R v Xie CA397/05

[2006] NZCA 201

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA397/05
CA398/05
CA399/05

THE QUEEN

v

QUNYING XIE (CA397/05)
JIE GUO (CA398/05)
WEILI ZHANG (CA399/05)

Hearing:22 June 2006

Court:Chambers, O'Regan and Ellen France JJ

Counsel:A Markham for Crown

J Haigh QC for Respondent Xie (CA397/05) and Respondent Zhang (CA399/05)
G J Newell for Respondent Guo (CA398/05)

Judgment:8 August 2006 at 11 am

JUDGMENT OF THE COURT

AThe Solicitor-General’s applications for leave to appeal against sentence are allowed and each appeal against sentence is allowed.

BIn CA397/05, the sentence with respect to importing the class C controlled drug pseudoephedrine on 28 November 2004 (shipment 6) is quashed and a new sentence of eight years’ imprisonment is substituted, such sentence to be concurrent with the sentences imposed on the other two importing charges.

CIn CA397/05, the sentence with respect to supplying a precursor substance namely pseudoephedrine (shipments 1-3) is quashed and a sentence of nine months’ imprisonment is substituted, such sentence to be cumulative on the other sentences imposed.

DIn CA398/05, the sentence with respect to importing the class C controlled drug pseudoephedrine on 28 November 2004 (shipment 6) is quashed and a sentence of five years, six months’ imprisonment is substituted, such sentence to be concurrent with all the other sentences.

EIn CA399/05, the sentence with respect to importing the class C controlled drug pseudoephedrine on 28 November 2004 (shipment 6) is quashed and a sentence of five years, six months’ imprisonment is substituted, such sentence to be concurrent with all the other sentences.

F        All minimum terms of imprisonment imposed are confirmed.

REASONS OF THE COURT

(Given by Chambers J)

Solicitor-General appeal against sentence

[1]       Between 24 June 2004 and 28 November 2004, six shipments of pseudoephedrine-based Contac NT capsules were illegally imported from China into New Zealand.  The precise details of the shipments were as follows:

Shipment	Landing Date	Number of Capsules	Pseudoephedrine
1	24 June 2004	30,000 est.	2.7 kg
2	26 August 2004	30,000 est.	2.7 kg
3	7 September 2004	80,000 est.	7.2 kg
4	23 October 2004	30,000 est.	2.7 kg
5	13 November 2004	109,240	9.831 kg
6	28 November 2004	130,000	11.7 kg
TOTAL	409,240	36.81 kg

[2]       Police located three people in New Zealand who were involved in these six importations.  The “mastermind”, as the sentencing judge, Priestley J, referred to him, was Qunying Xie (the respondent in CA397/05).  His two accomplices were Jie Guo (CA398/05) and Weili Zhang (CA399/05).  All three pleaded guilty to charges relating to the six importations.  Shipments 4, 5, and 6 were each the subject of separate charges of importing a class C controlled drug, namely pseudoephedrine.  Shipments 1-3 were the subject of a joint charge (which was termed, perhaps erroneously, a representative charge).  That charge, which only Messrs Xie and Guo faced, was one of supplying a precursor substance, namely pseudoephedrine-based capsules, knowing that the substance was to be used for the commission of an offence against s 6(1)(b) of the Misuse of Drugs Act 1975, namely the manufacture of methamphetamine.  This supply charge was brought under s 12A(1)(b) and (3)(a) of the Misuse of Drugs Act.  The reason why importing charges were not laid with respect to shipments 1-3 is that, at the date of those shipments, pseudoephedrine was not a class C controlled drug.  It was not classified as a class C controlled drug until 15 October 2004, a date falling between the third and fourth shipments.

[3]       Priestley J sentenced Mr Xie to a total period of six years four months’ imprisonment, and made an order that Mr Xie must serve a minimum period of imprisonment (MPI) of four years.  His Honour sentenced Mr Guo and Ms Zhang to four years’ imprisonment.  Each was given an MPI of two years. 

