Burt v Police [2012] NZHC 2551 (3 October 2012)

Last Updated: 16 October 2012

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CRI-2012-419-000047 [2012] NZHC 2551

BETWEEN LANCE MAXWELL BURT Appellant

AND NEW ZEALAND POLICE Respondent

Hearing: 19 September 2012

Appearances: P J O'Sullivan for Appellant

R G Douch for Respondent

Judgment: 3 October 2012

_{JUDGMENT OF VENNING J}

This judgment was delivered by me on 3 October 2012 at 11.00 am, pursuant to Rule 11.5 of the High

Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Crown Solicitor, Hamilton

O’Sullivans Lawyers Limited, Te Rapa

BURT V NEW ZEALAND POLICE HC HAM CRI-2012-419-000047 [3 October 2012]

[1] Following a defended hearing in the District Court at Thames1 Mr Burt was convicted on one count of accessing a computer system for a dishonest purpose.2

Judge Wolff subsequently sentenced him to nine months’ imprisonment. The Judge also directed Mr Burt to pay $81,930.98 by way of reparation.

[2] On 18 July 2011 Mr Burt appealed against his conviction and sentence. On

23 August 2012 Woolford J granted him bail pending the hearing of the appeal.3

Background facts

[3] Mr Burt was the principal shareholder and sole director of Coromandel Land

Trust Limited (CLT). CLT owned farmland in the Coromandel area. On 12 March

2005 CLT entered a sharemilking agreement with Ian and Lisa Handcock (or nominee) pursuant to which Mr and Mrs Handcock were to run and milk dairy cows on CLT’s property. The parties agreed to split the milk proceeds 50/50. The Handcocks apparently nominated their company Milkt Investments Limited (MIL) as the ultimate contracting party.

[4] CLT nominated Fonterra as the company to which the milk solids produced from the dairying operation were to be supplied. As a condition of accepting the supply Fonterra required there be only one nominated person, the owner of the shares in Fonterra, to whom the milk cheque would be paid. That was CLT, as owner of the land. Absent instruction otherwise from CLT, Fonterra would pay the cheque for the milk supply to CLT. However under the sharemilking agreement between CLT and MIL, CLT agreed to instruct Fonterra to pay MIL its proportion of the milk proceeds and for that purpose lodged an automatic payment authority in favour of MIL with Fonterra.

[5] From a relatively early point in the relationship, a number of issues arose between Mr Burt and the Handcocks. Mr Burt was essentially a property investor,

1 _{Police v Burt DC Thames CRI-2012-075-000049, 5 June 2012.}

2 _{Crimes Act 1961, s 249.}

3 Burt v Police HC Hamilton CRI-2012-075-000049, 23 August 2012.

not a farmer. The Handcocks were experienced dairy farmers, but Mr Handcock also ran a farm consultancy. In Mrs Handcock’s words, Mr Burt tried to make claims about how they were running the farm to make matters difficult for them, but they stood their ground under the contract.

[6] Despite the involvement of consultants, the relationship deteriorated to the stage that, on 19 April 2007, Mr Burt contacted Fonterra and instructed them to direct the milk cheque due to MIL on 20 April to CLT’s bank account. Fonterra would not accept the instruction by telephone. It required an email confirmation. Mr Burt then sent an email at 9.04 p.m. on Thursday, 19 April 2007 to Mr Drumm of Fonterra in the following terms:

Subject: Coromandel Land Trust Limited – URGENT sharemilker payment cancellation

As discussed please re direct Sharemilkers 20/04/07 payment into owners

Rabobank bank account [details].

Please continue re direction for all future payments until further notice. ...

Lance M. Burt

DIRECTOR

Coromandel Land Trust Limited.

[7] The sharemilking agreement provided that CLT could make deductions from the proceeds due to the sharemilker but only in accordance with the provisions of the agreement, including payment to CLT’s solicitors’ trust account to be held in trust on interest bearing deposit. Mr Burt did not do that.

[8] In all, five payments totalling $81,930.98 otherwise due to MIL under the sharemilking agreement were paid to CLT.

