different vintages.
(d)The offending risked damage to New Zealand’s significant wine export market and to the reputation of the New Zealand government.
(e)Staff were directed to carry out instructions which involved them in the offending, in some cases resulting in their own careers being adversely affected.
(f)The volume of wine affected by the offending is substantial, calculated at over 330,000 litres across client and company wines, and 100 per cent of the 2012 and 2013 vintages of sauvignon blanc wine was rendered non-compliant.
(g)Finally, Ms South suggests an aggravating feature of the offending is the cost of the investigation which she says at this stage is in excess of
$700,000. This was exacerbated by the time taken to disprove Southern Boundary’s detailed “explanation” document as false.
[54] I generally accept the aggravating features which have been identified by the Crown, except I do not agree that the cost of the investigation itself is an aggravating feature. That is simply a consequence of the identified aggravating features, including the extent of the offending and the fact that some of the offending involved providing false documents to MPI. I consider, however, that a further aggravating feature is the significant adverse effect the offending had on clients’ businesses, in addition to the identified effects on staff.
Mitigating features of the offending
[55] In terms of mitigating features, the Crown accepts that the resultant wine was not unsafe for human consumption and that the pressures were created, in part, by the volume of the 2013 vintage. Ms South also acknowledges that there are mitigating features of Ms Cope’s offending in that she did not initiate it, but became involved with it due to work pressures and the directions of her employers, and I accept those submissions.
Relevant sentencing decisions
[56] There are only two other instances of sentencing for offending under the Wine Act. The first is the decision in MPI v Yealands Estate Wine Ltd.6 In that case, the company director and two winemakers were charged with adding sugar, post-ferment, to wine destined for the EU markets. While this is an acceptable additive in most other wine markets, it is a banned post-ferment additive in the EU. A large volume of wine was affected, although it was a small fraction of the company’s overall production.
[57] The company faced five representative charges of making a false statement in export eligibility applications, and five recordkeeping charges, and the winemakers and director each faced the same charges.
[58] In that case, the Court adopted an overall starting point of $600,000 for the company (being 12 per cent of the notional maximum penalty of $5,000,000 on all charges), $120,000 and $109,000 for the two winemakers (again 12 per cent of the notional maximum penalty that each faced), and $80,000 for the director (being eight per cent of the notional maximum penalty of $1,000,000), noting that his culpability was less than those who directly participated in the offending.
[59] Taking into account various other matters, including good character, remorse and guilty pleas, and taking responsibility for what they had done, along with the financial capacity of each of the defendants, the total fines imposed were as follows:
(a)The company $400,000;
(b)The two winemakers $35,000 each;
(c)The director $30,000.
6 MPI v Yealands Estate Wine Ltd [2018] NZDC 25519, Blenheim DC, 11 December 2018 and MPI v Austin, Auckland DC, 17 December 2018, Judge Thomas A copy of this decision was unable to be located and I have relied on the Crown’s summary of its contents.
[60] I note that in setting those starting points the Court observed that the offending did not involve making false claims of vintage, region or variety, as is the case here, and observed that “such offending is viewed more seriously than this offending”.7
[61] The second case is MPI v Austin, but it is sufficiently dissimilar that I consider it does not assist in the present case.
[62] I note for completeness the Crown has referred me to other prosecutions in broadly comparable regulatory environments particularly under the Animal Products Act 1999 which carries the same maximum penalties as under the Wine Act. These were of some limited assistance in how the Court might go about allocating responsibility between multiple defendants, with overlapping liability for the offending, and with multiple charges.
[63] With that general background in mind, I turn now to sentencing the individual defendants.
The company
[64] The company is now in liquidation. It neither actively defended the charges nor did it plead guilty to them. The company faces 40 charges comprising 22 charges under s 97(1)(a) of making false statements, three charges under s 97(1)(b) of dishonestly mislabelling, and two charges under s 97(1)(c) of substituting client wine for a dishonest purpose. It also faces five charges of selling non-compliant wine and nine charges of exporting non-compliant wine.
