Commissioner of Police v Alexander
[2022] NZHC 1287
•2 June 2022
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE
CIV-2018-476-60
[2022] NZHC 1287
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER
an application of an asset forfeiture order
BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
STEPHEN CRAIG ALEXANDER
Respondent
AND
ETHAN CRAIG EYLES
Interested Party
Hearing: 11 April 2022 Appearances:
A R McRae for Applicant
S C Alexander (respondent) in person K C Beazley for Interested Party
Judgment:
2 June 2022
REDACTED JUDGMENT OF OSBORNE J
This judgment contains redactions of personal information
This judgment was delivered by me on 2 June 2022 at 11.15 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
COMMISSIONER OF POLICE v ALEXANDER [2022] NZHC 1287 [2 June 2022]
Introduction
[1] The Criminal Proceeds (Recovery) Act 2009 (the Act) provides for the forfeiture of property as a result of significant criminal activity without the need for a conviction.1
[2] The respondent, Stephen Alexander, resides in Winchester, South Canterbury. The Commissioner of Police (the Commissioner) asserts that Mr Alexander was involved in significant criminal activity, namely cultivating and/or selling cannabis and/or committing tax evasion.
[3] The Commissioner seeks the forfeiture of property identified below at [8] (the subject property).
[4] The subject property includes a Mitsubishi Mirage hatchback registered in the name of Mr Alexander’s son, Ethan Eyles.
[5] On the Commissioner’s applications, the Court made restraining orders over the subject property (and other property).2
[6]The application for forfeiture orders is opposed by Mr Alexander.
[7] Mr Eyles has applied under s 67 of the Act for an order for relief from any forfeiture order. The Commissioner opposes that application.
The subject property
[8] The subject property, as identified in the Commissioner’s application, comprises:
1 Criminal Proceeds (Recovery) Act 2009, s 4(1)(a).
2 Orders first made on 21 December 2018. A number of extensions to the duration of the restraining orders were sought and obtained, with the orders subsequently extended to expire on 23 September 2022.
(a)$6,000 cash seized from [“X Street”], Winchester (X Street), on 23 May 2018 and which is currently in the possession of the Police (the $6,000 cash);
(b)X Street, Winchester, consisting of [REDACTED]. The registered owner is the respondent and the rateable value as at 1 September 2017 is [REDACTED];
(c)an adjoining [“Y”] property with a shed complex (the shed complex) other than any interests of Westpac under registered mortgage [REDACTED]. The registered owner is the respondent and the rateable value as at 1 September 2017 is [REDACTED];
(d)[“Z Street”], Winchester (Z Street), consisting of [REDACTED]. The registered owner is the respondent and the rateable value as at 1 September 2017 is [REDACTED]; and
(e)a Mitsubishi Mirage hatchback (the Mirage), registration [REDACTED] other than any interests of [REDACTED]. The vehicle is registered in the name of Mr Eyles and is under his effective control.
[9] At all relevant times, Mr Alexander’s mortgages to Westpac have been in place and he has been making mortgage payments.
Commissioner’s evidence relating to Mr Alexander
[10] The Commissioner has supported his application with affidavit evidence from three deponents:
(a)First, Tracey Bruce, a Detective Constable attached to the Southern Asset Recovery Unit (SARU) of the Police’s Financial Group has provided evidence of search warrants executed in relation to the subject property and of the subsequent investigation. Her evidence includes many financial and similar records. It also includes records of interviews conducted with Mr Alexander (including by Constable
Darren Galbraith) and Mr Eyles, and details the history of the criminal investigation and subsequent prosecution.
(b)The second deponent is Melanie van der Pol, a financial analyst attached to the SARU. She collated and analysed the financial and accounting evidence assembled by the Police in order to determine whether any financial benefit had been gained from significant criminal activity. She concluded that there is a significant disparity between Mr Alexander’s income as returned to the Inland Revenue Department and his level of cash spending. She considered the quantum of Mr Alexander’s benefit from unlawful activity is not less than
$242,732.49 (calculated by reference to a table set out and fully explained in her affidavit). Ms van der Pol identified $19,238.62 as paid by Mr Alexander to the Timaru District Council on account of the rates for his properties, all sourced from unknown sources. Ms van der Pol deposed that Mr Eyles’ ownership of his Mirage was made possible only through household expenses (including his) being met by additional cash income provided by Mr Alexander and by the sale of various vehicles that had been owned by Mr Alexander.
(c)The Commissioner’s third deponent was Detective Sergeant Christopher Power, a member of the Police for 41 years and currently supervising an Organised Crime Unit in the investigation of organised crime in the Canterbury region. Detective Power provided evidence, as an expert, in relation to the production and supply of controlled drugs, with particular reference to exhibits seized during the searches of X Street and Z Street. Detective Power considered Mr Alexander’s explanation that seized cannabis was either for him to smoke or to juice and to then consume as a health drink. Detective Power opined that Mr Alexander was likely to have been smoking and possibly consuming cannabis by drinking it but that the seized cannabis which had been dried, packaged and concealed was intended to be sold, supplied or distributed.
