POLICE v PURE [2020] NZHC 330

POLICE v PURE [2020] NZHC 330 [28 February 2020]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECRI 2019-485-69[2020] NZHC 330BETWEEN NEW ZEALAND POLICEAppellantAND GENESIS PURERespondentHearing: 17 December 2019Counsel: K L Kensington for AppellantB J Dawson for RespondentJudgment: 28 February 2020JUDGMENT OF MALLON JIntroduction[1] The issue for determination is whether, on a charge of theft, the value of anitem stolen from a retail store includes the GST charged on that item.[2] The issue arises because Genesis Pure is charged with stealing an iPhone andSIM card pack from The Warehouse, which had a retail price of $1,004, inclusive ofGST. He has been charged under ss 219 and 223(b) of the Crimes Act 1961 with theftof property where the value of the property stolen exceeds $1,000. This has amaximum penalty of imprisonment for a term not exceeding seven years. Mr Purecontends the correct charge is theft of property where the value stolen exceeds $500but does not exceed $1,000 under ss 219 and 223(c), which has a maximum penaltyof imprisonment for a term not exceeding one year.[3] Although the sentence imposed should be the same whether the correct chargeis s 223(b) or (c) given the aggravating features are the same, the issue is not entirelyacademic. For example, a charge under s 223(b) is sufficient to trigger the reverseonus provision in s 12 of the Bail Act 2000, whereas a charge under s 223(c) or (d)does not. Further, in the case of a person who holds a residence-class visa for betweentwo and ten years, a conviction under s 223(b) will result in liability for deportationwhereas the lesser charges will not.1[4] The issue comes to this Court as an application for leave to appeal a pretrialruling of the District Court.2 It held that the value of the items did not include the GSTcomponent. It amended the charge to one under s 223(c). Leave to appeal is notopposed. I grant leave accordingly.The offence[5] Section 219 creates the offence. It provides:219 Theft or stealing(1) Theft or stealing is the act of,-(a) Dishonestly and without claim of right, taking any property withintent to deprive any owner permanently of that property or anyinterest in that property; [6] Section 223 sets out the various punishments for theft. It provides:223 Punishment of theftEvery one who commits theft is liable as follows:(a) (b) if the value of property stolen exceeds $1,000, to imprisonment for aterm not exceeding 7 years; or(c) if the value of the property stolen exceeds $500 but does not exceed$1,000, to imprisonment for a term not exceeding 1 year; or(d) if the value of the property stolen does not exceed $500, toimprisonment for a term not exceeding 3 months.1 Immigration Act 2009, s 161(1).2 Police v Pure [2019] NZDC 19253; Criminal Procedure Act 2011, s 296.District Court proceeding[7] In the District Court the Police contended the value of property stolen is theretail selling price, which is GST inclusive. This submission relied on Canadian caselaw.3 Mr Pure contended the value was determined by the owner's loss. As a retaileris only required to pay GST for goods "supplied", the retailer's loss is the retail valueexclusive of GST. This submission relied on American case law.4[8] The District Court Judge discussed that the charge of theft in its current formwas introduced in 2003. The Explanatory Note did not refer directly to the meaningof value, but did discuss that the focus on the Part 10 provisions was the concept ofbeing deprived of property rather than the concept of things capable of being stolen.5The Judge considered this implied the focus was on the complainant's loss, and"value" must be a proxy for loss caused to the complainant. The Judge consideredthat when the property is stolen from a retailer, the loss is the retail price less GST.This is because the retailer is not obligated to pay GST to Inland Revenue. If the valueincludes GST, there is the risk of overcompensating the victim and unfairly increasingthe penalty to which the defendant is subject.[9] The Judge concluded the "value" in this case was the retail price of the iPhoneand SIM card pack exclusive of GST. He amended the charge accordingly.Submissions on appealAppellant's submissions[10] The appellant submits value should be given its ordinary meaning, namely:"the amount of money for which a thing can be exchanged or traded." In NewZealand this includes the GST component. The value is how much money would beexchanged if the item were to be sold.3 R v Wheeler [2012] AJ No. 1 1431; R v Belanger (1972) 6 CCC (2d) 210.4 State v Alexander 12 Kan. App. 2d 1, 732 P.2d 814; People v Barbuto 106 Misc. 2d 542, 434N.Y.S. 2d 120.5 Police v Pure, above n 2, at [14], discussing the Explanatory Note to the Crimes Amendment Bill(No 6) 1999 (322-1).