BETWEEN COMMISSIONER OF POLICE Applicant AND SHUI TONG WONG First Respondent YANFANG WU Second Respondent YUEN CHEUNG CHAN Third Respondent YANXIAN WU Interested Party

[2023] NZHC 2738

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-140

[2023] NZHC 2738

UNDER

Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

SHUI TONG WONG

First Respondent

YANFANG WU
Second Respondent

YUEN CHEUNG CHAN
Third Respondent

YANXIAN WU

Interested Party

Hearing:

27 - 28 February and 1 – 2 March 2023

13 March 2023 further submissions of the Applicant
6 September 2023 memoranda of Applicant and First Respondent

Counsel:

S M Earl and L S Lai for Applicant

A Simperingham and K Leung for Respondents

Judgment:

3 October 2023

[REDACTED] JUDGMENT OF HINTON J

This judgment was delivered by me on 3 October 2023 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Solicitors:           Meredith Connell, Auckland

Woodward Chrisp, Gisborne

COMMISSIONER OF POLICE v WONG [2023] NZHC 2738 [3 October 2023]

[1]    The Commissioner of Police (Commissioner) applies for forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (the Act) as set out in an application dated 6 October 2021, as follows:

(a)Assets forfeiture orders under s 50 of the Act regarding restrained property, being funds previously held in various bank accounts in the name of the first respondent, totalling $12,659.19 and accrued interest (Mr Wong’s Bank Funds); cash in the sum of $257,280.10 seized during a search of [redacted], Auckland and from Mr Wong’s person on 14 March 2017 and accrued interest (Te Atatu Road Cash); and cash in the sum of $23,376 seized by police from the third respondent on 14 March 2017 and accrued interest (Mr Chan’s Cash).

(b)A profit forfeiture order under 55 of the Act against Mr Wong in the sum of $404,280, with orders that Mr Wong’s Bank Funds and the Te Atatu Road Cash be realised to meet that order.

(c)A profit forfeiture order under s 55 of the Act against Mr Chan in the sum of $23,376, with an order that Mr Chan’s Cash be realised to meet that order.

[2]    The profit forfeiture orders are sought only in the event that not all of the restrained funds are made subject to assets forfeiture orders.

[3]    The Commissioner’s position is that all of the assets are tainted in that they are derived from manufacturing, possession and sale of methamphetamine and/or in the case of Mr Wong from unlawful lending, all of which are significant criminal activities.1 Alternatively, the Commissioner says the respondents unlawfully benefitted from these activities. The Commissioner has filed affidavit evidence from Detective Alexandra Ramsay, Sergeant Benjamin Bergin, Matthew Galvin (a specialist investigator in the financial crime group of the police) and Detective Sergeants Stewart Hunter, Hamish Edwards and Joshua Potier.

1      The Commissioner originally relied also on benefit fraud but did not pursue that point.

[4]    Mr Wong accepts that all of the alleged criminal activities are significant criminal activities. He opposes the Commissioner’s application for assets forfeiture orders on the basis that his funds are not tainted because he says they are not acquired from these activities. He admits that as to $135,000, profit forfeiture orders can be made on the grounds that he had derived up to this amount from unlawful lending activities but otherwise opposes profit forfeiture orders.2 To the extent any forfeiture orders exceed $133,439, Mr Wong seeks relief under ss 51 and 56 of the Act, on the basis he will suffer undue hardship if his funds are forfeited above that amount. That is, he seeks relief such that the net effect is that a total of $136,500 is refunded to him. Mr Wong has filed several affidavits in support of his opposition, three from himself and others from Mr Shane Hussey, Ms Yanfang Wu (Ms Wu), Ms Yanxian Wu (Ms YX Wu), Mr James Wong and from Dr Zhixiong Liao.

[5]    Mr Chan filed a notice of opposition and supporting affidavit when earlier represented by Mr Hamblin. Mr Hamblin filed a memorandum seeking leave to withdraw on 3 February 2023, and I granted leave at the outset of the hearing.       Mr Chan has been deported to Hong Kong. He has been served by email with all documents filed in the proceeding, provided with a copy of the casebook and reminded of the hearing date. He was offered an opportunity to take part by AVL link but has taken no further steps in this proceeding. He was also given notice of cross- examination. As the Commissioner submits, his non-compliance with that notice has the consequence that his affidavit must not be used as evidence and the matter proceeds against him effectively by way of formal proof.3

[6]    A settlement was reached with the second respondent, Ms Wu and the interested party, Ms YX Wu, in respect of their interests in the proceeding, which was approved by orders of Walker J in a judgment dated 11 October 2021.4  Ms Wu  is  Mr Wong’s partner and Ms YX Wu is Ms Wu’s sister.