[11] Mr Alexander has not filed any affidavit evidence in this proceeding. His notice of opposition filed in March 2021 referred to “the affidavits to be filed” but no affidavit was filed.
[12] Mr Eyles filed two affidavits in support of his application for relief. He denied knowledge of any drug cultivation by Mr Alexander until the execution of the police searches. He gave evidence as to the sources of finance for the Mirage. He was cross- examined at the hearing.
[13] Similarly, the Commissioner’s witnesses were cross-examined at the hearing both by Ms Beazley representing Mr Eyles and by Mr Alexander representing himself albeit, as explained below at [61]-[70], not cross-examining Detective Power.
The evidence
[14] In preparation for the hearing, Mr McRae (appearing for the Commissioner) filed a helpful summary of the evidence. Except in relation to some detail relating to Mr Eyles’ Mirage, the content of the Commissioner’s evidence was not significantly impacted by cross-examination. In the following discussion I therefore substantially adopt Mr McRae’s summary which accurately represents the evidence.
[15] On 14 February 2017 Police executed a search warrant for a cannabis cultivation at X Street, Z Street and the shed complex, the addresses belonging to Mr Alexander.
[16] Cannabis was being cultivated in multiple grow rooms on the properties. There was a large quantity of dried cannabis located as well as $9,010 cash. Police located in the following areas the following items:
(a)Multiple grow rooms with a total of 88 cannabis plants in various stages of growth spread over the properties of X Street, Z Street and the shed complex as follows:
(i)Mr Alexander’s bedroom at X Street — 22 cannabis seedlings;
(ii)open room with a clearlite roof at X Street — four cannabis seedlings, five mature cannabis plants in buckets and two mature cannabis plants in soil;
(iii)the shed complex — first grow room, 10 mature cannabis plants; second grow room, nine mature cannabis plants; and third grow room, nine mature cannabis plants;
(iv)shed behind the hall at Z Street — first grow room, four mature cannabis plants;
(v)[REDACTED] at Z Street — grow tent in the rear, 23 cannabis seedlings;
(b)a total of 1310 grams of cannabis head material as follows:
(i)881 grams in second grow room of the shed complex;
(ii)four grams in a drawer in the dining room, X Street;
(iii)425 grams in Mr Alexander’s bedroom, X Street;
(c)581 grams of cannabis leaf, cabbage and stalk located in Mr Alexander’s bedroom;
(d)cash from Mr Alexander’s wallet, a safe in Mr Alexander’s bedroom and in another bedroom at X Street to the value of $9,010.00;
(e)a single barrel shotgun in Mr Alexander’s bedroom;
(f)scales in Mr Alexander’s bedroom;
(g)assorted equipment for the cannabis grow including buckets, hydrotherapy unit, grow lights, transformers, timer, fans, thermometer, climate control, ducting pipe, dehumidifier and a grow tent.
[17] Constable Galbraith interviewed Mr Alexander who did not want to say anything about the cannabis grow. He claimed some of the money was his “son’s” and that only $1,000.00 of it was his. He denied he sold cannabis.
[18] An initial summary of facts was prepared by Constable Galbraith on this search warrant. Mr Alexander was charged with cultivating cannabis, possession of cannabis for supply and possession of a firearm without a licence. The charge of possession for supply of cannabis was reduced to possession of cannabis and all reference to the cash was removed from the summary of facts.
[19] Mr Alexander provided an affidavit to the court dated 18 January 2018 as part of sentencing submissions. He stated that he suffered from back pain and irritable bowel syndrome (IBS); that he began juicing cannabis about two years ago for pain relief; that he used the cannabis head and disposed of the stalk and cabbage; and that he lived with his two sons, Ethan Eyles and Dylan Eyles.
[20] He further stated that he deals in scrap car parts as a hobby and as a source of minor income and subsequently gave an explanation for the cash found. He indicated that $960 belonged to his “son”; that $1,050 was to pay off a credit card purchase; and the other $6,000 was the remainder of a $9,291.31 inheritance he received upon the death of his father in 2010.
[21] Mr Alexander pleaded guilty to cultivating cannabis, possession of cannabis and possession of a firearm without a licence. He was sentenced to six months’ community detention. The equipment, cannabis and firearm were destroyed upon conviction.
[22] On 23 May 2018 Police again executed a search warrant at Mr Alexander’s properties while he was serving his sentence of community detention.