[11] The appellant submits this meaning is consistent with the purpose of theoffence. The purpose is to criminalise the taking of property "with intent to depriveany owner permanently of that property".6 This is not focussed on an intent to causeloss and nor is it aimed at reparation to the owner. Rather, the focus is on thedefendant's conduct and intent. The conduct involves taking something from a retailerwithout paying for it and with the intent to deprive the owner of property. If thedefendant had paid for the items, they would have paid the retail price inclusive ofGST. The value of the item taken in the defendant's hands is the retail price they havenot had to incur.[12] The appellant submits that policy reasons support this interpretation. It meansthe value of the property taken is capable of being ascertained by the defendant at thetime it is taken from a retailer. The variables that go into the price the retailer sets arenot relevant. It does not matter what price the retailer paid for the product, what itsoperating costs are and what profit margin it hopes to achieve. Nor should it matterthat the retailer will have to remit a portion of the GST to the Inland Revenue.[13] The appellant submits the Judge's approach in the District Court gives rise toa risk of anomalies. Had the defendant stolen from a person who had just purchasedthe items from the retailer for $1,004, rather than from the retailer, the value of thestolen property would be $1,004. The criminality involved is comparable, yet themaximum penalty would be different.[14] The appellant submits the Judge was wrong to rely on the risk of overcompensation. Reparation is directed at addressing the victim's loss. It may beordered if an offender has caused a person to suffer "loss". A reparation report can beobtained to provide information on the "value of that loss" amongst other things. Anyrisk of overcompensation is able to be addressed at this stage.Respondent's submissions[15] The respondent submits the purpose of the theft provisions is to criminalise theunlawful taking of property in circumstances that may cause financial loss to the owner6 Crimes Act 1961, s 219.of the property. Theft requires an intention to deprive the owner of the property. Thereneed not be any benefit obtained by the thief. The thief may destroy the property orpass it on to someone else. It is the owner's loss, and not the thief's enrichment, thatis punishable by the law. The respondent submits it must follow that a thief'sculpability is limited by the extent to which an owner may have been deprived ofownership. The value of the property must be quantifiable in dollar terms. The offenceprohibited is the owner's potential loss of ownership, quantified in dollar terms.[16] The respondent refers to the following observations of Tipping J in Nicholls vCommissioner of Inland Revenue.7[28] [A] vendor of goods does not receive any part of the price as GSTon behalf of the Crown. The vendor receives the whole price beneficially andas the price. The vendor's liability to pay output tax in respect of the supplyis an independent liability of the vendor. In short, no part of the price (whetherfixed as GST inclusive of GST exclusive) comprises a payment of GST. Thefact that the price may be fixed at say $80,000 plus GST, does not mean thatthe purchaser is paying a price of $80,000 plus GST of $10,000. It means thepurchaser is paying a price of $90,000. Reference to GST is simply a methodwhereby the total price is assessed and is useful to avoid doubt as to the totalpayable in a situation where GST is relevant.[17] The respondent notes that, regardless of how a price is determined or a contractstructured, the law requires a supplier to account for output tax on every singletransaction. GST is a tax on the final consumer, collected and payable to the IRD bythe person supplying the goods. Section 8(1) of the Goods and Services Tax Act 1985imposes the tax "by reference to the value of that supply." Section 10 defines "valueof supply" as the consideration paid less the GST. The value is easily established inthis way with reference to the advertised price. Further, a customer is entitled to aninvoice that will show the amount of GST on the supply.