2      As a result of my later finding as to the date of unlawfulness, this figure would change to $105,000.

3      High Court Rules 2016, r 9.74.

4      Commissioner of Police v Wu [2021] NZHC 2713.

Drug offending of Mr Wong and Mr Chan

[7]    On 3 August 2018, having pleaded guilty and been convicted of charges of conspiring to manufacture methamphetamine and possession of material and equipment with the intention to manufacture methamphetamine and an additional charge of possession of 22.3 grams of methamphetamine, Mr Wong was sentenced to nine years and nine months’ imprisonment with a minimum period of imprisonment of four years and ten months.5

[8]    Mr Chan pleaded guilty in October 2017 to charges of conspiring to manufacture methamphetamine and possession of material and equipment with the intention to manufacture methamphetamine. He was sentenced to nine years and eight months’ imprisonment, with a minimum period of imprisonment of four years, ten months.6

[9]    The offending took place in early 2017. It was large-scale and sophisticated. Chinese authorities located a consignment of 60 boxes, each containing two 10-litre plastic containers marked as dishwashing liquid in Guangzhou, China, destined for New Zealand. In fact a number of the boxes contained t-boc methamphetamine which is created from methamphetamine and through the addition of hydrochloric acid and an evaporation process, it can be reversed back into methamphetamine. Chinese authorities removed some and left a total of 160 litres of t-boc methamphetamine in 16 plastic containers. This quantity is capable of producing 46 kilograms of pure methamphetamine.

[10]   On 15 February 2017, the consignment was delivered to the home address of a Ms Liang who was the catcher in the syndicate. Mr Wong contacted her the same day and advised her he was the person that Mr Yang, based in China, had advised would collect the consignment. Mr Wong and Mr Mingsisouphanh then accompanied a furniture removal company truck in transporting the consignment from Ms Liang’s address  to  a  Storage  King  facility  where  it  was  placed  into  a  storage  unit.   Mr Mingsisouphanh left for Sydney on 18 February 2017.

5      R v Wong [2018] NZHC 1973.

6      R v Chan [2020] NZCA 486.

[11]   On 19 February 2017, Mr Chan arrived from Hong Kong on a Canadian passport and on 22 February he and Mr Wong visited the storage unit and inspected the consignment. They visited various rental properties in Auckland, which the Commissioner considers was for the purpose of leasing a property at which to convert the t-boc methamphetamine into pure methamphetamine for distribution. Mr Mingsisouphanh returned to New Zealand on  23  February  and  on  27  February Mr Chan left New Zealand for Hong Kong.

[12]   In the following days, Mr Wong and Mr Mingsisouphanh imported three sets of packages containing equipment for converting the t-boc methamphetamine into consumable methamphetamine. Mr Wong had the packages delivered to the home addresses of family members, using his nephew and nieces as unwitting recipients. Mr Wong told them that the packages contained a washing machine. The packages all contained false descriptions on their labels. The first set of packages, for example, stated the contents as being two blenders and two miniature blenders. They in fact contained a rotary evaporator used to remove solvents from a chemical solution by evaporation.

[13]   The same day the packages arrived, Mr Wong and Mr Mingsisouphanh collected them from his relatives and deposited them into the storage unit with the t- boc methamphetamine.

[14]   On 11 March 2017, Mr Chan arrived back in Auckland from Hong Kong, via Kuala Lumpur and the Gold Coast.  A Lynfield residential address was rented in   Mr Chan’s name from 13 March 2017.

[15]   On 14 March 2017, further packages of equipment were delivered, again to Mr Wong’s  relatives.  One contained an agitator, another, which was delivered to  Mr Wong’s niece, contained glass condensers, glass flasks, motorised items and a large plastic item. Some packages were picked up by Mr Chan and Mr Mingsisouphanh, others by Mr Wong.

[16]   On 14 March 2017, all equipment was taken to the Lynfield address and     Mr Wong, Mr Chan and Mr Mingsisouphanh transported the t-boc consignment from the storage unit to that same address.

[17]   Also on 14 March 2017, Mr Chan was arrested in Mt Roskill. Mr Wong, Mr Mingsisouphanh and others, were arrested in Newmarket. Mr Wong was in possession of a bag containing five cellphones, six glass tubes, a notebook and $6,000 in cash.

[18]   Police searched the home address of Mr Wong and Ms Wu at [redacted]. They located $257,280.10 in cash concealed in three bedrooms inside two suitcases and in a quilted duvet case.

[19]   In the upstairs bathroom they also located an ice-cream container holding one zip lock bag containing 236 milligrams of methamphetamine, one round plastic container containing 494 milligrams of methamphetamine and one plastic bag containing 22.3 grams of methamphetamine. Police also located equipment including scales and empty plastic bags.

[20]Mr Chan’s Cash was located by police on his person.

[21]   A residential address of Mr Mingsisouphanh was searched and various quantities of drugs, including methamphetamine, located there.

[22]   Police searched another storage unit which was leased in Mr Wong’s name at Storage King in Avondale and found two five-litre containers of hydrochloric acid. As noted above, hydrochloric acid is used to convert t-boc methamphetamine into pure methamphetamine.

Assets forfeiture orders

Relevant principles

[23]   For an assets forfeiture order to be made, the Commissioner must establish on the balance of probabilities that the property is “tainted property” under s 50(1) of the

Act. If the Court is satisfied that property is tainted property, the Court must make an assets forfeiture order in respect of it.

