Stanton v Solicitor-General

[2007] NZCA 434

IN THE COURT OF APPEAL OF NEW ZEALAND

CA117/07
[2007] NZCA 434

BETWEENMAURICE ROBERT STANTON

Appellant

ANDTHE SOLICITOR-GENERAL OF NEW ZEALAND

Respondent

Hearing:17 September 2007

Court:Ellen France, John Hansen and Wild JJ

Counsel:P G Mabey QC for Appellant

M D Downs for Respondent

Judgment:9 October 2007 at 3 pm

JUDGMENT OF THE COURT

A        The appeal is allowed. 
B        The order for forfeiture is quashed.

REASONS OF THE COURT

(Given by John Hansen J)

[1]       On 8 March 2005 the police executed a search warrant at the appellant’s rural lifestyle block at Whatawhata.

[2]       They found eight cannabis plants growing in a vegetable garden; 1.62 kilograms of drying cannabis head; three boxes of snaplock bags; and some ammunition.

[3]       The appellant, and a co-offender, Mr Hendriks, accepted growing the cannabis, but denied possessing it for the purpose of sale.  Mr Hendriks pleaded guilty to one count of cultivation of cannabis, one of possession of cannabis for sale, and one of possession of utensils and a pipe.  The appellant pleaded guilty to one count of possession of cannabis.  Following trial before Judge Tompkins and a jury, Mr Hendriks was convicted of one count of cultivation and one of possession of cannabis for sale.  The appellant was convicted on one count of cultivation of cannabis and two counts of possession of cannabis for sale.  The appellant was acquitted of cultivating cannabis in an area adjacent to his property for which his co-offender acknowledged guilt.

[4]       At sentencing, the Judge found the appellant and his co-offender had similar levels of culpability.  He sentenced both to two years and three months’ imprisonment on the cultivation of cannabis and possession of cannabis for the purpose of sale, and convicted and discharged the appellant for possessing ammunition.  The sentences were concurrent.

[5]       The Solicitor-General applied for the forfeiture of the appellant’s property that he had purchased in 2003 for $223,000.  All but $20,000 of this came from a bank mortgage.  The appellant’s mother maintained that she had advanced funds to her son, and claimed an interest.

[6]       Following a defended hearing, the District Court Judge rejected the mother’s claim and concluded that forfeiture was appropriate:  DC HAM CIV 2006-019-991 28 February 2007.  He did not consider the appellant’s personal circumstances would create insurmountable obstacles for him re-establishing himself as a law abiding, property owning member of the community.  He found that there was no undue hardship.  He accepted the state would gain from the significant inflationary increase in the value of the property, but when compared to the seriousness of the offending concluded there was no disproportionality.

[7]       The appellant appeals against that forfeiture order.

The District Court judgment

[8]       After analysing the valuation evidence, the Judge concluded that the extent of the appellant’s financial contribution to the purchase of the property was $20,000.  He concluded that any additional increase in value was as a consequence of the somewhat spectacular inflationary movement in New Zealand property prices over the relevant period.  He stated:

[62]     It is also relevant to note, but again not determinative, that the value of the cannabis located on a very rough approximation, equated with the cash contribution made by Mr Stanton to the purchase of the property when he bought it in September 2003. In one sense, the exercise required of the Court by the Act is arbitrary in this case because, as already noted, by far the bulk of the equity Mr Stanton now enjoys in his property came about not as a result of his own efforts, but rather merely the operation of the nation-wide property market over time. In that sense then, although Mr Stanton has for present purposes an “equity” in the property of $190,000, that is, and on Mr Stanton’s evidence will remain, an unrealised gain. He does not intend to sell the property, and indeed his approach to this application was founded on the premise that he desired to retain the property and live in it after his release from prison.

[63]     In very blunt terms, Mr Stanton put $20,000 into the original purchase, and approximately a year or so later decided to use the property to grow roughly the same amount in dollar terms of cannabis on it. What he stands to lose by forfeiture is that amount, plus a far greater unrealised windfall gain which, on his evidence, he does not intend (at least in the foreseeable future) to realise.