[9] The parties then became involved in a civil dispute. Ultimately the matter became the subject of a complaint to the police and in January 2012 Mr Burt was charged that, on 19 April 2007 he:

directly accessed a computer system, namely an ihug email account in the name of Lance Burt and thereby dishonestly and without claim of right obtained a pecuniary advantage, namely the use of $81,930.98.4

4 The charge was amended to this wording at the outset of the hearing in the District Court.

[10] Judge Wolff identified that the charge involved the following four elements:

(a) that Mr Burt had accessed a computer system to undertake the instruction;

(b) the activity instructed by use of the computer system must be dishonest;

(c) the prosecution must establish that there was a benefit; and

(d) that Mr Burt must have acted without claim of right.

[11] The Judge heard evidence over the course of a full day. The prosecution called Mr and Mrs Handcock; a Mr Ridler, a farm consultant retained by Mr Burt; and Detective Kavanagh, the officer-in-charge. The detective produced bank statements from Rabobank relating to CLT and other documents. In addition, the evidence of Mr Drumm, a Fonterra representative, and that of Mr Langille, who discussed the way in which email accounts operated, was admitted by consent. Mr Burt gave evidence in his defence.

[12] At the end of a long day the Judge delivered an oral judgment. He concluded that the four elements of the offence were established beyond reasonable doubt. The Judge rejected Mr Burt’s evidence. The Judge noted that it was accepted Mr Burt (CLT) had entered the sharemilkers’ agreement and that he ignored the dispute process in that agreement. He had not given notice in accordance with the agreement. He considered that Mr Burt’s actions amounted to a deliberate attempt to obtain a commercial negotiating advantage in the dispute which he later formulated through a solicitor’s letter.

[13] The Judge considered that when he addressed the email to Fonterra on 19

April:

[Mr Burt] well knew that he was directing to do something that he was not entitled to do (ie) cancel the sharemilkers’ entire income and take the strategic advantage because he could. ...

He knew he was and in directing that he had the right to cancel to Fonterra, he was acting dishonestly.

[14] The Judge was also satisfied that Mr Burt got a benefit from CLT by:

getting the negotiating whip handle in order to attempt to bully a non- commercial and inappropriate resolution of a commercial dispute that had well founded means of resolution, means of resolution he knew about and which he had been advised to follow.

[15] Finally the Judge concluded that no claim of right existed. He held that:

Any claim of right is a retrospective re-creation on the part of Mr Burt to attempt to justify the steps that he took on that occasion.

As noted the Judge found the charge proved. Subsequently, when Mr Burt appeared for sentence, the Judge rejected the recommendation of the probation officer for home detention and community work and instead imposed the sentence of nine months’ imprisonment. He also directed reparation:

Though it is unlikely to be met, there remains a prospect that you have assets that are not being disclosed and I am satisfied that until you declare yourself bankrupt the possibility of recovering the amount taken on this occasion should be left available. You are ordered to pay the sum of $81,930.98 by way of reparation.

The appeal

[16] The appeal is advanced on the grounds that, having regard to the evidence, the Judge was wrong to find the following elements proved or his decision to convict was unreasonable:

(a) finding the appellant had acted dishonestly; (b) rejecting the claim of right;

(c) finding that the appellant obtained a pecuniary advantage or benefit of the use of $81,930.98; and

(d) finding there was a causal link between the appellant accessing the computer system and obtaining the pecuniary advantage.

[17] In support of the sentence appeal, Mr O’Sullivan submitted that a sentence of imprisonment was manifestly excessive in the circumstances and that it was not appropriate to order reparation.

The police response

[18] The position for the Police is that the Judge was entitled to find the appellant acted dishonestly; that the Judge’s finding there was no claim of right was a factual finding open to him which should not be disturbed on appeal; that the appellant obtained a pecuniary advantage of the use, namely the use of $81,930.98; and that the email was an integral part of achieving his end, namely to divert the sharemilkers’ share of the proceeds to CLT’s benefit. The causal connection was clear.

