MICHAEL MAURICE QUINLAN Appellant. THE QUEEN Respondent. Appellant. Appellant. LIMITED Appellant

Transcription

1 IN THE COURT OF APPEAL OF NEW ZEALAND CA270/2013 [2013] NZCA 634 BETWEEN AND MICHAEL MAURICE QUINLAN Appellant THE QUEEN Respondent CA271/2013 AND BETWEEN AND PETER JOHN BENNETT Appellant THE QUEEN Respondent CA287/2013 AND BETWEEN AND STONEWARE 91 LIMITED Appellant THE QUEEN Respondent CA288/2013 AND BETWEEN AND HYDROPONIC WHOLESALERS LIMITED Appellant THE QUEEN Respondent Hearing: 13 November 2013 Court: Counsel: Wild, Simon France and Asher JJ P J Davison QC and H D L Steele for Appellants Quinlan, Stoneware 91 Ltd and Hydroponic Wholesalers Ltd G J Foley for Appellant Bennett K A L Bicknell for Respondent QUINLAN V R CA270/2013 [2013] NZCA 634 [10 December 2013]

2 Judgment: 10 December 2013 at 4 pm JUDGMENT OF THE COURT The appeals against sentence are dismissed. REASONS OF THE COURT (Given by Simon France J) Introduction [1] Following a trial spread over eight weeks in the District Court at Auckland the appellants were convicted of various drug offences. Each now appeals the sentences imposed by Judge Andrée Wiltens: 1 (a) Mr Quinlan four years and three months imprisonment; (b) Mr Bennett three years and nine months imprisonment; (c) Stoneware 91 Ltd and Hydroponic Wholesalers Ltd $125,000 fine each. Background [2] Mr Quinlan was the man behind a chain of stores (Switched On Gardener) that sold, amongst other things, hydroponic growing equipment. Mr Bennett was the general manager of the chain. Stoneware 91 Ltd is the corporate entity that formally owns the 16 stores nationwide, and Hydroponic Wholesalers Ltd is a company owned by Mr Quinlan that sold goods to the Switched On Gardener chain. [3] The essential allegation was that the stores were knowingly supplying equipment for the cultivation of cannabis. Indeed, it was alleged that the store 1 R v Quinlan DC Auckland CRI , 30 April 2013.

3 equipment was stocked for that purpose, and that the principals were part of an organised criminal enterprise. [4] Some charges were proven; others failed. In the end, all the appellants were convicted of 16 counts of supplying equipment for the cultivation of cannabis knowing at the time of sale that it was to be used for that purpose. The 16 convictions represent one representative count for each of the chain s 16 stores nationwide. All but Mr Quinlan were convicted of possession of equipment intending that it be used for cannabis cultivation (count three), and all were acquitted of the organised criminal group charge. [5] Although the indictment alleged offending between June 2008 and April 2010, it is common ground on the appeal that the commencement period for the offending was November This means the offending spanned about 18 months. [6] The convictions resulted from a nationwide operation by the police. Undercover officers were tasked to visit each store on several occasions, seeking to buy equipment having first made plain the illegal purpose for which the equipment was to be used. The success rate for purchasing in these circumstances was very high. This left little doubt that, nationwide, the salespeople at least were unconcerned about, and indeed in many instances encouraging of and informative about, the use to which the equipment was to be put. The key trial issue as regards Messrs Quinlan and Bennett was their awareness and complicity in what was happening, and what steps they had taken to prevent it happening. [7] The Crown advanced its case on an alternative basis, namely that either the appellants knew about and encouraged the offending, or alternatively, they came within s 17 of the Misuse of Drugs Act That section makes principals liable for the acts of their agents if it is proved the offending was committed by the agent with the principal s consent or connivance or that it was attributable to any neglect on [the principal s] part.

