Novoselets v Ministry of Fisheries

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY

CRI 2006 409 233

VOLODYMYR YAKOVICH NOVOSELETS
Appellant

v

MINISTRY OF FISHERIES
Respondent

Hearing: 4 March 2008

Appearances: M J Logan for Appellant
R M Thomas for Respondent

Judgment: 2 April 2008

JUDGMENT OF CHISHOLM J

[1] Having pleaded guilty to nine charges under s230(1)(b) of the Fisheries Act 1996 (omitting material information), the appellant, master of the commercial fishing vessel Aleksandr Ksenofontov, was convicted and fined $18,000, being $2,000 on each charge. In terms of s255C(2) of the Act the vessel was forfeited to the Crown unless the Court “for special reasons relating to the offence” ordered otherwise.

[2] The appellant contended that there were special reasons for non-forfeiture. However, by reserved decision delivered on 25 October 2007 a District Court Judge decided that there were no special reasons and made an order forfeiting the vessel to the Crown. This is an appeal against that decision. Quantum of the fine is not in issue.

Background

[3] In 2005 the owner of the vessel, a Russian company called DV Ryboprodukt Co Limited, entered into a joint venture with Fish Market Holdings Limited (“FMH”), a New Zealand company. Under that joint venture the Aleksandr Ksenofontov was chartered to fish within New Zealand waters under FMH’s fishing permit. The appellant, who had had considerable experience since 1993 fishing New Zealand waters for another substantial New Zealand fishing company, was engaged as master.

[4] One of the conditions of the joint venture imposed by the owner of the vessel was that the services of appropriately skilled personnel were to be utilised to ensure that the vessel’s operations were conducted in accordance with the New Zealand law relating to fisheries. A New Zealand company, Fisheries Consultancy (NZ) Limited (“Fishcon”), was contracted for that purpose.

[5] It is common ground that Fishcon is highly regarded within the New Zealand fishing industry. Fishcon was specifically tasked with briefing the master on completion of returns in accordance with fisheries laws and regulations. Representatives of Fishcon were present at each departure and landing of the vessel and were expected to undertake extensive compliance checks. Every return completed by the master was reviewed by Fishcon and, where appropriate, amendments were made before the return was forwarded to the Ministry’s agent.

[6] The agreed statement of facts recorded that New Zealand’s commercial fishing industry operates under a quota management system and the integrity of that system is heavily dependent on the completion of fishing returns and the accuracy of the information supplied in them. Every permit holder who takes fish, or on whose behalf fish are taken, is required to furnish a trawl/catch/effort/processing return (“TCEPR”) for each day or part of a day that a vessel is on a fishing trip. As a matter of practical convenience the master completes the TCEPR at sea on a daily basis under delegated authority from the permit holder.

[7] The top half of the TCEPR records individual tow data and is described as the “effort section”. It was common ground that data in this section associates fishing effort to the quantities of fish caught and that this association can then generate important information for monitoring the relative abundance of fish stocks and for managing sustainability risks. Data reported in the bottom half of the return, which is described as the “processing section”, provides important information about the use of the fish once they have been caught.

[8] The Aleksandr Ksenofontov is 103 metre factory stern trawler operating out of Lyttelton. It is worth approximately $850,000. Its first fishing trip in New Zealand under the charter agreement was from 18 February 2006 to 3 April 2006.

[9] When the fishing returns for that voyage were examined by fishery officers significant discrepancies between the effort data and the processing data emerged. In summary 32,160 kgs of bellowfish and 13,104 kgs of redbait were omitted from the effort section of the returns and 4,800 kgs of bellowfish were omitted from the processing section of the returns, a total of 50,064 kgs (50 tonne) of misreported fish. In each case, however, there was reference to the fish in the other section of the relevant return.

[10] Under the Act the maximum penalty for each offence against s230(1) is a fine of $250,000.

District Court Hearing

[11] Originally both the appellant and FMH were charged with the nine offences. However, at the sentencing hearing the Judge was invited to withdraw all charges against FMH, and he did so. An agreed summary of facts and two affidavits were before the Court. Further material was also presented by counsel for the appellant.

