Commissioner of Police v Burgess
[2016] NZHC 2625
•2 November 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-002893 [2016] NZHC 2625
BETWEEN COMMISSIONER OF POLICE
Applicant
AND
ROBIN ADRIAN BURGESS First Respondent
LLANNYS GWEN BURGESS Second Respondent
LOUISE ANNETTE BRINSDEN First Non-Respondent
KARL ROBIN BURGESS Second Non-Respondent
Hearing: 11, 12, 13, 14 & 15 July 2016 Appearances:
D Johnstone and A Park for Applicant
S Kilian and F Hawkins for First Respondent
F C Deliu and P Finau for Second RespondentA Simperingham and H Vaughn for First and Second Non- Respondents
Judgment:
2 November 2016
(INTERIM) JUDGMENT OF VENNING J
This judgment was delivered by me on 2 November 2016 at 3.30 pm, pursuant to Rule 11.5 of the
High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Meredith Connell, Auckland
Copy to: Kilian & Associates, Auckland
Woodward Chrisp, Gisborne
Copy to: F C Deliu & P Finau, Auckland
COMMISSIONER OF POLICE v BURGESS [2016] NZHC 2625 [2 November 2016]
Table of Contents
Introduction ..............................................................................................................[1] The asset forfeiture order ......................................................................................[10] Profit forfeiture order ............................................................................................[14] Have the respondents engaged in and benefitted from “significant criminal
activity”? .............................................................................................................[17]
The assets sought to be forfeited ...........................................................................[58] Henwood Road [58] Woodworking tools and antique pipes [78] Jewellery and other schedule items [80] Tractor [81] Corvette [84] The 2007 Harley Davidson [91] Undue hardship ......................................................................................................[93] Mr Burgess [93] Mrs Burgess’ application for relief in relation to Henwood Road [102] Ms Brinsden’s position [108] Karl Burgess’ position [127] Profit forfeiture order ..........................................................................................[139] Result/orders.........................................................................................................[144] Assets forfeiture order [144] Profit forfeiture order [145] Leave [146] Costs ......................................................................................................................[147]
Introduction
[1] Mr and Mrs Burgess are directors and shareholders of Dessen Investments Limited (Dessen). Dessen traded as a secondhand dealer under the names Rob’s Trading Post and Lovers of Yesteryear.
[2] Mr and Mrs Burgess, together with their adult children, Louise Brinsden and Karl Burgess and their families, live on a lifestyle property at 32 Henwood Road, Taupaki, Auckland (Henwood Road). The property is held in the name of Mr and Mrs Burgess as trustees of the Burgess Estate Trust (the Trust).
[3] The police suspected that Mr and Mrs Burgess were dealing in stolen jewellery and other stolen items through the business of Rob’s Trading in particular. From November 2009 to April 2010 the police conducted a significant investigation into their actions. The investigation included the use of an undercover officer “Billy”.
[4] Both Mr and Mrs Burgess were charged with receiving stolen property. Mr Burgess pleaded guilty to a representative charge of receiving stolen property between 1 January 2009 and 20 April 2010. For the purposes of sentence Mr Burgess accepted that he had received $250,000 worth of stolen jewellery/gold during that time. The sentencing Judge recorded that it was clear to him Mr Burgess
was an active fence of stolen property.1 Criminals would bring property to him, he
would buy it off them and he would then melt the stolen jewellery down and on-sell the gold. The charge of receiving against Mrs Burgess was not pursued. She was convicted of a charge under the Secondhand Dealers and Pawnbrokers Act 2004.
[5] While Mr Burgess accepted he had benefitted to the sum of $250,000 between 1 January 2009 and April 2010 the police investigation revealed that Regal Castings Limited (a gold refiner) had paid substantially more than that sum to him for melted down gold he had sold to it between April 2006 and April 2010.
[6] The Commissioner of Police (the Commissioner) seeks both an asset forfeiture order and a profit forfeiture order in the sum of $2,031,180 against Mr and Mrs Burgess.2
[7] The property sought to be forfeited is: (a) the Henwood Road property;
(b)chattels seized by the Official Assignee on 21 May 2010, being a 34 piece collection of woodworking tools, and a collection of 43 antique pipes;
(c) an extensive list of jewellery and other items seized from Rob’s
Trading;
(d) 2008 John Deere 3120 tractor and loader;
(e) 1980 Corvette, registration number ECQ814; and
(f) 2007 Harley Davidson, registration number A7JMR.
[8] Other items had originally been restrained but some have been released to be returned to legitimate owners and some items of sentimental value have been released to Mrs Burgess and/or Ms Brinsden. Further items have been released to enable Mr and Mrs Burgess to meet living expenses.
[9] The following items were purchased prior to April 2006. They have not been restrained but are still identified by the Commissioner as being available to meet a profit forfeiture order:
(a) 1923 Model T Ford motor vehicle; (b) 1997 Harley Davidson motorcycle; (c) Kiwi-Kraft boat and trailer;
(d) 1994 Yamaha motorcycle; and
(e) Petrol generator.
The asset forfeiture order
[10] If the Court is satisfied, on the balance of probabilities, that the specific property referred to in [7] above is tainted property it must make an assets forfeiture order in respect of that property subject only to the exclusion of certain property from the order if its forfeiture would be reasonably likely to cause undue hardship to
Mr Burgess.3 Mrs Burgess, Ms Louise Brinsden and Mr Karl Burgess have claimed
an interest in Henwood Road and certain of the other items of property. They seek relief on the basis they have not unlawfully benefitted from significant criminal activity or, in the alternative, that they will suffer undue hardship if relief is not granted.4
[11] There are a number of relevant definitions under the Criminal Proceeds
(Recovery) Act 2009 (the Act). Tainted property is defined as:5
(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
[12] Property is defined as:6
(a) means real or personal property of any kind—
(i) whether situated in New Zealand or a foreign country; and
(ii) whether tangible or intangible; and
(iii) whether movable or immovable; and
(b) includes an interest in real or personal property
[13] Significant criminal activity is also defined.7 Where the value of the property received exceeds $1,000, the offence of receiving meets the definition of a significant criminal activity.8 The Commissioner relies on the definition of significant criminal activity under s 6(2) of the Act and alleges that both Mr and Mrs Burgess were involved in receiving property valued at more than $1,000, indeed significantly more than the $250,000 that Mr Burgess admitted to with his guilty plea.
Profit forfeiture order
[14] The Commissioner claims that Mr and Mrs Burgess have unlawfully benefitted to the sum of $2,031,180 from significant criminal activity during the
relevant period.
5 Criminal Proceeds (Recovery) Act 2009, s 5.
6 Criminal Proceeds (Recovery) Act 2009, s 5.
7 Criminal Proceeds (Recovery Act 2009, s 6.
[15] Mr and Mrs Burgess dispute that. The onus is on them to rebut that presumption on the balance of probabilities.9
[16] Again, in the event that the Court determines a profit forfeiture order is appropriate, Mrs Burgess, Ms Brinsden and Mr Karl Burgess seek relief from the orders. They seek the exclusion of specific terms of property from the effect of the order.
Have the respondents engaged in and benefitted from “significant criminal activity”?
[17] In order to determine both the assets forfeiture order and the profit forfeiture order it is necessary to determine whether and to what extent Mr and Mrs Burgess engaged in and benefitted from significant criminal activity over the relevant period.
[18] Mr Burgess’ conviction is proof that he was engaged in significant criminal activity. The additional evidence satisfies the Court that Mr Burgess’ engagement in receiving stolen jewellery extended beyond that he was charged with and that he obtained substantially more by way of illegal proceeds than $250,000.
