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Watchorn v R [2014] NZCA 493 (7 October 2014)

Last Updated: 15 October 2014

     
IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellant
AND
 Respondent
Hearing:
21 August 2014
Court:
O’Regan P, Simon France and Mallon JJ
Counsel:
S W Hughes QC for Appellant M D Downs for Respondent
Judgment:


JUDGMENT OF THE COURT

A The appeal is allowed.

  1. The three convictions entered in the District Court are quashed.
  1. We decline to exercise the power under s 386(2) of the Crimes Act 1961 to substitute verdicts of guilty for accessing a computer system and thereby dishonestly and without claim of right obtaining a benefit for the verdicts found by the Judge.
  1. We do not order a retrial.

____________________________________________________________________

REASONS OF THE COURT

(Given by O’Regan P)

Table of Contents
Para No
Introduction [1]

Section 249 [3]
Issues
Conviction appeal [4]
Sentence appeal [10]
Factual background [12]
Definition of “property” [22]
“Dishonestly” accessing a computer system [24]
Claim of right [34]
Propensity evidence [39]
Unreasonable verdict [48]
Drag and drop [51]
T drive [54]
USB stick [55]
Lie [56]
“I got what I wanted” [58]
Home computer [59]
Response to solicitors’ letter [60]
Canada [62]
Conclusion [63]
Outcome: conviction appeal [64]
Should we replace the convictions? [65]
The parties’ submissions [67]
Police v Le Roy [69]
Legislative history [75]
Statutory context [77]
The “benefit” obtained by Mr Watchorn [82]
Sentence [87]
Should we order a new trial? [100]
Result [101]
Postscript [102]

Introduction

[1] The appellant, James Watchorn, was convicted after a Judge alone trial before Judge Roberts in the New Plymouth District Court, of three charges of accessing a computer system and thereby dishonestly and without claim of right obtaining property.[1] Judge Roberts sentenced the appellant to a term of imprisonment of two and a half years.[2] The appellant appeals against both conviction and sentence.
[2] We heard the appeal on 21 August 2014. At the conclusion of the hearing we reserved our decision. However, we indicated that we had reached a clear view that even if the conviction were to stand, the sentence of imprisonment was not appropriate. Having reached that view, we indicated to counsel that we were prepared to grant bail to the appellant pending the delivery of this decision. We granted bail the following day.[3]

Section 249

[3] The charges faced by the appellant were brought under s 249(1) of the Crimes Act 1961. Section 249 provides:

249 Accessing computer system for dishonest purpose

(1) Every one is liable to imprisonment for a term not exceeding 7 years who, directly or indirectly, accesses any computer system and thereby, dishonestly or by deception, and without claim of right,—

(a) obtains any property, privilege, service, pecuniary advantage, benefit or valuable consideration; or

(b) causes loss to any other person.

(2) Every one is liable to imprisonment for a term not exceeding 5 years who, directly or indirectly, accesses any computer system with intent, dishonestly or by deception, and without claim of right,—

(a) to obtain any property, privilege, service, pecuniary advantage, benefit, or valuable consideration; or

(b) to cause loss to any other person.

(3) In this section, deception has the same meaning as in section 240(2).

Issues

Conviction appeal

[4] The three charges on which the appellant was convicted referred to his having obtained “property” on accessing the computer system of his former employer, TAG Oil (NZ) Ltd (TAG). After Judge Roberts issued his verdict, this Court delivered judgment in Dixon v R.[4] Dixon also concerned an appeal against a conviction under s 249(1). This Court found that data obtained from a computer was not “property” as defined, but on the facts of that case found that Mr Dixon had obtained a “benefit”, which also constituted an offence under s 249(1). The Court therefore quashed his conviction but replaced it with a conviction for accessing a computer system and thereby dishonestly and without claim of right obtaining a benefit.
[5] It is common ground that this Court’s finding in Dixon, that data obtained from a computer is not “property”, is binding on us and that the conviction against Mr Watchorn therefore cannot stand.[5] However, counsel for the Crown, Mr Downs, submitted that the Court should follow the course adopted in Dixon and substitute one or more convictions based on the obtaining of a “benefit”, rather than “property”. The issue that arises is whether it is appropriate to do so in this case.
[6] Counsel for the appellant, Ms Hughes QC, submitted that a necessary ingredient of the offence was that the appellant had a dishonest purpose when he downloaded the data from the TAG computer system. She argued that the evidence did not substantiate a finding of dishonest purpose. The issues that arise are whether a dishonest purpose is an ingredient of an offence under s 249(1) and, if so, whether there was proof that such a dishonest purpose existed.
[7] The Judge found that there was no evidence before the Court that the appellant had a claim of right in relation to the downloaded data.[6] Ms Hughes argued that the Judge erred in this respect, and, in effect, reversed the onus of proof. A further issue that arises is therefore whether the Judge was correct to conclude that there was no evidence of a claim of right in this case.
[8] The downloading of information from the TAG computer system to which the counts in the indictment relate took place on 7 June 2012 (the 7 June download). There was evidence that the appellant also downloaded sensitive information from the TAG computer system on 31 July 2012 (the 31 July download). Evidence of the later download was admitted as evidence at the trial. Ms Hughes argued that the Judge erred in admitting this evidence. The issue we must resolve is whether the evidence ought to have been admitted.
[9] Ms Hughes also argued that a number of factual findings were unsupported by the evidence, meaning that the verdict was unreasonable. So another issue for resolution in the conviction appeal is whether the verdict was unreasonable.

Sentence appeal

[10] The appeal against sentence is advanced on the basis that the sentence was manifestly excessive because the Judge adopted too high a starting point. It is argued that a non-custodial sentence ought to have been imposed.
[11] Before we address these issues, we will set out the factual background.