[18] The respondent submits the value of the items to the retailer is their loss. Astheft is not a supply, the retailer is not required to account to Inland Revenue for anyvalue of the stolen item and their loss does not include GST. If the retailer purchasesreplacement items from a wholesaler, the wholesale price will include GST. However,the retailer will be able to claim a reimbursement of the input tax from Inland Revenue.The retailer's loss from theft is therefore the retail price less GST.7 Nicholls v Commissioner of Inland Revenue (1999) 19 NZTC 15,233.[19] The respondent also notes that some purchasers (those who are registered forGST) will be able to claim the GST as an input. In those cases the net value of theitem is also the retail price less the GST. The thief's liability should be the samewhether they are registered for GST or not.[20] The respondent submits his approach does not give rise to the anomalysuggested by the appellant. The respondent accepts that a person who took these itemsfrom a store would be liable for a lesser maximum penalty than a person who took thesame items from a customer just leaving the store having purchased them. Therespondent submits this is not anomalous because the victim customer has beendeprived of ownership rights to a greater value than the victim store. The extent ofloss is an aggravating feature of the offence.[21] Further, an anomaly can arise on either interpretation. The respondentcompares a thief who steals an item valued at $1,000 from a customer leaving a storewith another thief who snatches a similar item valued at $1,000.01 from anothercustomer leaving another store. In both cases the criminality of the thief's intent is thesame but, because of the difference in value of one cent, the second thief is liable to amaximum penalty seven times greater than the other.Overseas authorities[22] The appellant's and the respondent's submissions discussed the case law fromoverseas jurisdictions.[23] The respondent refers to the New York cases of People v Medjdoubi and Peoplev Barbuto.8 These cases held that sales tax charged on retail goods was not to beincluded when determining the value of the dishonestly obtained goods. Thelegislation under which the sales tax was imposed required the vendor to collect thetax from each customer when collecting the price charged. The courts reasoned thatthe sales tax increased the cost of an object but not its value. The vendor establishedvalue by the freely negotiated price and in addition collected the tax.8 People v Medjdoubi 173 Misc. 2d 259, 661 N.Y.S.2d 502; People v Barbuto, above n 4.[24] The same view was taken in the Kansas case of State v Alexander.9 The Courtreasoned that the vendor was not the "owner" of the tax and, because the item wasstolen, no tax had been imposed and so no tax had been stolen.[25] A different position was taken in California. In People v Seals the Court saidit was a longstanding principle in California that the retailer is the taxpayer, not theconsumer.10 The sales tax is imposed on retailers for the privilege of selling the retailproperty. The tax relationship is between the taxpayer and the state. Retailers arepermitted, but not required to, obtain reimbursement from the consumer for their taxliability. It is a matter of contract between the retailer and the consumer. However, itis always recognised that the ultimate burden of sales tax, as in the case of all taxespaid in the course of production, will be shifted to the consumer.[26] The Court in Seals held that "reasonable and fair market value" is the test fortheft crimes that contain a value threshold. This is determined by "a willing buyer andwilling seller" transaction in the open market. The Court in Seals further explained:11 [i]n a retail context, absent proof that the price charged by a retail storefrom which merchandise is stolen does not accurately reflect the value of themerchandise in the retail market, that price is sufficient to establish the valueof the merchandise within the meaning of [the Criminal Code].[27] The appellant submits the New York and Kansas case law is distinguishable.The advertised retail price of an item in a store is exclusive of tax. The sales tax(whether local, state or both) is added at the point of sale. In contrast, the advertisedretail price in a New Zealand store is always inclusive of GST. The appellant alsosuggests the decisions in the United States may have been driven by a desire tocategorise the offence as a misdemeanour rather than a felony because of theassociated mandatory minimum sentence that applied to a felony. Here the sentencewill inevitably be tailored to the circumstances.