[4]       The Solicitor-General sought leave to appeal against the sentences on the grounds that Priestley J had erred in principle in declining to impose cumulative sentences and that the overall sentences did not reflect the totality of the offending and were manifestly inadequate.

Issue on the appeal

[5]       There is really only one issue on this appeal: did Priestley J properly approach the sentencing task for this multiple offending?  Ms Markham, for the Crown, submitted that His Honour’s approach was wrong in principle.

[6]       In these reasons, we set out first Priestley J’s approach.  We shall then turn to Ms Markham’s criticism of it. 

Priestley J’s approach

[7]       Priestley J sentenced Mr Xie first: HC AK CRI 2005-404-000243 and CRI 2005-004-007989 16 September 2005.  The sentences imposed on Mr Guo and Ms Zhang were dependent upon the sentence imposed upon Mr Xie; His Honour was concerned, quite properly, to ensure that the sentences lined up properly among themselves.  Mr Guo and Ms Zhang each received a sentence approximately 63% of Mr Xie’s.  Ms Markham accepted that that was correct and in her submissions to us advocated that we should preserve that percentage differentiation.  Neither Mr Haigh QC, for Mr Xie and his partner Ms Zhang, nor Mr Newell, for Mr Guo, submitted anything to the contrary.  We are satisfied that the differentiation between the co-offenders adopted by Priestley J was correct.  It is reflected in the sentences we are substituting on this appeal.

[8] It follows that the sentence we should concentrate on is Mr Xie’s. The judge, in his sentencing notes, described Mr Xie and his co-offenders as being “involved in a sophisticated scheme to smuggle into New Zealand large quantities of Contac NT cold capsules which contain the drug pseudoephedrine, a well known precursor for methamphetamine manufacture”: at [4]. His Honour went on to describe the shipments and then continued:

[5]       By any stretch of the imagination these are huge quantities.  It is estimated, and in my view accurately so, that depending on the skill of the manufacturer and the sophistication of the laboratory involved, the 239,240 tablets contained in these last two shipments contained 21.5 kg of pseudoephedrine which would have produced the potential yield of between 10.7 and 16.1 kg of pure methamphetamine  The potential street value of that quantity, at the current and well known figure of $100 per point, would have been between $10.765 and $16.148 million.

[6]       The figures estimated (30,000 tablets per shipment) for the undetected first four shipments would have yielded just over 15 kg of pseudoephedrine, and on the same calculations, between 7.65 and 11.47 kg of methamphetamine with a potential street value of between $7.650 and $11.475 million.

[7]       These are huge quantities and quite frankly makes the parliamentary imposed maximum of eight years look inadequate.  I am satisfied that this importation scheme was deliberate, carefully planned, and a calculated response to the efforts of the police and pharmacists to deter large scale purchases of pseudoephedrine based products in New Zealand, and that your offending was driven by financial considerations.

[9] The judge then noted that the Crown had suggested a starting point of between 13 and 15 years: at [11]. But the judge, while obviously having sympathy for the Crown approach, considered it was not open to him by virtue of certain provisions in the Sentencing Act 2002. The judge said:

[19]     Turning now to the next question, of whether I should go above the eight year prescribed maximum by using a cumulative sentencing approach or adopt instead the concurrent approach urged on me by your counsel, I say this.  The justification for the approach urged on me by the Crown is that overall concurrent sentences, which would limit the Court to the prescribed eight year maximum penalty, would not adequately reflect the gravity of the offending.  I have some sympathy with that submission but in my judgment the obstacle confronting the Crown in this court is to be found in the eight year prescribed maximum.  Section 84 of the Sentencing Act, although not imposing mandatory rules, sets out very clear and well known guidelines to differentiate between cumulative and concurrent sentences.  The offences with which all prisoners were charged, and you specifically, and I am referring here to your co-offenders, allege known importations.  In s 84(1) terms these offences are not “different in kind”.  They are, however, for s 84(2) purposes “of a similar kind” and must also for the purposes of s 84(2) and (3) be regarded as a connected series of offences involving importation by you, by sea, of identical pseudoephedrine sources concealed in the same manner and in large quantities.

