Commissioner of Police v Dryland
[2013] NZCA 247
•20 June 2013 at 11 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA619/2012 [2013] NZCA 247 |
| BETWEEN | COMMISSIONER OF POLICE |
| AND | TIMOTHY ROSS DRYLAND |
| Hearing: | 21 May 2013 |
Court: | Arnold, Harrison and Rodney Hansen JJ |
Counsel: | D G Johnstone for Appellant |
Judgment: | 20 June 2013 at 11 am |
JUDGMENT OF THE COURT
AThe appeal is allowed. The order made in the High Court is set aside and the sum of $104,620 is vested in the Crown absolutely and is to be under the Official Assignee’s custody and control.
BThe respondent is to pay the Commissioner costs on a band A basis for a standard appeal together with usual disbursements.
CThe application for leave to adduce further evidence is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Harrison J)
Introduction
One afternoon in 2010 police officers located Timothy Dryland, the respondent, in a rural valley on the Coromandel Penninsula. On searching his vehicle they found and seized more than $100,000 in cash. The police believed that the money was associated with Mr Dryland’s participation in the manufacturing or sale of methamphetamine. The Commissioner of Police, the appellant, applied to the High Court for an order under the Criminal Proceeds (Recovery) Act 2009 forfeiting the cash. He alleged that it was tainted property which had been wholly or partly acquired as a result of or derived from significant criminal activity.
Gilbert J dismissed the application.[1] The Commissioner appeals against the judgment on the grounds that the Judge erred in fact and law.
[1]Commissioner of Police v Dryland HC Auckland CIV-2012-419-242, 30 August 2012.
The Commissioner also applies for leave to adduce new evidence in this Court about the circumstances of Mr Dryland’s recent arrest on charges relating to manufacturing methamphetamine.
Facts
The relevant facts are not in material dispute.
On 15 April 2010 members of the public complained to the police about a Holden motor vehicle being driven erratically on a motorway near Thames. Mr Dryland was the driver. Just after midday police officers located him and his car along a gravel track in the bush north of Thames. Mr Dryland was removing items from the boot of the vehicle and placing them into a backpack. Police observed a large knife in the backpack. After carrying out a search, the officers found four more knives inside the car and two more knives and a plastic Billabong bag in the boot.
The Billabong bag was concealed under the spare wheel in the boot. It contained nine vacuum sealed plastic packages of $50 and $20 notes. They had been divided into bundles of $5,000 and $10,000. The total amount of cash was $104,620. The outside of the packages were noted with the numbers “5” and “10”, apparently referring to the amounts inside. All packages had been vacuum sealed using a heat sealing machine. A plastic snap lock bag smelling strongly of cannabis was also found under the spare wheel.
Mr Dryland was then 30 years of age. He had for some years intermittently operated a firewood selling business from his mother’s rural property in Waikato. He had a lengthy criminal history. In 1997 and 2009 he was convicted of cultivating cannabis. In 2009 he was found in possession of broken glass methamphetamine pipes, leading to his conviction in June 2010.
The police carried out further searches of Mr Dryland’s vehicle after it was impounded at the Thames Police Station. An officer found three SIM cards for use in a mobile phone within another backpack inside the vehicle. A detective, Leah Shallcrass, swore an affidavit in support of the Commissioner’s application for a forfeiture order. Her uncontested evidence was that it was not uncommon for those involved in drug dealing activities to conduct their trade by using multiple SIM cards. In this way, dealers are able to use one phone hand piece for a range of purposes. For example, one SIM card could be used for communicating with family and friends. Another card may be more anonymous for the specific purpose of communicating with others about criminal activities.
Later that day Constable Bowman interviewed Mr Dryland. He denied that the cash was “drug money”. His explanation for its presence was that:
I was going to make a cash offer on a property and on past experience people buckle at the knees and you get things cheaper for cash.
Later, in the course of this brief interview, Mr Dryland told Constable Bowman that:
I’ve come off recovering from a motor bike accident, I’m just starting back out, self employed doing milling.
Mr Dryland said the backpack found in the boot belonged to a friend called “Sam” who placed the item there about three or four days previously.
Following the interview, Mr Dryland asked for permission to phone an associate to collect his vehicle from the police station. While retrieving a mobile phone from the car for Mr Dryland’s use, an officer heard the ring of an incoming call. It was from a phone number subscribed to an address in Hamilton which was then occupied by Brett Anderson and Loretta Burt. Both had criminal histories. The officer noted that Mr Dryland’s phone had registered 23 missed calls from the number.
In October 2009 the police had undertaken a covert operation into alleged drug dealing activities in the Waikato area. Information obtained led the police to Mr Anderson and Ms Burt. Based on evidence available from communications intercepted during the operation, Ms Burt was convicted in 2009 for selling methamphetamine and importing pseudoephedrine; Mr Anderson was convicted in 2011 of manufacturing and selling methamphetamine. Both were sentenced to terms of imprisonment.
In communications intercepted in August and September 2009, Mr Anderson and Ms Burt referred frequently to “Tim”. Among other things, they discussed “... buy[ing] some off him”, and seeing Tim “... cause he’s keen to do the deal” as “he’s got it on him” and has “got the wickedness as well”. Under cross-examination at the hearing in the High Court, Mr Dryland acknowledged that he was the “Tim” being referred to.
Following his arrest on 15 April 2010, Mr Dryland was convicted on a charge of dangerous driving and sentenced to community work and disqualified from driving. A charge of possessing offensive weapons was laid but later withdrawn.
Examination
In March 2011 Detective Shallcrass and another police officer examined Mr Dryland at the Hamilton Central Police Station in accordance with orders made in the High Court. These are the salient points to emerge from the interview:
(a)Mr Dryland said that when apprehended by the police on 15 April 2010 he was going to buy some land. His friend “Wally” had told him of a property on the Coromandel Peninsula which had a disused milling site and timber on it. His friend “Wally” was Wally Brougon who had committed suicide on 13 March 2010. And police enquiries revealed that the property identified by Mr Dryland was not in fact for sale.
(b)Mr Dryland repeated his denial that the cash of $104,620 found in his car had come from the sale of drugs. He said that he had saved it all from years of selling firewood and capital items. He had recovered the cash from under a house in Hamilton where it had been stored and he had vacuum packed it in sealed bags to protect it against moisture damage. He produced some records to verify the source of some of the money.
(c)Mr Dryland said he purchased the Holden Commodore from Mr Brougon for $9,000 cash a week before being stopped by the police. As noted, Mr Brougon had died a month previously. His partner, who had been living with Mr Brougon for five years before his death, said that Mr Brougon had never owned the vehicle.
(d)Mr Dryland claimed that he received $45,000 in cash from selling a sawmill to a “part-Maori guy” in Rotorua in October 2009. He had issued a receipt for the sale but it had been stolen along with many other records from his vehicle in November 2010. Police enquiries undertaken in Rotorua were unable to ascertain the purchaser’s identity.
(e)Mr Dryland gave details of his income and living expenditure. We shall refer to that evidence in more detail shortly.
High Court
In support of his application for a forfeiture order, the Commissioner filed extensive affidavits from Detective Shallcrass and from Barrie Vevers, a senior forensic accountant attached to the Hamilton Asset Recovery Unit of the New Zealand Police. Neither witness was required for cross-examination before Gilbert J. Mr Dryland and his mother, Gail Dryland, swore affidavits in opposition. Both were cross-examined.
Gilbert J noted that when examined by police officers in March 2011 Mr Dryland asserted that he had saved between $80,000 and $100,000 over the previous two and a half years, mainly from sales of firewood and slabs of timber. In evidence in the High Court Mr Dryland modified his evidence, as the Judge recorded as follows:
[10] However, at the hearing, Mr Dryland said that he had saved this money as a result of these activities during the 12 month period prior to 15 April 2010. He estimated that he had earned gross income of “upwards of $150,000” during this period and that all of his business had been conducted in cash with people paying only in $20 and $50 notes. He claimed that these were the notes that he had bundled up into lots of $5000 and $10,000 and then sealed in the plastic bags. He said that he had sealed the money in the bags to protect it from moisture. Mr Dryland said that he hid the money outside under piles of firewood, or under the house.
[11] Mr Dryland acknowledged that he had not placed any advertisements for his firewood business since June 2009 but explained that he had regular customers who referred others by word of mouth. He was only able to name a few customers who had purchased firewood from him. He said that the people he sold the timber slabs to have “moved on” and that he can no longer contact them. Mr Dryland advised that he sold a sawmill to a man in Rotorua for $45,000 but he cannot remember his name and does not know how to contact him. He said that he was not good at keeping records and that such records as he did have were stolen from a car in November 2010. However, Mr Dryland did produce a number of exercise books containing handwritten notes of daily events and tasks including references to firewood sales and deliveries.
Apart from the inherent implausibility of Mr Dryland’s explanations for his possession of such a large amount of cash, the Commissioner relied on two particular pieces of evidence. One was Mr Vevers’ affidavit. He had undertaken a detailed financial analysis of Mr Dryland’s income and expenditure for the three years prior to 31 March 2010. In this respect he took into account explanations and information given by Mr Dryland to the police at the examination in March 2011. He concluded that over the three year period Mr Dryland had access to an explained cash income source of not less than $158,148.
However, the Judge construed Mr Vevers’ evidence in this way:
[19] Mr Vevers’ analysis shows that Mr Dryland had surplus income from his legitimate business operations of $77,000 in the 12 month period to 31 March 2010 although Mr Vevers believes that this overstates the position. It is likely that Mr Vevers has not captured all sales in his analysis because Mr Dryland’s records are not complete. Mr Dryland did not deposit any of this money into his bank account. It is reasonable to assume that he maintained it in cash, as he said.
The Commissioner also relied on the intercepted telephone communications between Mr Anderson and Ms Burt in August and September 2009. However, the Judge gave little if any weight to this evidence. That was because Mr Dryland was not a party to the communications. While no objection was raised to its admissibility, the Judge concluded that the evidence was hearsay, had little probative value and was untested.[2]
[2]At [18].
