Commissioner of Police v De Wys
[2018] NZHC 609
•6 April 2018
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2010-419-990
[2018] NZHC 609
BETWEEN COMMISSIONER OF POLICE
Applicant
AND
RONNIE JOSEPH DE WYS
First Respondent
PENELOPE HELEN LOUISA DE WYS
Second Respondent
Hearing: 20 November 2017 Counsel:
R Douch for Applicant
D J Taylor for Respondents
Judgment:
6 April 2018
JUDGMENT OF WHATA J
This judgment was delivered by me on 6 April 2017 at 12.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors: Crown Solicitor, Hamilton
Gavin Boot Law, Hamilton
COMMISSIONER OF POLICE v RONNIE JOSEPH DE WYS [2018] NZHC 609 [6 April 2018]
[1] Mr and Mrs de Wys managed a farm at Putaruru for many years until they purchased a property at Kihi Road in April 2008. In the period leading up to and following settlement of the Kihi Road property, numerous cash deposits were made into the de Wyses’ bank accounts. This came to the attention of the police. They suspected criminal activity. They were right. The de Wyses harvested a cannabis crop at the Putaruru farm.
[2] Applications were made in 2012 by the Commissioner of Police for asset and profit forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (CPRA). The applications were rejected by Faire J on the basis that there was insufficient evidence to support a finding of significant criminal activity. But the Court of Appeal was satisfied the de Wyses ran a commercial cannabis operation. The Court found Faire J failed to consider the combined weight of all the various strands of evidence. The Court was not, however, able to finally quantify the extent of the benefits obtained by the de Wyses from this operation and referred this aspect, together with an undue hardship claim, back to this Court.1
[3] It was and is common ground between the experts that the de Wyses enjoyed cash of $729,558.62 in the period 2003 to 2010 which cannot be explained by independent sources. It is also common ground that unexplained cash was used to purchase the Kihi Road property. I must therefore determine:
(a)The quantum of the unexplained cash derived from the cannabis operation; and
(b)Whether a profit forfeiture order would cause undue hardship to Mr and Mrs de Wys.
1 Commissioner of Police v de Wys [2016] NZCA 634 at [93].
The Commissioner’s claim
[4] The value of benefit obtained from significant criminal activity over the relevant period is presumed to be the value stated in the Commissioner’s application.2 The full sum of the unexplained cash, $729,558.62, is claimed.
[5] The de Wyses say, by way of rebuttal, that a large portion of the unexplained cash comes from various sources, including $230,000 in long term savings stored in a tin box and about $398,410 from, among other things, dumping fees, the sales of machinery, scrap metal and firewood. The evidence said to support the de Wyses’ rebuttal is threefold:
(a)The evidence of Mr Tinsley, a former detective, on the likely scale of the cannabis operation.
(b)Mr and Mrs de Wyses’ evidence of Mr de Wys’ tin box cash savings prior to 2000.
(c)Mr and Mrs de Wyses’ recollection of the cash income earnt by them from 2001 to 2008, recorded in a “red book” after the police commenced proceedings under the CPRA.
[6] I will address this evidence, together with the evidence given at the first hearing, below at [15]. Before doing so, it is necessary to explain the statutory framework in more detail.
Statutory framework
[7] Sections 53 to 56 of the CPRA provide for profit forfeiture where the Court is satisfied on the balance of probabilities that the respondent has unlawfully benefitted from significant criminal activity within the relevant period of criminal activity. In the present case, the relevant period commenced on 6 August 2003 and expired on 7 August 2010, being the seven-year period prior to the Commissioner’s application
2 Criminal Proceeds (Recovery) Act 2009, s 53.
for restraining orders over assets to which the profit forfeiture order will relate. The making of an order pursuant to s 55 potentially requires the Court to take five separate steps:3
(a)It must determine whether the Commissioner has proved, on the balance of probabilities, that the respondent has unlawfully benefited from significant criminal activity during the relevant period.
(b)If the Court is so satisfied, the value of that benefit is presumed to be one of the values prescribed by s 53(1). The respondent may, however, rebut that presumption on the balance of probabilities.
(c)The Court is required to determine the maximum recoverable amount. It does that by taking the value of the benefit and deducting from that figure the value of any property already forfeited to the Crown by any assets forfeiture order made in relation to the same criminal activity as that to which the profit forfeiture application relates.
(d)The Court must determine whether any property should be excluded from the operation of the profit forfeiture order because undue hardship is likely to be caused to the respondent if such property were realised.