[10]     He then went on:

[22]     Although I accept that the imposition of cumulative sentences can properly lead, to an aggregated total in excess of the maximum available (R v Blackler (CA 66/91, 20 May 1991)), I consider it would be doing violence to both established sentencing principles and, in particular, to the clear guidelines enacted by s 84 to construct, in what in my view is essentially an artificial way, cumulative sentences to overcome the eight year maximum.  I test that reluctance by observing that if, hypothetically, you, Mr Xie, have masterminded the importation of the total volume involved, not in six shipments but in one shipment, with the total volume of pseudoephedrine contained in one consignment, the eight year maximum would apply and only that.  It seems, in my judgment, artificial to seize on, for instance, your pre-October 2004 offending as a pretext to go beyond the prescribed maximum.  I decline to do so. 

[11] The judge concluded that the starting point could not exceed “the eight year maximum”: at [26]. From that he gave Mr Xie a 20% discount for his “early guilty pleas”, resulting in a total sentence of six years four months’ imprisonment.

[12]     His Honour also imposed an MPI.  Ms Markham, in her submissions, noted that the Crown had intended to argue that, if the headline sentences were increased, the MPIs should also be increased proportionately.  She noted, however, that the Solicitor-General’s notices of appeal had not referred to the MPIs imposed.  While she submitted that that failure was not necessarily fatal, she advised us that the Crown acknowledged “that the respondents were not put on notice that an appeal against the MPIs was intended and as a matter of fairness the point is not pursued”.  In light of that, we propose not to interfere with the MPIs and we say no more about them. 

The starting point

[13]     Although the judge noted Blackler, he seems to have considered that it would be improper to adopt a higher starting point than eight years for two reasons:

(a)To do so would be contrary to s 84 of the Sentencing Act;

(b)If Mr Xie had brought in all the pseudoephedrine in one shipment rather than six shipments, he would have been subject to a maximum eight year sentence. 

[14]     With respect, this was false reasoning, as Ms Markham correctly observed. 

[15]     The first point to note is that each of the importing charges carried a maximum term of imprisonment of eight years.  The representative charge carried a maximum penalty of seven years’ imprisonment.  The potential maximum sentence, therefore, for Mr Xie’s offending was 31 years’ imprisonment.  No one in this case, either at sentencing or now on appeal, advocates a sentence anywhere remotely near the maximum sentence that is theoretically possible.  The reason no one is advocating a sentence near the maximum length possible is because such a sentence would offend the totality principle.  The totality principle has long been “a standard principle of general application” and has variously been described as “the established judicial approach to sentencing for multiple offences” (R v Strickland [1989] 3 NZLR 47 at 50 (CA)) and “a recognised principle of sentencing formulated to assist the court when sentencing an offender for a number of offences” (Mill v R (1988) 166 CLR 59 at 62). See generally Hall Hall’s Sentencing (looseleaf ed) at [SA85.2].  The principle has been carried over to the Sentencing Act and is now enshrined in ss 84 and 85.

[16]     The fundamental tenet of the totality principle is that the final sentence must reflect “the totality of the offending”.  How the total sentence is made up has never been important.  We cite what this court said in R v Williams CA91/00 31 May 2000:

[11]     We reject the argument that there is a particular way in which total sentences must be put together in respect of multiple offending.  The issue is what is an appropriate total sentence for the various charges which have been admitted or proved.  How that is constructed in the particular circumstances is a matter of individual discretion and assessment.  Sometimes there is advantage in imposing cumulative sentences on some or all of the charges, whereas others are more appropriately dealt with by one major sentence which subsumes all matters, with concurrent sentences imposed.

[17]     That passage from Williams was cited with approval in R v Barker CA57/01 30 July 2001.  In that case, this court, at [10] reiterated the key principles when sentencing for multiple offending:

(a)With multiple offences the sentence must reflect the totality of the offending;

(b)In respect of multiple offences, this court will not insist that the total sentence be arrived at in any particular way; and

(c)The total sentence must represent the overall criminality of the offending and the offender. 

