R v Gray [2013] NZHC 450 (8 March 2013)

[1] Stephen John Gray, as you know you have wrecked your life. You came from a modest but respectable family. You have worked hard in your various occupations, have made good incomes and have been able to accumulate assets. One of your drivers has clearly been to improve your financial situation and that of your family. You have been a good provider, a good father, and a concerned and protective son to your late mother. You have no previous convictions.

[2] You now stand to lose a substantial portion of your assets (over $5 million). A lengthy term of imprisonment, as you know, will be imposed on you. You have brought shame and disgrace on yourself and, to a degree, on your family. You have encouraged and involved your son Michael, whom I sentenced last month, in your various illegal activities. You have lost all that because of deliberate criminal offending and greed.

[3] As is clear from the intercepted conversations I have heard you knew precisely what you were doing. You were good at it. You enjoyed it. You were well aware of the destructive force of the drugs you were selling and the misery it could bring to other lives. You benefitted from a constant flow of untaxed drug money. You well knew the risks. This was not impulse offending, or one-off offending, it was deliberate and sustained.

[4] Your counsel, who has served you exceptionally well at all stages, has referred on a number of occasions to your “dark side”. At your trial he twice acknowledged to the jury that they would regard you with loathing and contempt. I do not regard you with loathing and contempt Mr Gray, nor shall I sentence you on that basis. But your brazenness and your calculated offending is disturbing. You were a drug supplier on a major scale and deserving of severe punishment.

[5] You and a large number of co-offenders were detected and caught as a result of an extensive police operation in the Waikato known as Operation Cape. The

period of indictments spanned five months. There was surveillance of telephone and text messages and subsequently the placing of listening devices in your home at 53E Exelby Road, a rural property which was the centre of your drug dealing and home.

[6] Realistically, given the strength of the evidence against you, you pleaded guilty before or during the trial to six counts. You were found guilty by the jury on the balance of six counts. So I am sentencing you today on four counts which carry a maximum penalty of life imprisonment (three methamphetamine related and one lysergide related). You are also to be sentenced on two counts of cultivating cannabis (a seven year maximum); one count of supplying cannabis (eight years); a relatively insignificant count of conspiring to cultivate cannabis which despite its seven year maximum might not justify the imposition of a custodial sentence; supplying the Class B drug MDMA (ecstasy) with a 14 year maximum in respect of which the evidence was problematic on amounts values and time; possessing cannabis for the purpose of supply (eight years) and two counts carrying a seven year maximum of possession of methamphetamine related precursor substances and possession of equipment and materials.

[7] On these last two counts you are jointly charged with your co-prisoner Mr Kayrouz who is yet to be sentenced. Kayrouz too was jointly charged with you on the manufacturing methamphetamine count.

[8] I have annexed to my sentencing notes a short table setting out the count numbers, charges, maximum penalties, and pleas or verdicts.

[9] In addition to your home at 53E Exelby Road, where you lived with your son Michael, you owned a large farm near Te Uku on the Raglan Road. One lot of this was purchased in 2001 and the second in 2008. Your farm manager was a Mr Ross who has been sentenced in respect of cannabis cultivation charges. He lived in the manager’s home on the State Highway. In a cottage set well back from the road on the other side lived Mr Kayrouz and his family. The Crown ran its case on the basis (and there was confirmatory intercept evidence to this effect), that Mr Kayrouz was

the “cook” and manufactured methamphetamine which was the source of that drug which you sold to others.

[10] Secreted on the farm, dug into hillsides and camouflaged, were a number of canisters and bags which contained items and substances all associated with methamphetamine manufacture. This included hypophosphorous acid which is difficult to acquire, has no rural use, and which would have been sufficient (if combined with sufficient quantities of pseudoephedrine and iodine) to manufacture

12.6 kg of methamphetamine. The value of the acid itself ranged between $50,000 and $80,000.

[11] There was no available evidence to the Crown of actual manufacture on the farm property. It could well have been that Mr Kayrouz manufactured elsewhere. Nonetheless your farm was used to hide these items. Your farm was where Mr Kayrouz lived and the jury, by its verdicts, made it very clear that you were a party to Mr Kayrouz’s manufacturing. I accept Ms Foster’s submission that this was a joint enterprise designed to manufacture methamphetamine where you used Mr Kayrouz’s skills as a “cook”.