[24]   The definition of tainted property is broad. Under s 5(1) of the Act, property is captured if it was wholly or in part acquired or derived directly or indirectly from significant criminal activity. Property is also captured if it was derived from or acquired as a result of more than one activity if at least one of those activities is a significant criminal activity. The respondent need not be engaged in the significant criminal activity personally, provided the property was wholly or in part derived from significant criminal activity.7

[25]Section 6 of the Act defines significant criminal activity as:

6        Meaning of significant criminal activity

(1)In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending—

(a)that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or

(b)from which property, proceeds, or benefits of a value of the threshold amount or more have, directly or indirectly, been acquired or derived.

(2)A person is undertaking an activity of the kind described in subsection

(1) whether or not—

(a)the person has been charged with or convicted of an offence in connection with the activity; or

(b)the person has been acquitted of an offence in connection with the activity; or

(c)the person’s conviction for an offence in connection with the activity has been quashed or set aside.

(3)Any expenses or outgoings used in connection with an activity of the kind described in subsection (1) must be disregarded for the purposes of calculating the value of any property, proceeds, or benefits under subsection (1)(b).

7      Doorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173 at [23].

[26]   Criminal proceeds deposited into bank accounts will taint the entirety of the funds because “[e]ven modest contributions to an asset [are] sufficient to taint the asset”.8 However, as the Commissioner acknowledges, cash and bank funds are conceptually different. Cash is by nature divisible, whereas a bank account is a singular chose in action, i.e. a debt owed by the bank to an account-holder. It is therefore necessary in the case of cash for the Commissioner to prove on the balance of probabilities that all of it or some identifiable quantum of it was acquired wholly from significant criminal activity in order to obtain an assets forfeiture order over all or the identifiable part.9 Property is not indirectly derived from significant criminal activity where it is acquired entirely through legitimate means, even where that was made possible only through the use of illegitimately obtained funds for day-to-day living expenses.10

[27]   It follows from s 6(2) that it is not necessary that the person engaging in the significant criminal activity has been charged or convicted of an offence. Although proceedings under the Act are usually associated with criminal proceedings, the nature of a proceeding under the Act and the burden of proof are materially different. Courts readily infer, as the Commissioner submits applies here, that criminal activity took place over a greater period of time than that established beyond doubt in a criminal proceeding.11

[28]   Inferences can be drawn from a number of separate items of circumstantial evidence, including established criminal activity, disparity between assets and legitimate income, and a lack of credible explanation. In Commissioner of Police v de Wys,12 the Court of Appeal confirmed the importance of unexplained money as a strand of circumstantial evidence:

[71]     We accept the Commissioner’s submission that the possession of large sums of unidentified income is potentially very significant. If the cash sums

8      Commissioner of Police v Cheah [2018] NZHC 2825 at [26]; aff’d Cheah v Commissioner of Police [2020] NZCA 253.

9      I agree with the Commissioner’s submission that the identifiable part would not need to be the specific notes, rather, an identifiable quantum of cash. In light of my ultimate finding, the point does not arise.

10 Commissioner of Police v Drake [2017] NZHC 2919 at [108]–[110].

11 Hayward v Commissioner of Police [2014] NZCA 624 at [15] citing Commissioner of Police v Hayward [2012] NZHC 1097 at [20] and [24].

12 Commissioner of Police v de Wys [2016] NZCA 634 at [71].

cannot be adequately explained then this will tend to support an inference that the relevant cash has been sourced from illegitimate or criminal activity. Referring to the other circumstantial evidence in this case will then assist in determining the likely nature of such activity.

[29]Similarly, in Commissioner of Police v Dryland, the Court of Appeal said:13

[34] The question then is this: do the proved facts as at 15 April 2010 provide a reliable basis for drawing an inference that Mr Dryland derived or acquired the cash from significant criminal activity? The starting point is Mr Dryland’s unexplained income in the preceding three years amounting to

$158,148. Significant criminal activity, involving a large cash transaction, is the only likely option if the money was not lawfully earned.

Is Mr Wong’s unlawful lending a significant criminal activity?

[30]   Mr Wong told the police that his cash came in part from loan shark lending which at the outset of this proceeding he accepted was significant criminal activity. However, the point needs to be addressed. As the Crown acknowledges it is not as straightforward as first thought.

[31]   Mr Wong says that from 1998 he met Chinese gamblers and “loan sharks” at SkyCity Casino, Auckland. He says the loan sharks generally loaned money to gamblers with a weekly interest rate of eight to ten per cent. He says that he did not loan money to gamblers directly but that, from 2000, he started loaning money to “a few retail loan sharks” with a weekly interest rate of four per cent. The retail loan sharks would “sub-loan” Mr Wong’s funds to gamblers.

[32]   Mr Wong says he would lend up to $20,000 cash to each retail loan shark and that, at any given time, he loaned money to up to three retail loan sharks. He estimates he made a profit on these loans averaging $15,000 per year in the years 2001 to 2017.14 He says all loans were given and repaid in cash and he has no written records of exactly how much he loaned, nor how much interest he earned. He also says he does not know the legal names of the retail loan sharks that he dealt with.

13 Commissioner of Police v Dryland [2013] NZCA 247.

14 Although Mr Wong provides no corroborating evidence to support his statements about the existence or extent of his loan shark lending, his evidence as to his lending activities and average profit was not contested by the Commissioner and I accept it for the purposes of this application.

