R v Gan [2016] NZHC 2349 (4 October 2016)

Last Updated: 4 October 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2015-404-000114 [2016] NZHC 2349

THE QUEEN

v

_{YIXIN GAN}

Hearing:	4 October 2016
Counsel:	S L McColgan and O M Klaassen for Crown G J Newell and Y Wang for Defendant
Judgment:	4 October 2016

_{SENTENCING NOTES OF DOWNS J}

Solicitors/Counsel:

Crown Solicitor, Auckland.

G J Newell, Auckland.

R v GAN [2016] NZHC 2349 [4 October 2016]

Introduction

[1] Ms Gan, you appear for sentence after a jury found you guilty of three charges in a trial last month: importing 250 kilograms of ContacNT, which contains pseudoephedrine (charge 1); possessing the same drugs for the purpose of supply (charge 2); and importing an earlier quantity of pseudoephedrine (charge 4).¹ As you know pseudoephedrine is a Class B controlled drug.

[2] Sentencing is dependent on charge, fact and case law. Each of your charges carries a maximum penalty of 14 years’ imprisonment. The facts I will come to. As to case law, the operative principle is that the quantity of the drugs and the role of the offender assume particular importance when sentencing for dealings in controlled drugs. I will say more about this shortly, but first let me say something about the facts of your case.

The facts

[3] You arranged with a contact in China to import at least 250 kilograms of ContacNT from there to New Zealand. That amount of ContacNT yields approximately 100 kilograms of pseudoephedrine. The drugs were packaged and labelled as potato starch or corn starch. They arrived here on or about 4 October

2013 in a larger shipment of goods imported by you.

[4] You had a legitimate importation business in which you brought goods, largely foodstuffs, to New Zealand from China but destined for Tonga. The goods would go to a customs-secure area in Auckland, operated under license by Ezi World Cargo Ltd, and from there, to Tonga. At some point—and exactly when we don’t know—you appreciated this presented an opportunity for great profit. You persuaded the operator of Ezi World Cargo Ltd, Mr Uele, to remove goods packaged

_{and labelled as potato starch or corn starch, but which really contained}

¹ The jury acquitted you of charge 3, which alleged yet earlier importation of pseudoephedrine between December 2009 and September 2011 (the charges went backwards in time). I assume the jury saw this time period as too remote from the October 2013 shipments in relation to charges 1 and 2. And, while there was evidence of large cash deposits within the period accompanying charge 3, that evidence was not quite as striking as it was in relation to charge 4, particularly as to the related cash flows of Ezi World Cargo Ltd.

pseudoephedrine, and to replace those packages with their innocuous counterparts. So, the foodstuffs would go on to Tonga, while the drugs would remain here.

[5] You later put that plan into effect by arranging for the shipment containing ContacNT to come to New Zealand from China. And when the shipment arrived at Ezi World Cargo Ltd in Auckland, you had others complete the switch. By

7 October 2013, the switch was complete: you had 250 kilograms of ContacNT in your possession for supply to others.

[6] The drugs were then distributed by others. You played no role in that, but you knew that would happen. As will be apparent, others were involved in this offending. I later say something about the sentences imposed on them.

[7] There is no doubt you were motivated by profit. Evidence was given at trial that ContacNT is legally available in China and hence cheap to purchase there. But in New Zealand in 2013, 223 grams of ContacNT, which converts to approximately

90 grams of pseudoephedrine, cost between $8,000 and $9,500. I should add that the price reflects demand: pseudoephedrine is an ingredient of methamphetamine, a pernicious Class A controlled drug. Consequently, the drugs you imported to New Zealand in October 2013, if sold in the amounts I have mentioned but only at the bottom end of the range, were worth almost $8,900,000. The jury heard very large amounts of cash entered your bank accounts.

[8] This deals with charges 1 and 2. I now turn to charge 4.

[9] Charge 4 alleged that between 21 May 2012 and 11 June 2013, you imported other shipments of pseudoephedrine from China. The charge was representative, meaning it alleged you had done that more than once. There was no direct evidence in relation to this charge; instead, the Crown relied on your conduct in relation to charges 1 and 2 (as what lawyers call propensity evidence), and evidence of not less than $3,201,000 in cash being deposited to your accounts within the same period. It was common ground you arranged four shipments to New Zealand in this period: the issue was whether any were proved to contain pseudoephedrine. I directed the jury

they had to be unanimous as to which shipment or shipments, if any, contained pseudoephedrine.² And you were found guilty.