[19] As to sentence, Mr Douch submitted that, whilst the starting point of imprisonment of one year could not be challenged, he accepted this Court would be entitled to readdress the question of home detention in accordance with the appellate authority of Manikpersadh v Queen.5 Mr Douch also acknowledged that no reparation report had been ordered but nevertheless submitted the order should remain. He suggested that perhaps this Court could vary the order to require a

nominated sum to be paid by instalments to engage s 36 of the Sentencing Act 2002 or alternatively, suggested that decision be passed to the Registrar.

Decision

[20] Section 249 was inserted in the Crimes Act 1961 as from 1 October 2003. It effectively replaced s 229A which provided for dealing with documents with intent to defraud.

[21] For present purposes the relevant wording of s 249 is:

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 ... and without claim of right,—

(a) obtains any ... pecuniary advantage ...

[22] The elements of the offence under s 249 in the present case are: (a) the accessing of a computer system;

(b) and thereby dishonestly;

(c) and without claim of right;

(d) obtaining any pecuniary advantage.

Accessing a computer system

[23] There is no issue that in this case the appellant accessed a computer system by sending the email of 19 April 2007. The other three elements of the offence are, however, in issue on the appeal.

Pecuniary advantage

[24] It is convenient to consider first whether it can be said that Mr Burt obtained any pecuniary advantage. In Hayes v R6 the Supreme Court discussed the concept of pecuniary advantage under the then s 229A. At [16] the Court said this:7

... The preferable construction treats the expression “pecuniary advantage” as meaning simply anything that enhances the accused’s financial position. It is that enhancement which constitutes the element of advantage. If what the accused person is seeking to obtain is of that kind, it does not matter whether he or she is entitled to it, or may be trying to avoid the risk of not continuing to receive it. It follows that even if the person from whom the pecuniary advantage is sought has an obligation to supply it to the recipient, that will not prevent the use of dishonest means to procure the advantage from being an offence.

6 _{Hayes v R [2008] NZSC 3; [2008] 2 NZLR 321.}

7 At [16]-[17].

[17] As the Court of Appeal put it in R v Thomas, [CA 71/00, 7 June

2001] a pecuniary advantage advances the economic interests of the recipient. ...

It is irrelevant that the pecuniary advantage was for the benefit of CLT rather than

Mr Burt (at least directly). Obtain is defined in s 217 of the Act as:

In this Part, unless the context otherwise requires,—

obtain, in relation to any person, means obtain or retain for himself or herself or for any other person.

So the definition of “obtain” extends in this instance, to a pecuniary advantage obtained by the accused for CLT. There is no requirement that that other person to whom the property is delivered must be a natural person: R v Bennitt.8

[25] In the present case, it is clear enough that CLT obtained a pecuniary advantage by Mr Burt’s actions. Eighty one thousand, nine hundred and thirty dollars and ninety eight cents was paid into CLT’s bank account as a direct consequence of Mr Burt’s direction. That enhanced CLT’s financial position. The above reasoning is also sufficient to deal with the requirement for causation.

[26] The Judge was right to find this element proved.

Dishonestly

[27] The next issue is whether, in sending the email to Fonterra to direct the payments to CLT, Mr Burt acted dishonestly.

[28] Dishonestly is defined in s 217 of the Act in the following terms:

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

[29] Mr O’Sullivan referred to Hayes again and the Court’s discussion at [42] of the concept of dishonesty, namely:

[42] It is important for an understanding of what follows to distinguish between two concepts. The first is whether conduct of the kind in question should be characterised as dishonest.24 The second is whether the mind of the particular accused was dishonest. It is seldom that any issue arises at trial in respect of the first concept. But where it has arisen, the correct approach to its resolution has proved controversial. What is normally in issue at trial is whether the mind of the particular accused was dishonest. That is conventionally assessed subjectively by reference to what the accused knew or believed the circumstances to be. ...