Factual background

[12] On 7 June 2012, the day on which the downloading that founded the charges occurred, the appellant was an employee of TAG, an oil and gas exploration company, engaged in both prospecting and production of oil and gas. It is common ground that on this date the appellant downloaded extensive and sensitive geoscience data from TAG’s computer system onto a portable hard drive. The whole of the “Z drive” and the “Geoscience” folder were downloaded. An executive of TAG described the Geoscience folder as holding the “secret recipe” as it contained data relating to the discovery of sites of oil and gas. There is no dispute that the information had a very high value to TAG and that, if it had been disclosed to a competitor, that would have been extremely damaging to TAG and extremely beneficial to the competitor.
[13] There is some dispute about the method adopted by the appellant for the downloading exercise, and whether he was aware of the scope and value of the data he downloaded. The evidence was that the downloading of the first tranche of data from the TAG system to the appellant’s personal hard drive took from just after 4 pm to after 7 pm, and the second download took from about 6.30 pm until about 9.30 pm. That gives an indication of the amount of data involved.
[14] On the day after the download took place, the appellant and his family went to Canada for four weeks. The Judge accepted that the reason for this visit was to allow Mr Watchorn to visit his mother, who was ill. While he was in Canada, the appellant met a representative from a company called New Zealand Energy Corporation Ltd (NZEC) which is based in Canada but carries on business in New Zealand. NZEC is a competitor of TAG. A job offer with NZEC followed this meeting.
[15] After the appellant returned from Canada, he told a work colleague that he intended to leave TAG and join NZEC. Subsequently, on 27 July 2012, an IT contractor engaged by TAG made a directory of files on the appellant’s hard drive. While this was happening, the appellant said to his colleague that he had “got what he wanted”.
[16] On 31 July 2012, the appellant downloaded similar TAG information to that which he had downloaded on 7 June. This time he downloaded it to a USB memory stick. On the same day, the appellant gave notice of his intention to resign from TAG and commence employment with NZEC. TAG agreed to pay him in lieu of notice and he left TAG’s employ on that day, commencing employment with NZEC on the following day.
[17] TAG was very concerned about material being downloaded from its computer system. On 1 August 2012, TAG’s solicitors sent a letter to the appellant reminding him of his obligations of confidentiality and inviting him to return an apparently missing hard drive. The appellant responded by text message on 8 August, addressed to his boss at TAG, Mr Cadenhead. The text message said:

Hi drew, saw the bell gully letter this morning, the only stuff I had on my personal hard drive was related to some of the things I helped put in place as well as technical data and work from previous employment. It seems a bit asinine to bring this up now so how do you want to deal with this??

If you want to meet and discuss this let me know.

[18] On 28 August 2012, the police executed search warrants, including one at the premises of NZEC. The appellant was then interviewed by the police on the same day, though the focus of that interview was on the 31 July download, not the 7 June download. He was then interviewed again on 7 December 2012 and arrested.
[19] There was obvious concern that the appellant had taken the information downloaded on 7 June with him to Canada so as to be in a position to offer it to NZEC. When interviewed by the police, the appellant said he had not in fact taken the hard drive with him to Canada. However, at trial his defence was that the purpose for the 7 June download was that he might require the data while in Canada, in the event that he was asked to undertake work for TAG while away from the office. There was an obvious conflict in these two stances. The evidence showed that he must have taken the hard drive to Canada because he accessed information on the hard drive for unrelated and innocuous purposes while in Canada.
[20] There was evidence that data that was downloaded by the appellant on 7 June to the personal hard drive was then copied on to a personal laptop computer on either 27 July 2012 or 5 August 2012. There was also evidence that the appellant had used the USB stick containing the 31 July download at NZEC’s premises to open TAG-related documents.
[21] However, there was no evidence indicating any disclosure of information to NZEC while the appellant was in Canada, when he later accessed the downloaded material at NZEC’s premises or, for that matter, at any other time. In fact, the evidence is that the data downloaded on 7 June was not disclosed at any time to any person.

Definition of “property”

[22] In Dixon v R, this Court held that digital CCTV footage stored on a computer is not property as defined in the Crimes Act, so that the obtaining of such data by accessing a computer system is not the obtaining of property within the meaning of s 249(1)(a) of the Crimes Act.[7] Mr Downs accepted that the analysis in Dixon must apply to data of the kind obtained by Mr Watchorn in the present case and that we were bound to follow Dixon. We agree. We accept, therefore, the submission made by Ms Hughes to the effect that the convictions entered against Mr Watchorn on the basis that he obtained property cannot stand.
[23] Mr Downs urged us to follow the approach adopted in Dixon and substitute convictions based on obtaining a benefit. We would do that only if we rejected the other grounds of appeal, assuming it would otherwise be appropriate to do so. So we will evaluate the other grounds of appeal before we address this issue.

“Dishonestly” accessing a computer system

[24] Ms Hughes submitted that the Crown had not proved that the appellant had a dishonest purpose when he accessed TAG’s computer system on 7 June. Ms Hughes said the Judge had misdirected himself because he did not identify any dishonest purpose for that download. She said the Judge effectively reversed the onus of proof by requiring the appellant to demonstrate that he had taken the download for an honest purpose.
[25] Much of the appellant’s case in this context focused on the appellant’s contention that the 7 June download had been for the purpose of ensuring access to data while in Canada, in case his employer required him to undertake any employment-related activity while he was in Canada. Ms Hughes said that the purpose of taking the material to Canada for work purposes should be inferred. However, there is no proper evidential basis for such an inference. Mr Watchorn never said that this was the reason for the 7 June download, rather he said he did it as a “backup”. He denied that he had taken the hard drive onto which he downloaded the 7 June data to Canada, but it later transpired that he had done so. Mr Watchorn chose not to put his version of events to the Court at trial. Thus the only evidence from him as to his purpose was contrary to the contention he now makes, namely that the purpose of the download was to ensure access to work-related materials while on holiday in Canada.
[26] In our view, it is incorrect to describe s 249(1) as requiring that there must be a dishonest purpose for obtaining a benefit. Although the heading to s 249 is “Accessing computer system for dishonest purpose”, that is not an accurate summary of the offence created by s 249(1). The ingredients of s 249(1) do not include a dishonest purpose. The Crown must prove that the defendant accessed a computer system and thereby dishonestly or by deception and without claim of right obtained a benefit.
[27] The term “dishonestly” as used in s 249(1) is defined in s 217 of the Crimes Act as follows:

217 Interpretation

In this Part, unless the context otherwise requires,—

dishonestly, in relation to an act or omission, means done or omitted without a belief that there was express or implied consent to, or authority for, the act or omission from a person entitled to give such consent or authority

...

