DNS FOREST PRODUCTS (2009) LIMITED v GISBORNE DISTRICT COUNCIL [2020] NZHC 2437

DNS FOREST PRODUCTS (2009) LIMITED v GISBORNE DISTRICT COUNCIL [2020] NZHC 2437 [18September 2020]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECRI-2020-416-13[2020] NZHC 2437BETWEEN DNS FOREST PRODUCTS (2009)LIMITEDAppellantAND GISBORNE DISTRICT COUNCILRespondentHearing: 16 September 2020Counsel: M Atkinson for appellantV C Brewer for respondentJudgment: 18 September 2020JUDGMENT OF ELLIS J[1] In the first half of June 2018, the Gisborne region experienced a significantstorm. Heavy rain over a number of days upheaved large amounts of logging debrisand carried it onto roads and landings. Forestry waste flowed onto and intoneighbouring properties, water bodies, and coastal areas across the region. Theenvironmental impact was significant.[2] DNS Forests Products (2009) Limited (DNS) later pleaded guilty to a chargeunder s 338(1)(a) of the Resource Management Act 1991 (the RMA) of contraveningor permitting the contravention of s 15(1)(b) of that Act. The contravention hereinvolved the discharge of contaminants—slash, logging debris, waste loggingmaterial, and forestry waste—onto land in circumstances where it then entered water.Judge Dwyer declined DNS' application for a discharge without conviction;1 hesentenced DNS to a fine of $124,700 and ordered reparation of $6,500.2[3] DNS now appeals that decision.BackgroundMakiri Forest and the resource consent[4] Makiri Forest is a 493 ha plantation forest about 38 km from Gisborne in theheadwaters of the Waihora Valley. As Judge Dwyer noted in the District Court, thearea is particularly vulnerable:[17] about 90 percent of Makiri Forest falls within Land Overlay 3 of theGisborne Regional Rules, being land areas most susceptible to erosion,sediment generation and soil loss in the region, an area which is well knownfor its vulnerability to significant weather events. The need for absolutecompliance with best forestry practice in terms of resource consents whenharvesting such land is overwhelmingly obvious.[18] Even when these requirements are followed there is a high degree ofrisk of slope failure and forestry waste mobilisation during (and for a periodof some years after) harvesting. Forest owners or harvesters undertakingharvesting operations in these conditions are at real risk no matter how carefulthey are.[5] Since early 2017, the Makiri forest has been owned by South Pacific ForestryHoldings Ltd (South Pacific). DNS was, effectively, the company responsible for theforestry operation on the land. Both South Pacific and DNS are wholly owned andcontrolled by Mr Daning Sun.[6] On 9 November 2016, the Gisborne District Council (the Council) grantedDNS a land use resource consent that allowed the formation of 11.1 km of roads, theconstruction of 28 landings and pads, the harvesting of 398 ha of trees, and theextraction of logs. The conditions of that resource consent included that:(a) On slopes greater than 25 degrees, fill used in compaction of road andlanding formations or sidecast to waste was to be held in place bybenching, compaction, armouring or a combination of those measures.1 Gisborne District Council v DNS Forest Products 2009 Ltd [2020] NZDC 11112.2 Gisborne District Council v DNS Forest Products 2009 Ltd [2020] NZDC 14233.(b) Runoff onto landings was to be intercepted by cut-off drains and wasto be discharged clear of any fill.(c) Water table culverts were to be installed and to discharge clear of fill.(d) Cut-off drains were to be installed at a maximum spacing of one every50 metres along arterial tracks.(e) At the conclusion of logging at each landing, no unstableaccumulations of logging debris could be left on or beneath landingedges.[7] The consent did not authorise discharges of forestry waste into water or ontoland in circumstances where the waste might then enter water.The forestry operation and its failures[8] In early 2017, DNS entered contracts with A&R Logging Limited (A&R) andLogic Forest Solutions (Logic). A&R was to build roads, harvest trees, and removethe logs; Logic was to oversee and manage this process. The contracts required A&Rand Logic to comply with the resource management conditions. As it transpired, A&Rand Logic did not comply with those conditions. But Logic did not report to DNS anybreaches; in many of its reports, it advised DNS that all resource consent conditionshad been met. DNS staff or directors visited the site around five or six times duringthe course of these operations.[9] The forest work continued from 1 June 2017 to 17 January 2018, when, after acontractual dispute with DNS, both A&R and Logic abruptly quit the operations. Post-harvest work (such as pulling slash back from landing edges and reinstating drains todivert water from skid sites) had not been completed. DNS tried to find anothercontractor to finish the work but was unsuccessful.[10] And so, the scene was set for the disastrous consequences of the heavy rainfallsin June 2018.