Solicitor-General v Brown no.2 HC Auckland CIV 2008-404-006760

[2011] NZHC 1355

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-404-006760

IN THE MATTER OF     an application pursuant to the Proceeds of

Crime Act 1991

BETWEEN  THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

ANDRONALD TERENCE BROWN Respondent

Hearing:         2 August 2011

Counsel:         R McCoubrey for the Applicant

D Reece for the Respondent

Judgment:      4 August 2011

JUDGMENT (NO 2) OF WOOLFORD J (As to forfeiture)

This judgment was delivered by me on Thursday, 4 August 2011 at 10:30 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Meredith Connell, DX CP24063, Auckland

David Reece, Barrister, PO Box 4208, Auckland 1140

THE SOLICITOR-GENERAL V BROWN HC AK CIV 2008-404-006760 4 August 2011

Introduction

[1] On 20 June 2011 I made a number of orders forfeiting motor vehicles, cash sums and items of jewellery to the Crown pursuant to s 15 Proceeds of Crime Act

1991.  I adjourned the balance of the Crown’s application, in particular, the matter of a pecuniary penalty order for a month to hear argument on the amount of such an order to be awarded against the respondent in light of the fact that he had derived a benefit of at least $4.5 million from the commission of the offences.

[2]      The respondent owns a property situated at 5 Rawene Avenue, Westmere, as a tenant in common with his brother.  They inherited the property from their mother. At my request I have now received an up-to-date valuation of the property from Darroch Limited.  The property has a market value of $1.3 million.  In addition, I am advised that the ANZ Bank is owed the sum of $78,582.62 as at 15 June 2011.  It holds a mortgage over the property.

[3]      I had also requested the respondent’s counsel to provide updated information to the Court about the circumstances which the respondent submitted warranted an order of a sum less than the respondent’s half-share in the property and, in particular, the current situation and requirements of the respondent’s son.  I am now advised by counsel that the interests of the respondent’s severely disabled son would not now be advanced and that the argument for the respondent would be based on the contents of the  affidavits  and  memorandum  already  filed  in  opposition  to  the  Crown’s application.

Respondent’s submissions

[4]      Counsel for the respondent submitted that the Court has a duty to be fair and just and must take into account the effect of a pecuniary penalty order.  If an order is made which would in effect take away the respondent’s share in the property, the respondent would be destitute when released from prison.  He would have nothing and would have to rely on his family and the state.  Counsel also submitted that the home had real spiritual significance for the wider family because it was bought by the  respondent’s  parents  over  40  years  ago.     He  said  that  the  respondent’s

circumstances are quite different from those of the convicted offenders in The Solicitor-General of New Zealand v Sisson[1] and R v Wallace[2] who had purchased the properties in question themselves and had used them for their drug dealing activities.

[1] HC Auckland M978/97, 1 August 2000, Salmon J.

[2] (2001) 18 CRNZ 577 (CA).

[5]      Accordingly, counsel submitted that a pecuniary penalty order was effectively a confiscation order and therefore undue hardship could be taken into account.

[6]      Counsel put forward a number of options for the Court to consider:

(a)      The Court could set a pecuniary penalty order at an amount lower than the respondent’s share in the property.  The figure of $250,000 was mentioned.   If this order was payable over a two or three year period, it may be able to be paid by the family which would enable it to retain the property.

(b)The Court could order that the respondent retain a life interest in the property while at the same time making a pecuniary penalty order for the respondent’s share in the property which would take effect on his death.

(c)      A sum of money of at least $100,000 could be set aside from the property if it did have to be sold so that the respondent would not be left destitute upon release from prison.  Counsel cited the case of R v Andrian[3] in support of this option.

[3] (1996) 13 CRNZ 449 (CA).

[7]      Finally, counsel referred to s 9 New Zealand Bill of Rights Act 1990 and submitted that in the unique circumstances of this case, a pecuniary penalty order of the  magnitude  suggested  by  the  Crown  would  be  disproportionately  severe treatment.

[8]      In a letter to the Court, the respondent stated that he was desperate to save the

house not for himself but for his children and his brother’s children.  He indicated

that he was even prepared to serve additional time in prison to pay his debt to society if that could possibly save the family home so his grandchildren could enjoy it.

[9]      As noted earlier, the respondent does not advance the interests of his severely disabled son, whose needs are apparently being adequately met by ACC. Apart from his severely disabled son, Mr Brown has two daughters aged in their early 40’s one of whom lives in the property.   The other daughter lives in Melbourne with her partner and their two children.  The respondent’s brother, who is 65, lives with his partner in Turangi.  He has two middle-aged children, one living in Auckland and one in Rarotonga.

Crown’s submissions

[10] Counsel for the Crown submitted that a pecuniary penalty order should be made for a sum equivalent to half of the net proceeds of sale of the property. In response to the submissions of counsel for the respondent, counsel reminded me of the legislative intention behind the Proceeds of Crime Act as confirmed by the Court of Appeal in R v Pedersen.[4]   Counsel submitted that any lesser sum would indirectly reward the respondent in some way for his crimes.  It would be a misplaced act of mercy.  Counsel also referred to the decision of Sisson.

[4] (1995) 13 CRNZ 34 (CA).

[11] Although there may be hardship to the wider family, counsel submitted that such hardship was not undue but a result of the proper application of the principles contained in the Proceeds of Crime Act. Counsel also submitted that many people were old and unwell and had to rely on their family and the state. If the respondent did fall into that category when he is released from prison, then there was nothing unusual in his circumstances. That fact should not stop an order being made.

