R v McKenzie [2013] NZHC 3351 (13 December 2013)

Last Updated: 18 February 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CRI 2010-009-008952 [2013] NZHC 3351

REGINA

v

JOHN DOUGLAS McKENZIE

Hearing: 13 December 2013

Counsel: B Hawes for Crown

JHM Eaton QC for Prisoner

Judgment: 13 December 2013

_{SENTENCING REMARKS OF WHATA J}

[1] Mr McKenzie you were charged and found guilty of one count of conspiracy to manufacture methamphetamine. This attracts a maximum sentence of 14 years imprisonment.

[2] A key factor in your sentencing is the extent of the role played by you in the conspiracy as any sentence I impose must be based on proven offending, that is proven beyond reasonable doubt.

Background

[3] It is important first to set your activities within the wider context of the conspiracy to manufacture which I am satisfied was established by the Crown beyond reasonable doubt. I will address later the extent of your knowledge and

_{active involvement in the conspiracy.}

R v McKENZIE [2013] NZHC 3351 [13 December 2013]

[4] Mr Newton was the central figure. He sourced pseudoephedrine based products and equipment, for example, from a Mr Situ. Pseudoephedrine was extracted from these products by a Mr Linton, Mr Black and a Mr Box. Mr Newton and Mr Box took the precursor substances to the cooks, including Mr Miles and Mr Lee. Mr Smith and Mr Harris were also cooks. Methamphetamine was then manufactured by them at various locations including clandestine laboratories located at Cashel St, Main South Road, Maunsell Street and 7 Gregory Avenue.

[5] Various types of substances containing pseudoephedrine were located at the addresses; the largest amount, 638 grams of ContactNT capsules and some 4,500 pseudoephedrine tablets was found at the Gregory Avenue address occupied by Mr Lee. This level of product could produce between 136.35-314.61 grams of methamphetamine. Large amounts of cash were also found totalling $134,855.

[6] The evidence of your connection to the conspiracy was relatively sparse, comprising an agreement to lend Mr Newton the sum of $180,000 at an interest rate of 80% over four months. The police also seized $37,970 in cash, which was said to be the remainder of a $50,000 part payment to you from Mr Newton. Relevantly the money found was wrapped in a similar manner to cash found at other addresses associated with the methamphetamine enterprise.

[7] A note was also found at your address, written by Mr Newton, recording a payment of “50k” to you, to a loss of “436k,” to “900 gram” in the boot, and “1.2 kg payd for”. The note also included reference to “Lance Lee” and to “60 x 20 Rits for you if you want”. Relevantly, at the time Lance Lee’s premises had recently been raided with a large quantum of precursors seized, and a quantity of rits or ritalin was also subsequently found at your address.

[8] A copy of this note will be attached to my sentencing given its central role in establishing your culpability.

[9] As I found in my pretrial ruling, I consider that this combination of evidence provided a sufficient basis for a jury to infer that you were a party to the wider

conspiracy described above, and it transpired that you were found guilty by the jury of the conspiracy charge.

[10] But I am not satisfied that there was sufficient evidence establishing that you had a detailed understanding of the scale of the methamphetamine manufacture undertaken at Mr Newton’s behest. At best, on the evidence, it could be said that you were aware of some of the detail of Mr Newton’s methamphetamine enterprise sometime after the agreement to lend him money. This might support the inference, combined with the scale of the loan and the rate of the return, that you were aware that Mr Newton was involved in a commercial scale methamphetamine enterprise.

[11] I observe further that there is no direct evidence or other evidence that you were involved in the day to day operation of the enterprise.

[12] On that basis, I am satisfied beyond reasonable doubt that you were aware that your loan was going to be used to fund, among other things, Mr Newton’s methamphetamine enterprise and that you knew it had a commercial quality. I am not satisfied however that you had any greater knowledge or understanding of its scale.

Personal circumstances

[13] As to your personal circumstances, I have had the benefit of a full pre-sentencing report and numerous supportive references. I also have read an assessment by Psychology Partners as to your mental health and a note from a GP.

[14] Mr McKenzie you are a 65 year old male. You have a partner, three children, and several grandchildren. You own a rural property, from which you run a business breeding and selling horses. You have no issues with alcohol or drug use and you are in reasonable health though I do understand that you have used unprescribed Ritalin in the past. You have no prior convictions.

[15] The pre-sentencing report says you maintain your innocence and therefore did not demonstrate any remorse or empathy. The report writer also observes your offending was assessed as the result of your involvement with

offending-supportive associates. It also states that your attitude and entitlement also contributed, and that you maintain that you are ignorant of the details of your investment and that meant you were not responsible for your offending. The report says you are unwilling to accept that your actions contributed to a methamphetamine operation and that you have shifted responsibility to your co-offenders.

