Commissioner of Police v Blance
[2018] NZHC 108
•12 February 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
CIV-2017-485-197 [2018] NZHC 108
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
applications pursuant to sections 21, 25, 33 and 35
BETWEEN
THE COMMISSIONER, THE NEW ZEALAND POLICE Applicant
AND
STEVEN ALBERT BLANCE First Respondent
JASON LANCE WALKER Second Respondent
AND
TRACEY MELANIE SNOOK First Interested Party
THE CO-OPERATIVE BANK LIMITED Second Interested Party
HAYLEY KINI-WAI KIRWAN Third Interested Party
TANYA MICHELLE GRACE Fifth Interested Party
ROBERT SHANE BROMLEY Sixth Interested Party
KARL WILLIAM GRUEBNER Seventh Interested Party
DAVID ALASTAIR MINKE Eighth Interested Party
WIREMU HAMILTON WORKMAN Ninth Interested Party
THE COMMISSIONER, THE NEW ZEALAND POLICE v BLANCE [2018] NZHC 108 [12 February 2018]
Hearing: 5 February 2018 Counsel:
E M Light for applicant
E A Hall for first respondent
K I Jefferies for second respondentJudgment:
12 February 2018
RESERVED JUDGMENT OF DOBSON J
[1] These civil proceedings arise out of a criminal investigation by Police in the Wellington Region into methamphetamine dealing under the name Operation Walnut. The first respondent, Mr Blance, and one of his co-defendants, William Berkland, are alleged by the Crown to be the major participants in relatively large-scale methamphetamine dealing. Numerous other alleged participants are co-defendants in charges presently set down for an 11 week trial commencing on 16 July 2018.
[2] Covert surveillance pursuant to warrants commenced in February 2017 and continued for a period of some 53 days. That surveillance resulted in some 18,500 intercepted communications focusing on the dealings of Messrs Blance and Berkland. The Crown case will be that they procured approximately 20 kilograms of methamphetamine.
[3] The Commissioner of Police (the Commissioner) has commenced proceedings seeking restraining orders over numerous items of property, prior to pursuit of applications for civil forfeiture orders in relation to the property. So far as those applications relate to certain motor vehicles, they are opposed, in some cases by
Mr Blance and in other cases by others who claim to be adversely affected.
[4] The Commissioner has also sought orders pursuant to s 35(e)(v) of the Criminal Proceeds (Recovery) Act 2009 (the Act), to authorise sale of the relevant vehicles so that the proceeds of sale might be held by the Official Assignee pending determination of subsequent forfeiture applications under the Act.
[5] This judgment deals with the opposed applications for restraint and sale of three vehicles.
2003 Ford Falcon
[6] This vehicle has, throughout the relevant period, been registered in the name of the second respondent, Mr Walker. Mr Walker was originally included as an interested party because of his status as registered owner, but has subsequently been joined as a respondent given a change to the basis of the Commissioner’s claim in respect of the Falcon. The Commissioner’s initial claim was that Mr Blance was the beneficial owner or possessor and controller of the Falcon, contending that Mr Blance had arranged for it to be registered in Mr Walker’s name, allegedly to avoid the prospect of seizure as tainted property.
[7] After Mr Walker had challenged that contention, and after further analysis of evidence gathered in the course of Operation Walnut, the Commissioner has amended the basis of the restraint application. The Commissioner now contends that the Falcon is tainted property in Mr Walker’s hands, given evidence of his alleged involvement as a dealer in methamphetamine sourced from Mr Blance. Mr Walker is not facing any charges in relation to his alleged involvement in the conduct observed by the Police during Operation Walnut.
[8] The Police observed Mr Blance driving the Falcon on five occasions between
8 February and 20 March 2017. The Falcon was also observed on a number of occasions parked outside Mr Blance’s residence during the course of Operation Walnut.
[9] Mr Walker accepts that Mr Blance had possession of the Falcon for a period of up to three months in early 2017. His explanation for that is that his driver licence was suspended for a three-month period and he gave the Falcon to Mr Blance who is an acquaintance of his. He claims he did this to avoid the temptation of driving it whilst prohibited from legally doing so.
[10] Mr Walker has adduced affidavits from Mr Tuhaka confirming the validity of his purchase of the Falcon from Mr Tuhaka. He has also adduced an affidavit from
Mr Barclay who accompanied Mr Walker to uplift the vehicle from Mr Blance once
Mr Walker’s driver licence was reinstated.