[30] Mr O’Sullivan submitted that in the present case Judge Wolff misdirected himself by concluding that the appellant had acted dishonestly because he misrepresented to Fonterra that he was entitled to cancel the payment arrangement (and that he was entitled to the funds) when, according to the Judge, he was not. Mr O’Sullivan referred to the following passages of the judgment:9

[28] In this case, Mr Burt was representing to Fonterra that [CLT] had an entitlement to the funds that entitled him to direct Fonterra to stop payment.

... I believe that when he addressed that email to Fonterra, he well knew that he was directing to do something that he was not entitled to do (ie) cancel

the sharemilkers’ entire income and take the strategic advantage because he could.

[29] ... He was taking advantage and he was breaching the contract. He knew he was and in directing that he had the right to cancel to Fonterra, he was acting dishonestly.

[31] Mr O’Sullivan submitted that the email sent to Fonterra was not a

misrepresentation. He noted that Mr Drumm had said in his brief of evidence:

Shareholders can ask Fonterra to pay a percentage of their milk payment to their share-milker(s). Shareholders can instruct Fonterra at any time to cancel any such payments to their share-milker(s).

Mr O’Sullivan submitted that the correct construction of the transaction was that an automatic payment to the sharemilker was stopped by Mr Burt, not that funds were diverted to CLT’s bank account (the default position being that the funds were payable to CLT’s bank account in any event). The finding that the email therefore amounted to a misrepresentation of Mr Burt’s (or CLT’s) entitlement (and was

_{therefore dishonest) had no basis on the evidence and was wrong at law.}

9 Police v Burt DC Thames CRI-2012-075-00049, 5 June 2012 at [28]-[29].

[32] However I accept Mr Douch’s submission in response that, while the arrangement between Mr Burt and Fonterra (more strictly the arrangement between CLT and Fonterra) may have allowed the appellant to make the representation he did, as regards the arrangement evidenced by the sharemilking agreement, such a representation was dishonest in terms of his relationship with the sharemilkers. That is the point. Because of the contractual arrangement between CLT and MIL, it was MIL which was, in the circumstances of this case, the entity entitled to consent or authorise the stopping of the payment otherwise due to it. Mr Burt knew, when directing Fonterra to stop the automatic payment to the sharemilkers and instead to pay the money to CLT that the sharemilkers had not consented or authorised him to do so. He could not have believed the Handcocks had given him such authority.

[33] Again, I accept the Judge was entitled to conclude this element was proved.

Claim of right

[34] The last and, in my judgment, real issue in the present case is whether it can be said that in acting as he did, Mr Burt acted without claim of right. Claim of right is defined in s 2 of the Crimes Act 1961 as:

a belief [at the time of the act in a proprietary or possessory right in property in relation to which the offence is alleged to have been committed], although that belief may be based on ignorance or mistake of fact or of any matter of law other than the enactment against which the offence is alleged to have been committed.

[35] The belief required to found a claim of right therefore involves the following elements:

(a) a belief in a proprietary or possessory right in property. That is, there must be a belief that relates to an element of ownership of the property in question or a right to claim possession of it;

(b) the belief must be about rights to the property in relation to which the offence is alleged to have been committed rather than some other property – this issue is not relevant in the present case;

(c) the belief must be held at the time of the conduct alleged to constitute the offence; and

(d) the belief must be genuinely held but need not be reasonable, although reasonableness may be relevant in determining whether the defendant’s assertion of the belief is credible.

[36] An honest belief, however wrongheaded, that the defendant had a legal right to take or attain possession of a particular item, in this case the funds from Fonterra, will suffice to make out the claim of right. As the Supreme Court said in Hayes on this issue:10

[57] The new formula also introduced to the Bill a defence of “claim of right”; distinguishable from the earlier legislative term “colour of right”. Colour of right, subject to certain qualifications, had meant “an honest belief that an act is justifiable”. As we have seen, claim of right refers to a “belief that an act is lawful”. The change from “justifiable” to “lawful” and the dropping of the word “honest” as a qualifier of the word “belief” confirmed the intention behind the 1989 Bill that a “Robin Hood” defence should not be available. The Committee explained: [at p 65]

“The term ‘dishonestly’ remains but is confined by our proposed definition to conduct which is known or believed to be without proper authority. While the Committee does not support the use of an objective standard to assess the defendant’s belief that the act in question was authorised, at the same time the bill should remove any doubt that an idiosyncratic moral view about what actually constitutes dishonest behaviour will excuse the defendant from liability.”