[19] While Mr Burgess admitted to receiving $250,000, the Commissioner’s witnesses identified that Mr Burgess (in the name of Rob’s Trading) had actually received $2,031,180 from the sale of 88 kilograms of gold to Regal Castings between April 2006 and April 2010. The Commissioner contrasts that with the income earned by Dessen and Mr and Mrs Burgess over that period. In the absence of any other credible explanation for the volume of gold sold by Mr Burgess to Regal Castings, the Commissioner invites the Court to draw an inference that the proceeds received by him from Regal Castings were all from the sales of stolen gold and jewellery. The Commissioner also relies on Mr Burgess’ conviction and the evidence of the undercover officer Billy.
[20] Ms Cairns, a financial analyst employed by the New Zealand Police carried
out a reconciliation of the invoices relating to Regal Castings’ purchase of scrap gold
from Mr Burgess in the years 2006 to 2010 and calculated the amount paid by Regal
9 Criminal Proceeds (Recovery) Act 2009, s 53(2).
Castings to Mr Burgess for scrap gold supplied by him at $2,031,180.03. Mr Astley, a director of Regal Castings, has confirmed that figure as correct.
[21] From 2006 to 2011 Mr and Mrs Burgess’ only declared income was shareholders’ salary from Dessen Investments as follows:
2006 $5,904 2007 $4,260 2008 $7,212 2009 $8,609 2010 $11,661 2011 $5,811
[22] After paying the shareholders’ salaries to Mr and Mrs Burgess, Dessen
Investments recorded no profit (or loss) in the 2006 to 2011 tax years.
[23] Based on the figures supplied by the Burgesses to their accountant, Menon and Associates, the total amount of sales of Rob’s Trading and expenditure and gross profit was as follows:
2008 $100,000 sales approximately
$89,000 expenditure approximately
$11,000 gross profit;
2009 $115,000 sales (approximately)
$84,000 expenditure (approximately)
$31,000 gross profit; and
2010 (April) $27,000 sales (approximately)
$19,000 expenses (approximately)
$8,000 gross profit.
[24] The amount of income the respondents’ own figures disclose would not
sustain their lifestyle nor support the purchases of assets they made during the
relevant period. Nor does it explain the substantial cash transactions they were involved in.
[25] Mr Kilian submitted the Court could not place reliance solely on the sales to Regal Castings as evidence of illegal proceeds and noted that Ms Cairns had not carried out a source and disposition reconciliation statement. He referred to the following passage from the decision of Doorman v Commissioner of Police in which the Court of Appeal explained the value of such an analysis:10
[42] … The purpose of the source and disposition statement, as Ms van der Pol explained, was to determine if the appellants had access to income from an unidentified source. The statement analyses where money came from and where it went. All known expenditure is compared with all known sources of income for a given period. A net deficit of funds indicates there is an additional unexplained source of income during the period under review.
[26] I do not read the passage from the Court of Appeal decision in Doorman as suggesting that a source and disposition statement is required in every particular case. The Court was referring to the work that Ms van der Pol had done in that case in response to the appellant’s attempt to rely on a deduction for legitimate income she had earned. Ultimately that legitimate income was irrelevant as it had been earned in an earlier period.
[27] Ms Cairns explained under cross-examination why she did not carry out a source and disposition statement. There were particular difficulties with such an exercise in the present case given the number of cash transactions carried out by Mr and Mrs Burgess. If she had put the cash from Regal Castings to one side and looked at Mr and Mrs Burgess’ bank accounts in isolation she would not have got a true picture. Instead Ms Cairns viewed all of the bank accounts from the relevant entities to complete a bank account analysis, but also took account of the cash received from Regal Castings.
[28] Mr Kilian also made the point that suspicion is not sufficient. He referred to the following statement by MacKenzie J in Commissioner of Police v Zhu:11
10 Doorman v Commissioner of New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173.
11 Commissioner of Police v Zhu [2015] NZHC 2175.
[64] In Commissioner of Police v Hayward Venning J noted that the Commissioner could invite the Court to infer, on the balance of probabilities, that the respondent was involved in other significant criminal activities that he was not charged with. That is so, but it is a question of fact in each case whether that is a proper inference to draw.
(footnote omitted)
and submitted there was insufficient evidence to draw the inference in this case.
[29] I accept that the issue is whether there is sufficient probative evidence which enables the Court to infer that Mr Burgess was involved in the further receiving alleged in this case and obtained illegal proceeds as a result.
[30] Mr and Mrs Burgess (and their family) dealt in cash. By his own admission Mr Burgess dealt in cash, even for substantial purchases. For example, during the period January 2010 to April 2010 Mr Burgess received $340,000 in cash and cheque payments from Regal Castings in payment for the melted down gold. At termination of the police inquiry during the initial search the police located $47,000 cash at Henwood Road. The cash payments Mr Burgess received from Regal Castings are properly part of the evidence relied on by the Commissioner and from which the Court may draw inferences.
[31] During the period of 2008 to 2011 the main business entity of Rob’s Trading made a modest gross profit. Dessen, the company entity under which the businesses were operated declared no profit for the entire relevant period 2006 to 2011. Mr and Mrs Burgess declared a very limited income averaging less than $7,300 per annum during that period. Despite that, they were able to maintain a substantial mortgage of $360,000, and further borrowing of $100,000. Further they made significant improvements to Henwood Road, acquired other assets and lived a lifestyle which could not have been sustained on their declared and legitimate income.
[32] In addition, it is relevant that Mr Burgess has been convicted of receiving stolen property to the value of $250,000 during the period 1 January 2009 to April
2010. Mr Burgess received stolen jewellery and gold items, melted the gold down and sold it to Regal Castings. That was his modus operandi. That he sold over $2 million to Regal Castings during the extended period of 2006 to 2010 supports the
inference he was operating in that same way during the earlier period. The discrepancy between the money received for the gold sold to Regal Castings and the money earned from legitimate trading activity during that period is marked.
[33] The Commissioner does not, as Mr Kilian suggested, rely on tax fraud as was discussed by Gilbert J in Commissioner of Police v Dryland.12 In that case the income had been legitimately earned, but not declared. In the present case it is the Commissioner’s case the income represented by the cash received from Regal Castings has not been legitimately earned at all but rather is the proceeds of significant criminal activity.
[34] There is also the evidence of the undercover officer, Billy, which supports the finding that both Mr and Mrs Burgess were engaged in receiving stolen jewellery and gold. The undercover officer was only involved for a short period from 30
March 2010 to 20 April 2010. The summary of facts to which Mr Burgess pleaded guilty related to the period 1 January 2008 to 20 April 2010. On his own admission Mr Burgess was receiving stolen property for a substantial period prior to the investigation.
[35] In the circumstances, in the absence of any other credible explanation for the large amounts of gold sold to Regal Castings, the Court would be entitled to infer that the payments from Regal Castings were the proceeds of the stolen gold received by Mr Burgess and melted down by him. I turn to the explanations offered by Mr and Mrs Burgess for those sales.
[36] Mr Burgess made a number of statements during the course of the criminal prosecution and these proceedings. He also made a number of affidavits. He was cross-examined at length by Mr Johnstone. In the course of those statements and evidence Mr Burgess has given a number of varying explanations for the source of the gold he supplied to Regal Castings.
