Commissioner of Police v Burgess
[2015] NZHC 2026
•26 August 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-2893 [2015] NZHC 2026
UNDER The Criminal Proceeds (Recovery) Act
2009
BETWEEN
COMMISSIONER OF POLICE Applicant
AND
ROBIN ADRIAN BURGESS First Respondent
AND
LLANYS GWEN BURGESS Second Respondent
Hearing: 19 June 2015, 31 July 2015 Counsel:
DG Johnstone for the Applicant
CB Wilkinson-Smith for the First Respondant, F Deliu and P Finau for the Second Respondent, A Simperingham for Louise Annette Brinsden and Karl Robin Burgess
Judgment:
26 August 2015
JUDGMENT OF DUFFY J
This judgment was delivered by me on 26 August 2015 at 4.00 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Crown Solicitor, Auckland
Boyle Mathieson, Henderson
Woodward Chrisp, Gisborne
Counsel:
C Wilkinson-Smith, Auckland
F Deliu, Barrister, Auckland
COMMISSIONER OF POLICE v BURGESS [2015] NZHC 2026 [26 August 2015]
[1] There are a number of applications under the Criminal Proceeds (Recovery) Act 2009 (the Act) before the Court for determination. They are:
(a) An application by the second respondent, Mrs Burgess, for a discharge of the restraining orders in relation to certain restrained property;
(b) An order for cancellation of the living expenses allowance;
(c) An order correcting a consent order in regards to additional property to be covered by the restraining orders; and
(d) An application to sell certain restrained property.
[2] The Commissioner no longer pursues the application to sell certain restrained property. The application to correct consent orders adding additional property to the restrained property will be dealt with later. This leaves for determination the application to discharge certain restrained property and the order for cancellation of the living expenses allowance.
Discharge of restraining order in relation to certain restrained property
[3] The Commissioner has filed an application for an assets forfeiture order under s 50 of the Act and a profit forfeiture order under s 55 of the Act in respect of the respondents’ property.
[4] The Commissioner has obtained restraining orders against certain property of the respondents to preserve this property until such time as the application for the
forfeiture orders is determined.1
1 Under s 24 of the Act, a Court may make a restraining order related to specific property if satisfied it has reasonable grounds to believe that any property is tainted property. Under s 25, the Court can make an order relating to all or part of a respondent’s property if satisfied it has reasonable grounds to believe that the respondent has unlawfully benefitted from significant criminal activity.
[5] Mrs Burgess contends that the scope of the present restraining orders is too wide and that some of the restrained property should be released from restraint. The first respondent, Mr Burgess, supports her application.
[6] Obviously the Commissioner wants to ensure that sufficient property is restrained to enable him to obtain the full benefit of the profit forfeiture and assets forfeiture orders.
[7] The Act requires the Commissioner, when making an application for a profit forfeiture order, to state the value of the unlawful benefit that he contends the respondents have received from significant criminal activity.2 This then becomes the presumed value of the unlawful benefit,3 after which it is for the respondents to rebut
this value.4
[8] In the present case the application for the profit forfeiture order states the value of the unlawful benefit to be:
(a) “at least $2,031,180”; or
(b) another value the respondents prove in accordance with s 53(2) of the
Act.
[9] I have concerns about the way in which the Commissioner has stated the value of the unlawful benefit here. In my view what he has done fails to comply with s 52(c) of the Act. I consider it is not open to the Commissioner to describe the value as “at least $2,031.180”.
[10] Section 52(c) of the Act requires the Commissioner to “state the value of this benefit” Here the inclusion of the phrase “at least” makes the stated value open ended, which leaves it open for the Commissioner to seek to have more than
$2,301,180 forfeited. To me this does not fit with the scheme of the Act insofar as
the Act seeks to provide a means for establishing a maximum recoverable amount.
2 Criminal Proceeds (Recovery) Act 2009, s 52(c).
3 Section 53.
4 Section 53(2).
Pursuant to s 54 the Court must fix a maximum recoverable amount before making a profit forfeiture order. The Court takes the value of the unlawful benefit as determined in accordance with s 53 and then deducts from that the value of any property forfeited to the Crown as a result of an assets forfeiture order. The balance left constitutes the maximum recoverable amount. In this way s 54 imposes a limit on the value of the property that may be forfeited. However, this would not work if one set of values was open-ended.
[11] Secondly, s 53(1) provides that the value of the unlawful benefit is presumed to be the value stated in: (a) the application under s 52(c); or (b) if the case requires, the amended application. The presence of s 53(1)(b) signifies that if the Commissioner wants to have more than the stated value in his application treated as the presumed value, he must file an amended application. If he could nominate an open ended value under s 53(1)(a) there would be no need to provide for any amendment.