[28] The appellant relies on the Canadian cases of R v Wheeler and R v Belanger.12In these cases the issue was whether the value of an item stolen from a retailer store9 State v Alexander, above n 4.10 People v Seals 14 Cal. App. 5th 1210, 222 Cal. Rptr. 3d 589.11 At 1216.12 R v Wheeler and R v Belanger, above n 3.was the retail price or the price at which the retailer had obtained the items or couldreplace it. As explained in R v Wheeler:36 In the context of the criminal law, as it relates to the theft of property,it would seem most appropriate that the value is determined by the monetaryworth of the property to the owner. In the context of a retail operation, thisvalue would be the retail price, as the value is the price that a seller is willingto accept and a buyer is willing to pay on the open market in an arms lengthtransaction. In the case at bar I therefore find the value of the equipment stolenby Mr. Wheeler is its retail value of $35,685.07 ...[29] These Canadian cases do not specifically address the issue of tax.[30] Counsel found no case law of assistance from the United Kingdom orAustralia.13Assessment of appeal[31] Section 219 defines the offence of theft. It requires:(a) a dishonest and without claim of right taking of property(b) with an intent to deprive the owner permanently of the property.[32] It is aimed at protecting property rights. In other words, the mischief theoffence addresses is focussed on the owner's property rights. However, it does notfollow that the seriousness of the offence is determined by the loss suffered by theowner. Section 223 sets the maximum penalties to which the offence is subject. Itdoes so by the monetary value of the property taken. This is a test of "value" not atest of "loss caused".[33] Sections 219 and 223 can be contrasted with ss 240 and 241. Section 240creates the offence of obtaining property (amongst other things) by deception orcausing loss by deception. Section 241 sets out the penalty for the offence dependingon the "loss caused or the value of what is obtained". The "loss caused" correlates to13 Counsel understand the reason for the absence of useful United Kingdom authority is that, sincethe 1960s, monetary thresholds have not been used to determine the maximum penalties for theft.the offence of causing loss by deception. The "value of [the property] obtained"correlates to the offence of obtaining the property.[34] The Shorter Oxford English Dictionary provides the following definition of"value":141a That amount of a commodity, medium of exchange, etc., considered to bean equivalent for something else; a fair or satisfactory equivalent or return.Freq. in value for money below. ME. b Orig., a standard of valuation orexchange; an amount or sum reckoned in terms of this. Later (now US), athing regarded as worth having. LME. 2 The material or monetary worth of athing; the amount of money, goods, etc., for which a thing can be exchangedor traded. ME. 3 The extent or amount of a specified standard or measure oflength, quantity, etc.[35] In the present context, the second meaning is most apt. The ordinary meaningof "value" of property assessed in monetary terms is the monetary worth of theproperty. A measure of that value is the amount for which the property can beexchanged or traded. This provides an objective measure for determining the value ofthe property. Such a measure can be the subject of evidence and determination by ajudge if necessary.[36] An example is provided by O'Brien v R.15 This case concerned s 240. Thedefendants were found to have obtained a licence to operate gaming machines bydeception. The deception involved concealing from Internal Affairs the fact thatMr O'Brien had significant influence over the management of the entity which heldthe licence. Internal Affairs would not have granted the licence if it had been awareof this.[37] The prosecution alleged the value of the benefit obtained (the licence)exceeded $1,000. Under s 241, this would mean the maximum penalty was a term ofimprisonment exceeding seven years. The Court of Appeal agreed with the trial Judgethat this had been established. In doing so it said "[as] a starting point, the value ofthe benefit in question is what prospective operators are prepared to pay for14 Lesley Brown, The New Shorter Oxford English Dictionary on Historical Principles (4th ed,Oxford University Press, Oxford, 1993) at 3542.15 O'Brien v R [2019] NZCA 83.one." The defendants had paid $9,148 to obtain the licence. The Court consideredthis plainly established the licence was worth at least $1,000.