[33]   The threshold amount for the purposes of s 6(1)(b) is $30,000 and Mr Wong says he derived a benefit of well above that figure.15

[34]   The Commissioner says (and Mr Wong’s counsel accepts) that significant criminal activity arises here either under:

(a)Section 103 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA), in that neither Mr Wong nor the loan sharks provided initial, nor continuing disclosure in accordance with ss 17, 18, 19, 32, 35 and 37 of the CCCFA. In particular, s 32 requires disclosure to be in writing and there was no written disclosure.

(b)Unlawful provision of financial services under s 11 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA).

[35]I address each in turn.

CCCFA

[36]   The provisions which the Commissioner relies upon fall within Part 2 of the CCCFA which applies only to consumer credit contracts.16 In closing submissions the Commissioner responsibly conceded that Mr Wong’s lending to loan sharks probably does not fall under the definition of a consumer credit contract17 and is likely therefore not in breach of s 103. The Commissioner submits, however, that non-compliance of the loan sharks with the provisions of the CCCFA constitutes an offence under s 103 and that Mr Wong has indirectly benefited from this significant criminal activity. In particular, the Commissioner relies upon alleged breaches of ss 17, 18, 19, 32, 35 and

37. These sections require that a creditor in a consumer credit contract provide disclosure about various matters.

15     Criminal Proceeds (Recovery) Act 2009, s 5(1).

16     Credit Contracts and Consumer Finance Act 2003 [CCCFA], s 10.

17     Section 11.

[37]   In this regard, the Commissioner faces a significant hurdle. While I can accept that the contracts between the loan sharks and the individual borrowers amounted to consumer credit contracts and are therefore subject to the disclosure requirements under the CCCFA, there is no evidence as to the content or nature of these agreements to determine whether the disclosure obligations were met or not. Absent any information about the details of those contracts, I cannot be satisfied that they breached the CCCFA and amount to an offence under s 103.

FSPA

[38]   Section 11(1) of the FSPA states that a person who is in the business of providing a financial service must be registered for that service and, if required, be a member of an approved dispute resolution scheme. Every individual who knowingly breaches s 11(1) commits an offence and is liable on conviction to imprisonment for a term not exceeding 12 months or to a fine not exceeding $100,000, or to both.18

[39]   I accept that through his lending activities Mr Wong was a provider of a financial service — he was a creditor under a credit contract.19 I also accept that by lending to loan sharks over a lengthy period with some regularity Mr Wong was in the business of providing a financial service.20 In contravention of s 11(1), he was not registered. The issue of the mens rea requirement of s 11(2), namely that Mr Wong “knowingly” breached s 11(1), still has to be satisfied. While there was some questioning over whether Mr Wong knew he was in breach, the Crown arguably did not have to prove knowledge on his part in circumstances where he admitted his actions were a crime.

[40]   In any event, Mr Wong’s actions amount to an offence under s 17(3) of the FSPA. As noted above, Mr Wong was in the business of providing a financial service by way of his lending to loan sharks. He was not registered and was therefore required by s 17(1)(a)(ii) to notify the Registrar of Financial Service Providers. He did not do so. In those circumstances, he has committed an offence under s 17(3) and is liable

18     Financial Service Providers (Registration and Dispute Resolution) Act 2008 [FSPA], s 11(2).

19     Section 5(1)(e).

20     Section 6.

on conviction to a fine not exceeding $10,000.21    Unlike offences under s 11(1), offences under s 17(3) have no mens rea requirement.

[41]   Based on Mr Wong’s evidence, from his lending activities he has derived benefits of over $30,000. I can properly treat these earnings as directly acquired from his offending under s 17(3) of the FSPA. The activity therefore meets the second limb of the definition of significant criminal activity for the purposes of the Criminal Proceeds (Recovery) Act. That Mr Wong has not been charged with an offence under s 17(3) is not relevant as there is no requirement that Mr Wong be charged or convicted of an offence for me to conclude that the activity was significant criminal activity.22

[42]   On this basis I consider that any money Mr Wong derived from lending to loan sharks from the date that Part 2 of the FSPA came into force, being 16 August 2010, is tainted property.

Assets forfeiture against Mr Wong

[43]   Mr Wong (and Mr Chan) were arrested before the manufacturing process began. There is no evidence of funds being received by Mr Wong from the 2017 offending, although the evidence is that he expected to make a large return from it. The Commissioner says there is sufficient evidence for the Court to find on the balance of probabilities that Mr Wong’s Bank Funds and the Te Atatu Road Cash were derived wholly from unlawful lending and from previous offending of a similar nature to that of which he has been convicted, namely manufacturing, possession and/or sale of methamphetamine. All of these fall into the category of significant criminal activities, which as noted is not disputed.

[44]   I accept it is likely that Mr Wong had previously been engaged in and profited from drug offending:

(a)Mr Wong was in possession of a large sum of cash, which I find below had no legitimate source. Mr Wong stopped working at all from 2015. He had no declared income from then onwards. Even for the years from

21     Section 17(3).

22     Criminal Proceeds (Recovery) Act, s 6(2).

13 October 2010 to 13 October 2017, Mr Wong’s only declared income to the Inland Revenue Department (IRD) totalled $18,232. The existence of very large amounts of cash, without plausible explanation, supports the inference that the cash was derived from criminal offending.23

(b)There is no question that Mr Wong has been involved in large scale drug offending based on his convictions.