[28] In light of that definition, all the Crown had to prove was that the appellant did not have TAG’s authorisation to download the data that he downloaded onto his hard drive on 7 June, and that the appellant did not believe he had such authorisation.
[29] The evidence from the TAG executives, Mr Cadenhead and Mr Davis, gave a clear evidential basis for a finding that there was no such authorisation. That being the case, the finding that the appellant had dishonestly obtained the data that he downloaded on 7 June was inevitable.
[30] We are cognisant of the Supreme Court’s decision in R v Hayes.[8] In particular, the Supreme Court said that “dishonestly” requires an absence of belief that there was consent or authority to (in this case) download the data. It is not necessary to prove that the belief was reasonable.[9]
[31] So if Mr Watchorn had actually believed he was authorised to download the data, then the element of “dishonestly” obtaining the data would not be proven. In the present case, whether the appellant downloaded the data for the purpose of taking it with him to Canada or as he said, to make a backup, does not directly address the question as to whether he believed he was authorised to do this.
[32] The key finding by the District Court Judge was that both of the TAG executives who gave evidence said that Mr Watchorn had no authority, implied or otherwise, to take TAG geoscience data or the material contained within the TAG drilling and TAG electronics site and well files.[10] Mr Watchorn’s claim that he thought he was authorised to download the data so he could take it to Canada and access it there if necessary was directly contrary to his own version of events (to the effect that he did not take the hard drive containing the data to Canada) when interviewed by the police. That means that Mr Watchorn gave no credible evidence of a belief that he was authorised (and, in fact, lied about the purpose for which he downloaded the data). The size of the download and the lack of relevance to his work of much of what he downloaded told against an inference that he believed he was authorised to download the material.
[33] Mr Watchorn’s alternative case was that he believed he was allowed to download data of the kind he downloaded because he had made similar downloads before when employed by other energy companies and had not got into trouble for doing so. We will deal with that in the next section, under the “claim of right” heading, because the same considerations arise.

Claim of right

[34] An alternative defence was claim of right. It raises similar considerations to those arising in the discussion of dishonesty above. But the two concepts are different. Dishonesty addresses whether Mr Watchorn believed he was authorised to download the data. Claim of right addresses whether he believed, even if he was not authorised, that the downloading was permissible. In this case, it was said that Mr Watchorn had a defence of claim of right because he believed there was an industry-wide practice in the oil and gas field of employees transferring from one firm to another downloading data relevant to the employee’s work before leaving the employ of the owner of the data.
[35] The Judge held that there was no evidence before the Court that the appellant had a claim of right in relation to the downloaded data. The appellant argued that the Judge effectively reversed the onus of proof in coming to that conclusion.
[36] The defence case was that the appellant had often downloaded data from the computer systems of previous employers, and thought that there was no impediment to his doing so. The Judge dealt with that as follows:[11]

Whatever Mr Watchorn has done previously can have little bearing on the current prosecution. No where within the admissible evidence before this Court has Mr Watchorn gone anywhere close to establishing a claim of right. ... I accept that Mr Watchorn did not have to give evidence but the simple fact is there is nothing before me today to support the assertion of his claim of right. I must thus fall back and deal with the evidence that is available to me.

[37] Ms Hughes relied on the Supreme Court decision in R v Hayes, to which we have already referred in the context of the submissions on “dishonestly”.[12] She argued that the data that was downloaded by the appellant was stored in an open drive where all of TAG’s staff had access to it. She said this gave rise to an implied entitlement to access the information. We agree. But that begs the question as to whether there was an implied entitlement to download confidential information onto a personal hard drive. There was, as the Judge said, no evidence that such an implied entitlement existed, and no evidence that Mr Watchorn believed it did.
[38] We agree with the District Court Judge that the fact Mr Watchorn had downloaded data from previous employers did not provide a proper foundation for a finding that he believed he was lawfully entitled to do so. All it proved was that he had done so before, whether lawfully entitled or not. We see no error in the Judge’s approach to this issue.