[9]       He then found:

[65]     Pulling all those strands together, I conclude that forfeiture is appropriate. I do not consider that Mr Stanton’s circumstances render insurmountable the obstacles he will face upon his release from prison to re–establishing himself as a law–abiding, property–owning member of the community.

[66]     There will be hardship but not, I conclude, undue hardship. If it is appropriate that he, as a convicted drug dealer, have further involvement in his children’s upbringing, then I do not view the absence of his owning a property as either insurmountable or sufficient to cause his children undue hardship.

[67]     Whilst the state, rather than Mr Stanton, stands to gain from the crystallisation, in financial terms, of the effect of a rampantly upwardly mobile property market, in terms of Mr Stanton’s actual cash contribution to the acquisition of the property, when compared to the seriousness of his offending and the value of the cannabis he grew, there is no disproportionality.

Submissions

[10] Mr Mabey submitted that the Judge, in focusing on the reason for the increase in the appellant’s equity, made the wrong enquiry. Instead of focusing on the appellant’s equity and comparing it with the seriousness of the offending, the Judge, by discounting inflationary increases, placed the value of the cannabis as equating with the appellant’s cash contribution to the purchase of the property. He submitted the Judge failed to take into account in considering undue hardship that the property was not acquired solely for the purpose of cultivating cannabis, and there was no evidence that it was acquired other than by legitimate means. He also submitted that it was clear the property was intended for use as a home, and that on release the appellant would not be in a position to re-establish himself as a property owning member of the community. He submitted the Judge has failed to apply a full and balanced consideration of the discretionary factors in s 15 of the Proceeds of Crime Act 1991, and as a consequence forfeiture was disproportionate.

[11]     For the Solicitor-General, Mr Downs argues that the references to the equity in the property and how it was created by inflation exhibited no error of principle.  He submitted there should be no strict correlation between benefits and forfeiture (R v Crombie CA453/05 29 June 2006), and that unlike Cooksley-Mellish v Solicitor‑General of New Zealand CA209/05 27 March 2006, this appellant is in a position to work.  However, Mr Downs did accept that it was the loss of the equity of $190,000 that needed to be considered against the seriousness of this offending in determining whether or not forfeiture was disproportionate.

Discussion

[12] Section 15 of the Proceeds of Crime Act reads:

(1)     On the hearing of an application for a forfeiture order in respect of a person's conviction of a serious offence, the Court may, if it is satisfied that property specified in the application is tainted property in respect of the offence, order that such of the property as is specified by the Court is forfeited to the Crown.

(2)     In considering whether or not to make an order under subsection (1) of this section in respect of particular property, the Court may have regard to—

(a)     The use that is ordinarily made, or was intended to be made, of the property; and

(b)     Any undue hardship that is reasonably likely to be caused to any person by the operation of such an order; and

(c)     The nature and extent of the offender's interest in the property (if any), and the nature and extent of any other person's interest in it (if any); and

(d)     In addition to the matter referred to in section 14(1)(b) of this Act, any other matter relating to the nature and circumstances of the offence or the offender, including the gravity of the offence.

(3)     A Court that makes a forfeiture order against property may, if it considers that it is appropriate to do so, by order,—

(a)     Declare the nature, extent, and value of any person's interest in the property; and

(b)     Declare that the forfeiture order may, to the extent to which it relates to the interest, be discharged pursuant to section 22 of this Act.

(4)     Where the Court orders that property (other than money) is forfeited to the Crown, the Court shall specify in the order the amount that it considers to be the value of the property at the time the order is made.

(5)     Where a Court makes a forfeiture order, the Court may give such directions as are necessary and convenient for giving effect to the order.

