Huang v New Zealand Customs Service [2013] NZHC 3277 (9 December 2013)

Last Updated: 19 February 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2013-404-227 [2013] NZHC 3277

BETWEEN TERRY HUANG Appellant

AND NEW ZEALAND CUSTOMS SERVICE Respondent

Hearing: 9 December 2013

Appearances: G J S R Foley for Appellant

B D Tantrum and H Musgrave for Respondent

Judgment: 9 December 2013

(ORAL) JUDGMENT OF LANG J

_{[on appeal against conviction and sentence]}

HUANG v NEW ZEALAND CUSTOMS SERVICE [2013] NZHC 3277 [9 December 2013]

[1] Mr Huang is an Australian citizen and lives in Sydney. He is the sole director and shareholder of three New Zealand companies that operate souvenir retail businesses in Auckland City and Rotorua. Mr Huang travels regularly between Australia to New Zealand as a result of his business interests here.

[2] On 21 March 2011, Mr Huang went to Auckland International Airport and checked in for a flight to Sydney. His passport was checked at the check-in area and he was pre-cleared to proceed through to passport control. He then went upstairs to passport control, where he tendered his completed departure card to the Customs official on duty before proceeding to the security area. When his hand luggage passed through the x-ray machine, the contents attracted the interest of the officer attending the machine. His bag was then searched, and cash in foreign currencies having a value of approximately NZ$420,000 was found. Mr Huang had not reported the fact that he was carrying this quantity of cash on either of the occasions when he dealt with customs officers in the check-in area and at passport control.

[3] Customs officials then required Mr Huang to complete a form declaring the cash that he intended to remove from New Zealand. At that point his hand luggage was screened again, and he was permitted to proceed to the departure lounge. A short time later, however, he was brought back to the security area. He was then interviewed later that evening about the cash that had been found in his hand luggage. The cash was seized, and he was charged some months later with attempting to commit an offence against s 106 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“the Act”). Section 106 provides that an offence will be committed if a person fails without reasonable excuse to make a cash report in accordance with the Act having moved more than $9,999 into or out of New Zealand.

[4] The Service laid an alternative charge against Mr Huang of transporting prohibited goods with intent to export them from New Zealand under s 209(1)(b) of the Customs and Excise Act 1996 (“Customs Act”).

[5] Mr Huang defended the charges, but in a decision delivered on 27 February

2003 Judge McNaughton found the charge under s 106 of the Act to have been

proved beyond reasonable doubt. He dismissed the alternative charge laid under the

Customs Act.

[6] The Judge subsequently rejected a submission that Mr Huang should be discharged without conviction under s 106 of the Sentencing Act 2002. The Judge convicted Mr Huang, and fined him the sum of $500.00.¹ He also ordered Mr Huang to pay Court costs of the $130.00.

[7] Mr Huang initially appealed against both conviction and sentence. At the conclusion of the hearing today, he abandoned his appeal against sentence.

Issues

[8] The following issues need to be determined:

(a) Is the offence created by s 106 of the Act one of strict liability?

(b) Is it legally possible for a person to be convicted of attempting to commit an offence under s 106 of the Act?

(c) If so, what form of intention must the prosecution establish on the part of the defendant?

(d) Should the Judge have considered Mr Huang’s defence based on

“mistake of fact” rather than “reasonable excuse”?

(e) Were the Judge’s factual findings inconsistent with his ultimate

conclusion?

(a) Is the offence created by s 106 of the Act one of strict liability?

[9] The Judge proceeded on the basis that a charge under s 106 of the Act is a strict liability offence.² He did not, however, explain why he had reached that

_{conclusion. Counsel for Mr Huang contends that the Judge was wrong, and that the}

¹ New Zealand Customs v Huang DC Manukau CRI-2011-092-013967, 27 February 2013.

charge required the prosecution to prove that Mr Huang intended to commit the offence.

[10] The language used in s 106 does not provide any express indication as to whether or not Parliament intended the section to require proof of an intention to commit the offence. Nor, however, does the section expressly exclude intention as an element of the offence. As a consequence, it is necessary for the Court to have regard to other factors in order to determine whether or not the charge was one of strict liability.