(e)Once the Court has undertaken such of these exercises as may be relevant, it must make a profit forfeiture order under s 55(1) if it is satisfied on the balance of probabilities that the respondent has interests in property. Any such order must specify the value of the benefit, the maximum recoverable amount and the property that is to be disposed of.
[8] The first step has been completed by the Court of Appeal. The second step, the assessment of value of the benefit pursuant to s 53, is the ultimate issue in this
3 Lang J described this process in Pulman v Commissioner of Police HC Auckland CIV-2010-404- 5666, 27 May 2011 at [10]-[13] (footnotes omitted). He identified four steps. His first step included both (a) and (b).
proceeding. The approach to s 53 and its rationale have been stated by Gilbert J as follows (which I adopt):4
Once the Commissioner discharges the initial onus under s 53(1), the onus of proving the correct figure rests with the respondent under s 53(2) and does not pass back to the Commissioner. This interpretation serves the purposes of the forfeiture regime which include eliminating the chance for persons to profit from undertaking or being associated with significant criminal activity and deterring such activity. These objectives could be frustrated if the legislation was interpreted so as to require the Commissioner to prove the benefit in all cases where a respondent can establish some error in the Commissioner's assessment. The respondent will know what the benefit was and will have access to the witnesses and records that may be needed to prove this, whereas the Commissioner does not. I conclude that if the respondent fails to prove the benefit on the balance of probabilities, the amount stated in the Commissioner's application must stand, even if the correctness of the underlying assessment is questionable.
[9] The reverse onus placed on respondents to rebut the presumption at subs (1) is, as noted, on the balance of probabilities.
[10] The third step required by s 54 is essentially an arithmetic exercise, while the fourth step, invokes the jurisdiction to relieve from undue hardship. “Undue” connotes excessive or greater hardship than the circumstances warrant and therefore requires something more than the ordinary hardship arising because of the execution of the forfeiture order.5 As Hugh Williams J stated in Commissioner of Police v Nelson:6
[75] The statute requires much more than mere inconvenience or difficulty. Ms King needs to show that forfeiture of AQT455 would, for her, go well beyond those concepts and into privation to be regarded as excessive in the circumstances for her and her children. She has to show the hardship to her would be “grossly disproportionate” to the circumstances of acquisition of the vehicle or “extreme want of privation” to which is added the necessity that such privation must be “undue”.
Argument
Quantum of benefit
[11] Mr Taylor and Mr Douch are agreed the starting point for the assessment of quantum is $729,558.62, being the unexplained cash figure.
4 Commissioner of Police v Filer [2013] NZHC 3111 at [13].
5 Lyall v Solicitor-General [1997] 2 NZLR 641 (CA) at 646.
6 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010, at [75].
[12] Mr Taylor submits a deduction accounting for the cash in the tin box and legitimate earnings recorded in the red book is required. He points to Mr de Wys’ evidence that he had a sum of $230,000 in cash stored in a tin box prior to 2000. He submits this evidence was unchallenged at the hearing before Faire J and largely unchallenged by the Court of Appeal. In terms of the red book, he refers to earnings (excluding GST) in the period from 1 June 2001 to 31 May 2008 of $372,190.40 (the sum recorded in the red book less other amounts accounted for or accepted by police). This is the sum arrived at by Mr Parsons, who gave expert evidence for Mr and Mrs de Wys. He adds a further $47,189.59 is accounted for by various explanations given by Mr and Mrs de Wys, such that the net unexplained cash is in fact $310,178.63. But Mr Taylor also conceded in his closing submissions that the red book was “not satisfactory from the point of view of verification of those numbers”.
[13] Second, Mr Taylor seeks to discharge the onus by showing that Mr and Mrs de Wys could not have cultivated enough cannabis between 2003 and 2006 (the relevant period in which he says they were cultivating cannabis) to earn $729,558.62. For this purpose, he adopts Mr Tinsley’s evidence that the cannabis was cultivated between 2001 and 2006, as there is no evidence of cultivation in 2007 or subsequently. Mr Tinsley also gave evidence, outlined in detail below, that the likely value of the benefit of the cultivation between 2001 and 2006 is in the range of $250,000 to $325,000. Controlled for the relevant period, 6 August 2003 to 2006, he is of the opinion a reasonable range of benefit would be between $155,000 and $200,000. Based on this evidence, Mr Taylor submits the unexplained cash amount is out of proportion to the amount Mr and Mrs de Wys could in fact have earned from criminal activity during the relevant period.