[18]     Those principles survive the enactment of the Sentencing Act and indeed are endorsed by it.  Having endorsed it, Parliament then goes on in ss 84 and 85 to describe when concurrent sentences and cumulative sentences “are generally appropriate”.  The guidelines do not have the effect of trumping the central principle of sentencing for multiple offending, namely that the total sentence must represent the overall criminality of the offending and the offender. 

[19]     In this case concurrent sentencing would have been appropriate, provided that concurrent sentencing could lead to an appropriate total sentence.  But it could not, at least in Mr Xie’s case.  In circumstances where the total sentence appropriate for the totality of the offending exceeds the maximum penalty for any one offence, cumulative sentencing must be used.  This is a circumstance where concurrent sentencing is not appropriate because it prevents the implementation of the fundamental tenets of sentencing for multiple offending: R v Mackwood CA197/95 28 March 1995 at 2. 

[20]     In short, therefore, s 84 did not prevent cumulative sentencing in this case.  The judge was also wrong with respect to the “test” he applied in [22] of his sentencing notes (quoted above at [10]).  To import drugs on six different occasions is clearly more serious offending than to be engaged in only one importation, as Mr Haigh accepted during argument. 

[21]     We now turn to consider what the appropriate sentence would have been for “the totality of the offending”.  Ms Markham submitted that we should take a starting point of 12 years’ imprisonment for Mr Xie.  Messrs Haigh and Newell naturally sought to uphold Priestley J’s starting point of eight years for Mr Xie.

[22]     We have little authority to guide us, which is not surprising given that pseudoephedrine was classified as a class C drug only in October 2004.  We do not find sentencing guidelines on other class C drug offending to be particularly helpful, given that ephedrine and pseudoephedrine have been classified as class C drugs for reasons which differ from those justifying the inclusion of other drugs in class C.  Pseudoephedrine is not a class C drug because it is harmful in its own right, but rather because of its status as the principal ingredient in the production of methamphetamine, a highly dangerous class A drug.  This was made clear in the Health Committee’s report Misuse of Drugs (Classification of Ephedrine and Pseudoephedrine) Order 2003.  In that report, the committee noted at 3:

The order is unusual in that the substances to be classified do not pose a risk of harm in their own right, but rather as key precursor chemicals used in the illicit production of methamphetamine.  Both substances have legitimate uses, and are already covered by the Medicines Act.

Pseudoephedrine and ephedrine are the principal ingredients in the production of methamphetamine.  Methamphetamine was recently reclassified as a Class A drug, reflecting the risk of harm it poses and the current prevalence of methamphetamine in New Zealand.

Methamphetamine is a drug that appeals to vulnerable populations, has a high physical and psychological dependence potential, and can lead to long‑term adverse physical and psychological effects.  It has been linked to deaths in New Zealand and overseas.  Use of methamphetamine poses significant risk to public health through intravenous use, psychological effects, and the dangers posed by illicit methamphetamine laboratories.  Methamphetamine offers few, if any, therapeutic applications.

[23]     The importation or supply of pseudoephedrine is, therefore, really the first step towards the manufacture of methamphetamine.  To some extent, therefore, the guidelines in R v Fatu [2006] 2 NZLR 72 (CA) are likely to be of more significance in pseudoephedrine sentencing than other class C drug sentencing. Of course, appropriate recognition must be given to the fact that class A offending carries a maximum penalty of life imprisonment whereas class C offending carries a maximum penalty of only eight years’ imprisonment.

[24]     Clearly, in the near future, this court will need to set guidelines for pseudoephedrine supply and importation.  We are not equipped to undertake that task in this case, as neither the Crown nor the respondents have supplied us with the necessary background and comparable material to enable guidelines to be set. 

