Commisisoner of Police v Milosevic
[2022] NZHC 1595
•6 July 2022
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2018-463-81
[2022] NZHC 1595
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
TE OHORERE MILOSEVIC
Respondent
AND
IRENE RAKI
Interested Party
Hearing: 27 and 28 June 2022 Appearances:
R Jenson for the Applicant
C Harvey for the Respondent
Judgment:
6 July 2022
JUDGMENT OF GORDON J
This judgment was delivered by me on 6 July 2022 at 3:30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Office of the Crown Solicitor, Tauranga Gowing & Co, Whakatane
COMMISSIONER OF POLICE v MILOSEVIC [2022] NZHC 1595 [6 July 2022]
[1] The Commissioner of Police (Commissioner) has applied for asset forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (the Act) in relation to the following property (the application):
(a)A residential property at 33 Newall Street, Kawerau (the house); and
(b)The sum of $2,024.21 being funds remaining from the sale of a 2013 Ford Ranger 3.2TD Utility, registration number GZZ937 (funds and Ford Ranger respectively).
[2]The application is opposed by the respondent Te Ohorere Milosevic.
[3] Irene Raki, the respondent’s mother, who is an interested party in relation to the house, was served with the proceeding but has not taken any steps in the proceeding.
Procedural history
[4] The proceeding follows from Police Operation Notus, an investigation by the National Organised Crime Group, which commenced in August 2017 into the activities of the Kawerau Mongrel Mob. Te Ohorere Milosevic (Mr Milosevic), his brother Slobodan (Mr S Milosevic) and his father Frank (Mr Milosevic senior) are all patched members of the Kawerau Mongrel Mob. Mr Milosevic senior is the President of the Kawerau chapter.
[5] The Police obtained intercepted communications during the electronic surveillance phase of the operation. Mr Milosevic’s communications were intercepted for a two-month period between 2 October 2017 and 30 November 2018. Interception of the communications of Mr Milosevic senior and Mr S Milosevic continued until 26 March 2018. From the perspective of the Police this electronic phase indicated a large scale cannabis cultivation involving Mr Milosevic, Mr S Milosevic and Mr Milosevic senior along with two others.
[6] In September 2017, the Police Assets Recovery Unit (ARU) commenced an investigation into the financial activities of Mr Milosevic (as well as the other
individuals I have referred to). The investigation identified Ms Raki as the purchaser of the house for $39,000 on 18 March 2015. This purchase was funded by earlier cash deposits into Ms Raki’s bank account. On 9 August 2016 Ms Raki transferred the ownership of the house by way of gift to Mr Milosevic.
[7] On 17 July 2017 Mr Milosevic purchased the Ford Ranger from Turners Car Auctions in Auckland for $28,780 and paid for it in cash.
[8] On 27 March 2018 the Police executed warrants issued under the Search and Surveillance Act 2012 throughout the Eastern Bay of Plenty area including at the house, which is the home address of Mr Milosevic, his partner and children.
[9] Mr Milosevic was charged with unlawful possession of a firearm and unlawful possession of ammunition. He was also charged with cultivating cannabis, together with Mr Milosevic senior, Mr S Milosevic and two associates. Mr Milosevic senior and Ms Raki were charged with money laundering.
[10] On 25 July 2018 a without-notice restraining order was granted by this Court in relation to the house and the Ford Ranger. An on-notice order was then granted on 24 October 2018. Those orders have been renewed from time to time and remain in place.
[11] The Commissioner then sought the sale of the Ford Ranger. The application was opposed and proceeded to a hearing. On 11 April 2019 Lang J granted the application for the sale order.1 The Ford Ranger was then sold and part of the sale funds were used to settle the balance owed by Mr Milosevic to a finance company for repairs to the Ford Ranger. The Official Assignee retained control of the balance of the sale funds, being $2,024.21, which are now the subject of the application before the Court.
[12] On 21 September 2020 the criminal trial for Mr Milosevic senior, Ms Raki, Mr S Milosevic and Mr Milosevic was heard in the Hamilton High Court over an
1 Commissioner of Police v Milosevic [2019] NZHC 783.
eight-week period.2 In relation to Mr Milosevic, at the conclusion of the Crown case the trial Judge dismissed the unlawful possession of ammunition charge and amended the unlawful possession of a firearm charge to a charge of unlicensed possession of a firearm. Mr Milosevic pleaded guilty to the amended firearm charge and was found not guilty by the jury on the charge of cultivating cannabis.
[13] The jury found Mr Milosevic senior and Mr S Milosevic guilty of jointly cultivating cannabis as well as other drug-related charges and money laundering. The jury found Ms Raki guilty on two charges of money laundering.
[14] Mr Milosevic senior was sentenced to 17 years and six months’ imprisonment on charges of drug dealing, cultivation of cannabis and money laundering. A minimum non-parole period of eight years and nine months was imposed. He is subject to separate proceedings under the Act.
