Solicitor-General of New Zealand v Field

[2012] NZHC 2251

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-5507 [2012] NZHC 2251

BETWEEN  THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

ANDPHILIP HANS FIELD Respondent

Hearing:         18 June 2012

Counsel:         DG Johnstone for Applicant

MA Karam and AV Shinkarenko for Respondent

Judgment:      3 September 2012

JUDGMENT OF RODNEY HANSEN J

This judgment was delivered by me on 3 September 2012 at 3.00 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Meredith Connell, P O Box 2213, Auckland 1140 (Email:  [email protected] ) MA Karam, P O Box 5444, Auckland 1141 (Email: [email protected] )

THE SOLICITOR-GENERAL OF NEW ZEALAND V PHILIP HANS FIELD HC AK CIV-2009-404-5507 [3

September 2012]

Introduction

[1]      On 4 August 2009, Mr Field was convicted of 11 counts of bribery as a Member of Parliament and 15 counts of attempting to pervert the course of justice. He was sentenced to a total of six years imprisonment.  Appeals against conviction and sentence to the Court of Appeal and Supreme Court were unsuccessful.

[2] On 26 August 2009, the Solicitor-General applied under s 24 of the Proceeds of Crime Act 1991 (the Act) for an order under s 25 that Mr Field pay to the Crown a pecuniary penalty in respect of benefits derived by him from the commission of the bribery offences. The Solicitor-General alleges that the total value of those benefits is approximately $58,000 and seeks a pecuniary penalty order in that amount. Mr Field contends that the value of benefits received was approximately $15,500.

Relevant statutory provisions

[3]      The Act was repealed by s 171 of the Criminal Proceeds (Recovery) Act 2009 which commenced on 1 December 2009.  However, under s 172 of the new Act, the Act continues in force for the purpose of continuing and completing a proceeding commenced under the previous legislation.

[4]      By s 2(3) of the Act, a benefit derived by a person includes a benefit derived directly or indirectly by the person.  By s 25(1) the Court may, if it is satisfied that a person derived benefits from the commission of an offence, assess the value of the benefits in accordance with ss 27 and 28 of the Act and order the payment of a pecuniary penalty not greater than the penalty amount.   By s 25(2), the penalty amount is the value of the benefits assessed under ss 27 and 28, reduced by the value of any forfeited property, any pecuniary penalty already imposed and, if appropriate, any sanction in the nature of a pecuniary penalty or forfeiture of property imposed on  conviction.    It  is  not  suggested  that  any adjustments  under  these  heads  are required.

[5]      Section 27 relevantly makes the following provision for the assessment of a pecuniary penalty:

...

(2)       For the purposes of an application for a pecuniary penalty order, the value of the benefits derived by a person (in this subsection referred to  as  the  “defendant”)  from  the  commission  of  an  offence  or offences shall be assessed by the Court having regard to evidence before the Court concerning all or any of the following matters:

(a)      The money, or the value of the property other than money, that came into the possession or under the control of—

(i)       The defendant; or

(ii)      Another  person  at the  request  or  direction  of  the defendant—

by reason of the commission of the offence or any of the offences:

(b)      The value of any other benefit provided to—

(i)       The defendant; or

(ii)      Another  person  at the  request  or  direction  of  the defendant—

by reason of the commission of the offence or any of the offences:

(c)      The value of the defendant's property,—

(i)       Where the application relates to  a single  offence, before and after the commission of the offence; or

(ii)      Where the application relates to 2 or more offences, before, during, and after the offence period.

(3)       In calculating, for the purposes of a pecuniary penalty order, the value of benefits derived by a person from the commission of an offence or offences, any expenses or outgoings of that person in connection with the commission of the offence or offences shall be disregarded.

[6]      Section 28 permits the Court to assess the value of benefits by reference to

any increase in value of the defendant’s property.  It relevantly provides:

...

(2)       Where  an  application  for  a  pecuniary  penalty  order  is  made  in respect of 2 or more offences, and the Court is satisfied that the

value of the defendant's property at any time during or after the offence period exceeded the value of the defendant's property before the offence period, then, for the purposes of section 27 of this Act, the Court may, subject to subsection (3) of this section, treat the value of the benefits derived by the defendant from the commission of the offences as being not less than the amount of the excess.