[65] The theoretical maximum penalty the company faces is $16,750,000. However, I accept that I must have regard to the principal of totality, and in that regard I accept that much of the offending is overlapping in that a mislabelling of wine for example would also give rise to a false export eligibility application, and the export and sale of non-compliant wine.
7 At [38].
[66] I also note that Southern Boundary has no realistic ability to pay any fine given the liquidator’s report of 12 February 2018. While an offender’s ability to pay is a relevant consideration, I consider in this case it is important to set a fine which reflects the culpability of the offending, at least, in part, for the deterrent effect of doing so. As Ms South points out, the wine industry must be squarely on notice that “crippling fines are appropriate in cases involving rampant dishonesty and offending, as evident in this case”.
[67] Ms South then breaks down her submission on penalty in relation to the specific offences. She submits that the two charges of substituting client wine under s 97, being charge 1 and charge 32, should attract starting point fines at the mid to higher end of the scale, particularly because of the impact it had on the respective clients.
[68] In respect of the dishonest mislabelling charges, again she submits that a significant starting point fine should be adopted to mark the behaviour of labelling wine simply to meet orders, with no reference to the region or making false and unsustainable premium label claims, such as single vineyard.
[69] On the representative charge of making false statements to the MPI investigators (charge 14), she points to the evidence that an original job sheet which was returned to the company was then subsequently falsified in an effort to demonstrate that certain wine had been made in a compliant and traceable manner when it was not. Similarly, records relating to the B wine were created in 2014, although purporting to date from the time the wine was made. She says these charges should be marked by a significant starting point in the range of $100,000.
[70] After taking into account the charges relating to selling and exporting non-compliant wine, she submits the global starting point should end up well in excess of $1,000,000 or as high as $2,000,000 in order to convey to the industry that offending on this level and scale will result in heavy penalties.
[71] I agree. In my view, an appropriate global starting point is around $1,700,000, or approximately 10 per cent of the theoretical total maximum. I consider that starting
point includes an appropriate adjustment for totality. Because the company has gone out of business I cannot take into account any mitigating factors such as changes or improvements the company might have made to its systems. As there are no other factors to take into account, the starting point of $1,700,000 remains as the fine which is to be imposed on the company.
[72]That fine is to be apportioned as follows to the various charges:
(a)on charges 1 and 32, charges of substituting client wine, I consider these are serious charges and I impose a fine of $250,000 on each charge, being 50 per cent of the statutory maximum;
(b)similarly, on charge 14, the representative charge of making false statements to MPI, I consider a fine of $250,000 is also required to recognise this charge involves creating a number of records designed to mislead the investigation and avoid penalties;
(c)on the three charges of dishonest labelling (charges 47, 88 and 154), I impose fines of $55,000 on each charge, making a total of $165,000;
(d)on the 21 charges of making false export eligibility applications (charges 4, 51, 66, 68, 73, 100, 105, 110, 121, 126, 139, 149, 160, 165, 170, 181, 186, 191, 202 and 207), I impose fines of $25,000 on each charge making a total of $525,000;
(e)similarly, on the five charges of selling non-compliant wine (charges 18, 61, 83, 94 and 136) and the eight of exporting client wine (charges 56, 67, 78, 115, 131, 144, 175, 196 and 212), I impose fines of $20,000 on each of these charges,8 making a total of $260,000.
8 I erroneously, in sentencing, referred to there being eight charges of exporting client wine, when in fact there are nine. For this reason, I have not imposed a penalty in relation to the last charge, charge 212, to maintain the level of time set when sentencing.
Scott Berry
[73]I now turn to the position of Mr Scott Berry.
The Crown submissions
[74] The Crown identifies Mr Berry as the principal offender and Mr Davis accepts that, because he held the Wine Standard Management Plan Licence for the company, all actions taken by him and others became his responsibility.
[75] Mr Berry was involved in the winemaking process and is directly responsible for the additions and alterations which were made to client wine without their authority.