[37] Mr Burgess did not impress as a witness of truth during his evidence. It did not help him when he sought to resile from his admission that he had benefitted to
12 Commissioner of Police v Dryland HC Auckland CIV-2012-419-242, 30 August 2012.
the extent of $250,000. Rather, he suggested that he had only received $70,000, which he had “carelessly or recklessly” received as commissions from a Mr de Falco. Mr Burgess said he met Mr de Falco and dealt with him at a time Mr de Falco was in the business of refining gold. Mr de Falco later accepted employment with Regal Castings as a refiner. Mr de Falco was then unable to buy and sell any form of precious metal himself. Mr Burgess says that at Mr de Falco’s request he took his, Mr de Falco’s gold, to Regal Castings to be refined. Mr Burgess said he collected the money from Regal Castings for Mr de Falco and paid him in cash. He says he would meet Mr de Falco at a café in New Lynn on a Saturday morning and pass over the cash. Mr Burgess said he had received approximately $70,000 by way of commission from Mr de Falco. At one stage of his evidence in an attempt to explain the $2 million he had received from Regal Castings Mr Burgess said that Mr de Falco had brought him gold to a value of $800,000. At another stage of his evidence he said it would have been approximately $250,000. When challenged about that Mr Burgess then said that the $250,000 was purely a guess.
[38] In his 2015 interview Mr Burgess had said Mr de Falco bought various sized gold buttons to be sold to Regal Castings on his behalf, and that he would put them through the letter slot in the front door of the shop in an envelope. At other times, in his affidavits Mr Burgess said he purchased the gold from Mr de Falco.
[39] Mr Burgess now says that Mr de Falco admitted the gold was stolen. Mr de
Falco was not called as a witness. He was apparently not able to be located.
[40] Mrs Burgess also gave different explanations about how they dealt with Mr de Falco. At one time she said Mr de Falco would text Mr Burgess when the gold was ready to be picked up in ingot form, but when examined in September 2014 she said Mr de Falco bought lumps of gold into the shop or to their home.
[41] Next, Mr Burgess said the gold sold to Regal Castings came from an insurance payout. In his April 2010 interview following arrest, Mr Burgess said that he had put through Regal Castings “probably half a million, probably a bit more actually” and the gold was from a big insurance payout that he invested in gold. He said:
Many years ago I had a big insurance payout and I invested in gold. That’s all I’m going to say.
And later:
I got a huge payout a few years ago which I won’t comment too much on
and I purchased a large quantity of gold.
[42] However, in a later interview conducted under the Act in 2015 Mr Burgess said he had received an insurance payout about 15 to 17 years ago, which was about
$15,000. Patently, the $15,000 insurance payment cannot explain the large amounts of melted down gold sold to Regal Castings.
[43] Next, Mr Burgess says that sometimes he sold gold on behalf of family members and friends (including a Russian tradesman). However he accepted that the sums involved were relatively modest. He also referred to an Indian woman and her dowry.
[44] Finally Mr Burgess says that through his business he met a man called John Gunaselan Karuppiah (John) who manufactured gold chains and bracelets for the Burgesses. In his 2015 interview Mr Burgess said he purchased gold from John when John became very sick in 2001. Before he died he sold an assortment of gold, both nine carat and 18 carat in sheet form together with bracelets and chains to Mr Burgess for $72,000 cash. (Mr Burgess also said he used the insurance proceeds of
$15,000 to pay for that gold). Mr Burgess said he subsequently sold the gold in 2008 when gold was at an all time high and made a profit of approximately $400,000. He says he applied that money to put a garage built by Totalspan onto the property at Henwood Road.
[45] Mr Burgess said that he had bought 1.2 kilograms of nine carat gold and
3,000 grams of 18 carat gold from John. Through cross-examination Mr Johnstone established with Mr Burgess that the gold he said he had purchased from John, (who was himself a goldsmith) for $72,000 was worth approximately $130,000 at the time (without taking account of the value of any stones embedded in the gold). Mr Burgess also accepted that the gold would have had to have been sold for approximately $1,850 a troy ounce to have achieved the profit of $400,000 he
claimed to have made, which would have been close to the market high for gold in
2008.
[46] There are a number of issues with Mr Burgess’ evidence concerning John. It is illogical that a goldsmith who would know the value of the gold, would sell it for approximately half its value at a time when he knew he was dying and wanted to make provision for his family. Nor is it at all consistent for Mr Burgess to have kept the gold he says he bought from John to one side until the peak of the market in 2008 when during the same period, (or at least from 2006) he was regularly selling gold to Regal Castings. Nor is there any credible explanation as to where the balance of the money (after application of the insurance proceeds) came from to purchase John’s gold.
[47] I did not find Mr Burgess at all credible as a witness. His evidence changed from the initial interviews, to his affidavit evidence and then even during the course of the cross-examination on a number of topics and on several occasions. He had no explanation for the inconsistencies in his evidence.
[48] Mrs Burgess was also not a witness of truth. She changed her evidence to meet what she considered to be the issues raised in cross-examination and that had been raised during Mr Burgess’ evidence.
[49] The evidence satisfies me that Mrs Burgess was well aware of Mr Burgess’ illegal activity. I reject her evidence to the contrary. The suggestion that Mrs Burgess was not aware that Mr Burgess was melting down and selling stolen jewellery and gold to Regal Castings is not credible. They are a close couple. Both worked in the business of Rob’s Trading.
[50] The evidence of the undercover officer is significant. It also confirms Mrs Burgess’ involvement. After dealing with Mrs Burgess at the shop premises at the end of March and in early April, on 14 April 2010 the undercover officer, Billy, met Mr and Mrs Burgess in their car, off-site at the Mitre 10 Mega car park. They both signalled to him to get into their car. Billy gave Mr Burgess a 62 gram, nine carat bangle and two gold nine carat earrings, which Mr Burgess weighed. Mrs Burgess
handed Billy the cash for the earrings and also handed Mr Burgess a pile of $100 notes stapled together that Mr Burgess then used to hand Billy six $100 notes. Mrs Burgess also took part in the following discussion with Billy:
Billy: “You won’t put this in your shop on display will you?
MrBurgess: “Fuck no Billy, we’re not that stupid, this will go straight into the melting pot.”
Mrs Burgess: “We wouldn’t do that to you”.
Mr Burgess: “It all goes into the melt Billy, we all got to make a buck”.
Mrs Burgess: You don’t have to worry; we can always go out the back of the shop. I only let people into the shop that I want”.
[51] Mr Deliu made the point that the items sold by “Billy” were not stolen. That is correct, as is the concession that there was no direct evidence Mrs Burgess had received stolen property. However, Mrs Burgess’ actions and involvement with Billy are relevant. She was an active participant in the transaction with Billy and heard Mr Burgess say it would go straight to the melting pot. The circumstances of the meeting and conversation overall lead to the inference that Mr and Mrs Burgess thought they were dealing with stolen property.
[52] Further, during the course of her evidence Mrs Burgess was caught out on a number of occasions in making contradictory statements. I am satisfied that she was well aware that Mr Burgess was dealing in stolen jewellery and gold and was selling the melted down stolen jewellery as gold to Regal Castings. The quantum of the gold dealt with and the years of dealing is itself telling. The gold was melted down in a crucible at the Henwood Road property. Mr and Mrs Burgess both dealt in cash. Mrs Burgess worked from time to time in the business. She would or should have known it could not legitimately make the amount of money Mr Burgess had available.
[53] Further, the intercepted telephone conversation between Mr and Mrs Burgess regarding the Rolex watch shows the extent Mrs Burgess was prepared to go in order to assist Mr Burgess.
[54] Mrs Burgess’ explanation for earning a legitimate income is her operation of the businesses Lovers of Yesteryear and Coffee and Gems To Go Limited. But the only business Mrs Burgess produced any evidence of income for relates to Coffee and Gems To Go, a company incorporated in September 2011, well after Mr and Mrs Burgess were arrested for the present offending.