[25]     We approach the matter in this way.  Section 8(c) of the Sentencing Act requires the court when sentencing an offender to “impose the maximum penalty prescribed for the offence if the offending is within the most serious of cases for which that penalty is prescribed, unless circumstances relating to the offender make that inappropriate”.  We have no doubt that being the mastermind of an importation of 100,000 Contac capsules or more is “offending…within the most serious of [that class of] cases”.  In this regard, we note that shipments 5 and 6 alone accounted for the highest ever seizure of pseudoephedrine in New Zealand.  The six shipments represent a very significant proportion of the Contac capsules intercepted by Customs in 2004: R v Chen HC AK CRI2005-4-2191 11 October 2005 at [6].  Further, the agreed facts reveal that each Contac NT capsule contains 90 mg of pseudoephedrine.  100,000 capsules contain, therefore, 9 kg of pseudoephedrine.  The agreed facts disclose that each kilogram of pseudoephedrine can make between 500 grams and 750 grams of pure methampethamine.  So 100,000 Contac capsules can be converted into a minimum of 4.5 kg of pure methampethamine.  That quantity is well into the “very large commercial quantity” band (band 4) of Fatu. Band 4 starts at 500 grams. The agreed facts state that pure methamphetamine has a street value of up to $1,000 per gram. Accordingly, the potential street value of methamphetamine able to be produced from 100,000 Contac capsules is in the order of $4.5 million.

[26]     This court has already held in R v Posimani CA369/04 21 March 2005 that the courts on sentencing are not concerned with the retail value of the pseudoephedrine; rather, “value” (in so far as it is relevant) is “to be calculated by reference to the potential yield of pure methamphetamine from the pseudoephedrine”: at [9]. In our view, once it is acknowledged that the end product would be worth many millions of dollars, heavy deterrent sentencing is required. It is no answer to the imposition of a maximum penalty starting point that more serious cases can be imagined (eg, the importation of 150,000 Contac capsules). First, s 8(c) does not confine the injunction to impose the maximum penalty to only the most serious case it is possible to imagine. The paragraph merely requires the offending to be “within the most serious of cases”.  Secondly, it is always possible to think of more serious cases; if that were the test, no one could ever be sentenced to the maximum penalty, and that is clearly not the parliamentary intention.

[27]     It is also worth noting what the starting point would be for importing or manufacturing 4.5 kg of methampethamine (the potential yield from 100,000 Contac capsules).  Band 4 for importing methamphetamine (500 grams plus) gives a starting point of 12 years’ to life imprisonment: Fatu at [36]. Band 4 for manufacturing methampethamine (500 grams plus) gives a starting point of 13 years’ to life imprisonment: Fatu at [43]. Importing or manufacturing 4.5 kg of methampethamine would have to involve a starting point of at least 20 years’ imprisonment for the mastermind. Judged in that light too, we think that an eight year starting point for the importation of equivalent precursor substance is appropriate.

[28]     Mr Haigh submitted that to draw this analogy with methamphetamine sentencing, as the Crown did in its submissions and as we are doing, was “to elevate the culpability of the respondents to the level of class A offending”.  But that is not right.  As the previous paragraph shows, there is a very distinct difference in starting point between class A (methamphetamine) sentencing and sentencing for offending relating to the equivalent amount of pseudoephedrine.  Not to draw comparisons between pseudoephedrine sentencing levels and methamphetamine sentencing levels would be to ignore the reason why pseudoephedrine has been classified as a controlled drug.

[29]     We now turn to the precise facts of this case.  Shipment 5 and shipment 6 each involved the importation of more than 100,000 Contac capsules.  So the starting point for the totality of this offending must clearly be much higher than eight years.  The overall offending after all involved more than 400,000 Contac capsules.  We appreciate that the numbers of capsules for the first four shipments are estimates – but they are agreed estimates.

[30]     We have already noted that Mr Xie was accepted by Priestley J as the mastermind.  His Honour recorded that Mr Xie was 53 years old, had been born in China, and had come to New Zealand in 2001.  He acquired permanent residence status.  The judge noted that Mr Xie had never worked in New Zealand.  He had no employment income which he was prepared to acknowledge.  He frankly admitted that his motive for importing the capsules was to make money.  He knew what he was doing was wrong.  He told the probation officer he was not a user of drugs.  The offending therefore was not driven by an addiction; it was driven by pure financial greed. 