[16] No rehabilitative needs were identified. Your risk of reoffending was assessed as low, since you have suffered significant stress and financial loss. Although the harm caused to the public by your offending was high, your risk of harm in the future was assessed as low.

[17] No community-based sentences were considered due to the seriousness of your offending. A long term of imprisonment was recommended.

[18] The numerous supportive references attest to, among other things, your honesty, dedication to your family and friends, your passion for horses and harness racing and the positive contribution you have made to the local community, including local youth rugby and the local school.

Crown submissions

[19] The Crown refers to my starting point for Mr Newton of ten years and suggests a similar starting point for you. Reference is made to the case of Macfarlane v R¹ where it is said the appellant had the discrete role as principal financier to the sum of $120,000. He was sentenced on the basis that he was an essential player and of broadly equal culpability as the principal offender case (Mr Clifton) in that case.

[20] I am unable to accept that that case is apposite. While it might be that financiers should carry greater culpability than say a cook or a distributor, I am not able to accept that you are as culpable as Mr Newton. Mr Newton was plainly the CEO of a complex enterprise (as the literally thousands of transcribed

_{communications revealed), and with the most to gain from it. Further he skilfully}

¹ Macfarlane v R [2012] NZCA 317.

isolated the various members of the conspiracy from each other, with the result that no other member, including you, had the complete picture of its scale. It is therefore not available to me to find, on the evidence, equivalent culpability by dint of the investment you made, and the note, cash and Ritalin found on your premises. I will return to the significance of this below.

[21] Mr Hawes accepts that there is in fact no probative evidence of your appreciation of scale though Mr Hawes endorsed the view that it is naïve and counter-intuitive to think that you did not appreciate that Mr Newton was engaged in a commercial methamphetamine enterprise.

[22] Mr Hawes accepts that your unblemished record is a mitigating factor and that there are no personal aggravating factors, but that your ongoing denial precludes any discount for remorse.

Submissions for you

[23] Mr Eaton QC calls for an exacting examination of the evidence of your culpability. He highlights factors which he says shows that you must have had little if any knowledge of Mr Newton’s enterprise when you recorded your agreement to lend him money and then paid the money to a third person, Mr Mao, of unknown relevance or significance to the enterprise. He further highlights that there is no evidence that you knew whether or how the monies you paid to Mr Mao supported the methamphetamine enterprise. He accepts that I must proceed on the basis that you had some knowledge of Mr Newton’s intentions, but that there is no basis to conclude that you had any interest or specific knowledge of the enterprise.

[24] Rather he says that key to the assessment was that your lending was part of a pattern of dealings with Mr Newton and importantly his father. There was therefore, he says, a sufficient basis for you to be confident of the return that you sought on the money that you lent to Mr Newton quite independently of the methamphetamine enterprise.

[25] I accept the primary thrust of Mr Eaton’s submission, namely that there is

insufficient evidence of direct knowledge or active involvement in terms of the

precise scale of Mr Newton’s enterprise. But the evidence was sufficient to conclude, as the jury must have done, that you were aware of Mr Newton’s enterprise and that this enterprise was one of the means by which you would obtain a very significant return on your loan. I also think that the commercial tenor of your relationship is a strong indicator that you were aware that Mr Newton was involved in commercial level methamphetamine production.

[26] Mr Eaton also emphasises a number of personal factors said to favour a considerable discount. He refers to your lack of prior convictions, and an exemplary life with a very positive contribution to the community.

[27] He also highlights the following factors:

(a) Your age (65) and the difficulties this will cause in prison, especially in light of your mental and emotional state;

(b) Your previous good character;

(c) Your vulnerability, referring to your use of Ritalin - a factor that

Mr Newton used to further his commercial objectives;

(d) Your expectation that you will not be found guilty and the lengthy delay to resolution;

(e) Your financial loss.

[28] As to these factors I accept that age and previous good character are relevant. I am unable to accept that your alleged vulnerability, expectations as to result, procedural delay and financial loss are mitigating factors. Each of those factors are linked to decisions you have made and are part of the consequences of engaging in a conspiracy to manufacture methamphetamine.

[29] Mr Eaton distinguishes Macfarlane, noting findings that Mr Macfarlane was

involved in two separate fundings and “knew well what he was doing”. As I have

indicated, I accept his analysis of Macfarlane. Mr Eaton therefore seeks a starting point for you that should be no higher than 50% of Mr Newton’s.