[11] An inspection of the forest by the Council following the June rains revealed:(a) There was no evidence of benching, compaction or armouring of fillon the roads constructed on slopes greater than 25 degrees other thanthe clearing of material off old skid located below some roads andlandings (breach of condition 8);(b) Water on landings was being directed onto fill and logging debrisincluding waratah waste mixed with soil on the edge of landings(breach of condition 10);(c) Runoff from roads was being directed [through] cut-offs and culverts(where culverts were found) onto fill and side-cast material (breach ofcondition 11);(d) A number of cut-offs were seen along the outside edge of the accessroad and runoff directed into fill or side-cast material causing rillingand scouring (breach of condition 14);(e) Three landings where harvesting operations had been completed hadunstable accumulations of logging debris, slash, and/or waste loggingmaterial mixed with soil left on the edges of landings, with manylandings having perched slash/slovens overhanging the landings andbelow the landings (breach of condition 23);(f) Three landings had collapsed causing debris slides of forestryharvesting waste material, sediment and sediment contaminated waterto enter watercourses within the forest. These landing collapses werethe direct result of various breaches of consent conditions as referredto above;(g) There was a lot of woody debris in the beds of streams.The subsequent criminal charges[12] Charges were laid against DNS and South Pacific under ss 338, 9 and 15(1)(b)of the RMA. As the District Court Judge recorded, it was apparently the failuresreferred to at (e) and (f) that formed the basis for those charges.3 Logic and A&R wereseen as responsible for the other matters listed; charges were laid against them, too.[13] By February 2020, DNS agreed to a plea deal whereby:(a) DNS—rather than South Pacific—would be the Sun company heldresponsible for the offending;(b) DNS would plead guilty to the s 15(1)(b) charge;(c) the Council would seek leave under s 146 of the Criminal ProcedureAct 2011 (the CPA) to withdraw all charges against South Pacific andthe s 9 charge against DNS; and3 At [13].(d) Mr Sun would give evidence at the hearing of the charges against Logicand A&R.[14] DNS' culpability was also agreed and recorded in a joint memorandum ofcounsel in the following terms:(a) After A&R left the site in January 2018, DNS ought to have reviewedthe state of the forest. It would then have become aware of the need forlogging debris and sediment to be pulled back from landing edges, andthe need for water controls to be reinstated.(b) DNS' offending was not deliberate or reckless.(c) DNS was not responsible for deficiencies in the construction of roads(including water controls) and landings. DNS had no reason to doubtLogic's assurances that those features had been built correctly.[15] DNS' guilty plea was entered on 11 February 2020. In accordance with theplea deal, the Council then sought and was granted leave to withdraw charges againstSouth Pacific and the s 9 charge against DNS.[16] But then, on 17 February, the Council sought leave under s 146 to withdraw allcharges against Logic and A&R. Leave was granted.4 It seems that no reasons wererecorded for the grant of leave. Because of the limitation periods in the RMA, thereis no possibility of charges being laid again.54 Ms Brewer for the Council has suggested that the charges were sought to be withdrawn becauseof the Council's potential exposure to a large costs award in the event the prosecution wasunsuccessful. The perceived risk of a failed prosecution here may have arisen due to the fact thatLogic and A&R had left Makiri Forest five months before the damage occurred. Ms Brewer alsonoted that shortly before the application for leave, the defendants' expert briefs of evidence hadbeen served on the Council.5 This obliterates the usual distinction drawn between the withdrawal of a charge with leave unders 146 and the dismissal of a charge under s 147, which is deemed to be an acquittal.Sentencing in the District Court[17] Judge Dwyer's analysis began by noting that the maximum penalty for theoffence was a fine of $600,000. The Judge noted the need for deterrence—particularlygiven the vulnerability of the Gisborne region to significant weather events.[18] As to culpability, the Judge said:[23] Culpability is a matter of some debate in this case. DNS was a "hands-off" forester depending on its forest manager and contractor performing asthey should have done. It was badly let down but, in any event, is caught byprinciples of strict and vicarious liability which are not disputed in the senseof being defended in this case. However, as it must accept, there was a periodof five months after the contractors walked off site during which the skid sitesand their water diversion systems were left in an unsatisfactory state. Overthis period DNS should have been on guard for potential problems due tounsatisfactory work leading to slumping and road disruption which requiredrepair. I concur with the Council's view that it should have been on notice tocheck the standard of the work which had been done.[24] DNS contends it was unable to get a contractor to undertake thenecessary work on skid sites. In my experience and observation, ascertainingskid site condition is not a difficult exercise. The need to pull slash back fromthe edge of landings from where it might easily be mobilised downhill anddivert water flows is readily apparent. Simple common sense is all that isrequired.[25] In this case that was also required by consent conditions. It is difficultto describe leaving the three skid sites which give rise to the offendingdischarges in an unsafe condition for five months as anything other thanextremely careless. Their tidying should have been a matter of high priorityand it was not. Even if the Defendant was unable to arrange a contractor tolook at and tidy up any skid sites, it could have asked the Council to havechecked to make sure everything was satisfactory once it was aware there hadbeen failures in the standard of site works.