[55] I am satisfied that the gold Mr Burgess sold Regal Castings was melted down from stolen gold and jewellery that he had received and that Mrs Burgess was aware Mr Burgess was dealing in stolen gold and jewellery albeit, she may not have been aware of the extent of Mr Burgess’ operation.
[56] The business of Rob’s Trading had a legitimate aspect to it. But in terms of the profit forfeiture order the onus is on Mr and Mrs Burgess to prove, on the balance of probabilities, that the figure argued for by the Commissioner is incorrect. The Burgesses have not attempted to prove, other than by evidence which I have rejected, what, if anything, of the legitimate part of the business of Rob’s Trading involved sales of melted down gold to Regal Castings. In the absence of such proof Mr and Mrs Burgess have failed to satisfy the burden on them. For the purposes of the assets and profit forfeiture orders I am satisfied that the respondents benefitted from significant criminal activity to the value of $2,031,180.
[57] I return to the issue of the profit forfeiture order later in the judgment but now turn to the assets that are sought to be forfeited.
The assets sought to be forfeited
Henwood Road
[58] The major asset is Henwood Road. Mr Parsons, a chartered accountant engaged by the respondents, has given evidence as to the source of the funds used to purchase Henwood Road. Henwood Road was purchased in late 2006. Mr Parsons’ evidence is that apart from the deposit of $38,000 the purchase was funded by the sales of properties held in the name of Mr and Mrs Burgess which netted $653,352, together with an ASB loan advance of $360,000. The purchase was settled on 20
November 2006 in the name of the Trust. The Trust had been settled on 28
September 2006 by Mr and Mrs Burgess. The Trust acknowledged an advance from Mr and Mrs Burgess of $690,000 and borrowed the balance of $360,000 from ASB to pay the purchase price of $1,050,000.
[59] From April 2006 until November when Henwood Road was settled Mr Burgess received over $100,000 in cash from Regal Castings. Mr Burgess denied that any of that cash was used to pay the deposit of $38,000. He says the deposit was provided from the sale of (another) Corvette motor car at the prompting of the real estate agent. That seems extremely implausible. There is no record of any such sale. I find it more likely, on the balance of probabilities, that part of the $100,000 from the proceeds of sale of stolen jewellery was used to fund the deposit.
[60] Further, the Commissioner’s evidence, particularly that of Ms Cairns, confirms that money Mr Burgess received from Regal Castings was applied to the Trust bank account which was in turn applied by the Trust to pay its obligations to the ASB Bank under the loan agreements with that Bank. Ms Cairns has been able to trace and confirm that during the period 9 November 2006 through to 28 May
2010 cash deposits totalling $276,450 were applied to the Trust bank account. Of the 130 cash deposits made during that period 64 of the deposits totalling $162,390 were made on the same day that Mr Burgess either received cash from Regal Castings or when he had cashed one of the Regal Castings cheques at a BNZ branch. A further four deposits totalling $11,950 were made within one to two days after Mr Burgess had either received cash from Regal Castings or had cashed one of Regal Castings’ cheques at a BNZ branch. I readily infer those payments were from the sales of stolen gold to Regal Castings. (The deposits to the Trust bank account also support the rejection of Mr Burgess’ evidence the gold he was selling belonged to Mr de Falco). Ms Cairns was not able to trace the disposition of the other cash payments or cash cheques Mr Burgess received from Regal Castings.
[61] Between 3 March 2007 and 3 May 2010 39 transfers totalling $17,831.25 were made from the Trust’s bank account to the home loan account as principal repayments. During the period 3 December 2006 to 3 May 2010 42 amounts totalling $93,225.69 were debited to the Trust’s bank account for interest accrued on the home loan.
[62] Mr and Mrs Burgess as trustees of the Trust also borrowed an additional
$100,000 from ASB in February 2007. That borrowing was also secured against Henwood Road. From March 2007 to May 2010 39 amounts totalling $9,145.92 were debited to the Trust’s bank account to pay the interest on the $100,000 overdraft facility.
[63] On the basis of that evidence and in the absence of any other explanation for the source of the moneys applied to the Trust bank account I am satisfied that moneys from the cash Mr Burgess received for the sale of gold to Regal Castings was applied to pay the deposit and to repay both principal and interest in relation to borrowings secured over the Henwood Road property. The evidence also discloses that cash was used to pay for substantial improvements to Henwood Road. Henwood Road is prima facie tainted property.
[64] Mr Kilian and Mr Deliu argued (on the basis that the deposit was not from criminal proceeds) that it could not be said Henwood Road was tainted property as being wholly or in part, “acquired” from the proceeds or that it was directly or indirectly derived from the proceeds. They argued that the paying down of the mortgage increased the Trust’s equity in the property but it did not follow that the property as a whole was tainted.
[65] However, in Duncan v Commissioner of Police the Court of Appeal took the view that in such circumstances the entire property is tainted. The Court referred to counsel’s submission that:13
[14] … the fact that profits from serious criminal offending had been used to defray the mortgage debt secured over otherwise lawfully obtained property could not have the effect of tainting the lawfully acquired assets, and could not authorise forfeiture of the property as tainted property.
[66] But went on to reject that argument in the following paragraph:
[18] We have already set out the definition of “tainted property”. We note here that para (a) of that definition refers to property that has “wholly or in part” been acquired or derived as set out in the paragraph. Andrews J found that, since 2005, funds for the mortgage payments were derived from “significant criminal activity”, a finding that is not now challenged. The
13 Duncan v Commissioner of Police [2013] NZCA 477, (2013) 26 CRNZ 796.
result of the mortgage reductions increased Mr Duncan's equity in the property by reducing the principal sum owed. His interest as the registered proprietor was thereby increased. It follows that his interest was in part derived from significant criminal activity, and an interest in the Bonnieglen Road property has in part been acquired as a result of significant criminal activity.
(footnote omitted).
[67] While acknowledging that the interest under discussion was the increase in equity through the mortgage principal reductions, the Court held that given the broad definition of property the consequence of the payments under the mortgage was that the property had been in part, directly or indirectly derived from significant criminal activity. Since the money used for that purpose was the result of significant criminal
activity that was sufficient to taint the property as a whole.14
[68] Alternatively the Court concluded that the entire property would be tainted by operation of (b) of the definition.15
[69] Miller J adopted a similar approach at first instance in Commissioner of
Police v Doorman:16
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 interests 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.
[70] The Court of Appeal approved that reasoning in the following paragraphs of the appeal judgment in that case:17
[31] The Judge noted that for the purposes of forfeiture it was sufficient if the property was derived in part from cannabis cultivation. He concluded that because it was derived in part in this way it was tainted and must be forfeited subject to the application for relief.
[32] On the factual findings, which are uncontested, Ms de Leon’s
interest in the property has been in part directly or indirectly derived from
14 At [21]–[22] and [27].
15 At [28].
16 Commissioner of Police v Doorman HC Nelson CIV-2010-442-169, 15 December 2011 at [36].
17 Doorman v Commissioner of New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173.
significant criminal activity. It is not possible in this factual situation for Ms de Leon to separate out her initial contribution from the later contributions that have increased her equity in the property.
[33] An alternative argument, although not run expressly for Ms de Leon, is that the words “acquired” and “derived” in the definition of tainted property are effectively synonyms, or at least do not encompass a reduction of the principal and/or interest under a mortgage.
[34] In a separate judgment we have upheld the decision of Andrews J in Commissioner of Police v Duncan and rejected a similar argument. It fails because of the width of the relevant definitions, in particular, that “property” is defined to include an interest and that “tainted property” includes property added to in part.
(footnotes omitted).