(c)I agree with the Commissioner that the overall circumstances and sophisticated nature of the 2017 conspiracy and Mr Wong’s senior role within the syndicate, indicate experience on his part in drug offending, and a situation where he had built up trust with other members of the syndicate, including those based overseas. I consider it very unlikely he would have played the part he did in the 2017 drug conspiracy as a beginner.

(d)I further infer that Mr Wong was involved in prior similar drug offending to the 2017 offending from notebook entries from 2016, which I agree with the Commissioner bear significant similarities to his 2017 notebook entries relating to the t-boc importation. I also agree with the Commissioner that Mr Wong’s explanations about these entries, particularly given where the notebook was found, are wholly implausible. Mr Wong claimed that he did not recognise the 2016 notebook yet it was found in his bag which he was carrying when arrested. It matched in layout the 2017 notebook found at his home. It had similar entries to the 2017 notebook, for example, “Paid Hong Kong man”, the evidence having established that “Hong Kong man” was Mr Chan.

(e)I consider it significant also that Mr Wong was involved in a commercial importation of equipment in 2015 which had a similar description to the false descriptions on the packages delivered to his

23     Commissioner of Police v de Wys, above n 12, at [71].

relatives in  2017,  in  terms  of  the  goods  contained.  I  also  find  Mr Wong’s explanation as to why he was importing the 2015 goods wholly implausible. This was that a friend in China suddenly had goods which he expected Mr Wong to sell on his behalf. There is no evidence that Mr Wong was involved in any such business. I consider it likely that these 2015 importations were also of equipment designed for use in methamphetamine manufacture.

(f)Mr Wong had rented a storage unit for at least one year that was being used to store materials for this importation. This suggests its use was to be for more than the 2017 importation.

(g)Mr Wong travelled regularly to Australia and parts of Asia between 2010 and 2015. Notably he travelled to Sydney, Australia on six occasions, to Guangzhou, China, once  and  to  Hong  Kong  once.  Mr Wong told police he met Mr Mingsisouphanh  while in Sydney.  Mr Mingsisouphanh was a key player in the 2017 drug conspiracy.  Mr Wong last  went  to  Sydney  in  December  2015.  Accordingly, Mr Wong was associated with Mr Mingsisouphanh for at least a year prior to the 2017 conspiracy.

(h)Mr Wong also gambled extensively at SkyCity Casino, losing large sums of money as set out subsequently.

(i)I also accept that the quantity of methamphetamine at Mr Wong’s home, being 22.3 grams and packaged in a zip lock bag, a plastic container and a plastic bag, is indicative of possession of methamphetamine for supply. I reject Mr Wong’s explanation that it was all for personal use. The other equipment found there, including scales and empty plastic bags,  alongside  the  notebook  found  on  Mr Wong, are also indicia of supply. I note also that Mr Wong had possession of five phones on arrest. All of these are typical of involvement in drug dealing generally. The fact that Mr Wong was not ultimately convicted of possession for supply does not preclude a

finding to the above effect under the Act. The sophistication of the t- boc methamphetamine importation is consistent with Mr Wong being an experienced commercial dealer of methamphetamine with a network of customers to whom the methamphetamine was targeted.

(j)Overall, Mr Wong’s lifestyle was, as the Commissioner submits, consistent with drug dealing over a period of time before the 2017 conspiracy for which he was convicted.

(k)It seems that the Te Atatu Road Cash was all brought to the house in a plastic bag sometime after Mr Wong reunited with Ms Wu,  i.e. sometime in the latter half of 2016. Ms Wu said that it was not usual for Mr Wong to have large sums of cash during the time they were married which was between 2000 and 2005. The fact that she was clearly aware of the large amount that he brought home in late 2016, but not aware of cash earlier, strongly suggests it was not saved over a long period as Mr Wong says. Further, I note that he claimed a large part of his cash savings were derived between 1999 and 2002, for most of which he was living with Ms Wu.

(l)Mr Wong operated his affairs outside the banking system. He says he chose to keep his cash at home as he was scared of the IRD and chose to avoid banks to prevent himself from leaving too many paper trails. This also is consistent with the funds being from illegal sources. Whether he was truly concerned about the IRD or not, it can reasonably be inferred he was avoiding notice by the authorities generally.

(m)The Commissioner’s evidence is that the New Zealand currency component of the Te Atatu Road Cash appeared to be largely recent. The notes consisted of series six and series seven bank notes. Series six notes were released between 1999 and 2015/2016 while series seven were released in October 2015 (as to the $5 and $10 denominations) and May 2016 (as to the remaining denominations). On the face of it, the series seven notes would not have been saved over time. All of the

notes were in good order. Mr Wong claimed that he would turn over old notes for new ones but I consider that implausible. If his case, which presumably had been prepared in advance given he says at all points he was concealing the cash from the authorities, was that the cash represented long-term savings, it would make no sense to refresh the cash. And if his case was that he refreshed the cash, it would make no sense to still have some old notes.

(n)The Te Atatu Road Cash was, as noted, heavily concealed, being located in two suitcases secured with locks and concealed with a quilted duvet.