[23] Police located a total of 693 grams of mostly cannabis head throughout X Street as follows:
(all in Mr Alexander’s bedroom)
(a)180 grams of cannabis head in a Toolpro container;
(b)36 grams of cut cannabis plant in trays;
(c)61 grams of cannabis head in drawers;
(d)37 grams of cannabis head in drawers;
(e)29 grams of cannabis head in drawers;
(f)42 grams of cannabis head in drawers;
(g) one gram of cannabis head in drawers; (elsewhere at X Street)
(h)304 grams of cannabis leaf on a bench by the back door; and
(i)three grams of cannabis in the rear of a Ford Falcon, registration [REDACTED].
[24]Police located in the shed complex:
(a)one grow room with 46 cannabis plants from 20 to 70 cm in height; and
(b)a second grow room with 14 small cannabis plants and eight propagated cuttings.
[25]Further items of interest were located as follows:
(a)a Mitre 10 bucket containing bags of dried cannabis head (2.292 kg) buried underground by a container;
(b)two pails in black bin liners containing bags of dried cannabis head (1.828 kg) behind car doors near the container;
(c)a Mitre 10 bucket containing bags of dried cannabis head (1.404 kg) buried in the front garden;
(d)$6,000.00 in a drawer in Mr Alexander’s house (11 x $100 notes and 98 x $50 notes); and
(e)assorted equipment for the cannabis grow including shears, extractor fans, buckets, filter, fans, lights, tubing, transformers and timers.
[26] The total amount of dried cannabis head material located at X Street and the adjacent section weighed 6.27 kg.
[27] Mr Alexander was interviewed by Constable McCabe. He stated that this was his first grow for the year and that he used it for IBS and back pain. He admitted he buried one of the buckets of dried cannabis and tucked the other buckets into a corner by car parts.
[28] Given Mr Alexander’s explanation for his previous offending, namely that he juiced cannabis to relieve symptoms, Police specifically looked for juicing equipment during the search. None was found other than a “kitchen whizz stick” in the kitchen and a vaporiser in the master bedroom.
[29] Mr Alexander faced charges of possession for sale of a Class C controlled drug and cultivation of a prohibited plant (with a commercial intent).
[30] Detective Sergeant Power reviewed all the information. He opined that the yield and other circumstances would suggest that the cannabis was intended for supply.
[31] A detailed analysis of Mr Alexander’s financial position was then undertaken by both Detective Bruce and Ms van der Pol. The assessment included reviewing Mr Alexander’s payments for groceries, fuel, cellphone, travel, insurance, rates and energy over the relevant period. This analysis identified a lack of expenditure on such items over the review period, which indicated an alternate cash source was being used. Both Detective Bruce and Ms van der Pol concluded that Mr Alexander’s lifestyle had been beyond his legitimate income and that he had benefitted from significant criminal
activity, namely the possession for supply of cannabis, supplying cannabis and cultivation of cannabis.
[32] On 3 December 2019 Mr Alexander’s charges of possession for supply of cannabis and cultivation of cannabis were dismissed under s 147 Criminal Procedure Act 2011. This was as a consequence of a challenge to the search warrant obtained to search Mr Alexander’s premises on 23 May 2018. Judge Maze found the search unlawful but admitted the evidence under s 30(3) Evidence Act 2006.3 That ruling was appealed to the High Court. The evidence was found to be unlawfully obtained and that its exclusion was a proportionate and appropriate response.4
[33] Detective Bruce and Ms van der Pol also concluded, having reviewed Mr Alexander’s bank statements and having spoken to him, that there is evidence that he deals in cars, car parts and furniture. Many of the bigger sales have been accounted for, including the sale of a Ford Bronco, a deal involving coupes, a car purchase by Gos Cut concrete, a campervan and a Ford motor vehicle. The Commissioner accepts this income as explained income. However, Ms van der Pol’s analysis concluded that notwithstanding those legitimate sales, there was a significant disparity between Mr Alexander’s returned income and the level of his cash spending. Over the relevant period Mr Alexander was in receipt of a Work and Income Benefit, receiving between
$213 and $269 per week.
[34] Ms van der Pol calculated the quantum of Mr Alexander’s benefit from unlawful activity as being not less than $242,732.49. She identified the direct tainting of Mr Alexander’s real properties held by him as arising from the payment of
$19,238.62 of rates to the Timaru District Council in cash from unknown sources.
[35] Ms van der Pol identified indirect tainting of Mr Alexander’s real properties through the fact Mr Alexander was able to meet his mortgage payments from his modest benefit income (from Work and Income) simply because his household income was boosted by a significant amount of cash from unknown sources.
3 Police v Alexander [2019] NZDC 12152.
4 Alexander v Police [2019] NZHC 2920.
[36] Because of the significant amount of cash available to bank and to pay expenses for the household outside of the bank accounts, Mr Alexander did not have to sell vehicles and other items to meet his cost of living but rather he was able to benefit from these items with overseas holidays and other purchases. In the absence of the cash he would have otherwise been unable to afford such luxuries from the residue of his Work and Income benefit.