[76] Ms South submits that the lead charge for Mr Berry should be charge 33, relating to the B wine, as this has resulted in over $1,000,000 in claimed losses to that company. Ms South also points out that while Mr Berry did not directly financially gain from this particular offending, that he did stand to gain via his shareholding in the company by being able to sell this wine to meet an order for its own 2012 Sauvignon Blanc wine and says there was, therefore, a direct financial motivation for Mr Berry. She submits that a starting point of imprisonment is appropriate given the level of loss caused to the complainants, and that a sentence in the range of two years or more is appropriate on this charge.
[77] She submits that should be uplifted by a further six months to reflect the offending involving E. She then submits that the sentence should be further uplifted to reflect the other charges under s 97, including for dishonest mislabelling and in relation to dishonesty in obtaining export documentation. With an adjustment for totality she considers than an end starting point of three to three and a half years’ imprisonment is appropriate.
[78] Ms South then points out that there are 13 charges which involve a fine only, being the charges which relate to sale and export of non-compliant wine. She notes that approximately 134,000 litres of non-compliant wine was exported. Although the theoretical maximum penalty for these fine-only offences is $650,000 she submits that
taking account of the relatively low level of volume, but the repeated and high level of dishonesty, an overall starting point fine in the range of $100,000 would be appropriate.
The defence submissions
[79] Mr Davis disputes that Mr Berry personally gained from the offending. While his parents held more than 16 per cent of the shares in the company, Mr Berry only held one share, and I accept that submission.
[80] He says that Mr Berry does not own any assets and has recently sold the matrimonial home in order to raise funds to make an offer of reparation. He currently works in his wife’s business where he draws no wage or salary and his family is now wholly reliant on his wife’s income of $50,000. Mr Davis says Mr Berry can borrow up to $25,000 to be applied to reparation if this Court believes that should be ordered.
[81] Mr Davis was critical of the suggestion that the proportion of wine affected when compared with the total volume of the company is a relevant aggravating feature. In his submission, and I agree, the total volume of wine involved is more relevant. In other words, producing 100,000 litres of non-compliant wine when that is the company’s total production is not automatically more culpable than producing a 100,000 litres of non-compliant wine for a company that has a total production of, say, one million litres.
[82] The mitigating features of the offending are that there was no risk to health and the resulting wine was not unsafe for human consumption. Mr Davis also submits, and I accept, that Mr Berry and his co-offenders got caught up in a period of growth in winemaking and allowed themselves to be overwhelmed by this, to the detriment of proper recordkeeping and to the detriment of employee training and supervision. That said, however, this was not inadvertent offending, and I am satisfied Mr Berry knew he was taking shortcuts and was deceiving his clients and MPI.
[83] I accept that an appropriate starting point is imprisonment given the scale and culpability of the offending. I take as the lead charge, charge 33, involving C, and I accept that a sentence of two years’ imprisonment is an appropriate starting point. I
then consider this should be uplifted by six months to reflect the offending involving E (charge 2). I would then uplift by a further six months for the balance of the s 97 offences. This takes the total starting point to three years’ imprisonment which I am satisfied is a fair reflection of the totality of the offending and requires no further adjustment.
[84] I then accept that Mr Berry should receive a discount for good character, for his remorse, his willingness to participate in restorative justice, and for the steps he has taken to educate others, particularly by participating in a recent New Zealand Wine Compliance Training Workshop to share his experience and to assist others to learn from his mistakes. In my view, these factors warrant significant discounts, totalling 20 per cent. This would take the three year starting point to two years and five months.
[85] I then consider he is entitled to a 25 per cent discount for his guilty plea. I accept he has acknowledged responsibility for his offending right from the outset. That would take his sentence on the s 97 charges down to just over 21 and a half months.
[86] Mr Berry has been assessed as being suitable for home detention and he has an address assessed as suitable.
[87] I am therefore satisfied it is appropriate to commute this sentence to one of 10 months and two weeks’ home detention to be served at the residential property identified in the pre-sentence report. This would be served on the standard conditions of any electronic monitoring sentence and I expect he would be approved to leave the address in order to work in his current job as is permitted by s 80C3(c)(ii) Sentencing Act. That sentence is to commence on Monday, 16 March 2020 to allow time to make the necessary arrangements.