[71] As I have found that the mortgage payments (and for that matter other payments applied to the improvement of Henwood Road) were sourced from the proceeds of significant criminal activity Henwood Road is, therefore, tainted property on the basis of the authority of Doorman and Duncan. The extent by which the property was in part acquired from legitimate sources is only relevant to the consideration of relief against forfeiture.
[72] Mr Deliu sought to argue that this Court should not follow Doorman and Duncan on the basis that the provisions of the Land Transfer Act 1952 apply and that it is clear a mortgage does not operate as a transfer of the legal estate in the land. However, I accept Mr Johnstone’s submission that for present purposes the relevant definitions are those specific provisions of the Act, rather than the more general provisions in the Land Transfer Act. The Court of Appeal also addressed this issue
in Duncan,18 referring with approval to the decision of the Ontario Court of Appeal
in Ontario (Attorney General) v 1140 Aubin Road (Windsor) and the comments of the Ontario Court of Appeal that although the mortgagee maintains an equitable interest until the obligation is discharged, payments on the mortgage affect the respective rights of both mortgagor and mortgagee.19
[73] I also note on this point that importantly such an interpretation of the Act is consistent with its stated purposes set out at s 3(1) and 3(2).
18 At [23]–[27].
19 Ontario (Attorney General) v 1140 Aubin Road (Windsor) [2011] ONCA 363.
[74] Next, I have in any event rejected the implausible suggestions the deposit was funded by the sale of a Corvette motor car at the real estate agent’s suggestion. Therefore, as the deposit was funded from criminal proceeds, Henwood Road was to that extent acquired in part as a result of significant criminal activity.
[75] Also, to this point, consideration of the ongoing payments to the mortgage has been limited to the cash Ms Cairns was able to trace through the bank accounts. Importantly, there were significant sums of cash which Ms Cairns was not able to trace directly to the Trust bank account.
[76] In addition to paying the mortgage over Henwood Road Mr Burgess used the cash from Regal Castings to pay for improvements to the property. During his evidence Mr Burgess accepted that he used the proceeds from the sales of gold to Regal Castings to pay for renovations and improvements around the home at Henwood Road. I do not overlook that at points of his evidence Mr Burgess gave other explanations, for example, he went on to say that the sale of a vintage bike collection enabled him to carry out the improvements to Ms Brinsden’s home on the property which was formerly a garage and art studio but the overwhelming weight of evidence supports the finding that the improvements to Henwood Road were funded by the cash which came from the sales of stolen gold to Regal Castings.
[77] I am satisfied that the funds deposited to the Trust bank account that paid the mortgage and the cash Mr Burgess used to pay for renovations and improvements to Henwood Road came from the proceeds of significant criminal activity. While Ms Brinsden and her brother Mr Karl Burgess paid money towards the mortgage payments, the payments were supplemented by the proceeds of significant criminal activity. In addition the deposit was paid from criminal proceeds. Henwood Road is tainted property and, subject to the issue of relief, is liable for forfeiture.
Woodworking tools and antique pipes
[78] A 36 piece collection of woodworking tools and a 44 piece collection of antique pipes have been restrained. Mr Burgess says that he has been collecting the woodworking tools for 35 years, adding to the collection gradually as he locates further pieces. Similarly he has been collecting the pipes for around 20 years,
locating them at markets and auctions all over the world, including the USA, Germany and England.
[79] Apart from a general admission by Mr Burgess that he had been collecting the items over a long period of time and that in the five years leading up to when the police arrived in 2010 he would have been adding to the collections, there is no evidence to support the Commissioner’s submission that the pipe and woodworking tool collections were obtained from the proceeds of significant criminal activity. Both involve the collection of small items that could have been purchased in the usual course of Mr Burgess’ secondhand business or while he was overseas. Each individual purchase would not have involved significant sums of money. The Commissioner fails to satisfy the Court that the woodworking tools and antique pipes are tainted property.
Jewellery and other schedule items
[80] Detective Peat confirmed that the jewellery and other valuable items in the schedule to his affidavit were seized from the business premises of Rob’s Trading. They are the sort of items that a secondhand dealer would purchase as stock and trade during the course of the operation of their business. While a handful of the items have been claimed as stolen property following public advertisement, there has been no particular response or interest shown in the vast majority of the items. I accept there is some force in Mr Johnstone’s point that years later and after receiving insurance proceeds people may not be interested, but there is no evidence to suggest that the remaining items in the schedule are stolen items. The evidence shows that Rob’s Trading had sales of approximately $100,000 to $115,000 and $70,000 to
$80,000. The items on hand could represent legitimate stock on hand of the business. In the absence of further evidence in relation to these items I am not able to be satisfied that they were stolen or obtained from the proceeds of criminal activity. They are not to be forfeited as tainted property.
Tractor
[81] The tractor seized by the police was purchased in December 2008. To purchase it Mr and Mrs Burgess traded in a tractor they had previously purchased
through the Trust in 2007 (the “trade-in tractor”). The balance owing was financed
by John Deere Credit.
[82] The purchase of the trade-in tractor had originally been funded by a $10,000 cheque drawn on the Burgess Estate Trust in April 2007 with the balance funded through borrowing. After the $10,000 was drawn down the Trust’s bank account was consequently overdrawn to the extent of $33,959. Mr and Mrs Burgess have produced evidence that they sold tools to a value of approximately $25,000 at around this time and that the funds went into the Trust on 18 May 2007 to clear the overdraft. Given that evidence, I am not satisfied the Commissioner can establish that the tractor was acquired from the proceeds of crime.
[83] However, again the ongoing payments to John Deere Credit in relation to the tractor have come out of the Trust. The principal source of funding for that Trust are the proceeds of the stolen gold sold to Regal Castings. Applying the reasoning of Doorman and Duncan, the John Deere tractor is tainted property and subject to forfeiture.
Corvette
[84] The VedaAutoPlus record discloses the Corvette was purchased in, or at least transferred into, Mrs Burgess’ name on 18 March 2008. There is no explanation for the source of funds used to purchase the vehicle.
[85] The Corvette was initially ordered to be restrained but when the orders were served the respondents advised Detective Peat that they had sold the Corvette for
$30,000 after the execution of the search warrant on 21 April 2010 and before service of the restraining orders.
[86] However, further inquiries by Detective Peat led to him obtaining evidence of a telephone call between Mrs Burgess and the NZTA on 29 August 2014 which suggests Mrs Burgess claims ownership of the car. Mrs Burgess is recorded as saying:
Hi Kylee. I don’t know if I was talking to you earlier. Someone was going
to get back to me um .. about um .. my Corvette um .. E-C-Q-8-1-4. Um ..
I’ve just realised that its actually one year, one month from getting it registered and warranted cause normally I put it on hold... but for some reason they .. when I rung they said the billing was going to 32 Henwood Road Mangere East.
[87] The person advised Mrs Burgess that the car was registered and it would cost her $290.54 to have its licence reinstated. Mrs Burgess then said she would pay the fee and gave her visa card number in the name of L G Burgess for the payment to be made. The bank payment subsequently went through on 29 August 2014 to NZ Transport Agency.
[88] During the course of cross-examination Mrs Burgess advised that the Corvette was still at the Henwood Road property. Mrs Burgess said that it was going to be sold and the proposed seller had already paid a $5,000 deposit and the sale could not be completed as there was a hold on the vehicle.
[89] As noted there is no evidence how the purchase of the Corvette was funded. There is some evidence it was being stored by the people who Mrs Burgess said had agreed to purchase it but Mrs Burgess came and took it from their property. Mr and Mrs Burgess have given conflicting evidence about the Corvette. Mr Burgess has said he has no knowledge about who Mrs Burgess had sold the Corvette to. Mrs Burgess said she thought Mr Burgess had sold it but she did not know who had purchased it.