[10] I do not know whether the jury found you guilty in relation to more than one shipment. Mr Uele said none of the earlier shipments involved pseudoephedrine and I directed the jury if they considered his evidence on this issue might reasonably be true, they should acquit you on charge 4. While the jury were entitled to reject this aspect of his evidence—I would have too—there is little to assist me in assessing how the jury approached its task in relation to the number of shipments or how I should approach the issue myself, save for one thing: the cash deposit evidence. On one view, the sheer scale of the cash deposits in this period, $3.2 million, could be seen as implying more than one shipment contained pseudoephedrine. But that approach is blunt and I am uncomfortable with it given the criminal standard. Accordingly, I proceed on a cautious basis on the assumption only one shipment contained pseudoephedrine. That may well be to your favour Ms Gan.

[11] As will be apparent, there is no evidence as to how much pseudoephedrine was brought in on this occasion. The only safe inference is a not inconsiderable commercial quantity, which is consistent with the use of sea as against air freight, and the cash deposit evidence.

Your role

[12] Notwithstanding Mr Newell’s submissions to the contrary, I am sure, which is shorthand for satisfied beyond reasonable doubt, you were the primary architect—at least in New Zealand—of the October 2013 importation, and the related possession for supply charge. I reach this view because:

(a) You arranged for the associated shipment to New Zealand from

_{China. Documentary evidence confirmed as much at trial.}

² See R v Gan [2016] NZHC 2086.

(b) You had an otherwise legitimate business whereby you imported goods to New Zealand ultimately bound for Tonga. You used your business to camouflage the importation.

(c) You prevailed upon Mr Uele to assist you by permitting his company’s apparently secure customs area to be exploited. There, as I have said, the pseudoephedrine was removed from the shipment and replaced with innocuous foodstuffs, the label under which it had entered our jurisdiction. I say prevailed because Mr Uele testified you had repeatedly asked him to assist you in this way, and that he ultimately succumbed to money.

(d) Super-profits are rarely divided between minor players. Mr Uele was to be paid $60,000 for his role. You, however, deposited or caused to be deposited almost $400,000 in cash to your accounts between October and November 2013; that is, almost $400,000 in just two months. Most of the deposit activity in this period was made up of smaller deposits of between $5,000 and $10,000. On 14 October

2013, $230,000 in cash was deposited to your accounts. By that date, the drugs had left your possession.

(e) You were careful to deal directly and separately with each of the other members of the enterprise. So, for example, you dealt directly with Mr Uele; and then entirely separately from him, with Mr Shao. As Mr McColgan submitted this morning, it would have been easy for you to let the others deal directly amongst themselves.

(f) These people reported to you, at least in relation to the importation.

This conclusion is supported by some of the recorded conversations between you and Mr Shao in which you emerge as the dominant figure. Your trial testimony reinforces this view. You presented as intelligent, worldly, even shrewd. You gave evidence in near fluent English. Mr Uele on the other hand presented as somewhat hapless, and someone manipulated by you. That too was the effect of his

evidence. As it happens, Woolford J reached the same conclusion when he sentenced Mr Uele in advance of your trial.³

(g) Your commission of at least one earlier importation using the same methodology, that is charge 4, does not by itself establish your occupation of the primary New Zealand-based role in relation to charges 1 and 2. But it is a stepping stone on the path to that conclusion, particularly given the very large amounts of cash that reached your bank accounts in the associated period. Indeed, you deposited or caused to be deposited approximately $3.2 million in cash to your accounts between 21 May 2012 and 11 June 2013. Again, super-profits rarely reach minor players.

(h) You did not deal in the drugs as such. That role fell to others, particularly Mr Shao and Mr Tran. Again, while this factor is small by itself, it is consistent with your occupation of a more senior role.

(i) The final factor is this: Mr Newell advanced the submission that Mr Shao’s presence in China shortly before the October importation and before another shipment in March of the same year suggested he had a more significant role, or at least occupied the same tier as you. My response is simple: do major players dirty their hands with work of that nature?

[13] There is no reason to believe your role in relation to charge 4 was different, particularly given the similarities in modus operandi as between charges 1, 2 and 4, and the cash deposit evidence.

Starting point

[14] The Crown advances a global starting point of 16–18 years’ imprisonment

based on a 13–14 year starting point for charge 1, and an uplift of three to four years for charge 4. On your behalf Mr Newell contends charge 1 should attract a starting

³ R v Uele [2014] NZHC 2239 at [6].

point of 11-12 years’ imprisonment, with an uplift of three years’ imprisonment for charge 4, and hence an overall starting point of 14–15 years imprisonment. As you will be aware, the parties are not far apart.

[15] This case is clearly within the top band of Class B controlled drug offending, as identified by the Court of Appeal in a cased called R v Wallace “as commercial activity on a major scale”, in which the starting point “for the principal offender will be in excess of eight years and in very bad cases up to 14 years, especially where repeat offending is involved”.⁴ But Wallace itself provides little guidance on where this case sits within the band.