[38] That case is different from the present one. Section 240 creates an offence ofobtaining a benefit by deception and s 241 reflects this. The prosecution must prove"the value of what is obtained" exceeds the specified monetary threshold. This putsthe focus on the value to the defendant of what has been obtained. Under s 223, theprosecutor must prove the "value of the property stolen." It does not say the "value tothe defendant of the property stolen". Nor does it say the "value of the stolen propertyto the owner". In my view this indicates a legislative intent to assess value objectivelyand not from either the point of view of the owner or the thief where they are different.[39] The evidence that establishes the objective value will depend on the context.For example, when a thief steals an item of property from a private residence that isalso available in the open market, the value of the property will be its marketreplacement value assessed at the time it was taken. Where the property is taken froma retail store, the retail price provides an obvious source of evidence for its value.[40] It may be that a retail store has set the price of an item of property too highrelative to the market and the store would not have been able to sell the property at theadvertised price. In such a case, I see no reason why a defendant could not adduceevidence about this if it wished to do so. It is likely this would be relatively unusual.This is partly because retailers, at least in a competitive market, will usually set marketprices. It is also because in most cases it will not be necessary to establish the precisevalue of the property. The advertised retail price will provide sufficient evidence ofwhich monetary threshold the value of the property falls into.[41] The retail price is the price the customer would pay to purchase the item. Asexplained in Nicholls v Commissioner of Inland Revenue, no part of the price (whetherfixed as GST inclusive or GST exclusive) comprises a payment of GST.16 Thecustomer pays the price set by or negotiated with the vendor and, from that price, thevendor accounts for GST. That is, the vendor has an independent obligation to accountfor GST arising from that transaction and the amount of GST depends on the price the16 Nicholls v Commissioner of Inland Revenue, above n 7.customer has paid. I agree with the appellant that the position in New Zealand istherefore distinguishable from that in New York and Kansas and is more similar to theposition in California. I consider the definition of "value" in the Goods and ServicesTax Act 1985 does not assist. It is the meaning of "value" in the Crimes Act 1961 thatmust be determined.[42] In my view it is irrelevant to determining the value of property stolen from aretailer that the retailer will have no obligation to account for GST on that stolen item.It would be relevant if the monetary thresholds in s 223 were set with reference to theloss caused to the owner. But they are not. They are set by value (meaning itsmonetary worth) and that will (usually) be the amount a customer would have paid forthe item (that is, the retail price inclusive of GST).[43] Because the legislature has adopted bright line monetary thresholds fordetermining which maximum penalty the offence is subject to, it is inevitable that therewill be some cases that fall just under or just over a particular threshold. Those thatfall just over a threshold might be regarded as unlucky and those that fall just under athreshold might be regarded as lucky. As the respondent pointed out, there is thepotential for adverse consequences when the property stolen by a thief falls just overthe monetary threshold. However, in some cases there may be scope for debate as towhether a monetary threshold has or has not been met and the charge can be broughtunder the lesser threshold to avoid potentially unfair or disproportionateconsequences.[44] Importantly, it will usually be the sentence imposed on a thief that is theprimary consequence. No unfairness should arise in that. That is because all featuresof the offending and the offender will ultimately determine its seriousness. All otherfeatures being equal, a similar sentence will be imposed on an offender who takesproperty that falls just under one threshold and on the offender who takes property thatfalls just over the threshold.[45] Lastly, I agree any risk of overcompensating retailers who are victims of theftis addressed by the reparation regime.Result[46] The appeal is allowed. I am not amending the charge back to s 223(b). Thatis a matter for the prosecution to pursue in the District Court if it remains of the viewthat the value of the items stolen exceeds $1,000 in light of my decision and itconsiders it appropriate in all the circumstances to seek the amendment.Mallon J