[12] Your home at 53E Exelby Road was where you sold drugs. Methamphetamine was hidden under haylage on the treed fenceline of a paddock behind your house. Cannabis was stored in a lawnmower catcher against the house. Some cannabis was cultivated amongst shrubs on the driveway. When Exelby Road was raided 181 grams of methamphetamine was seized at the haylage site. In your bedroom, hidden in a bag, was approximately $155,000 in cash.

[13] Your customers, many of whom were trusted friends and acquaintances, would call you to see whether you were at home and come to Exelby Road to be supplied. It was to that address that on one occasion I am satisfied Mr Kayrouz brought newly-made methamphetamine.

[14] You chose to give evidence at your trial. In an endeavour to resist the Crown case for manufacturing methamphetamine (you already having pleaded guilty to supply) you suggested that the methamphetamine in the haylage was put there at the

request of a middle-aged neighbour with motorbike gang associations, a Mr Cryer. You tried to suggest that the cash found in your bedroom flowed from legitimate transactions you had as a car dealer. The jury, by its verdicts, clearly rejected your explanations. For my part as trial Judge I found your evidence unconvincing and undoubtedly fabricated.

[15] I need to say a little more about the available evidence and inferences about the volumes and values of the four drugs you were trafficking. There is a contest between you and the Crown on the issue of volumes of methamphetamine.

[16] The Crown says that intercepted communications over the five month indictment period identify supplies of methamphetamine in excess of 50 ounces, which included sales to an associate, Barber, of 10 ounces on three separate occasions. The Crown estimates the value of the transactions at $770,000.

[17] Further, the Crown says that in October 2009, 181 grams (6.46 ounces) was found at your home, which could have resulted in further revenue of $102,400. Ms Foster has provided the Court with a table detailing the transactions and volumes it relies on. These total just over 60 ounces, or 1.68 kg of methamphetamine.

[18] You have sworn an affidavit suggesting that the Crown’s submissions grossly overestimate the amounts you yourself admit to having supplied. You say that you supplied small quantities to associates Messrs Grant Bates, Kenton Haine and Chris McKenzie, in the vicinity of one or two grams each time. You supplied Mr Brett Anderson with half an ounce, but that was heavily cut. You supplied Mr Brendon Carlisle on one occasion with half an ounce, but usually in amounts of one or two grams. There were also supplies to Mr Kyle Murphy, but again only in the vicinity, you say, of a gram or two, perhaps a substantially cut ounce on one occasion.

[19] You state that the only substantial quantities you sold were to Mr Peter Barber, on three separate occasions amounts to the value of $10,000 each time. You deny suggestions of amounts close to 30 ounces.

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[20] Mr Morgan too has provided the Court with a table. In contrast to the Crown’s position, which is the total amount of methamphetamine found in your possession or supplied by you totalled 60.09 ounces (1.68 kg) Mr Morgan submits that the total amount involved is approximately 540 grams (still in terms of methamphetamine a large amount placing you inside band four of R v Fatu).1 This submission is based on an analysis of four tabs of intercepted conversation where it is said that references to the figure “10” refers to $10,000 and not 10 ounces and references to the figure “26” refers to grams and not ounces.

[21] In your affidavit, as I have said, you say that you dealt in the main in half ounces, not ounces, (the exception being supplies to Mr Barber which you say were of $10,000). I note that during the course of cross-examination Ms Foster, fairly and thoroughly, cross-examined you on these figures. Essentially what Mr Morgan QC is asking me to do is to accept your denials of the Crown’s analysis of the intercepted conversations and accept your version of the figures. I note Mr Morgan’s submission that the jury’s verdicts do not necessarily mean the jury accepted all the detail of the Crown case in its closing. Nonetheless, against the backdrop of the jury’s clear rejection of your evidence, my own assessment that much of it – particularly the Mr Cryer aspect – was false, the finding of large cash sums in your house, and the sustained nature of your offending, I am satisfied beyond doubt that the Crown estimates are likely to be correct. Even if I were, in some arbitrary way, to halve the difference between counsel on methamphetamine volumes I would still be dealing in quantities in the order of 750 to 800 grams.