Undue hardship
[14] The basis for undue hardship advanced by Mr Taylor is the fact Mr and Mrs de Wys will likely have to sell their home to pay the forfeiture order. But he accepts the question of disproportionality is only engaged if the forfeiture order is small. To elaborate, he submits if the order is only in the sum of tens of thousands, then it would be a disproportionate result for them to have to sell their home. But if it is a sum of
$200,000 or more, then the result would not be disproportionate because it would reflect that they paid for their house in large part through the proceeds of crime.
The evidence
[15] The Commissioner relied on various sources of evidence to prove the de Wyses were engaged in a cannabis operation. These were addressed at length by the Court of Appeal. For present purposes, it is sufficient to refer to:
(a)The evidence of Terry O’Brien: Mr O’Brien harvested the maize crop on the Putaruru farm on two to three occasions. He noted that usually there were three rows missing from the middle of the maize crop and in 2006, he saw a 30-40 metre strip of mature cannabis plants, at 2 metre intervals, at the same location. The Court of Appeal found the probative value of this evidence to be high.
(b)The evidence of Mr Edmeades: he purchased the Putaruru farm from Mr and Mrs de Wys. He found 30-40 plastic bins on the Putaruru farm in 2010.
(c)90 grams of cannabis remnants were found in the roof of the Putaruru farm house, laid out on newspapers dating back to 2001. The Court of Appeal accepted this indicated the roof cavity was used as a cannabis drying facility during the period of occupation by the de Wyses.
(d)The large quantum of unexplained cash.
[16]Based on this evidence the Court of Appeal concluded:
[67] In our view, taking into account all of the evidence we have outlined, it is significantly more likely that the cannabis drying area in the roof is attributable to the respondents than to the subsequent tenants. That likelihood increases further when this evidence is considered in the broader context of all of the circumstantial evidence in this case, including Mr O’Brien’s evidence and the respondents’ access to very large sums of unexplained cash throughout their later years of living at the Arapuni Road property.
[17] As to the unexplained cash, Ms Laura Clay gave evidence for the Commissioner and Mr Dennis Parson gave evidence for the de Wyses. As noted, they agree that the unexplained cash totals $729,558.62 in the period December 2004 to July 2010. Ms Clay also relevantly identified the linkage between cash earnings and the purchase of the Kihi Road property:
(a)37 structured unexplained cash deposits in the period 1 January 2008 - 1 April 2008, totalling $262,016, into one of the de Wyses’ bank accounts.
(b)An unexplained $20,000 cash deposit to the de Wyses’ solicitor.
(c)The further transfer of $55,000 to their solicitors from the above bank account.
(d)A payment of $195,500 from the bank account, together with a payment of $75,000 by the solicitors toward the purchase of the Kihi Road property.
[18] Mr and Mrs de Wys sought to explain that this “unexplained” cash derived from pre-2000 cash savings stored in a tin box and, among other things, sales of farm assets, dumping fees, firewood and scrap metal sales in the period 2000 to 2008 subsequently recorded in the red book. Helpfully, Mr Parsons, an expert for the de Wyses, provided a summary of the red book entries. He says that that work book reveals sources totalling $398,410:7
7 It would appear the items in this spreadsheet in fact sum to $397,910. The slight difference in Mr Parson’s total figure is immaterial.
Review Type $
Firewood Sales
31,700
Dumping Fees
30,000
Livestock Fees
98,550
Machinery Sales
94,500
Scrap Metal Sales
86,300
Other items
56,860
Total
$398,410
[19] This, together with other itemised income, is said to reduce the unexplained cash to $310,178.63.
[20] Under cross-examination, Mr de Wys accepted that in the period 20 December 2004 to 16 July 2010, he had access to more than $700,000 in cash that was not recorded in any accounts. He was also cross-examined at length as to the, in short, implausibility of his detailed entries over such a lengthy period. He admitted he was doing it from memory alone and he could not identify independent sources of the unexplained cash. He was also questioned about the tin box savings. It was put to him that his savings were down to $30,000 by Christmas 2007, which he accepted. He was also cross-examined on the mismatch between the red book earnings and the de Wyses’ cash expenditure in 2007-2008. Mr de Wys was unable to explain how his tin box savings could have increased to from $220,000 to about $320,000 to cover the unexplained cash flow.