[58] The significance for present purposes of this history is that it is clear those who framed the new definitions did not seek to introduce any reasonableness qualification of the relevant beliefs. The beliefs contained in the definitions of “dishonestly” and “claim of right” were not meant to be subject to a reasonableness control, albeit their reasonableness will obviously have evidential relevance to the question whether they were actually held. It would in these circumstances be wrong for this Court to read in a requirement that the beliefs referred to in the statutory definitions must be reasonable.

[37] In the present case the issue then is whether, in the context of the commercial dispute between Mr Burt and CLT on the one hand, and the sharemilkers and MIL on the other, the Crown have excluded the reasonable possibility that Mr Burt genuinely believed he was entitled to direct Fonterra to pay MIL’s share of the milk cheque to

_CLT.

10 Hayes v R at [57]-[58].

[38] Although the Judge accepted there was a commercial dispute, he found that Mr Burt did not have such a belief. Mr Douch submitted that this was a finding of fact which this Court should not disturb on appeal. I acknowledge the advantage that a Judge at first instance has in seeing and hearing the witnesses: Austin, Nichols & Co Inc v Stichting Lodestar.11 However, it is necessary to consider the evidence on the issue and what Judge Wolff said about this in his reasoning in a little more detail.

[39] The Judge dealt with the issue of claim of right at the very end of his decision as follows:

[32] The final issue is whether Mr Burt’s claim that the dispute about the lease; the dispute about the flooding of the land; the dispute about whether the initial independent third party was biased or not; the dispute about the carrying on of stock that ought not to have been carried on, (and there is one other that has completely escaped my mind for the minute).

[33] By way of explanation if anyone is reading this judgment at some later stage, this decision is being delivered at five to seven after a daylong hearing, simply because the Court must resolve the matter whilst the essential factual matters are still in the Court’s mind. The Court does not have the luxury of a reserve day, before undertaking a vast number in the list tomorrow of other matters that will distract from memory.

[34] The claim of right needs to be considered with particular care, because a claim of right may exist even if the person who holds that claim is utterly and completely muddled in their thinking and even if they are plainly legally incorrect, then a claim of right can still apply. Applying that test to the present case, I am satisfied that in the present case, no claim of right exists. Any claim of right is a retrospective re-creation on the part of Mr Burt to attempt to justify the steps that he took on that occasion. I am therefore satisfied beyond reasonable doubt that all the necessary four elements are proved beyond reasonable doubt and a conviction will be entered on the charge currently before the Court.

[40] It can be seen from that discussion that the reason the Judge rejected the appellant’s claim of right defence was that he considered it to be a “retrospective re- creation on the part of Mr Burt to attempt to justify the steps that he took”.

[41] It is necessary to consider the background factual matters in a little more detail to determine whether the finding, that it was a retrospective recreation, was

_{open to the Judge.}

11 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141 at [13].

[42] The following matters are relevant. As noted, there were clearly issues between the Handcocks and Mr Burt from an early stage in their relationship. There were difficulties on both sides. The Handcocks were not full-time on the farm as sharemilkers. Initially they employed a manager who caused them problems. So much so that by April 2006 they (through MIL) rendered the manager an account for losses of $44,238. Mr Burt took advice and was told the production of milk solids was less than could have been achieved on the farm. A major issue leading to the breakdown in the relationship seems to have been an arrangement in relation to another block of leased land. The Handcocks harvested silage from the land. Mr Burt considered they should have accounted for that. Next, a floodgate on the property failed, allowing sea water inundation. Mr Burt blamed the Handcocks. They said it was not their responsibility. Mr Burt then instructed a farm consultant, Mr Ridler, in January 2007. The Handcocks considered Mr Ridler to be obstructive and aggressive. Mr Ridler called for the Handcocks to produce the records of their farming operation (as Mr Burt was entitled to under the agreement). The Handcocks told Mr Ridler he could view them at the farm. Mr Ridler also considered the Handcocks should have removed more cull cows. An impasse developed between Mr Ridler and the Handcocks. By early 2007 the relationship between Mr Burt and the Handcocks had largely broken down.