Propensity evidence

[39] As noted earlier, Mr Watchorn downloaded material from the TAG computer system on 31 July 2012, the day on which his employment with TAG terminated. This largely duplicated the material he had downloaded on 7 June 2012. For reasons which were not explained to us, the charges he faced related only to the 7 June download. There is a reference in the case materials to a comment made by the Crown prosecutor that the reason for this was that the Crown had not, until a few weeks before the trial, realised that the 31 July download was a fresh download from the TAG computer system, rather than a copying of material already downloaded on 7 June. Whether that is the case or not, the fact is that the only charges faced by Mr Watchorn related to the 7 June download, but evidence relating to the 31 July download was admitted at the trial. It was, however, mentioned only in passing in the Crown prosecutor’s closing address.
[40] Ms Hughes argued that evidence of the 31 July download ought not to have been admitted, because this amounted to a breach of s 17(1) of the Criminal Procedure Act 2011, which requires that a charge must relate to a single offence. We disagree. We do not think there is any suggestion in the Judge’s decision that the Judge treated the 31 July download as part of the conduct to which the offending related.
[41] Ms Hughes said that the Judge had unfairly concluded that the downloading of data immediately before leaving TAG’s employment was likely to be for a dishonest purpose and that he then attributed that purpose to the 7 June download. When asked whether her complaint was with the way the Judge used the evidence of the 31 July download rather than its admissibility, she confirmed that her complaint was that the evidence of the 31 July download was inadmissible because its prejudicial effect was greater than its probative value. She said the circumstances of the 7 June download, at a time when the appellant was still employed by TAG and had no intention of leaving, were completely different from the circumstances of the 31 July download. Ms Hughes argued there was not sufficient similarity between them for the latter to provide any proof of dishonest purpose in relation to the former.
[42] We consider that this analysis proceeds on the wrong premise. We accept Ms Hughes’ point that the focus of the investigation of Mr Watchorn was on the concern that the seismic data downloaded from the TAG system would find its way to TAG’s competitor, NZEC. But as noted earlier, it was not necessary for the Crown to prove what Mr Watchorn’s purpose in making the download was.[13] Rather, the Crown was required to prove that he had obtained a benefit, and that he had done so dishonestly and without claim of right.
[43] The basis on which the evidence was admissible was as propensity evidence, tending to prove that Mr Watchorn had a propensity to download material from his employer dishonestly, that is, knowing that he was not authorised to do so.[14] At trial, again proceeding on the basis that proof of a dishonest purpose was required by s 249(1) of the Crimes Act, Ms Hughes had argued that it should be inferred that the 7 June download was for a purpose associated with Mr Watchorn’s employment at TAG, namely for work-related purposes.
[44] We do not consider the Judge erred in treating the evidence of the 31 July download as probative in relation to the dishonesty or otherwise of the obtaining of data from the 7 June download. Mr Downs highlighted the similarities between the downloads on 7 June and 31 July. In particular:
[45] The dishonest nature of the 31 July download was clear. Mr Watchorn was about to leave TAG’s employ, he did not seek permission to download the data and he could not possibly have had a work-related reason for downloading the data or a belief that he was authorised to download it.
[46] There is no reason that evidence of later conduct cannot be propensity evidence in relation to earlier conduct.[15] The fact that the later download was clearly unauthorised and therefore dishonestly obtained in terms of s 249(1) supported the proposition that the earlier download was dishonestly obtained, contrary to the argument made on behalf of the appellant that he had acted within the authorisation of his employer to download data for a work-related purpose.
[47] We accept that the propensity evidence was not, given the different circumstances of the 7 June and 31 July downloads, of high probative value. But we are satisfied that the propensity reasoning the Judge was asked to adopt was permissible and that the probative nature of the evidence outweighed its prejudicial effect.

Unreasonable verdict

[48] Ms Hughes argued that a number of the factual findings made by the Judge were unsupported by the evidence, and that this led to an unreasonable verdict.
[49] The present appeal is an appeal under s 385 of the Crimes Act, and the standard applied to such appeals is established by the Supreme Court’s decision in Owen v R.[16] Although the present case was a trial by Judge alone, the same standard applies, though the fact that full reasons had been given will make the appellate Court better placed to assess the justification for, and correctness of, the Judge’s verdict than in a jury case.[17]
[50] Bearing in mind that our function as an appellate Court is a review function, and not one of substituting our own view of the evidence, we now turn to the particular matters raised by the appellant.

Drag and drop

[51] The first is the contention that the appellant had engaged in a “drag and drop” process on 7 June and had not taken care in identifying files to be downloaded. This is considered to be important because the appellant claimed that he was unaware of the extent of the data he had downloaded. There was expert evidence about this, which was conflicting. The Judge held that the process involved was not a drag and drop, but was rather the process of targeting. Ms Hughes said that in doing so he ignored the expert evidence.
[52] Ms Hughes relied on the evidence of the defence expert to the effect that the analysis of the time taken for the download was consistent with a drag and drop method being adopted. The expert later said that the quantity of files and the time taken were indicative that it was not a targeted download of specific files but rather a broad scope of data being sought.
[53] We do not propose to engage with this point in any detail because on the approach we take to the appeal, it makes no difference to the outcome. The Judge did not accept that there was any inadvertence in the scope and volume of data downloaded and we see that finding as open to him on the evidence.

T drive

[54] The second issue relates to the drive on which the material downloaded by Mr Watchorn was kept in the TAG server. There were references both to a “Z drive” and a “T drive”. Ms Hughes said that the Judge was mistaken in relation to the relevance of these drives. We disagree. There was no dispute that the information was contained on a drive that was accessible by TAG employees. But the Crown case was that there was no authorisation or belief in authorisation that downloading the entire contents of either drive was authorised. That was all the Crown had to prove and there was a clear evidential basis for that conclusion.

USB stick

[55] The third concern relates to the Crown submission at the trial that Mr Watchorn had accessed TAG data while working at NZEC. This referred to data on a USB stick which was accessed on 21 and 24 August 2012, and a folder that was copied to the USB stick on 31 July 2012. The Judge recited this as part of the Crown case but did not then refer to it as part of his reasoning. We do not see its relevance given the nature of the charge was the obtaining of the benefit, not the use to which it was put. Again, therefore, we do not consider there is any need to engage directly with this point.

Lie

[56] The fourth matter raised under this head by Ms Hughes was the reference in the judgment under appeal to the Crown submission that Mr Watchorn lied when he was asked whether he had transferred information from the personal hard drive on to his home computer. Mr Watchorn responded to that inquiry, “I don’t believe so”. The Crown said this was a lie, because the evidence showed that the information had been transferred to the home computer. Ms Hughes said it was not a lie but rather a statement of uncertainty. The Judge’s elevation of it to a lie was wrong and contributed to a miscarriage of justice.
[57] We consider the Judge was entitled to interpret the reply as a lie given that the transfer from the hard drive to the home computer had occurred less than three weeks before the police interview at which the denial was made. As the Judge pointed out, the transfer of information occurred only days after TAG’s solicitors had written to the appellant reminding him of his obligations in relation to computer data, and demanded that he return any property of TAG that he had taken from TAG. We do not see any proper basis to differ from the Judge on this aspect of the case.