[15] Mr S Milosevic was sentenced to 15 years and nine months’ imprisonment on charges of drug dealing, cultivation of cannabis and money laundering. A minimum non-parole period of seven years and ten months was imposed. He is also subject to separate proceedings under the Act.
[16] Ms Raki was sentenced to two years and six months’ imprisonment on the two money laundering charges. She is also subject to separate proceedings under the Act.
[17] On 13 February 2021 Judge Mabey QC sentenced Mr Milosevic on the firearm charge to a $500 fine.
[18] The Commissioner relies on a number of affidavits filed in support of the application. Two of the deponents, Laura Clay, a forensic accountant attached to the Waikato ARU and Detective Nicola Robinson were cross-examined at the hearing by counsel for Mr Milosevic, Mr Harvey. Mr Milosevic, who swore two affidavits – dated 25 January 2019 in opposition to the Commissioner’s application for a sale order for the Ford Ranger (first affidavit) and dated 18 November 2021 in opposition to the
2 The two associates had earlier pleaded guilty.
application (second affidavit) – was cross-examined by counsel for the Commissioner, Mr Jenson.
The statutory context
[19] The primary purpose of the Act is to establish a regime for the forfeiture of: property derived either directly or indirectly from significant criminal activity3 (assets forfeiture orders); or property representing the value of a person’s unlawfully derived income4 (profit forfeiture orders).
[20]Significant criminal activity is defined in s 6 in the following terms:
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 $30,000 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).
[21] As is apparent from s 6(2)(b) this Court may find that Mr Milosevic was undertaking a significant criminal activity even though he was acquitted on the charge of cultivating cannabis. The maximum penalty for cultivating cannabis is imprisonment for a term not exceeding seven years.5 The same penalty applies to money laundering.6
3 Section 3(1)(a).
4 Section 3(1)(b).
5 Misuse of Drugs Act 1975, s 9(2).
6 Crimes Act 1961, s 243(2).
[22] Section 50(1) requires this Court to make an assets forfeiture order if satisfied on the balance of probabilities that specified property is “tainted property”:
50 Making assets forfeiture order
(1) If, on an application for an assets forfeiture order, the High Court is satisfied on the balance of probabilities that specific property is tainted property, the Court must make an assets forfeiture order in respect of that specific property.
[23]Property is defined in s 5:
property—
(a) means real or personal property of any kind—
(i)whether situated in New Zealand or a foreign country; and
(ii)whether tangible or intangible; and
(iii)whether movable or immovable; and
(b) includes an interest in real or personal property
[24] The house and the Ford Ranger, including the balance of the sale proceeds of the Ford Ranger, are clearly property within the above definition.
[25]Tainted property has a broad definition in s 5:
tainted property—
(a) means any property that has, wholly or in part, been—
(i)acquired as a result of significant criminal activity; or
(ii)directly or indirectly derived from significant criminal activity; and
(b) includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity
The parties’ respective positions
[26] In summary, the position of the Commissioner is that the house is tainted by virtue of it being funded through significant criminal activity, namely funds obtained by Ms Raki and Mr Milosevic senior from the sale and supply of methamphetamine and/or cannabis.
[27] The Commissioner says this tainting is not “cured” by the “gifting” of the house to Mr Milosevic. The Commissioner says in fact that transfer effectively constitutes further tainting (as the Court can infer the transfer constitutes a money
laundering transaction) or at the very least, represents Mr Milosevic deriving the house as a result of his family’s significant criminal activity.
[28] With respect to the Ford Ranger, the Commissioner’s position is that Mr Milosevic had insufficient legitimate means to fund such a cash purchase and the vehicle is tainted because it was purchased with illegitimately obtained cash. The balance of the sale funds is therefore also tainted.
[29] Mr Milosevic’s position is that the two items of property sought to be forfeited are not “tainted property”, and he has not benefited from “significant unlawful activity”.
Purchase of the house
[30] The conveyancing files for the purchase of the house7 reveal the following transactions:
(a)On 18 March 2015 Ms Raki attended a mortgagee auction and placed a successful bid of $39,000 for the purchase of the house.
(b)On 20 March 2015 Ms Raki paid a deposit of $3,900 from her ANZ account via an electronic transfer to the real estate agent’s trust account.
(c)On 1 April 2015 Ms Raki electronically transferred the outstanding settlement balance (including solicitor’s fees) of $35,467.44 from her Central Credit Union account (CCU account) into the trust account held by a Rotorua law firm; and
(d)On 9 April 2015 Ms Raki was registered as the owner of the house.
[31] A review of Ms Raki’s bank accounts revealed that $27,300 cash was deposited into her CCU account between 1 October 2014 and 8 April 2015:
7 Obtained pursuant to production orders made under the Search and Surveillance Act 2012, from a Rotorua law firm.
(a)9 October 2014 $2,300 CCU Kawerau
(b)15 December 2014 $7,000 CCU Kawerau
(c)12 January 2015 $5,000 CCU Kawerau
(d)23 January 2015 $7,000 CCU Kawerau
(e)9 February 2015 $6,000 CCU Kawerau
[32] At the time the above cash deposits were made between October 2014 and February 2015 Ms Raki had declared a gross yearly income of $14,444 to Inland Revenue.