Sentence approach

[30] I turn then to my sentencing approach. I must be guided by the purposes and principles of the Sentencing Act 2002. Particularly relevant to you and the alleged offending, is the need for denunciation and deterrence. But I must also be conscious of the need to secure your rehabilitation and that any sentence I impose should reflect the circumstances of your specific offending and your personal circumstances.

[31] Helpfully there is the guideline judgment of R v Fatu² on sentencing for offences relating to methamphetamine. Fatu established four bands for sale or supply of methamphetamine, namely:

(a) Band one – low-level supply (less than 5 g) – starting point 2-4 years imprisonment.

(b) Band two – supplying commercial quantities (5 g to 250 g) – starting point 3-9 years imprisonment.

(c) Band three – supplying large commercial quantities (250 g to

500 g) – starting point 8-11 years imprisonment.

(d) Band four – supplying very large commercial quantities (500 g or more) – starting point 10 years to life imprisonment.

[32] Fatu also established bands for the manufacture of methamphetamine:

(a) Band one – not applicable because manufacture of methamphetamine almost always involves significant commerciality.

(b) Band two – manufacture of up to 250 grams - starting point 4-11 years imprisonment.

(c) Band three – manufacture of large commercial quantities (250-500 grams) - starting point 10-15 years imprisonment.

(d) Band four – manufacture of very large commercial quantities (500 grams or more) - starting point 13 years to life imprisonment.

² R v Fatu [2006] 2 NZLR 72 (CA).

[33] The Court in R v Te Rure³ however noted that conspiracy involves lesser criminality than supply and manufacture and I take that into account.

[34] I have also examined a range of cases dealing with methamphetamine conspiracy, manufacture and supply, and I have now had the opportunity to sentence your co-offenders. I do not propose to burden this sentence by reciting them, but they include low end culpability for performing the role of a real estate gofer attracting a sentence of eight months home detention but a starting point of two years, low to moderate level culpability for a confined precursor supply type role and a starting point of three years six months (Mr Situ), middle order culpability for active involvement in the enterprise with a starting point of seven years (Mr Linton), and then high end culpability for Mr Newton, and a starting point of ten years uplifted to 11 years to reflect the totality of Mr Newton’s offending.

Assessment

[35] As to your offending, as signalled above, the jury found and I am satisfied there was a proper basis for finding that you were aware that Mr Newton was involved in the commercial level manufacture of methamphetamine, and that you knew that your substantial loan would assist Mr Newton in that enterprise. You also stood to gain significantly from that loan – perhaps as much as $144,000. I am not satisfied, however, that you were aware of the exact scale of the enterprise, or for that matter that your return on investment would be solely derived from it. The bands do not therefore greatly assist with providing guidance in terms of where you sit in the spectrum. Indeed there is a risk of speculation, or were I to rely solely on the Note, exaggeration in terms of your culpability. In this regard, it cannot be suggested that the Note is definitive proof of the scale of your involvement, only that you were involved. Indeed the Court of Appeal found that that the Note was not

produced as proof of the truth of what it asserts.⁴

[36] Overall therefore I assess your culpability as opportunistic, motivated by

greed but without a clear appreciation of the full scale of Mr Newton’s

_{methamphetamine business.}

³ _{R v Te Rure [2008] 3 NZLR 627 (CA).}

⁴ McKenzie and Miles v R [2013] NZCA 378 at [39].

[37] I therefore propose, as a first step, to reject Mr Newton’s starting point of ten years, for the reasons I have already given above. I then commence with Mr Linton’s starting point of seven years, as he was actively involved in most aspects of the conspiracy, and this is an appropriate general reference point for the scale of the conspiracy to manufacture. But as you were not actively involved in the day to day operation, I consider that this starting point should be reduced to reflect your different more focused culpability. Having said that, financing methamphetamine carries a special type of culpability, because it is the genesis of such activity. In short, without it, the methamphetamine production cannot occur. I therefore propose to reduce the starting point by 18 months from Mr Linton’s with the result that your starting point is properly five years and six months.

[38] In terms of your personal circumstances, I broadly accept Mr Eaton’s submissions that you are entitled to a substantial discount for your prior good record, and in line with authority a discount is warranted of 20%. I also accept that a lengthy prison sentence may have a disproportionate impact on you, in light of your age and emotional condition, and a further 10% discount is warranted.

[39] A minimum period of imprisonment has not been sought and in any event I

would not impose one.

[40] Accordingly Mr McKenzie, please stand, on one count of conspiring to manufacture methamphetamine, I sentence you to three years ten months imprisonment.

[41] I understand that the application for forfeiture is not opposed and accordingly is granted.

[42] Mr McKenzie please stand down.

Solicitors:

Raymond Donnelly & Co, Christchurch

JHM Eaton QC, Christchurch