[12] Thirdly, profit forfeiture orders can have serious and significant adverse consequences for respondents. The respondents carry the burden of rebutting the presumption as to the stated value. In such circumstances I consider that when Parliament required the Commissioner to state a value in s 52(c) it did so in order to ensure that respondents were given full and proper notice of the presumed value so that they had a fair idea of the degree of property at risk. An application that merely states a minimum value would not provide respondents with sufficient notice.
[13] Finally, an open-ended presumed value makes it difficult for a Court to assess whether the scope of any restraining orders has been drawn too widely, as there is no finite limit on the presumed value. When it comes to the restrained property the preservation of that property should approximately equate to the presumed value of the unlawful benefit. If a restraining order is spread too widely, so that it impinges upon property that has no connection whatsoever to significant criminal activity, it will unduly constrain the respondents’ ability to use and enjoy their property and infringe upon the guarantee given by s 21 of the New Zealand Bill of Rights Act
1990.
[14] So, s 52(c) requires the Commissioner to state a finite value for a property forfeiture order. In the present case the use of the phrase “at least” leaves open the opportunity for the Commissioner to seek to have more than $2,301,180 forfeited, which does not fit with the scheme of the Act.
[15] I propose, therefore, to treat the presumed value of the unlawful benefits in this case as being capped at $2,031,180.
[16] The presently restrained items of property are:
(a) 1923 Model T Ford motor vehicle, registration BDE234; (b) 1997 Harley Davidson motorcycle, registration 92UNJ;
(c) Kiwi-Kraft 590 boat with 115 Yamaha motor on a 2005 Kiwi-Kraft trailer registration G803C;
(d) 2008 John Deere 3120 tractor and loader;
(e) 1994 Yamaha XJR motorcycle, registration 66TYJ; (f) Pramac petrol generator model ES800;
(g) Chattels seized by the Official Assignee on 21 May 2010, being the
34 piece collection of woodworking tools; and the collection of 43 antique pipes;
(h)All interests in the residential dwelling and land at 32 Henwood Road, Taupaki, Auckland, described in Certificate of Title 26D/613 as Lot 4 Deposited Plan 63277, other than the interest of ASB Bank Limited as mortgagor under registered mortgage 7103373.3 (32
Henwood Road);
(i) Cash found by Police on 21 April 2010 during the search of 32
Henwood Road being sums of NZ$47,420, AU$60, and US$2,942;
and
(j)The items listed in the schedule to the Commissioner’s application marked “A” (excluding any items released from restraint to be returned to legitimate owners).5
[17] Section 35 of the Act permits a Court to make further orders in relation to the restrained property, including varying the restrained property to which a restraining order relates.6 I consider the Court’s jurisdiction to vary the property subject to a restraining order to be analogous to the inherent jurisdiction of the Court to vary or to rescind interlocutory orders such as interim injunctions in the light of changing circumstances as justice requires.7
[18] In the present case the items in paragraph 16(a) to (h) are the subject of restraining orders made by consent on 9 June 2010. The cash in paragraph 16(i) was made subject to restraining orders following a hearing on 2 September 2010. Further orders were made in relation to the John Deere tractor and the items of jewellery in paragraph 16(j) by consent on 15 November 2010. Ordinarily an order made by
consent bars the parties from seeking review of the order.8 However, the Court has
inherent jurisdiction to set aside a consent order if the interests of justice require it, though good grounds must be established to warrant that course.9
[19] I have approached the application by Mrs Burgess for a discharge of the restraining orders in relation to certain restrained property on the basis that it is for her to satisfy me that there has been such a change of circumstance that the interests
of justice warrant the orders being varied in the way that she seeks.
5 These items came to a value of approximately $255,000 minus the released items.
6 See ss 33, 34 and 35 of the Act.
7 See Foodtown Supermarkets Ltd v Tse (1987) 2 PRNZ 545 (HC).
8 See High Court Rules, r 7.49.
9 Auckland Regional Services Trust v Lark [1994] 2 ERNZ 135 (CA); and Ryde Holdings v
Sorenson (1995) 8 PRNZ 339 (HC).
[20] The evidence that the Commissioner relies upon to establish the time frame of the significant criminal activity covers the period from 20 April 2006 until
15 April 2010.10 During the course of the hearing the Commissioner conceded that
items (a), (b), (c) and (e) were acquired by the respondents earlier than 20 April 2006 and accordingly they were not tainted property in terms of s 50 of the Act.11 He also conceded that the origin of item (f) was unknown which means it may also not be tainted property.
