Commissioner, New Zealand Police v Song
[2017] NZHC 2104
•31 August 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-9648 [2017] NZHC 2104
UNDER the Criminal Proceeds (Recovery)
Act 2009
IN THE MATTER
of an application pursuaunt to sections 22,
24 and 25BETWEEN
THE COMMISSIONER, THE NEW ZEALAND POLICE
Applicant
AND
XIAOYUN SONG First Respondent
SHAOYAN MA Second Respondent
AND
WESTPAC NEW ZEALAND LIMITED Interested Party
Hearing: 10, 11, 12 May 2016, 18 July 2016
(Further submissions received up to 4 August 2016)
Appearances:
E M Light for the Applicant
A R Davie for the Respondents
No appearance for the Interested PartyJudgment:
31 August 2017
INTERIM JUDGMENT OF NICHOLAS DAVIDSON J
THE COMMISSIONER, THE NEW ZEALAND POLICE v SONG & MA [2017] NZHC 2104 [31 August 2017]
TABLE OF CONTENTS
A. INTRODUCTION ……………………………………………… [1]
Applications ……………………………………………………... [1] Asset forfeiture orders ………………………………………….. [2] “Tainted property” …………………………………………….. [4] Profit forfeiture orders ................................................................ [5] “Significant criminal activity” …………………………………. [6] “Unlawful benefit” …………………………………………....... [8] Evidence ……………………………………………………….. [13] The respondents’ position ........................................................... [17] Credibility ………………………………………………………. [22]
B. THE RESPONDENTS’ RELATIONSHIP ………………….. [29]
Respondents’ denial of ownership……………………………... [36]
C. SIGNIFICANT CRIMINAL ACTIVITY – FISHERIES
ACT 1996 ………………………………………………………. [43]
Facts …………………………………………………………….. [44] Operation Grand – prosecution …………………………………. [45] Other evidence of unlawful sale of seafood ……………………… [50] Value of seafood sold ………………………………………………….. [57]
D. SIGNIFICANT CRIMINAL ACTIVITY – BENEFIT
FRAUD ………………………………………………………… [61]
“Benefit fraud” ………………………………………………. [61] Evidence ………………………………………………………. [64] Discussion …………………………………………………….. [82] Martin Square …………………………………………………. [86] Apu Crescent …………………………………………………... [90] Landcruiser ……………………………………………………. [92] Conclusion …………………………………………………… [93]
E. APPLICATION FOR PROFIT FORFEITURE ORDERS… [94]
Steps to Interim Judgment ………………………………….. [97]
The presumption of the unlawful benefit asserted by
the Commissioner ........................................................... [103] Double counting ………………………………………………. [113] Operation Grand ……………………………………………… [114] Re-banking ……………………………………………………. [115] Parents / Relatives ……………………………………………. [128] Trade Me ……………………………………………………… [131] eBay ………………………………………………………….. [132] Motor vehicles ………………………………………………… [133]
Watch …………………………………………………………. Benefit fraud ……………………………………………….. Martin Square …………………………………………………. Conclusion ……………………………………………………. [134] [135] [140] [144] F.
THE APPLICATION FOR ASSET FORFEITURE ORDERS ……………………………………………………..
[145]
Asset forfeiture order ………………………………………..
[146]
“Tainted property” ………………………………………….. [147] Discussion …………………………………………………….. [152] Toyota Landcruiser ………………………………………….. [157] Conclusion G.
UNDUE HARDSHIP …………………………………………
[159]
Is there undue hardship? …………………………………….
[160]
Respective Roles …………………………………………….. [164] The forfeiture of Apu Crescent …………………………… [166] Conclusion …………………………………………………… [167] H.
RECONCILIATION OF ASSET AND PROFIT FORFEITURE ORDERS …………………………………..
[169]
I.
DISPOSITION ………………………………………………..
[173]
A. INTRODUCTION Applications
[1] The Commissioner of Police (“the Commissioner”) alleges Xiaoyun Song (“Ms Song”) and Shaoyan Ma (“Mr Ma”) unlawfully sold seafood and committed benefit fraud and seeks asset and profit forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (“the Act”). The guiding purpose of this legislation is to “eliminate the chance” for persons to profit from undertaking, or being associated
with, “significant criminal activity”.1
Asset forfeiture orders
[2] The property against which asset forfeiture orders are sought is alleged to be “tainted” under the Act by the respondents’ “significant criminal activity”, which the Commissioner alleges is the unlawful sale of seafood contrary to the Fisheries Act 1996 (“Fisheries Act”) in the sum of $214,924.35.
[3] “The property” is:
(a) the residential property located at 42F Apu Crescent, Lyall Bay, Wellington (“Apu Crescent”), described under certificate of title WN38B/574, registered in the name of the first respondent, Xiaoyun Song, subject to mortgage to Westpac New Zealand Limited;
(b)a 2004 Toyota Landcruiser, registration number HJY826, including ignition keys, registered in the name of the second respondent, Shaoyan Ma (“the Landcruiser”).
“Tainted property”
[4] The Commissioner alleges that Apu Crescent is owned by Ms Song and Mr Ma, and is “tainted” because payments received from the unlawful sale of seafood were made to a bank account which was used to meet mortgage payments.
Apu Crescent had significant equity in it as of 2014, which will have increased if it
1 Criminal Proceeds (Recovery) Act 2009, s 3(2)(a).
has caught the wave of rising property values in Wellington. The Commissioner alleges the Landcruiser is tainted property as Mr Ma’s legitimate and declared sources of income would not have enabled him to buy this vehicle. “Tainted property” is defined in the Act as follows:
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.
Profit forfeiture orders
[5] The application for profit forfeiture orders against Mr Ma and Ms Song is based on an alleged “unlawful benefit” figure claimed by the Crown of $324,960.24, made up of $214,924.35 from unlawfully selling seafood and what will be described as benefit fraud in a total sum of $110,035.89, from the Ministry of Social Development (“MSD”).
“Significant criminal activity”
[6] The two categories of alleged offending are said to be “significant criminal activity”:
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).
[7] The Crown correctly submits that the unlawful sale of seafood, and the benefit fraud alleged under the Crimes Act 1961 constitute significant criminal activity for the purpose of the Act, as such offending carries the requisite sanctions under s 6(1)(a) of the Act. A conviction for criminal offending is not required and "significant criminal activity" is (or is not) made out according to the civil standard,
on the balance of probabilities.2 Recognising the seriousness of the Commissioner’s
allegation and potential effect should it be established, this proof should not rest on a fine margin.
“Unlawful benefit”
[8] The Act defines an unlawful benefit:
7Meaning of unlawfully benefited from significant criminal activity
In this Act, unless the context otherwise requires, a person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).
[9] Thus, a person unlawfully benefits from significant criminal activity when it can be shown that he/she knowingly, directly or indirectly, derived a benefit from
2 Commissioner of Police v Zhu [2015] NZHC 2175 at [54].
that activity, whether or not involved in it. For these purposes a “benefit” includes
proceeds and property, and is not limited to profit.3
[10] Consistent with the purpose of the Act, once the Commissioner proves the unlawful benefit, it is for a respondent to disprove the value which the Commissioner alleges. Here that is an Herculean task for the respondents, given the way in which the Commissioner has calculated the unlawful benefits by such intricate analysis, and the years over which that analysis extended.
[11] Section 53 of the Act reads:
53 Value of benefit presumed to be value in application (1)
If the Commissioner proves, on the balance of probabilities, that the respondent has, in the relevant period of criminal activity, unlawfully benefited from significant criminal activity, the value of that benefit is presumed to be the value stated in—
(a) the application under section 52(c); or
(b) if the case requires, the amended application.
(2)
The presumption stated in subsection (1) may be rebutted by the respondent on the balance of probabilities.
[12]
The
presumption applies even where the underlying assessment is
questionable.4 Evidence will usually be required from the respondent to prove an alternative value.5 In my view, that may be achieved through cross-examination and analysis which may break down the Commissioner’s figure for the unlawful benefit, but more often evidence for the respondent will be required. The reverse onus is
described by Ellis J in Commissioner of Police v He as “consistent with the Act’s
focus on unexplained wealth, rather than on the underlying criminal acts”.6
In Commissioner of Police v Tang, Katz J explained the rationale as based on the proposition that:7
People who have profited from criminal activity are those best placed to
prove the amount of any “benefit” they have received, and the Police will
3 Commissioner of Police v Tang [2013] NHZC 1750.
4 Commissioner of Police v Filer at [14].
5 Commissioner of Police v Read [2015] NZHC 2055 at [28].
6 Commissioner of Police v He [2015] NZHC 777 at [19].
7 Commissioner of Police v Tang, above n 3, at [7].
seldom have access to the information necessary to undertake such an exercise.
Evidence
[13] In this case, the Commissioner relies in part on a successful prosecution of the respondents for the unlawful sale of seafood following an investigation (code named “Operation Grand”), expert financial analysis and investigation evidence. The evidence is presented in almost overwhelming detail with thousands of pages of affidavit and exhibit evidence and nearly 300 pages of Transcript of oral evidence over two hearings.
[14] The Commissioner says the evidence proves that the respondents had access to unidentified sources of cash income of at least $204,638.35, which is alleged to come from the unlawful sale of seafood. A further $45,461 in the bank accounts held or used by the respondents is identified as from the sale of seafood. Mr Peters identifies a possible “re-banking” in the respondents’ accounts (money out – money in) in the sum of $35,175, so the total unlawful benefit alleged by the Commissioner is $214,924.35.
[15] The alleged benefit fraud is based on evidence of declarations and statements made to MSD which failed to disclose income and assets, including the proceeds of sale of seafood, and the allegation that Mr Ma and Ms Song lived together in a partnership “relationship”. The Commissioner alleges Mr Ma unlawfully benefited in the sum of $79,072.87 and Ms Song $30,963.02, but as they were living together the unlawful benefit was to their joint advantage. Ms Song’s declared income from various sources from 1 April 2009 to 31 March 2014 was $136,250.64, and Mr Ma’s declared income was $51,284.46.
[16] The Commissioner adduced evidence from witnesses Antony Peters, Gordon Beattie and Steven Tunley. This involved intricate analysis of bank records, text communications, statements made at interview, and a large number of exhibits. Mr Peters is a forensic accountant with the Serious Fraud Office. Mr Beattie is officer in charge of this investigation, employed by the New Zealand Police as a financial investigator attached to the Central Asset Recovery Unit (“ARU”) based in
Wellington. The primary function of the ARU is to investigate persons who have accumulated wealth or assets as a result of involvement in significant criminal activity, as defined in the Act. Mr Tunley is employed by the MSD as an investigator for Fraud Intervention Services. He draws on technical analysis of benefits and allowances received by the respondents and calculations of those overpaid, which creates some doubt as to the amount of overpayment.