Discussion

[12]     I first note the comments of Cooke P. and Richardson J in R v Pedersen.[5]

Being a measure designed to deter serious crime by demonstrating emphatically that it does not pay, the Proceeds of Crime Act should be judicially administered in that spirit. In simple cases of serious drug selling the Courts should be slow to award less than the maximum penalty against sellers. This is a move in a necessary direction, involving recognition that imprisonment is not an adequate remedy for crime.

[5] At page 40 line 33 – 38.

[13]     In Sisson, Salmon J held that the interests of young children aged about 5 and

7 did not justify departure from the starting point that a pecuniary penalty order together with the value of property forfeited should equal the benefits received from the offences.  Such a departure could only be justified by compelling circumstances. To do so would allow an offender to retain some benefit from his or her criminal activity which Salmon J thought was inappropriate.

[14]     In Wallace, the Court of Appeal held that the possibility of harm to a third party could justify a reduction in a pecuniary penalty.   Counsel for the appellant pointed to the fact that the house and land in issue had been legitimately purchased before the offending with mortgage funds and money realised from the sale of other properties and that the property was tainted only to a relatively insignificant degree. Counsel  also  submitted that  the  payment  of  the  pecuniary penalty order  would necessitate the sale of the family home, and that this would cause undue hardship to the family, especially Mr and Mrs Wallace’s children who were 18 and 19 year old students.

[15]     The Court of Appeal agreed with Salmon J at first instance[6] that there was no evidence to suggest the existence of such hardship.  Mr and Mrs Wallace’s children were at an age where they could support themselves.   Any hardship to Mr and Mrs Wallace was as a consequence of the offending and, to the extent that such a consideration is relevant, it could be regarded as “undue” in the circumstances.

[6] At [7] and [9].

[16] When fixing a pecuniary penalty, I acknowledge that I do have a discretion pursuant to s 25 Proceeds of Crime Act 1991 to order the payment of a lesser sum than the benefit received by the respondent in the commission of the offences. The

starting point, however,  in the present case, must be that the pecuniary penalty

should be fixed at a level to take away the respondent’s share in the property.  As

noted by the Court of Appeal:

the Courts should be slow to award less than the maximum penalty against sellers [of drugs].

[17]     The enforced sale of the property will not, in my view, leave any family members destitute.   Although one of the respondent’s daughters is living in the property, she is in paid employment and able to find accommodation elsewhere. Although regarded as the family home, the respondent’s other daughter, the respondent’s brother and his children do not have a close connection with the property. The respondent has lived in the property for many years.

[18]     The respondent’s brother says that his half-share in the property is worth more to him than the cash he would receive from it’s sale.  However, after repayment of the mortgage and the payment of the real estate agent’s commission, he is likely to receive the sum of approximately $600,000 which would enable him to purchase a substantial family home in Auckland suburbs other than Westmere or outside of Auckland.

[19]     I also do not accept that the making of a pecuniary penalty order at a level to take away the respondent’s share of the property would be disproportionately severe treatment in terms of s 9 New Zealand Bill of Rights Act.  On the contrary, it is a proportionate response to the significant benefits the respondent received from his drug dealing activities.

[20]     Finally, the fact that the respondent may be released from prison destitute and reliant on his family and the state is not persuasive.  The respondent is fortunate to retain the support of his brother and his children who have continued to stand by him notwithstanding the devastating effect the respondent’s drug dealing activities have had on the community.

[21]     In conclusion, I have taken the view that there are no compelling reasons why the pecuniary penalty amount ordered by the Court should be less than the respondent’s share in the property.   Even at this level there is still a significant

shortfall between the benefits received by the respondent and the sum to be realised by the Crown from the sale of the forfeited cars and jewellery, the forfeited cash and the pecuniary penalty order.  The so called unique factual situation concerning the Rawene Avenue property, in particular the ownership structure of the property and the way it came into the possession of the respondent and his brother, are not matters which persuade me to depart from the starting point that the pecuniary penalty order should at least equate to the respondent’s share in the property.

[22]     Accordingly, I make a the following orders:

(a)      The  respondent  is  to  pay  a  pecuniary  penalty  order  of  a  sum equivalent to the respondent’s half-share in the property situated at

5 Rawene Avenue, Westmere.

(b)The  respondent’s  half-share  in  the  property  situated  at  5  Rawene Avenue, Westmere, is to be made available to meet the pecuniary penalty order.

(c)      The Official Assignee is to sell the property situated at 5 Rawene Avenue, Westmere, in satisfaction of the pecuniary penalty order subject to a condition that the Brown family be given the right to purchase the respondent’s half-share in the property by paying the sum of $600,000 to the Official Assignee (being approximately half the value of the property less the mortgage and real estate agent’s commission).

(d)The Official Assignee is to pay the Crown a sum equivalent to the respondent’s half-share in the property situated at 5 Rawene Avenue, Westmere, after deduction of the mortgage and  real estate agent’s commission, with the remainder to be paid to the respondent’s brother or, alternatively, pay the Crown the sum of $600,000 received from the Brown family as payment for the respondent’s half-share in the property.

[23]     The reasonable legal costs of the respondent and the respondent’s brother in relation to this application, as approved by the Official Assignee, are to be paid from the proceeds of the forfeited property.  The Official Assignee is also entitled to his reasonable costs in realising the respondent’s assets.

[24]     Leave is reserved to come back to Court if any further ancillary orders are necessary.

Woolford J