Commissioner’s evidence in relation to Mr Eyles
[37] Ms van der Pol concluded that Mr Eyles’ Mirage was funded by cash deposits amounting to $7,540 from unknown sources and was, therefore tainted property.
[38] She further concluded that Mr Eyles’ acquisition of the Mirage was only made possible from his minimal income from Work and Income because the household expenses were being met by additional cash income. Mr Alexander met the household expenditure through his source of cash, thus enabling his son to use his benefit payments to meet instalments on his cars.
Cross-examination of Mr Alexander
[39] Mr Alexander cross-examined Detective Bruce and Ms van der Pol (but not Detective Power).
[40] Mr Alexander’s most relevant cross-examination of Detective Bruce was in relation to evidence the detective had given concerning Mr Alexander’s buying and selling of cars to make a profit. The witness had deposed that the approach of the Ministry of Social Development was that, if Mr Alexander had made a one-off sale of a car, the Ministry would not treat that as chargeable income. However the protracted buying and selling of cars for profit would be treated as chargeable income. Mr Alexander questioned Detective Bruce as to whether there was anything in her affidavit regarding tax evasion (tax evasion being one of the “significant criminal activities” identified in the Commissioner’s application). Detective Bruce referred to the relevant passage in her affidavit and expanded upon it. She explained that Mr Alexander’s benefit would have been reduced if he was “buying and selling so many cars” and furthermore that Mr Alexander would have been required to declare
such income to the Inland Revenue Department for the assessment of tax. Detective Bruce explained that the Police did not believe Mr Alexander declared his income (with the result that tax was evaded).
The evidence relating to Mr Eyles
[41] Mr Eyles gave succinct affidavit evidence in support of his application for relief.
[42] He is 25 years old and lives (as he has for some years) with his father, Mr Alexander, at X Street.
[43] Mr Eyles was born with an intellectual disability which was not diagnosed until he was around 20 years old. Mr Eyles’ disabilities affect his reading, writing and general comprehension. Once his disabilities were diagnosed, he obtained support from CCS Disability Action and was able to obtain a driver’s licence (as did his brother, Dylan Eyles).
[44] Mr Eyles deposed that their father suggested that he and his brother should each buy a car. With Mr Eyles’ income being from a benefit, he needed assistance from Mr Alexander. The vehicle initially purchased was also a Mitsubishi Mirage (registration number [REDACTED]) (the original car). It was purchased on 17 February 2017. It was financed for a total of $18,290 but with a cash deposit of
$6,549.5
[45] Mr Eyles deposed that Mr Alexander sold a Ford Bronco, with the proceeds of sale used to provide the deposit money for both sons’ car purchases.
[46] Mr Eyles deposed that he then had to make payments every week from his bank account to Mr Alexander (to cover finance instalments). He stated that he did so from two sources — both out of his benefit payments and from jobs he did from time
5 Both Mr Eyles and Ms van der Pol in their evidence spoke of a purchase price of $18,290 which I find to be the correct figure. Ms van der Pol’s flow-chart (below at [49]) incorrectly states the purchase price to have been $12,990 (the same as the car subsequently bought).
to time to earn more money. He stated that, from looking at his father’s bank account records, the sum paid was $140 per week.
[47] In January 2018, Mr Eyles had a collision in the original car as a result of which it was written off. It was to be replaced by the Mirage, the subject of this application, at the price of $17,990.
[48] Mr Eyles deposed that he still had to make weekly payments into Mr Alexander’s account (sourced from his benefit payments) to pay for the vehicle. He deposed that he missed making some payments as he did not have enough money to make automatic payments.
[49] Ms van der Pol provided the financial analysis for the Commissioner in relation to Mr Eyles’ car purchases. At the hearing she produced a flow chart — Schedule 1 to this judgment — setting out her up-to-date analysis of the financing of the cars. Ms van der Pol’s updated analysis led her to correct some figures that had been set out in her affidavit evidence (her figure for the “taint” fell from $7,540 to $5,929). Her updated evidence, was as follows:
(a)on 17 February 2017 Mr Alexander purchased the original car, registered into the name of Mr Eyles;
(b)the purchase price was $18,290 (which I have corrected as explained in fn 5 above);
(c)the purchase was part-funded by finance of $11,741 through Mercedes Benz Financial Services;
(d)the finance was to be repaid by one payment due in February 2018 and a second and final payment due in February 2019;
(e)the remaining $6,549 of the purchase price was funded by a bank cheque drawn from Mr Alexander’s Kiwibank current account on 17 February 2017;
(f)the bank cheque was funded by deposits made into that current account of $829 with the remaining amount of $5,720 being funded by transfers from Mr Eyles and his two brothers;
(g)the original car was written off within the year;
(h)on 12 February 2018 the (replacement) Mirage was purchased;
(i)the purchase price was $17,990;
(j)the original payments through Mercedes-Benz Financial Services were carried over to the new vehicle, leaving approximately $11,998 owing;
(k)Mr Alexander paid the vendor cash of $1,600 towards the purchase;
(l)on 12 February 2018, a cash withdrawal of $6,000 was made from Mr Alexander’s Westpac account, funded by $3,500 cash deposits made to Mr Alexander’s Westpac account along with deposits from unknown sources;
(m)a final payment towards the car of $5,999 was made on 15 February 2019, funded by payments from Mr Eyles and his two brothers.