The respondents’ position
[17] There are evidential and principled challenges to the Commissioner’s case.8
The respondents deny the allegations of significant criminal activity, although they have had to admit their convictions resulting from Operation Grand, and Mr Ma admits some further sales of seafood.
[18] Mr Davie says that a “broad overview” of the respondents’ positions is that there were minimal seafood sales outside of Operation Grand and that both respondents were entitled to the benefits they received from the MSD.
[19] Counsel refers to the “ever changing position” of the Commissioner in relation to the bank deposits which are said to reflect the unlawful sale of seafood. Mr Ma accepts only a small part of the sales alleged. He acknowledges mistakes in his reconstruction of events to resist the Commissioner’s case and Mr Davie says that trawling over several years of records would be testing for anyone forced to defend their position. That, of course, goes with the territory for those who are proved to have gained from significant criminal activity and seek to rebut the presumption of the value of the unlawful benefit under s 53 of the Act.
[20] The respondents challenge the extent to which an unlawful benefit has been applied to the Apu Crescent mortgage. They say that Mr Ma does not have an interest in the Apu Crescent property, which is registered in the name of Ms Song. The Commissioner says that Mr Ma admitted his ownership interest at interview with Mr Beattie, in the presence of his lawyer, Mr Davie, on 29 April 2015. The
Commissioner says he does have an interest by that financial contribution and his
8 Criminal Proceeds (Recovery) Act 2009, s 53.
personal relationship with Ms Song. The ownership of Apu Crescent is relevant to the orders sought by the Commissioner.
[21] The respondents say they were not in a relationship during the relevant period. This is an important component of the Commissioner’s case for the benefit fraud and unlawful seafood sales. The respondents otherwise claim undue hardship in different ways and say this should temper any assets or profit forfeiture orders which might otherwise be made.
Credibility
[22] I am mindful that an adverse finding of credibility on a specific issue does not mean other evidence of a witness is untrue or unreliable. The credibility of a witness requires particular and overall assessment. This applies to all witnesses.
[23] Mr Ma’s credibility is relevant to many issues. He denies the extent of unlawful seafood sales alleged. He denies benefit fraud. He gives evidence relevant to these and other issues. Ms Song denies everything but her small part in the unlawful seafood sales, and denies benefit fraud. She swore an affidavit in opposition on 18 November 2014.
[24] I had ample opportunity to consider Mr Ma’s evidence in the witness box. I have reflected on this. English is his second language and he struggled considerably when giving evidence. The questions, particularly in cross-examination, were searching and often complex in the need to comprehend the question, to understand documents that were put to him, and in explaining his own position often from memory over several years. The possibility of genuine mistake must be brought to account, and I have done so. So too must I weigh carefully all his evidence and not reach a global view which may lead to less than adequate consideration.
[25] Ms Song did not appear in court. She does not have to disprove the allegation of unlawful sale of seafood and benefit fraud which the Commissioner first has to prove. In her affidavit she denies benefit fraud and provides evidence of
her earnings, study, and financial assistance from her parents. She denies the seafood sales alleged by the Commissioner. Her father deposes to that.
[26] In Ms Song’s examination at interview on 29 January 2014 she often refused to answer a question on the grounds it might incriminate her, but that was her right, and it was in a different setting, when there was the risk of prosecution. As she was not available to give evidence, I do not have the same opportunity to assess her credibility as I do with Mr Ma, for better or worse.
[27] Mr Davie’s submission is that Mr Ma has done the best he can and in one sense I agree, but I must decide whether his evidence is truthful, and accurate, across the issues where credibility has to be assessed. Ms Light for the Commissioner says that generally Mr Ma’s evidence was inconsistent, contradictory and unreliable, and he had nothing to prove his various contentions by way of independent documentation or other evidential support. Further, she says that his evidence in the resumed hearing was inconsistent with that he gave earlier, and inconsistent with his sworn affidavit. Ms Light also describes his evidence as “evasive and constantly evolving, unreliable”, and says that the evidence of Mr Beattie, Mr Peters and Mr Tunley should be preferred.
[28] I have marked credibility for separate mention, as the difficulties I refer to have meant that I had to re-read and reflect on the evidence at length. The evidence is extensive, and has required close analysis, and on two issues I find Mr Ma has discharged the onus on him largely because of my impression of his evidence and the sheer extent of monetary transactions, which cannot all be analysed with exactitude.
B. THE RESPONDENTS’ RELATIONSHIP
[29] The Commissioner submits that, on the balance of probabilities, the respondents were in a relationship early in 2010.
[30] Several evidential factors are employed by the Commissioner to prove this. On 24 June 2010 they opened a joint bank account, which was kept open until
18 March 2014. On 30 June 2010, the sale of Unit 516/20 Martin Square in
Wellington resulted in funds of $69,892.02 being used to release Mr Ma’s caveat
over the property, and he instructed Brandons, solicitors, to transfer the funds to a
bank account in Ms Song’s name. On 5 July 2010, they opened a joint bank account.
[31] As of mid-2010, they lived at 88a Maupuia Road, Maupuia. The landlord said she could not be 100 per cent sure that Ms Song lived there, but she was definitely staying the night, and they were always together. When Mr Ma moved out, she was there cleaning. She told Mr Peters that Ms Song turned up a short time after Mr Ma moved in. Mr Ma told her that his girlfriend was moving to Wellington. In December 2010, Mr Ma wrote down the joint bank account in the respondents’ names on the bond refund form when he moved out of Maupuia Rd. This is largely hearsay evidence.
[32] In December 2010, Apu Crescent was purchased and registered in Ms Song’s name. Brandons wrote to Ms Song and referred to “relationship property”, and that she had told Brandons that she would be living with Mr Ma in the property. Despite the fact that the property and the mortgage were in her name, the correspondence records that Mr Ma contributed to payment of the purchase price. Brandons strongly recommended a relationship property agreement.
[33] I refer to a section of an interview of Mr Ma on 29 April 2015 when he said:
SM: Yeah.
GB: So it’s – the house is 42F Apu Crescent. SM: Yeah.
GB: It’s restrained by the police.
SM: Yep.
GB: And you have some ownership of that? SM: Yep.
GB: And you’ve put in how much?
SM: 70,000. GB: 70,000? SM: Yeah.
GB: Seven-zero? SM: Yeah.
GB: 70,000?
SM: Roughly about, roughly about. GB: Of your money?
SM: Yep.
GB: Okay. So where did the 70,000 come from? SM: Come from the sale of Martin Square.
[34] On 31 December 2010, the Dominion Post published an article about a sea rescue in which Mr Ma swam to shore and his two friends were rescued after their boat capsized while fishing and diving. Mr Ma said that the thought that he would never see his mother or “girlfriend” again spurred him to safety. That begs the question of identity.
[35] On 14 May 2011, Mr Ma and Ms Song flew from Auckland to Guangzhou, China on the same flight, CZ306. On 11 June 2011 they arrived back into Auckland from Guangzhou, China on the same flight, CZ305. Mr Ma texted a customer saying “I give you my girlfriend’s account” (Ms Song).
Respondents’ denial of relationship
[36] When Ms Song and Mr Ma flew from Auckland to China in May 2011, Mr Ma said he went to his city and Ms Song to her city. He says the relationship did not appear to be happy because after they became partners they had broken up a number of times and Mr Ma found Ms Song chatting on the internet to an old boyfriend. They say that they did not become partners until the year 2013.
[37] Mr Ma’s unchallenged evidence is that Ms Song left New Zealand on
31 December 2014 so Mr Davie submits that for Mr Ma to have an interest in Apu Crescent at law at that date, they would need to have been in a relationship in the nature of marriage by 31 December 2011, if his interest in property is derived from the relationship. It is not so dependent on that, given his admission at interview and the findings in this judgment.
[38] Mr Ma says he did not meet Ms Song until 2010. He says that money received from his mother in 2010 was paid into a joint bank account with Ms Song, but only in order to obtain a good interest rate through the ANZ Bank at Johnsonville where Ms Song was working.
[39] Mr Davie refers to the contention that he told the landlord that “his girlfriend” was moving to Wellington, and says that was not put to Mr Ma. Very late in the piece, during the hearing, Mr Ma said that a “Ms Xe” and Ms Song were living in Wellington at the time. The newspaper article in 2010 referred to Mr Ma’s
“girlfriend”. Mr Ma says that was “Ms Xe” and Denise was her English name. He said that all his friends knew he was in a relationship with Ms Xe before 2012. Mr Ma exhibits a photograph, undated, with his arm around a woman, which he says that was taken in 2009 or early 2010. An email from (David) Gao says that Ms Xe was Mr Ma’s girlfriend while he lived with him, but that was in 2009 and early 2010. Enquiries about Ms Xe after the hearing on 10-12 May 2016 were reflected in Mr Ma’s evidence that her name was not spelt “Xe” but “Zi”. Mr Ma’s first affidavit refers to her as “Ms Xe”. He said that he spelt out her name at the hearing on
10-12 May 2016, but the only name he wrote down was “Yan Meng Eng”. Mr Ma said that Ms Song had a boyfriend in 2009 and 2010. Mr Ma, to the end of the case, disputed he was in a relationship with Ms Song from early to mid 2010.
[40] Ms Light submitted that Mr Ma’s evidence of his relationship status worsened as time went on. The Police produced a photograph of a newspaper article, and Mr Ma then said the girlfriend concerned in that article was Ms Xe. Mr Ma first mentioned Ms Xe’s name on 12 May 2016, during cross-examination. The photograph which Mr Ma produced in evidence does not assist as there is no date in the photo and the woman is not separately identified as “Ms Xe”.
[41] I have considered this and all other evidence, including Mr Ma’s sworn evidence. I find that it is not credible that Mr Ma nor Ms Song should never mention “Ms Xe” or Ms Song’s “boyfriend” until late in the hearing when his relationship with Ms Song was front and centre to this whole case. These proceedings have had several facets over the years, and Mr Ma should not expect that such a late entrant in the relationship stakes should be held credible by the Court. The evidence, in my view, is compelling, indeed overwhelming, that Mr Ma and Ms Song were in a relationship as the Commissioner alleges, throughout the time he alleges. They were banking in joint accounts and acquired Apu Crescent together in 2010.
[42] I find to the point of certainty that Mr Ma and Ms Song were in a relationship living together from early 2010.
C. SIGNIFICANT CRIMINAL ACTIVITY - FISHERIES ACT 1996
[43] The Commissioner alleges the respondents sold and supplied seafood in contravention of the Fisheries Act, and unlawfully benefited as the result. The offending carries a maximum penalty sufficient to constitute significant criminal activity under s 6 of the Act. The Commissioner says the “relevant period” of criminal activity includes 1 January 2009 to 28 July 2014, but under s 5 of the Act it runs from five years before the application for restraint and ends when the profit forfeiture was made. This extends the period.