[11] One factor that may assist in determining this issue is the severity of the maximum penalty prescribed for the offence. The more severe the penalty, the less likely it is that Parliament intended the offence to be one of strict liability. The penalties following conviction under s 106 are a fine of up to $10,000 or a maximum sentence of three months imprisonment. These might be viewed as being towards the lower end of the scale given the penalties that usually apply in respect of offences that are regarded as truly criminal in nature. The fact that an offence does not carry a particularly severe penalty is not, however, determinative of whether it is one of strict liability.

[12] Another factor that is often relevant in this context is whether the legislation creating the offence is designed to regulate conduct in a particular field so as to promote the welfare of the public. So-called public welfare regulatory offences are often categorised as being strict liability offences for the reasons set out in the many cases that have followed the decisions of the Court of Appeal in Civil Aviation Department v MacKenzie³ and Millar v Ministry of Transport.⁴

[13] The purpose of the Act is prescribed by s 3, which provides:

3 Purpose

(1) The purposes of this Act are—

(a) to detect and deter money laundering and the financing of terrorism; and

³ Civil Aviation Department v MacKenzie [1983] NZLR 78 (CA).

(b) to maintain and enhance New Zealand’s international reputation by adopting, where appropriate in the New Zealand context, recommendations issued by the Financial Action Task Force; and

(c) to contribute to public confidence in the financial system.

(2) Accordingly, this Act facilitates co-operation amongst reporting entities, AML/CFT supervisors, and various government agencies, in particular law enforcement and regulatory agencies.

[14] I consider these purposes fit squarely within the description of public welfare objectives. The Act is designed to regulate financial transactions, and the movement of money in particular, so that money laundering and the financing of terrorism can be detected and deterred. In this way the Act seeks to maintain and enhance New Zealand’s international reputation and to contribute to public confidence in the financial system. All of these factors are consistent, in my view, with the legislation being designed to enhance the welfare of the public.

[15] The determinative factor in the present case, however, is that Parliament has seen fit to enact statutory defences to charges laid under the Act. A statutory defence in respect of charges laid under Part 2 of the Act, which relates to entities who are required to file reports under the Act, is prescribed by s 98 which relevantly provides:

98 Defence

(1) It is a defence to a charge against a person in relation to a contravention of, or a failure to comply with, Part 2 if the defendant proves that—

(a) the defendant took all reasonable steps to ensure that the defendant complied with that Part; or

(b) in the circumstances of the particular case, the defendant could not reasonably have been expected to ensure that the defendant complied with that Part.

(2) In determining, for the purposes of subsection (1)(a), whether or not a defendant took all reasonable steps to comply with Part 2, the court must have regard to—

(a) the nature of the reporting entity and the activities in which it engages; and

(b) the existence and adequacy of any procedures established by the reporting entity to ensure compliance with that Part.

...

[16] The statutory defence in s 98 does not apply, however, to a charge laid under s 106 of the Act. The only statutory defence in relation to s 106 is that contained in s

109. It provides:

109 Defence

It is a defence to an offence under section 106 or 107 in relation to a failure to make or cause to be made a cash report to a Customs officer under section

70(d) if the defendant proves that—

(a) the failure was due to some emergency or to any other circumstances outside the reasonable control of the defendant; and

(b) the defendant made or caused to be made a report in respect of that cash as soon as practicable after the obligation to make the report arose.

[17] The wording used in s 98 is consistent with that used in many statutes where a defendant may escape liability if he or she proves, on the balance of probabilities, an absence of fault together with the taking of reasonable steps to prevent the commission of the offence.

[18] Section 109, however, goes much further than this. The wording of s 109 strongly suggests that, but for the existence of the section, a person will be guilty of an offence under the Act even if he or she had no control over the events that gave rise to it. In my view this concept is wholly inconsistent with the notion that the prosecution should be required to prove that the defendant committed the offence intentionally. It also means, in my view, that the offence should be regarded as one of strict liability. As a consequence, the prosecution is not required to prove that the defendant intended to commit the offence.