[16] R v Wang is of assistance here.⁵ The defendant in that case faced one charge of possessing 35 kilograms of ContacNT for the purpose of supply. He provided material assistance to the importer but was not a prime mover or major player. On a Crown appeal against sentence, the Court of Appeal adopted a starting point of eight years’ imprisonment. But more importantly, it observed if the defendant had been “a prime mover or major player ... a starting point of approximately 12 years’

imprisonment” would have been appropriate.⁶ That case involved much less

ContacNT and only one charge.

[17] Relevant too is the recent case of Yuen v R,⁷ in which the Court of Appeal approved a starting point of 13 years’ imprisonment for a commercial operation involving importation of 61 kilograms of ephedrine. The defendant was not the mastermind but his involvement was significant.

The co-offenders’ sentences

[18] The sentences in relation to your co-offenders are obviously relevant. However, care must be taken with these. None of them was convicted of exactly the same charges as you, their roles were different to yours and in relation to Mr Tran

_{and Mr Shao, there is no way of knowing whether the pseudoephedrine they}

⁴ _{R v Wallace [1999] NZCA 89; [1999] 3 NZLR 159 (CA) at [30].}

⁵ _{R v Wang [2014] NZCA 409.}

⁶ _{R v Wang, above n 5, at [24].}

⁷ Yuen v R [2015] NZCA 555.

supplied necessarily came from you. Consequently, I will focus upon the starting points adopted in relation to your co-offenders where the charges were the same.

[19] Woolford J adopted a starting point of nine years’ imprisonment in relation to Mr Uele, who faced a single charge of importation corresponding to your charge 1. Woolford J concluded Mr Uele was “not the prime mover” but nonetheless an “important [player] in the importation because of [his] directorship of Ezi World Cargo Ltd”.⁸ A constellation of mitigating features resulted in a final sentence of five years’ and five months’ imprisonment.

[20] Lang J adopted a base starting point of 11 years’ imprisonment in relation to Mr Shao’s possession for supply, of the 250 kilograms of pseudoephedrine; your charge 2. The Judge concluded Mr Shao was “a senior leader of the distribution side of the network”, who took “instructions directly from the ringleader, Ms Gan”.⁹ I should make it plain, that remark has not influenced my view of your role, which I have established independently. The final sentence in relation to this charge was

nine years’ and four months’ imprisonment, albeit Mr Shao’s actual sentence was

more severe because of other charges.

[21] The final sentence of some relevance is that of Mr Tran. The Chief High Court Judge, Venning J, adopted a starting point of 18 years’ imprisonment in that case.¹⁰ Embedded within the 18-year starting point was a nine year starting point for charge 1. Mr Tran had pleaded guilty to that charge, to possessing the same drugs for supply, another charge of possessing 30.8 kilograms of pseudoephedrine for supply, and 36 charges of the actual supply of 53.5 kilograms of that drug. The ultimate sentence was 13 years’ and eight months’ imprisonment. Materially, while Venning J adopted the same starting point for the importation as Woolford J had

done, the Judge “did not wish to be seen as endorsing that sentence as at an appropriate level in Mr Uele’s case”,¹¹ and the Judge had earlier recorded without comment, a Crown submission that 14 years’ imprisonment should have been the

_{starting point for that offending alone.}

⁸ _{R v Uele, above n 3, at [3].}

⁹ _{R v Shao [2016] NZHC 1000 at [9].}

¹⁰ _{R v Tran [2015] NZHC 1545.}

¹¹ At [36].

[22] Both Mr Shao and Mr Tran received minimum periods of imprisonment. Mr Uele did not.

The starting point

[23] By any measure, this was serious offending. It involved a very large amount of ContacNT, and what appears to be the second largest importation of ContacNT to date.¹² The offending was not unsophisticated. Many importers of drugs rely on so- called “mules”, people who carry drugs for modest reward. Others conceal drugs in goods placed into the postal system. Your offending was more sophisticated than these methods, particularly in its exploitation of a customs-controlled area in the context of your legitimate business enterprise. The Crown contended to the jury this was “a near-perfect scam”. There was no overstatement in that language; you were caught only by chance.¹³ As observed, you committed these offences for profit; that your bank accounts were ultimately overdrawn is beside the point. And, you were the architect of the offending, at least in New Zealand. Deterrence as a sentencing imperative looms large, particularly as the flow of ContacNT from China continues unabated. So:

(a) I adopt a base starting point of 13 years’ imprisonment on charge 1.

(b) I uplift that by three years’ imprisonment to reflect the discrete

offending in relation to charge 4.