[50] On the basis of that evidence (as summarised in the flow chart), Ms van der Pol concluded that Mr Eyles’ Mirage had been directly tainted by cash deposits from unknown sources to the extent of $5,929 (comprising cash deposits for the first car of
$829, the $1,600 paid in cash by Mr Alexander for the replacement car and the $3,500 of deposits made from unknown sources into Mr Alexander’s Westpac account as part of the further cash payment for the replacement car.
[51] Mr Alexander cross-examined Ms van der Pol as to her analysis of cash withdrawals from Mr Eyles’ bank accounts. Ms van der Pol confirmed that over the
64 month period of her review from January 2012 some $12,974.30 had been withdrawn in cash. Ms van der Pol confirmed that she did not know if cash withdrawn
from Mr Eyles’ accounts had been used for the car purchases. She also observed that it would be open to Mr Eyles to explain where he got his cash from.
[52] Following Mr Alexander’s cross-examination of Ms van der Pol, there was this exchange between the Court and Ms van der Pol:
Q. … picking up on Mr Alexander’s question, why do you draw a conclusion of tainting if there is an alternative explanation, namely that Ethan Eyles may have drawn money out of his account and used it for this purpose.
A. It is possible, I don’t necessarily believe that that’s happened, but it could’ve happened, I don’t know that, but I also have gone along the thought of I guess the lack of spending on other necessities of life that money can’t go to more than one place, but it could’ve gone to this, but that’s not the conclusion that I made at the time.
[53] It transpired, upon further questioning of Ms van der Pol, that the Commissioner had not produced in evidence Mr Eyles’ bank account records, with the consequence it was not possible to identify at the hearing whether there was a relationship between the timing of Mr Eyles’ withdrawals and Mr Alexander’s payments for the vehicles.
[54] Mr Eyles gave evidence in relation to the car purchases over and beyond that contained in his brief affidavit. He first explained his additional sources of income (beyond his benefit). He stated that he has bought and sold Xbox consoles for profit and had earlier also bought and sold radio-controlled cars. He stated that out of those transactions he would give his father money for the car payments and buy groceries and the like.
[55] In cross-examination, Mr Eyles stated that he never had much money spare and that he missed some of his finance instalment payments. He stated however that when that occurred and his father had to make the payments, he would pay it back.
[56] Mr McRae cross-examined Mr Eyles as to the fact that Mr Eyles had gone on a trip to the United States at the time Mr Alexander arranged the purchase of the replacement car. Mr Eyles stated that, while he was unsure of the amount of cash involved, he had left some cash in his bedroom at home when he went overseas — he did not know how much. He said his father rang him while he was overseas asking
whether it was okay for him to get the money and use it, and that he must have done so as it was gone when he came home.
[57] Mr Eyles reiterated in answer to questions from Mr McRae that, when at times he missed making payments on his car and his father made the payments, he then paid his father back.
[58] There was further discussion in evidence as to Mr Eyles’ level of functioning which it is unnecessary to repeat in any detail. It was abundantly plain in the course of his evidence that Mr Eyles has significantly limited abilities in comprehension and expression. He acknowledges the need he has for support in his day-to-day living. Medical records he produced evidence a history of mental health issues, including interventions under the Mental Health (Compulsory Assessment and Treatment) Act 1992.
[59] While Mr Eyles’ difficulties with comprehension in particular meant that the adducing of his evidence had to be undertaken patiently, I was impressed by the directness with which he answered the questions when they were clearly put. He gave the impression of speaking simply and frankly. His explanations of matters of some detail (such as his trading in Xboxes) was straightforward with no appearance of contrivance. He did not try to suggest that every dollar that had gone into his motor vehicles had come from him.
[60] All in all, on the matters of which Mr Eyles had clear recollection, I found him to be a credible and generally reliable witness.
Completion of the hearing
[61]The hearing concluded in somewhat unusual circumstances.