[88] In respect of the fine only charges under ss 99 and 100, while I consider an overall starting point fine in the range of $100,000 would be appropriate, I must take account of Mr Berry’s financial circumstances. As Mr Davis explains, Mr Berry does not own any assets and has recently sold the matrimonial home in order to raise funds to make an offer of reparation.
[89] I am required by the Sentencing Act 2002 to prioritise payment of reparation over a fine in such circumstances.9 For this reason, instead of a fine, I impose an order for reparation of $25,000 in respect of those offences.
[90] While reparation has been sought by both the two client wine producers, and by MPI for its investigation, I consider it appropriate that the reparation paid by Mr Berry is prioritised to the two victims of his offending, being C and E. While C may have access to insurance if its litigation is successful, there is no certainty of that, and in any event, it will not cover the entirety of the loss. Furthermore, there is no reason to differentiate between the victim or its insurer when making an order of reparation, so long as there is no double-recovery.10 The payment of reparation is therefore to be split equally as between the two adversely affected clients. I recognise that MPI has also sought reparation for its investigation costs. Given this defendant’s lack of ability to pay reparations to meet all losses caused by the offending, I consider it appropriate to prioritise payment of reparation from him to his two victims and not to the investigating body.
Andrew Moore
[91]Mr Moore has pleaded guilty to 16 charges under the Wine Act. These are:
(a)eight charges of exporting non-compliant wine under s 100;
(b)four charges of selling non-compliant wine under s 99; and
(c)four charges involving deception under s 97.
[92]Nine of these charges are representative charges.
The Crown submissions
[93] The Crown says that the lead charges for Mr Moore should be the charges under s 97 which include charges of dishonest mislabelling to order and making false
9 Sentencing Act 2002, s 14(2).
10 R v O’Rourke [1991] NZLR 155 (CA) at [158], Clark v Police, HC Dunedin AP8/93, 28 April 1993 and Julian v Police, HC Whangarei, CRI-2005-488-38, 8 December 2005.
export eligibility applications. The Crown submits that a starting point in the range of 12 months’ imprisonment is appropriate.
[94] In addition, Mr Moore faces charges of selling and exporting non-compliant wine. The Crown notes that although Mr Moore seeks the imposition of a fine only, he may have no assets or means to pay a fine and the Crown says that, in any event, a fine alone will fail to meet the purposes and principles of the sentencing, given the level of dishonesty present in this case.
[95] The Crown says that a detention based starting point should be adopted in relation to the dishonesty offending and that a starting point of 12 months’ imprisonment is appropriate, along with a starting point of a substantial fine for the other offences.
The defence submissions
[96] Mr Moore’s lawyer, Mr Shamy, emphasises that Mr Moore was primarily involved in the marketing side of the business as opposed to the winemaking itself. He was not charged in relation to client wines and there is no allegation that he caused loss to clients. Indeed, he was not involved in the winemaking process, which occurred at a different location from the office that he worked from. Mr Shamy also submits that the allegations do not involve him authorising or carrying out the offending, but rather, knowing that the offending was being committed and failing to take all reasonable steps to prevent or stop it.
[97] Mr Shamy argues that I should look carefully at the level of culpability involved in the charges of deceptive conduct. He submits that the director in the Yealand’s decision was in a similar position to Mr Moore, in that his offending was a crime of omission; in other words, it was downstream of the actual offending and involved an omission to take steps to stop the s 97 offences, and the Court in that case imposed a fine only.
[98] In identifying the mitigating features of the offending, Mr Shamy also points out that there was no food safety issue. He says the allegations are historical and relate to vintages made six years ago. He says the amount of affected wine exported was
tiny in comparison to New Zealand’s total wine exports, and, Mr Moore’s offending relates to only a small portion of the impugned wine, which in turn relates to only a portion of the wine produced by the company. He also points out that Mr Moore has pleaded guilty and the company is no longer in business.