[21] Mrs de Wys was also cross-examined on the red book entries and the tin box savings. She was unable to provide much by way of corroboration in relation to either, noting that Mr de Wys did not keep any records and the money in the tin had nothing to do with her.
[22]With the benefit of the foregoing evidence, the Court of Appeal observed:
[75] It is significant, in our view, that there is no paper trail to support any of the remaining items included in the unexplained cash figure. We accept that the respondents would not have kept detailed accounts, given that they were not paying tax on their cash income. Nevertheless, we would expect that cash businesses of the magnitude claimed would generate at least some documentation. For example, documentation was provided in relation to some machinery sales and credit was given for those sales. There is no documentation, however, in relation to the remaining machinery sales of almost $100,000. Mr de Wys deposed that this related to such things as farm machinery that he sold on the side of the road. Although it is possible that some machinery may have been sold on the side of the road, it is inherently implausible that almost $100,000 of it was. Further, one would expect at least some of the purchasers of machinery sold in this way to be local and therefore identifiable.
[76] To generate cash of the magnitude claimed, a very significant number of customers must have been involved, including those who paid livestock fees, purchased machinery, scrap metal or firewood, or paid to dump cars or other items on the farm. Not one such person provided corroborating evidence, however.
[77] The inherent implausibility of the sheer scale of some of the businesses is further illustrated by the claimed sale of $60,000 worth of scrap metal to “Santa Claus” in December 2007 (details of which are set out at [52] above). It is simply not credible that, over the space of a few weeks (at most), an individual who was completely unknown to the respondents and who did not even give them his name or that of his business paid them $60,000 in cash for scrap metal.
[23] The Court acknowledged the de Wyses clearly operated some legitimate cash businesses but they had already been given credit for that. The Court goes on to say:
[78] … the inevitable inference is that a very significant portion of it has been sourced from unlawful activity.
[24]The Court, however, did not reject outright the tin box evidence.
[25]It noted:
[81] The Commissioner did not dispute that Mr de Wys kept money hidden in a tin box under his house. Indeed, Mr de Wys’s evidence on this issue is inherently plausible, given the extent of cash savings (however sourced) that he kept outside the banking system. It is quite possible that Mr de Wys may have had a significant sum in the tin box by the year 2000. We are somewhat sceptical that that sum would have been as great as $230,000, particularly given that Mr de Wys had to incur the significant expense of purchasing the dairy herd from his parents only five years previously. For present purposes, however, we will err in Mr de Wys’s favour and assume that there was
$230,000 in the tin box by 2000.
[26]The Court nevertheless concluded:
[84] In conclusion, taking into account all of the strands of circumstantial evidence relied on by the Commissioner, we are satisfied that he has proved, on the balance of probabilities, that the respondents benefitted from significant criminal activity during the relevant period. As with most circumstantial cases, any one strand of evidence, considered in isolation, would not have been sufficient to prove the Commissioner's case to the requisite standard. However, all of the circumstantial evidence, when considered together, strongly supports the inference that from 6 August 2003, until they moved to the Kihi Road property in May 2008, the respondents were involved in (and benefitted from) cannabis cultivation and sale on a commercial scale. The proposition that they were the innocent victims of an implausible and unlikely series of coincidences linking them to various aspects of cannabis offending is simply untenable.
[85] Our conclusion is further supported by the remaining circumstantial evidence (albeit of somewhat less probative value) of cannabis cultivation and sale that was not analysed in detail above. This includes the note written by Mrs de Wys, the seedling containers found by Mr Edmeades (which could have been used to cultivate cannabis) and the black drum found at Kihi Road. Mr de Wys's claim that he stored a small amount of cannabis, for personal use, in the drum is not particularly credible. We also note his changing evidence as to the likely reasons why the drum tested positive for cannabis constituents, as set out at [42] above.
[27]I agree with these conclusions.
Mr Tinsley
[28] I turn now to the further evidence produced by Mr Taylor for this part of the proceeding.
[29] Mr Tinsley is a private investigator but he was previously a police officer, having served for 30 years. Mr Tinsley assessed the likely size of the cannabis operation. Based on evidence given at the first hearing, he assumed:
(a)The cultivation consisted of rows of cannabis plants 2.5 metres in height, planted at 2 metre intervals.
(b)The area cultivated in the paddock consisted of the middle three rows of maize being removed approximately 30 – 40 metres in length.
(c)The relevant period of cultivation occurred between 2003-2006 (that is between the start date for the application and last date cultivation was observed).