(b) Is it legally possible to attempt to commit an offence under s 106 of the Act?

[19] This issue arises because Mr Huang was not charged with a substantive offence under s 106. Instead, he was charged with attempting to commit an offence under s 106. Counsel for Mr Huang submits that this gives rise to significant issues that call into question the viability of the charge.

[20] A substantive charge under s 106 requires the prosecution to prove the following elements:

(a) the defendant has moved cash over the applicable threshold value into or out of New Zealand; and

(b) in doing so the defendant failed to make a cash report in accordance with Sub-Part 6 of Part 2 of the Act; and

(c) the defendant failed to make that cash report without reasonable cause.

[21] A failure to make a cash report is obviously an omission rather than the commission of a positive act. As counsel for Mr Huang points out, difficulties may arise in cases where a defendant is charged with attempting to omit a specified act. He referred me to the following passages from Principles of Criminal Law, where the learned authors state:⁵

... where D deliberately omits to perform a legal duty but fails to bring about the (intended) consequence specified in the principal offence, the failure may constitute an attempt. However, because omissions liability is by its nature rare, an omission will seldom be the basis of an attempt prosecution.

...

This analysis applies in those rare cases where a result crime may be committed by an omission. However, it will not apply where the offence charged alleges a simple omission that does not require any consequences for its commission. For example, it would not normally be possible to be convicted of the offence of attempting to fail to stop after an accident, or of attempting to fail to permit a blood specimen to be taken. In such cases, D’s omission constitutes not merely an attempt but a successful commission of the full offence. There is no middle ground.

[22] These difficulties do not, however, arise in the present case. The omission to make the cash report is a necessary element of the charge, but it does not form the entire basis of the charge. The positive act that leads to the commission of the

_{offence, or the actus reus, is the movement of money into or out of New Zealand.}

⁵ Principles of Criminal Law (A P Simester and W J Brookbanks, 4^th Ed, 2012 Thomson Reuters)

at 763-764.

That act may logically amount to an attempt if a defendant takes steps to move money into or out of New Zealand, but for whatever reason is unable to do so.

[23] In order to prove the charge, the prosecution must also establish that the act of moving the money was committed in circumstances where the defendant did not make a cash report as required by the Act, and that the failure to report the existence of the cash occurred without reasonable excuse. Those elements of the charge are best viewed, in my judgment, as states of affairs that the prosecution must prove as being in existence at the time of the attempted movement of money rather than as separate omissions giving rise to the offence.

[24] The acts relied on as constituting the attempt must, of course, be sufficiently proximate to amount to an attempt rather than an act of mere preparation.⁶ In the present case, however, Mr Huang had taken the cash as far as the departure lounge from which he was to board his aircraft. He was therefore just one step away from moving the cash out of New Zealand. That act must, in my view, be sufficiently proximate to constitute an attempt to move the cash out of New Zealand.

[25] If correct, the argument for Mr Huang would lead to startling and absurd results. Two of the stated purposes of the Act are to detect and deter the laundering of money and the financing of terrorism. One of the means by which money may be laundered is by physically moving it out of the country. The financing of terrorism may also be achieved by physically moving cash around the world, thereby avoiding the trail and risks that electronic transactions create. Section 106 seeks to promote these purposes by making it an offence to move money into and out of New Zealand without reporting it at the border. If a person attempts to remove money from New Zealand but is intercepted before being able to do so, it makes perfect sense that he or she should be charged with attempting to commit an offence against s 106. It would make no sense, and would defeat the purposes of the Act, if a charge of attempting to commit that offence could not be laid in those circumstances.

_{[26] I therefore do not accept the argument for Mr Huang on this point.}

⁶ Crimes Act 1961, s 72(2).

(c) What form of intention must the prosecution establish to prove a charge of attempting to commit an offence against s 106 of the Act?