[11] The Commissioner rejects that explanation for Mr Blance having possession of the Falcon. He contends that Mr Blance took possession of the Falcon as a form of collateral because Mr Walker had not paid significant debts he owed to Mr Blance for methamphetamine supplied. On the Commissioner’s analysis, Mr Walker was allowed to re-take possession only after paying $20,000 off the amount outstanding for supplies of methamphetamine.
[12] Paul Brown is the detective who has investigated the circumstances of potentially tainted property implicated in the conduct giving rise to the charges in Operation Walnut. He has analysed a number of intercepted communications that tend to support this reconstruction of events.
[13] In three recorded discussions that occurred at Mr Blance’s home on 20 and
30 March, and 2 April 2017, a person or persons referred to as “Jase”, “Jason” and
“Jason Walker” is named as a person who travelled to Rotorua at the same time as
Mr Blance, a person who received “20 Os” (interpreted as referring to 20 ounces of methamphetamine) from Mr Blance, and as a person who was very slow in paying amounts owed to Mr Blance.
[14] In one conversation, which the Commissioner contends was between
Mr Blance and Mr Walker’s former partner, Deborah Hospoda, Ms Hospoda is interpreted as commenting that methamphetamine in “Jason’s” possession was of poor quality, implicitly when it was sourced from someone other than Mr Blance. Further, that Mr Blance charged “Jason” more than other purchasers for methamphetamine supplied because he was so slow in paying.
[15] The last conversation on 2 April 2017 included Mr Blance commenting that “Jason” had only paid him $20,000 so that he could get his car back. That conversation occurred some days before the date, in Mr Barclay’s recollection, on which he and
Mr Walker uplifted the Falcon from Mr Blance’s property.
[16] Mr Walker denies that he has been involved in dealing methamphetamine received from Mr Blance. He argues that the person referred to in the relevant recorded conversations is likely to be another Jason, or another Jason Walker. He claims that when in prison for previous offending, he received mail intended for another Jason Walker. He has had a mutual friend, Mr McGoldrick, confirm that his former partner, Ms Hospoda, has a step-brother who is also called Jason. On cross- examination of Mr McGoldrick, it transpired that Ms Hospoda’s step-brother, who is called Jason Smith, has lived in Australia in recent years, although he has returned on some occasions for visits to New Zealand.
[17] Further inquiries by Detective Brown reveal that the other Jason Walker who has been a sentenced prisoner was released approximately two weeks before
Mr Walker was incarcerated in 2009. No links could be found between the other Jason
Walker and any of the defendants or others involved in the present charges. In contrast,
Mr Walker acknowledges that he is an acquaintance of Mr Blance and dealings between them included (on Mr Walker’s evidence) Mr Walker trusting Mr Blance with the Falcon vehicle to avoid the temptation that Mr Walker would drive the car whilst his driver licence was suspended. The relationship between the two is such, on
Mr Walker’s evidence, that he was able to tell Mr Blance that he was not to use the
Falcon for any criminal activity.
[18] I am readily satisfied on the balance of probabilities that each of the conversations relied on by the Commissioner implicate Mr Walker in receipt of methamphetamine from Mr Blance and tardy payment of amounts owing for the purchase of methamphetamine.
[19] Mr Jefferies submitted that none of the voluminous recorded communications includes any participation by Mr Walker. In the criminal context, unless he was charged as a co-conspirator, those conversations would be inadmissible against him. Further, the extent to which the Crown reconstruction of his involvement was unreliable and speculative is underscored by the absence of any charges against
Mr Walker.
[20] The absence of charges is not decisive. Nor is absence of direct contributions by Mr Walker to the conversations implicating him in methamphetamine dealing. The timing of Mr Blance having possession of the Falcon tends to corroborate the reconstruction that it was with him as security for a significant debt, and was released back to Mr Walker once the debt had been reduced. Ms Hospoda’s description of her dealings with “Jason” are consistent with him possessing methamphetamine sourced both from Mr Blance and from elsewhere. Mr Walker has served two terms of three years’ imprisonment each for methamphetamine dealing in 2010 and 2006. The explanations he has offered fall substantially short of challenging the Commissioner’s analysis on the basis of the evidence adduced.