[12] The Judge proceeded on the basis that there was no allegation that the appellant had acted in a dishonest manner or that any economic advantages flowed from his actions. He recorded that counsel were agreed that an overall fine of approximately $17,000 would be appropriate and that he had been left with the impression that:

“… the offending is not as serious as Ms Butler [for the informant] would have me believe but somewhat above the very low level set by Mr Sullivan [for the appellant].”

The Judge considered that some emphasis needed to be placed on the need to preserve New Zealand’s fishery resources and on deterrence. On the other hand, he accepted that Fishcon was involved in scrutinising statutory returns (including the TCEPRs), that guilty pleas had been entered and that the appellant had a good record. A fine of $2,000 in respect of each charge was imposed accordingly.

[13] Turning to the forfeiture issue, the Judge noted that Mr Sullivan had appeared as counsel not only for the appellant but also for FMH and the owner without any objection from the informant. He also noted that the onus of establishing special reasons fell on the appellant and that the statutory expression “special reasons” had been explained in Basile v Atwill [1995] 2 NZLR 537 (CA) at 539:

“In the statutory context "special" is a limiting adjective. A special reason is one that is not found in the common run of cases. While not necessarily being categorised as "exceptional" or "extraordinary", it is one that may properly be characterised as not ordinary or common or usual. Section 107B(2) does not employ and contrast both expressions "special reasons relating to the offence" and "special reasons relating to the offender". Some considerations such as those relating to intent may affect both the offence and the offender. Those expressions are not mutually exclusive and where only one is used there is some room for overlap. In essence, to come within the exception in s 107B(2) the special reasons must relate to the facts involved in or connected with the commission of the offence in the particular case.”

Although that explanation referred to s107B(2) of the previous Fisheries Act, there is no suggestion that the interpretation of the same words in s255C(2) is any different.

[14] The “special reasons” advanced on behalf of the appellant, owner and permit holder were then recorded by the Judge:

“(1) The defendant did not intend to commit the offences;

(2) The difficulty with complying with the particular requirement to ensure all processing on the day was included in the relevant portion of the TCEPR of that day;

(3) FMH Limited and the owner of the vessel recognised their lack of skill and knowledge base in operating in compliance with New Zealand fisheries law;

(4) These weaknesses were actually addressed by the defendant company, at the behest of the owner, by employing a highly qualified reputable company with skilled personnel familiar with fisheries to train, supervise and audit compliance with fisheries laws by the vessel and master;

(5) That the contractor, in fact, undertook ongoing regular compliance briefings, training, supervision and auditing of the vessel and the master but failed to identify the problems that occurred or prevent them from occurring;

(6) All the feedback that FMH Limited and the owner received indicated that the systems they had employed were of high quality and there was no indication that there were any serious problems with the returns in question;

(7) The owner of the vessel was innocent of any offending;

(8) The offending in this case had no discernible impact on the fisheries resources concerned as it was all reported to the Ministry;

(9) That the offending is of a technical nature and relates to the failure to properly record the relevant information in both parts of the return where it is required to be reported rather than involving the reporting of false information.”

Each matter was then considered by the Judge.

[15] The Judge did not accept that the absence of an intention to commit the offence amounted to a special reason. While he accepted that the owner of the vessel and the permit holder were not responsible for the appellant’s omissions, the Judge noted that this factor did not relate to the offence. He said that he was unsure what the submission actually meant. If it meant that the appellant did not have a dishonest intention when he filled in the forms, then, said the Judge, that was accepted but it did not constitute a special reason. He continued:

“Presumably Mr Sullivan would have the Court infer that the omissions were the result of honest or inadvertent mistake. It is possible that the defendant, although an experienced master, could have made nine such mistakes on this occasion, but there is no evidence to that effect.”

It was then recorded by the Judge that there was nothing in the statement of facts about this aspect, that no statement had ever been made by the appellant to MFish officers, and that there was no affidavit or oral evidence from the appellant about this aspect.

[16] As to point (2) about difficulty in completing the returns, the Judge accepted that there had been a change in the forms which made them more difficult to complete. However, the Judge concluded that there was no evidence that the appellant had found difficulty in completing the forms and that the evidence indicated that the appellant had in fact correctly recorded catches in the past, although, the Judge acknowledged, that might have been before the changes to the form were made. It was also noted by the Judge that all persons involved in the industry were required to complete these forms.