Facts
[44] Between 1 January 2009 and 28 July 2014, neither respondent was a licensed fisher. Unlicensed fishers are not authorised to sell seafood. Evidence of their alleged offending is drawn from several sources, including convictions on their pleas of guilty to charges laid following Operation Grand, infringement notices and warnings which Mr Ma received for Fisheries Act offences, and evidence consistent with the sale of seafood. The latter includes transactions in their accounts clearly attributed to the sale of seafood, and unexplained cash transactions in their accounts, which the Commissioner says cannot be explained as coming from any other source.
Operation Grand - prosecution
[45] On 28 July 2014, Ms Song and Mr Ma each pleaded guilty to one representative charge of obtaining a benefit by knowingly selling paua and sea cucumber otherwise than in accordance with the Fisheries Act. Thus, Ms Song and Mr Ma must accept that they were engaged in significant criminal activity, to the extent of $15,000, reflecting a representative charge. They were convicted for their different participation.
[46] The Sentencing Notes of His Honour Judge Hastings illustrate the seriousness of the offending. The Judge described Mr Ma as frequently diving for sea cucumber and paua around the Wellington coastline without a fishing permit or licence. On 6 November 2013 he was found with 161 sea cucumbers in Oriental Bay, against a limit of 50 per person per day. The Judge said Mr Ma was well
known in the Wellington Chinese community as the “go to” man for sea cucumber and paua. Mr Ma bagged and froze paua. It was sold and distributed to buyers in Wellington and Auckland for direct delivery. Ms Song had a courier account. For the purpose of the charge, Mr Ma paid $15,267.50 into the bank account of Ms Song from the unlawful sales. He had been convicted of a Fisheries Act offence in 2010. The Judge brought to account that Mr Ma forfeited about $11,900 worth of property, as well as his car said to be worth $9,000. Diving was said to be the family’s sole source of income. Mr Ma, after sentencing, had incorporated a sea cucumber distribution company and obtained a fishing permit.
[47] The unlawful fishing was alleged to have affected the sustainability of paua and sea cucumber stocks, although the sea cucumber quota had not been achieved in the previous three years. The attempt to conceal the banking into Ms Song’s account was undone by the express reference to deposits from the sale of sea cucumber. The Judge noted that there appeared to be a “settled pattern of offending” during the five months of investigation under Operation Grand. The Judge called this a medium sized commercial operation. Although imprisonment was an option, the fact that Mr Ma was to become a father for the first time tipped the balance in favour of home detention. He was sentenced to six months home detention and 150 hours community work. The sentence was to be served at Apu Crescent. A statutory ban from fishing applies, and the Judge did not exercise his discretion not to ban Mr Ma.
[48] Ms Song was sentenced on the basis of the same offending. She was not directly involved in the gathering of paua and sea cucumber, and she packed and delivered it twice only. That reduced her culpability. She was sentenced to four months community detention to be served at Apu Crescent. She was ordered to pay
$15,000 to the Paua Industry Council to help maintain the sustainability of the paua industry.
[49] Mr Davie says that Mr Ma had only previously been involved in some small scale offending which by and large did not involve the sale of seafood, but he does acknowledge some seafood sales prior to Operation Grand in the sum of $1,850. Mr Davie says that given the reparation ordered, along with the confiscation of dive gear, the Landcruiser, a computer and monitor, an iPhone and the amount paid to
secure the return of Ms Song’s car, the total “punishment” for their offending was
$41,662. That corresponds with the admitted sum obtained by Mr Ma from his unlawful fishing during the Operation Grand period, as Mr Davie puts it. Mr Ma thus acknowledges more seafood sales than alleged in the prosecution. Mr Davie says that to be punished by the District Court and then also to have to pay as the result of forfeiture is unfair. This will be reflected under hardship considerations.
Other evidence of unlawful sale of seafood
[50] The sea cucumber was fresh, or dried using a food dehydrator, vacuum-packed into plastic bags, then sent to customers. The respondents sold sea cucumber and paua to customers in Auckland and Wellington by direct delivery or by using a courier company with which Ms Song had an account.
[51] The Commissioner says that Mr Ma’s text messages are explicit as to the unlawful activity. Customers often paid him in cash. The inference is advanced that the unlawful benefit the respondents received was more than the bank accounts demonstrate. Mr Ma was seen diving for sea cucumber and paua up to three or four times a week. His cell phone records during the period 7 October 2013 to
7 January 2014 are submitted as compelling evidence of the sale of seafood.
[52] A flavour of these texts is:
… Don’t have any dried sea cucumbers in stock. I’m currently flat out with
orders for live sea cucumbers selling at $3/fish. So if you want to pay
$4/fish I can go catch them for you tomorrow and have them dried. Probably be ready for you on Friday.
[53] Mr Peters gives evidence that the prices obtained from Deep Blue Seafoods New Zealand Ltd, with whom Mr Ma used to deal, indicated market prices of $40/kg for wet sea cucumber (about $4 per sea cucumber) and $700-$800/kg for dried sea cucumber.
[54] Mr Davie says that the reference in a text to Mr Ma having dived so much he was vomiting, is not probative or sustainable because the words before the statement are “Nah, gotta work”, so he was working for another person at the time. They are,
however, entirely consistent with Mr Ma’s view of his “work”, fishing unlawfully,
which I find by this Interim Judgment to be a major part of his income.
[55] The convictions in the District Court are supplemented by evidence of infringement notices and warnings from Ministry of Primary Industries (“MPI”) officers given to Mr Ma for offending between 19 January 2009 and the
commencement of Operation Grand. These include:
Date Infringement notice/warning Seafood Mr Ma had in his possession Estimated
Value
19 January 2009 Issued an infringement notice
by Fisher Officer Sealey for possession of undersized paua and possessing more than the prescribed daily limit of seafood
In possession of
17 paua
$425-$850 17 February 2009 Issued an infringement notice
by Fishery Office O’Leary for
possession of undersized paua.In possession of
nine paua
$225-$450 6 September 2009 Issued an infringement notice
by Fishery Officer Sealey for possessing more than the prescribed daily limit of seafood
In possession of
16 paua
$400-$800 18 January 2010 Issued an infringement notice
by Fishery Officer Bernie for taking undersized paua and undersized rock lobster
In possession of
10 paua
$250-$500 21 April 2010 Convicted of
taking/possessing paua against the FA9
In possession of
60 shucked ordinary paua and seven ordinary paua in their shells
$1675-$3350 26 April 2010 Issued an infringement notice
by Fishery Officer Bernie for taking undersized paua
In possession of
paua
Amount of paua
not recorded
5 November 2010 Issued an official warning
notice by Fishery Officer Mendoza for being in possession of an undersized rock lobster
In possession of a
rock lobster
$70/kg
On average weigh 0.5-2.5kg
22 October 2011 Issued an infringement notice
by Fishery Officer Sealey for possessing more than the prescribed daily limit of seafood
In possession of
17 black foot paua, sea cucumber and kina
$425-$850 (the
paua alone)
25 October 2011 Issued a warning for taking
excess paua
In possession of
30 paua
$750-$1500
9 Mr Ma was sentenced to 350 hours’ community work and to pay reparation of $1,006.25. An
order was made for the forfeiture of his fishing gear and the paua.
[56] Other evidence consistent with the sale of seafood relates to purchases by
Mr Ma and Ms Song, separately and at different times between 23 June 2011 and
5 April 2015, of items for storage, food dehydration and vacuum sealing. They involve purchases, all on Trade Me, of items such as a Sharp Nano Deodoriser Fridge Freezer, food dehydrators, vacuum sealed storage bags, and a multi function packing sealer packing machine plus bags. The Commissioner says the items are consistent with packaging and storing frozen and dried seafood.
Value of seafood sold
[57] Mr Peters prepared a list of deposits which Mr Ma identified as relating to the sale of seafood, between 29 December 2011 and 12 February 2014. These total
$45,461. He refers to Mr Peters’ evidence of “unexplained” cash deposits, which are submitted to be consistent with the unlawful sale of seafood. Mr Peters analysed the respondents’ bank accounts and identified “cash” deposits totalling $171,768.74 and “unknown” deposits totalling $35,656.12. For example, between March and May 2013, cash deposits and deposits with references to seafood totalled $16,520.
[58] References to the deposits include:
(a) An unknown deposit of $1,200 on 3 February 2012 with the
description “YUANYUAN SEAFOOD DANIEL ST”;
(b) An unknown deposit of $400 on 7 May 2012 with the description
“YUANYAUN SEAL”;
(c) An unknown deposit of $700 on 14 January 2013 with the description
“WU YUANUYAN SEAFOOD”;
(d) An unknown deposit of $1,200 on 11 April 2013 with the description
“MISS Y WU SEA”;
(e) An unknown deposit of $200 on 16 April 2013 with the description
“MISS Y WU AND SEA”;
(f) An unknown deposit of $1,200 on 2 May 2013 with the description
“MISS Y WU SEA CUCUMBER”;
(g)An unknown deposit of $300 on 2 September 2013 with the description “Liu,Shengnan Amy seacu”.
[59] As Ms Song’s total declared income for the period 1 April 2009 to
31 March 2014 was $136,250.64, and Mr Ma’s total declared income for the same period was $51,284.46 from MSD, there is no other income to explain the cash deposits and the Commissioner says they came from the unlawful sale of seafood.
[60] I conclude on all the evidence, and having heard Mr Ma’s denial and explanations and Ms Song’s case, that the Commissioner has on the balance of probabilities, and by a comfortable margin, established the respondents’ significant criminal activity in the unlawful sale of seafood in the relevant period, and that both respondents unlawfully benefited from such activity. Each was involved, in different ways, in a joint enterprise, proven in my view beyond any doubt. This means the presumption in s 53(1) of the Act applies, and the Commissioner’s assertion of unlawful benefit in the sum of $214,924.35 is presumed to be correct unless rebutted by the respondents.
D. SIGNIFICANT CRIMINAL ACTIVITY – BENEFIT FRAUD
“Benefit fraud”
[61] “Benefit fraud” is a convenient shorthand for the Commissioner’s contention that the respondents have committed the offences of using a document to obtain a pecuniary advantage or obtaining by deception pursuant to ss 228(b) and 214(a) of the Crimes Act 1961. The maximum penalty is seven years imprisonment.
[62] The alleged offending associated with the MSD is based on applications for benefits and allowances by each respondent. Mr Ma said he had no sources of income and had no partner when he sought unemployment benefits between 2010 and 2013. The Commissioner says his statements and declarations were false because he failed to disclose the unlawful sale of seafood and his personal
relationship with Ms Song, and he under-declared his income. He failed to declare Ms Song’s income, but was living with her. She too is alleged to have failed to declare unlawful benefit from seafood sales, and their relationship.