“I got what I wanted”

[58] The fifth point was the statement made by the appellant to his work colleague, Mr Davis, “I got what I wanted”. The Judge found that this was a reference to the material that had been downloaded on 7 June. The statement was made the day before the appellant resigned from TAG. The circumstances were that TAG had made arrangements for the appellant’s computer to be shut down while he was out of the office so that their investigation could be undertaken. We consider it was open to the Judge to find that the appellant was referring to the data he had already taken from the TAG system, that is the data downloaded on 7 June. There was nothing from the appellant to contradict that interpretation and no other circumstances to which the statement could be attributed.

Home computer

[59] The sixth issue was the transfer of material from the hard drive to the home computer. Ms Hughes said that it could be reasonably assumed that the appellant had undertaken a “drag and drop” process, and therefore could not have been aware of the precise contents of the files he had transferred. There was no evidence that this was the process undertaken and no reason for such an assumption to be made. In any event, it does not seem to us to have had any material impact on the outcome of the case.

Response to solicitors’ letter

[60] The seventh matter relates to the letter from Bell Gully to Mr Watchorn on 1 August 2012, the day after he left TAG and the day on which he commenced work for NZEC. That letter reminded Mr Watchorn of his obligations under his employment agreement with TAG. His response was a text message to Mr Cadenhead, which we have already reproduced above at [17], but repeat for ease of reference:

It seems a bit asinine to bring this up now, so how do you want to deal with this??

If you want to meet and discuss this let me know.

[61] In the judgment under appeal, the quotation of this text message incorrectly replaces the words “so how do you want to deal with this” with the words “so I hardly want to deal with this”.[18] It seems clear that this is a mere typographical error, and there is nothing to indicate that the Judge treated the text with any greater negativity as a result. The statement “so how do you want to deal with this” is reproduced correctly later in the judgment.[19] Furthermore, the judgment contains a correct recording of the offer made by the appellant to meet Mr Cadenhead to discuss the matter.[20] Ms Hughes said the Judge overlooked this. We disagree. And there is nothing to indicate how this could have led to any different outcome to the trial.

Canada

[62] The eighth point relates to the personal hard drive and the fact that the appellant said that he had not taken it to Canada, when the evidence showed that he had done so. Ms Hughes said that the Judge ought to have inferred that the appellant not only took the hard drive to Canada, but that he had undertaken the 7 June download so that he could take it to Canada for work purposes. We disagree. The appellant had his chance to give that version of events both in his police interview (when he denied taking the hard drive to Canada) and at trial. If he wanted the Court to make a finding to that effect he needed to give evidence to that effect. He chose not to.

Conclusion

[63] We have considered all of these matters out of deference to the submissions made by Ms Hughes, but they were made without sufficient regard to the nature of the appellate task in dealing with the unreasonable verdict ground of appeal under s 385(1)(a) of the Crimes Act. We do not consider any of them to be made out in any event.

Outcome: conviction appeal

[64] For these reasons, we conclude that the convictions entered in the District Court should be quashed, but only on the ground conceded by the Crown, namely that computer data is not “property” as defined. Having rejected all other grounds of appeal, it is now necessary for us to address the Crown’s submission that we should substitute convictions based on obtaining a “benefit”.

Should we replace the convictions?

[65] In Dixon, this Court substituted the convictions against Mr Dixon for convictions based on obtaining a benefit, the benefit being the opportunity to sell the digital CCTV footage that he obtained by accessing his employer’s computer. Mr Dixon had in fact attempted, albeit unsuccessfully, to sell the footage after obtaining it. The Court did not discuss the concept of “benefit” as used in s 249(1)(a) in any detail. It said:[21]

Mr Dixon never disputed that he obtained the footage. The footage, although not property, is something of value that is capable of being sold. While Mr Dixon ultimately did not sell the footage (whether because he chose not to or because negotiations fell through), he certainly had the opportunity to do so. Mr Dixon clearly obtained a benefit as envisaged by s 249(1)(a).

[66] On the facts of Dixon, it may be arguable that Mr Dixon was in breach of s 249(2) as well, because his attempt to sell the digital footage could be seen as indicating that he accessed the computer system with intent to obtain a pecuniary advantage.

The parties’ submissions

[67] Mr Downs urged us to adopt the same course as that adopted in Dixon in the present case, and substitute convictions against Mr Watchorn on the basis that the data he downloaded from TAG’s computer system was “a benefit” as that term is used in s 249(1)(a). He accepted that, in the present case, there was no evidence that Mr Watchorn had tried to sell the data he obtained from TAG’s computer system, as Mr Dixon had. But he said this was not a material element in the decision in Dixon. Rather, the key point was that the CCTV footage in that case was “something of value that is capable of being sold”, meaning the obtaining of anything that had value amounted to the obtaining of a benefit for the purposes of s 249(1)(a).[22] In effect, Mr Downs’ submission was that the concept of “benefit” expands to fill the gap created by the adoption of a narrow definition of “property” for the purposes of s 249(1)(a).
[68] Ms Hughes resisted this approach. She submitted that the concept of “benefit” in the context of s 249 anticipated a financial benefit and not “some amorphous benefit by maintaining a reference library or toolbox”. She said there was no principled basis for finding that Mr Watchorn had obtained a benefit, given that he made no effort, despite the prolonged period of time that he held the information downloaded on 7 June, to translate it into any financial advantage to himself or detriment to TAG, by providing it to a third party.

Police v Le Roy

[69] The question as to whether a benefit is limited to a financial benefit arose in a High Court case, Police v Le Roy.[23] In that case the defendant worked for a telecommunications company and had accessed the company’s computer system to obtain the email password of the victim, a woman who had obtained a protection order against the defendant. He accessed her email account on a number of occasions. The District Court Judge had concluded that the term “benefit” meant a benefit that “could result in advancement of a person’s material situation and was confined to a ‘benefit’ of a financial nature”.[24]
[70] A case was then stated for the High Court. Gendall J surveyed the authorities and concluded that a benefit was not limited in the manner determined by the District Court Judge. He said:

[11] A non-monetary advantage may nevertheless comprise a benefit. Such an advantage might, for example, be the acquiring of knowledge or information to which one was not otherwise entitled. The advantage might be the invasion of another’s privacy. It might be knowledge or information that could be used to exploit another person. For example, wrongful accessing of the email communications of another for the advantage of disclosure. Or use for political purposes or purposes of embarrassment. Information obtained might also be used for the benefit or advantage of the wrongdoer in acting in a way so as to harass another in breach of the Harassment Act 1997, or to be used to assist in the breach of a protection order under the Domestic Violence Act 1995.