[43] Mr Burt asked Mr Ridler if he could terminate the sharemilking agreement. Significantly, on 12 April, a week before Mr Burt instructed Fonterra to cancel the automatic payment and pay MIL’s share of the milk cheque to CLT, Mr Ridler sent an email to Mr Burt identifying the damages caused by the Handcocks and MIL and his assessment of the compensation due as a consequence of the Handcocks’ poor management decisions. The email was in the following terms:

Hi Lance,

round figures for damage and compensation due to poor management decisions or lack of decision making.

1) Seawater damage to 3 ha. of flats due to lack of floodgate maintenance.

900kgMS/year for next 2 years; 900kgx3ha x $4.60 x 2 = $24,840

Re-development required. 3 ha x cultivation, salt neutralising, seed, fertiliser 3 x $950 = $2850

Impaired performance for subsequent 2 years until salt neutralisation is

complete 3 ha @ 320kgMS produced instead of 800MS/yr)

reduction of 3ha. x 480 x $4.60 = $6624 x 2 yrs = $13,248.

Full MS price as owner will bear full cost of remedial action and MS loss after termination.

2) Under-performance due to lack of adequate management supervision as required in agreement.

Budgeted performance stated varied from 110,000 to 130,000kg MS

_{(1,000kgMS/ha)}

1st year at 50% of $3.94 and second year at 50% of $4.12 on lower production of deficit of 10,000 kg MS/year $19,700 and $20,600.

3) Supplementary feed required to make up for pasture cover decrease due to cull cows not being removed from farm when instructed. 60 x 7kgDM/day x 40 days – 16,800kgDM or 65 large bales at $55 per bale + cartage of

$15/bale = $4550.

4) Benefit due from rearing of beef animals on shared lease block.

Assessed benefit of 25% of animal worth. (Accurate figures for numbers involved required: assumed 100 at $350 –rearing cost deducted-at sale)

100 x $350 x .25 = $8750

Benefit from animals grazed in first year winter 80 x $6 x 15 weeks x 50% =

$3,600

5) Cost of work required to deal with correspondence and threatened action by Meyer who was then dismissed prior to dispute meeting.

February to April 12th total 75 hours @ $120 per hour = $9,000

Totals $24,840

2,850

13,248

19,700

20,600

4,550

8,750

3,600

9,000

TOTAL $107,138

NOTE: some figures could be in dispute due to either accuracy of numbers or whether “benefit” as in special clauses applies to stock reared on lease block.

[44] During Mr Ridler’s evidence Mr O’Sullivan put other emails to him, but Mr Ridler was not able to confirm that he had authored them. However, he did not dispute that the email of 12 April was his, although he said he had never charged himself out at $120 per hour. The items set out in the email were matters he had raised with Mr Burt.

[45] Following the advice in that letter Mr Burt and Mr Ridler decided to take the matter up with the Handcocks. A meeting was arranged for 18 April in Taupo. The

meeting did not proceed. There was a dispute as to the reason for that. Mr Handcock said there was no point in attending it because Mr Burt had not exchanged the necessary documents beforehand. Mr Burt considered it was because the Handcocks had fired their consultant which in turn was further evidence of the Handcocks’ refusal to co-operate. As the meeting did not proceed Mr Burt then took matters into his own hands. The next day, 19 April, he effectively cancelled the agreement with the sharemilkers by directing Fonterra to pay the MIL’s payments to CLT. In doing so, Mr Burt acted against Mr Ridler’s advice which was that it would be easier to carry on with the agreement than terminate it.

[46] There can be no dispute that in acting in that way, by redirecting the milk cheque, Mr Burt did not act in accordance with the provisions of the sharemilking agreement. Subject to the point about cancellation, Mr Burt (CLT) may well have breached the sharemilking agreement.