(3)       Notwithstanding anything in subsection (1) or subsection (2) of this section, if the defendant satisfies the Court that the whole or part of the excess was due to causes unrelated to the commission of the offence or offences, the excess or that part of the excess, as the case may be, shall not be included, for the purposes of section 27 of this Act,  in the  value  of  benefits  derived  by the  defendant from the commission of the offence or offences.

...

Approach to assessment

[7]      The  quantum  of  the  order  sought  by  the  Solicitor-General  is  based  on evidence given at trial as to the value of works carried out by Thai tradesmen on four properties in New Zealand owned by Mr Field and a house under construction in Samoa.  While limiting the Solicitor-General’s claim to the aggregate value of those benefits, Mr Johnstone contended that the increase in value of the New Zealand properties could be taken into account in exercising the overall discretion as to the amount of the pecuniary penalty.   He pointed to evidence that the four properties were sold at a profit of $387,500 after being held, on average, for 17.8 months.

[8]      Mr Karam was taken by surprise by the Solicitor-General’s reliance on s 28 of the Act.   He said that if he had foreseen that the Solicitor-General intended to advance the application in this way, he would have filed evidence in response which would have provided proper context to the evidence of profits on sale of the property relied on by the applicant.

[9]      Although the Solicitor-General’s application is expressly made in reliance on both ss 27 and 28 of the Act, I sympathise with Mr Karam’s position.  There was no other indication in the application that there would be reliance on capital accretion and the way in which the application was formulated suggested otherwise.   The benefits referred to were assessed at $58,000 which coincides with the value of the labour estimates relied on by the Crown at the sentencing of Mr Field.  It is entirely

understandable that Mr Karam should have proceeded on the basis that the value of the work carried out by the tradesmen would be the key factual issue for the purpose of assessing the pecuniary penalty.  I do not think it would be fair to have regard to the profits made on the sale of the properties for the purpose of determining the penalty.   I accept that the profit on sale of the properties will not simply be the difference between the purchase and sale prices.

[10]     I was invited by Mr Johnstone to follow William J’s dictum in Solicitor- General v Allison and to make “a ‘somewhat rough and ready’ assessment rather than one derived from the strict application of accounting principles.” [1]    However, Williams J was discussing the assessment of benefits from drug dealing, a situation in which it is not helpful to strictly apply accounting principles; the Court often will have to assess the value of benefits derived on material which is far less satisfactory than what it normally would expect to have in litigation.[2]    This is not such a case. The value of benefits has been the subject of expert evidence and can be assessed by the application of orthodox principles.   For the most part, there is no need to be “rough and ready” in assessing the value of benefits derived by Mr Field.

[1] Solicitor-General v Allison HC Auckland CIV-2000-404-2587, 3 February 2006 at [37] citing R v Fagher (1989) 16 NSWLR 67, R v Pederson [1995] 2 NZLR 386 and Carter v Solicitor- General [1999] 1 NZLR 541..

[2] R v Fagher at 80.

Evidence of value

[11]     The Solicitor-General relied on evidence given at trial by Mr Anthony Dean, a quantity surveyor, who gave evidence at trial in relation to work done on the New Zealand properties; and of Robert Garner, a building consultancy contract supervisor of Samoa whose brief of evidence was read at trial in relation to the Samoan building work.

[12]     Mr Dean inspected the New Zealand properties at the request of Dr Noel Ingram QC for the purpose of the inquiry he was asked to carry out.  Mr Field was present when some of the properties were inspected and Mr Dean was also able to talk to some of those who carried out the work.  His approach was, however, to make

his own assessment of the time needed to carry out the work and to apply an hourly

rate of $30.    Mr Garner also based his evidence on an inspection carried out for the purpose of Dr Ingram’s inquiry.  He provided estimates of the cost of laying tiles and painting the interior and exterior of the house.  Materials were calculated separately, but can be disregarded for present purposes as Mr Field met the cost of materials.

[13]     Mr Field did not call evidence at trial on the value of the works.  He filed affidavit evidence for the purpose of this proceeding.   Those who deposed to the value of the works carried out in Auckland were Mr David Arthur, a carpenter who has worked in the building industry for over 60 years and has experience in building, maintenance and repair, including painting and tiling; Mr Michael Ren, a self- employed   professional   painter   with   experience   of   painting   commercial   and residential buildings; and Mr Roger Singleton, a registered master painter with over

15 years experience.  I will refer to the evidence adduced by Mr Field in relation to the value of the work carried out in Samoa when I come to discuss that aspect of the application.