[30]He also observes:
(a)Fully mature cannabis plants will reach 2.4 metres in height and therefore it would suggest that the plants identified had reached full maturity.
(b)The price of cannabis can vary between areas and seasons but it has been his experience that a pound of cannabis will sell for between
$2,800 to $3,000 and an ounce will sell from between $180 to $250.
(c)The maximum plants grown per season would amount to 15 plants if the area of growing was in fact 30 metres in length or 20 plants if the area was 40 metres in length.
[31] Using these figures, multiplied by six, he assumes 90 to 120 plants would have been grown in the period 2001-2006. Allowing an average of 105 plants over six years, and assuming two-thirds of those are female, the number of plants would be 70 and at $3,000 per plant, would give a value of $210,000. If sold as ounces, it would yield about $280,000. Assuming the maximum number of plants at 120, then $3,000 each would give a value of $360,000. Using ounces, it would yield $480,000. He says, however, a high value of $360,000 is unlikely. He considers the lower bound to be unlikely as well.
[32] Accordingly, in his opinion, the likely value of the benefit of the criminal activity over the six-year period inclusive is in the range of $250,000 to $325,000. He also says if the benefit of the criminal activity prior to 6 August 2003 is not to be included in any profit forfeiture order, then all of 2001 and 2002 would be excluded and approximately four months of 2006 would be excluded as well. Therefore, apportioning the six-year figure over a three and two-thirds year basis, the number of plants would reduce from 70 to 43 but he proposes 45 to be a little more conservative.
On that basis, at $3,000 a plant, the lower bound would be $135,000 and the upper bound would be $225,000. He thus concludes the profit earned is unlikely to exceed
$200,000 and unlikely to be below $150,000.
[33] Under cross-examination he accepted there was a lot of room for variance about the price and that his assessment was dependent on several important assumptions, including the number of rows and the spacing between the plants. He accepted he could not be confident in putting a figure on the value of the cultivation. He also conceded that he did not consider the unexplained cash as part of his assessment and as an investigator he would have taken it into account.
Mrs de Wys
[34] Mrs de Wys was called to give further evidence. She details the extensive work undertaken on their Kihi Road property since purchase. She notes the Putaruru farm, when sold, was a top selling farm and that at about that time her parents offered
$300,000 as compensation for the work done on the farm, over and above the work that would normally be done by a share milking couple. This money, the money from the herd and the savings in the tin box represented their capital. She then lists the restrained items, values them at their purchase price and arrives at a total value of
$451,962.
[35] Mrs de Wys notes that the Kihi Road property represents her entire life’s work and savings. The farm is her main income. She has provided a breakdown of what they could afford to pay using the farm as security. Based on income levels, they estimate they would be able to borrow between $60,000 and $80,000. This may increase to $105,000 over time.
[36] She also refers to the voluntary disclosure (in the form of the red book) made in October 2010. She notes the position of the Inland Revenue Department is that they are awaiting the outcome of this case so that the amount of the profit forfeiture order can be deducted from the undisclosed income and before they undertake the investigation as to the amount of tax and interest that is owing. She says, in effect, the higher the profit forfeiture order, the lower the tax liability and vice versa.
[37] She also refers to the delay in making the application and the stress and anxiety the case has caused. She refers to Mr de Wys’ depression.
[38] Under cross-examination, she accepted that her analysis does not refer to the value of her primary asset, namely, the house, and that the object of the evidence was to show that the profit forfeiture order could be offset by the sale of those items. She accepted, however, that they were based on cost price, not on present value.
[39] She was cross-examined at length on money earned by Mr de Wys and she maintained that the cash came from cash sales and it did not come from illegal sources. A substantial shortfall (about $258,723.49) in cash income even considering the red book entries was highlighted to her together with the substantial increase in household cash spending over the same period. While she ultimately accepts that there was a significant amount of money available for their use, which is not explained by the red book, she maintained the Kihi Road property was purchased from lawful sources of income including the tin box savings and sales of their property.
Assessment of quantum of benefit
[40] I am not satisfied on the balance of probabilities the sum claimed by the Commissioner is rebutted by the case for the respondents. In summary, Mr Tinsley’s assessment does not provide a sufficiently reliable basis for assessing the size of the cannabis operation in the relevant period of criminal activity and the evidence of Mr and Mrs de Wys about the red book and the tin box savings is not reliable or credible. My expanded reasons now follow.