[17] The next four points, (3) – (6), were dealt with by the Judge together because they all related to the engagement of Fishcon to ensure compliance with the Act. Although the Judge accepted that both the owner and FMH relied on the appellant and Fishcon to ensure correct compliance with reporting procedures, he noted that there was no oral or affidavit evidence from either the appellant or Fishcon as to its actual role in scrutinising the TCEPRs in question or any evidence from the appellant that he had relied on Fishcon when he was completing the relevant forms. The Judge went on to say:

“… Furthermore, there is a certain internal inconsistency in the reliance placed by the owner and FMH Ltd on their engagement of Fishcon, as a special reason. Fishcon was their agent. In respect of these offences Fishcon’s involvement did not prevent the omissions from occurring.

Putting all that aside, the fact that the owner and FMH Ltd engaged Fishcon is a reason. In my view it is not a special reason as Judge Ongley correctly, in my view, pointed out in Ministry of Fisheries v Abel Fisheries & Ors (23/2/1998, Wellington District Court, CRN 7085005665-5907 and ors at page 21) …”.

Notwithstanding that the Judge did not accept the involvement of Fishcon amounted to a “special reason”, he accepted that weight had to be given to this aspect of the case as part of the special reasons argument.

[18] With reference to point (7) the Judge concluded that the fact that the owner was innocent of any offending did not constitute a special reason, Basile v Atwill being authority for that view. Nevertheless he accepted that it was a factor to be taken into account.

[19] The argument in (8) that there had been no discernible impact on the resource did not impress the Judge. He noted that the Act places emphasis on correct reporting because, inter alia, of the difficulties in detection. Although he accepted the catch was properly recorded on other forms, he commented that mis-reporting can affect management of the fish resource. Again, however, the Judge indicated that he was prepared to take the factor into account.

[20] Finally, the Judge regarded the technical nature of the offending (raised in (9)) as a “neutral matter”. On the one hand, he said, the offences consisted of wrong entries on the forms providing data, while on the other it was a failure to record a significant amount of catch and the offending fitted squarely into what is proscribed by the Act.

[21] An issue of proportionality (if the Court reached the stage of having to consider whether or not to exercise its discretion) had also been raised by Mr Sullivan. When considering that issue the Judge said:

“… Although in this case the quantity of fish involved in the misreporting was 50 tonnes, the case could not be said to be in the serious category. It is modest offending. This is reflected in the amount of fines which I have imposed. The value of the vessel subject to forfeiture is considerable …”.

It was the Judge’s view that proportionality was not a special reason but that it should not be overlooked in the discretionary exercise.

[22] Weighing up all relevant matters the Judge concluded that there were no special reasons in this case. Nor did he consider that the various matters he was prepared to take into account added up to special reasons.

This Appeal

[23] For the appellant Mr Logan’s primary submission was that the Judge failed to give adequate weight to the fact that while there were omissions in parts of the form, all relevant fish had been reported and accounted for through the record keeping system and trail of documents. This submission was developed by Mr Logan with reference to the returns giving rise to the charges.

[24] Mr Logan also claimed that insufficient weight had been given to the fact that the owner and operator had taken every possible step to avoid the offending. In particular, Fishcon had been engaged to audit returns when the vessel reached port which, Mr Logan submitted, took this case out of the common run of cases. He said that once the case was looked at in the round it is apparent that the “special reasons” threshold was satisfied and that the Judge had erred by ordering forfeiture.

[25] For the respondent Mr Lange submitted that when deciding whether the reasons in a particular case take it out of the common run of cases it is necessary to take into account the overall statutory scheme and industry practices. He noted that the onus is on the appellant and that there was no evidence in relation to industry practices in this case. Indeed, he submitted, it is by no means uncommon for there to be an audit by a third party and the case law establishes that this does not constitute a special reason for non-forfeiture.

[26] In supporting submissions Ms Thomas argued that this was an appeal against the exercise of a discretion and that under those circumstances the usual principles relating to such appeals should apply. She submitted that the Judge had considered all relevant factors, reached a decision that was open to him, and that in all the circumstances there was no proper basis for interfering with his decision.