4 [8] Given the number of alternatives left to the jury, a key issue on appeal is whether the Judge correctly identified the proper culpability basis when sentencing the appellants. It is submitted that a more favourable view should have been taken. Mr Quinlan further submits that his acquittal on some charges means the more favourable view was the only logical basis available to the Judge. The second primary ground of appeal relates to the size of the discount given to each appellant. [9] Finally, Mr Bennett advances a discrete ground of appeal relating to his health, and the manner in which the prison authorities are managing his Type 1 diabetes condition. We called for further evidence on that and will address the matter separately. Brief overview of facts [10] Switched On Gardener specialised in the provision of equipment for indoor growing. At the time of the offending it had 16 stores nationwide, as well as a website. [11] The enterprise openly linked itself to cannabis. It frequently sponsored events for NORML, an organisation that promotes the legalisation of cannabis. The company s free phone number was 0800 NZGREEN. It advertised in a way that could attract the cannabis community. For example, one advert began Heads or Tails and then advised the listener that if it is heads you want, come to the store. The vehicles run by the stores had personalised plates such as BUDVAN, BUDZLA, BUDONE and BUDFR8. Nutrients were sold under names which similarly engaged cannabis terms, and cannabis smoking equipment was available for purchase. [12] The results of the undercover operation did nothing to dispel the proposition that the business was linked to, and profited from, the cultivation by others of cannabis. More than 130 offences were committed by staff during the course of an operation that revealed a consistent pattern across the country to readily supply equipment knowing the illegal purpose for which it was to be used. Further on these occasions, not only would some staff regularly and openly link themselves to cannabis and its use, they would also provide the undercover officers with cannabis plants, or product. Across the country at least 10 staff members sold or offered to

5 sell such items to the undercover officers. Others admitted to cannabis use. Most of this occurred with a minimal amount of prompting by the officers. [13] There was a second phase to the operation. The police posed as a potential purchaser of a franchise. 2 This process allowed them access to staff members that would otherwise not have been available. There was also considerable discussion with Mr Bennett. Many conversations were recorded, and extracts played at trial. [14] Finally, to close the circle in a way, at the end of the operation the police carried out search warrants on a large number (99) of people who had been identified as a result of their being customers of Switched On Gardener. This phase led to the seizure of 7276 cannabis plants and 21,597 grams of dried cannabis material. Sentencing remarks [15] The crucial aspects of the Judge s reasoning in relation to the appellants is captured by the following paragraphs: [11] All of those matters are indicative that what occurred could be seen in two ways, but was actually seen by management, by staff and eventually I am satisfied, the public as being indicative of Switched On Gardener being the place to go to purchase materials and equipment for the cultivation and consumption of cannabis. [12] Mr Bennett was very heavily involved in management in a direct fashion. He was very directly involved in the communications with staff. He went to these stores. The suggestion that he did not know what was happening beggars belief. Mr Quinlan was less involved because he handed over the majority of the day-to-day operations to Mr Bennett. Nevertheless, he had an understanding of what was happening. He went to stores on occasions, he went to staff functions on occasions, he received s and he made the high level decisions. His knowledge might be to a lesser degree than Mr Bennett s knowledge of what was actually taking place, but he still had sufficient knowledge of what was going on, to be properly convicted by the jury, as indeed he was. [13] It seems to me that the operation of Switched On Gardener changed from what it was initially, which was a gardening company with an emphasis on hydroponics, to what it eventually became over the 2 The proposal was not actually that the undercover officer would purchase a franchise, but rather that they would set up an independently owned hydroponics store which would purchase all of its equipment, materials and paraphernalia through Hydroponics Wholesalers Ltd and another company owned by Mr Quinlan. However, we will refer to this arrangement as a franchise in this judgment.