[26] Accordingly, I attribute a significant degree of culpability to DNSentirely relating to that five-month period.[19] Given the environmental damage (and with reference to similar cases), theJudge set a fine of $150,000 as the sentencing starting-point. He reduced this by fiveper cent for DNS' previous good character. For the guilty plea, entered 10 days beforetrial, he gave a 12.5 per cent reduction.[20] The Judge then turned to the question of a discharge without conviction, whichhad been sought by DNS. He noted that s 107 of the SA set a high threshold, and thatthe court needed to be satisfied that the direct and indirect consequences of aconviction would be "out of all proportion" to the gravity of the offending.[21] The Judge rejected the submission made for DNS that because the Council hadwithdrawn charges against A&R and Logic—despite those companies being (counselsaid) the principal, and more culpable, offenders—the parity principle reflected ins 8(e) of the SA required a discharge. His reasons were:(a) Section 8(e) applies only where the relevant offenders and offendingare similar, which was not the case here. DNS was the consent holderwho held ultimate responsibility to ensure that the operation satisfiedthe consent conditions. The offending also occurred five months afterA&R and Logic had left the site—DNS had ample opportunities torectify any shortcomings.(b) The Court was unable to consider why the Council withdrew chargesagainst A&R and Logic; DNS' sentence needed to be based on thesummary of facts, which contained nothing that might permit the Courtto question the propriety of the withdrawal of charges against the othertwo entities.(c) Section 8(e) had no application because no court had sentenced, orindeed "otherwise dealt with", either A&R and Logic. The authoritiesrelied on by counsel for DNS all concerned parity with other, related,defendants who had been discharged without conviction.[22] The Judge concluded that the fine of $127,400 was not out of all proportion tothe gravity of DNS' offending.66 Later, at final sentence, he imposed an additional sentence requiring payment of $6,500 reparation(under s 32(1)(a) SA) to be paid to an adjoining property owner: [2020] NZDC 14233, above n 2,at [4].The appeal[23] An appeal against a refusal to discharge without conviction is properlycharacterised as an appeal against conviction and sentence.7 It is brought unders 232(2) of the CPA: an appellant must show either that a miscarriage of justice hasoccurred by virtue of a material error by the sentencing judge in entering a conviction,or that "for any reason" the judge has erred in applying the relevant s 107 principles.8[24] Here, DNS' appeal is based squarely on s 8(e) and the parity principle. DNSsays that Judge Dwyer failed to properly consider consistency in the treatment of DNS,Logic, and A&R. Mr Atkinson says that the Judge's reasons for rejecting theapplication of the principle and refusing a discharge without conviction were wrongbecause:(a) the parity principle applies here;(b) there is nothing special (or relatively more culpable) about being theconsent holder;(c) the effluxion of time after A&R leaving the site does not reduce Logicand A&R's culpability (although it does increases DNS' culpability).[25] If—despite these submissions—this Court does not consider a dischargewithout conviction is appropriate, then Mr Atkinson asks that the level of DNS' finebe adjusted to reflect parity.Discussion[26] It is useful to begin with s 8(e) itself. It provides that, in sentencing orotherwise dealing with an offender the court—must take into account the general desirability of consistency with appropriatesentencing levels and other means of dealing with offenders in respect ofsimilar offenders committing similar offences in similar circumstances; 7 Jackson v R [2016] NZCA 627, (2016) 28 CRNZ 144.8 Jackson at [12]; Gaunt v Police [2017] NZCA 590 at [9].[27] And s 4(3)(a) of SA provides that "otherwise dealing with an offender or othermeans of dealing with an offender":means dealing with the offender in relation to an offence following a findingof guilt or a plea of guilty, instead of imposing a sentence; [28] Although there is authority from this Court that parity can be relevant to adecision to discharge without conviction,9 it is quite clear that s 8(e) has no applicationin this case. Rightly or wrongly, neither A&R nor Logic have been convicted of anyoffence (and so are not "other offenders"); neither has been sentenced or "otherwisedealt with" following a finding or plea of guilt.[29] Nor am I able to agree that parity is a principle of wider application that can beapplied even though A&R and Logic have not been—and now cannot be—convictedand sentenced. As Judge Dwyer said, there is no way of knowing why the chargesagainst A&R and Logic were withdrawn. But it must be assumed that (consistent withthe Solicitor-General's Prosecution Guidelines) the prosecutor sought leave afterreviewing the sufficiency of the evidence against those companies and after evaluatingthe public interest in the prosecution continuing. It is neither desirable nor possible tosecond-guess that decision and proceed on the basis not only that A&R and Logic wereeffectively guilty, but also that their level of culpability can be assessed.