(o)Between about 2015 and 2016 Mr Wong paid $10,000 to his son and in December 2015 he took his son on a trip to Australia, paying for his airfare and staying at a hotel. There is no suggestion of expenditure of such a degree on his children in earlier years. This suggests Mr Wong had come into significant money during this time.

[45]   Mr Wong says that his cash and bank funds come from his undeclared income and savings over many years up to 2015 and from profits from his loan shark lending, which, as noted, he estimates at $15,000 per annum. He says the undeclared income came from working at various café and takeaway businesses from 1999 to 2015. He says his greatest cash income was between 1999 and 2002 while he was running a fish and chip shop and that he received $1,000 per week during that period. Other than during that period, Mr Wong says he received undeclared income ranging between

$350 and $780 per week up to 2015. The actual sums claimed are somewhat confusing. There are no records, even of Mr Wong’s, to support any of the figures.

[46]   Mr Wong’s bank accounts show very little day to day activity over the relevant period. He says that he lived a cash-based lifestyle.

[47]   I do not accept that Mr Wong received undeclared wages at anything other than a minor level that can be disregarded. There is no verifying evidence, independent or otherwise, including from any employer. Even in terms of Mr Wong’s assertions, the

various weekly figures cannot be said to be other than plucked out of the air. As I have noted above, in a number of respects I do not believe Mr Wong’s evidence. I also take into account that the type of work he says he was engaged in after 2002 would have attracted very low remuneration, particularly for the period he relies on which is nearly a decade ago. Given all of the circumstances, including the fact that Mr Wong has serious drug related convictions and that his claims amount to a major fraud on the IRD, I reject his allegations  as  to  undeclared  wages.  The  only  evidence  as  to Mr Wong’s income is the amount of $18,232 declared to the IRD between 2010 and 2017. For the purposes of this application I treat Mr Wong’s income from wages as being $2,000 per year.

[48]   Mr Wong also says he lived very frugally, spending materially less than the Statistics New Zealand survey figure estimating a single person household would spend approximately $116,000 over the period from 2010 to 2017, excluding rent, that is approximately $17,000 per annum.  The  mean  rent  in  the  area  within  which Mr Wong rented a three bedroom house ranged from approximately $300 to $450 per week during this period. However, Mr Wong says that, including rent, his living costs including child support were $400 per week from September 1997 to March 2005;

$300 per week from April 2005 to March 2016 and nil from 31 March 2016 to March 2017. I find that wholly implausible. In the latter period Mr Wong claimed Ms Wu was meeting all his living expenses. She denied that and I reject his claim in that regard. I accept that some items of his expenditure may have been very low, especially over earlier years, such as food. However, I do not accept that Mr Wong’s expenditure or “living costs” were as low as he claims at any point.

[49]   Significantly, Mr Wong had a number of extraordinary costs which could not remotely be described as frugal, including the following:

(a)between August 2000 and 2017, he spent a total of $1,054,990 at SkyCity Casino, with an overall loss of $181,790 over this period;

(b)between 2010 and 2015, he went on nine overseas trips to Australia, Brunei, China and Hong Kong. Mr Hussey estimated expenditure of

$32,000 but that seemed to be cost of travel only, whereas Mr Wong

would have incurred other costs and on one occasion Mr Wong spent three months in Australia; and

(c)on Mr Wong’s account he was consuming methamphetamine regularly by at least December 2016 and I would expect, given all of the above, he was doing so well before that. Mr Hussey allowed a sum of $91,000 for Mr Wong’s methamphetamine use.

[50]   This evidence is wholly inconsistent with Mr Wong’s claim that he has lived frugally and saved money up to 2015. I assess Mr Wong’s expenditure, excluding SkyCity gambling, at an average of $20,000 per annum since 2000, at an absolute minimum. In addition, he has lost an average of $10,000 per annum since 2000 at SkyCity, bringing his expenditure to a minimum of $30,000 per annum on average.24

[51]Many years ago, Mr Wong received two lump sums. In 1997 he received

$60,635 as part of a relationship property settlement and in 2002 he received $82,000 from the sale of his fish and chip business or so it seems on the face of the documents provided. Aside from a $10,000 deposit made on sale of the business, these amounts were deposited into Mr Wong’s ASB account. He deposes that he later withdrew this money for gambling and loan shark lending, keeping the profits from these activities as cash. As explained below, I am satisfied that these lump sums received long ago, would have been spent, along with any legitimate income received by Mr Wong, well before 2016.

[52]   I do not ignore the careful analysis provided by Mr Hussey,  in support of   Mr Wong’s claims. However, each of Mr Hussey’s models relies on inputs which, for reasons set out in this judgment, I do not accept, particularly in terms of claimed cash savings. Cases such as this are simply not capable of any sensible or reliable forensic analysis.

[53]   Taking a helicopter view of such evidence as there is, Mr Wong received income from loan shark lending that was not unlawful from 2000 up until mid-2010

24 This is a very conservative assessment. I suspect Mr Wong’s true expenditure was materially greater. He was, for example, also involved in other forms of gambling. I also note that although I have averaged Mr Wong’s SkyCity losses, most were incurred by 2008.

of $15,000 per annum. I also allow for income from wages from 2000 of $2,000 per annum. Balanced against expenses of at least $30,000 per annum, Mr Wong therefore had a shortfall of $13,000 per annum, at a minimum. On that basis, the two capital sums would have been exhausted by 2011/2012. His only known income from that time came almost entirely from unlawful lending. On that basis, I can safely conclude that any cash Mr Wong had in 2016 was derived from significant criminal activity, being unlawful lending and drug offending.