[33]There was a further cash deposit into Ms Raki’s CCU account of $30,000 on
15 December 2015. The narration on the deposit slip is “Deposit on house Te Ohorere”. The bank voucher obtained from CCU recorded the $30,000 cash had been deposited by Ms Raki and consisted of 600 $50 denomination notes.
[34] On 9 August 2016 Ms Raki transferred the ownership of the house to Mr Milosevic, recording the transaction on a sale and purchase agreement with the value of the house stated as $59,000. Other documents that accompanied the sale and purchase agreement were:
(a)A Deed of Acknowledgement of Debt for the sum of $59,000 dated 9 August 2016; and
(b)A Deed of Forgiveness of Debt by way of Gift for the sum of $59,000 also dated 9 August 2016.
[35] Mr Milosevic, his partner and children began living in the house after it was purchased and continue to do so.
Explanations regarding house purchase and $30,000 deposit
[36] In his second affidavit and under cross-examination at the hearing, Mr Milosevic has given two different explanations regarding the $30,000 cash deposit into his mother’s bank account on 15 December 2015.
[37] On 27 March 2018, when the Police executed a search warrant at the house, Mr Milosevic did not mention any connection between himself and the $30,000 deposit when first spoken to by a police officer. He referred to the cost of the house being between $30,000 and $50,000. Under cross-examination he confirmed that part of his statement to the Police was simply a reference to the purchase price.
[38] Mr Milosevic also addressed his mother’s acquisition of the house and the subsequent transfer to him in his first affidavit.8 He did not mention the $30,000 deposit.
[39] Mr Milosevic did not give evidence in the criminal trial, but by then he would have been aware of the evidence regarding the $30,000 deposit into his mother’s bank account.
[40] In his second affidavit, sworn after the completion of the trial, he referred to his mother’s purchase of the house and said:
4. … my mother Irene Raki purchased the property on 8 April 2015. My family and I moved into the property.
5. At the time there was no arrangement for me to purchase it. However as we continued to live in it, we came to the arrangement that I would purchase it for $59,000. We agreed that I would pay the remaining about [sic] at a rate of $100 per week, however that was flexible. Sometimes I paid more, other times I paid less. These payments were all made in cash, but can be seen in my withdrawals from my ANZ account.
6. From my cash savings I paid $30,000 into my mother [sic] account on 15 December 2015. That deposit was titled “Deposit on house Te Ohorere”.
8 Although the focus of this affidavit was on opposing the application for a sale order of the Ford Ranger.
[41] Mr Harvey’s opening submissions at the hearing were consistent with that evidence. His submissions say:
6. An arrangement was made to purchase the property from Ms Raki for
$59,000. The respondent was living in the property with his family at the time.
7. Mr Milosevic maintained a significant sum of cash savings. It is from those savings that he paid a deposit to his mother on 15 December 2015 and titled the transaction appropriately.
[42] However, under cross-examination at the hearing Mr Milosevic asserted that the $30,000 payment into his mother’s bank account was not directed at the purchase of the house. He said “… I gave her $30,000 to put away for me, okay for a deposit. It had nothing to do with 33 Newall Street”. He further said that he knew “Nothing about the $30,000 that I had given her going into her account … I thought she still had it on her”. He repeated that evidence in the course of the following questions and answers:
Q So the $30,000 from your perspective has nothing to do with 33 Newall Street?
A Its got nothing to do with 33 Newall Street. It was put aside so I can save up for a house later on, not knowing that my mother was going to gift me the house.
Q So that $30,000 isn’t in any way a payment for 33 Newall Street? A No.
Q Your mother’s just gifted you the house? A Yes.
Q And as you say, you’re paying her off at $100 or whatever a week?
A Well its called manaakitanga, respect, I got respect from my family, my mother, so I do give her money when I can and that’s an agreement that me and her only know.
[43] Mr Milosevic said that to date he had paid his mother $300 under that arrangement.
Approach
[44] I will proceed to consider the application first, on the basis of Mr Milosevic’s evidence at the hearing, namely that Ms Raki provided all the funds for the purchase of the house, and that it was gifted to Mr Milosevic (and that Mr Milosevic subsequently paid her $300).
[45] In the alternative I will consider the position on the basis that the $30,000 deposited into Ms Raki’s account was given to her by Mr Milosevic and was part payment from him for the house, as appeared to be his position in his second affidavit and counsel’s opening submissions.
Available evidence/use of convictions
[46] With respect to the convictions of Ms Raki and other members of Mr Milosevic’s family, Mr Jenson for the Commissioner refers to s 47(1) of the Evidence Act 2006 which provides:
47 Conviction as evidence in civil proceedings
(1) When the fact that a person has committed an offence is relevant to an issue in a civil proceeding, proof that the person has been convicted of that offence is conclusive proof that the person committed the offence.