6 22 month period of the indictment, where a significant proportion of its business activity was cannabis related. [16] Concerning Mr Quinlan, Judge Andrée Wiltens identified a starting point of five years. This reflected that Mr Quinlan was the most senior person in the hierarchy, and came after a review of the sentencing of other staff members who had earlier pleaded guilty and been sentenced. The starting point also reflected that although at the top of the hierarchy, Mr Quinlan had been convicted only by the extended culpability route provided by s 17. Reflecting his lower place in the hierarchy but more direct involvement, Mr Bennett received a starting point of four years and six months imprisonment. Both then received a nine month reduction for mitigating factors, resulting in the sentences now under appeal. Appeals (a) Mr Quinlan [17] The primary challenge to the starting point is that the trial Judge incorrectly assessed Mr Quinlan s culpability. This error is said to stem from the Court not drawing the correct inferences from Mr Bennett s acquittals on other charges. The second focus of challenge is to the Judge s assessment of the overall scale of the offending, it being said that the Judge took into account inadmissible and unreliable evidence in concluding that the cannabis offending provided a significant proportion of business income. [18] Turning first to the issue of the basis on which Mr Quinlan was convicted, the Crown s primary allegation at trial was that Mr Quinlan was a knowing participant in what was happening. However, if the jury were not satisfied of that to the requisite standard, the Crown relied upon the extended culpability options found in s 17 of the Act. As noted at [7], these are that Mr Quinlan consented to or connived in what was being done by his staff, or neglected to prevent it happening. [19] In terms of assessing why the two men were convicted, the Judge drew a contrast between Mr Quinlan and Mr Bennett. He accepted that for Mr Quinlan, but not Mr Bennett, s 17 was indeed the likely conviction route. Where issue is taken on the appeal is that in relation to Mr Quinlan, his Honour declined to differentiate

7 between the s 17 options namely, consent or connivance on the one hand, and neglect on the other. Mr Davison QC had urged Judge Andrée Wiltens to make that distinction, and then to find Mr Quinlan was convicted on the basis of neglecting to prevent the offending. This submission is repeated on the appeal, the end proposition being that neglect is a much less culpable state of mind that would require a significantly lower starting point. [20] There can be no debate that conceptually there is a difference between the options contained in s 17. The first two states of mind suggest a species of recklessness whereas neglect could be a culpable failure to realise what was happening and stop it. That said, we are far from convinced the distinction has any significance on the facts of this case. [21] Mr Quinlan was convicted separately in relation to all 16 stores which he owned and operated. His business had openly aligned itself with cannabis use, and had exploited that connection in all facets its phone number, its licence plates, its adverts, its products and its sponsorship. To his knowledge the business targeted the very market that has led to the offending, and we cannot accept that there is any reality in the proposition that Mr Quinlan was merely negligent. [22] As we see the case, Mr Quinlan represents an example at least of blatant wilful blindness. We are not at all surprised that the Judge saw, in this case, insufficient merit in the differences in the s 17 options to necessitate analysing the matter in any depth. Had the trial Judge acceded to Mr Davison s submission that Mr Quinlan was only guilty of neglect, it could only be neglect of the most serious kind, and an extremely convenient neglect that enabled Mr Quinlan to profit from a significant criminal endeavour whilst seeking to establish a degree of separation. On appeal, it should not be ignored that the Judge presided over this lengthy trial with its large volume of material, and we see no reason at all to differ from his assessment. Indeed, for ourselves, we would be content to reject neglect altogether as a realistic option. [23] The Crown pointed to other material such as s that indicated Mr Quinlan must have had a significant level of awareness or suspicion. We do not

8 consider it necessary to explore this evidence for the purposes of a sentence appeal. We are satisfied that Mr Quinlan s business positioned itself and indeed targeted a customer base of cannabis users and growers; it sold not only hydroponic equipment but other items useful for cannabis smoking such as bongs under farcical descriptions such as ornaments or vases, and it employed staff and managers who openly used and discussed cannabis, and who willingly sold products to customers who had disclosed they intended to use the equipment to grow cannabis. Several staff also sold actual cannabis material as well. We have no doubt it was open to the Judge to assess Mr Quinlan s culpability at the level he did notwithstanding a conclusion that s 17 of the Act provided the basis. [24] Nor do we accept that Mr Quinlan s acquittal on count three is inconsistent with this view. That charge required the jury to be satisfied that there was equipment in the stores that was intended to be sold for cannabis cultivation. In other words, as put to the jury, that the purpose for which the equipment was stocked was cannabis cultivation. It is not inconsistent to acquit Mr Quinlan of this and yet say that he must have been aware that there was a significant possibility all this activity was happening and he chose not to find out or confirm his suspicions. Given he was the owner and profiting handsomely, that was significantly culpable wilful blindness. [25] The second limb of the challenge is to the Judge s conclusion as to the scale of the offending. It is said that the Judge relied on both inadmissible and unreliable evidence to form the view that a large amount of the business was due to sales to cannabis cultivators. We preface our discussion of this challenge by observing that we regard as generous to the appellant an overall starting point of five years for a nationwide, and internet based, operation involving the exploitation of a business opportunity to sell cannabis cultivation equipment. [26] The allegedly inadmissible evidence is the evidence concerning the searches of customers undertaken at the end of the operation. It has been noted that these subsequent searches yielded almost 22 kg of cannabis material and more than 7,000 plants. The complaint is that this information was not formally before the Court as