[27] With particular reference to the appellant’s contention that all fish had been reported and accounted for, Ms Thomas drew attention to the affidavit of Stefan Leslie, the deepwater manager for MFish, which explains the importance of the data provided by TCEPRs. She emphasised that even though in each case there had been reference to the fish in the other half of the return, there was nevertheless missing information about the effort involved in catching the fish or about what had happened to them after they had been caught.

[28] In his reply Mr Logan explained that three witnesses had attended the District Court to give evidence on behalf of the appellant in connection with the forfeiture issue. However, following discussion between the prosecutor and Mr Sullivan (who was ill and unable to appear in support of the appeal in this Court) it had been agreed that the matters to be traversed by the witnesses were not contested, and the witnesses were released. Subsequently disputes emerged about matters that counsel for the appellant thought were not in issue.

[29] At the conclusion of the appeal hearing I gave the respondent an opportunity to check whether there had been any cases in which a third party had been engaged to check TCEPRs after the vessel returned to port and before the returns were supplied to MAF. Mr Lange has now lodged a memorandum indicating that the most comparable case that he has been able to locate is Ministry of Agriculture and Fisheries v McManaway and Modesto Holdings Ltd & Ors (District Court, Invercargill, P A Moran DCJ, 11 December 1992). In his memorandum in response Mr Logan submitted that McManaway is distinguishable and the closest decision is in fact Basile v Atwill.

Discussion

[30] In my view, rather than being an appeal against the exercise of a discretion this is an appeal against the finding in the District Court that there were no special reasons in terms of s255C(2). Assuming that discretionary considerations can arise under that provision (and I leave that point open), they would only come into play if the Court had decided that there were special reasons and had moved to consider whether or not an order for non forfeiture should be made. The Judge’s remarks with reference to proportionality suggest that he also approached the matter on this basis.

[31] It is also important to keep in mind that this is a general appeal against sentence and that the District Court has not enjoyed any particular advantage such as technical expertise or the opportunity to assess the credibility of witnesses. While the appellant bears the onus of satisfying this Court that it should differ from the decision under appeal, this Court is nevertheless entitled to bring its own judgment to bear on the matter: Austin, Nicholas & Co Inc v Stichting Lodestar [2007] NZSC 103 at [5]. Having said that, I acknowledge that the Judge whose decision is under appeal is extremely experienced and highly respected.

[32] As mentioned earlier, a special reason is one that is not found in the common run of cases and can be properly categorised as not ordinary or common or usual: Basile v Atwill. Even though individual matters might not satisfy the threshold, a combination might do so. In Ministry of Agriculture and Fisheries v Hughes (CA52/95, 21 June 1995) the Court of Appeal explained:

“While it will not generally be possible to combine factors themselves normal or not unusual in offending of the kind involved and conclude that together they amount to special reasons for ordering non-forfeiture, we do not think it necessary to engage in over-analysis of what is a straight forward statutory test. It is not helpful to contract another test for the statutory test. The requirement clearly is for the Court to look at the offence or offences in the round and to determine whether there are matters that place the offending out of the ordinary run of cases so as to be categorised as special and for that reason call for the order arresting the statutory consequence.

The circumstances of the offender except so far as they bear upon the offence are not material. That the consequence of refusing the order is harsh must be accepted as legislative policy. The very difficulty in policing fisheries clearly is considered to justify serious consequences by way of deterrence. As was said in Basile v Atwill there are administrative provisions for ameliorating these in appropriate cases, s 107C(2).”

It should be added, however, that the administrative provisions previously vested in the Minister under s107C(2) have been replaced by s256 of the current Act under which a much more constrained power to provide relief has been vested in the Court. But that does not, in my view, require the test described in Basile v Atwill and MAF v Hughes to be revisited.

[33] With the benefit of those general observations I turn to the merits.

[34] It was not seriously disputed by Mr Logan that the Judge was entitled to reject the absence of intent as a special reason in this case. On the other hand, as the Judge appears to have accepted, the relative seriousness of the offending needs to be taken into account. Mr Logan described the offending as “simple omissions” (which I interpret as careless omissions) and contrasted that situation with the “rigging of returns” or other more serious conduct in relation to returns. He explained that the guilty plea was a pragmatic response to the strict liability imposed by s240 and the high threshold for defences under s241.