[22] As to cannabis dealing, the Crown submits that the intercepted communications reveal total sales of cannabis of 110 ounces, returning revenue of at least $28,000. In addition, 5.6 ounces of cannabis was found at your Exelby Road property in October 2009. Your practice was to buy in or store cannabis during the

[23] Mr Morgan has not taken issue with this assessment of quantum in his submissions.

[24] The Crown says that intercepted communications over the indictment period identify that you supplied a total of 1,196 tabs of LSD, and were found in possession of a further 100 LSD tabs at Exelby Road.

[26] The Crown is less precise on quantities of MDMA that you are said to have sold. The intercepted communications refer to assertions by you that you no longer distributed the drug because you were unable to identify a source that produced a product of consistent quality. This would tend to suggest historic distribution of MDMA over a period, followed by letting go of MDMA because of quality concerns.

[29] You are 57 years old. You say you have been in a domestic relationship for some 11 years and have been helpful with your partner’s children. You have a son and daughter of your own, both adult. You say, and I accept, that since your release on bail in 2009 you have abstained from drug use. The pre-sentence report raises some concerns about a harmful pattern of drinking. You have no criminal record and the report writer assesses your risk of re-offending as being low to medium risk. You

have written to me a letter of contrition in which you say that, having had time to reflect, you now appreciate the harm you have inflicted not only on yourself, your family, and your assets but also on society generally. Six people, including family members, have filed letters and references in support of you which I have read. In large measure these assessments are reflected in my opening words to you this morning. You are a hard worker with a good work ethic. You were a caring son to your mother. In a family context you are kind, caring, reliable, and generous. Your uncle refers to family tragedy some years ago perhaps resulting in you being excessively driven to acquire money and assets.

[30] Counsel, and you Mr Gray, are to be complimented on being able to negotiate an overall settlement covering both the instrument forfeiture order which the Crown is seeking and also covering other claims the Crown was able to bring under the Criminal Proceeds (Recovery) Act 2009. I have approved this settlement under s 95 being satisfied that the settlement is consistent with both the purposes of the Act and the overall interests of justice. The sums involved are huge. It is common ground between counsel that two motor vehicles, 53E Exelby Road and the Te Uku farm properties were vulnerable and could be attacked by way of an instrument forfeiture order. Those assets, the two properties, were owned not by you but by a family trust. The Trust has other assets as did you. In short the instrument forfeiture order will forfeit Trust assets to the tune of $2.7 million (those assets being Exelby Road, the farm, and the two motor vehicles), leaving a stipulated balance for you of $1.29 million.

[31] There will additionally be, under the settlement, a profit forfeiture order of

$2.4 million to which your $1.29 million will be applied and with you making up the balance to meet the $2.4 million.

[32] In terms of s 10B of the Sentencing Act I must take the $2.7 million instrument forfeiture order sum into account and particularly must take into account the value of the property which has been forfeited and the nature and extent of your interest in it.

[33] Ms Foster submits that a discount on your sentence of four years is appropriate. Mr Morgan describes such an allowance as “niggardly”, and submits that a further 50 percent discount is appropriate. I will return to this shortly.

[34] What I have to do now, Mr Gray, is to craft a suitable sentence. I intend to use the well known methodology of R v Taueki.2 Your offending is serious involving as it does four types of drugs at a high level of commerciality and being sustained over a period of five months. The quantities involved and the $155,000 cash recovered from you speak for themselves. You were the architect and principal operator of a substantial drug selling operation from which you must have reaped huge returns.

[35] In crafting a sentence, in the interests of transparency and to avoid confusion, I intend to adopt the following approach. I am recording a number of issues canvassed by counsel.

[a] I intend to use your conviction for manufacturing methamphetamine as the lead sentence. This was common ground with counsel.

[b] There is an irresistible inference that the volumes of methamphetamine you supplied flowed from the same source and that you were a party to the manufacturing of that drug.

[c] It is appropriate in respect of the lead sentence to place the start point inside band 4 of R v Fatu.

methamphetamine offending but such uplift must mirror the totality of your offending and not adopt some artificial arithmetical approach.