[21] At this stage of the proceedings, the Commissioner is required to have reasonable grounds for a belief that Mr Walker has unlawfully benefited from significant criminal activity. The scale of the methamphetamine dealing in which he is implicated certainly qualifies as such. The more precise analysis as to whether the vehicle constitutes tainted property is to be addressed when a forfeiture order is sought.
[22] I am accordingly satisfied that the Commissioner is entitled to a restraining order in respect of the Falcon.
1984 Pontiac Firebird
[23] Mr Blance has been registered as the owner of this Pontiac vehicle since February 2017. During the criminal investigation he was observed driving it more than 20 times and it was regularly observed being parked in the vicinity of his residence. No one else was observed driving the vehicle in the period of covert surveillance in Operation Walnut.
[24] On the basis of registered ownership and possession, the Commissioner contends that there are reasonable grounds to believe that Mr Blance has effective control over the Pontiac, and that a restraining order is appropriate on that ground.
[25] In Mr Blance’s opposition to the orders sought in relation to the Pontiac and the Impala, Ms Hall accepted, solely for the purposes of the present argument, that the
Commissioner does have reasonable grounds to believe that Mr Blance was involved in, and unlawfully benefited from, significant criminal activity.
[26] The application in relation to the Pontiac is opposed on the ground that
Mr Leonard Allen Fenemor is the beneficial owner and is entitled to possession of it.
Mr Fenemor completed an affidavit and was cross-examined. He is a 71 year old beneficiary who lives in Porirua. He has deposed that his son (who has subsequently been killed in an accident in the United States) arranged for him to transfer the Pontiac to Mr Blance in return for Mr Blance’s promise to strip wallpaper, plaster and re-paint
Mr Fenemor’s bedroom at his Porirua home. Mr Fenemor gave possession of the Pontiac to Mr Blance and facilitated registration of the change of ownership, anticipating that the work would be done quite soon after that occurred in January or February 2017. The work has not been done. Mr Fenemor therefore considers that he is entitled to have the vehicle returned because Mr Blance did not perform his part of the bargain.
[27] Mr Fenemor had wanted to sell the vehicle. He estimates that it might be worth
$4,000, but in cross-examination emphasised that there is very little market for such cars and doubts the ability to find a buyer for what he considers it to be worth. He explains transferring ownership before Mr Blance had done the promised work because he did not want to be responsible for any traffic offence notices that might be issued whilst others were driving the vehicle.
[28] Mr Fenemor had previous experience of Mr Blance as, in his view, a high quality plasterer and painter. He explained the absence of complaint about
Mr Blance’s failure to perform on the ground that he did not “want the Mongrel Mob coming round and hassling me”. Mr Blance is a senior patched member of the Mongrel Mob.
[29] Mr Fenemor was cross-examined about these arrangements. He said the vehicle would fetch very little. He suggested the outcome of ultimate forfeiture would be very unfair when it left him without the vehicle, and without completion of the maintenance work in his home that he claimed was the consideration for the vehicle.
Mr Fenemor was less than convincing. Putting the value of the Pontiac at about
$4,000, which value presumably took into account the difficulties of sale and restricted nature of the market for such a vehicle, a far more sensible course for him would be to find a cash buyer, and apply part of the proceeds to pay for the maintenance work required. No detailed specification of the work was provided, but I accept Ms Light’s proposition that $4,000 was a generous amount for the work as described.
[30] Even if the arrangement was made as claimed by Mr Fenemor, such arrangement would be consistent with a form of credit sale. That is, Mr Fenemor agreed Mr Blance could have the vehicle and transferred ownership to him in reliance on a promise of subsequent performance of Mr Blance’s consideration that could be deferred for an undefined period of time. A variant on that arrangement is a credit sale in which Mr Blance had agreed to pay $4,000, but was given time to pay, with change of registered owner occurring at the time possession passed. In that event,
Mr Fenemor would be an unsecured creditor of Mr Blance, for the value of the work
Mr Blance promised to complete.
[31] I am accordingly satisfied that the Commissioner has made out reasonable grounds for the belief that Mr Blance has effective control over the Pontiac, and a restraining order is justified.
1967 Chevrolet Impala
[32] Since August 2012, the Impala has been registered in the name of the third interested party, Ms Kirwan, who is the mother of Mr Blance’s children. Detective Brown deposes that Ms Kirwan resides in Otaki and does not hold a driver licence.
[33] Police records include references to the Impala being linked to Mr Blance since
2014. When Operation Walnut was terminated, the Impala was located at one of the addresses with which Mr Blance is linked.