[35] Obviously, as recorded by the Judge and reflected by the fines he imposed, this offending could not be said to be in the serious category. The precise tag is not critical. Suffice to say it is very much towards the bottom of the scale of seriousness and that this is a factor that should be taken into account when looking at the offences in the round.

[36] Now I turn to the involvement of Fishcon. Although the Judge accepted that the involvement of this company needed to be taken into account, it seems to be implicit from his discussion that this factor did not weigh very heavily with him. He approached the matter on the basis that the master had not placed any reliance on Fishcon, that Fishcon was the agent of the joint venture partners, that Fishcon had failed to prevent the offending, and that MFish v Abel applied.

[37] In my view the role of Fishcon justified significantly greater weight than it appears to have received in the District Court. Moreover, I have reached the conclusion that MFish v Abel is distinguishable and that the Judge erred when he proceeded on the basis that that case was authority for the proposition that the involvement of Fishcon was not a special reason.

[38] For present purposes the most significant aspect of the Fishcon involvement arose from its representatives being required to attend at each landing of the vessel for the purpose of undertaking compliance checks. In his written submissions to the District Court Mr Sullivan advised the Court:

“33. … every single return completed by the master was reviewed by Fishcon and, where appropriate, amendments made, and then subsequently forwarded to FishServe (the Ministry’s agent for receipt of statutory returns).”

The Judge noted at paragraph [13] of his decision that Mr Sullivan’s submissions referred to the involvement of Fishcon in paragraphs 17 – 39 inclusive, that no formal objection had been taken by the prosecutor, and that he was “prepared to accept them as part of the evidence relating to special circumstances”. On the other hand, he seems to have been critical of the fact that there was no oral or affidavit evidence about Fishcon’s actual role in scrutinising the TCEPRs in question. Given Mr Logan’s explanation about the agreement reached between counsel before the District Court hearing and the Judge’s willingness to accept Mr Sullivan’s submissions as part of the evidence, I proceed on the basis that there is a proper evidential foundation for the proposition that Fishcon was specifically contracted to vet the TCEPRs before they were submitted to MFish.

[39] Without doubt this auditing responsibility, which had been allocated to a highly reputable independent firm with expertise in the fishing industry, was designed to avoid the very situation that arose. Given that each return included reference to the omitted fish in the other section of the return, it should have been apparent that there were omissions and that those omissions would have to be remedied before the returns were submitted to MFish. While it is true, as the Judge pointed out, that Fishcon failed to prevent the offending, the important point is that the owners had put in place an independent screening system that the owners could have reasonably expected would prevent the offending that occurred.

[40] This can be contrasted with the situation in MFish v Abel where the Russian owner of the vessels sought to establish special reasons on the basis of its innocent ownership and the precautions it had taken to prevent offending. But at p22 Judge Ongley concluded:

“… At its strongest, it [the owner’s case] depends on innocent ownership combined with a reliance on assurance that the masters were sufficiently experienced and tutored to be able to avoid breaches of quota management rules, along with an understanding that the charterer and sub charterer were reputable and reliable, exercising a measure of control and supervision that would prevent the commission of offences. [The Russian owner], while intending that offences should not occur, did nothing out of the ordinary to avoid the possibility of offences being committed. There was nothing unusual about the degree of supervision of the officers responsible for returns nor concerning the extent to which assurances of competence and supervision were sought or obtained. Most of the reasons which have been advanced concern [the Russian owner’s] intent, understanding and perception of the precautions in place to avoid offences being committed. There is nothing out of the ordinary in the actions which [the Russian owner] took to ensure such precautions.”

Significantly the Judge had observed earlier (at p19) that if the Russian owner had made a proper inquiry to enlist the assistance of a responsible branch of the New Zealand fishing industry there might have been a sounder basis to contend that it had advanced beyond mere intention to avoid quota management offending on its vessels “and had taken a positive step to prevent offending”.