(6)     Without limiting the generality of subsection (5) of this section, where a Court makes a forfeiture order against any property title to which is passed by registration on a register maintained pursuant to any New Zealand enactment, the Court may direct an officer of the Court to do anything reasonably necessary to obtain possession of any document required to effect the transfer of the property, and for that purpose may, by warrant, authorise any such officer to enter and search any place or thing and seize any such document.

(7)     Sections 31 to 34 of this Act, so far as applicable and with all necessary modifications, shall apply in relation to a warrant issued pursuant to subsection (6) of this section to an officer of the Court as if it were a warrant issued under section 30 of this Act to a member of the Police.

[13]     In terms of R v Terewi [1999] 3 NZLR 62 (CA), this was category two offending. The Judge accepted there were both personal and commercial elements to it. However, it was clearly a rustic, unsophisticated operation.

[14] In terms of s 15(2)(a) the Judge found that the property was purchased for, and was intended to be used as, a residence for the appellant. He also accepted it was acquired from legitimate means and 18 months passed before this offending.

[15]     In our view the critical question in this case is the disproportion between the seriousness of the offending and the value of the interest that will be lost (see Lyall v Solicitor-General [1997] 2 NZLR 641 at 649 (CA)).

[16]     There is always an overlap between disproportionality and undue hardship under subs (2)(b).  In terms of undue hardship a useful non-exclusive list of factors that would weigh can be found in Taylor v Attorney-General for the State of South Australia (1991) 55 SASR 462 at 474 (SCCCA). This case has been cited with approval in New Zealand (Solicitor-General v Sanders (1994) 2 HRNZ 24 at 31 (HC); Solicitor-General v Wong (1997) 14 CRNZ 624 at 633 (HC)).  Those factors include the value of the property; the nature of the offender’s interest; the value of the drugs involved; whether the property was acquired with the proceeds of sale of drugs; the utility of the property to the offender; length of ownership; the extent to which the property is connected with the commission of the offence; and the fact that the forfeiture provisions are intended as a deterrent to drug dealers; and the interests of innocent third parties.  A number of these factors are relevant in this case.

[17]     The fact the appellant’s equity has increased because of inflation is at best a neutral factor.  In Cooksley-Mellish a Lotto win enabled the appellant to purchase a lifestyle block in a quiet rural location in Northland.  He was found to be raising cannabis with an estimated value of $47,000.  The District Court Judge saw the acquiring of the property from Lotto winnings as a significant factor.  He contrasted it with cases where the property had been owned for a long time before being used for illegal purposes.  This Court stated:

[22] The Judge was asked to consider hardship by reference to the position of the appellant and Ms Marriner.  In considering whether there was undue hardship to the appellant himself, the Judge focused on the source of the funds used to acquire the property, contrasting the circumstances with cases in which a property had been acquired from savings and its value enhanced by hard work.  However, an assessment of undue hardship requires a consideration of all circumstances which might have consequences going beyond the simple loss of a valuable asset. The loss of a property which is especially suited to the appellant’s special needs is one such circumstance.  Another is that because he is unable to work and now aged 50, there is no realistic prospect of his ever acquiring another property; he will have lost his major asset. Of relevance too, though of less significance, is that a number of chattels with an estimated value of $10,000 were also confiscated because of their use in the growing operation.

[23] We accept that the appellant’s lucky win precluded any argument that undue hardship derived from the way in which the property had been acquired or built up. But that is not the end of the matter. Forfeiture has consequences for the appellant which go beyond those which would follow in the usual run of cases.  Those we have referred to should have been taken into account.

[18]     It is therefore necessary, as Mr Downs conceded, to assess what the effect of forfeiture on the appellant would be compared with the seriousness of his offending.

[19]     This was a joint enterprise between the appellant and his co-offender.  Only eight cannabis plants were found growing, along with 1.62 kilograms of drying cannabis head.  The value was assessed to be between $20,000 and $40,000 if it was all sold.  However, the Judge clearly accepted that at least some of this was for personal use.  The extent is impossible to ascertain, but it is clear that the appellant would only benefit from part of the production.