[47] In exceptional circumstances a judge may permit a party to offer evidence tending to prove that the person convicted did not commit the offence.9 Mr Milosevic does not seek to do so.
[48] This being a civil proceeding, the convictions of Mr Milosevic’s family members referred to earlier in this judgment are conclusive proof that each of them committed the offences I have referred to.
[49] Mr Jenson properly brought to the Court’s attention that in relation to Ms Raki the $30,000 deposit made into her CCU account was included in one of the two representative money laundering charges on which she was found guilty and convicted.
9 Evidence Act 2006, s 47(2).
[50] Mr Jenson accepts that proof of that particular transaction was not essential to proof of the money laundering charge at trial, given that the charge was based on a number of cash transactions, any one of which would have justified the guilty verdict.
[51] However, having made that acknowledgement, Mr Jenson notes that Judge Mabey QC was in no doubt that the offence had been committed with respect to the
$30,000 transaction when he sentenced her following the trial. Mr Jenson, relying on Commissioner of Police v Filer,10 submits that this Court can take Judge Mabey’s factual findings in his sentencing notes into account.
[52]In Filer, Gilbert J after referring to s 47 of the Evidence Act 2006, said:
[31] The factual findings made by Keane J regarding the extent of Mr Filer’s involvement in the manufacture and supply of methamphetamine were essential to his sentencing decision. These findings are admissible as evidence in this proceeding as proof of the benefit he is likely to have received. I consider that this is admissible hearsay evidence under s 18 of the Evidence Act, and possibly also under s 19. The exclusionary rule in s 50 only applies to factual findings in civil proceedings. It does not apply to factual findings in a criminal proceeding, no doubt because of the much higher standard of proof required.
[53] Proceeding on the basis that Judge Mabey’s factual findings are admissible, I set out the relevant passages from his sentencing notes:11
[1] Ms Irene Raki is before the Court today in person to be sentenced on two charges of money laundering. Those charges were preferred against her jointly with her husband, Frank Milosevic, and are charges 62 and 63 in the Crown charge list. That list related to a trial conducted in Hamilton last year when Ms Raki, together with her husband, two sons and a number of other people, were charged as a result of the Operation Notus inquiry. That inquiry investigated suspected drug dealing by the Mongrel Mob in the Kawerau area.
[2] Frank Milosevic and Slobodan Milosevic were convicted and have been sentenced as the leaders of that activity. Ms Raki and her husband were convicted of two charges of money laundering involving approximately
$260,000 over a period from December 2015 to March 2018. Mr Slobodan Milosevic’s partner, Ms Tawera, was jointly charged with him in money laundering allegations and was also convicted. She is yet to be sentenced.
[3] The charges brought by the Crown involved two representative allegations, which were particularised as charge 62,46 individual cash deposits into accounts controlled by Ms Raki and her husband, and charge 63, a number of cash purchases made by them both. At trial the Crown was able
10 Commissioner of Police v Filer [2013] NZHC 3111.
11 R v Raki [2021] NZDC 2567.
to provide a comprehensive analysis of the bank accounts and the transactions all said to be from an unexplained cash source.
[4] The deposits into the bank accounts were numerous and the purchases were substantial and involved, for example, the purchase of an expensive Ford vehicle for Mr Milosevic, a Harley Davidson motorcycle for one of the sons, a substantial deposit on a house for that son and a Hilux vehicle for another son. There was some concession at trial that a transaction concerning a caravan was wrongly included in the cash availability statement but after any adjustments the total amount laundered, the subject of the jury verdicts, is in the range of $250,000.
[5] At trial the charges were defended on the basis that the money was explained from legitimate sources. Attempts were made to establish these sources included salary or wages but the total amount of income established was a fraction of the money laundered. Mr Frank Milosevic gave evidence that there were substantial funds coming in such as trading in crayfish, whitebait or meat, but the jury rejected that evidence as shown by the convictions entered on drug dealing allegations against Mr Frank Milosevic and the other defendants who relied upon his evidence.
[6] As trial Judge it was plain to me that the evidence to support the money laundering allegations was overwhelming. There was no legitimate source for the money. The money was substantial and was unexplained. The only inference available to the jury and to me as trial Judge assessing the facts consistent with the verdicts, is that Mr Frank Milosevic and Ms Raki were obtaining money from the sale of drugs and laundering it. To suggest otherwise is completely unrealistic. The charges were defended as a matter of right but Ms Raki is here today to be sentenced without the benefit of a guilty plea and I must establish a start point for the charges and arrive at an end point having regard to any personal factors that might be available.