The size of the cannabis operation
[41] Mr Tinsley’s assesses the yield of the cannabis operation at $150,000 assuming:
(a)Three and two-thirds cultivation seasons;
(b)One row of cannabis plants of 30-40 metres in length at 2 metre intervals;
(c)Two-thirds of the plants are females;
(d)A yield of 45 plants; and
(e)A sale price of $3000 plant.
[42] There are substantial problems with this analysis. First, it relies on highly contestable assumptions, as Mr Tinsley quite properly conceded in cross-examination. Plausible adjustments to the spacing between the plants, the percentage of female plants, the number of seasons, the number and length of the rows and the price per pound or ounce of cannabis materially impact on the assessment of scale.
[43] To illustrate, if contrary to Mr Tinsley’s assumption, 100 per cent of the cultivated plants were female plants8 over six seasons commencing with the 2003 season (being the start point for the relevant period of criminal activity)9 up to and including the 2008 season (being the last possible season for cannabis cultivation),10 the number of plants available for cultivation increases from an assumed 45 plants to 120 plants. If then, a reasonable upper bound price of $5000 per pound for cannabis in 2004 is adopted, this would increase the assumed yield to $600,000. That number would increase substantially if further plausible adjustments are made to the intervals between the plantings, with a potential yield approximating to the sum claimed by the Commissioner.
[44] Furthermore, Mr Tinsley assumed one row of cannabis plants were grown per season. This is a conservative assumption. It may be inferred from Mr O’Brien’s evidence that there may have been more than one row of cannabis as his evidence refers to three rows of maize missing from the centre of the field.
[45] Second, Mr Tinsley did not factor the unexplained cash into his assessment. In so doing he made, with respect, the same error made by Faire J.11 He failed to see the
8 This a plausible assumption given the evidence of seedling production.
9 On the evidence, the harvest would have taken place prior to the start date of August 2003. But I accept Mr Douch’s submission that profits from the 2003 harvest may have been earned after this start date.
10 As stated by the Court of Appeal: Commissioner of Police v de Wys, above n 1, at [84].
11 At [21].
whole picture. An assessment of the scale of the operation needed to consider the quantum of the unexplained cash. Mr Tinsley also quite properly conceded this point in cross-examination. When that information is considered, it remains entirely plausible and, indeed, more likely that a much larger cannabis operation than that assessed by Mr Tinsley was undertaken by the de Wyses during the relevant period of criminal activity.
[46] Third, Mr Tinsley’s evidence is not corroborated by the respondents. They continue to deny any involvement in the offending. This is important because I am left to speculate on the scale of their operation and the amount earnt from it, both prior to and during the relevant period of criminal activity. As Mr Taylor submitted, the
$230,000 in the tin box might be explained, at least in part, by cannabis production in 2001-2002. But without the de Wyses’ admission to such cultivation and detailed evidence as to yield or their level of spending in that period, I cannot be satisfied that this potential explanation for the unexplained cash is more plausible than the one offered by the Commissioner, namely, that the relevant criminal activity generated profits in the order claimed by the Commissioner. For reasons I will shortly explain, this gap in the evidence is not filled by the red book or tin box evidence.
The red book and the tin box
[47] There are several factors undermining the credibility of the red book entries and the tin box savings. First, quantum and timing of the major unexplained cash deposits and expenditure appears to coincide with the period of proven cannabis cultivation, but not with the red book entries. Helpfully, Mr Douch produced a summary of the cash flow position, which was not challenged. It shows that between June 2005 and May 2008 the cash available to Mr and Mrs de Wys totalled
$535,673.49. For the same period, the red book entries leave a substantial shortfall of
$258,723.49 and if the earlier periods of red book earnings are included, there remains a shortfall of $137,762.49.
[48] Second, there is very little independent corroborative evidence supporting the “red book” entries or the “tin box” savings. Faire J noted:
[88] …. Mr Lane swore an affidavit in which he commented upon his visits to see his daughter, son-in-law and grandchildren over a substantial period at the Arapuni farm. He said he walked over the farm, saw the maize growing there and identified no cannabis plants growing on the property. Of importance, so far as the financial aspect is concerned, he confirmed his observations of the milling business, sale of firewood, the clearing of the land and other activities undertaken to improve the Kihi property.
[49] But there are more than 200 transactions spanning eight years listed in the red book, very few of which could be cross-checked against supporting documentation and none of which were verified by independent witnesses involved in these transactions.12 Furthermore, as the Court of Appeal also put it, the sheer scale of some of the unverified transactions is highly implausible.