(c) For completeness, in relation to charge 2, I adopt a starting point of

12 years’ imprisonment, one year longer than that adopted by Lang J in relation to Mr Shao. And in relation to charge 4, I adopt a starting point of eight years’ imprisonment, the base starting point for the most

_{serious category of offending identified in Wallace.}

¹² R v Zhang [2015] NZHC 2325 is the largest. There, Toogood J adopted a starting point of 13 years’ imprisonment in relation to two importation charges involving 390 kilograms of ContacNT. In my respectful opinion, the starting point on those charges could have been higher.

¹³ The Police were secretly investigating Mr Shao, and recording his conversations. You featured in those.

Mitigating features

[24] Ms Gan, you are a first offender. The case of Wang I mentioned earlier confirms previous good character is only of modest relevance when an offender has imported or dealt in a large quantity of drugs.¹⁴ A six month deduction was made in that case, albeit the Court of Appeal held no deduction could have been offered. I adopt the same figure as in that case: six months.

[25] You voluntarily returned to New Zealand from China to face these charges, thereby avoiding the need for potentially protracted extradition proceedings. Your actions spared the resources of two governments, and your willingness to confront these charges also implies there is hope you may return to your previously law- abiding ways. I allow a further 12 month deduction.

[26] The final discount reflects the fact your three young children remain in China, as does your husband. Consequently, prison here will be harder for you than some others. But as against that, you are fluent in English and well adjusted to Western life. More importantly, New Zealand must not be seen as a soft touch in relation to the importation of controlled drugs, so any discount must be modest. I adopt a further six month deduction. The starting point of 16 years’ imprisonment will be reduced by two years to 14 years’ imprisonment.

Minimum period of imprisonment

[27] Section 86 of the Sentencing Act 2002 provides for minimum periods of imprisonment:

86 Imposition of minimum period of imprisonment in relation to determinate sentence of imprisonment

(1) If a court sentences an offender to a determinate sentence of imprisonment of more than 2 years for a particular offence, it may, at the same time as it sentences the offender, order that the offender serve a minimum period of imprisonment in relation to that particular sentence.

(2) The court may impose a minimum period of imprisonment that is longer than the period otherwise applicable under section 84(1) of

¹⁴ R v Wang, above n 5, at [28]–[29].

the Parole Act 2002 if it is satisfied that that period is insufficient for all or any of the following purposes:—

(a) holding the offender accountable for the harm done to the victim and the community by the offending:

(b) denouncing the conduct in which the offender was involved: (c) deterring the offender or other persons from committing the

same or a similar offence:

(d) protecting the community from the offender. (3) Repealed.

(4) A minimum period of imprisonment imposed under this section must not exceed the lesser of—

(a) two-thirds of the full term of the sentence; or

(b) 10 years.

(5) For the purposes of [Part 6 of the Criminal Procedure Act 2011], an order under this section is a sentence.

[28] In Solicitor-General v Huang, the Court of Appeal affirmed “it is ‘almost invariable’ in cases of serious drug offending that the criteria for an MPI will be made out”.¹⁵

[29] Mr Newell argued against the imposition of a minimum period. When I asked him for the legal basis for that submission he responsibly replied that he was instructed to make the argument.

[30] The pre-sentence report notes that you are at low risk of re-offending. I am heartened by that. However, protection of the public is only one consideration under s 86. I am satisfied parole eligibility after only one-third of your sentence would be inconsistent with the imperatives of denunciation and deterrence, particularly general deterrence in the context of large scale commercial drug trafficking.

[31] The minimum periods in relation to Mr Shao and Mr Tran were set at 50 per cent. The Crown advances that percentage for you too. However, your role was

_{greater than both, and but for you, grave doubt attaches to whether the drugs would}

¹⁵ Solicitor-General v Huang [2011] NZCA 436 at [23].

have arrived in New Zealand. As I have said, you used your legitimate business to orchestrate and conceal the offending. For all of these reasons, I impose a minimum period of 60 per cent.

[32] Ms Gan, please stand:

(a) On charge 1, the charge of importing pseudoephedrine on 4 October

2013, I sentence you to 14 years’ imprisonment.

(b) On charge 2, the charge of possessing that drug on 7 October of the same year for the purpose of supply, I sentence you to 10 and a half years’ imprisonment.¹⁶

(c) On charge 4, the charge of importing pseudoephedrine between May 2012 and June 2013, I sentence you to seven years’ imprisonment.

(d) The terms are concurrent, so the overall sentence is 14 years’

imprisonment.

[33] However, I impose a minimum period of eight years’ and four months’

imprisonment.

[34] You may stand down.

...................................

_{Downs J}

16. The discounts in relation to charge 1 amounted to 12.5 per cent of the starting point. I applied the same percentage to charges 2 and 4.