[47] But to breach a contract is not necessarily a criminal act, and in this case will not be so if Mr Burt genuinely believed he could act as he did, even if that belief was not reasonable.

[48] As to Mr Burt’s (CLT’s) right to cancel, there could be an argument in a civil context as to whether the actions of the Handcocks, if established, would have entitled cancellation under the Contractual Remedies Act 1979. Apart from the matters raised by Mr Ridler in his report of 12 April there is a further fundamental factor. The Handcocks appear to have breached clause 34 of the agreement. Clause

34 provided:

34. Assignment and Disposition of Land

34.1 The Sharemilker will not assign any of the Sharemilker’s rights, privileges or benefits under this Agreement without the prior consent in writing of the Owner.

[49] The Handcocks and MIL assigned part of their rights, privileges and benefits under the agreement by entering a sub-sharemilking agreement with a Mr and Mrs Payter. They transferred 21 per cent of their income to the Payters. Mrs Handcock said that Mr Burt was aware of it. However, she accepted they did not obtain his

written consent in writing. The Handcocks suggested that the arrangement with the Payters was authorised by cl 31 of the agreement which provided for the management of the milking operation by the sharemilker. However, that clause deals with the quite separate issue of farm management. It is no answer to the strict requirements of cl 34. There could be an argument that such a breach (subject to Mr Burt’s waiver of the requirement) would amount to a repudiation, entitling CLT to cancel.

[50] The next significant event is that on 23 April 2007, the second working day after the 19th, Mr Burt and CLT’s solicitors wrote a detailed letter to the Handcocks and MIL giving notice of termination of the sharemilking agreement. The notice referred to a number of breaches, noting that they were not an exclusive list. It is significant the first one noted was that in breach of the obligations under clause 34.1 the Handcocks had transferred 21 per cent of the income to a third party. A number of other breaches were referred to.

[51] While that letter was written after the termination on 19 April I am driven to the conclusion that the Judge erred when concluding Mr Burt did not have a claim of right when directing Fonterra to pay MIL’s share of the milk cheque to CLT. The letter is a detailed letter. It does not read as an ex post facto re-creation to justify Mr Burt’s actions. The letter records a number of issues between the parties. It is apparent from the evidence that there were ongoing disputes between the parties from an early stage in their relationship and that the issues, or at least most of them had been raised by Mr Burt (or his consultant) with the Handcocks. Further, a week prior to 19 April Mr Burt had advice from Mr Ridler as to potential claims for more than $100,000.

[52] Regarding this issue, it is not enough for the Judge to have found, as he did, that Mr Burt knew the contract required him to give notice. To convict, the Judge must have found there was no reasonable possibility that Mr Burt considered he was entitled to cancel the contract and re-direct the milk cheque because of the Handcocks’ actions and their (from Mr Burt’s point of view) breach of the sharemilking agreement. Nor is it enough Mr Ridler may have told Mr Burt not to terminate the contract.

[53] The issue remains whether Mr Burt genuinely believed he was entitled to act that way and cancel the contract. With respect to the Judge, he appears to have fallen into error when assessing that question. In his questions to Mr Ridler, the Judge put it this way:

Q. Was there anything that you said to Mr Burt that would justify him reaching the conclusion that he could act unilaterally?

A. Not unilaterally, no. Probably the opposite, twice I told him to continue on with the share-milking agreement until the end of its term.

[54] The Judge’s reference to Mr Burt’s actions being justified suggests that he was considering whether Mr Burt’s actions were reasonable but, as noted, that is not the test applicable in relation to the issue of a claim of right.

[55] In the circumstances, while the Judge may have been entitled to conclude Mr Burt had not acted reasonably, on the documentary evidence and the general evidence the Judge should have been left with a reasonable doubt as to whether or not Mr Burt actually did have a claim of right.

Result

[56] For those reasons, in my judgment, I consider the prosecution could not prove beyond reasonable doubt that Mr Burt did not have a claim of right.

[57] The appeal will be allowed. The conviction and sentence are quashed and set aside. There will be no order for retrial.

Venning J