[27] Section 72 of the Crimes Act 1961 (“Crimes Act”) provides:

72 Attempts

(1) Every one who, having an intent to commit an offence, does or omits an act for the purpose of accomplishing his object, is guilty of an attempt to commit the offence intended, whether in the circumstances it was possible to commit the offence or not.

(2) The question whether an act done or omitted with intent to commit an offence is or is not only preparation for the commission of that offence, and too remote to constitute an attempt to commit it, is a question of law.

(3) An act done or omitted with intent to commit an offence may constitute an attempt if it is immediately or proximately connected with the intended offence, whether or not there was any act unequivocally showing the intent to commit that offence.

(Emphasis added)

[28] Given my conclusion that s 106 of the Act creates a strict liability offence, the issue that now arises relates to the intention that the prosecution must establish under s 72(1) of the Crimes Act in order to prove a charge of attempt. The Judge held that it was not necessary for the prosecution to prove that Mr Huang was aware of his

legal obligation and that he intentionally ignored it.⁷ He expressed his conclusion

regarding this issue as follows:

[75] I am satisfied beyond reasonable doubt that the defendant intended to take cash exceeding the threshold amount out of New Zealand and that he knew that a cash report had not been made. That is sufficient to prove the required intent. The only issue that remains is whether the prosecution has proved beyond reasonable doubt that the defendant did not have a reasonable excuse.

[29] I agree with the Judge’s conclusion on this point. Like him, I have found the judgment of Clifford J in TL & NL Bryant Holdings Ltd v Marlborough District Council to be of considerable assistance.⁸ In that case the appellants had constructed a stopbank on a river without first obtaining the necessary resource consent. They

_{were charged under s 72 of the Crimes Act and s 14 of the Resource Management}

⁷ _{New Zealand Customs v Huang, above n1 at [74].}

⁸ TL & NL Bryant Holdings Ltd v Marlborough District Council HC Blenheim CRI-2008-406-3,

16 June 2008, [2008] NZRMA 485.

Act 1991 with attempting to divert the water in the river without first obtaining a resource consent. As in the present case, the Court was required to determine what form of intention the prosecution was required to prove in order to establish an attempt to commit a strict liability offence. Clifford J said:

[70] As regards Mr Clark’s basic submission, that s 72(1) requires, even where an attempt is to commit a strict liability offence, the establishment of intent, I accept that proposition. The question, in my judgment, is what is the intent that is required to be established here. Having regard to the elements of the offence under s 14 [of the Resource Management Act 1991], it is in my judgment necessary for the Crown to prove to the satisfaction of the Judge beyond reasonable doubt that the appellant intended by its action of constructing the stopbank to divert the waters of the Pelorus River knowing that, as a matter of fact, it did not have a resource consent and knowing that, again as a matter of fact, it had not notified the Council of the proposed action. It is not, in my judgment, necessary for the Crown to establish that the appellant knew it required a resource consent, in the absence of notifying the Council. On an attempt, as for a substantive offence, ignorance of the law provides no defence. Moreover, and responding to Mr Clark’s argument, although there was no evidence before the Court at the original hearing on any of these issues, it would not be a defence for the appellant to establish that, in some way, it had intended to apply for, and expected to receive, a resource consent before it anticipated that the Pelorus River would flood and thereby be diverted. If evidence was provided that that was the state of mind of the appellant, that would be relevant in terms of culpability and sentencing. It would not, in my judgment, provide a defence to the charge of attempt.

[30] I respectfully agree with this approach. As a result, the prosecution in the present case was required to prove that Mr Huang intended to move the cash out of New Zealand. It was also required to prove that he knew, as a matter of fact, that he had not completed a cash report in respect of the money. It was not necessary for the prosecution to prove that Mr Huang knew that he was required to make a cash report, or that he had even turned his mind to that issue.

[31] In practical terms, the matter can be approached in this way. Suppose the official who discovered the money in Mr Huang’s bag had then asked Mr Huang if he had reported it when he went through passport control. Mr Huang would undoubtedly have replied in the negative, because he knew he had not made a report even if he did not know he was required to make one. The position is no different that which would arise if the same official had asked Mr Huang whether he had used the bathroom or gone into a particular shop whilst in the airport terminal. Mr Huang would have been able to answer those questions, because he knew the answers to

them even if he had never turned his mind to the possibility that he might use the bathroom or go into that particular shop.