9 evidence, 3 and there had therefore been no opportunity to test it. It seems the focus of such testing would have been to explore whether the secondary targets had made their intended use of the equipment known at the time of purchase. [27] In sentencing the Judge had referred to this information as being indicative of his conclusion that a significant proportion of its business activity was cannabis related. The Crown accepts it was not open to the Judge to rely on this material. We are content to proceed on that basis but we do not consider that conceptually it was wrong of the Judge to act as he did. Whether or not the individual customers said something at the time of the purchase, the evidence of what was found in the possession of customers still has value in emphasising the link between the business and cannabis users, a link which every aspect of the promotion of the business sought to foster. It is a factor relevant to the overall culpability assessment. Beyond this, we see the Judge s particular reliance on the information as being of little moment. [28] The other aspect of challenge is also directed at the Judge s conclusion that a significant proportion of the business activity was cannabis related. In reaching this assessment the Judge referred to evidence that one witness put the proportion at 95 per cent, and another at 60 per cent. Mr Davison submits the sources of this evidence were plainly unreliable. [29] We address first the 60 per cent figure, which came from an employee who had worked at a Switched On Gardener store. He was pressed to estimate the percentage of customers who wanted the equipment for illegal growing. He was reluctant but ultimately suggested a ballpark of to cannabis, 60 or something, that s a guess. Mr Davison notes that not only is this just a guess, the witness was plainly unreliable. He had admitted to being under the influence of methamphetamine most of the time and to having only a vague recollection of what had gone on. 3 It was subject to pre-trial challenge and ruled admissible. The defendants appealed but prior to the hearing of the appeal the Crown elected to not call the evidence.

10 [30] In response we observe that it remained open to the Judge to see the guess as having some validity. We do not accept the appellant s submission that because it is a guess it lacks probative value. Regardless of the accuracy of the specific number, it remains indicative of the broad proposition that cannabis related transactions were a significant proportion of total sales. As for the 95 per cent figure, it was sourced in one of the taped conversations. We address these shortly. [31] The Judge had also referred to evidence about the proportion of sales that were cash sales. We accept the appellants submission that such evidence is not a factor particularly relevant to establishing the percentage of business that was attributable to cannabis related sales. Ms Bicknell, however, pointed to the other evidence that supported the Judge s conclusion. [32] It will be recalled that the other phase of the undercover operation involved the police posing as a potential franchisee, leading to recorded conservations with staff. Within these conversations there are numerous statements about the extent to which business activity was attributable to cannabis. For example, there are separate comments by two staff members in one shop that they handle half the grow rooms in West Auckland. Another employee in a different shop estimates the legitimate business to be only two per cent, and another suggests the proportion dedicated to veggies is only five per cent (this is the source of the 95 per cent figure cited by the Judge). A different staff member again suggests that the proportion of genuine customers is a fraction or minority. [33] It is unrealistic to separate this evidence from the overall picture that emerges, and to seek to undermine it by reference to its untested nature. These are comments by staff members who as a cohort revealed themselves nationwide to undercover police officers as people involved in the cannabis industry. One can point, as counsel did, to the context of the statements being one of the sale of a business and therefore puffery or indeed just exaggerated showing off. However, none of these explanations reduces culpability since what the statements still show is that staff plainly think it a selling point that the store has a strong cannabis clientele.