[f] You are entitled to mitigating credits for your hitherto unblemished record, your age, and your guilty pleas. With your guilty pleas I note Ms Foster’s submission that these pleas did not really impact on the way the trial was run or bring about any savings so far as the prosecution was concerned. Nonetheless there is clear authority

[g] You are clearly entitled, in terms of s 10B, to a credit to reflect the large instrument forfeiture order which I am making. I am obliged (s 10B(2)) in the weighing exercise to consider the value of the forfeited properties ($2.7 million) and the nature and extent of your interest in them. You were the controlling trustee and a beneficiary. Relevant too is the fact that the properties were not acquired with drug monies and that, particularly with the Te Uku property, the properties had other uses. The valuable farm was used in part for cannabis cultivation and in part to secrete methamphetamine-related items. But the farm was not primarily used for drug purposes. Its forfeiture therefore will be a significant penalty imposed on you which entitles me to temper the sentence.

[h] Care must be exercised to ensure that the discount for the instrument forfeiture order neither discourages other offenders from agreeing to the making of such orders. Nor must it open the door to disparate treatment in the sentencing of asset-rich offenders compared with impoverished or assetless offenders.

[i] In considering a minimum term of imprisonment under s 86 the weighting of the deterrence factor must reflect the fact that a

[k] I accept Mr Morgan’s submission the comparable (but not identical) authorities which he cited need to be borne in mind and that, in general terms, those authorities suggest a start point in the 15 year to

17 year range and that minimum terms of approximately 50 percent have been imposed. They are: Beckham v R;4 R v Rodgers;5 R v Huang and Wei;6 R v McQuade;7 R v Phuan;8 R v Zhou;9 R v Bouavong;10 R v Kahn.11

[l] The Court of Appeal has given no guidance about the quantum or extent of the s 10B discount, understandably pointing out that such a discount must depend on the circumstances of each case.12

Against that background a sentence which flows from these principles is relatively easy to structure. There must, however be a degree of proportionality between the offending and what is forfeited. I accept that $2.7 million is a large sum and that the parties, when negotiating it, may have been looking at the bigger picture.

[36] I consider that, given the views I have expressed about volumes and your culpability generally, an appropriate lead sentence to reflect your offending, both on the manufacturing charge and on the supplying of methamphetamine charge, is one of 17½ years imprisonment. Without doing violence to the totality principle I consider that can safely be uplifted by 2½ years to reflect your offending with LSD

_{and cannabis. Such an uplift is sufficient too to reflect the ecstasy
offending. This}

9 _{R v Zhou HC Auckland
CRI-2008-092-2364, 10 March 2009, Harrison J; [2009] NZCA 365.}

12 MacPherson v R [2012] NZCA 552 at [6]. See also R v Sharp HC Rotorua CRI-2010-

[37] This uplifted start point is somewhat lower than the 21½ to 23 year start point urged by Ms Foster. It is somewhat higher than that proposed by Mr Morgan in his submissions, which undoubtedly reflected his view on a substantially lower volume of methamphetamine. Obviously I am satisfied that a 20 year start point reflects the number of charges involved, the duration of your offending, the commercial values involved, and the mix of drugs with which you were dealing.

[38] You are, however, entitled to mitigating credits. These have been correctly identified by counsel as: your previous good record, your guilty pleas to a number of the counts you face; your clear ability to put drug use behind you; and to reflect also the relatively low risk of your re-offending and your realisation (which I accept) that your offending has had serious consequences not only for yourself but for others, including your family and those whom you supplied. I consider that you are entitled to a discount of three years which will bring the sentence to 17 years imprisonment.

[39] Included in that discount, unless someone thinks I have forgotten it, is a recognition of remorse. I think you are remorseful about the position you and your family find yourselves in. However, I do not detect significant remorse for your offending. You have focused on its consequences. Nonetheless, I accept that your agreement to the substantial orders ($5.1 million) being made against you demonstrate an acceptance that your crimes deserve substantial penalties. Clearly an element of remorse feeds into that mind set.