[50] Third, the form and timing of the preparation of the red book undermines its evidential worth. It was prepared by Mr and Mrs de Wys based on their memory. Implausibly, specific dates for these transactions over a 10-year period are noted, even though there is very little contemporaneous documentation to support them. Further, the red book was drafted only after Mr and Mrs de Wys had been served with a copy of the restraining order application. The sum identified in the red book ($398,410) happens to nearly correspond with the sum claimed in that application ($380,000). This remarkable coincidence was not cogently explained by the de Wyses.
[51] Fourth, as Mr Douch submits, the explanations offered by Mr and Mrs de Wys for the unexplained cash lack credibility. Mr de Wys’ answers to simple questions about the source of the cash entries strongly suggest contrivance. The following passages of cross-examination are illustrative. The first example was highlighted by the Court of Appeal and is worthy of repetition:13
QFor your notation from 1 June 2007 through to 31 May 2008 you record that in December 2007 there was 300 tonnes of scrap metal at $200 a tonne, sold for a return of $60,000?
A Yeah I’m not too sure on that $200 a tonne because it wasn’t sold as a tonne.
Q $60,000 cash yes.
12 Mr de Wys’ long term friend Mr Dunstan who gave evidence he had purchased a number of items from Mr de Wys. These were removed from the overall unexplained cash figure.
13 Commissioner of Police v de Wys, above n 1, at [52].
A Yeah.
Q Who from?
A From the scrap man.
Q Who is he?
A I don’t know. I don’t know his name. All I know, all I thought, just known
him as Santa Claus.
[52] He was also cross-examined about a purchase of a saw mill purchased in 2007. The cross-examination refers to the fact he spent $139,470 in cash. Reference was made to the red book which records an income of $67,806 in cash. It was put to him that he was $70,000 short. This culminated in the following question:
Q How can it go up [the money in the tin which increased from $220,000 to
$320,000] when you’re spending more than you say you’re making in your
book?
A I don’t know that. I don’t understand that one.
…
QWell, Mr de Wys, there’s a fundamental difficulty here, that your spending over the period exceeded the cash you said you were making by $71,664. Where did that $71,000 which you spent over and above what’s in your book come from?
AWell that’s what I’m saying the book was – there would be more in the book, it’s not correct, it’s not bang on, there’s a lot more that should have been in there at time.
Q So how much more should Santa Claus have contributed? A I don’t know what you mean by that.
[53]The questioning continues:
Q You understand that it’s double what you recorded here? You see you spent
$140,000 and recorded $68,000?
AYeah, I don’t know what’s recorded cos I don’t read papers or do the recording so I don’t.
Q Well that means the books miles out isn’t it?
A I don’t know.
Q Mmm?
A I don’t know if it is.
…
QWell it can’t have because if it came out of other savings the amount in the tin box goes down, not increases from $220,000 to $320,000?
A Yeah I can’t, I don’t understand what you mean.
QWell there must have been another source of income between December ‘04 to May ‘07 to explain how you could spend $139,470 in cash over a period when your book says your cash was $67,802?
A Well obviously the book needs to have – is wrong, the books not –
Q The books wrong?
A Yeah the book, it’s just the memory not as strong as it’s on there.
[54] It is unnecessary to traverse the evidence said to support the existence of the unaccounted for income in further detail. Mr de Wys could provide only a small number of references to diary entries and other material that might support his recollection of the red book entries and even fewer in relation to the tin box savings. Furthermore, the striking impression gained from the cross-examination of both Mr and Mrs de Wys is that when pressed to provide evidence that might corroborate their evidence of this income, they quickly retreated into obfuscation and/or absent memory. I have referred to two examples concerning Mr de Wys above. A further illustration is provided by the cross-examination of Mrs de Wys about evidence of calf sales in the period 2001-2004. Mrs de Wys was questioned about the records supporting these sales but could provide none, even though she accepted that it was important to keep records of calf sales to manage, among other things, the spread of TB. She noted that she was careful to ensure her sales of calves were on the books, but that Mr de Wys’ sales were not on the books.
[55] Fifth, Mr and Mrs de Wys continue to deny their cannabis offending. For the reasons already explained by the Court of Appeal, the de Wyses’ ongoing denial of the offending is simply not sustainable. This bears on the credibility of their evidence and case overall. In reaching this view, I acknowledge that there are many reasons why people may lie, including in this case fear of criminal prosecution. But their ongoing untruthful denial about their cannabis operation has meant that their credibility or reliability on issues of quantum cannot be fully tested. That lack of transparency is a strong reason not to accept their explanation for the quantum of their profit.