…
[11] Ms Raki, the long-term partner of Mr Milosevic and the matriarch of her own family was involved in the receipt and laundering of money from drug dealing by her family. She dealt with that money and the jury verdicts make that plain. The fact that she might not have been present when some transactions were undertaken, as advanced by Ms Webby, is beside the point. The jury found that she was a party to those transactions but Ms Webby says that conferring benefits on immediate family, being partner and sons, is not a personal benefit to Ms Raki. They get the benefits and she does not, but I do not accept that submission at all.
[54] Both counsel agreed that the reference in [4] of the sentencing decision above to “a substantial deposit on a house for that sum” is a reference to the $30,000 deposit under consideration in this proceeding.
Is the house tainted property?
[55] Mr Jenson submits that the law is clear that there is no requirement that Mr Milosevic be personally engaged in the significant criminal activity that taints the property or that he has been charged with or convicted of any such offence.12
[56] Mr Jenson further submits that the evidence clearly makes out that the purchase of the house was funded, at least in part, by significant cash deposits into Ms Raki’s bank account which, based on her convictions, can be inferred to have come from significant criminal activity, namely the sale and supply of methamphetamine and/or cannabis.
[57] As already noted, at the time cash deposits were made into Ms Raki’s bank account between October 2014 and February 2015, Ms Raki had declared to Inland Revenue receipt of a gross yearly income of $14,444. Further, Ms Clay’s evidence was that from 2015 to 2018 Mr Milosevic senior and Ms Raki had access to an unexplained cash source of at least $263,758.90; a broader analysis starting from 2011 through to 2018 reveals a total unexplained cash source of $582,440.20.
[58] The presence of a quantity of unexplained cash can warrant an inference that a person has been engaged in significant criminal activity at the time the money was acquired.13
[59] In Commissioner of Police v Drake, the High Court considered the word “tainted”:14
[110] … The word “tainted” is generally understood to mean that something has been touched, tinged or imbued with some bad or undesirable quality. Thus, when the definition of tainted property refers to property which is “indirectly derived from significant criminal activity”, I consider there must nevertheless be some traceable connection between the proceeds of crime and the property so acquired or retained. ...
12 Criminal Proceeds (Recovery) Act 2009, s 6(2) and Commissioner of Police v Doorman [2013] NZCA 476 at [23].
13 Commissioner of Police v Jeffries [2014] NZCA 566 at [49].
14 Commissioner of Police v Drake [2017] NZHC 2919 at [110] (footnotes omitted).
[60] This Court has held that deposit of funds earned through significant criminal activity into a bank account will taint the entirety of the funds in the bank account.
Even modest contributions to an asset is sufficient to taint the asset.15
[61] I am satisfied on the balance of probabilities, having regard to all the above evidence, that the house was tainted property in Ms Raki’s hands. That is the only logical inference to be drawn from the combination of the evidence I have referred to. It was acquired as a result of significant criminal activity, namely laundering of money obtained from cultivating cannabis.
[62] The question then arises as to whether the acquisition of the house by Mr Milosevic somehow “cures” the tainting of the property.
[63] Mr Harvey submits that the transfer was a genuine transaction. He takes issue with the submission on behalf of the Commissioner that the house was gifted to Mr Milosevic. He says there was consideration by way of Mr Milosevic agreeing to pay his mother $100 a week as and when he could.
[64] Mr Jenson submits that Mr Milosevic must have known that Ms Raki purchased the house using illegitimate funds by virtue of the close family relationship. He submits that the “gifting” constitutes a further tainting of the property. He submits the Court can conclude that Mr Milosevic has engaged in a money laundering transaction : he has been involved in dealing with the house which is the proceeds of offending, while knowing or believing that all or part of the property (the house) is the proceeds of an offence or being reckless as to the same.16 That satisfies the first part of the definition of tainted property in s 5.
[65] Alternatively, Mr Jenson submits that Mr Milosevic knowingly but indirectly derived the property from significant criminal activity: a close family member, his mother, purchased the property using illegitimate funds and gifted it within the family unit in order to disperse those funds. He says that proceeds of the significant criminal activity were distributed to family members in this way.
15 Commissioner of Police v Cheah [2018] NZHC 2825 at [25]–[26].
16 Crimes Act 1961, s 243.
[66] First, I accept that the phone calls and other communications between the family, which were put in evidence before the Court, indicate they were a close family and involved in each other’s lives.
[67] I also have no doubt that if Mr Milosevic was not actually involved in the family’s cannabis growing operation he was, on the balance of probabilities, at least aware of the operation. I make this finding on the basis of the intercepted communications. I will later refer to this evidence in combination with other evidence in order to consider whether Mr Milosevic was actually involved in significant criminal activity (rather than simply being aware of the involvement of his family members).
[68] Some of the intercepted phone calls were played during the course of the hearing and Mr Milosevic was cross-examined about their content. In one phone call on 14 December 2017 between Mr Milosevic and Mr S Milosevic, Mr Milosevic asked his brother “Did you already go out to grab those things”. He clarified that the things were from someone called Nate. Mr Milosevic said “the old man” had said they had to go and grab them. Mr S Milosevic said that the old man had said he (that is Mr S Milosevic) had to go grab Nate “to do these cuttings”. It is accepted that the name Nate referred to Nathan Waikato, who was one of the associates charged with cultivating cannabis.