[14]     The affidavits do not contain a statement complying with r 9.43(2) of the High Court Rules.  That is no doubt explained by the fact that they were filed at a time when Mr Field was unrepresented and Mr Johnstone did not oppose their being read.  He submitted, however, that the weight of the evidence could be affected.

42 Allen Street

[15]     Mr Dean estimated the value of plastering work at $3,410 and of interior and exterior painting at $9,790. This excludes the cost of materials.[3]

[3] All further references to costs and value will exclude the cost of materials unless otherwise stated.

[16]     The cost of the plastering work comprise $2,160 for “trueing up” the walls. Mr Dean said the plasterers told him they had removed the wallpaper from most of the interior of the house and “skimmed” the walls which involves applying a thin plaster coat and then sanding to make the surface smooth.  He allowed $1,250 for outside plastering of the patio and some small nib walls.  He estimated labour for the

interior work at 72 hours (eight nine-hour days) and, for the outside, 51 hours.

[17]     Mr Field’s witnesses distinguished between a “quick job” and a “thorough job”.    The  former  involved  “refreshing”  the  property  in  preparation  for  future tenants.  Both included plastering the interior in preparation for painting.  Mr Arthur used an hourly rate of $25.  Mr Ren allowed $50 an hour for three painters.

[18]     On this basis, their estimates for 42 Allen Street are:

Mr Arthur  Mr Ren

Interior – quick  $2,400  $1,900

– thorough  $2,800  $2,950

Exterior – quick  $2,000  $1,200

– thorough  $2,400  $1,700

Mr Singleton’s assessment for the interior and exterior with two top coats of paint is

$6,500 plus GST.  With one top coat only, his estimate reduces to $4,000 plus GST. These estimates exclude comprehensive preparation work including sanding.   He said a further cost of around $2,500 plus GST should be allowed for this.

[19]     Part  of  the  discrepancy  between  Mr  Dean’s  assessment  and  those  of Mr Field’s  witnesses  is  the  allowance  of  $1,250  Mr  Dean  made  for  exterior plastering.   That work appears not to have been considered by the other experts. Otherwise, the variations are due to the much higher time estimates assumed by Mr Dean and the differences in the hourly rates used.

[20]     The plasterer who did the work at Allen Street, Somjit Kaewbabpha, told Mr Dean that the plastering work inside the house took four to five days which, using Mr Dean’s hourly rate of $30, would give a cost of between $960 and $1,200. Mr Kaewbabpha gave the distinct impression at trial of being a reluctant prosecution witness  and  his  evidence  of  the  time  he  took  seems  unrealistic  in  light  of  the evidence of Mr Dean and also Mr Singleton who said a proper plastering job would cost $2,500 at 2012 prices, to be reduced by 15 to 20 per cent to adjust to 2005 prices.

[21]     There are indications that Mr Dean priced the painting work on the basis of a higher quality of finish than was actually achieved.  He acknowledged that the work

was of a low standard generally, not what one would expect from master painters. He said of one of the properties (Blake Road) that the work was “probably lower than even a brush-hand should find acceptable”.   His assessment appears applicable to the work on all properties.  He said elsewhere the quality generally was “pretty shoddy in some places”.  As the same painter worked on all four properties, it seems likely that the work was of a uniformally low standard.

[22]     The  estimates  for  Messrs  Arthur  and  Ren’s  “thorough”  job  and  Mr Singleton’s two-coat “option” are all considerably lower than Mr Dean’s costing.  I think he made insufficient allowance for the acknowledged low standard of the work.  A more hurried and inexpert job at a lower hourly rate seems to be indicated. Mr Dean said the rate of $30 was what he would normally use when estimating “this type of work” but he accepted that charge-out rates for brush-hands could be as low as $15 and at the time the going rate could have been $18 to $20.

[23]     I conclude that Mr Dean’s valuation of the plastering work was realistic but that his costings had insufficient regard for the quality of the painting job.  I propose to adopt Mr Dean’s valuation of the plastering, $3,410, and Mr Singleton’s valuation of the painting, based on one top coat ($4,000), plus preparation ($2,500), reduced to

$5,500 to reflect 2005 costs.

73 Blake Street

[24]     This  was  a  brick  house.     The  plastering  was  a  relatively  minor  job. Mr Dean’s estimate of cost was $270.   Mr Kaewbabpha said in evidence that the work took only one to two hours to complete. As I have said, I did not regard him as a reliable witness on such issues.  Mr Dean’s assessment – equivalent to a little over a day’s work – seems reasonable for what was acknowledged to be a minor job.