[40] I now turn to what discount should be allowed under s 10B to reflect the very real punishment of the $2.7 million instrument forfeiture order. I consider Ms Foster’s four year figure is realistic rather than niggardly. I can find no mandate for a 50 percent discount as urged by Mr Morgan and I would regard such a generous discount as opening the door for disparate treatment of wealthy offenders.

[41] Although you should be sent to prison on a sentence of 17 years I am prepared to extend to you a generous discount of five years imprisonment which would bring the end sentence to one of 12 years.

[42] The last issue is that of a minimum period of imprisonment. In the clear terms of s 86 I consider that parole eligibility in four years, despite the instrument forfeiture order, would be insufficient to meet the principles of accountability, denunciation, and deterrence. In enacting s 86 Parliament has declared a coherent policy which sentencing courts over the last decade have followed. Courts must consider a s 86 minimum term once they have arrived at an end sentence, and against s 86 criteria. I note Mr Morgan’s submission that by imposing an MPI a court may be rendering nugatory the s 10B discount. But I am more attracted by Ms Foster’s submission that a s 86 order is still available to the Court and that the preferable approach is to give less weight to the deterrence factor in cases where a s 10B order has been made.

[43] My assessment of these competing factors is that in your case, Mr Gray, imposition of a minimum period of just under 50 percent – one of 5½ years imprisonment is necessary. It is by no means certain that you would be released on parole after 5½ years but in effect I am delaying your parole eligibility by 1½ years.

[45] On the charge of manufacturing methamphetamine I sentence you to 12 years imprisonment.

[46] On the charge of supplying the Class A drug methamphetamine I sentence you to 12 years imprisonment.

[48] On the charge of supplying LSD I sentence you to five years imprisonment. [49] On the two charges of cultivating the Class C drug cannabis I sentence you to

four years imprisonment on each, seeing no need to differentiate between cannabis cultivated at Te Uku and cannabis cultivated at Exelby Road.

[51] On the charge of conspiring to cultivate cannabis, the conspiracy never proceeding beyond your request, you are in the circumstances sentenced to six months imprisonment.

[52] On the charge to which you pleaded guilty of possessing cannabis for supply you are sentenced to four years imprisonment.

[53] On the charge of supplying MDMA, this being somewhat historic and vague in terms of its detail, you are sentenced to two years imprisonment.

[54] On Counts 15 and 16 relating to possessing precursor substances and materials you are sentenced to four years imprisonment.

[55] All those sentences of imprisonment I have imposed on you Mr Gray will be served concurrently.

[56] And in terms of s 86 of the Sentencing Act 2002, on the three terms of imprisonment of 12 years which I have imposed on you in relation to methamphetamine charges, I order that you are to serve a minimum term of 5½ years imprisonment.

[57] So those are sentences I have imposed Mr Gray. But for the large sum you have forfeited you would be looking at 17 years imprisonment and probably a minimum term of 8½ years. You are lucky to have a supportive family. You know your stupidity and greed must be punished. I have considerable confidence you will not offend again when you are released.

Count	Charge	Maximum penalty	Result
1	Manufacturing Class A Methamphetamine	Life imprisonment	Found guilty
2	Supplying Class A Methamphetamine	Life imprisonment	Pleaded guilty
3	Possessing Class A Methamphetamine for the purpose of supply	Life imprisonment	Pleaded guilty
4	Supplying Class A Lysergide (LSD)	Life imprisonment	Pleaded guilty
6	Cultivated Class C Cannabis	7 years imprisonment	Pleaded guilty
7	Cultivated Class C Cannabis	7 years imprisonment	Found guilty
9	Supplying Class C Controlled Cannabis	8 years imprisonment	Pleaded guilty
10	Conspired to cultivate Class C Cannabis	7 years imprisonment	Pleaded guilty
11	Possessing Class C Cannabis for the purpose of supply	8 years imprisonment	Found guilty
12	Supplied Class B MDMA	14 years imprisonment	Found guilty
15	Possession of precursor substances	7 years imprisonment	Found guilty
16	Possession of equipment and materials	7 years imprisonment	Found guilty

High Court of New Zealand Decisions

R v Gray [2013] NZHC 450 (8 March 2013)