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

THE SOLICITOR-GENERAL V BROWN HC AK CIV 2008-404-006760 4 August 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2008-404-006760IN THE MATTER OF an application pursuant to the Proceeds ofCrime Act 1991BETWEEN THE SOLICITOR-GENERAL OF NEWZEALANDApplicantAND RONALD TERENCE BROWNRespondentHearing: 2 August 2011Counsel: R McCoubrey for the ApplicantD Reece for the RespondentJudgment: 4 August 2011JUDGMENT (NO 2) OF WOOLFORD J(As to forfeiture)This judgment was delivered by me on Thursday, 4 August 2011 at 10:30 ampursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors/Counsel:Meredith Connell, DX CP24063, AucklandDavid Reece, Barrister, PO Box 4208, Auckland 1140Introduction[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 Act1991. I adjourned the balance of the Crown's application, in particular, the matter ofa 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 informationto 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 bycounsel that the interests of the respondent's severely disabled son would not now beadvanced 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'sapplication.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 bythe respondent's parents over 40 years ago. He said that the respondent'scircumstances are quite different from those of the convicted offenders in The Solicitor-General of New Zealand v Sisson1 and R v Wallace2 who had purchased the properties in question themselves and had used them for their drug dealing activities.[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 lowerthan 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 forthe respondent's share in the property which would take effect on hisdeath.(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 Andrian3 in support of this option.[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 thehouse not for himself but for his children and his brother's children. He indicated1 HC Auckland M978/97, 1 August 2000, Salmon J.2 (2001) 18 CRNZ 577 (CA).3 (1996) 13 CRNZ 449 (CA).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 fromhis 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.[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.54 (1995) 13 CRNZ 34 (CA).5 At page 40 line 33 – 38.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.[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 tothe family, especially Mr and Mrs Wallace's children who were 18 and 19 year oldstudents.[15] The Court of Appeal agreed with Salmon J at first instance6 that there was no evidence to suggest the existence of such hardship. Mr and Mrs Wallace's childrenwere 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.[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 penalty6 At [7] and [9].should be fixed at a level to take away the respondent's share in the property. Asnoted 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 familymembers destitute. Although one of the respondent's daughters is living in theproperty, she is in paid employment and able to find accommodation elsewhere. Although regarded as the family home, the respondent's other daughter, therespondent's brother and his children do not have a close connection with theproperty. 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 totake 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 havehad 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 therespondent's share in the property. Even at this level there is still a significantshortfall 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 topurchase the respondent's half-share in the property by paying the sum of $600,000 to the Official Assignee (being approximately halfthe value of the property less the mortgage and real estate agent'scommission).(d) The Official Assignee is to pay the Crown a sum equivalent to therespondent's half-share in the property situated at 5 Rawene Avenue, Westmere, after deduction of the mortgage and real estate agent'scommission, with the remainder to be paid to the respondent's brotheror, 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 inrelation 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 hisreasonable 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