[63] I have found they were living together during the time alleged by the Commissioner. I have rejected their denials. They have otherwise provided explanations for all the periods relied upon by the Commissioner claimed to reflect in overpayments. They say the Commissioner has not proven on the balance of probabilities that they have unlawfully benefitted by overpayment of benefits. If the Court decides they have, then they submit they have rebutted the presumption but for
$6,120.33 of the sum alleged. It is conceded that Mr Ma received benefits during
Operation Grand that he should not have done.
Evidence
[64] Mr Tunley, giving evidence for the Commissioner, says that when the MSD considers an application for a benefit, it does so on the information provided, and takes that on good faith.
[65] He refers to alleged false statements in the forms completed to obtain benefits from the MSD. A declaration of the truth and completeness of information records the client’s obligations:
I must tell Work and Income immediately if either my partner or myself:
· have a change in work situation (such as starting part-time, casual or full-time work, whether paid or unpaid)
· become self employed/start to run a business
· have changes to my/our income or financial circumstances
…
· have changes to my/our living situation…
…
· have any other change that may affect my/our benefit entitlement or rate.
[66] He says after revision of earlier calculations that benefits were overpaid through a failure to properly provide information to the MSD, resulting in an unlawful benefit of $79,072.87 to Mr Ma and $30,963.02 to Ms Song. This evidence is derived from a week-by-week analysis of the benefits received, compared to the income and assets asserted by the Commissioner. This is a highly technical exercise as it depends on a comparison of the benefit received against what is said to be the entitlement to that benefit.
[67] I go on to find that there was a large sum earned from the unlawful sale of seafood. The respondents failed to declare that to the MSD. Of that I am left in no doubt, except as to two elements of calculation to which I will refer under Section E of this interim judgment. The failure to do so, and to disclose other cash and property interests, contaminates receipt of benefits in the relevant period. The Commissioner relies on other elements of criminality in the information provided, or not provided, to which I will refer.
[68] The Commissioner says that an unemployment benefit application on
27 November 2008 signed by Mr Ma failed to disclose that six days earlier he received a transfer of $89,194.30 into his bank account when he was specifically asked if he had money in a bank. He declared that he did not expect other income in the next 52 weeks.
[69] In his application for an unemployment benefit on 27 January 2010, Mr Ma listed his address as Unit 517, 20 Martin Square and did not declare his interest in Unit 516, 20 Martin Square in the “assets” section of the form. He was required to disclose assets. His explanation was that it was under Mr Gao’s name. He declared he was not working and had not been in the past 52 weeks, and had no other employment. He did not declare that he had been receiving rent from Martin Square, despite the form providing examples of such income. He said he did not expect to get income in the next 52 weeks, but he was then getting regular rent from tenants in Martin Square. In the accommodation supplement section of the form, Mr Ma said he paid rent. He said he was living at Unit 517, 20 Martin Square, and that he did not own the home he lived in, which was untrue.
[70] Mr Ma also said that he was attending 40 hours per week at an educational institution. His Victoria University records show he completed four courses in trimesters two and three of 2009, but not as a fulltime student, and he could not have been attending University 40 hours per week. He said in evidence he had finished summer school by that date.
[71] Mr Ma applied for an unemployment benefit on 6 June 2012 and said he was single and living alone. The Commissioner says he was living with Ms Song at Apu Crescent, as I have found. He said he had no employment for the past 52 weeks and received no other income, and had no assets. He said he was paying $190 rent each week to Ms Song, but there were no rental payments in Ms Song’s bank accounts, nor were there regular $190 payments from Mr Ma’s bank accounts to any other account.
[72] Mr Ma re-applied for an unemployment benefit on 27 May 2013. He said that he was single, and the Commissioner says he was evasive and equivocal when asked about his relationship with Ms Song. When asked if they had a personal relationship he said in evidence “I don’t think so but I was – what my explanation was, I was thinking to have a relationship with her”. He said he had not been in employment for the past 52 weeks, not received any income from any source in that time and that he was not expecting any. Yet between 19 March 2013 and
7 May 2013 he received $16,520 income into his account.
[73] On 25 February 2014, Mr Ma said he was doing casual work as a diver for “odd hours here and there”, and he got paid in a lump sum. The prospect of fulltime work was before him, and he was trying to buy quota. Less than a month earlier, on
29 January 2014, he was arrested as a result of Operation Grand. His statements to
Mr Beattie did not refer to the income he received from the sale of seafood.
[74] In his 10 February 2016 affidavit, Mr Tunley affirmed his response to Mr Ma’s affidavit regarding the alleged benefit fraud. He attached what is known as an e-Sieve report, which showed the various benefits received by Mr Ma from
25 November 2008 to 9 March 2015. Mr Tunley referred back to the benefit overpayment alleged, and the fact that Mr Ma received a student allowance, which
was also brought to account to produce a figure of $79,072.87. The same affirmation exhibited an “income sweep” which showed all income declared by Mr Ma to the MSD. Mr Tunley identified a correct declaration of income in one instance by Mr Ma, but there was plainly other income he did not declare to the MSD. When Mr Ma submitted a re-application for an unemployment benefit on 27 May 2013, he said he and his partner had not been working in the last 52 weeks, but his affidavit of
18 December 2015 said he was employed. When Mr Ma said he made contact with the MSD, Mr Tunley reviewed all interactions in the year 2013 and he could find no reference. Mr Ma deposed that the business had been run by Ms Song, but Mr Tunley could find no indication that she had declared this business as of 2014.
[75] Mr Tunley reviewed the MSD’s interactions with Mr Ma in 2014. Mr Ma deposed that Ms Song was self employed at Prestige Trading Ltd and earned an income by way of gross receipts between March and June 2014. However, he did not declare that to the MSD at the time. If that had been declared by Mr Ma then an assessment would have been undertaken for Job Seeker support.
[76] He married Ms Song in April 2014 and then declared their relationship.
[77] Ms Song swore an affidavit dated 18 November 2014 on behalf of herself and Mr Ma. She said her grasp of English was better than his. The affidavit addressed Mr Beattie’s affidavit of 4 August 2014. At that point Mr Beattie considered that Mr Ma and Ms Song had profited to the extent of $335,265 from the sale of seafood and Ms Song said that was “utterly false”. She said that only $1,550 may have resulted from such sale outside the period of Operation Grand.
[78] Ms Song said that she met Mr Ma in late June 2010 and they lived at Maupuia, but not as a couple. He had lived in Martin Square and after Mr Ma moved in with Ms Song, he rented the Martin Square property. Ms Song said they commenced their relationship as a couple in mid-2013. Ms Song says “our home”, being Apu Crescent, was purchased in December 2010. It cost $300,000 and a bank loan of $170,000 was arranged. The property was put in her name. The balance of the purchase price was provided by her parents and she refers to her father’s affidavit. Her parents had provided significant financial support.
[79] Ms Song in her affidavit said that she rejected the allegation of benefit fraud as the only benefit she obtained was when she was not working. She says that she received her salary from ANZ first on 6 May 2009, and was paid every second week until 21 April 2010. She received a benefit from 1 June 2010 to 17 August 2010. She then began work with ANZ again on 25 August 2010. Her last payment was on
18 September 2012. Ms Song deposed to part-time work at the Victoria University’s café where she worked from January 2009 to April 2010. She was paid cash daily. She worked on call. She said she has since lost her “boss’s” cell phone number and when she visited to talk to him the café was closed.
[80] I have considered all of Ms Song’s assertions in her affidavit. I have also read the Transcript of interviews conducted by Ms Sagar of MPI on 29 January 2014 and 5 February 2014.
[81] Mr Tunley addressed the alleged benefit fraud by Ms Song in a supplementary affidavit of 3 May 2016, having made affidavits on 20 July 2015 and
10 February 2016. He referred to a paper based assessment of 2 June 2015 by a technical officer in respect of Ms Song’s benefits and student allowance. That was to provide an indication only of potentially overpaid benefits and/or student allowances. That showed a total overpaid benefit of $13,925.56 and an overpaid student allowance of $12,779.17, a total of $26,704.73. There was then a “full and comprehensive debt assessment” completed in relation to the student allowance by another technical officer, which confirmed the overpaid student allowance. Then there was a further assessment made on 31 July 2015 which showed a total of
$30,963.02. Mr Tunley deposed that he reviewed the reports of the technical officers and agreed with those figures.
Discussion
[82] My reservations in coming to interim judgment are not based on the lack of proof by the Commissioner on the balance of probabilities that the offending alleged has occurred, but rather the way it is calculated, which creates particular difficulties for the respondents in trying to discharge the onus which lies upon them. I have brought this to account when considering the explanations that are provided, so as
not to create an impossible burden on the respondents through the sheer difficulty of their task.
[83] In a sense, the allegation of offending against the MSD is reasonably straightforward because Mr Ma admitted he did not declare income received from the sale of seafood and by this Interim Judgment I find that he did have income to a substantial degree. The amount by which he and Ms Song unlawfully benefited influences this Interim Judgment. The Commissioner asserts the benefit fraud by each respondent, linked, given their relationship.
[84] In addition to income from seafood sales not declared to the MSD other “income” and assets not disclosed to the MSD, and relevant to entitlement to benefit is said to come from the following:
(a) Asset sales (Martin Square): $90,682.02;
(b) Funds received from Guangyang Song [Ms Song’s father]:
$157,410.09;
(c) Rental income: $24,654.00; (d) Trade Me sales: $9,474.00; (e) Term Deposit: $60,487.36;
(f) Money transfer from Runda Son 24/12/2013: $40,000.00; and
(g) Sales of seafood identified by Mr Ma: $45,461.00.
[85] These do not relate to Ms Song on the face of it, except to the extent to which she derived a benefit, directly on the case of the unlawful seafood sales, or otherwise failed to declare the relationship. Ms Light submits that the evidence is clear that Ms Song had income sources that she did not disclose to the MSD and that the income from the unlawful sale of seafood is attributable to both respondents. She did not disclose the relationship. I have upheld that submission, given Ms Song’s
admitted and proven involvement in unlawful seafood sales and the relationship with
Mr Ma.