[62] All three of the Commissioner’s witnesses had been required for cross- examination. Detective Bruce and Ms van der Pol were each cross-examined. When Detective Power was sworn in, and Ms Beazley had no questions for him, it then became apparent that Mr Alexander had for some reason not had time to read the witness’s affidavit (filed in April 2021). After the Court took an initial adjournment
and then a further adjournment to enable Mr Alexander to consider his cross- examination, Mr Alexander left the Court precinct without explanation. The witness was then excused and the Commissioner’s case closed.
[63]Ms Beazley then presented Mr Eyles’ case and Mr Eyles was cross-examined.
[64]I then heard closing submissions.
[65] As counsel advised that Mr Alexander had apparently indicated he was feeling unwell before he left the Court precinct, I indicated to counsel that I would consider at a later date if necessary any explanation from Mr Alexander as to his absence from Court, to be supported by a medical certificate if he wished to take further steps in his defence.
[66] Mr Alexander on the following day provided to the Registrar a medical certificate from a general practitioner who reported on some statements made to her by Mr Alexander when she saw him that day. There was no indication from Mr Alexander whether he wished to have Detective Power recalled for cross-examination or whether he wished to make closing submissions in relation to his defence. I directed that he was to file a memorandum making any such requests to be supported by an affidavit sworn by Mr Alexander in relation to any medical matters.
[67]Mr Alexander did not take that course.
[68] Instead, on 28 April 2022 he filed a memorandum entitled “Appearance for Ancillary Purposes”, in which he recorded that he did not oppose the Commissioner’s claim but appeared in order to be heard. In the memorandum he set out a number of Latin maxims, a series of questions relating to statutory and common law provisions and a number of propositions challenging the Court’s jurisdiction.
[69] Sometime later he submitted a handwritten document headed “private” and concluding “without prejudice rights reserved”. It appears to reproduce contents of his earlier memorandum.
[70] In the circumstances, Mr Alexander not having made any request for the hearing to be reconvened or to make further submissions, I have proceeded to give this judgment in accordance with the evidence adduced and the submissions made.
Discussion — assets forfeiture
The statutory regime
[71] The Commissioner invokes s 50 of the Act, which provides for the making of an assets forfeiture order:
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.
[72] Accordingly, if the Court is satisfied on the balance of probabilities that identifiable “property” specified in the application is “tainted property” as defined in
s 5 of the Act, the Court must make an assets forfeiture order in respect of that property, subject to an application under s 51.
[73] “Tainted property” is defined as any property that has, wholly or in part, been acquired as a result of, or directly or indirectly derived from, significant criminal activity.6
[74]“Significant criminal activity” is defined in s 6 of the Act:
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).
[75] The Commissioner also invokes s 55 of the Act, which provides for the making of a profit forfeiture order:
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—
6 Criminal Proceeds (Recovery) Act, s 5.
(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, and the maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.
[76] Subsections (1) and (2) of s 55 are expressly subject to s 56 of the Act. Section 56 provides for the exclusion of a respondent’s property from a profit forfeiture order where undue hardship is reasonably likely to be caused to the respondent from the realisation of otherwise forfeited property. For there to be exclusion, there must have been an application by the respondent. Mr Alexander has made no such application.
The evidence — findings
[77] The record of Mr Alexander’s convictions (upon his guilty pleas) for cultivating cannabis and possession of cannabis in 2017 (in quantities detailed by Detective Power) provides context for what Police later found in May 2018. It was the 2017 offending which also evinced Mr Alexander’s explanation that he had been juicing cannabis for some two years to relieve physical discomfort.
[78] The quantities of cannabis subsequently located in 2018 (as again detailed by Detective Power) clearly on their face point to a commercial intention. Detective Power’s evidence in this regard has not been challenged and I accept it. In relation to Mr Alexander’s repeated explanation as to using cannabis for pain relief, I accept
Detective Power’s evidence that the dried material found by the Police was unsuitable for juicing and that the more likely use was for smoking or vaporising.
[79] I accept also the evidence of Ms van der Pol in analysing Mr Alexander’s financial records, including the evidence of his income as returned to the Inland Revenue Department and the level of his cash spending, all while he was in receipt of a Work and Income benefit. The extent of Mr Alexander’s undocumented sources of income is pointed to by the contrast between his benefit income during the analysed period of 64 months (between $213 and $269 per week) and his mortgage commitments ($240 per fortnight), at a time when he was maintaining a household of three adult males.
[80] I find, on the balance of probabilities, there exists for the analysed period a disparity between Mr Alexander’s returned income and his level of cash spending of no less than $242,732.49, as concluded by Ms van der Pol.