[30] And even if that were not the case, I do not agree that it is in any way obviousthat DNS is less culpable than those companies.[31] First, I agree with the District Court Judge that DNS' status as the consentholder is relevant. The consent holder is, ultimately, responsible for compliance withthe resource consent. The fact that Logic and A&R may have been contractuallyobliged to comply with the terms of the consent is just that: a contractual matterbetween those companies and DNS. And the fact that a consent may not be personalto the consent holder (as s 134 of the RMA provides that a consent runs with the land)is similarly immaterial.9 Police v Paki [2014] NZHC 3112 at [54].[32] Secondly, I do not accept that DNS' liability here was vicarious or (for thatreason) that Cooke J's decision in Sowman v Marlborough District Council is of anyrelevance or assistance.10 I acknowledge that Judge Dwyer did refer (at [23]) to DNSbeing "caught by principles of strict and vicarious liability". I also acknowledge that,apparently, it is not necessary for a prosecutor to specify reliance on s 340 of the RMAin the charging document, if liability is alleged to be vicarious.11 But a reading of boththe summary of facts and the joint memorandum does not suggest that DNS wascharged vicariously here. Rather, liability under s 338 was founded on DNS' ownfailure to take steps to prevent—and so "permitted"—a contravention of s 15(1)(b).As Ms Brewer submitted, DNS ought to have checked compliance at Makiri Forestafter 17 January 2018 because:(a) The harvesting manager and harvesting contractor had abruptly left theforest after a commercial dispute;(b) Their abrupt departure meant that post-harvest work (such as pullinglogging slash away from landing edges and reinstating water controls)was left incomplete;(c) The longer that the forest was left alone during this time, the greater therisk of environmental issues;(d) There were obvious risks of environmental damage at Makiri Forestgiven its steep terrain, susceptibility to severe erosion, and thedifficulties that DNS had had in engaging contractors to work on suchtricky terrain;10 Sowman v Marlborough District Council [2020] NZHC 1014. At [57] of that decision, Cooke Jsaid:The RMA contemplates a principal may be strictly liable for the act of an agent. But theposition is different at sentencing. The whole focus of the Sentencing Act is to carefullyconsider an offender's individual circumstances and sentence accordingly. The parityprinciple presupposes that, all things being equal, co-offenders ought to receive the samesentence. But matters such as the relative involvement in the offence often justify differentoutcomes.11 Subject to specified defences, s 340 makes a principal liable for the acts and omissions of hisagents, contractors and employees in relation to offences committed under the Act. In FultonHogan Ltd v Canterbury Regional Council [2019] NZHC 1767, [2019] NZRMA 642 this Courtheld that the Council was not required to refer to s 340 in a charging document where vicariousliability was alleged.(e) After engaging a new contractor to clear major slumps in the forest inFebruary 2018, DNS was on heightened notice of potential issues in theforest;12(f) DNS' resource consent application identified the risks of slash heap andbird nest collapse at Makiri Forest; and(g) DNS' resource consent application also said that it would follow theNew Zealand Forest Owners Association's Environmental Code ofPractice for Plantation Forestry, but DNS' offending involved breachesof those standards too.[33] And I agree with the Judge that it is also relevant that this failure to actcontinued over a period of five months, over which time the risk increased.[34] The fact that blame of some (non-criminal) kind may be laid at the feet of A&Rand Logic for other defaults and breaches is neither here nor there. That submissionfalls at the first hurdle, namely that A&R and Logic have not been convicted of anysuch failings—they cannot be taken into account. While DNS may well have privateremedies against them for those breaches, that can have no bearing on the appropriatesentence for DNS.[35] So in short, the parity principle has no application here and, even if it did, itwould not assist DNS.[36] Once that point is reached, Mr Atkinson very properly accepted that no issuecould realistically be taken with either the decision not to discharge without convictionor with the end sentence imposed here. More particularly:(a) The offending here was serious, and DNS has not pointed to any director indirect consequences disproportionate to its offending.13 It is12 Between February and June 2018, DNS engaged a new contractor both to clear slips that wereblocking parts of the main access road and to clear major slumping in the forest. But DNS did notengage this new contractor to check the skid sites or water controls, or to carry out any work toaddress skid site issues.13 Although DNS is now in liquidation, it has insurance to cover the fine in this case.simply not possible to conclude that the s 107 "out of all proportion"threshold is met.(b) The sentence imposed was not manifestly excessive. The starting pointof $150,000 fell within the appropriate range and accorded with:(i) DNS' culpability;(ii) the environmental damage caused by the offending;(iii) comparable cases; and(iv) the need to denounce environmental breaches in the forestryindustry, particularly in Gisborne.[37] The appeal is dismissed, accordingly._____________________Rebecca Ellis JSolicitors: