Commissioner of Police v Doorman HC Nelson Civ-2010-442-169

[2011] NZHC 2078

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2010-442-169

IN THE MATTER OF     an Application pursuant to the Criminal

Proceeds (Recovery) Act 2009

BETWEEN  THE COMMISSIONER, NEW ZEALAND POLICE

Applicant

ANDPAUL STEVEN DOORMAN First Respondent

ANDCATALINA GUINTO DE LEON Second Respondent

Hearing:         7 December 2011

Counsel:         J Webber for Applicant

S J Zindel for Respondents

Judgment:      15 December 2011

JUDGMENT OF MILLER J

Introduction

[1]      Before me is an application for forfeiture of assets and profits said to be derived  from  cannabis  cultivation  and  dealing.     The  application  is  opposed, essentially on the ground that the necessary connection to criminal activity has not been established, and an application has been made for relief against forfeiture on hardship grounds.

[2]      The assets forfeiture order concerns a property at 121 Clover Rd East, of which Ms de Leon is the registered proprietor.   It is the family home for her and

Mr Doorman and their two children.

THE COMMISSIONER, NEW ZEALAND POLICE V PAUL STEVEN DOORMAN HC NEL CIV-2010-442-

169 15 December 2011

[3]      The profits forfeiture order concerns an alleged benefit of $366,607.20 said to have been gained by both respondents from drug dealing.  The applicant wants the Clover Rd property realised to recover part of this sum.

Background

[4]      Mr Doorman met Ms de Leon in 2005.  He was discharged from bankruptcy on 7 January 2006, having been bankrupted three years earlier.

[5]      Ms de Leon purchased Clover Rd on 5 December 2006, paying $540,000 of which $390,000 was advanced by the Bank of New Zealand and secured by a first mortgage.  This became the family home when the transaction settled in February

2007. The original equity was $150,000, all of it contributed by Ms de Leon.

[6]      In 2009 the family moved to another property at 339 Redwood Valley Rd. They agreed to purchase it, executing an agreement for sale and purchase on a ―rent to buy‖ basis and paying a deposit of $99,000.  The balance is said to have been due on 31 October 2009.

[7]      On 10 September 2009 the police searched both properties.   At Redwood Valley Rd, where the couple had by then been living for a few months, they found a sophisticated shed purpose-built for growing cannabis.   It contained 193 plants. Mr Doorman admitted to erecting the shed and growing the plants but claimed that he only sold the cannabis in one-ounce lots to people with medical needs, charging

$50 an ounce rather than the $280 it would normally fetch.  He claimed to have sold only $1,500 worth.

[8]      At Clover Rd was found a shed which showed signs of having been used to grow cannabis, and another that had apparently been used to hang it for drying.  The average monthly power bill for the property for the preceding 12 months had been

$1368, a suspiciously high figure for normal domestic use.

[9]      Mr Doorman eventually admitted to growing cannabis at Clover Rd over a two-year period from 1 September 2007 to 1 June 2009.   He also pleaded guilty to

five other charges including two of cultivation, one of which was at Redwood Valley Rd between June and September 2009, two of sale, and one of possession for sale. The other cultivation charge concerned a third address, 600 Hill St South, Richmond, where he admitted growing cannabis between July 2005 and May 2009.   He was convicted and sentenced on 29 June 2010 to 12 months home detention and 150 hours community work.  Ms de Leon has never been charged.  Forfeiture was not pursued at the time of sentencing.

[10]     The Redwood Valley Rd agreement for sale and purchase has been cancelled, the respondents say because it turned out that Clover Rd was worth much less than they thought.  They deny that it had anything to do with the loss of Mr Doorman’s illicit income following his arrest.  They have forfeited the deposit.  The couple are again living with their children, who are aged 9 and 4, at Clover Rd.

[11]     The Crown moved for a restraining order against Clover Rd on 20 October

2009.  An examination of the respondents was conducted in June 2010 under s 106 of the Criminal Proceeds (Recovery) Act 2009.

[12]     It is the Crown case that Clover Rd is tainted property, in that it was acquired or derived in part from significant criminal activity, a term which is defined to include cannabis  growing,  during the relevant  period  of criminal  activity,  being seven years before the first Crown application for a restraining order.   The initial equity on the property was Ms de Leon’s, it is conceded, but the property is relationship property and the mortgage has been paid using Mr Doorman’s cannabis revenue.    The  couple  are  also  said  to  have  made  substantial  profits  from  drug dealing, evidenced by many cash deposits made by Mr Doorman to Ms de Leon’s bank account and the absence of any lawful means of support which might account for the income.   She is said to have benefited unlawfully in that she knowingly acquired a benefit from the cannabis growing and dealing.   An analysis of their income, including all lawful sources, and expenditure shows substantial unexplained cash income.

[13]     The respondents say that Clover Rd is worth far less than $590,000 and their equity is now only about $120,000, less than Ms de Leon originally put into the

place.  Her equity came from untainted property, her former home at 11 Burroughs Place, Stoke.  The period of Mr Doorman’s offending began after the property was purchased.   So the property was not derived from drug dealing.   Nor was Ms de Leon, the registered proprietor, ever charged with any offence.  They now deny some of the details of the admitted offending, including the places and the period of time involved, saying that Mr Doorman believed he had pleaded only to cultivation at Redwood Valley Rd.  Cannabis was grown at Redwood Valley Rd, but none of the proceeds were applied to the mortgage over Clover Rd.  They itemise many lawful transactions, such as loans, asset sales and salaries, which are said to account for much of the money which the police mistakenly consider to be the proceeds of crime.   Finally, they say that they are in dire straits financially and survive on a partial benefit.  Income from their video rental business is low, and they have rent arrears to pay.  Clover Rd is the family home.  In the circumstances they will suffer undue hardship from forfeiture, and they seek relief against it.

[14]     Affidavits were sworn  on both sides.   The respondents were both cross- examined, as was Detective Bell, one of several police witnesses.  He analysed the respondents’ financial dealings thoroughly, and his evidence was supported by that of a police financial analyst, Ms van der Pol, who prepared a source and disposition statement on which the forfeiture application rests.

The legislation

[15]     The  respective  applications  are  brought  under  the  Criminal  Proceeds (Recovery) Act 2009.  I will set out the relevant provisions.  Section 50 provides for an asset forfeiture order:

50       Making assets forfeiture order

(1)       If, on an application for an assets forfeiture order, the High Court is satisfied on the balance of probabilities that specific property is tainted property, the Court must make an assets forfeiture order in respect of that specific property.

(2)      Subsection (1) is subject to section 51.

(3)       The Court must specify in an assets forfeiture order the property to which the order applies and that the property—

(a)      vests in the Crown absolutely; and

(b)      is in the custody and control of the Official Assignee.

...

[16]     ―Tainted property‖ is a defined term:1

tainted property—

(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.

[17]   Significant criminal activity includes cannabis growing, which carries a maximum term longer than the five-year threshold on which the definition rests.  It is not necessary that the person engaging in the activity be convicted:

6        Meaning of significant criminal activity

(1)       In  this  Act,  unless  the  context  otherwise  requires,  significant criminal activity means an activity engaged in by a person that if proceeded   against   as   a   criminal   offence   would   amount   to offending—

(a)       that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or

(b)      from which property, proceeds, or benefits of a value of

$30,000 or more have, directly or indirectly, been acquired or derived.

(2)       A  person  is  undertaking  an  activity  of  the  kind  described  in subsection (1) whether or not—

(a)       the person has been charged with or convicted of an offence in connection with the activity; or

(b)       the person has been acquitted of an offence in connection with the activity; or

1   Section 5(1).

(c)       the person's conviction for an offence in connection with the activity has been quashed or set aside.

(3)       Any expenses or outgoings used in connection with an activity of the kind  described  in  subsection  (1)  must  be  disregarded  for  the purposes of calculating the value of any property, proceeds, or benefits under subsection (1)(b).