[81] The Commissioner relates the disparity between Mr Alexander’s income and expenditure to one or more unlawful activities. Those activities are:
(a)cultivation of cannabis — an offence under s 9 of the Misuse of Drugs Act 1975 carrying a maximum of seven years’ imprisonment;
(b)sale of cannabis — an offence under s 6(1)(e) and (2) of the Misuse of Drugs Act, carrying a maximum of up to eight years’ imprisonment; and
(c)tax evasion under s 143B Tax Administration Act 1994, carrying maximum penalties of five years’ imprisonment.
[82] These nominated offences all fall within the s 6 definition of “significant criminal activity” under s 6 of the Act.
[83] The Commissioner, by his application for a profit forfeiture order, asserted the value of the unlawful benefit obtained by Mr Alexander from significant criminal activity was at least $242,732.49. Under s 53(1) of the Act, it is presumed that that
was the value of Mr Alexander’s unlawful benefit if the Commissioner has proved, on the balance of probabilities, that Mr Alexander in the relevant period of criminal activity unlawfully benefited from significant criminal activity. Mr Alexander, under s 53(2) of the Act, may rebut the s 53(1) presumption on the balance of probabilities.
[84] The “relevant period of criminal activity” (pursuant to the definition in s 5 of the Act) covers the period analysed by Ms van der Pol. I am satisfied the Commissioner has established on the balance of probabilities that Mr Alexander unlawfully benefited from significant criminal activity within that period.
[85] The value of the unlawful benefit obtained by Mr Alexander is therefore presumed to be the $242,732.49 stated in the Commissioner’s application. Mr Alexander has not rebutted the presumption.
Finding — direct tainting
[86]Ms van der Pol’s evidence established that Mr Alexander paid rates of
$19,238.62 in relation to the properties. I am satisfied that the source of the funds used for payment lay in significant criminal activity. It has been recognised in relation to mortgage payments that it is not only money payments that reduce the principal mortgage that can give rise to tainted property — payment of interest only on a mortgage which preserves the existing equity in the mortgaged property can also result in the property becoming tainted.7 The payment of rates is analogous to the payment of interest as it preserves the equity in the property in the sense that the local authority would otherwise become entitled to sell the property to recover the unpaid rates.
[87] I therefore find that X Street, Z Street and the Y property with the shed complex are tainted property.
7 Commissioner of Police v Winsor [2014] NZHC 161 at [33]; Commissioner of Police v Debreceny [2016] NZHC 3152 at [32]–[33], citing Doorman v Commissioner of Police [2013] NZCA 476 at [32]–[36]; and Commissioner of Police v Duncan [2013] NZCA 447 at [18]–[27].
Finding – indirectly tainted property
[88] I am satisfied that Mr Alexander’s properties also represent tainted property on the basis they are indirectly derived in part from significant criminal activity. The Commissioner has established that Mr Alexander was able to meet his mortgage payments only because he was using illegitimately obtained funds for day-to-day living expenses and other extraordinary expenses. A case such as Commissioner of Police v Drake is distinguishable in this regard.8 There, the property was found not to be indirectly derived from significant criminal activity because it was entirely acquired through legitimate means, notwithstanding that that was made possible only through the use of illegitimately obtained funds for living expenses.
Tainted property — Mr Eyles’ Mirage
[89]The Commissioner has clearly established that the Mirage is tainted property.
[90] Ms van der Pol’s evidence and her flow chart indicated the extent to which, on a proper investigation, the funds provided by Mr Alexander to pay for the original car and the (replacement) Mirage came from Mr Alexander’s unexplained sources and ultimately criminal activity. The extent of the taint as assessed by Ms van der Pol (on her revised figure) was $5,929 as against the total purchase price of close to $18,000.
[91] That said, the answers responsibly given by Ms van der Pol in cross- examination highlight the fact (particularly when the relevant bank records have not been in evidence) that the withdrawals from Mr Eyles’ bank account have not been reconciled with the payments made or arranged by Mr Alexander on account of the car purchases.
[92] Mr Eyles’ evidence, which I have accepted, is of a pattern of paying back Mr Alexander when Mr Alexander stepped in with payments on his behalf. There is also his evidence that Mr Alexander was able to use the uncertain amount of cash that Mr Eyles had in his bedroom towards the $1,600 payment made when the Mirage was purchased (while Mr Eyles was in America).
8 Commissioner of Police v Drake [2017] NZHC 2919 at [108]–[110].
[93] On the balance of probabilities I am satisfied that Mr Eyles’ additional cash contributions would have significantly reduced the extent to which Mr Eyles’ vehicle purchase was tainted by use of Mr Alexander’s own money. But even on Mr Eyles’ evidence it cannot be asserted that the purchase of the Mirage is entirely untainted. I am satisfied the amount of the taint would probably have been in the range $1,000 to
$4,000. In these circumstances I am satisfied that an asset forfeiture order is required in relation to the Mirage unless I find Mr Eyles is entitled to relief from such order.