[25]     The painting work was more extensive.  Mr Dean estimated a cost of $3,390 or 113 hours work at the charge-out rate of $30.  This contrasts with estimates of Messrs Arthur and Ren whose respective estimates were $900 to $1,800 and $1,800 to $2,700, depending on whether the job was categorised as “quick” or “thorough”. Mr Singleton’s equivalent estimates (at 2012 prices) are $3,200 and $4,100.

[26]     The painter, Mr Phongphat Chaikunpol, said in evidence that the work took only 30  hours  which  is  $900  at  a  charge-out  rate  of  $30.    I  am  satisfied  that significantly understates the time expended, even for a relatively superficial job. Materials alone cost $915.  For the reasons already discussed, I consider Mr Dean’s estimate has insufficient regard for the quality of the work.   I propose to adopt Mr Singleton’s “one-coat” costing of $3,200, reduced by 15 per cent to $2,720.

51 Church Street

[27]     Mr Dean’s estimate for plastering was $810 based on what he was told of the extent of the work done.   As Mr Kaewbabpha was paid $300 for materials, the suggested cost of labour does not seem excessive.

[28]     The cost of painting is more controversial.  Mr Dean’s estimate was $1,860 for materials and $9,050 for labour.   Again, he said the quality of the work was “pretty low”.   Mr Dean’s estimate is much higher than the costings of Mr Field’s witnesses.  Messrs Arthur and Ren’s estimates were, respectively, in the range $1,400 to $1,700 and $2,200 to $3,300.   Mr Singleton’s estimate for the interior painting only was between $3,200 to $4,100 at 2012 prices.

[29]     The painter, Mr Chaikunpol, said in evidence that the work took him 15 days or 120 hours (at eight hours a day).  On this basis, and having regard to the estimates of Mr Field’s witnesses, Mr Dean’s costing seems very high, allowing, as it does, for over 300 hours of work.  That seems a lot for a brick veneer house, particularly when compared to the similar price suggested for the painting of the weatherboard house at Allen Street.

[30]     None of the estimates are entirely satisfactory.  I consider Mr Dean’s figure to be too high, having regard to the extent and quality of the work and the estimate for Allen Street.  On the other hand, I find Messrs Arthur and Ren’s estimates difficult to reconcile with the hours Mr Chaikunpol said he expended.  Doing the best I can with the available information, I propose to take the lower of Mr Singleton’s estimate for the interior painting, reduced to $2,720 to reflect 2005 prices, and to add one-third to reflect the exterior work.  I assess the value of painting accordingly at $3,600.

[31]     This was a two-room extension to an existing building.  Mr Dean assessed the  labour  cost  of  plastering  at  $2,110.    However,  as  I noted  when  sentencing Mr Field,[4] his estimate appears to have been inflated by the mistaken belief that the plasters fixed the gib board.   Ms Jinda Thaivichit who, with her husband, did the plastering, said it took twelve hours for the two of them at $30 per hour.   That indicates a cost of $720 which, in the absence of a contrary view, I consider to be reasonable.

[4] R v Field HC Auckland CRI-2007-092-18132, 6 October 2009 at [20].

[32]     Mr Dean estimated the cost of internal painting at $1,480 and external work at $690, a total of $2,170.  At an hourly rate of $30, that indicates 72 hours of work. The painter, Mr Chaikunpol, claimed that the painting took 12 hours.  I consider that to be a gross understatement.

[33]     Mr Arthur estimated the cost of a “quick” job at $1,400.  Mr Ren’s estimate

ranged from $700 to $1,050.   Mr Singleton estimated a cost for one top coat of

$2,000 for the interior walls only, although that included preparation of the painted surfaces.

[34]     Mr Singleton’s evidence (which once again I consider to provide a more realistic  assessment  than  Messrs Arthur  and  Ren),  tends  to  confirm  Mr  Dean’s figures.  I conclude that the value of the painting was $2,000.

House at Afiamalu, Samoa

[35]     Mr Field and his wife bought a partly constructed house at Afiamalu, Samoa. Finishing work comprising tiling, plastering and painting was carried out by Thai

tradesmen who travelled to Samoa for the purpose.

[36]     Mr Garner carried out a visual inspection of the tiling work done at the residence.  He estimated that 448 square metres of tiling had been carried out inside the house and 12.95 square metres on an exterior porch.   He said at the time he viewed the tiling there were small areas still to be completed.