[99] For these reasons, Mr Shamy says that the starting point should be financial and to impose a starting point which is a full-time custodial sentence would be out of proportion with the type of offending Mr Moore was involved in, particularly in light of the Yealands case.
[100] He says the starting point that should then be adjusted to take account of various mitigating factors which relate to Mr Moore himself. Mr Moore has no previous convictions and has provided the Court with references showing his good character, he is remorseful, and he is no longer involved in winemaking. He is now a sales manager for a company that does not make wine.
[101] Furthermore, Mr Shamy says he is entitled to a significant credit for his guilty pleas. While Mr Moore did pursue applications under s 147 of the Criminal Procedure Act 2011, as soon as a decision was released declining the discharge, Mr Moore began investigating a negotiated resolution. The agreed resolution involved the Crown offering no evidence on a total of 54 charges in the charging document and Mr Moore pleading guilty to the balance, with some of the charges having been amended to be representative charges. Mr Shamy notes, in particular, that the negotiations led to the withdrawal of the false statement to investigators charge which related to job sheet 644, and a significant variation to the timeframe over which the offending is alleged to have occurred. In assessing the discount I should give for a guilty plea, Mr Shamy notes that the trial was estimated to take 35 hearing days and I should factor in that the guilty pleas saved a huge amount of resources which would have been required had the trial proceeded.
[102] Mr Shamy says that in recognition of the principle of totality and imposing the least restrictive sentence that is appropriate in the case, a financial penalty of $20,000, which is what Mr Moore is able to borrow from family members, should be imposed.
Sentence
[103] I accept that the lead charges for Mr Moore are the charges under s 97 which involve charges of dishonest mislabelling (charges 50 and 159) and representative charges of making false export eligibility applications (charges 55 and 77). These charges attract potentially significant prison sentences and fines up to a maximum of
$100,000.
[104] While Mr Shamy seeks to compare Mr Moore’s offending with that of the director in the Yealand’s case, I consider Mr Moore’s involvement in dishonest mislabelling exacerbates the seriousness of the offending, something which was expressly noted in the Yealand’s sentencing decision.11
[105] I also note that Mr Moore does not have the ability to pay the level of financial penalty which I consider is required to reflect the seriousness of this and the other s 97 offending. I accept the Crown’s view that a starting sentence of imprisonment is therefore appropriate. However, in my view, an eight month prison sentence is an appropriate starting point on the s 97 charges.
[106] I then must take account of the mitigating factors and I accept the submissions that Mr Shamy has made in this regard. Mr Moore’s remorse and good character warrant a discount of approximately 15 per cent, taking the sentence to some six and a half months. He is then entitled to a credit for his pleas of guilty which, although it came after the application to have his charges dismissed and then a lengthy negotiation process, has avoided the need to resource a lengthy trial. For this, I would deduct a further one and a half months, or approximately 20 per cent, to reach an end sentence of five months.
[107] Mr Moore has been assessed as suitable for home detention and I am satisfied it is appropriate to commute this sentence to one of two months and two weeks’ home detention to be served at the residential property identified in the pre-sentence report. This is to be served on the standard conditions, and it is my expectation that he will be allowed to leave the property to attend his current employment pursuant to
11 At [38].
s 80C3(c)(ii) Sentencing Act. Again, this sentence is to commence on Monday, 16 March 2020.
[108]That leaves the issue of the eight charges where a fine only penalty is available.
[109]I am satisfied that Mr Moore does not have the means to pay any more than
$20,000 for a fine or reparations. I consider it is appropriate to sentence Mr Moore on the basis he make a payment of $20,000 in reparations to go to the Ministry of Primary Industries, and that sum is to be apportioned equally between the 12 charges where a fine only penalty is available.
Rebecca Cope
[110]Ms Cope has pleaded guilty to three representative charges. These are:
(a)making a false statement (under s 97(1)(a) and 3(b) Wine Act 2003). The maximum penalty is five years’ imprisonment and a $100,000 fine;
(b)being a party to the sale of non-compliant wine (under s 99(1) of the Wine Act and s 66 Crimes Act 1961) where the maximum penalty is a
$50,000 fine; and
(c)being a party to exporting non-compliant wine (under s 100 Wine Act 2003 and s 66 Crimes Act 1961) where the maximum penalty is a
$50,000 fine.