[32] I therefore uphold the approach that the Judge took in relation to the issue of intention.

(d) Should the Judge have approached Mr Huang’s defence on the basis of

“mistake of fact” rather than “reasonable excuse”?

The Judge held that the prosecution had proved that Mr Huang did not have a reasonable excuse for failing to make a cash report because he had failed to read or understand the clear instructions on the departure card. Immediately below the signature line on one side of the card were the words “Please read the reverse of this card before signing.” On the other side of the card the following section appeared:

Cash Reporting

If you are carrying, on your person or in your baggage, NZ$10,0000 or more in cash, or foreign equivalent, you must report this to a Customs officer when you are completing passport formalities on departure from New Zealand. Cash means physical currency, bearer negotiable instructions (BNI), or both. BNI means any of, a bill of exchange, a cheque, a promissory note, a bearer bond, a traveller’s cheque, a money order, postal order, or similar order, or any other instrument prescribed by regulations under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. If anyone you are responsible for, who is travelling with you, has cash to that value, you must report this to the Customers officer also. It is an offence to fail to report as instructed here.

[33] Counsel for Mr Huang contends that the Judge erred in taking this approach. He submits that, where one of the ingredients of an offence includes a particular state of knowledge or intention, the defendant is entitled to be acquitted if such a state of mind was absent at the time of the conduct giving rise to the offence. This will be so even where the defendant’s mental state results from a mistake of fact which may not have been reasonable or based on reasonable grounds.

[34] This submission is based on the premise that Mr Huang misunderstood (or failed to properly comprehend) the instructions on the form. His counsel submits that this was a mistake of fact, and that it prevented Mr Huang from forming the necessary intention to commit an offence under s 106.

[35] My earlier conclusions mean, however, that the prosecution only needed to prove that Mr Huang intended to move more that NZ$9,999 out of New Zealand. It could do that regardless of any mistake Mr Huang may have made regarding the advice given on the departure card.

[36] I do not consider, in any event, that Mr Huang’s actions can realistically be described as being based on a mistake of fact. His evidence was to the effect that he checked the back of the departure card to see whether he needed to tick a box indicating whether he had anything to declare. When he did not see such a box on the back of the form, he proceeded through passport control without giving the matter further thought. The statement on the departure card was, however, no more than advice to Mr Huang about his legal obligations. Mr Huang’s failure to read and comprehend the advice therefore meant only that he failed to become aware of his legal obligations. As the Judge correctly observed, ignorance of the law does not provide an excuse or a defence.

[37] I therefore do not accept that a defence was available to Mr Huang based on mistake of fact.

(e) Were the Judge’s factual findings inconsistent with his ultimate conclusion?

[38] Next, counsel for Mr Huang contends the Judge made factual findings that were inconsistent with his ultimate conclusion that Mr Huang was guilty of the charge. These included findings that Mr Huang did not deliberately mislead the officer who searched his bag, and that the evidence did not suggest he had knowingly attempted to smuggle cash out of the country. The Judge also accepted that Mr Huang had acquired the cash honestly through the businesses that he operated in New Zealand, and he had it in his possession for legitimate purposes. The cash was to be used to pay commissions to tour operators based in Australia and China. The commissions were payable to compensate tour operators who arranged for Chinese tourists to visit Mr Huang’s shops in New Zealand.

[39] All of these matters were undoubtedly relevant to the issue of penalty. They did not, however, relate to the elements the prosecution was required to prove in

order to establish the charge. The Judge accurately identified these in the passage of his decision set out above at [28].

[40] It follows that the Judge’s conclusions were not inconsistent with the factual

findings upon which counsel for Mr Huang now relies under this ground of appeal.

Result

_{[41] The appeal against conviction is dismissed.}

Lang J

Solicitors:

Crown Solicitor, Auckland

Counsel: G J Foley,