[37]     Mr Garner estimated that preparation for one man for the tiling would be one month  to  four  weeks  and  the  tiling  itself  would  take  at  least  another  month. Mr Garner said that labour only rates for tiling in Samoa at the time were between 22 and 32 tala per square metre which would indicate a price of between 9,856 tala and

14,336 tala.   Using an approximate exchange rate of 1 tala = $NZ.50, that is approximately equivalent to $NZ5,000 to $7,000.

[38]     Mr Konrad Keil, the managing director of a building company in Samoa, who has some seven years of building and project management experience, swore an affidavit on Mr Field’s behalf.  His estimate of the floor area to be completed was similar  to  that  of  Mr  Garner.    His  estimate  of  the  total  tiling  costs,  including bathroom walls but excluding the porch area, was 12,475 tala or a little over $6,000. His evidence supports a cost at the mid-point of Mr Garner’s range, which I propose to adopt.

[39]     Mr Karam pointed out that in his evidence Mr Garner noted that some of the tiling had not been completed at the time of the inspection.  I do not propose to make any adjustment on that account as there was evidence that Mr Siriwan, the tiler, did more work after the date of inspection.

[40]     However,  I  consider  some  allowance  should  be  made  for  the  fact  that Mr Siriwan was paid an allowance while in Samoa.  The payment was irregular but I consider it reasonable to allow for a weekly payment of 150 tala per week over the notional 10-week period it took to complete the tiling work.

[41]     This would reduce the net value of the work for Mr Field to $5,250.

[42]     There was no direct evidence of the extent of the plastering work.  Based on the evidence of the Thai tradesmen who went to Samoa and those who were present, I concluded for the purpose of sentence[5]  that the two plasterers worked long hours during the two to three weeks they were in Samoa.  I accept the Solicitor-General’s position that a conservative estimate is 306 hours work, being the 17 week days they were in Samoa working nine hours per day.

[5] R v Field at [28].

[43]     Mr Johnstone submitted that the work should be priced at the $30 per hour that, on Mr Dean’s evidence, the plasterers would have been paid in New Zealand.  I do not think that is the right approach.  The value of the work and the benefit derived by Mr Field should be assessed by reference to Samoan costs and prices.  That is the cost which Mr Field was able to avoid and will more closely approximate the value of improvements to his property, which can be assumed to reflect Samoan costs and prices.

[44]     Evidence of the hourly rates payable to qualified tradesmen in Samoa varied from 2.50 to 10 tala.  Having regard to the skill levels and productivity of the Thai workers, I consider it is appropriate to use a rate of 10 tala.  That suggests a cost of

3,000 tala or $1,500.  From that should be deducted Mr Field’s contribution of $367

to air fares.  I propose to allow $1,200 for the plastering work.

Painting

[45]     Mr Garner estimated that the cost of the interior painting would have been

14,375 tala and the exterior painting for a three-coat finish would have been 9,890 tala. That would equate to approximately $NZ12,000.

[46]     That estimate is difficult to reconcile with the evidence given at trial which was that the house was painted inside and out by three painters who worked over a

period of three weeks.  Based on a six-day week and an eight-hour working day, that

4,320 tala or just over $2,000.

[47]     The large discrepancy between the two bases of calculation is concerning. Either Mr Garner’s costs are widely exaggerated or the hours spent painting and/or the hourly rate for painters used by Mr Kiel are grossly understated.

[48]     Mr Garner’s evidence of tiling costs had proved to be reliable but, in the absence of a breakdown of his estimates, there is no satisfactory basis upon which I can resolve the issue.  The Solicitor-General has the onus of proof.  Although I have considerable misgivings, I must adopt the lower figure, based as it is on evidence given at trial and the uncontradicted evidence of Mr Kiel.

Summary

[49]     I conclude that the value of benefits derived by Mr Field from the work done on each of the properties is as follows:

42 Allen Street              Plastering

Painting

3,410

5,500                  8,910

73 Blake Street              Plastering

Painting

270

2,720                  2,990

51 Church Street           Plastering

Painting

810

3,600                  4,410

2A Prangley Avenue      Plastering

Painting

720

2,000                  2,720

Afiamalu, Samoa           Tiling Plastering Painting

5,250

1,200

2,000                  8,450

GRAND TOTAL  $27,480

[50]     I order that Mr Field pay to the Crown a pecuniary penalty in the sum of

$27,480.

1. In accordance with the usual practice in applications under the Act, I make no

   order as to costs.