[31]     Were we sentencing at first instance, we consider that Ms Markham’s suggested 12 year starting point could well have been justified.  But, on an appeal by the Crown, it has long been the case that the sentence should be increased only “to that level which is considered the lowest appropriate for the class of offending”: R v Urlich [1981] 1 NZLR 310 at 311 (CA). See generally Hall’s Sentencing at [APP II.5.9].  Applying that test, we conclude that the lowest appropriate starting point was 11 years’ imprisonment.

Mitigating circumstances

[32] Priestley J considered that the only mitigating factor was the “early guilty pleas”: at [26]. For that he gave “a discount in the order of 20%”. Ms Markham accepted that a discount in that order was appropriate. Mr Haigh did not suggest there were any other mitigating factors. He did, however, submit that a discount in the order of 20% was “moderate in terms of discounts given for this factor”.

[33]     We are satisfied that Priestley J’s discount was appropriate in the circumstances.  It was well within the broad range of discounts given for early guilty pleas. 

[34]     From our new starting point, a discount in the order of 20% translates to discount of two years three months.  The resulting sentence for the totality of the offending is, therefore, eight years nine months’ imprisonment.

Result

Mr Xie

[35]     Having established that the appropriate period of imprisonment representing “the overall criminality of the offending and [Mr Xie]” is eight years nine months, we now turn to how it should be distributed among the four charges to which Mr Xie pleaded guilty.  Clearly at least two of the sentences must be cumulative, as the appropriate overall sentence exceeds the maximum penalty for any one offence.  Although it is not particularly important how we distribute the sentence, we have decided that the appropriate course is to give the three importing charges a total sentence of eight years’ imprisonment; the charge relating to shipments 1-3 can carry the additional nine months.

[36]     Since the sentences for the three importing charges are to be concurrent amongst themselves, it is necessary that “the most serious offence” of those three importations should “receive the penalty that is appropriate for the totality of [that] offending”: see Sentencing Act, s 85(4).  The largest shipment was shipment 6.  We allocate to it, therefore, the penalty appropriate for that overall offending.  It will carry a sentence of eight years’ imprisonment.  There is no need to adjust the penalties Priestley J imposed with respect to the shipment 4 and 5 offending.

[37]     The representative charge (shipments 1-3) will carry the balance of the appropriate sentence, namely nine months’ imprisonment.  That sentence will be cumulative on the other sentences imposed. 

[38]     We stress, however, that the individual sentences allocated are not terribly important.  What is important is correctly working out the sentence appropriate for the totality of the offending.  It would be quite wrong in future for this judgment to be cited as authority with respect to any particular sentence.  Its usefulness will be limited to the approach adopted and starting point adopted with respect to the overall offending. 

[39]     Note also that, despite Mr Xie’s being given the maximum penalty for the shipment 6 offending, due recognition has been given for his guilty plea in respect of that offence and the other offending.  He has received overall a 20% discount for his early guilty pleas.  That amounted to a two years three months’ reduction.  There is no need for that artificially to be built into the shipment 6 sentence eg by deducting 20% from the eight year maximum, and then increasing the cumulative sentence. 

Mr Guo and Ms Zhang

[40]     Mr Guo and Ms Zhang received lower sentences than Mr Xie for a number of reasons.  The main one was, however, that Mr Xie was the acknowledged mastermind of the operation. 

[41] In any event, we find it unnecessary to go into detail about Mr Guo’s and Ms Zhang’s position, for the reasons given at [7] above. Sixty-three percent of eight years nine months is approximately five years six months. On this occasion, because that result is lower than the maximum for any one offence, concurrent sentencing can be used. All we need do is substitute a sentence of five years six months’ imprisonment for one of the sentences imposed by Priestley J. Once again, it is appropriate that the most serious offending, namely the shipment 6 offending, should carry the penalty appropriate for the totality of the offending. For that reason, we quash the sentences imposed on Mr Guo and Ms Zhang with respect to the shipment 6 importation and we substitute a sentence of five years six months’

imprisonment.  Those sentences are to be concurrent on those appellants’ other sentences as imposed by Priestley J.

Solicitors:

Haigh Lyon, Auckland, for Respondent Xie (CA397/05) and Respondent Zhang (CA399/05)
Crown Law Office, Wellington