[54]   As far as the foreign currency component of Mr Wong’s Te Atatu Road Cash is concerned (NZD 4,280.10), I do not accept the suggestions from Mr Wong, for example, that it was “[his son’s] lucky money/red pocket money”, as that was not supported by either Ms Wu’s evidence or his son’s evidence. His son said he did not know the foreign currency was even there. For the same reasons set out above, I am equally persuaded on the balance of probabilities that this money was derived from significant criminal activity.

[55]   The combination of the above factors leads me to conclude, with regard to the Te Atatu Road Cash, that on the balance of probabilities this cash was wholly derived from drug offending and unlawful lending both of which constitute significant criminal activity. It is therefore tainted property and must be the subject of an assets forfeiture order.

[56]   As to Mr Wong’s bank accounts, the Commissioner points, in addition to the matters set out above, to cash deposits for which she says there is no possible legitimate source, nor any explanation from Mr Wong. Mr Wong received various cash deposits, totalling $27,500, into his bank accounts, which the Commissioner submits means his Bank Funds are tainted:

(a)the ANZ term deposit account was opened on 6 December 2013 with a

$10,000 deposit which was funded by an equivalent cash deposit;

(b)the ASB account balance of $517.07 was funded by cash deposits of

$3,500 in 2011 and 2012; and

(c)the balance of $837.10 in the ANZ 35 account was funded by $14,000 in cash deposits between December 2010 and February 2011. Most of that money had since been spent on SkyCity and on a $6,000 withdrawal to cover the drug syndicate expenses.

[57]   Mr Wong said that these bank balances could be loan shark-related. Given all of the deposits were after August 2010 when Part 2 of the FSPA came into force, these deposits can be categorised as acquired at least in part from unlawful lending and therefore tainted. As set out earlier, if any tainted money can be traced into a bank account, the entire asset is tainted. Given the Commissioner has the burden of proof, Mr Wong’s acknowledgement on its own would not be sufficient. However, the combination of his evidence and all of the matters set out above leads me to conclude that the deposits do come from unlawful lending or drug offending. Amongst other things, they were not derived from gambling as Mr Wong says he kept his gambling profits as  cash.  Nor were they derived  from  the two lump sums  he received as   Mr Wong said he withdrew that money for gambling and loan shark lending and kept the profits as cash. Based on my findings above there was no potentially legitimate source for the deposits made.

[58]   I therefore find that the application for assets forfeiture orders has been made out in respect of all of Mr Wong’s restrained assets.

Assets forfeiture against Mr Chan

[59]   The cash found on Mr Chan amounted to NZD 23,376 and was in a variety of currencies, including New Zealand, USA, Thailand, Malaysia, Laos, China, Canada and Hong Kong.

[60]   I accept the Commissioner’s submission that on the balance of probabilities, Mr Chan’s Cash is tainted property, having likely been derived from drug offending:

(a)Mr Chan’s role in the syndicate is indicative of his experience in drug offending. Mr Chan accepted that he was a regular user of cannabis and methamphetamine in Hong Kong. As noted by Gordon J at sentencing, Mr Chan travelled to New Zealand twice with the “express

purpose of committing [the offence]”.25 This is indicative of his seniority in the enterprise. His role was to assist with the production of methamphetamine from the t-boc methamphetamine.

(b)The cash was found inside a small shoulder bag in Mr Chan’s possession when he was arrested by police. Carrying cash in a variety of currencies is consistent with previous drug offending, where drug traffickers wish to minimise interactions with foreign exchange providers.

(c)I accept it is likely that Mr Chan had been earning an income from drug offending for some time. Mr Chan’s affidavit evidence having been set to one side, there is no other evidence as to likely sources of funds. Further, I note Mr Chan claimed the money came from wages but it is highly unlikely he would have been paid wages in the variety of currencies he was carrying.

(d)The evidence is that Mr Wong was meeting some expenditure of the syndicate, including “Hong Kong man” (Mr Chan) based on his notebook entries. Mr Wong’s Cash being tainted, it would follow to that extent that Mr Chan’s Cash is also tainted.

[61]   I find that the grounds for an assets forfeiture order in respect of Mr Chan’s Cash are therefore made out.

Profit forfeiture orders

[62]   As all of the restrained funds are the subject of assets forfeiture orders, the application for profit forfeiture orders becomes redundant. I do not address that application except to say that the Commissioner’s case in that regard is stronger still than in respect of assets forfeiture and I would have made orders as sought against both Mr Wong and Mr Chan. Mr Wong accepted that a profit forfeiture order could

25     R v Chan [2017] NZHC 2924 at [11].

be made as to $135,000 but, for the reasons advanced by the Commissioner, I would have made an order to the full extent of the application made.