[94] Mr Eyles’ application for relief from forfeiture invoked s 66 of the Act, which provides:
66Making order for relief from civil forfeiture order where person has interest and was not involved in significant criminal activity
(1)On receipt of an application for an order for relief from a civil forfeiture order under section 61 or 62, the High Court must grant the relief that the Court considers appropriate if the applicant proves on the balance of probabilities that the applicant—
(a)has an interest, or would but for any civil forfeiture order have an interest, in the property to which the application relates; and
(b)has not unlawfully benefited from the significant criminal activity to which the application relates.
(2)The High Court may make an order for relief under this section at or after the time the associated civil forfeiture order is made.
[95] In this case it is not disputed that Mr Eyles has an interest in the Mirage. He was the intended owner and I am satisfied that he is, as a matter of law, the true owner.
[96] The issue is whether Mr Eyles has proved on the balance of probabilities that he has not unlawfully benefited from the significant criminal activity to which the Commissioner’s application relates.
[97] I am satisfied on Mr Eyles’ evidence that such benefit as he received from Mr Alexander’s significant criminal activity was not the result of unlawful conduct or participation on Mr Eyles’ part. In particular I accept his evidence that he was not involved in his father’s drug cultivation activities and did not help his father in any way. Mr McRae, for the Commissioner, did not cross-examine Mr Eyles in relation
to this aspect of his evidence. Equally, there was no suggestion that Mr Eyles may have been wilfully blind to whether his father was sourcing money from unlawful drug activities.
[98] In these circumstances I am satisfied that the threshold requirements for s 66(1) of the Act are established and I must grant the relief I consider appropriate.
[99] Had Mr Eyles’ application been brought under s 67 of the Act (relief on grounds of undue hardship), which it could have been, I would then have taken into account the relevant circumstances identified in s 67(2). I find it appropriate to have regard to those circumstances here:
(a)Mr Eyles, with his very significant disabilities and his limited income, uses the Mirage for his day-to-day needs and recreation in a small country town, distant from bigger centres;
(b)the Mirage has at all times been Mr Eyles’ property (subject only to the financier’s interest);
(c)I find that Mr Eyles did not have knowledge of the significant criminal activity in which Mr Alexander was engaged; and
(d)the value of Mr Eyles’ interest in the car greatly exceeds any benefit derived from Mr Alexander’s “significant criminal activity” as flowed through into the Mirage.9
[100] Beyond the particular circumstances identified in s 67(2) of the Act, it is also proper to have regard to the extent to which the Commissioner is obtaining forfeiture orders against Mr Alexander’s real property. If Mr Eyles’ Mirage was to be subject of relief, except as to the approximately $3,000 sourced to Mr Alexander, then any order of forfeiture for that value could appropriately be regarded as de minimis when
9 See Solicitor-General v Loftus HC Auckland CIV-2003-404-3085, 5 May 2005; Commissioner of Police v Duncan HC Tauranga CIV-2010-470-933, 11 October 2011 at [155].
compared to the value of the assets which will be subject to the forfeiture orders in relation to Mr Alexander’s property.
[101] In these circumstances I am satisfied that it is appropriate to make an unqualified order for relief in favour of Mr Eyles.
Costs
Mr Alexander
[102] It is appropriate that there be an order that Mr Alexander pay the Commissioner’s costs (on a 2B basis) together with disbursements.
Mr Eyles
[103] I reserve matters of costs as between the Commissioner and Mr Eyles. My tentative view is that there should be no order as to the costs and disbursements of the proceeding as between the Commissioner and Mr Eyles. The Commissioner established an entitlement to a civil forfeiture order in relation to the Mirage but the granting of discretionary relief has resulted in no order being made in favour of the Commissioner in that regard. In the event the parties are unable to resolve this aspect of costs, any application for costs is to be filed by memorandum within 10 working days (four page limit) to be followed by a response memorandum within five working days (four page limit), whereupon I will determine the matter on the papers.
Orders
[104]I order:
(a)the property specified in [8](a)–(d) vests in the Crown absolutely and is to be in the Official Assignee’s custody and control.
(b)the property referred to at [8](a)–(d) is as follows:
(i)$6,000 cash located at X Street, Winchester;
(ii)X Street, Winchester, [REDACTED];
(iii)an adjoining Y property with a shed complex [REDACTED]; and
(iv)Z Street, Winchester, [REDACTED];
(c)the respondent is to pay the costs of the Commissioner’s application on a 2B basis together with disbursements to be fixed by the Registrar; and
(d)the interested party is granted relief from any civil forfeiture order in relation to his Mitsubishi Mirage hatchback, registered number [REDACTED].
Osborne J
Solicitors:
Crown Solicitor, Timaru
K C Beazley, Barrister, Timaru
Copy to: Mr Alexander and Mr Eyles
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