[41] As Mr Logan said, the appellant has gone the extra mile in this case. Apart from taking all the precautions described in MFish v Abel, the appellant had contracted with a responsible company having expertise within the New Zealand fishing industry to vet the returns for the purpose of preventing this very type of offending. In other words, the precautions taken by the owner in this case went well beyond the type of general supervision in MFish v Abel and specifically targeted the fishing returns. On the authorities that had been cited this was well out of the ordinary and it is difficult to see what more the owner could have done to guard against human error on the part of the master when completing the returns.

[42] It is also my view that MAF v McManaway & Modesto is distinguishable. In that case Mr McManaway sought to avoid forfeiture of fishing quota on the basis that he had relied on a third party to “rectify” false returns. His allegation was that the third party had instigated the offending by volunteering to deal with paua in a way that would not be recorded against the quota and that Mr McManaway had relied on the third party’s assurance that it could “rectify” the returns. But it was conceded by Mr McManaway’s counsel that those actions did not relate to the offence of making a false entry and not surprisingly the Judge concluded that the matters relied on by Mr McManaway did not constitute special reasons.

[43] It is also significant that in MAF v McManaway & Modesto Judge Moran commented at p8:

“In any event I am far from persuaded that McManaway is not equally as culpable as [the third party] for the commission of the offences relating to false statements and returns.”

That can be contrasted with the entirely innocent owner in this case. I agree with Mr Logan that that case is well removed from the situation under consideration where the owner used an independent entity, with appropriate expertise, to scrutinise returns so as to ensure compliance with the law.

[44] The next factor that should be mentioned arises from the appellant’s ninth submission in the District Court - that the offending was of a technical nature. When sentencing the appellant the Judge commented at [6]:

“The forms … did not add up because they revealed in the first instance more fish were processed than were caught and in the second instance more fish were caught than processed. There were other forms on which the catches had been recorded correctly and this presumably was how the informant picked up the omissions.”

At a later point in his judgment the Judge responded to the ninth submission by saying that the technical nature of the offending was a neutral matter. It is not altogether clear whether or not he actually accepted that it could be categorised as technical offending.

[45] In my view this offending could not be accurately categorised as purely technical offending. The appellant pleaded guilty to material omissions which reflects that in some instances there was incomplete information about the effort involved in the catch and in other instances there was incomplete information about what had happened to the fish that had been caught. On the other hand, there is a record of the fish that were caught. So the offending needs to be kept in perspective. While it might not qualify as purely technical offending akin to such cases as Ministry of Agriculture & Fisheries v Johnson & Anor (District Court, Napier, CRN 5041009438-523, 14 August 1996, Judge Hole) or Ministry of Fisheries v Jacobs (District Court, Chatham Island, CR 5008003127, 5 March 1996, Judge Dalmer), it is nevertheless very much towards the bottom of the scale of seriousness.

[46] Now I step back and look at the offences in the round to determine whether there are matters that place the offending out of the ordinary run of cases so as to be categorised as special. Although numerous authorities have been cited there is not one case involving features that are close to this case. In particular, none of the cases have involved offending where: an entirely innocent owner faces forfeiture of a valuable vessel as a result of the offending; positive precautions were taken by the owner through the involvement of a reputable, independent and experienced third party to prevent the offending; while the offending comprises omissions on one half of the TCEPR there was reference to the omitted fish on the other half of the return; and the offending does not give rise to any allegation that the offender acted in a dishonest manner or that any economic advantages flowed from his actions.

[47] Once all those features are taken into account it seems to me that this case is well outside the ordinary run of cases and that the combination of features constitutes special reasons relating to the offence in terms of s255C(2) of the Act. Given that conclusion the order for forfeiture cannot stand.

Outcome

[48] The appeal is allowed and the order for forfeiture of the Aleksandr Ksenofontov is set aside. There will be no order for forfeiture. Leave is reserved for either party to apply further if any orders consequential upon the order for nonforfeiture are required.

[49] If any issues concerning costs arise and cannot be settled between the parties it will be necessary for counsel to submit memoranda to enable those issues to be determined by the Court.

Solicitors: Oceanlaw New Zealand, Nelson for Appellant
Crown Solicitor, Christchurch for Respondent