[69] Mr S Milosevic further said “… it wasn’t the ones he was bagging, it was these other ones. Cos he had to put them … under the lights a bit longer I think”. Mr Milosevic acknowledged that saying “Okay”.
[70] In his second affidavit Mr Milosevic said he didn’t know what he and his brother were talking about in that conversation, but they were “not talking about cannabis or anything related”.
[71] However, under cross-examination he said that he and his brother were referring to having “bagged a couple of deer the night before”. They were the “things”. He denied that “the things” were cannabis cuttings. The reference to “cuttings” he said was cutting up the meat. The use of lights he said was because “when you catch
something you don’t cut it up straight away, you let it dry”. I do not believe this explanation. It is implausible in the context of a cannabis growing operation, given that Mr S Milosevic was found guilty of this activity by a jury.
[72] There was a second phone call on 4 January 2018, played during cross- examination. It was between Mr Milosevic and Mr Milosevic senior. Mr Milosevic senior said “… we’ll do an afternoon one tomorrow instead aye”. Mr Milosevic replied saying “okay then”. Mr Milosevic senior said “We’ll start tomorrow afternoon and whack them all out”. Mr Milosevic replied “sweet as”.
[73] It was put to Mr Milosevic in cross-examination that the first phone call indicated that in December 2017 he and his brother were assisting the cannabis growing operation by obtaining cuttings from Mr Waikato. It was also put to him that at the phrase “whack them all out” in the second phone call, in January 2018, indicated he was going up into the bush with his father to plant those cuttings.
[74] Mr Milosevic said that was not the case. They had a couple of deer hanging in the chiller and his father needed a hand to “whack them out”. He said his father was teaching him to butcher meat. This was a new explanation not mentioned in his second affidavit. I do not accept this is a plausible explanation. The two phone calls taken together, at the very least, indicate a knowledge on the part of Mr Milosevic that his father and brother were involved in cannabis cultivation along with Mr Waikato.
[75] With that knowledge Mr Milosevic took ownership of the house. I consider the gifting was simply a device to move the house out of Ms Raki’s hands. The alleged consideration of $100 a week was also simply a device. Despite Mr Milosevic’s assertion that he provided consideration by way of weekly payments of $100 to his mother (as and when he could afford it) he only ever paid her, on his evidence, $300, since the transfer to him on 9 August 2016. This does not seem plausible given his assertion that he had access to large amounts of cash acquired through legitimate means, an issue I will come to shortly.
[76] In my view, Mr Milosevic’s acquisition of the house from his mother was itself a significant criminal activity. That acquisition falls within money laundering under
s 243 of the Crimes Act 1961. The house was the proceeds of an offence; Mr Milosevic dealt with the house within the terms of the definition of “deal with” in s 243; and I draw the inference that Mr Milosevic knew or believed that all or part of the house was the proceeds of an offence or was reckless as to the same. That is money laundering.
[77] In short, the transfer of the house into Mr Milosevic’s name did not in any way “cure” the tainting of the property in Ms Raki’s hands. On the balance of probabilities the house is tainted property. The Court must make an assets forfeiture order (there being no application for relief against forfeiture).17
Alternative basis – the $30,000 provided by Mr Milosevic
[78] As already noted, Mr Milosevic said in his second affidavit that he provided the $30,000 deposit for the house. He effectively abandoned this explanation at the hearing, when he said he gave his mother $30,000 cash for a house deposit in the future but that had nothing to do with the house in Newall Street. For completeness, I will nevertheless consider his earlier explanation.
[79]Inland Revenue records show Mr Milosevic declared a gross income of
$32,461.15 for the year ending 31 March 2016. He declared an average gross annual income of $34,120.83 for the six years between 2013 and 2018.
[80] A review of Mr Milosevic’s bank account statements from 2014 and 2015 did not identify any withdrawals to reflect the cash deposit recorded on 15 December 2015 into Ms Raki’s CCU bank account. At the time of the $30,000 deposit, Mr Milosevic had an account balance of $149.98 in his ANZ account.
[81] Inland Revenue records for Mr Milosevic’s partner, Tara-Lee Murray, show she declared an average gross annual income of $6,693.80 for the six years between 2013 and 2018.
17 Section 51.
[82] Mr Milosevic says he had further money available to him from three cash sources: withdrawals from his bank account, the sale of opossum fur and the breeding and sale of puppies.
[83]As to the first source, Mr Milosevic said in his second affidavit that:
10. From 2009 to 2018 I have withdrawn $77,275.88 from my account. At the time that I purchased 33 Newell [sic] Street from my mother, I had roughly $48,000 saved. I would keep the cash in zip lock bank bags, and hide them in my clothing draws [sic]. I would take them with me when I had to move houses.