11 [34] It is plain from our observations that we do not accept the basis on which the appeal is advanced. First, in our view, it was a business that aligned itself with the cannabis industry. It has been exposed as doing so illegally, and doing so on a large nationwide scale. The items of disputed inference are but part of a larger picture. For example, the inference that could alone be drawn from the ease with which officers bought cannabis growing equipment on repeated occasions at every store over a 18 month period is compelling in terms of what it says about all the participants knowledge. This inference is reinforced by many different aspects of the evidence including, as we have said, the way the business saw itself and marketed itself. [35] Second, we have not been led to the view that Mr Quinlan s culpability is less than those more directly involved. He was the original owner of the stores 4 and was aware of, and involved in, the positioning of the business in the marketplace. His defence was to separate himself from responsibility. The convictions show that to have been not wholly successful, and we are of the view the trial Judge s factual conclusions were open to him, and indeed correct. If s 17 was the basis for liability, it is a high end example of such liability. [36] Third, generally we consider there was merit in the Crown s suggested starting point at sentencing of seven years imprisonment. It is a unique case but represents the significant nationwide commercial exploitation of cannabis cultivation. As such, a condign starting point would have been unobjectionable. It follows that we reject the challenge to a starting point of five years. [37] We turn next to the issue of whether sufficient credit was given for Mr Quinlan s previous good character and remorse. Mr Davison submits that a credit of three months was wholly inadequate to reflect an offending free past and a lifetime of positive activity. It is also submitted that there has been double counting in that the lengthy period over which the offending occurred has been used to both 4 Ownership was later changed to other family members.

12 inform the starting point and limit the mitigation. 5 Judge wrongly diminished Mr Quinlan s level of remorse. It is further submitted that the [38] The total discount was nine months, which is 15 per cent. This reflected the matters referred to by Mr Davison, and also credit for steps taken by the appellants to ensure there was no further offending by Switched On Gardener. The issue for us is whether, as a total discount, it is inadequate. We do not consider it to be so. [39] The six months credit given for subsequently changing the focus of Switched On Gardener was generous. The Judge likened it to the credit given to an addict who seeks cure and attempts to come clean prior to sentencing. We do not agree with the analogy. This was commercially motivated offending that continued until exposed. The fact that the appellants once exposed stopped operating their business illegally is not worthy of credit on sentencing. [40] We accept that more credit could and perhaps should have been given for Mr Quinlan s past good character. We are less convinced about the challenge to credit for remorse. Our overall conclusion is inevitably coloured by the view we take of the six month discount previously discussed. Given that we consider it was not a factor meriting credit, it follows that we are satisfied a total discount of nine months was not manifestly inadequate. [41] It follows that Mr Quinlan s appeal is dismissed. (b) Mr Bennett [42] Mr Bennett, in relation to culpability and mitigation, supported the submissions advanced for Mr Quinlan. As such little more needs to be added to what has been said in relation to Mr Quinlan. [43] In his submissions supporting those presented by Mr Davison, Mr Foley perhaps emphasised to a greater extent parity issues with other staff members who 5 A separate challenge was raised about the duration of the offending identified by the Judge. The Crown accepts that it is several months shorter than that stated, but is still around 18 months. We do not find the Judge s mistake to be one of any significance.

13 had already been sentenced. A particular focus was a Mr Gestro who was next down in the hierarchy and who it is alleged was the main person responsible for changing the culture to what it became. 6 This submission is reflective of an underlying proposition that Mr Bennett s responsibility was similar to Mr Quinlan s, and was a case of neglect in his role of general manager. [44] For similar reasons to those set out relating to Mr Quinlan we do not accept this, but also note the Judge concluded Mr Bennett to have been more likely convicted on the basis of actual encouragement. Indeed, in the extract cited at [15], his Honour said the idea that Mr Bennett did not know what was happening beggars belief. A starting point of four years had been taken for Mr Gestro. The six month distinction between he and Mr Bennett is consistent with the gap recognised between Mr Bennett and Mr Quinlan. We also note Mr Gestro was sentenced on fewer charges than Mr Bennett, and do not consider any disparity issue arises. [45] More generally, we observe that it is arguable Mr Bennett has been favourably treated. Mr Bennett was involved in the business on a day to day basis. The evidence from the franchise sting part of the operation was quite damning against him. He was convicted of an extra offence of some significance and the Judge concluded that his convictions were probably based on intentional encouragement of the offending. Further, his insight and remorse were assessed as less than Mr Quinlan s. In our view there was a case for him to receive the same starting point as Mr Quinlan and a reduced discount. Putting to one side the matter now to be addressed, we have no concerns about Mr Bennett s final sentence. [46] The other matter on appeal, personal to Mr Bennett, is the effect imprisonment is having on his health. [47] Mr Bennett has Type 1 diabetes. He filed material on the appeal which set out his concerns about how his condition was being managed in prison. In Mr Bennett s view his current and long term health is being jeopardised by inadequate treatment in prison. 6 R v Gestro DC Auckland CRI , 28 September 2012.