[18]     Section 55 allows the Court to make a profit forfeiture order:

55       Making profit forfeiture order

(1)       The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—

(a)      the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and

(b)      the respondent has interests in property. (2)         The order must specify—

(a)       the  value  of  the  benefit  determined  in  accordance  with section 53; and

(b)       the maximum recoverable amount determined in accordance with section 54; and

(c)       the property that is to be disposed of in accordance with section 83(1), being property in which the respondent has, or is treated as having, interests.

(3)       Subsections (1) and (2) are subject to section 56.

(4)       A profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it, and the maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.

[19]     An unlawful benefit is defined in s 7:

7Meaning  of  unlawfully  benefited  from  significant  criminal activity

In this Act, unless the context otherwise requires, a person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).

[20]     Where the applicant, the Commissioner of Police, proves on the balance of probabilities that the respondent has, in the relevant period of criminal activity, benefited unlawfully from significant criminal activity, the value of the unlawful benefit is deemed under s 53 to be that alleged in the application for profit forfeiture, but the respondent may rebut that presumption on the balance of probabilities:

53       Value of benefit presumed to be value in application

(1)       If the Commissioner proves, on the balance of probabilities, that the respondent has, in the relevant period of criminal activity, unlawfully benefited from significant criminal activity, the value of that benefit is presumed to be the value stated in—

(a)      the application under section 52(c); or

(b)      if the case requires, the amended application.

(2)       The presumption stated in subsection (1) may be rebutted by the respondent on the balance of probabilities.

[21]     As a matter of process, the Court must determine the maximum recoverable amount under s 54 before making a profit forfeiture order.  That is the value of the benefit calculated under s 53 less the value of any property forfeited to the Crown under an asset forfeiture order.   The Court may rely on or seek an independent valuation of such property for this purpose.

[22]     Relief against forfeiture is available under s 51 (for asset forfeiture) and s 56 (for assets to be realised under a profit forfeiture order) if the Court considers that in all the circumstances forfeiture is reasonably likely to cause the respondent undue hardship.   Relevant considerations include, in both cases, the use made of the property, the respondent’s interest in it, and the circumstances of the significant criminal activity to which the forfeiture relates.  I will quote s 51(2) only:

(2)      The circumstances the Court may have regard to under subsection

(1) include, without limitation,—

(a)       the use that is ordinarily made, or was intended to be made, of the property that is, or is proposed to be, the subject of the assets forfeiture order; and

(b)       the  nature  and  extent  of  the  respondent's  interest  in  the property; and

(c)      the  circumstances  of  the  significant  criminal  activity  to which the order relates.

[23]     The test of undue hardship was examined under former legislation in Lyall v Solicitor-General.2   There the Court of Appeal recognised that undue hardship must be assessed in light of the legislative policy that wrongdoers should be stripped of the proceeds of their crimes.   The Court conclude that so far as an offender is concerned, grossly disproportionate harm must be shown to justify relief.  I refer also to the leading authorities under the current Act, Commissioner of Police v Duncan

and Commissioner of Police v Nelson, in which the Court adopted the same test of hardship.3    Under the current Act close attention must be paid to the respondent’s involvement in the offending and interest in the property, and the interests of an innocent family member may justify relief.

The issues

[24]     I will address the issues in the following sequence:

(a)      Has the applicant proved on the balance of probabilities that the respondents benefited unlawfully from cannabis growing in the seven years preceding the application for a restraining order?

(b)Has the applicant shown that 121 Clover Rd East is tainted property, in that it was acquired or derived in part from cannabis cultivation?

(c)      If  the  answer  to  (a)  is  yes,  have  the  respondents  shown  that  the unlawful benefit alleged in the application is wrong, and if so what is the correct sum?

(d)What is the maximum recoverable amount under s 54, taking into account the value of 121 Clover Rd East?

2   Lyall v Solicitor-General [1997] 2 NZLR 641 (CA).

3   Commissioner  of  Police  v  Duncan  HC  Tauranga  CIV-2010-470-000933, 11  October  2011;

Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010.

(e)       Should the respondents have relief against forfeiture under ss 51 or

56?

[25]     This sequence differs from that implicitly adopted by the statute, which gives precedence to the asset forfeiture application, but the application for relief against forfeiture requires that an overview be taken.  For that reason, it is convenient to deal with the question and form of relief against forfeiture last, after I have assessed the amounts subject to forfeiture under both assets and profit forfeiture applications.

Have the respondents benefited unlawfully from cannabis cultivation?

[26]     Mr  Doorman  pleaded  guilty  to  cannabis  cultivation  at  three  properties, including Clover Rd, but he sought to resile from that admission in his affidavits and in oral evidence before me, claiming that he did not appreciate what he was doing and that the police threatened that they would take his children into state care and charge Ms de Leon.  His impressive cash income, he maintained, was all from lawful sources.

[27]     Never have I heard a witness lie less convincingly.  It seemed not to occur to him that judicial experience might have extinguished any native credulity in his listener.  His entries in a 2008 diary recording the planting, fertilising and harvesting of  named  cannabis  clones  at  Clover  Rd  he  put  down  to  disciplined  vegetable growing,  while  a  rogue  water  heater  explained  the  large  power  bills.     His explanations for the extraordinary sums that he deposited in cash into various bank accounts were no better.   He said that he buried a bucket of cash before he was bankrupted in January 2003, although he omitted to tell the Official Assignee about it when  he declared  no  assets.   The buried  bucket  was  said  to  contain the entire proceeds of a house sale.   He also earned large sums telemarketing for friends in Auckland whom he would not name because ―they’ve got wives and young kids and family‖; although this was said to be lawful activity relating to insurance and Aucklanders are believed to enjoy access to internet banking, they paid him by despatching bags of cash.   For good measure he further explained that he is a successful gambler, and that he sold a large and valuable cigarette lighter collection which he had similarly forgotten to mention to the Official Assignee. All of this cash

he banked in many separate transactions, using false names on the deposit slips by way of a little joke on Ms de Leon.  Enough.

[28]     I find that Mr Doorman was responsible for not one but three substantial cannabis growing operations which collectively extended over a period of not less than four years (2005-2009) and supplied him with his principal and eventually only source of income.   The scale of the operation is demonstrated by the operation at Redwood Valley Rd; sheds had been built and kitted out for indoor growing, and there were many plants growing.  His claim that he went to all that trouble to sell

$1500 worth of cannabis at a low price because, as a man of principle, he would sell only for medicinal purposes, merely confirms the absurd lengths to which he was prepared to go to deceive the Court.

[29]     Ms de Leon denied knowledge of Mr Doorman’s activities, saying she never entered the places where cannabis was being grown or, if she did, noticed only household goods that were in storage.  I did not believe her.  The operations were substantial, and they were carried on for a considerable time at properties where she lived.  She was in a relationship with Mr Doorman from 2005 and she lived with him for a time at Hill St South before the couple went to Clover Rd.   Given her own financial circumstances – she was made redundant from her job at Sealord in September 2007 and thereafter seems not to have worked – she cannot have been indifferent to the money which supported the family and paid the mortgage at Clover Rd.  She was no more able to explain those sources than was Mr Doorman; the most she could say was that she did not know where he got the money from.  I observe that she swore a joint affidavit which contained manifest untruths of the sort that Mr Doorman inflicted upon me in his oral evidence.  I am satisfied that she benefited knowingly from the cannabis cultivation.   It is immaterial that the police never charged her.

[30]     Both respondents admitted that Mr Doorman paid the mortgage on Clover Rd, but the applicant has shown on the balance of probabilities that they benefited from cannabis cultivation to a far greater extent than that.   The family relied for support upon his illicit cash income, which was very substantial as I explain below.