Martin Square
[86] Units 516 and 517, 20 Martin Square, were purchased for $186,000 on
11 March 2009 in Xiang Gao’s name. Xiang (David Gao) was Mr Ma’s flatmate at the time. Brandons prepared a deed of trust and a loan agreement for execution by Mr Ma and Mr Gao. Mr Gao lent Mr Ma $120,000 for a term of five years, at an interest rate of six per cent for the first year, payable in monthly instalments. Mr Ma provided the balance of the funds to purchase the property. After five years the outstanding principal with interest would be paid to Mr Gao and the Martin Square properties would be transferred into Mr Ma’s name. Mr Ma could register a caveat to protect his interest and receive the benefit of rental income, though Mr Gao was the registered owner. The Body Corporate interest was recorded as that of Mr Ma, as were the bank account details provided. The Commissioner says that the Martin Square properties were investment properties for Mr Ma and that Brandons correctly regarded the arrangement as “slightly unusual in that you [Mr Gao] are the registered proprietor of the land but Max [Mr Ma] is the beneficial owner”. However, Mr Ma says that he purchased the Martin Square properties for his mother using money she sent him from China, and that the properties were investments for her. The Commissioner says there is no evidence to support this at all. There is no reference in Brandons’ documentation which even hints at that. The Commissioner says it is inconceivable that Mr Ma would take on a $120,000 loan from Mr Gao without reference to the fact that the liability belonged to his mother. Nor does his mother give any evidence to support this. It seems Mr Gao did not know of this ownership arrangement either, because he wrote to Mr Brandon on 20 August 2014 regarding the purchase which he said was to help his flatmate Mr Ma as he did not have enough money. In an email of 24 June 2015 to Mr Beattie, Mr Gao said Mr Ma was his tenant and said he had done him a favour when he decided to invest in units 516 and 517 as he could not borrow money from the bank. A deposit of $89,194.30 into Mr Ma’s bank account on 21 November 2008 was from a New Zealand finance company, not from China (or if it was, there is no evidence whose bank account it came from), four months prior to the purchase of the Martin Square properties. By
2 January 2009, the account had reduced to $78,110.05. The Commissioner says none of this is consistent with Mr Ma’s evidence that money was transferred from his mother to purchase a rental property on her behalf.
[87] The discussion with the Court when Mr Ma gave evidence was illuminating with regard to Martin Square and the financial relationship with his mother. He said he put money into Martin Square when the opportunity to buy two properties came at a “lower price because my money for my Mum”. The loan from his mother he said was “over two property” and he could not get a loan from the bank. He discussed the position with Xiang Gao, and he agreed to lend Mr Ma the money to purchase the property and he paid interest. He said the reason he [Mr Ma] put money into the property was:
Because the reason my Mum sent the money to New Zealand is to invest so I was to invest the money and I see the opportunity. So that’s – I put the money in the investment.
[88] When Mr Ma was asked if that was to be his investment he said “But the money from the property was paid back to my Mum”. After some further exploration, Mr Ma was asked what would happen when the property was sold and there was a profit. He seemed to agree that if had simply borrowed money from his mother then he would pay her back and that might leave a profit. However, the position was clarified when he was asked specifically if he had an investment interest in Martin Square. Mr Ma said:
Yes, I, I did have some interest in that but I am actually not sure because after paying interest to Xiang Gao, interest to my Mum, interest to the Body Corporate and the rest of the money and also sometime the Department is also …
[89] The difficulties with tenants, and these factors, meant Mr Ma had no idea how much money he made. In fact he said that he did not make a profit on this investment. He acknowledged that he collected rent for Martin Place “but only a small part”. He acknowledged that the rent was paid direct to his bank account, about $230 per week, a total of about $450 for the two units. After payment of Body Corporate charges and rates, he received a third. Mr Ma said that he stopped paying Ms Song rent after they got married, but they agreed that before they had got married they were living together and he agreed that he was “claiming rent”. He also agreed
that he got an allowance for rent. He acknowledged that when they moved into Apu Crescent he claimed the rent allowance, but he said that he did not tell MSD that they lived together until after they were married.
Apu Crescent
[90] When Mr Ma was interviewed on 29 April 2015 with Mr Davie in attendance, Mr Ma began by saying that he had made an affidavit which set out his position. However, he quickly clarified that he had put money into Apu Crescent, some $70,000 from the sale of Martin Square. He said that the money he used to acquire an interest came from money transferred from China in 2008, from his mother. He said that the decision to sell was because Xiang Gao and his wife wanted to sell. He said that the money he got from the investment he put into a savings account on Ms Song’s recommendation, and he netted about $80,000 from the sale of the two properties. He said that the money belonged to his mother and he told his mother that he would pay her later on “when I have the ability to earn more money”. He referred to the exchange rate as being poor at the time. Mr Ma then said that Ms Song “break this principle” because she “borrowed [lent] this money to our friends”, being Wang Dong.
[91] He said that he paid rent at Apu Crescent to Ms Song. He said that he paid it from “the benefit”. The benefit came into his ASB account, but he said that he paid her most of the time in cash.
Landcruiser
[92] Mr Ma said that the Landcruiser was not paid for from the proceeds of unlawful sale of seafood, but by “Karens parent”. Her father deposed that he transferred $6,000 on 22 April 2004. He said the balance came from international transfers from Karen’s father. He referred to the withdrawal of $11,000 from the Westpac account, and he paid cash.
Conclusion
[93] Through the period of significant criminal activity alleged, the respondents were non-compliant with this obligation in failing to declare their relationship, and unlawful seafood sales as I have found. That is sufficient to establish benefit fraud. I do not know whether the reduction in the unlawful benefit from seafood sales in Section E of this Interim Judgment abates the Commissioner’s calculation from benefit fraud. The outcome is reserved for final judgment.
E. APPLICATION FOR PROFIT FORFEITURE ORDERS
[94] I have found significant criminal activity by the respondents in two respects, and now address the extent to which they unlawfully benefited from that.
[95] Section 55 of the Act provides:
55 Making profit forfeiture order
(1) The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—
(a) the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and
(b) the respondent has interests in property. (2) The order must specify—
(a) the value of the benefit determined in accordance with section 53; and
(b) the maximum recoverable amount determined in accordance with section 54; and
(c) the property that is to be disposed of in accordance with section 83(1), being property in which the respondent has, or is treated as having, interests.
(3) Subsections (1) and (2) are subject to section 56.
(4) A profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it …
[96] The application for the restraining order was filed on 28 July 2014 and the application for a profit forfeiture order was made on 31 July 2015. Property acquired prior to the alleged period of significant criminal activity may be the subject of a profit forfeiture order where that property was acquired within the relevant period of criminal activity, as earlier calculated in this Interim Judgment .10
Steps to Interim Judgment
[97] In Pulman v Commissioner of Police, Lang J observed that the making of a profit forfeiture order potentially required the court to take four steps.11 I make some additions to those for this Interim Judgment.
[98] First, as discussed earlier, the value is presumed to be that prescribed by s 53(1) of the Act unless and until the respondents prove otherwise.12 The respondents must show that the Commissioner’s assessment of the value was wrong and prove the actual benefit, in order to rebut the presumption. The onus does not pass back to the Commissioner.13 How the Commissioner arrived at the value stated in the application is strictly irrelevant.14 I have observed that the onus may be discharged without such evidence by the respondent if the Commissioner’s contention as to the unlawful benefit is shown to be wrong.
[99] Second, the Court must determine the “maximum recoverable amount” under s 54(1)(b). That exercise involves taking the value of the benefit and deducting from that figure the value of any property already forfeited to the Crown by virtue of an assets forfeiture order made in relation to the same criminal activity as that to which the profit forfeiture application relates.
[100] Third, the Court must determine whether any property should be excluded from the operation of the profit forfeiture order because undue hardship is likely to
be caused to the respondent if such property were to be realised.
10 Commissioner of Police v Nathan [2014] NZHC 216.
11 Pulman v Commissioner of Police HC Auckland CIV-2010-404-5666, 27 May 2011 at [10]-[13].
12 Commissioner of Police v Tang, above n 3, at [39].
13 Criminal Proceeds (Recovery )Act 2009, s 55.
14 See affidavit of Steven Tunley sworn 10 February 2016 at [7].
[101] Fourth, and finally, once the Court has undertaken each of the above steps as may be relevant, it must make a profit forfeiture order under s 55(1) if it is satisfied on the balance of probabilities that the respondent has interests in property. The order must specify the value of the benefit, the maximum recoverable amount and the property that is to be disposed of.
[102] Property does not have to be acquired solely out of the fruits of that significant criminal activity. It is sufficient that a benefit has been unlawfully derived from that activity, and a figure identified, so that any property in which the respondents have an interest may be forfeited up to that value, subject to any undue hardship decision.
The presumption of the unlawful benefit asserted by the Commissioner
[103] Mr Davie submits that the Court faces the same problem as it did in Commissioner of Police v Zhu.15 In Zhu, the Court was asked to draw an inference that unexplained deposits were the product of some other offending by Mr Zhu, beyond that for which he had been charged. The IRD, using search powers, discovered documentary evidence which indicated offending between 2003 and
2011. McKenzie J said an inference may be drawn that a conviction reflects only part of the offending, and it may be the “tip of the iceberg”, but that is for proof on the balance of probabilities.
[104] Ms Light submits that is the case here, because the significant criminal activity was ongoing and there is clear evidence from which to draw an inference that the seafood sales are part of a clear pattern of offending, pointing to the extensive evidence in that regard. She submits that this case is like The Commissioner of Police v He where, after restraint proceedings, further enquiries were made by the Commissioner to see if there were obvious and plausible
explanations for unverified deposits.16
[105] Operation Grand ran for five months and, with the other evidence referred to above, established a clear pattern of offending. For two months, between
15 Commissioner of Police v Zhu, above n 2.
16 The Commissioner of Police v He, above n 6.
March 2013 and May 2013, the deposits totalled $16,520, a short patch in the overall offending. I conclude the Commissioner has tried to find obvious or plausible explanations for some or all of the deposits said by the Commissioner to be unverified, as any applicant should do, rather than rely on the presumption.
[106] Mr Davie makes the point that Mr Beattie first deposed that $353,265 was obtained from seafood sales. He submits Mr Ma’s offending was small scale and some years ago. The respondents submit that the Commissioner has not discharged his burden to prove that profit has been obtained by way of unlawful sale of seafood and what is left is de minimis.
[107] Given the explanations offered by Mr Ma, I refer to some evidence which Ms Light submits bears on his credibility as to the amount of unlawful benefit received, and overall, when addressing the onus taken up by the respondents.
[108] Ms Light refers to the evidence of Mr Fredericksen, from the New Zealand School of Commercial Diver Training, that Mr Ma’s diving course was completed in three parts:
(i) 27 September 2010 to 16 October 2010 (19 days);
(ii)5 March 2011 to 10 March 2011 (10 days with the possibility of dives in February 2011); and
(iii) 11 April 2011 to 13 April 2011 (19 days).
[109] Mr Beattie looked for bank transactions to identify those that were made in Huntly to fit within the dates provided by Mr Fredericksen. Mr Ma said that he was in Huntly from September 2010 to April 2011, except for a break over Christmas and the New Year. Ms Light submits that cannot be true as there was a five months break between Parts One and Two of the course. Mr Ma, however, stuck to his line that he was in Huntly and returned to Wellington shortly before the New Year break. Mr Davie says that the dates Mr Ma attended the course are of little relevance in relation to deductions from the applicant’s list of unknown and cash deposits
(“$204k List”), and there was no deduction sought for time spent at Huntly. Mr Davie says that one could reasonably assume that seafood would have been hard to gather and sell in Huntly. I find Mr Ma’s evidence was contradictory, and scrambling in his attempt to explain his attendance in Huntly. It does not support his credibility.
[110] A second issue relates to an Omega watch sold through Trade Me. Mr Ma says his Omega watch was sold for $4,000 and he produced a photograph said to be of him wearing the watch. He said the photograph was taken in 2009, but under cross-examination he said it was 2008. However, the Trade Me records for Mr Gao showed the watch listed for sale between May and June 2009. If so, it could only reasonably have been sold on Trade Me after the last listing on 22 June 2009. His explanation that he sold it because he was behind in payments to Mr Gao does not fit with his saying that he owed Mr Gao “200 bucks”. Mr Davie submits that only $4,000 was sought as a deduction from the $204k List, as he calls it, and there is little doubt that Mr Ma remembers the watch, did not like it, and that he was sure it was sold with the assistance of Mr Gao. He used Mr Gao’s account on Trade Me to do so. I do not accept the evidence regarding the sale of the Omega watch as associated with seven deposits between February 2010 and April 2010. He would not have sold it in 2009 and had the money in hand for many months before depositing it in 2010. I do not accept Mr Ma’s explanation and it is not upheld.
[111] The funds which the Commissioner says were the result of significant criminal activity are recognised by Mr Davie as presumptively correct, but he calls in aid Police v He, where Ellis J cautioned that it is very easy for the Commissioner to examine the respondents’ bank accounts and list deposits over a five year period and say they are unverified or unidentified.17 There must be a sufficient link between the significant criminal activity and the deposits, and that must be “clear and cogent”. There must be more to it than a degree of analysis, and Mr Davie puts it that a more rigorous approach to the evidence is warranted given that the “effective
forfeiture of the respondents’ home” is in issue. He puts it this way:
17 Commissioner of Police v He, above n 6.
… Has there been a sufficient link to the unknown deposits relied on by the Police? The first three convictions in 2009 [Mr Ma] were for small sums totalling no more than $800.00 each.
[112] He submits that the Commissioner is inviting the Court to “speculate” and “infer” deposits are linked to offending and says that has not been established to the requisite standard. Further, he says that there are glaring errors in the list alleged by the Commissioner. If that is so then they will reduce the sum which relates to the Fisheries Act offending. At the same time, Mr Davie concedes Mr Ma has unlawfully benefited from significant criminal activity during the relevant period, and that Ms Song has benefited, but he says only to the extent of $400 paid against the mortgage liability over Apu Crescent.
Double counting
[113] The first error is said by Mr Davie to be “double counting”. He refers to
$45,461 identified deposits from the sale of seafood, which is accepted but for one entry of $1,700 on 10 January 2013 (which was a deposit against Ms Song’s Visa card). That was withdrawal from an 00 account on the same day. I agree that should not be included as on balance it may have come from another source, and is to be deducted from the sum of $45,461.00.
Operation Grand
[114] Mr Davie refers to Operation Grand. Nearly all deposits are made after Operation Grand commenced. The first seven amounted to $3,550 and (after taking off $1,700 as above), $1,850 represents sales of seafood outside Operation Grand and Mr Ma accepts those.
Re-banking
[115] Mr Beattie accepts possible “re-banking” of $35,175. When that is deducted the sum attributable to the unlawful sale and supply of seafood is $214,924.35. Mr Davie says that $35,175 should be deducted for “re-banking” from the
$204k List, so the starting point for the Court is $169,463. However, Mr Peters’
analysis shows unidentified sources of cash income of $204,638.35. A further
$45,461 is identified as being from the sale of seafood, a total of $250,099.35. From that he deducts $35,175.00 to reach $214,924.35.
[116] Mr Davie says that the total re-banking on the evidence goes well beyond
$35,175, and it was simply left to Mr Beattie to decide what he considered to be re-banking. Mr Ma’s evidence of “re-banking” of $74,820.65 came to $98,960.05 by close of trial, and he complained his evidence was the product of having to work through five years of transactions in his “daily life”.
[117] Mr Davie submits that (Mr Ma’s) Table (i) represents same day withdrawals
and re-banking which have been missed by Mr Beattie. These come to $10,380.19.
[118] Table (ii) relates to deposits and withdrawals on the same day for similar amounts which are said to be in the nature of “re-banking”. An example is deposit on 5 November 2013 of $4,300, allegedly from seafood sale. On that day Ms Song closed her bank account ending “450” and took out $4,382.08 by way of cash cheque deposited into the 00 account that day. Table (ii) comes to $33,736.
[119] Table (iii) sets out where similar sums have been withdrawn on days very close to deposit dates said by the Commissioner to be unlawful seafood sales. One withdrawal was on 17 February 2004 for $650, after Mr Ma had all of his diving gear forfeited and was unable to dive. 268 sea cucumber were confiscated during the raid on Mr Ma’s home, he could not get more product. The same is said to go for the last four entries in the $204k List. Table (iii) amounts to $16,338.44.
[120] Table (iv) comprises 11 deposits, and explanations are provided. Most relate to withdrawals one or two months prior to deposits. These amount to $12,335.
[121] Table (v) contains 11 entries, where withdrawals were made after deposits. Mr Ma said he would borrow from friends to make a deposit, withdraw from the bank account, and repay that. Most of the later “payback” withdrawals are close to the initial deposit. He could not pay Ms Song’s outgoings while he was in Huntly, so he borrowed from a friend to settle those and she would pay those back within a week. Table (v) comes to $7,655.20.
[122] Table (vi) refers to transfers and Mr Ma provides explanations listed by him in evidence. There was an international transfer of $2,990 from Mr Ma’s brother in China. Table (vi) totals $16,551.50.
[123] Table (vii) reflects deposits by Ms Song from before the respondents met. As it has never been suggested Ms Song fished unlawfully, it is submitted that these cannot be proceeds from the sale of seafood. Table (vii) totals $1,971.72.
[124] Mr Davie concludes by saying that total re-banking of $98,968.05 should be brought to account, reducing the $204k List to $70,494.95 (his $169,463 - $98,968.05).
[125] Ms Light submits the respondents have not established on the balance of probabilities that the transactions set out in tables one to seven are not related to the sale of unlawful seafood. All were considered by Mr Beattie. She makes the following overarching points. First, the respondents have provided no explanation why they would withdraw an amount or amounts and then re-bank over several different days, weeks, or months, in varying amounts. It makes no sense. Further, Mr Ma relies on “re-banking” transactions which involve funds obtained by multiple withdrawals which do not match the amounts of the funds deposited. Mr Peters has identified some re-banking which Mr Ma relied on where the deposit date preceded the withdrawal date. Further, the alleged re-banking involved funds from multiple withdrawals that do not match the funds subsequently deposited.
[126] I regard it as significant that Mr Ma’s explanations differ for the transactions set out in his Tables (i) to (vii) helpfully attached to Ms Light’s submissions in closing. Tables (i) to (vi) represent deposits where different explanations have been provided about a specific transaction. I have considered each of Mr Ma’s explanations. While it is not in every case that he gives different explanations, for a significant number of the transactions there have been such, and there is no independent evidence to support what Mr Ma says. If he does not know, he does not know, but giving different explanations does not assist his credibility.
[127] Ms Light’s overall submission is that due to the lack of any “independent” evidence to verify the explanations, the respondents have not established on the balance of probability that the transactions in Mr Ma’s Tables (i) to (vii) represent “re-banking”. Where there is a credible case for such “re-banking”, Mr Beattie has deducted it, and I agree with Ms Light that is as far as it goes. The onus on Mr Ma, with Ms Song, has not been met as to this item.
Parents / Relatives
[128] Mr Davie says that there is no credit given for money received from the
respondents’ parents, or money brought into the country. Mr Ma says that
$51,114.44 was received and banked into various accounts from monies provided by relatives, and there is evidence of travel movements.
[129] That there was approximately $51,000 in cash purportedly received from relatives was confirmed by Mr Peters in his evidence. Mr Ma said he and Ms Song were outside New Zealand on dates which correspond with receipt of cash from relatives. Mr Ma says that this money, including from his mother, was not banked immediately, to take advantage of a better exchange rate. Mr Ma gave a detailed explanation of what happened when those funds were brought in. Mr Davie submits that there was only a late challenge by the Commissioner in this regard, so
$51,114.44 should be removed from the $204k List.
[130] I have considered Mr Ma’s evidence with that of Mr Peters, and the exhibits. Mr Ma gave evidence about travel movements. Mr Peters understood that Mr Ma and Ms Song were outside the country on the dates to which he deposes. Ms Light challenges the credibility and thus the discharge of the onus in this regard. However, I note that the sums received were just under the New Zealand Customs limit of
$10,000 per person for each entry into the country. I think there is credibility in the evidence as to why moneys were not immediately exchanged into New Zealand Dollars, for exchange rate reasons. While Mr Davie puts it on the basis of being “fair”, I accept that by a slender margin the onus is discharged with regard to these moneys and I deduct them from the $204k List.
Trade Me
[131] Trade Me cash sales of $9,200 were allowed for in the $204k List. The respondents do not accept that being “the end of the matter” or even close to being an accurate figure, but they do not say what the figure should be. Mr Peters identified Trade Me sales by going through bank accounts and the records provided by Trade Me and saw that they totalled $9,474 in the respondents’ bank account. The Trade Me records indicated approximately $12,000. Ms Light says the Trade Me sales are not in the “$204k List”, as Mr Peters said in evidence. That $204k List is made up of cash deposits of $171,768.74 and “unknown” deposits of $35,656.12. The difference in the Trade Me records and the bank account records is then deducted. While three Trade Me sales were included in the $204k List, the Trade Me figure the Commissioner relied on is based on sales shown in the information provided by Trade Me, so the sales have been accounted for. The onus on the respondents is not discharged.
eBay
[132] Mr Ma says he brought diving gear on eBay for some $20,000 and he made a profit on this of some $5,000 to $6,000 which Mr Davie says should be rounded to
$5,500. eBay buyer feedback indicated that there were buyers, and satisfaction with the gear sold. The Commissioner does not accept that a profit of $5,000 to $6,000 was made on the sale of diving gear Mr Ma bought on eBay, and then resold. There is no evidence of that other than the assertion. Ms Light says the feedback was from the vendors of the diving gear, not those to whom Mr Ma says he sold items. There is no evidence on which the Court could attribute $5,500 to such sales but the assertion of Mr Ma in evidence. The onus on the respondents is not discharged.
Motor vehicles
[133] Mr Ma said he sold a Honda and a Mitsubishi Pajero which he had listed on Trade Me, but later sold privately. He says they were not taken into account and further sum of $6,300 should be deducted from the $204k List. Ms Light submits there is only the assertion, with no records of the transfer, or transactions in the
accounts. There must be such, at least as to transfer. The onus on the respondents is not discharged.
Watch
[134] This has been discussed as to credibility. Mr Ma said he sold an Omega watch, and the buyer came to see him at Mr Gao’s home in Newlands. He says it was worth $4,000, when that should be deducted. Ms Light says there is no Trade Me record to support this assertion. I conclude that the bare assertion and a lack of record means the onus on the respondents is not discharged.
Benefit fraud
[135] The Commissioner says that $214,924.35 was received from the unlawful sale and supply of seafood, and not declared to the MSD. The other “income” and assets not disclosed to the MSD have been mentioned, and the fact that Ms Song and Mr Ma did not disclose their relationship.
[136] Mr Davie says the presumed unlawful benefit from benefit fraud is disproved by the case presented for the respondents. Mr Davie says that it is not clear that the respondents had access to income beyond their declared income. They did not live the “high life”. He submits that the maximum possible MSD benefits unlawfully
received during Operation Grand was as follows:
Job seeker support single
25 + years
19-08-13 to 13-10-13 8 weeks $206.21 pw $1,639.38 14-10-13 to 20-10-13 1 week $52.21 pw $52.21 21-10-13 to 27-10-13 1 week $146.71 pw $146.71 28-10-13 to 03-11-13 1 week $206.50 pw $206.04 04-11-13 to 10-11-13 1 week $83,71 pw $83.71 11-11-13 to 31-01-14 12 weeks $206.21 pw $2,503.98 Accommodation
supplement
19-08-13 to 31-01-14 24 weeks $62.00 pw $1,488.00 Total $6,120.33
[137] Any money earned outside the Operation Grand period is below the
$80 gross per week threshold referred to by Mr Tunley. Mr Davie submits that is
the only income that should have been declared by Mr Ma, even though he paid back the disqualifying income earned during Operation Grand. The other benefits he was entitled to. He earned only $3,935 outside the Operation Grand period under the
$80 per week exemption.
[138] Mr Davie understands the Commissioner relies on the undeclared income received from the sale of seafood, and that calculations of overpayments in relation to Ms Song seem to rely upon excess income. Mr Davie says she did not receive any excess income or seafood sale income. Indeed, he says there was insufficient evidence of any income being earned by her from the sale of unlawful seafood and Ms Song was entitled to claim the benefits that she did. However, I have found to the contrary. When she left New Zealand in December 2014 she told the MSD to stop her benefit, and she carefully stopped and started her benefit in between working for ANZ. Thus, it is submitted that there is no evidence that Ms Song received more than two small payments into the mortgage account of $400 from the sale of unlawful seafood.
[139] Mr Davie breaks down the alleged overpayments under five headings:
(1) Unemployment benefit 29.04.10 to
15.08.10 (between ANZ contracts)
$3,022.72 (2)
Training benefit hardship 08.09.12 to
18.11.12 after the ANZ contract$2,108.16
(3)
Job Seeker support 25.11.13 to 29.12.14. (Ms Song was not working and for some of that period was on Community Detention)
$8,454.55
(4)
Accommodation supplement 29.04.10 to
29.12.14 (claimable with Unemployment benefit)
$4,598.42
(5)
Student allowance
$12,779.17
$30,963.02
Martin Square
[140] This property is said to have been purchased with a loan from Mr Ma’s mother, but the property was never put into his name. He says the loan was always repayable, and was repaid. The loan was outside the Police investigation timeframe, but Mr Davie says that Mr Ma gave evidence in relation to it. He submits the Martin Square purchase was not a success. Mr Ma paid interest to Mr Gao, to his mother, and to the Body Corporate. He had trouble with tenants. To suggest the Martin Square properties provided Mr Ma with income is submitted to be incorrect and Mr Ma’s income is submitted “absolutely minimal” from December 2012 to November 2013 ($5,455.00). Ms Light submits there is no evidence to support these assertions other than the bald statement. There is a clear admission by Mr Ma that he did receive income from Martin Place.
[141] Ms Light submits that the respondents had income sources during the relevant period not disclosed to the MSD, in addition to the money received from the respondents’ unlawful sales and supply of seafood. I have found that Ms Song and Mr Ma unlawfully benefited from seafood sales and theirs was a joint enterprise. They lived together in the relevant period. The other items of income and assets on which the Commissioner relies have been set out above. Mr Ma and Ms Song were in a relationship from early 2010, and therefore the unlawful benefits arising from the false declarations and statements to the MSD are as the Commissioner alleges. The onus is on the respondents to rebut the presumption. They have not done so.
[142] I am satisfied that Mr Ma and Ms Song together received unlawful benefits
from the sale of seafood in the relevant period. From Mr Beattie’s figure of
$214,924.35 I deduct $1,700, and $51,114.44 to leave a figure of $162,109.91
[143] I have found that the income received from the unlawful sale of seafood is attributable to both respondents, so they had to make disclosure to the MSD. The Commissioner overall alleges overpayment of benefits due to false information being provided as to income, assets, and relationship status. Mr Ma said he had not received any source of income and had no partner in applications for unemployment benefits between 2010 and 2013. This was false as his unlawful sales of seafood and
the relationship with Ms Song were not disclosed and Mr Ma failed to declare the income Ms Song received. The finding of benefit fraud has been made. Following this Interim Judgment, the question remains whether the full assessment undertaken by technical officers, $79,072.87 for Mr Ma and $30,963.02 for Ms Song, is affected by my findings. Mr Tunley explained how this was done. Week by week the benefit entitlement is compared with whatever income is thought to be available. The “income” is that which was understood to have been available through the investigation. This was applied against the benefit, and abated accordingly. I have reviewed Mr Tunley’s evidence with the other evidence for the Commissioner. I have a reservation about the sums asserted and the outcome as I have found the unlawful benefit from seafood sales is less than the Commissioner asserts.
Conclusion
[144] The maximum recoverable amount for the purpose of the profit forfeiture order is presumed to be the value set out in the Commissioner’s application, namely
$324,960.24, and the onus is on the respondents to rebut this sum. I have found this onus partially discharged as to the sale of seafood, and that may impact on the value of the alleged benefit fraud. This is for further evidence and submission, if that is necessary.
F. THE APPLICATION FOR ASSET FORFEITURE ORDERS
[145] This application has elements distinct from the profit forfeiture order which has been determined on a preliminary basis above, other than as to hardship.
Assets forfeiture order
[146] Sections 50 and 51 of the Act read:
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.
(2) Subsection (1) is subject to section 51.
(3) The Court must specify in an assets forfeiture order the property to which the order applies and that the property—
(a) vests in the Crown absolutely; and
(b) is in the custody and control of the Official Assignee.
(4) Despite subsection (1), the Court may not make an assets forfeiture order in relation to property that no person has claimed an interest in, unless the Court is satisfied, on the balance of probabilities, of the following additional matters:
(a) that a restraining order was earlier made in relation to the same property; and
(b) that the restraining order has been in place for a period of at least 1 year; and
(c) that the Commissioner has contacted or made all reasonable efforts to contact any person the Commissioner believes may have an interest in the property.
(5) If any property that is land is vested in the Crown absolutely as a consequence of an assets forfeiture order made under subsection (3), an interest recorded on the title to the land that is not affected by the assets forfeiture order is not extinguished.
51Exclusion 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) the circumstances of the significant criminal activity to which the order relates.
“Tainted property”
[147] I have referred to s 5 of the Act above. When an explanation is offered by a respondent which is found to be plausible, the Court must decide whether, on the
balance of probabilities, it is satisfied that the property in question is tainted property.18
[148] The application proceeds on a relatively narrow front as the purchase of Apu Crescent is not alleged to be out of unlawful benefits derived from significant criminal activity. There was “equity” introduced through Ms Song’s father and a substantial mortgage. At some point, Mr Ma contributed $70,000, but that does not base the Commissioner’s case for taint.
[149] The Commissioner relies on the evidence of deposits into Mr Ma’s bank account, used to service the mortgage over Apu Crescent, which contained references to seafood. The account is Westpac Bank 03-0521-0391967-000. Payments between 11 September 2012 and 28 July 2014.19
[150] While the respondents say that Apu Crescent is not tainted property, Mr Davie acknowledges that payments discharging a mortgage and building up equity can lead to the property becoming tainted. Mr Davie says that the principal sum was only reduced by $10,000 in the space of five years, and only six entries in the accounts over four to five years purport to show seafood sales deposited into the mortgage account.
[151] Ms Song deposed that these payments came from product bought by Ms Song in China and repaid into her New Zealand bank account by Ms Wu, and did not relate to seafood. Ms Wu was not spoken with and Mr Davie made much of the fact that she should have been “investigated”. Mr Beattie could not remember being told by Mr Ma where Ms Wu lived, but I do not see that as relevant. Ms Light submits correctly, as I find, that there were no contact details provided for Ms Wu during an interview of Mr Ma, and that was an obvious thing for him to provide. Mr Ma said in his interview with Mr Beattie that no seafood was sold to Ms Wu. Mr Davie says this falls well short of the appropriate investigation. Mr Davie says
that Mr Ma’s salary was credited to the mortgage account. Mr Davie’s contention is
18 Commissioner of Police v Jefferies [2014] NZCA 566 at [26].
19 These payments are set out above at [58].
that there are explanations for all but $400 of the payments referred to by the
Commissioner in support of the application for asset forfeiture order.
Discussion
[152] All the transactions relied on by the Commissioner have the word “sea” in their reference. It is not plausible to suggest these payments did not relate to the sale of seafood, and I conclude that they did. I reject the evidence of the respondents. It follows that Apu Crescent is tainted property as payments received from the unlawful sale of seafood were used to meet the mortgage payments. This is the effect of the statutory provision which provide for taint by even a small application of unlawful benefit. As harsh as it may seem, that is the effect of the legislation before hardship is addressed.
[153] Mr Ma does not accept that he contributed $70,000 towards the purchase of Apu Crescent and says he did not have an interest in that property. However, Mr Ma squarely admitted his contribution to Apu Crescent when he was interviewed. Ms Song and Mr Ma own the property, Ms Song as the owner from the time of purchase and Mr Ma through introducing $70,000 close to that time.
[154] The taint falls across the whole property, unless the Court decides otherwise. It is the product of unlawful benefits derived by Mr Ma and Ms Song from the unlawful seafood sales. They were in that together. The Court may identify parts of the property which may not be tainted and sever those from the effect of an order. If part of the property is derived from legitimate sources, as here that may be taken into account when considering relief against forfeiture. In that respect, the Court of
Appeal upheld the judgment in Doorman v Commissioner of New Zealand Police.20
In short, the “legitimate equity” may be taken into account in assessing undue hardship.21 In Commissioner of Police v Doorman, the High Court ordered the forfeiture of “tainted property”, purchased by a Ms de Leon who contributed all
the original equity from tainted funds.22 The mortgage repayments came
20 Doorman v Commissioner of New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173.
21 Commissioner of Police v Ranga [2013] NZHC 745 at [39].
22 Commissioner of Police v Doorman HC Nelson CRI-2010-442-169, 15 December 2011.
substantially from cash payments into her mortgage account by Mr Doorman, derived from drug offending. The Court said:23
However, I reject Mr Zindel’s submission that I must confine the property forfeited to an interest corresponding to the extent that the property is tainted. I accept that interest may be separately defined and severed, but the interests of justice do not require that here. Tainted property includes property that was derived in part from relevant criminal activity. The whole of the respondents’ interest in Clover Rd is accordingly tainted. To the extent that the property was also derived from legitimate sources, that may be taken into account when considering relief against forfeiture.
[155] This recognises that there may be definition and severance of interest where the circumstances in the overall interests of justice require that. The approach was confirmed in Commissioner of Police v Ranga, where the Court said:24
Decisions of this Court recognise that a regime which allows the Crown to seize all the equity in a property, when only a fraction of that has been built up by unlawful means, is harsh, and effectively operates as an additional punishment to that already imposed through the criminal justice system. However, in cases where only a fraction of the property is “tainted”, by the proceeds of crime, the extent of legitimate equity may be taken into account when assessing undue hardship. (footnote omitted)
[156] I find that Apu Crescent is tainted property, owned by Ms Song and Mr Ma, and thus, aside from the debt to Westpac, it is forfeit to the Crown in the sum of
$162,109.91, subject to consideration of undue hardship under s 51 of the Act.
Toyota Landcruiser
[157] The Landcruiser was bought for cash. There are unexplained deposits into the respondents’ accounts in April 2014. The Commissioner alleges that the Landcruiser is tainted property as Mr Ma’s legitimate declared sources of income would not have enabled him to generate the funds to purchase this vehicle. Mr Davie contests this and points to the evidence of Mr Ma who says that the vehicle was financed out of deposits into the respondents’ bank account in April 2014 from Ms Song’s father, and $1,000 from their savings. It is not clear
from whom the vehicle was purchased, but Mr Ma says it was someone named
23 At [36].
24 At [39].
“Ben”. Mr Ma says that there is no evidence of the purchase being paid for from
seafood sales.
[158] While I have my suspicions, I am not satisfied the Commissioner has proved the Landcruiser is “tainted property”. There is no presumption of this. Mr Ma’s evidence that it was purchased from legitimate sources is tenable. Ms Song’s father did, I find, provide financial help from time to time and on this specific issue that is a real possibility, just enough to leave the Commissioner short of proof.
G. UNDUE HARDSHIP
[159] Mr Davie submits that the applications for relief must be addressed separately for each of Mr Ma and Ms Song. I agree.
Is there undue hardship?
[160] Apart from Mr Davie’s submission, no particular hardship is claimed. Ms Song swore an affidavit which referred to the imposition of the District Court sentence. I have nothing else to base judgment on, but I turn to the relevant principles. Ms Song said she was punished sufficiently by her sentence, and the reparation payment she made. She was not fined. She then estimated that the cost to Mr Ma and her as coming to $37,500, plus legal fees.
[161] The threshold to establish undue hardship is high. It is something out of the ordinary. As such, “undue hardship” is not defined and is to be assessed case by case. There is no limitation on the circumstances which constitute undue hardship, but under s 51(2) the Court may have regard to the use that is ordinarily made, or was intended to be made, of the property, the nature and extent of the respondent’s interest, and the circumstances of the significant criminal activity to which the order relates.
[162] Legislative policy and the Courts’ application of that will guide, but not direct the finding of undue hardship given the unique factual settings for each case. However, principles must be consistently applied. It must however be something out
of the ordinary, and more than the hardship that arises inevitably out of a forfeiture order. In Commissioner of Police v Ranga, Collins J put it in short form:25
[37] The threshold for relief for a person in Mrs Ranga’s position is set at a high level. It requires Mrs Ranga to show not merely inconvenience or difficulty but that any hardship she will suffer will be disproportionate to the gravity of her offending.
[38] In Lyall v Solicitor-General the Court of Appeal held that undue hardship should be assessed in light of the legislative policy that wrongdoers should be stripped of proceeds of crime. Therefore any disproportion between a respondent’s offending and the value of the property sought to be forfeited must be gross or severe before relief can be justified.
[163] In The Commissioner of Police v Duncan, Andrews J found that the family home, owned in trust, had been bought with legitimate funds. However, the mortgage payments could not have been paid but for significant criminal activity.26
Her Honour dismissed the application for relief on the grounds of undue hardship and held:
[156] In terms of the undue hardship that Mrs Duncan says that she will suffer, she has said that if the house and car are forfeited, she will have nothing; her only income is a domestic purposes benefit and she has the care of a young child. I am not satisfied that this hardship would be more than most people would suffer if they were to have their home confiscated under the Act.
Respective roles
[164] The taint falls across the whole of Apu Crescent, as the result of unlawful benefit by Mr Ma and Ms Song from the seafood sales. Mr Davie refers to the Sentencing Notes in the District Court where the Judge said:
Your role in your partner’s offending appears to be limited to a supporting role. You, unlike him, are not a diver and you have little or no knowledge of fisheries law and the quota management system.
[165] I accept that Mr Ma was the prime mover, but Ms Song let Mr Ma use her bank account, delivered sea cucumber twice to clients, and opened a courier company account. She shared the unlawful benefits, in their shared relationship.
Narrowing the lens of consideration of undue hardship to the few payments by
25 Commissioner of Police v Ranga, above n 22.
26 Commissioner of Police v Duncan HC Tauranga CIV-2010-470-000933, 11 October 2011.
Ms Song does not, in my view, have proper regard to the scale of the offending here, which both respondents were involved in and which totals a considerable amount of money. Ms Song and Mr Ma benefited from the MSD offending. In all respects, they should be looked at together, then separately for undue hardship.
The forfeiture of Apu Crescent
[166] Mr Davie submits that Apu Crescent is in Ms Song’s name and Mr Ma has no interest in the home, so to confiscate the entirety of the equity by forfeiture would be a “big step” for the Court to take, and would strongly affect Ms Song. The Commissioner does not contest the financing of the house property from legitimate sources by way of a $170,000 loan and a contribution from Ms Song’s father, via two transfers into her account. However, Mr Ma does have an ownership interest as, on his own admission, he put in $70,000. He also has an interest as a result of the relationship. I have found that the relationship began from early 2010 so prima facie Mr Ma owns a half share in any event. Forfeiture of Ms Song’s asset is as appropriate as that of Mr Ma.
Conclusion
[167] Narrowing the lens of consideration of undue hardship to the few payments made to Apu Crescent does not in my view have proper regard to the scale of the offending here, with which both respondents were involved, and which in total comes to a considerable amount of money, even allowing for a judgment less than the Commissioner sought. This is serious criminal offending, admitted only to a small degree by the pleas of guilty, but established as such in the civil context on the balance of probabilities. I do not consider that the sanctions imposed by the District Court are more than anyone should expect as a result of such criminal conduct.
[168] I consider Ms Light is correct that there is nothing in relation to the assets forfeiture order which constitutes undue hardship. The small taint which has been upheld in this interim judgment triggers forfeiture. Forfeiture extends to the amount I have found attributable to the unlawful sale of seafood, $162,109.91. I conclude that no allowance should be made for undue hardship in relation to the assets
forfeiture order. I reserve my position in relation to a profit forfeiture order as to quantum and property to which the order may apply.
H.RECONCILIATION OF ASSET AND PROFIT FORFEITURE ORDERS
[169] The Interim Judgment to this point concludes that asset and profit forfeiture orders should be made, but the profit forfeiture order requires further evidence and submission.
[170] Under s 54(1)(b) of the Act, the profit forfeiture order must reflect the value of the property forfeited to the Crown under the assets forfeiture order. The Crown made its case for an assets forfeiture order in respect of Apu Crescent based on unlawful seafood sales. The unlawful benefit ascribed by the Commissioner is for the sale of seafood at $162,109.91, and that is, on the face of it, recoverable from Apu Crescent.
[171] A profit forfeiture order will reflect:
(i)a conclusion as to the maximum reasonable amount after evidence and further submissions regarding benefit fraud;
(ii)the extent to which the maximum recoverable amount determined under s 54 of the Act is adjusted by deduction of the value of property forfeited to the Crown. The value of the property forfeited is not known on an up to date basis. Section 54(2) of the Act provides that the Court may seek an independent valuation;
(iii) judgment as to the respondents’ “interests in property”; and
(iv)any further undue hardship considerations relevant to the profit forfeiture order which results.
[172] As the final outcome is not known, this judgment must be interim. I will hear from counsel, first at a telephone conference, to resolve by agreement or further
short hearing the matters necessary final judgment. It may be that the parties can agree on some of the elements outstanding.
I. DISPOSITION
[173] For reasons given, the findings which direct disposition in terms of this
Interim Judgment are as follows:
(1)Both respondents were involved in significant criminal activity and obtained unlawful benefits from the sale of seafood in the sum of
$162,109.91.
(2)Both respondents were involved in significant criminal activity and obtained unlawful benefits from “benefit fraud” in a total sum to be determined following this Interim Judgment.
(3)The property at 42F Apu Crescent, Lyall Bay, Wellington, described under certificate of title WN38B/574, registered in the name of the first respondent, Siaoyun Song, other than the rights, title and interest of Westpac New Zealand Limited under the registered mortgage number 9175681.2, is tainted property and an assets forfeiture order in respect of this property is made in the sum of $162,109.91.
(4)A profit forfeiture order will be made in the sum of $162,109.91 plus a sum to be determined based on the benefit fraud, less the sum received as the result of the assets forfeiture order and further consideration of undue hardship.
(5)I reserve the final form of the orders required to reflect interim and final judgment.
[174] Costs are reserved.
[175] I want to conclude by expressing my gratitude to counsel. This was a case which imposed considerable burdens on them and the Court. They conducted the trial most efficiently, and did not at any stage prolong the hearing by unnecessary evidential inquiry.
………………………………………………….
Nicholas Davidson J
Solicitors:
Crown Solicitor (Wellington) GJ Burston
Treadwells (Wellington)
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