[71] Gendall J drew support from an earlier High Court decision in a case involving use of a document with intent to obtain a benefit.[25] In that case, the defendant had used a trust account receipt so he could tender it to a District Court Judge, with the object of obtaining a lesser sentence upon later sentencing. Bisson J found that a lighter sentence was a “benefit”. He rejected a submission that a benefit must be a financial benefit.[26]
[72] Gendall J approved the following commentary from Adams on Criminal Law:[27]

The word “benefit” is defined in wide terms in [s 237(3) of the Crimes Act]. Of the words in that extended definition, only “property” is further defined in the Act ... While “property”, “pecuniary advantage” and “valuable consideration” all have the connotation of things of financial value, the same is not necessarily true of “benefit” itself, nor of “privilege” or “service”. It is unlikely the words in the extended definition form a genus, so that a privilege, service or benefit not defined in monetary terms may come within the definition, as with a reduction in sentence for an offence ... or refugee status ... or a work permit ...

[73] We agree with Gendall J that, in the context of s 249(1)(a), there is no reason to confine the concept of “benefit” to financial benefits, as submitted by Ms Hughes.
[74] We do not see that conclusion as necessarily resolving the present case, however.

Legislative history

[75] The legislative history in relation to the definition of property is set out in Dixon v R.[28] As noted there, the original version of the Crimes Amendment Bill (No 6) 1996 introduced to Parliament had its own definition of property, which was deleted by the Select Committee.[29] The deleted definition was broad enough to include computer data. We have considered whether the statutory history assists in determining the scope of the term “benefit”. There is nothing directly relevant to our analysis.
[76] But it is instructive that the Select Committee considering the Bill which led to the amendment to pt 10 of the Crimes Act, including the present s 249, proposed amendments to what is now s 228, which gives some indication of the intended scope of the term “benefit”. Section 228 makes it an offence to obtain any document dishonestly and without claim of right with intent to obtain any property, service, pecuniary advantage or valuable consideration. The contrast with s 249(1)(a) is obvious: the references to “privilege” and “benefit” in the latter provision are missing from s 228. Their omission from s 228 was a result of the Select Committee’s decision that those terms should be omitted to make it clear that s 228 related only to financial benefits.[30] Their omission in those circumstances indicates that their inclusion would otherwise have extended the scope of s 228 to include the situation where a document was used with intent to obtain a non-financial benefit. This supports the analysis of Gendall J in Police v Le Roy.

Statutory context

[77] We have also considered the broader statutory context. The term “benefit” is used in a number of different provisions in the Crimes Act and in particular:
[78] This analysis does not provide decisive guidance on the meaning of “benefit” in s 249(1). It is notable, however, that the specific definitions do not limit the concept of “benefit” and there is nothing to suggest an intention on the part of Parliament to constrain the scope of the term “benefit”.
[79] We are mindful that s 252(2) makes it clear that it is not an offence for an employee to access a computer system for an unauthorised purpose. Section 252(1) says that a person who intentionally accesses a computer system without authorisation commits an offence and is liable for imprisonment for a term not exceeding two years. But the effect of s 252(2) is to exclude access by an employee for an unauthorised purpose from the ambit of that provision.[33] In the present case, the accessing of the geoscience data on TAG’s computer was not an unauthorised action on the part of Mr Watchorn. There was no limitation on access to that part of TAG’s system. He was not, however, authorised to download the files that he did.
[80] The question that arises is whether the fact that Mr Watchorn downloaded the data onto a hard drive, which he was not authorised to do, was sufficient to turn his action into a criminal offence attracting a maximum penalty of seven years’ imprisonment. It seems that the parliamentary intention was that this should be so, because that initial definition of “property” would have included computer data. The deletion of the property definition by the Select Committee was not accompanied by any expression of intention to limit the scope of the provision.
[81] We do not consider that there is any proper basis to limit the scope of the term “benefit” to financial advantage or to limit its normal meaning of anything that is of advantage to the person concerned.

The “benefit” obtained by Mr Watchorn

[82] Mr Downs argued that Mr Watchorn obtained a benefit as that term was defined in Dixon: “something of value that is capable of being sold”.[34] He noted that the Court in Dixon indicated that, even if the defendant did not sell the data he obtained (whether by choice or because negotiations to do so fell through) it was still something he had the opportunity to sell, and, therefore, a benefit.[35]
[83] Although we are bound by the decision in Dixon, we see the issue of what constitutes a benefit in the present case as more nuanced than in Dixon. It is arguable on the facts of the present case that the advantage gained by Mr Watchorn was his ability to access the data outside his work environment and without the supervision of his colleagues, including after he left the employment of TAG. It could be argued that the fact he did not exploit the advantage given to him by selling the data or making it available to his new employer does not reduce the fact that he had the option to do any of these things. On that basis, it could be argued that his possession and control of, and therefore opportunity to use, the downloaded files constituted a “benefit” for the purposes of s 249(1)(a).[36]
[84] However, that formulation of “benefit” was not advanced by the Crown in the present appeal, let alone at the trial. Although Ms Hughes did not argue that Mr Watchorn would be prejudiced by the substitution of a verdict based on obtaining a benefit, she resisted that course on the basis that there was, in fact, no benefit.
[85] The discretion to substitute a different verdict under s 386(2) of the Crimes Act arises where “it appears to [this Court] that the [Judge] must have been satisfied of facts which proved [the appellant] guilty of that other offence”. We do not consider we can be satisfied of that when the Crown has not articulated what “benefit” Mr Watchorn obtained. We consider Mr Watchorn was entitled to prior notice of the benefit alleged by the Crown so that he could, if he chose to do so, adduce evidence or give evidence contradicting the allegation. That evidence might include whether there is in fact any advantage to him in having possession and control of the data. Because the prosecution proceeded on the basis of his obtaining “property”, that entitlement has not been met.
[86] We see this case as different from Dixon, where the Court was able to identify the benefit from the facts proved at trial. We consider the grounds for substituting new verdicts are not met in the present case. In normal circumstances, that would lead us to order a retrial. But we do not consider it would be fair to the appellant to do so if the sentence he has served already equates with or exceeds the maximum sentence he would (or should) face if convicted at a retrial. We therefore turn now to the issues raised in relation to the sentence imposed in the District Court.