[34] The intercepted communications during Operation Walnut included a telephone discussion between Mr Blance and an unknown female discussing the availability of storage for vehicles. The unknown female told Mr Blance that there was room to fit the Impala. Detective Brown has deposed to his belief that the Impala
was purchased with proceeds from the sale of methamphetamine and that Mr Blance has registered it in Ms Kirwan’s name to conceal his ownership of it.
[35] Mr Blance opposes the application for a restraining order in relation to the Impala in reliance on two affidavits. The first is from Arthur Blance. Although not biologically connected, Arthur Blance’s parents raised Mr Blance and Arthur Blance regards him as his brother. Arthur Blance deposed that he and his biological brother, Wayne Blance, purchased the Impala from Mr Steve Roberts in about 2012. They are classic car enthusiasts and have the skills to restore and maintain classic cars. He deposed that he and Wayne Blance each provided one half of the $15,000 paid in cash for the vehicle. Arthur Blance deposed that after the Impala had been in storage for a period, there were times when he would let Mr Blance drive it. In cross-examination, Arthur Blance explained somewhat differently that the vehicle had been bought for family members to use, but not to own. Consistent with retaining control, Arthur Blance stated in evidence that he did not trust Mr Blance to drive it on an unsupervised basis.
[36] That attitude to limited entitlement to use the vehicle on a supervised basis is inconsistent with the Impala having been left in Mr Blance’s possession for significant periods, including leaving to Mr Blance responsibility for registering the change of ownership and renewing the vehicle’s warrant of fitness. It would not alter the analysis of possession and control if, as Arthur Blance explained in cross-examination, he reimbursed Mr Blance for the costs of obtaining warrants of fitness.
[37] I infer that Arthur Blance did not know that the vehicle was being registered in
Ms Kirwan’s name when that occurred. He did know that it would not be registered in his or brother Wayne’s name.
[38] In Arthur Blance’s affidavit he stated that the vehicle is not worth anything more than a few thousand dollars. However, during cross-examination he claimed that the vehicle has appreciated and it is probably now worth $20,000, and that it is increasing in value. The change in attitude to value between completing the affidavit in December 2017 and giving evidence to the contrary in February 2018 cannot be explained by such a short passage of time.
[39] Ms Light criticised the absence of any evidence from Arthur Blance supporting the claim that both he and his brother provided $7,500 in cash, and the absence of any explanation as to the source of such funds.
[40] An affidavit was also completed by Mr Steve Roberts, confirming that his dealings over sale of the Impala were with Messrs Arthur and Wayne Blance, and that they had paid him the asking price of $15,000 in cash. Mr Roberts was unaware of
Mr Blance having anything to do with the vehicle.
[41] Ms Hall submitted that the Commissioner could not make out control of the Impala by Mr Blance when he was not a party to the sale negotiations and it was not registered in his name. That overlooks the evidence that those who claim to have paid for the vehicle left registration of it to Mr Blance, he controlled whose name it was registered in, and that there is a pattern of the vehicle being in Mr Blance’s possession over a substantial period of time.
[42] Ms Hall also submitted that Mr Blance did not enjoy control over the vehicle because of Arthur Blance’s evidence that he told Mr Blance off for the manner in which he drove the vehicle, and purportedly limited the extent of Mr Blance’s use of it. I am not satisfied that there is evidence that whatever stance was adopted by Arthur Blance operated as effective control over the Impala when Mr Blance had possession of it.
[43] As with the other vehicles, I am readily satisfied of the reasonableness of grounds for belief that Mr Blance has exercised control over the Impala throughout the relevant period. It follows that the Commissioner is entitled to a restraining order in respect of the Impala, pending pursuit of an application for forfeiture under the Act.
Application for sale of the vehicles
[44] The Commissioner has also sought orders for sale of the Falcon, the Pontiac and the Impala (the vehicles). Section 35(e)(v) of the Act provides:
35 Types of further order
Without limiting the generality of section 34(1), a court may, on an application under section 33(1), make 1 or more of the following further orders in relation to restrained property:
…
(e) an order relating to the Official Assignee that—
…
(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property …
[45] The rationale for the statutory power of sale was acknowledged by Venning J
in Commissioner of Police v Cavanagh in the following terms:1
[7] A sale order may be made at any time. Typically sale orders are pursued by the Commissioner where the restrained assets in relation to which the sale orders are sought have high depreciation rates combined with additional costs of storage and insurance which ultimately decrease the potential return to the Commissioner and/or [the] parties who claim an interest in the assets. There is a further additional benefit in the sale in that, once the assets are sold, the Official Assignee is able to hold the funds in an interest bearing account.