14 [48] Mr Bennett has been resident at two prisons. Initially he was at the Mount Eden Corrections Facility and then he was transferred to the Northland Region Corrections Facility. He describes incidents at both institutions which he says indicate the institution is not capable of managing his situation. [49] We invited the Crown to provide evidence in response which it has done, and subsequently Mr Bennett has filed a further affidavit. There remains, as is inevitably the case in these situations, factual conflicts over some incidents in dispute. We are satisfied, however, that Corrections authorities are aware of Mr Bennett s condition and have drawn up a Treatment Plan. Concerning this, the evidence indicates that Type 1 diabetes is a common disease in prison, and that Corrections Health Services follow current New Zealand best practice guidelines. [50] The evidence also indicates that since the matter was raised, some changes have occurred, such as allowing Mr Bennett to have his blood sugar testing kit with him in his cell, and placing insulin supplies in the officers room in the unit. A specialist diabetes nurse is also being sent to Mr Bennett s particular unit to provide some specific training to officers. [51] It is not possible nor appropriate on a sentence appeal to seek to resolve individual points of dispute. The safe management of prisoners remains the duty of the Department of Corrections and we are satisfied it is aware of Mr Bennett s condition and is implementing a regime it considers is medically appropriate and sufficient. [52] The material has not led us to the view that any alteration to an otherwise proper sentence is required and accordingly Mr Bennett s appeal is dismissed. (c) The companies [53] Both companies were fined $125,000. The lack of explanation by the sentencing Judge for how this figure was arrived at is a primary focus of their appeal. It is submitted that the Court was required to identify a starting point and give credit for mitigating factors, particularly the efforts taken to prevent further

15 offending. It is also noted both companies are first offenders. 7 Finally, it is submitted there should have been differentiation between the two companies. It is submitted the appropriate starting points were $125,000 for Stoneware 91 Ltd and $100,000 for Hydroponics Wholesalers Ltd. Discounts were then required. [54] Hydroponics Wholesalers Ltd is a company established by Mr Quinlan to provide supplies to the Switched On Gardener chain. Notwithstanding this degree of apparent separation from the day to day activities of Stoneware 91 Ltd, it was convicted of the same offences being both the actual supply charges and the possession of equipment for supply offences. Given that it has been convicted of the same offences, we do not consider we have been pointed to a basis in the evidence that necessitates differentiating between them. [55] More generally, this is not an occasion to analyse the correct approach to sentencing companies for this type of offending. We have commented already on the nature of the offending and our view that it is serious drug offending meriting significant condemnation. Against that background we limit ourselves to consideration of whether a final sentence of $125,000 following a not guilty plea can be said to be manifestly excessive. [56] We acknowledge $125,000 is a substantial fine but again have not been pointed to evidence of turnover or financial viability to suggest it is disproportionate. His Honour had information that Stoneware 91 Ltd was valued at $1.5 million and had an annual profit of $500,000, and that Hydroponic Wholesalers Ltd was in equally good health. At the hearing before us, Mr Davison advised that the Stoneware profit, after director s salary, was $305,000 in 2009 and $360,000 in [57] The key feature of the offending is that, for these corporate appellants, the sole purpose for the offending was profit. Given the nationwide scale of the enterprise we see no basis to conclude a fine of $125,000 was manifestly excessive. 7 We consider that whilst that might be relevant for an established company in the area of regulatory and safety compliance, it is of doubtful relevance as regards this type of offending.

16 On the figures given to us at the hearing, it is around one third of one year s profit. On that basis the fine could be said to be lenient. These appeals are also dismissed. Conclusion [58] The appeals are dismissed. Solicitors: Crown Law Office, Wellington for Respondent