Is 121 Clover Rd East tainted property?

[31]     The applicant must prove on the balance of probabilities that the property is tainted.  That having been done, forfeiture must follow except to the extent that the application for relief is made out.

[32]     The applicant accepts that Ms de Leon’s untainted property was the source of the couple’s original equity but maintains that Clover Rd has become tainted because Mr Doorman’s drug money paid the interest and principal on the mortgage.

[33]     Mr  Zindel  did  not  dispute  that  property may  be  derived  indirectly from unlawful activity to the extent that such activity has met interest on a loan, although he urged me to focus on the principal reductions.   The principal secured by the mortgage was reduced over the period until 9 May 2011 from $390,000 to $319,000. Payments of principal and interest to the Bank during the review period, October

2007 to October 2009, totalled $112,038.48.   (The review period is the period for which the police have conducted a detailed financial review.)  The amount paid in cash into Ms de Leon’s mortgage account over the same period was $85,557.20.  It can be seen that most of the total payments to the Bank over the review period came from Mr Doorman’s cash deposits.  I am satisfied that the mortgage was routinely paid by Mr Doorman, using cash that he paid into Ms de Leon’s account.  That cash was substantially if not entirely derived from cannabis cultivation.

[34]     For purposes of forfeiture it is enough that the property was derived in part from cannabis cultivation.   I conclude that the property is  tainted and  must be forfeited to the Crown subject to the application for relief.

[35]     Thus far I have spoken of the property without isolating the respondents’ interest in it from that of the mortgagee, the Bank of New Zealand.  It is necessary to do so, for property once forfeit must vest in the Crown absolutely.4    The applicant does not seek forfeiture of the Bank’s interest as mortgagee.  That interest can be protected, because ―property‖  as defined in s  5 includes any interest  in real or personal property and the legislation admits the possibility of severing interests in

the same property.5   The property which the applicant wants forfeited is accordingly confined to the respondents’ interest in Clover Rd after repayment of the mortgage. Ms de Leon is the registered proprietor but Mr Doorman has an interest in it because it is the family home, and so relationship property.

[36]     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.

Have the respondents shown that the amount of the unlawful benefit stated in the amended application is wrong?

[37]     The applicant initially alleged that the amount of the unlawful benefit, being unexplained income, was $369,607.20, relying on an affidavit of Ms van de Pol. That has since been reduced by $3,000 to $366,607.20 in a supplementary affidavit and amended application.  It is said to be a benefit that accrued to both respondents jointly since it was the source of their income and not only paid the mortgage but also paid for assets that they enjoyed.

[38]     The source and disposition statement prepared by Ms van der Pol compared all known expenditure with all sources of funds over the review period, July 2005 to

10 September 2009 for Mr Doorman and September 2007 to 30 October 2009 for Ms de Leon.   It took into account the money that Ms de Leon and Mr Doorman received from legitimate sources, including the sale of her former property, wages, redundancy payments, child support payments from the father of Ms  de Leon’s eldest child, state-provided family assistance, TradeMe sales, and gambling income. Mr Zindel went to some effort in cross-examination to point to legitimate sources of income, but he was not able to persuade me that any were overlooked by the police

analysts.   On the contrary, a generous approach appears to have been taken, the explanations that were given in the interviews having been accepted in part even where there was no supporting evidence.   Some of the items he identified were outside the review period.

[39]     I observe that during the review period there were many cash deposits to bank accounts, often not much less than the $10,000 that would require the bank to report  an  individual  deposit.    $238,846.20  went  into  Ms  de  Leon’s  accounts (including the mortgage account) and $335,446.20 into Mr Doorman’s.  A further

$31,161 in cash was used to pay for vehicles and other substantial items.  I think it very unlikely that anything more than a small portion of this income was legitimate, and  I am  not  persuaded  that  the police have failed  to  recognise  any legitimate income.