[84] Mr Milosevic attached to his affidavit a summary of what he says were the total withdrawals from his account. The amount he allegedly withdrew is close to but not exactly the same as that referred to in paragraph 10 of his affidavit. He then purports to attach details from his bank statements. However, these documents are not in fact bank statements; they are typed documents with the dates and the amounts of alleged withdrawals and deposits. The Court therefore gives those schedules no weight in the absence of the underlying evidence.
[85] Further, Mr Milosevic has given inconsistent evidence about his practice of withdrawing money from the bank. In his second affidavit he said he didn’t keep his savings in the bank. He said he doesn’t trust banks since they can run into trouble and he might not be able to get his money back. However, when he spoke to a police officer on 27 March 2018 he said he had no cash on hand and that “everything goes into my bank account”.
[86] Additionally, the assertion that he had significant sources of cash is inconsistent with his own financial activities: his bank account went into “unarranged overdraft” on 82 occasions between 2011 and 2018, attracting a bank fee each time; he was also charged $20 for dishonoured payments, with 12 individual fees totalling
$220 between 2011 and 2013; and in 2013 he made monthly repayments of $351.03, to a total of $3,862.30, to service a debt to Motor Trade Finance. All of this is inconsistent with a person having a large source of cash readily available.
[87] In relation to the alleged sales of opossum furs, a police officer, Detective Watt, carried out inquiries with two commercial opossum fur traders in the Bay of Plenty region, Basically Bush and Dawson Furs. Those inquiries are as follows:
(a)On 13 February 2019 Detective Watt spoke to Kim Saunders, agent for Basically Bush, who covers the area from Opotiki to Bombay, including Whakatane. Mr Milosevic is not known to Mr Saunders;
(b)On 14 February 2019 Detective Watt spoke to Bruce Dawson, owner of Dawson Furs, Rotorua. Mr Milosevic is not known to Mr Dawson; and
(c)On 19 February 2019 Detective Watt spoke to Alec McIver, agent for Basically Bush who covers the Rotorua area. Mr Milosevic is not known to Mr McIver.
[88] Agents for both Basically Bush and Dawson Furs confirmed it takes approximately 20 opossums to obtain a kilogram of plucked fur, which had an average price of $130 per kilogram at the date of the inquiries. Both businesses say that details of suppliers are obtained at the time of purchase and that payment is made by way of cheque or direct credit and never in cash.
[89] A review of Mr Milosevic’s ANZ bank account does not record any transactions consistent with payments received from either Basically Bush or Dawson Furs.
[90] Under cross-examination and faced with the evidence obtained by Detective Watt, Mr Milosevic said he trapped or shot opossums with friends or family members, who obtained payment by cheque from Dawsons (in their own name) and then paid him his share in cash.
[91] In relation to alleged puppy breeding, Detective Watt carried out inquiries with the Kawerau District Council to establish whether any dogs over the age of three months had been registered by Mr Milosevic as is required in the Kawerau area. On 13 February 2019 Detective Watt spoke to Lisa Springfield, Team Leader, Animal
Control and Compliance, Kawerau District Council. Ms Springfield confirmed the Kawerau District Council had a record of only one dog registered by Mr Milosevic.
[92] Detective Watt also carried out inquiries with Bay Vets, Kawerau, which confirmed they did not hold any records of Mr Milosevic ever purchasing goods and services consistent with the breeding of puppies. Bay Vets confirmed they held one record of treating an injured dog brought into their veterinary clinic by Mr Milosevic on 7 July 2014.
[93] Under cross-examination and faced with this evidence, Mr Milosevic said that his dog was a male and he used him to breed with female dogs owned by his friends. He said if they got a good litter he would go half and half with his friends.
[94] In the four years since this proceeding has been on foot, not a single witness has been located to give evidence in support of Mr Milosevic’s explanations of significant cash income from selling opossum fur and breeding puppies. The failure to adduce any such evidence enables the Court to draw an adverse inference that such evidence is not available because no such activities were undertaken and no such income streams were available to Mr Milosevic.
[95] This conclusion is supported by the analysis of Ms Clay and Detective Robinson which did not find any evidence of Mr Milosevic engaging in an “off the books” business. Further, I note that on 28 February 2018 Mr Milosevic did not mention any income from the sale of opossum fur or breeding puppies when seeking a $10,000 loan from the ANZ Bank.
[96] I do not consider Mr Milosevic’s explanation of legitimate, but undeclared, sources of cash income to be plausible. However, the evidence does establish that Mr Milosevic had an unexplained source of income. The evidence of Ms Clay, who conducted a thorough review of the outgoings from the bank account of Mr Milosevic and Ms Murray identified gaps in expected lifestyle costs. She charted the basic costs of grocery and dairy items, takeaways and alcohol for Mr Milosevic and Ms Murray. She says the trend seen in the data is inconsistent with that expected from banking transactions. She says essentially the gaps identified are consistent with another
source being used to fund these expenses. Ms Clay’s analysis covered the period from April 2011 through to February 2018. She says the highest month of transactions was April 2016. There were 56 transactions in that month, totalling $2,767.18. The lowest month of transactions was September 2012, with a single transaction made at the Bakehouse Café totalling $9.