Relief from forfeiture — Mr Wong

[63]   Mr Wong applies under s 51 and s 56 of the Act for relief on the basis of undue hardship caused to him. As only assets forfeiture orders are being made, the application proceeds under s 51 which provides as follows:

51 Exclusion of respondent’s property from assets forfeiture order because of undue hardship

(1)The High Court may, on an application made by the respondent before an assets forfeiture order is made, exclude certain property from an assets forfeiture order if it considers that, having regard to all of the circumstances, undue hardship is reasonably likely to be caused to the respondent if the property is included in the assets forfeiture order.

(2)The circumstances the Court may have regard to under subsection (1) include, without limitation,—

(a)the use that is ordinarily made, or was intended to be made, of the property that is, or is proposed to be, the subject of the assets forfeiture order; and

(b)the nature and extent of the respondent’s interest in the property; and

(c)in the case of a type 1 assets forfeiture order, the circumstances of the significant criminal activity to which the order relates.

[64]   Undue hardship is a stringent test. It must be so disproportionate as to require the objectives of recovery and deterrence to be subordinated to the particular needs of the wrongdoer.26

[65]   The Commissioner submits that where property is tainted from previous drug offending (or a respondent has unlawfully benefitted from this) then that is particularly serious and is a factor against exclusion of property.27

[66]   Mr Wong’s argument that he would personally suffer undue hardship is based on his assertion that on release from prison, he will need to rely on superannuation.

26     Nicholas v Commissioner of Police [2017] NZCA 473, [2018] NZAR 172 at [57].

27     Criminal Proceeds (Recovery) Act, s 51(2)(a).

This does not amount to undue hardship and is within the normal consequences of forfeiture where someone has accumulated funds through illegitimate rather than legitimate means. I note further that age is not a factor that must be considered by the Court. All factors are discretionary.

[67]   Mr Wong also relies on claimed undue hardship to others, being claimed health needs of Ms Wu and of his mother, and the need for him to pay what he says is a large debt he owes to Ms Wu’s sister to fund his legal costs (or that Ms Wu owes to her sister). But I accept the Commissioner’s submission that Mr Wong cannot claim relief on behalf of and in reliance on the needs or hardship of others. Those parties would have to make an application under s 61 on the basis of either innocent interest (s 66) or undue hardship (s 67). For it to be otherwise would subvert the operation of those sections. This is consistent with the Court of Appeal decision in Snowden v Commissioner of Police.28 In the High Court, relief was granted on the basis that adult children who were discretionary beneficiaries of the trust that held the tainted property would suffer undue hardship from an assets forfeiture order.29 However, the Court of Appeal overturned the decision, holding they should have made their own application under s 61.30

[68]   Further, in this case Ms Wu and her sister were named as respondent and interested party. Any interest in the restrained property was disclaimed by them as part of the settlement with the Commissioner.31 As part of this settlement the Commissioner released some restrained funds, while others vested in the Crown absolutely.32 It would amount to an abuse of process for them to claim further exclusion of property to meet their needs (via the first respondent’s application) when the matter as between the Commissioner and those parties has settled.

[69]   I note that even if s 51 included undue hardship caused to a respondent from being unable to continue meeting the needs of others who do not have an interest in the property and are unable to make an application (which is not conceded and does

28     Snowden v Commissioner of Police [2021] NZCA 336 at [47]–[49].

29     Commissioner of Police v Snowden [2020] NZHC 2036 at [158].

30     Snowden v Commissioner of Police, above n 28, at [66].

31     Commissioner of Police v Wu, above n 4.

32 At [8].

not require consideration on these facts), the evidence is that Mr Wong has not, in the past, provided financially for either Ms Wu (since their separation) or his mother. There is also a lack of supporting up to date evidence for the claimed health needs of Ms Wu and no evidence in support of the claim regarding Mr Wong’s mother (or confirmed diagnosis). Further, Mr Wong’s concerns are framed as a concern for the future as opposed to actual demonstrated hardship (as confirmed in evidence by him).

[70]   To the extent that Mr Wong relies, as an undue hardship to him, on being unable to assist others or to repay a loan as bringing him a feeling of shame, this is also a consequence of his offending. That does not reach the necessary threshold to establish undue hardship.

[71]For the above reasons, Mr Wong’s application for relief is dismissed.

Orders

[72]I make the following orders:

(a)An assets forfeiture order in respect of all funds previously held in the following bank accounts in the name of Shui Tong Wong, as set out in full in the Commissioner’s application dated 6 October 2021, and any accrued interest:

(i)ASB-00 account;

(ii)ANZ-35 account; and

(iii)ANZ-00 term deposit.

That property vests in the Crown absolutely and is in the Official Assignee’s custody and control.

(b)An assets forfeiture order in respect of the $257,280.10 cash seized during the search of [redacted], Te Atatu, Auckland and from Mr Wong’s person on 14 March 2017 and any accrued interest. That

property vests in the Crown absolutely and is in the Official Assignee’s custody and control.

(c)An assets forfeiture order in respect of cash to the value of $23,376 seized by police from the person of Yuen Cheung Chan on 14 March 2017 and any accrued interest. That property vests in the Crown absolutely and is in the Official Assignee’s custody and control.

Costs

[73]   The Commissioner is entitled to costs and if costs are being sought, should file a memorandum within two weeks. The respondents are to reply within a further two weeks.

Hinton J