[90] The Burgess’ evidence concerning the purchase and their dealings with the Corvette is unsatisfactory. There being no other explanation for how the Burgesses, with their limited income at the time (in 2008), could fund the purchase of a $30,000 sports car, I infer it was purchased using the proceeds of significant criminal activity and is tainted property. The suggestion it has been sold is an artifice and an attempt to avoid its forfeiture. I note the “purchasers” have not sought relief from forfeiture.
The 2007 Harley Davidson
[91] The 2007 Harley Davidson (the Harley) is registered in Mr Burgess’ name. It was seized and restrained. On 1 December 2012 Mr Burgess paid $18,700 to purchase the Harley. That included $4,000 in cash. On 6 August 2014 the
registration of the Harley was changed into the name of Louise Brinsden, Mr and Mrs Burgess’ daughter. Ms Brinsden does not hold a motorcycle licence. Ms Brinsden’s evidence was that in August 2014 she sold her BMW car for $9,000 and used that money to buy the Harley off her parents in order to help her father with his lawyers’ fees. She paid $1,000 in cash and $8,000 by cheque to her parents for the Harley. When Detective Peat spoke to Ms Brinsden on 29 May 2015 and told her that the orders included the Harley he recorded her as saying that he could not have the Harley and that she would make matters as difficult as possible for the police.
[92] The evidence as to the source of the funds to purchase the Harley in the first place is limited. The email from the dealer says it was paid by $9,700 on visa,
$4,000 in cash and $5,000 by cheque. The bank accounts for the Trust however do not extend back to December 2012. It is impossible to tell where the $4,000 cash for the Harley came from or what cheque account the cheque was written on. I also note that the transaction occurred some years after Mr Burgess was charged and at a time when Mrs Burgess was operating a legitimate business. The Commissioner fails to satisfy the Court the 2007 Harley was purchased from proceeds of crime.
Undue hardship
Mr Burgess
[93] Although his notice of opposition does not address the point, I have considered whether there is any basis to exclude any of the assets from forfeiture on the grounds of undue hardship to Mr Burgess. The concept of undue hardship was discussed by the Court of Appeal in Lyall v Solicitor-General:20
There will always be some hardship to an offender and sometimes to a third party when a forfeiture order is made. It stems from the operation of the Act and is disregarded: …
[94] Although those comments were made in the context of the Proceeds of Crime
Act 1991 and in a situation where the property had been used to facilitate the
20 Lyall v Solicitor-General [1997] 2 NZLR 641 (CA), at 646.
offending, they have been confirmed in other cases by this Court in cases under the
Act: Commissioner of Police v Nelson and Commissioner of Police v Duncan.21
[95] The Court must consider whether forfeiture would result in a gross or severe disproportion between the offending and the value of the property sought to be forfeited. Whether or not undue hardship arises is a matter of fact and degree in each case, which will be informed by the purposes of the Act generally and the particular considerations under s 51.22
[96] In determining whether Mr Burgess would be reasonably likely to be caused undue hardship by forfeiture of Henwood Road the circumstances the Court may have regard to include:
(a) the use the property is usually put to;
(b) the nature and extent of Mr Burgess’ interest; and
(c) the circumstances of the significant criminal activity.
[97] The property is Mr and Mrs Burgess’ home (it also provides homes for Ms Brinsden and Mr Karl Burgess). That is a relevant factor, but as the authorities show, is not decisive.23
[98] Mr Burgess and Mrs Burgess are both registered proprietors. They hold Henwood Road as trustees. The evidence discloses that Mr and Mrs Burgess have effective control of the property, both in practical terms and in terms of s 58 of the Act. They are the settlors and trustees of the Trust and have the power of appointment of trustees. They can exercise the power to replace trustees without giving reasons. Through that they effectively control the Trust of which they are also beneficiaries. Henwood Road was purchased using the proceeds of properties that they had owned personally. While they completed documentation recording a loan
to the Trust, only $54,000 has been forgiven by them. I reject their evidence that
21 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010 at [73]; and
Commissioner of Police v Duncan HC Tauranga CIV-2010-470-933, 11 October 2011 at [144].
22 Duncan v Commissioner of Police above n 13, at [57]–[58].
23 Doorman v Commissioner of Police, above n 17, at [70].
they were effectively holding the property for Ms Brinsden and Mr Karl Burgess as well. While I accept the Trust is not a sham, given the extent of the control Mr and Mrs Burgess exercise over the administration of the Trust they have effective control over its only apparent asset, Henwood Road. They made the decision to purchase it, they make decisions as to its use and also as to the improvements to the property. Ms Brinsden and Mr Karl Burgess’ interest in Henwood Road can only be an indirect one as beneficiaries of the Trust which owns the property or on the basis of a claim
arising from the contributions they have made to the property.24
[99] The circumstances and extent of the significant criminal activity, are particularly relevant to whether Mr Burgess would be entitled to relief. The offending was extensive and carried out over a long period. The sum involved was substantial, in excess of $2 million. In addition, Henwood Road was used in relation to the offending in issue, albeit peripherally. The stolen jewellery was melted down in the crucible at the property, but the receiving itself took place elsewhere.
[100] The main factor in favour of some relief is that apart from the deposit, the balance of the Burgess’ contribution to the purchase, just over 60 per cent, was from the sale of their other properties and there is no evidence those properties were acquired from the proceeds of crime. Henwood Road was purchased for $1,050,000. Approximately 62 per cent of the equity contributed to its purchase was from the sale of the other properties. Mr Burgess’ half share of that contribution was approximately $325,000. If the property is forfeited, Mr Burgess will lose that sum together with the inflationary gains on it over the last 10 years.
[101] Despite that, on balance, in Mr Burgess’ case, given the extent of the offending, his controlling role in it, the substantial benefits he received from it and his deliberate application of its proceeds towards Henwood Road, I do not consider that it can be said to cause undue hardship to Mr Burgess to forfeit his interest in Henwood Road given the property was partially acquired and was then sustained and
substantially improved from the proceeds of his illegal activity.
24 Commissioner of Police v Winsor [2014] NZHC 161.
Mrs Burgess’ application for relief in relation to Henwood Road
[102] Mrs Burgess seeks relief against the forfeiture of Henwood Road. She does so under both ss 66 and 67. Mrs Burgess has unlawfully benefitted from the significant criminal activity to which the application relates. She lived in the property and has taken the benefit of that and of the improvements made to the property. She has done so in the knowledge that mortgage payments and improvements were made to the property from the proceeds of significant criminal activity. For the reasons given above, I am satisfied that Mrs Burgess was aware of Mr Burgess’ activities and indeed, on the balance of probabilities, there is proof to the civil standard she was prepared to engage in at least some of them. As she has knowingly and unlawfully benefitted from the significant criminal activity, she is precluded by s 66(1)(b) of the Act from relief under that section.
[103] Mrs Burgess also seeks relief under s 67. She has an interest in the property in that, like Mr Burgess as trustee, she has effective joint control of the property. Like Mr Burgess her half share in the “untainted equity” when the property was purchased was approximately $325,000.
[104] There are however two points of difference in Mrs Burgess’ case. The first is that I accept she may not have been aware of the full extent of Mr Burgess’ offending in terms of the full value and benefit obtained from the criminal proceeds.
[105] The second and more important consideration in Mrs Burgess’ case is her health and personal situation. Mrs Burgess gave evidence that she has had surgery in relation to cancer. She has lymphoma and is required to have an injection every three months to control matters. She is on medication. She has had four major invasive surgeries to deal with the cancer. At the age of 57 she has no particular qualifications and essentially works as a shop assistant.