Sentence

[87] The sentencing was preceded by a disputed facts hearing, at which Mr Cadenhead gave evidence about the impact of the offending on TAG. This occurred because a victim impact statement filed on behalf of TAG had contended that the impact on TAG had included a fall in the value of the shares in TAG because shareholders had been “spooked” by Mr Watchorn’s actions and that TAG had made a bid for the 2012/2013 petroleum bid season involving a much greater financial commitment on its part than would otherwise have been the case, due to its concern that its confidential information had been leaked to NZEC.
[88] The outcome of the disputed facts hearing was that the claimed losses were not in fact incurred. The Judge then dealt with the impact on TAG in his sentencing notes in these terms:[37]

[11] Impact on a victim is a matter to which I must have regard. For the purpose of sentence today I am sentencing on the basis that the impact on TAG has been significant. While perhaps not in direct financial repercussions, in many ways it has, that the material taken was voluminous and understandable time was expended associating with the accumulation of that material. It would have been of significant value to the company. As a direct consequence, although perhaps not affiliated with these proceedings, there were legal costs. There is I gather some continued and maintained challenge by Mr Watchorn as to his culpability. I do note that what followed was an update to the TAG security and IT systems and as I have already said, time has been applied to matters that might in the eyes of perhaps those driving the company otherwise be channelled to more lucrative factors. These are all matters that I consider to be made out.

[12] There are inherent difficulties attaching to the fixing of a financial consequence or worth to loss in many of these matters. Suffice it to say, notwithstanding the fact that there is no dissemination detected, this was to all intents and purposes significant offending.

[89] The Judge assessed that the matters indicating the seriousness of the offending were:[38]
[90] The Judge took a starting point of three years’ imprisonment, made an allowance of six months for previous good character and reached an end sentence of two and a half years’ imprisonment, which was applied on a concurrent basis to all counts. He also ordered the forfeiture of the computer onto which the data had been transferred.
[91] Ms Hughes argued that the Judge’s assessment of loss was not based on the evidence. She said that the disputed facts hearing had clarified the position of TAG, and established that there was no loss of shareholder value and no requirement to incur additional costs for bids in the 2012/2013 bidding season. She said that the consequential losses suffered by TAG had already been dealt with by the Employment Relations Authority (ERA) in dealing with TAG’s claim against Mr Watchorn in that forum.[39] The ERA had ordered Mr Watchorn to pay TAG the sum of $65,567 to compensate it for the costs it had incurred and had also ordered him to pay penalties totalling $12,000, half of which was paid to the Crown and half to TAG.
[92] Ms Hughes also took issue with the Judge’s finding that Mr Watchorn had derived a benefit from holding the data. The Judge had referred to the fact that the data was on a device that was with Mr Watchorn in the offices of NZEC when the police executed the search warrant. The Judge had asked rhetorically “Why otherwise would it be there if it were not to enable access?”[40] Ms Hughes renewed her argument that, as Mr Watchorn had a habit of retaining large tranches of information from previous employers for reference purposes, it could not be said that there was a concomitant disadvantage to TAG nor an illegitimacy of benefit. We do not accept that submission for reasons we have given earlier.
[93] Ms Hughes argued that given Mr Watchorn was a first offender, the crime was not a crime of violence, Mr Watchorn had been identified as a person unlikely to reoffend and Mr Watchorn had already been punished by the ERA, the conviction was itself a significant punishment and had led to him being unemployed. In those circumstances a non-custodial sentence was appropriate. She said the term of imprisonment imposed was manifestly excessive and should be replaced by a
non-custodial sentence. She did not, however, specify in her written submissions what the sentence should have been and, when pressed on this at the hearing, she suggested that a fine, community work or community detention would have been the appropriate sentence. She said that reports had been prepared for sentencing for both home detention and community detention, and those remained current.
[94] For the Crown, Mr Downs emphasised the factors referred to by the Judge, and said that, despite the findings made as a result of the disputed facts hearing, there was still considerable impact on TAG given it had thought for some time that the data may have ended up in the hands of NZEC. He said that the Crown would resist a starting point that was less than imprisonment, but would not resist the notion of home detention.
[95] Mr Watchorn commenced his prison sentence immediately after the sentencing on 14 July 2014, and was imprisoned until bail was granted on 22 August 2014. So he has already spent just over five weeks in prison. In broad terms, that is the equivalent of a sentence of imprisonment of 10 weeks.
[96] There is little guidance in the case law on sentencing levels for offending of this kind. Both counsel referred to the decision in Dixon, in which the sentence of four months’ community detention and 300 hours’ community work was upheld by this Court.[41] In that case, the sentencing Judge had adopted a starting point of 12 months’ imprisonment, but had been persuaded to step back from a custodial sentence principally on account of the fact that Mr Dixon had no relevant previous convictions. This Court considered that a sentence at that level was justified, and rejected the submission made on behalf of Mr Dixon that a fine was appropriate.
[97] Counsel made contrasting submissions about Dixon. Ms Hughes argued that it was a more serious case than the present one, given that Mr Dixon had attempted to derive a pecuniary advantage from his unlawful possession of the digital footage taken from his employer’s computer. Mr Downs argued that the far greater inherent value of the data taken by the appellant in the present case made it a more serious case, even though the appellant had not attempted to sell the data and had not transferred it to anyone else.
[98] In our view, the sentence imposed by the Judge exaggerated the seriousness of the offending. This was perhaps understandable given the fact that the police investigation had been undertaken against a background of an assumption that TAG’s data had been disclosed to NZEC. We accept Ms Hughes’ submission that the harm to TAG was limited to the costs it incurred in engaging lawyers and forensic experts and the management distraction. We do not underestimate that, but we also acknowledge that TAG has been compensated for much of that cost in the ERA proceeding. The benefit obtained by Mr Watchorn was the ability to access the data outside the work environment and after cessation of employment with TAG. TAG did not lose access to the data because Mr Watchorn made a copy of it rather than transferring it off the TAG system on to his own hard drive. Mr Watchorn obtained the ability to misuse the data but did not actually do so, and the sentencing ought to have reflected that.
[99] In our view a starting point at a higher level than that adopted in Dixon could not be justified in this case. Nor could a requirement that the appellant serve a prison term. In our view a sentence of community detention combined with community work, as was imposed in Dixon, was the appropriate sentence. Having regard to the fact that the appellant has now served a prison term of five weeks, we would, if we had had to decide the sentence appeal, have reduced the sentence imposed in the District Court to a term of imprisonment of 10 weeks, that is, the equivalent of the term that has now been served by the appellant.