[21] No evidence that would establish that items (a), (b), (c) (e) and (f) were derived by way of an unlawful benefit from significant criminal activity that occurred before 20 April 2006 was drawn to my attention.
[22] In view of the Commissioner’s concession that items (a), (b), (c) and (e) were acquired before 20 April 2006 and the lack of evidence to prove the occurrence of significant criminal activity before 20 April 2006 I consider that those items also fall outside the scope of the application for a profit forfeiture order. Accordingly, I see no basis for the continued restraint of those items. I am satisfied therefore that the information now before the Court satisfies the test for varying the orders in relation to those items.
[23] Regarding item (f) I am satisfied that the absence of evidence on the origin of this asset warrants it being released from restraint. There is insufficient evidence to establish that it is tainted property. As regards being property subject to a forfeiture order I consider there is sufficient other property under restraint to ensure there is sufficient property to which a profit forfeiture order could attach. Again the test for varying the orders is met.
[24] Mrs Burgess did not oppose the continuation of the restraining order over item (h), 32 Henwood Road. Her case was that the value of this property alone was
10 See affidavit of Kylie Anne Cairns sworn 6 May 2015.
11 “Tainted property” is defined in s 5 of the Act as property that has, wholly or in part, been acquired as a result of significant criminal activity or directly or indirectly derived from significant criminal activity. Significant criminal activity is activity that, if proceeded against as a criminal offence would amount to offending punishable by a maximum term of imprisonment at 5 years or more or from which property, proceeds or benefits of a value of $30,000 or more have been acquired or derived.
sufficient to protect the Commissioner in terms of his ability to recover the presumed value of $2,031,180.
[25] In his notice of opposition Mr Burgess stated that the value of the criminal activity upon which he was convicted and sentenced was $250,000.12 However, under the Act a criminal conviction is not a prerequisite to obtaining a forfeiture order. It remains open to the Commissioner to argue that the value of the unlawful benefits from criminal activity and the value of the tainted property come to the
$2,031,180 that is stated in the application. I consider, therefore, that I must proceed on the basis of the value as stated by the Commissioner.
[26] In her affidavit dated 3 June 2015 Mrs Burgess provided the Court with appraisals from two real estate agents who were active in the West Auckland locality. The first appraisal, which was from Harveys estimated the sales potential of 32
Henwood Road to be in the range of $2.2 to $2.5 million. The other appraisal, which was from L J Hooker estimated a market value of $2,407,387. Both appraisals show the estimated market value to be within the same range. The property is described as being in a very good location, along with subdivisions, a new shopping centre and motorway extension, making it well sought after in a market which was described as “currently extremely heated.”
[27] There is a mortgage security registered against 32 Henwood Road. The current mortgage debt is $299,845.94 with an overdraft of $75,225.95. Thus the total secured indebtedness comes to $375,071.89.
[28] The three estimates provide an average value of $2,369,129. When the total secured indebtedness is deducted from that sum, the balance comes to $199,405.72. This figure is less than the Commissioner’s presumed value of $2,031,180.
[29] In her affidavit Mrs Burgess suggested that the value of 32 Henwood Road in itself is enough to cover the presumed value of $2,031,180 stated by the
12 This was filed to oppose the Commissioner’s application to extend the restraining orders to
additional assets.
Commissioner. But this would only be so if the highest estimate of $2.5m were to be relied upon.
[30] I consider the market appraisals by the real estate agents are reliable and do provide some sound guidance on the value of 32 Henwood Road. However, the estimates must be recognised for what they are; some room for error, the potential for market conditions to change and other factors that can influence realty values must be allowed for. I am not, therefore prepared to treat the estimated value of 32
Henwood Road as being sufficient to provide security for the forfeiture orders.
[31] Moreover, there may be other claims to 32 Henwood Road. Louise Annette Brinsden and Karl Robin Burgess are the adult children of the respondents. They intend to claim an interest in 32 Henwood Road. At present they have not filed sufficient information for me to be able to ascertain the extent of the interest they claim in this property or the strength of any such claim. Until more is known here, I consider that recognition of third party interests in 32 Henwood Road cannot be limited to the registered mortgagee.
[32] As regards the remaining restrained items, there is evidence to prove that item (d), the John Deere 3120 tractor and loader, was acquired within the time frame during which the significant criminal activity took place. Thus there remain reasonable grounds for this item being either tainted property or susceptible to a profit forfeiture order. Despite the age of some of the items in (g), (i) and (j) those items could well have been acquired sometime after 20 April 2006. I was shown no evidence that would prove a change of circumstance since those items were made subject to the restraining orders. Accordingly there is no basis for interfering with the orders relating to these items.