[106] In Mrs Burgess’ case, the balance falls just in her favour. I am influenced by the significant contribution to Henwood Road from the sale of other properties legitimately acquired, and also her personal circumstances. I accept Mrs Burgess should have some relief from forfeiture in relation to her interest in Henwood Road. However the relief should be limited. Mrs Burgess should not benefit from the
maintenance and improvements to the property which were from the sale of stolen gold, and nor should she benefit from the inflationary increase in the value of the property, given that the property was sustained in part by the proceeds of criminal activity. In my assessment, a fair result is to grant relief to Mrs Burgess for half of the untainted contribution to the property but based on the 2007 valuation of $1.2 million and after deducting the borrowing. Most of the improvements funded by Mr Burgess’ illegal activity were carried out after that time. That leads to a figure for relief of approximately $372,000.
[107] It would not be undue hardship for either Mr Burgess or Mrs Burgess for the tractor or Corvette to be forfeited. They are chattels which have no particular significance.
Ms Brinsden’s position
[108] Ms Brinsden seeks relief in relation to:
(a) her claim to an interest in Henwood Road;
(b) $20,000 found in Mr Burgess’ safe at the property; and
(c) a 9 carat charm bracelet.
[109] Ms Brinsden claims relief under both s 66 and s 67.
[110] While there are grounds for suspicion as to the extent of Ms Brinsden’s knowledge of Mr Burgess’ activities, I am not satisfied on the balance of probabilities that she knew that Mr Burgess was involved in receiving, at least up until Mr Burgess’ arrest in April 2010. Since then Ms Brinsden has acted in a way which does her no credit at all, but the evidence does not go as far as establishing that prior to the arrest she knew of Mr Burgess’ offending.
[111] Ms Brinsden and her husband and child lived at Henwood Road since its purchase. Ms Brinsden has now separated from her husband. She and her former
husband bred bulldogs at the property. She remains at Henwood Road with her family.
[112] As I have found that Ms Brinsden was not aware of Mr Burgess’ offending, she cannot be said to have “unlawfully” benefitted from that activity, at least up until Mr Burgess’ arrest. She has not knowingly (or with wilful blindness) benefitted.25
Under s 66 the focus then becomes what her interest in the claimed property was
before Mr Burgess’ arrest on 21 April 2010.
[113] Ms Brinsden has an interest as beneficiary in the Trust but has no claim to a direct interest in Henwood Road through her status as beneficiary. Beneficiaries have no interest, legal or equitable in the assets of a trust.26 Further, I have found that her parents had effective control of Henwood Road. She has, however, on her evidence contributed money towards the property and its improvements. If made out, that would give her a claim and an interest in Henwood Road in particular on Lankow v Rose principles.27
[114] Ms Brinsden claims a direct interest in the Trust property, firstly on the basis that the proceeds of the house she had formerly occupied in part enabled the purchase of Henwood Road; second, on the basis that she has paid for improvements to Henwood Road.
[115] I reject Ms Brinsden’s evidence of a claim to the property on the basis that she says she contributed to its purchase. This appears to be very much a recent invention on her part.
[116] In her initial affidavit Ms Brinsden said that: “My parents had owned several properties”. She said her parents purchased a small home at Adriatic Avenue, Te Atatu for her and her daughter and she “paid $200 towards the mortgage per week” and that she and her husband then contributed to the mortgage of another property her parents had acquired at Falgrove Road. None of that suggests a claim the
properties at Adriatic Avenue or Falgrove Road were hers. The properties were
25 Commissioner of Police v Vincent [2016] NZHC 892.
26 Hunt v Muollo [2003] 2 NZLR 322 (CA); and Solicitor-General v Monk [2011] BCL 793 (HC).
27 Lankow v Rose [1995] 1 NZLR 277 (CA).
purchased by Mr and Mrs Burgess and in their name. Significantly the payments that Ms Brinsden identified she made in relation to those properties were recorded in her bank statements at the time as rent. It was only much later, (some time after July
2009) that the reference to rent was deleted.
[117] Ms Brinsden’s evidence on this issue was unconvincing and was also contradicted in part by Mr Burgess’ evidence. During cross-examination Mr Burgess accepted that the renovations and extension to Ms Brinsden’s home on the Henwood Road property, stage one, cost close to $100,000. Mr Burgess accepted that he funded that. Ms Brinsden sought to claim she had paid for the renovations and extension on the basis that she had “loaned” Mr Burgess $70,000 from the sale of Adriatic Avenue which he then used to purchase a boat. From that she sought to argue that Mr Burgess’ payment for the work to her home at Henwood Road was effectively a repayment of the $70,000. But as noted, she did not make that claim in her first affidavit and also, it is contradicted by her treatment of the mortgage payments on Adriatic Avenue as rent. Further Mr Parsons confirms that the $77,000 (approximately) surplus on the sale of Adriatic Avenue was paid to Dessen’s bank account on Mr and Mrs Burgess’ instructions.
[118] There was further work done on the property in 2010 but the building contract dated 20 February 2010 for work to a value of $84,842 is addressed to Rob, which I infer is Rob Burgess. It is not addressed to Ms Brinsden. Next, a significant part of the work was carried out after Mr Burgess’ arrest when Ms Brinsden knew of the allegations against him. Ms Brinsden accepted during the course of cross- examination that the carpet was bought after the police had arrived and after the property was restrained, as was the payment for electrical work.
[119] Ms Brinsden nevertheless maintained that she had paid for a range of improvements to Henwood Road herself and had contributed $39,600 of her own money to improving the home.
[120] Detective Peat’s investigations reveal that there were two payments of
$22,279 and $17,969 from the Trust account to Ms Brinsden’s accounts in June 2010
after the restraining orders had been served. That appears to have been an effort to
avoid the consequences of the restraint. Those sums closely approximate the
$39,600 she says she paid for improvements to the property.
[121] Ms Brinsden said she was due that money because the $20,000 cash she had set aside from the sales of bulldogs to pay for the renovations was in her father’s safe, which was seized, and she had to borrow $25,000 from the Trust to pay the accounts.
[122] Ms Brinsden’s evidence on this issue was also unsatisfactory. While she accepted in cross-examination that in 2010 Mr Burgess had paid the builder $25,000 in cash for improvements to the part of the property she was living in, when presented with a receipt which confirmed the builder had actually received $25,000 from her on 22 May 2010 she said the builder had given the cash back to her father and she had then passed the builder a cheque. That seems a rather strained explanation to justify the payments she had received from the Trust. It is extremely unlikely a builder having been paid in cash would have it to hand back and would accept a cheque in response. The transaction she suggests took place makes little sense.
[123] I do not accept Ms Brinsden’s evidence that she has personally contributed to the property by paying for the improvements from her own sources. The suggestion that the $20,000 cash in Mr Burgess’ safe was hers is also inconsistent with the fact that at the same time she had a $20,000 overdrawn account with Westpac. Her explanation that the $20,000 was hers, whereas the bank account was joint with her husband, does not sit with the evidence that at the time she and her husband were still together, and on his evidence, she controlled the bank account. Further her former husband used some of his superannuation to pay for a fence for the purposes of the bulldog breeding.
[124] Taken overall the evidence satisfies me that the improvements to the property which Ms Brindsen has enjoyed were primarily paid for by her father, Mr Burgess, and from the proceeds of his criminal activity. The only amount that she and her husband contributed is approximately $10,000 for the fencing work carried out around the property in relation to the bulldog breeding business. In the context of
the building overall that “improvement” is minimal. Further, and balanced against that, Ms Burgess has had the advantage of living in the property paying at most $300 a week towards the mortgage payments, which is less than an equivalent market rental.