[40]     I conclude that the respondents have failed to show that the amount of the unlawful benefit stated in the amended application, $366,607.20, is wrong.  I need not distinguish between the respondents for this purpose.   I am satisfied that the unlawful benefit was joint, in that the unlawful income that Mr Doorman earned funded  the  lifestyle  that  they  enjoyed  together  and  much  of  it  was  paid  into Ms de Leon’s bank accounts.   I note that ―benefit‖ is broadly defined to include proceeds and property.  If it were necessary to deal with the respondents separately, I would divide the unlawful benefit equally between them.

What is the maximum recoverable amount of unlawful benefit?

[41]     Section 17 admits the possibility of dual assets and profit forfeiture orders arising from the same criminal activity, and s 54 requires that I calculate the maximum recoverable amount by deducting from the unlawful benefit the value of any specific property forfeited  under an  assets  forfeiture order.   The  only such property is the respondents’ equity in Clover Rd.

[42]     It was common ground before me that the value of the land and buildings is now $445,000, the value having fallen since the property was purchased for two reasons; a general market decline and a revelation that some of the structures on the

property were erected without necessary building consents.  Mr Zindel advises that the amount due under the mortgage as at 13 December 2011 was $328,275.43.   I accordingly fix the respondents’ equity at $116,724.57.   That is the value of the interest being forfeited under the assets forfeiture order for purposes of s 54(1)(b).

[43]     It follows that the maximum recoverable amount for purposes of the profit forfeiture order is $249,482.63.

The profit forfeiture order

[44]     Under s 56 I must make a profit forfeiture order if I am satisfied on the balance of probabilities that the respondents have unlawfully benefited from significant criminal activity within the relevant period and that the respondents have interests in property.  Both of these requirements have been made out.  I have already given my reasons for finding that they benefited from cannabis growing and dealing, and their interests in property include not only Clover Rd but also other personal or real property including a video rental business at Wakefield and the associated lease of commercial premises, although none of that is specified in the Commissioner’s application.

[45]     The order must specify the value of the unlawful benefit for purposes of s 53 ($366,607.20) and the maximum recoverable amount under s 54 ($249,482.63).  But it must also specify ―the property that is to be disposed of‖ under s 83(1).   The legislature envisaged that a profit forfeiture order will result in the disposal, pursuant to s 83, of property in which the respondent has an interest but which is not tainted. Property that is not tainted cannot be reached under an assets forfeiture order.  In this case, however, the only property specified in the application for a profit forfeiture order is Clover Rd.  That has already been taken into account when calculating the maximum recoverable amount, so it cannot be specified in the profit forfeiture order. For purposes of s 55(2)(c), no property is to be specified in the profit forfeiture order.

[46]     In these circumstances, Mr Zindel contended, a profit forfeiture order cannot be made, for s 55 contemplates that property will always be realised under a profit forfeiture order.  That construction is open, I accept, having regard to the prerequisite

in  s  55(1)(b)  and  the  reference  to  ―the  property  that  is  to  be  disposed  of‖  in s 55(2)(c).    Section  52  also  prescribes  that  the  application  should  identify  the property in which the respondent holds interests.   But the better reading of the legislation, consistent with its purpose of confiscating unlawful benefits of any sort and reducing the rewards of crime, is that a profit forfeiture order can be made although no property is realised under the order.  The Act permits multiple forfeiture orders, and s 55 primarily establishes a debt recoverable as a result of civil proceedings.  Subsection (2) is designed to ensure that there is no double counting, in that the maximum recoverable amount, which is the amount subject to profit forfeiture, must exclude the value of any assets forfeited.   The section also contemplates that any property realised under s 83 might not suffice to meet the profit forfeiture order.

[47]     The Court has no discretion to adjust the amount recoverable under the profit forfeiture order.  The statute provides that the maximum recoverable amount is the sum recoverable as a debt to the Crown under the order.