Application for a discharge without conviction
[111] Ms Cope seeks a discharge without conviction on these charges on the basis that the consequences of a conviction are out of all proportion to the gravity of the offending.12 This is opposed by the Crown.
12 Sentencing Act, s 106.
[112] As was set out in Ms Basire’s written submissions, consideration of a discharge without conviction involves a three-step process.13 This Court, must consider first the gravity of the offending, second, the consequences of a conviction and finally, whether those consequences are out of all proportion to the gravity of the offending. When I am considering the gravity of the offending at the first step, I need to take account of all aggravating and mitigating factors relating not just to the offending, but also to the offender.14
[113] Ms Basire says Ms Cope’s offending was at a low level of culpability. She points to Ms Cope’s affidavit evidence explaining the circumstances of the offending. Ms Cope was employed full-time as the company’s production winemaker, commencing in December 2012. She also relied on the company for her accommodation. Ms Cope explains that she had to blend wine according to either the client’s or Scott Berry’s instructions, and she was not given information about what claims the clients were going to make on their labels. She also says that she was put under huge pressures because she was only able to finish a wine when Mr Moore gave her the go ahead to do so, after receiving payment, and this often meant working late into nights and weekends to ensure the deadline for shipment was met. She also explains that the company was chronically understaffed, and this led to a lack of attention to paperwork. There was also a lack of an appropriate software system to keep the records as to varietal and geographical composition of wine and to avoid mistakes.
[114] Ms Cope says that her offending occurred because she was “loyal” and “accepted the decisions that management made were for the right reasons or were authorised by clients”. She acknowledges that she did not ask enough questions. However, she also acknowledges that she suspected the wine would not meet the geographic requirements of labelling but says she did try to raise this with her employers. By way of example, when she realised that part way through 2014 some of the wines had been labelled incorrectly, she says she spoke to Mr Moore saying the wine needed to be recalled and MPI informed. He responded saying that the company could not afford to do that and they were sold anyway. She also accepts she knew that
13 R v Hughes [2008] NZCA 546 and [2009] 3 NZLR 223.
14 Z (CA447/2012) v R [2012] NZCA 599.
non-compliant wine was going to be exported, although she says she was not involved in any of the decisions regarding this. She says she now knows a great deal more about the Wine Act and what her obligations are in respect of reporting such activities.
[115] In terms of the representative charge of making a false statement, she explains that she transcribed information onto job sheet 644 that was then used by Mr Moore in his interview with MPI, but she says she did this in an effort to “prove the traceability of the wine”. In respect of the other allegations of making false statements, she said Scott Berry asked her to reconstruct the records about dispatch and bottle volumes. However, she acknowledges that, in doing this, she did mislead MPI. However, she says that at no stage did she have an appreciation of the scale and magnitude of what was happening in the company.
[116] While I accept that the company and its directors put Ms Cope in a difficult position and this was exacerbated by the company’s lack of resources, I nevertheless consider Ms Cope was still an integral part of the offending. In order to achieve the objects of the Wine Act, it is important that all key players in the winemaking process take responsibility for ensuring that the Act is complied with, and winemakers have responsibilities in this regard.
[117] However, in mitigation, I accept that Ms Cope has taken steps to fully educate herself on the requirements under the Wine Act and she has suffered significantly on a personal level from her involvement in the investigation. While she says that by virtue of the investigation alone, she is unlikely to ever work in the wine industry again, because of damage to her reputation, I do not consider this is inevitable. Ms Cope is a person of good character who would not now make the mistakes that she made while working at Southern Boundary. In my view, the steps she has taken since the offending and the impact it has had on her, reduce the overall gravity of the offending for the purposes of step one.