[46] The concern for the Commissioner here is that final resolution of forfeiture proceedings may be up to 18 months away, and appropriate storage costs $10.70 per day per vehicle. The Commissioner has not adduced any evidence of the realisable value of any of the vehicles.
[47] Orders for sale are opposed in each case. Mr Walker deposed that the Falcon is one of only 500 made, having been developed for the Australian Bathurst motor race. Mr Walker’s intention is to carry out a complete restoration of the vehicle over time, with a view to it representing a worthwhile investment. He opposes sale and instead invites the Court to return the vehicle to him, subject to restraints on his entitlement to dispose of it.
[48] The Commissioner generally approaches depreciation on motor vehicles by adopting the rule of thumb applied by Inland Revenue of 30 per cent per annum.
Whilst that might be appropriate for relatively new vehicles, I do not accept that it is the case in so-called classic cars of the age of the Pontiac and the Impala. I am not persuaded that there is a material risk of their value depreciating substantially before the Commissioner’s entitlement to forfeiture orders can be resolved.
[49] In the case of all the vehicles, the sale prices are likely to be modest. The risk is therefore not that delay will reduce the net recovery, but that the holding costs until realisation might substantially reduce or even extinguish the amount recovered. Holding a vehicle under restraining order for a period of 18 months would not meet storage and other costs unless the vehicle realised more than approximately $5,000. There is a real risk that the vehicles in question here will not realise more than that amount.
[50] Given the low interest rate regime currently applying, the prospect of the Official Assignee earning interest on net proceeds until the entitlement to them is resolved is also not compelling. Three per cent on $5,000 for 12 or 15 months is hardly a compelling improvement in the overall financial outcome.
[51] In Commissioner of Police v Evans, Brown J was not prepared to order immediate sale for a vehicle then valued in excess of $26,000 where there was the prospect that the vehicle would hold its value.2 Brown J observed:
[33] … While I recognise that there will be costs associated with storage, and insurance, such costs are the inevitable by-product of asset seizures. I do not consider that it is appropriate to take such expenditure into account in addressing the question posed by s 35(e)(v). Were it otherwise, then in order to defeat an application for sale an owner would need to demonstrate that the vehicle was likely to appreciate in value at a rate at least equal to the annual cost of storage, maintenance and insurance. I do not consider that the section imposes that obligation.
[52] With respect, I would not go so far as to disregard the relevance of holding costs in all cases. However, in the case of vehicles that are appropriately treated as investments, or at least where the rate of depreciation has bottomed out, nor can the reduction in the eventual return caused by the holding costs be sufficient of itself to warrant an order for sale.
[53] In this case, Mr Fenemor wanted to sell the Pontiac but was doubtful of his ability to do so. Accordingly, a sale supervised by the resources available to the Official Assignee will effect the realisation for whatever the market will produce for it. I am therefore prepared to make an order of sale in respect of the Pontiac.
[54] In the case of the Falcon and the Impala, there is scope for contending that
Mr Walker and Arthur Blance attribute sentimental or other forms of non-monetary value to those vehicles, giving them a worth to them greater than the amount they would realise on sale.
[55] The criminal proceedings to which these applications relate are scheduled to be completed by the end of September 2018. In the case of the Falcon, Mr Walker is not facing charges. The further evidence available on the anticipated forfeiture application for the Falcon will likely arise out of the evidence given, but is unlikely to be directly influenced by the verdicts for any of the existing defendants. Therefore the length of time before forfeiture applications can be realistically assessed is not extensive relative to the period during which holding costs have already been incurred.
[56] For these reasons, I am not prepared to order sale of the Falcon and the Impala at the present time. If the delay until determination of forfeiture applications on those two vehicles remains a material distance away by the end of September 2018, then I reserve leave to the Commissioner to make further application under s 35(e)(v) for sale of the vehicles on the circumstances as they then appear.
[57] There will be no order as to costs on the present applications.
Dobson J
Solicitors:
Crown Solicitor, Wellington for applicant
Jefferies Law, Wellington for second respondent
Counsel:
Elizabeth Hall, Wellington for first respondent
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