[56] Sixth, turning to the tin savings, the Court of Appeal was prepared to give the de Wyses the benefit of the doubt about these savings. In my view, this was a very generous approach given the clear adverse credibility findings made by the Court on both the issue of whether the de Wyses were engaged in a significant criminal activity and the red book entries. The relevant evidence has not improved with time. I accept it is plausible that there were unaccounted for savings prior to the year 2000 and Mr de Wys was not directly challenged on the existence of tin box savings. But on my view of the evidence, the reference to the tin box savings in the order of $230,000, like the red book entries, appears contrived to fill a clear gap in the respondents’ case. In this regard, like the red book entries, there is no independent evidence corroborating the sources of the tin box savings. Indeed, there is sparse direct evidence on the source of these alleged savings. Notably also, the accounts given by the de Wyses about the tin box savings were also internally inconsistent. In evidence, Mr and Mrs de Wys claimed that the tin box savings were used to purchase the Kihi Road property in 2008, but Mr de Wys accepted under cross-examination that the tin box savings were spent by the end of 2007. Furthermore, the marked increase in cash flow from May 2005 to May 2008 (in the order of $500,000) is not consistent with the existence of untouched savings until the Kihi Road purchase. A more plausible explanation is that the profits from the cannabis operation were coming to fruition over this period and spent during this period and later.
[57] In reaching this view, I have not put any significance on the fact that the cash was said to be in new dollar bills as suggested by the police (a point made by the Commissioner in the first round of litigation). Rather, I simply find that there is no independent evidence to support a claim of $230,000 having been saved prior to 2000
and not expended until the Kihi Road purchase. It is simply an assertion made by persons who have been shown to lack any credibility on the key issues in these proceedings.
[58] Seventh, Faire J had a less favourable view of the Commissioner’s case and, conversely, a more favourable view of the evidence by the de Wyses. But he was not prepared to place weight on unexplained cash as bearing on the overall credibility of Mr and Mrs de Wys. As noted, the Court of Appeal took a different view. This is relevant not only on the issue of whether the de Wyses cultivated cannabis. It must bear on the broader credibility assessments made by Faire J about quantum and I am significantly more sceptical about the credibility of the de Wyses’ explanation for the otherwise unexplained cash deposits and cash expenditure in the relevant period.
[59] Overall therefore, I accept, as the Court of Appeal did, it is plausible that there was income from other sources prior to and during the relevant period of criminal activity. But, in the absence of any material that might corroborate the scale of that income, I can do no more than speculate as to what that income might have been. I am therefore not satisfied on the balance of probabilities the presumption in favour of the Commissioner’s assessment is rebutted by the evidence for the de Wyses.
Undue hardship
[60] As Mr Taylor properly conceded, in the absence of any material reduction in the quantum claimed, there can be no proper basis for a claim to undue hardship. However, for completeness, I acknowledge:
(a)Mr and Mrs de Wys have substantially improved the Kihi Road property through their efforts;
(b)There was a two-year delay before the application to restrain was made; and
(c)The loss of their home will be very distressing for them.
[61] However, the threshold test is undue hardship. The loss of assets derived from criminal activity is a natural, not undue consequence of that activity. As to improvements, these should be reflected in any uplift in the value of the property since the purchase, which will be payable to the respondents over and above the profit forfeiture figure. Furthermore, they have enjoyed the benefit of their home in the interim. These factors account for, in part at least, their efforts and their change in position pending the commencement of these proceedings.
Final quantification
[62] At the time of hearing there was no independent evidence as to the value of the restrained assets. I make a direction that this be undertaken at the respondents’ expense by an independent suitably qualified expert to be agreed between the parties. If agreement cannot be reached, the parties are to provide the name of an expert for my approval. The agreed or approved expert is to produce a report on the value of the assets, which is to be filed with the Court within 15 working days of instruction. Mr and Mrs de Wys are directed to provide access to the Kihi Road property for the valuation.
[63] At this stage I do not propose to make any further order, though a final profit forfeiture order, together with asset forfeiture orders, can be anticipated.
Costs
[64] Mr Taylor sought leave to file submissions on costs. My current view is that costs most follow the event on a 2B basis. Submissions may be filed, no longer than three pages in length.
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