THE QUEEN v WILLIAM JOHN WALLACE [2001] NZCA 46 (2 April 2001)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca 287/00 CA 288/00

THE QUEEN

V

WILLIAM JOHN WALLACE

& BEVERLEY CAROLINA WALLACE

Coram:	Thomas J Blanchard J McGrath J
Counsel:	P J Kaye for Appellants A R Burns for Crown
Judgment: (On the papers)	2 April 2001

judgment of the court DELIVERED BY THOMAS J

The issue

[1] The issue in this appeal is straight-forward and counsel has requested that it should be dealt with by the Court on the basis of written submissions.It is whether the Judge in the High Court exercised his discretion wrongly in fixing the quantum of a pecuniary penalty under s 25 of the Proceeds of Crime Act 1991.As is well-established, this Court does not lightly interfere with the exercise of a discretion.

The pecuniary penalty order

[2] The appellant, Mr Wallace, pleaded guilty to one count of manufacturing a Class B controlled drug, viz., methamphetamine, between 8 April 1997 and 2 June 1997, one count of supplying the same drug between 1 December 1995 and 2 June 1997, two counts of possessing the drug for the purpose of supply during the period 1 December 1995 and 2 June 1997, and one count of money laundering covering the period 1 December 1995 to 2 June 1997.Mrs Wallace, his wife, pleaded guilty to one charge of money laundering covering the same period as her husband, that is, 1 December 1995 to 2 June 1997.In his sentencing remarks the sentencing Judge said:

What can be distilled from the summary of facts is a sophisticated and calculated drug manufacturing operation producing significant quantities of a prohibited and dangerous drug, with the potential for vast material gain, much of which was realised in this particular case.

Sentences of 10 years imprisonment for Mr Wallace and two years three months imprisonment for Mrs Wallace were upheld in this Court.See R v Wallace [1999] 3 NZLR 159 and R v Wallace CA 415/98, 16 December 1998.

[3] Subsequently, on 1 August 2000, Salmon J ordered various items of property to be forfeited, the total value of which amounted to $585,077.17.The learned Judge also made a pecuniary penalty order for $482,950.40.This latter sum represented the difference between the sum of $1,068,027.50, which the parties had agreed represented the value of the benefits derived from the commission of the offending by Mr and Mrs Wallace, and the amount of the forfeiture order.

Counsels' submissions

[4] Mr Kaye, who represented Mr and Mrs Wallace, accepted that a pecuniary penalty order was justified, but contended that the sum fixed should have been less than that determined by the Judge.He urged that the factors set out in s 15(2) of the Act in relation to forfeiture orders should also be used as a guide in making pecuniary penalty orders.Had these matters been considered, he argued, their consideration would have resulted in a lesser pecuniary penalty.In particular, he 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.Mr Kaye also submitted that the payment of the pecuniary 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 are 18 and 19 year old students.

[5] Mr Burns, for the Crown, defended the Judge's exercise of his discretion. The Judge had taken into account such matters as were appropriate and, indeed, precisely those principles which were now urged upon the Court by Mr Kaye in support of the appeal.With respect to Mr Kaye's argument that the house and land had been purchased prior to the date of offending and were only tainted to a limited degree, Mr Burns contended that the purpose of a pecuniary penalty order is clearly to ensure that offenders do not benefit from their offending. The Act clearly envisages the disposal of legitimately acquired property to meet a pecuniary penalty order.Indeed, he pointed out, the pecuniary penalty is calculated after the deduction of forfeited property (s 25(2)) so that only property that is not the proceeds of crime would be available to meet such an order.

The Judge's reasoning

[6] Salmon J dealt with the issues in a thorough manner.The learned Judge rightly took the view that the appropriate way to exercise the discretion conferred by s 25 is to first consider the purpose of the Act.Persons should not benefit in any way from the proceeds of serious crime.He concluded that this purpose required a pecuniary penalty to take into account all benefits received, including those no longer represented by assets.He took as a starting point, therefore, the "penalty amount" being the difference between the value of the benefits received and the value of the property forfeited and held that in a case of serious drug offending there would have to be a compelling reason to justify an order for less than the penalty amount.Any lesser order would effectively enable the offender to gain some benefit from the commission of the offences.