[20]     The appellant had suffered a serious back injury that prevented him carrying on his work as a diesel mechanic on heavy machinery.  Previously his pre-tax income was approximately $100,000.  He is now employed at $50,000 per annum, but with an apprentice assisting with heavy lifting, and other work that is difficult for the appellant to carry out because of his back injury.  It is clear from a letter provided to the Court that when the apprentice is qualified the salary will be reduced.  It is unclear whether the appellant will retain that employment.  Those factors are relevant to the Judge’s assessment that he can “re-establish himself as a law-abiding, property-owning member of the community” (at [65]).

[21]     The property also has special utility to the appellant.  It allows him to store equipment associated with his work as a mechanic, and further allows him to carry out some work as a diesel mechanic.

[22]     Mr Downs submitted that the Judge’s references to the inflationary increase in the appellant’s equity did not govern the decision.  With respect, we cannot agree.  On a close reading of the decision, especially the paragraphs we set out earlier, it is clear that the Judge has equated the seriousness and extent of the offending with the appellant’s cash contribution.  He has specifically stated at [67] that in terms of Mr Stanton’s actual cash contribution, compared to the seriousness of the offending, there is no disproportionality.  This is following a statement that the state stands to gain from the effect of the rampantly upward mobile property market.  That makes it clear that the Judge’s focus was on the appellant’s cash contribution compared to the seriousness of the offending.  As Mr Downs properly conceded, that is not the correct enquiry.  Clearly this appellant cannot claim that he has made any significant contribution to the increase in value of the property.  But that is merely one aspect of undue hardship that is frequently considered.  All circumstances must be considered (Cooksley-Mellish at [22]). 

[23]     As the Solicitor-General accepted, the question the Judge should have asked, but did not, is whether the forfeiture of the present equity in the property is disproportionate to the appellant’s offending.  We are satisfied it is.  The appellant’s circumstances can be contrasted with decisions such as Solicitor-General of New Zealand v Anaru CA52/06 16 August 2006, where a shed was converted for hydroponic cultivation.  The police estimated annual turnover of between $217,000 and $1.4 million.  Similarly Solicitor-General of New Zealand v Kelly CA215/06 7 December 2006, where within a month of the property being purchased a sophisticated indoor hydroponic operation had been set up.  Kelly did not live at the property, and the police located 324 plants.  Despite this, this Court did not disturb what was described at [20] as a benevolent lower Court decision against forfeiture.

[24]     In Crombie, referred to by the Solicitor-General, this Court said at [17]:

In this case, the economic interest which was forfeited by the Judge is in the order of $50,000.  On any view of it, the benefits derived by the appellant as a result of his offending greatly exceed what will be lost to him by reason of the forfeiture orders.  In saying this, we are not to be taken as implying that the extent to which an offender benefits from offending sets an upper limit on the extent to which forfeiture orders may be made.  But where the economic impact of a forfeiture order is appreciably less than the benefits derived by the offender, we see no scope for the view that the order results in a disproportionate punishment for the purposes of s 9.

[25]     This is draconian legislation, and it is intended to operate as a deterrent.  However, in considering proportionality the correct assessment is to view the true value of the equity in the property owned by the offender with the seriousness of this offending. 

[26]     In our view it would be clearly disproportionate for the appellant to lose his property when the following matters are balanced:

(i)        it was rustic, unsophisticated offending;

(ii)the appellant only had a share in the crop said to be worth $20,000–$40,000;

(iii)      the property was acquired by legitimate means;

(iv)      the property was used as a residence by the appellant;

(v)the property was not acquired for the purpose of drug offending;

(vi)      the property has a special utility for the appellant; and

(vii)the appellant’s ability to work is seriously curtailed, which makes it almost impossible to re-establish himself upon release.

[27]     From such a balancing there is undue hardship and disproportionality.

[28]     The appeal is allowed.  The order for forfeiture is quashed.

Solicitors:

Crown Law Office, Wellington