[33] Mrs Burgess argued that further evidence from Ms Cairns in her affidavit sworn on 6 May 2015 was hearsay and inadmissible. Ms Cairns is a financial analyst in the Northern Asset Recovery Unit, Finance Crime Group, New Zealand Police. I accept that Ms Cairns’ evidence is hearsay in the sense that she has provided an analysis of material which the police obtained through their criminal and civil investigations into the affairs of Mr and Mrs Burgess, without attaching that
material to her affidavit. Nonetheless, the restraining orders operate as interim orders to preserve the position until the application for forfeiture orders is determined. The High Court Rules relating to interlocutory applications are relevant here: particularly r 7.30 and r 19.10.13 These permit the Court to accept hearsay evidence when it is in the interests of justice. I consider that to be so here. It would be unduly onerous to require Ms Cairns to produce the source material on which she made her analysis.14
[34] In any event I have approached the remaining items of property to which I am satisfied the restraining order should still attach on the basis that Mrs Burgess has failed to satisfy me that circumstances have so changed since the making of the restraining orders that it is in the interests of justice that they be discharged. I have only relied upon Ms Cairns’ further affidavit for the purpose of identifying the starting and end points of the criminal activity as well as for attributing a value to the assets seized by police.
[35] Given the present uncertainty about the extent and strength of the claims made by the adult Burgess children I am not prepared to infer that any one or more of the remaining restrained items are superfluous. As matters stand the restraining order over 32 Henwood Road does not provide sufficient cover for the Commissioner, and until more is known about the value of the interest of Mr and Mrs Burgess in 32 Henwood Road I consider that the restraining orders should continue to cover the other restrained property as well.
[36] It follows that the following items are released from the current restraining orders:
(a) 1923 Model T Ford motor vehicle, registration BDE234;
(b) 1997 Harley Davidson motorcycle, registration 92UNJ;
13 See also Vincent v Commissioner of Police [2013] NZCA 412 at [45]-[47] where the Court used r 19.10 to apply rules relating to interlocutory applications in the context of restraining orders.
14 Also relevant are s 18 and s 20 of the Evidence Act 2006. Regarding s 18 I am satisfied that the circumstances surrounding the affidavit provide reasonable assurance the statements of Ms Cairns are reliable and that it would cause undue expense and delay to require the source material to be produced at the stage of considering restraining orders. Regarding s 20 I consider that r 7.30 and r 19.10 provide the basis for s 20 to operate here.
(c) Kiwi-Kraft 590 boat with 115 Yamaha motor on a 2005 Kiwi-Kraft trailer registration G803C;
(d) 1994 Yamaha XJR motorcycle, registration 66TYJ; (e) Pramac petrol generator model ES800;
[37] The other items in the application remain under restraint.
Cancellation and repayment of weekly allowance of $800
[38] Mrs Burgess is receiving an allowance of $800 per week (the living allowance) which was granted to her pursuant to s 28(1) of the Act. The Commissioner applied for orders cancelling the living allowance and requiring Mrs Burgess to repay monies that she had already received under this allowance.
[39] The application went so far as to require an order that all monies paid to Mrs Burgess for living expenses but utilised for legal expenses be repaid to the Official Assignee whether by Mrs Burgess and/or her legal services provider. The legal services provider was neither made a party to the proceeding nor named in the application. It is difficult to see how a Court could make an order against an unidentified person, let alone when such a person was not a party to the application before the Court.
[40] One of the orders that the Commissioner sought in this application was an order that Mrs Burgess had an arrangement for the purposes of directly or indirectly defeating, avoiding, preventing or impeding the operation of the Act. This language is taken from s 167 of the Act, which empowers the Court to declare void such arrangements. However, whilst an order to that effect was sought, the grounds in the application did not make any allegations that the living allowance that Mrs Burgess had obtained from the Court formed part of, or was derived from, such an arrangement.
[41] The case that the Commissioner advanced in his submissions for cancellation of the living allowance and for past payments to be repaid to the Official Assignee
was based on the view that when Mrs Burgess applied to the Court for the living allowance she did so with the purpose of defeating the prohibition in the Act that prohibits the Court from allowing legal expenses to be met out of a respondent’s restrained property. This prohibition is to be found in s 28, which provides as follows:
(1) A court may make a restraining order subject to any conditions the court thinks fit including, without limitation, conditions that provide for the following to be met out of a respondent’s restrained property:
(a) the reasonable living costs of the respondent and any of his or her dependants:
(b) the reasonable business expenses of the respondent:
(c) the payment of any specified debt incurred by the respondent in good faith:
(d) any other expenses allowed by the court.