[125] Ms Brinsden is not able to make out a claim to an interest in the property on constructive trust principles and is not entitled to relief under either s 66 or s 67. Given the lack of a claim to a recognisable interest in Henwood Road, it cannot be said that undue hardship will be caused to her if it is forfeited. While it is her home, she is effectively paying rental to live there. She could pay rent for another property.
[126] As noted, I do not accept Ms Brinsden’s evidence regarding the $20,000 in the safe. If it still exists it is to be forfeited. However, I accept the personal nature of the charm bracelet. If it has not already been returned to her it should be.
Karl Burgess’ position
[127] Mr Karl Burgess also lives at Henwood Road with his wife and two young children. He seeks relief under both ss 67 and 67 in relation to Henwood Road and also in relation to NZ$6,000 and US$1,000 found in his father’s safe.
[128] I accept that Mr Karl Burgess had no knowledge of his father’s offending
until his arrest in April 2010.
[129] Like Ms Brinsden, his claim to an interest in Henwood Road through the Trust is as a beneficiary of a trust and cannot succeed. That does not give him a direct interest in the property. He also claims an interest in the property on Lankow v Rose principles.
[130] Karl Burgess also says that forfeiture of his home would result in a massive undue hardship. He says he has expended a significant amount of time, money, stress and sweat to improve and renovate the home and has contributed to the mortgage. He says it is shocking that his parents’ decisions, which he had no knowledge of, have jeopardised his home and his family’s home. Mr Burgess gave
evidence that he contributes $1,120 a month towards payment of the mortgage at
Henwood Road.
[131] Prior to the purchase of Henwood Road Karl Burgess lived at 3/1 Tawa Avenue, Te Atatu Peninsula. That property was bought by and held in the name of Mr and Mrs Burgess. Karl Burgess says he contributed to the mortgage payments for that property. The Tawa Avenue property was sold, with the other properties owned by Mr and Mrs Burgess to enable the purchase of Henwood Road. He says in his affidavit he was given a right to occupy his part of the property at Henwood Road by the Trust. He confirmed that his parents paid the deposit for the flat at Tawa Avenue and that he met the mortgage payments. There is no basis for Karl Burgess to sustain a claim to Henwood Road based on the submission he contributed to its purchase. The first time he expressed any direct claim to an interest in Tawa Avenue was in his supplementary evidence-in-chief. I reject it.
[132] Karl Burgess said that once Henwood Road was purchased he paid $280 (in cash) a week towards the mortgage of Henwood Road. He says he gave his mother the cash for payment of the mortgage. The bank records are not entirely consistent with that. But even accepting he did pay $280 a week towards the mortgage, that is less than market rental for a family property.
[133] Mr Karl Burgess also says that since taking up residence at 32 Henwood Road he has carried out a number of improvements to the part of the property he and his family live on. A Totalspan shed was put on the property which he converted into two or three bedrooms, a bathroom, washhouse, lounge, and kitchen.
[134] He estimates he spent about 1200 hours of his time on it and also has receipts totalling $11,819.56 for materials recently used in improving his dwelling on the property in relation to doors, electrical work, awnings and other incidental materials.
[135] A significant amount of the contributions or payments he says he has made to the property were made after Mr Burgess’ arrest, in particular his claim for materials for $11,819. He is not entitled to relief in relation to the cost of those materials
incurred or the work carried out after his father’s arrest. An earlier invoice from
Awesome Awnings appears to have been paid for from the Trust bank account.
[136] Further, given his limited interest in the property it would not be undue hardship if it were forfeited. He can be compensated for his work on the property. He effectively pays a weekly rental to live there and can pay rent for another property.
[137] On balance, the evidence satisfies me that Mr Karl Burgess carried out work on the property to a value of approximately $42,000, being 1,200 hours at $35 an hour before he became aware of his father’s offending. Karl Burgess is entitled to have that interest recognised on Lankow v Rose principles. The work improved Henwood Road for the benefit of the Trust. Mr Karl Burgess could reasonably expect to share in the benefit of his work and the trustees should expect to yield a share. In the absence of better evidence, the value is fixed at his contributions.
[138] The evidence concerning the money found in Mr Burgess’ safe is equivocal. Karl Burgess says the US dollars were left over from an overseas holiday. The Commissioner notes that while Mr Karl Burgess went to the USA, it was some years ago. The sums involved are insignificant. Karl Burgess was not cross-examined about it. If the NZ$6,000 and US$1,000 is still restrained it is to be returned to Karl Burgess.
Profit forfeiture order
[139] The Commissioner also seeks a profit forfeiture order. The Court must make a profit forfeiture order if satisfied on the balance of probabilities that Mr and Mrs Burgess have unlawfully benefitted from significant criminal activity within the relevant period (which in this case goes back to 2003) and that Mr and Mrs Burgess have interests in the property. These requirements are satisfied. The value of the benefit determined in accordance with s 53 is $2,031,180.
[140] The maximum recoverable amount is to be determined in accordance with s 54. That requires the Court to deduct from the $2,031,180 the value of any property forfeited to the Crown as a result of the assets forfeiture order.
[141] In the present case, the property to be forfeited to the Crown is:
(a) Henwood Road (subject to the relief granted to Mrs Burgess of
$372,000 and the relief granted to Karl Burgess of $42,000); (b) the 2008 John Deere tractor and loader; and
(c) the 1980 Corvette, registration ELQ 814.
[142] As there are no current valuations for the property it is not possible, at this stage, to finalise the profit forfeiture order. Further, the property forfeited to the Crown is to be sold. The profit forfeiture order will have to be finalised, and the assets against which it is to operate identified (s 55(2)(c)) following sale of the forfeited items. For that reason this is a final judgment as to the asset forfeiture orders but can only be interim in relation to the profit forfeiture order.
[143] I have considered whether the Court should direct a valuation under s 54(2) and I do not overlook that counsel for Mrs Burgess submitted that Mrs Burgess be given an opportunity to make submissions on terms and conditions as to how any order could be enforced. However, given the delays to date in this process I consider it appropriate the asset forfeiture order be given effect to by the sale of Henwood Road (and the other assets directed to be forfeited). Mrs Burgess can bid at auction (if the property is marketed that way) or may make an offer if the Official Assignee decides on a private treaty sale.
Result/orders
Assets forfeiture order
[144] The following assets are subject to an assets forfeiture order and are to vest in the Crown absolutely and be in the custody and control of the Official Assignee:
(a) the Henwood Road property, subject to the relief granted to Mrs
Burgess of $372,000 and the relief granted to Mr Karl Burgess of
$42,000. Those sums are to be paid out to those parties from the sale of Henwood Road;
(b) the 2008 John Deere tractor and loader; (c) the 1980 Corvette, registration ELQ 814; (d) the $20,000 from the safe if it still exists.
Profit forfeiture order
[145] The Commissioner is entitled to a profit forfeiture order. The value of the benefit determined in accordance with s 53 is $2,031,180. However, the maximum recoverable amount is not able to be fixed until the property directed to be forfeited above has been sold. For that reason, this is an interim judgment in relation to the application for a profit forfeiture order. It will be finalised once the assets forfeiture order has been implemented. The application for a profit forfeiture order is formally adjourned on that basis with leave reserved to the Commissioner of Police to relist on one week’s notice.
Leave
[146] Leave is reserved if it is necessary to give effect to the implementation of the assets forfeiture order.
Costs
[147] Costs are reserved. The Commissioner of Police is to file submissions within
15 working days with other parties to respond 10 working days later.
Venning J
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