[97] Her evidence was that in total there were 37 months involving transactions of less than $500. She says this is an extremely low threshold, particularly for a family of two adults and one to three children depending on the year, and would equate to expenditure of less than $125 weekly.
[98] Ms Clay further says that if all of the cash withdrawn over the years was saved and used for the two large “spends” ($30,000 for the house and $28,780 for the Ford Ranger) it can only be presumed that Mr Milosevic and Ms Murray had access to a cash income source outside of cash withdrawals in order to fund their lifestyle, even at a basic level. Ms Clay says she did not see any evidence which aligned with a legitimate available cash source. She says the bank accounts clearly show that Mr Milosevic and Ms Murray were conducting day to day transactions with a source other than their EFTPOS card. She says that if the Court accepts that this source is the cash withdrawals from their account, then there is no explanation for the $30,000 paid to Ms Raki (and the $28,780 for the Ford Ranger). The only remaining possibility is that Mr Milosevic and Ms Murray had access to an unknown cash income source.
[99] Under cross-examination and faced with Ms Clay’s evidence, Mr Milosevic insisted that he was a careful shopper and would do a large shop from time to time. This, he said, explained the gap in spending identified by Ms Clay. He also said his hunting supplemented his family’s purchases of food.
[100] Overall, I found Mr Milosevic to be an unconvincing witness. I consider his evidence was designed to try and explain away the evidence for the Commissioner, rather than being anything approaching the truth.
[101] Given the lack of a plausible explanation for a legitimate source of cash income and the intercepted communications (referred to above), I am satisfied on the balance
of probabilities that Mr Milosevic’s cash income was derived from his family’s cannabis growing operation. The $30,000 (or at least a significant part of that sum) can only have come from that source.
[102] Accordingly, proceeding on the alternative basis as stated in his second affidavit, namely that Mr Milosevic provided the $30,000 for the purchase of the house, the house is tainted property.
Purchase of Ford Ranger
[103] On 17 July 2017 Mr Milosevic purchased the Ford Ranger from Turners Vehicle Auctions in Auckland for $28,780 in cash.
[104] An analysis of Mr Milosevic’s banking transactions between 1 January 2014 and 22 March 2018 confirmed the following:
(a)There were no significant cash withdrawals from his bank accounts around the time of the Ford Ranger purchase;
(b)Mr Milosevic did not have any savings in accounts held by the ANZ Bank; and
(c)Mr Milosevic appeared to be living week to week on Government- funded benefit payments supplemented by an irregular income from Intergroup Ltd.
[105] For the years ending 31 March 2017 and 2018, Mr Milosevic declared an annual income of $15,608.57 and $8,101.59 respectively. In his affidavit of 25 January 2019 Mr Milosevic said the following in relation to the purchase of the Ford Ranger:
I purchased the vehicle on 17 July 2017 at Turners Car Auction in Auckland for $28,780 in cash …
The source of the funds that was used for the purchase of the vehicle was from ten years of personal savings derived from the sale of possum furs and breeding and selling puppies for pig hunting. I earned approximately $100 per week over a ten-year period. These earnings were all received in cash and not deposited into bank accounts. The income [sic] quite variable depending on the amount of animals trapped or bred.
[106] I have already rejected Mr Milosevic’s explanations as to his three sources of cash. Based on my findings above, the only conclusion available on the balance of probabilities is that funds used to purchase the Ford Ranger were from an illegitimate source, namely the growing and sale of cannabis. The Ford Ranger and the funds remaining from its sale are tainted property.
Conclusion
[107] If the Court concludes that the two items are tainted property, it must make an asset forfeiture order. I have reached that conclusion both in relation to the house and the remaining proceeds from the sale of the Ford Ranger.
Result
[108] I make an order that the following property vests in the Crown absolutely and is to be in the Official Assignee’s custody and control:
(a)The property situated at 33 Newall Street, Kawerau comprised and described in Certificate of Title SA25B/1333, South Auckland Land Registry, of 749 square metres more or less being Lot 85, Deposited Plan South Auckland 4716; and
(b)$2,024.21 being the funds remaining from the sale of the 2013 Ford Ranger 3.2TD Utility registration GZZ937.
Costs
[109] I did not hear from the parties as to costs. Costs are therefore reserved. The Commissioner as the successful party is prima facie entitled to costs. If the parties are able to reach agreement a joint memorandum is to be filed no later than 20 working days from the date of this judgment. If there is no agreement as to costs the Commissioner may file and serve a memorandum within five working days of the date for the joint memorandum. Mr Milosevic is to file and serve his memorandum in reply within five working days of the date of service of the Commissioner’s memorandum.
[110] Costs memoranda should not exceed four pages (excluding attachments). I will determine costs on the papers.
Gordon J
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