(2) Despite subsection (1)(d), a court may not allow any legal expenses
to be met out of a respondent’s restrained property.
(3) In determining whether or not to make a restraining order subject to a condition, the court must have regard to the ability of a respondent to meet the reasonable living costs, expenses, or debt concerned out of property that is not restrained property.
[42] Section 28(2) expressly prohibits a Court from allowing any legal expenses to be met out of a respondent’s restrained property. However, the reference in s 28(2) to s 28(1)(d) shows that the prohibition in s 28(2) is to be read in the context of subs
1(d), which enables a Court to make orders permitting release of restrained funds for any other expenses allowed by the Court. When read in this way it is clear that Parliament intended s 28(2) to be no more than an express fetter on the otherwise general power in s 28(1)(d) to award other expenses. This is different from a blanket prohibition against a living allowance being used to meet legal expenses.
[43] For the Commissioner to advance his case successfully he would need to establish that the effect of s 28(1) and (2) was to impose a general prohibition on the recipient from using a living allowance to meet legal expenses. In the course of hearing argument from the Commissioner on this subject he, in my view, responsibly and properly conceded the following:
If you obtain a living expenses order validly and in good faith and in a way that does not mislead the Court as to the existence of funds being held to pay legal expenses you do not later breach s 28 if you then use funds from that order to pay legal expenses.
[44] Thus the Commissioner accepted that if a living allowance were properly obtained there could be no complaint later if subsequently some of the funds advanced as part of that allowance were in fact used to meet legal expenses. I consider this must be right. The prohibition in s 28(2) is directed solely at the Court. As stated earlier, its intent is to qualify and restrict the general power in s 28(1)(d) for the Court to make orders allowing “other expenses” to be met. Once an order is made and the funds paid to a recipient, I consider that at the time the funds are received and go into the recipient’s general bank account they lose the character of being restrained property. Indeed, the order for the release of those funds takes them out of the definition of restrained property.
[45] Moreover, once the living allowance was deposited into the bank account those funds become pooled with other funds in the account. Accordingly they were no longer identifiable as funds from restrained property.
[46] During the course of the hearing an argument arose as to whether the present application by the Commissioner went so far as to allow the Commissioner to challenge whether the present orders under which the living expenses were being paid were honestly obtained. The Commissioner argued that any failure on the part of Mrs Burgess to inform the Court making orders under s 28(1) that she had unrestrained property available to her out of which she intended to pay legal fees amounted to her misrepresenting her circumstances to the Court. The Commissioner argued that this would amount to a dishonest misrepresentation. During the hearing I ruled that the present application did not permit the Commissioner to run his case in
that way.15 I found that the form of the present application restricted the
Commissioner to focusing on how the living allowance, once received, had been used.
15 Commissioner of Police v Burgess HC Auckland CIV-2010-404-2893, 31 July 2015, ruling on the cross-examination of Mrs Burgess.
[47] The Act does not prohibit someone who honestly obtains a living allowance from subsequently using part or all of that allowance to meet legal expenses. The Commissioner acknowledged as much. It follows that the application for cancellation and repayment of the living allowance must fail, and accordingly it is dismissed.
[48] For completeness I note that the evidence that Mrs Burgess gave regarding how the living allowance was used also supported her opposition to this application.
[49] Statements of Mrs Burgess’s bank accounts show that she used approximately
$13,000 of the living allowance to pay legal expenses. On the other hand, the bank statements show that other monies have been used for general household expenses, and there were some deposits that were from sources other than the living expense allowance.
[50] Mrs Burgess’s evidence is that there was unrestrained property available to her that she sold for cash sums. She intended to keep this cash to meet legal expenses. For example, she said that she received $15,000 in cash from the sale of six elephant tusks. She has a serious illness. At a time when she was unwell, her daughter, who has access to Mrs Burgess’s internet banking and bank cards, paid legal fees from her bank account using internet banking. Mrs Burgess said that the use of the funds in the bank (which included the deposits of the living allowance) to meet legal expenses meant that the cash that was being kept to meet those expenses was then used to meet living expenses. She described this argument as “robbing Peter to pay Paul”.
Result
[51] The application by Mrs Burgess for a discharge of the restraining orders is partially successful. The property identified at [32] herein is discharged from restraint. The balance of the property subject to restraint remains so.
[52] The application by the Commissioner for cancellation and repayment of the living allowance is dismissed.
[53] Leave is reserved to the parties to file memoranda on costs.
4