[118] Overall, I accept that the circumstances in which Ms Cope was working, where she was overworked and poorly supported, reduces her culpability, as do her personal experiences and the steps she has taken following the offending. That said, I still
consider that this offending is of low to moderate seriousness in all those circumstances.
[119] I then turn to the consequences of conviction. While Ms Cope’s affidavit sets out extensively the stress that the investigation has put her under, this is not, of course, a consequence of conviction. The consequences which are, are the effect on future employment and travel. Specifically, she says in her current employment with a brewing company, she has the opportunity to take over from the managing director as head brewer, but that would require her to visit overseas breweries and collaborate internationally and market the brand overseas. If she has criminal convictions it will make this very difficult, particularly to enter the United States where her employer would expect her to travel and upskill with other brewers.
[120] She also says that if the convictions are entered, she will be unable to work in the wine industry whether in New Zealand or overseas, noting that Japan, in particular, has stringent requirements and would not “touch somebody with criminal convictions of this nature”.
[121] However, I am not of the view that, if convictions are entered, Ms Cope will be unable to work in the wine industry in New Zealand. I note that that was not the outcome for the winemakers in the Yealand’s case and Ms Cope already has a job in a related business where her employer clearly thinks highly of her. While this investigation has had an impact on Ms Cope’s reputation and her ability to work in the wine business, I do not consider that this will be exacerbated by a conviction. Her employment prospects are, as she acknowledges, already affected by her involvement in this offending and it is not clear that a conviction would make this worse. I also note that I am satisfied she is now well versed in the requirements of the Wine Act and is unlikely to ever offend again. Indeed, I would consider that she is more alive to the obligations on her than most people working in the wine industry.
[122] In my view, the most critical issue is whether she will be unable to travel as might be required if she took up a role as head brewer, or otherwise in such an industry. I do not consider it is a sufficient impediment to warrant granting a discharge without conviction. While entry to the United States would be more difficult as she would
need to apply for a visa, that is not necessarily an insurmountable difficulty. She also has current employment which does not require such travel.
[123] Similarly, while she is concerned she could not work in Japan, that is simply a possible work option and not one that I have evidence she is actively pursuing for the future.
[124] In short, Ms Cope is employed and I do not consider that the difficulties she may have to surmount to travel overseas, should she take on other employment, is a sufficiently compelling reason to grant a discharge without conviction. While it might be, as Ms Basire says, a disproportionate outcome, it is not a consequence that can be described as out of all proportion to the offending.
[125]Having reached that conclusion, I go on to consider the appropriate penalty.
[126] I accept that Ms Cope does not have the financial means to pay a fine. Her earnings are modest at present and she has debt, but no assets. In my view, given her lesser culpability, her good character, her remorse, and the consequences this offending has already had on her life, it is appropriate to impose a sentence of community work on her.
[127] A sentence of 200 hours’ community work is accordingly to be imposed in respect of the offence under s 97 (charge 16). On the remaining two charges she will be convicted and discharged.
Conclusion – Summary of sentences imposed
[128] Mr Berry, Mr Moore and Ms Cope would you please stand and I will formally summarise the sentence to be imposed on you.
[129] Mr Berry, on all charges laid under s 97 of the Act, you are sentenced to concurrent sentences of 10 months two weeks’ home detention, commencing Monday, 16 March 2020.
[130] On the balance of the charges you are ordered to pay a total of $25,000 in reparations, to be apportioned equally to the two wineries which are the victims of your offending.
[131] Mr Moore, on all charges laid under s 97 of the Act, you are sentenced to concurrent sentences of two months and two weeks’ home detention commencing Monday, 16 March 2020.
[132] On the balance of the charges you are ordered to pay $20,000 in reparation to the Ministry of Primary Industries.
[133] Ms Cope, on charge 16, you are convicted and ordered to serve 200 hours’ community service. On the remaining charges (charges 21 and 120), you are convicted and discharged.
[134]Please stand down.
Solicitors:
Raymond Donnelly & Co., Christchurch Clark Boyce, Christchurch
S J Shamy, Barrister, Christchurch K Basire, Barrister, Christchurch