[7] The Judge accepted that, in an appropriate case, undue or serious hardship to a third party might well provide a compelling reason.In the present case, however, 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 a consequence of the offending and, to the extent that such a consideration is relevant, it could not be regarded as "undue" in the circumstances.

[8] The Judge concluded:

This was very serious drug related offending on a very substantial scale. Mr Wallace was the principal of the operation.Mrs Wallace was actively involved in laundering the proceeds.There is no factor in this case which persuades me that the pecuniary penalty order should be less than the penalty amount, and accordingly, I make the order sought in the sum of $482,950.40.

Our decision

[9] We agree with Salmon J's approach and reasoning, and we cannot fault the manner in which he exercised his discretion.

[10] The governing principle was laid down by this Court in R v Pedersen (1995) 13 CRNZ 34.Cooke P and Richardson J, in a judgment delivered by Cooke P, acknowledged (at 39) that the judicial discretion conferred in the legislation enabled unduly harsh results to be avoided in appropriate cases, but then stated (at 40):

The discretion to order a lesser amount falls to be exercised in the light of the policy of the Act.We do not think that the mere fact that the price received by an illegal seller exceeded his ultimate profit would be enough to justify a lesser penalty.Otherwise most illegal sellers would escape with penalties below the maximum, which would tend to frustrate the hoped-for deterrent effect of the Act.

Being a measure designed to deter serious crime by demonstrating emphatically that it does not pay, the Proceeds of Crimes 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.

[11] Salmon J's discretion was exercised in accordance with the purpose and in the spirit of the Act.We agree that there is no basis in the Act to restrict the benefits to be assessed to identifiable assets acquired with the proceeds of crime.There can be no doubt, and it is not contended otherwise, that the Court may make both a forfeiture order and impose pecuniary penalties in the same case.Under s 25(2), a pecuniary penalty is calculated after the deduction of the value of the forfeited property.Under s 15, property within the definition of "tainted property" may be ordered to be forfeited to the Crown."Tainted property" is defined in s 2 to mean any property used to commit, or facilitate the commission of, an offence, or the proceeds of an offence.In contrast, s 25 refers to benefits derived "from the commission of a serious offence" and empowers the Court to order a person to pay a pecuniary penalty not greater than the penalty amount.The penalty amount is to be assessed by reference to ss 27 and 28, and pursuant to s 25(2)(a) is the value of the benefit derived from the commission of the offence reduced by the value of any property that has been forfeited under the Act.

[12] Under s 27, relating to the assessment of the pecuniary penalty, the Court may have regard to money and the value of property that came into the possession or control of the offender by reason of the commission of the offence; the value of any other benefit provided to the offender by reason of the commission of the offence; and also the value of the offender's property where a single offence is involved "before and after" the commission of the offence and where two or more offences are involved "before, during and after" the offence period.Consequently, the Act clearly contemplates that property which is not "tainted" by the offending may be used to meet a pecuniary penalty order.For this reason, as held by Salmon J in the Court below, it is irrelevant that the house and land were purchased prior to the date of offending.

[13] Nor do we consider that the learned Judge exercised his discretion wrongly in rejecting Mr Kaye's submission that the pecuniary penalty should not be so great as to require the sale of the family home because of the hardship it would cause.The Judge was fully aware that the possibility of harm to a third party could justify a reduction in the pecuniary penalty.In the absence of further evidence on which an assessment of any the hardship could be based, however, we are disinclined to question the Judge's decision.Indeed, we do not consider any other decision was sensibly open to him in the circumstances of this case.

[14] For the above reasons the appeal is dismissed.

Solicitors

Crown Law Office, Wellington for Crown