Should we order a new trial?

[100] As Mr Watchorn has served a prison term in circumstances where, in our view, only a non-custodial sentence is available and has paid penalties as ordered by the ERA,[42] we do not consider it appropriate to order a retrial.

Result

[101] We allow the appeal against conviction and quash the three convictions entered in the District Court. We do not substitute replacement verdicts. We do not order a retrial.

Postscript

[102] The decisions of this Court in Dixon and the present case have identified some drafting issues and inconsistencies in some Crimes Act provisions. We respectfully suggest that consideration be given to remedial legislation.







Solicitors:
Crown Law Office, Wellington for Respondent

[1] R v Watchorn DC New Plymouth CRI-2012-043-3092, 29 April 2014.

[2] R v Watchorn DC New Plymouth CRI-2012-043-3092, 14 July 2014 [Sentencing Notes].

[3] Watchorn v R [2014] NZCA 416.

[4] Dixon v R [2014] NZCA 329, [2014] 3 NZLR 504.

[5] Ordinarily this Court is bound by its own decisions: R v Chilton [2005] NZCA 295; [2006] 2 NZLR 341 (CA) at [83]. It was not suggested that there was any basis for departing from Dixon in the present case.

[6] R v Watchorn, above n 1, at [69].

[7] Dixon v R, above n 4, at [23]–[39].

[8] R v Hayes [2008] NZSC 3, [2008] 2 NZLR 321.

[9] At [52]–[58].

[10] R v Watchorn, above n 1, at [53].

[11] R v Watchorn, above n 1, at [69].

[12] R v Hayes, above n 8.

[13] At [26] above.

[14] Evidence Act 2006, s 40.

[15] Solicitor-General v Rudd [2009] NZCA 401 at [27].

[16] Owen v R [2007] NZSC 102, [2008] 2 NZLR 37 at [13] citing R v Munro [2007] NZCA 510, [2008] 2 NZLR 87.

[17] Roest v R [2013] NZCA 547, [2014] 2 NZLR 296 at [56].

[18] R v Watchorn, above n 1, at [17].

[19] At [72].

[20] At [17].

[21] Dixon v R, above n 4, at [46].

[22] At [46].

[23] Police v Le Roy HC Wellington CRI-2006-485-58, 12 October 2006.

[24] Reproduced in Police v Le Roy, above n 23, at [4].

[25] Dauncey v Police HC Hamilton M170/85, 25 June 1985.

[26] At 6.

[27] At [13] (citations omitted); the paragraph from Adams on Criminal Law has been amended slightly since the decision of Gendall J, but the substance of the text is the same: Bruce Robertson (ed) Adams on Criminal Law (looseleaf ed, Brookers) at [CA237.06].

[28] Dixon v R, above n 4, at [14]–[18].

[29] At [17]. See the definition of “property” included in the proposed s 305A that would have been inserted by cl 19 of the Crimes Amendment Bill (No 6) 1999 (322-1); Law and Order Committee Crimes Amendment Bill (No 6) and Supplementary Order Paper No 85 (20 July 2001) at 17.

[30] Law and Order Committee, above n 29, at 17.

[31] The defined phrase “obtain a material benefit” is used only in s 98A of the Crimes Act 1961 dealing with an organised criminal enterprise. It is also used in the definition of “for a material benefit” in s 2, which is used in ss 98AA, 98C and 98E.

[32] R v Connolly HC Christchurch CRI-2008-409-14401, 31 July 2009; R v Andrews Weatherfoil Ltd [1972] 1 WLR 118 (CA).

[33] It is unclear whether the exclusion of employees by s 252(2) was intentional, because the Explanatory Note to the Crimes Amendment Bill (No 6), above n 29, said that the offence would cover “employees who are not authorised to access a particular part of their employer’s computer system” as well as outside hackers, and the speech of the Minister foreshadowing the introduction of the Supplementary Order Paper containing this provision expressed a similar intention: (5 October 1999) 580 NZPD 19732.

[34] Dixon v R, above n 4, at [46].

[35] At [46].

[36] It would therefore also likely constitute a “benefit” for the purposes of the other Crimes Act provisions that use the same wording.

[37] Sentencing Notes, above n 2.

[38] At [25].

[39] TAG Oil (NZ) Ltd v Watchorn [2014] NZERA Wellington 58.

[40] Sentencing Notes, above n 2, at [25].

[41] Dixon v R, above n 4.

[42] See [91] above.

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