Relief against forfeiture

[48]     The Court is able to grant relief against forfeiture under ss 51 and 56.  The respondents seek relief, primarily against the forfeiture of Clover Rd.  The general question is whether forfeiture is likely to cause the respondent undue hardship. When answering the question the Court may, without limitation, consider the criteria in s 51(2) and s 56(2), which deal with the use normally made of the property, the nature and  extent  of a  respondent’s  interest  in  it,  and  the circumstances  of the relevant significant criminal activity.

[49]     Mr Doorman cannot possibly succeed in an application for relief against forfeiture.   I have assumed that he has an interest in Clover Rd as relationship property, but his interest in the property and in the profits subject to forfeiture is entirely  attributable  to  drug  dealing.    I  accept  that  the  couple’s  income  from legitimate sources is modest, at about $400 net per week, and their video rental business is not doing well.  He will suffer hardship, along with Ms de Leon and the children, from losing the family home, and he points to a bad back and his age,

which he describes as mid-forties.  He appeals for relief that will preserve the family home, saying he is devoted to the family and needs something to live for.  But where a home is tainted property its forfeiture and resulting dependence on a benefit and state rental housing does not ordinarily work undue hardship on someone who knowingly participated in the relevant criminal activity.6

[50]     Ms de Leon presents a more difficult case.  She was convicted of no crime, and her untainted assets were the source of the original equity of $150,000 in Clover Rd.     Her  legitimate  income,  including  redundancy  payments,  contributed  to payments of principal and interest under the mortgage.  The property is tainted but the taint can be quantified only to the extent that $85,557.20 was paid in cash into her mortgage account during the review period and used to meet payments of interest and principal.  It is the family home and she will be left without assets if the property is forfeited.  For reasons explained below, it is not possible to grant her relief from the profit forfeiture order so she will be left owing a substantial debt to the Crown in any event.

[51]     Against that, Ms de Leon benefited very substantially from Mr Doorman’s activities, which I have found she knew about.  The amount of the unlawful benefit that she and Mr Doorman jointly gained was $366,607.20 over the review period. That far exceeds the couple’s present equity in Clover Rd.  The loss of her original equity in the property is also attributable to causes other than forfeiture; apart from her decision to make it relationship property, I have mentioned its building defects and the recent decline in property values.  Assuming she is entitled to a half share of relationship property, she would lose only $58,362 under an asset forfeiture order. That is far less than the amount of cash income that was paid into her bank accounts and far less than a half share of the unlawful benefit.  The property must be sold in any event to realise Mr Doorman’s interest in it.   Standing back, I am unable to accept that she will suffer undue hardship from the asset forfeiture order in the circumstances.  I note too that the Crown might elect to bankrupt her if she were left with any equity in Clover Rd, because she cannot be granted relief from the profit forfeiture order.

[52]     Mr Webber was prepared to contemplate that leniency might be extended to Ms de Leon in the form of relief against the profit forfeiture order so long as she was denied relief against forfeiture of Clover Rd.  The difficulty with this concession is that relief against forfeiture under s 56 is confined to assets to be disposed of under s

83(1) and there are no such assets in this case.  It is not possible to grant Ms de Leon relief against the profit forfeiture order in these circumstances.   I observe that, a profit forfeiture order having been made, the maximum recoverable amount is recoverable as a debt due to the Crown.7     The Crown may extend leniency by choosing not to pursue recovery of the debt against her.

Decision

[53]     The application for an asset forfeiture order is granted.   The respondents’ interest in the property at 121 Clover Rd East, after repayment of the registered mortgage, is forfeit.   That interest vests in the Crown absolutely and the entire property is henceforth in the custody and control of the Official Assignee.

[54]     The application for a profit forfeiture order is granted.   The value of the unlawful benefit calculated under s 53 is $366,607.20.  The maximum recoverable amount under s 54 is $249,482.63.  No property is to be disposed of under s 83(1).

[55]     The application for relief against forfeiture under ss 51 and 56 is dismissed. [56]     The respondents are legally aided. There will be no order as to costs.

Miller J

Solicitors:

Crown Solicitor’s Office, Nelson for Applicant

Zindels, Nelson for Respondents