Gilbert J was satisfied that the circumstances in which the cash was found were highly suspicious. He was also sceptical of Mr Dryland’s evidence. But he dismissed the forfeiture application because the Commissioner had failed to prove on the balance of probabilities that the cash was wholly or partly acquired through dealing in drugs. In particular, he was satisfied that Mr Dryland “... accumulate[d] significant sums of cash from his lawful business activities”.[3]
[3]At [20].
The Judge dismissed the Commissioner’s alternative argument that the cash was tainted property because it was acquired or derived through tax evasion, which is significant criminal activity.[4] While the Judge was satisfied that it was likely that Mr Dryland had committed that offence, he concluded:
[22] However, this does not mean that the cash is tainted property. Mr Dryland did not acquire or directly or indirectly derive the money through tax evasion. Rather, he acquired it through his lawful activities but has subsequently evaded his tax obligations in respect of the money he has earned. He is vulnerable to penalties and to prosecution under the Tax Administration Act but this does not mean that the money is tainted property.
Decision
[4]Tax evasion is significant criminal activity for the purposes of s 6 of the Criminal Proceeds (Recovery) Act 2009 because it is punishable by imprisonment for a term not exceeding five years: Tax Administration Act 1994, s 143B.
Mr Johnstone for the Commissioner submits that Gilbert J erred in three material respects: (a) in misinterpreting Mr Vevers’ evidence; (b) in concluding that the intercepted communications were hearsay and were arguably inadmissible; and (c) in concluding that Mr Dryland did not acquire the cash through tax evasion. Given our conclusions on the first two grounds, it will be unnecessary for us to address the third. And, given that the essence of the Commissioner’s appeal is the Judge erred in fact, it will be unnecessary for us to subject the statutory provisions to any particular scrutiny. It was not in dispute before us that selling, supplying or manufacturing methamphetamine is significant criminal activity as defined.[5]
[5]Criminal Proceeds (Recovery) Act, s 6.
We would normally be reluctant to intervene in or revisit a factual finding where the trial Judge has had the benefit of seeing and hearing the witnesses. But in this case the primary ground for the Judge’s decision was that the Commissioner had not satisfied the statutory standard of proof on the balance of probabilities. And neither Detective Shallcrass nor Mr Vevers were challenged in cross-examination, although Mr Hamblett properly observes that the evidence of the latter, which was of an expert nature, is a matter of weight.
Moreover, the Judge’s decision was not based on a finding that Mr Dryland, who was robustly challenged in cross-examination, was a credible or reliable witness. To the contrary, he expressed his scepticism. In these circumstances we are able to consider the evidence afresh.
Mr Johnstone’s primary submission is that the Judge erred in finding that Mr Vevers’ analysis showed Mr Dryland had surplus income from legitimate sources of $77,000 in the 12 month period to 31 March 2010. As noted, Mr Vevers’ unchallenged evidence was to the contrary – it was that Mr Dryland’s total unexplained income for the three years before 31 March 2010 was $158,148. He had assessed that sum by undertaking this analysis:
(a)In the relevant three year period Mr Dryland had excess expenditure over his declared income (excluding the cash found on 15 April 2010) of $79,242.96.
(b)While Mr Dryland claimed to have earned income from various sources of $94,000 (principally, handwritten sales of $40,000, disposal of a sawmill for $45,000 and firewood sales of $6,600), Mr Vevers could only verify $25,714.43.
(c)After subtracting $25,714.43 from the sum of $79,242.96, being excess expenditure over income, there was unexplained income of $53,528.53. Once the cash of $104,620 was added, Mr Vevers’ total unexplained income was $158,148.53.
Mr Hamblett was unable to explain the basis for Gilbert J’s conclusion that Mr Vevers’ analysis showed Mr Dryland enjoyed a surplus of income over expenditure of $77,000 in the year to 31 March 2010. It seems, as Mr Johnstone submits, that the Judge misread Mr Vevers’ calculations by treating $94,000 of claimed additional expenditure by Mr Dryland as proved income for the year ended 31 March 2010, subject only to the deduction of $17,000 expenditure. If so, this was clearly an error because only $25,000 of income for the period was established and this was taken into account when calculating the unexplained income of $158,148. We accept that the Judge’s error was material to his decision.
Mr Johnstone also submits that Gilbert J erred in rejecting the Commissioner’s evidence about the intercepted telephone communications. We agree that the fact that Mr Dryland’s cellphone had logged 23 missed calls from Mr Anderson and Ms Burt’s phone number was relevant and admissible. This evidence showed an unusually high degree of contact between Mr Dryland and two people who had been involved in intensive drug dealing over the previous year.
However, we reject Mr Johnstone’s submission that the contents of the intercepted communications are admissible. They fall within the definition of “hearsay” contained in s 4 of the Evidence Act 2006.[6] Neither Mr Anderson nor Ms Burt were witnesses at the hearing in the High Court and the evidence was offered to prove the truth of its contents.[7] The purpose of adducing the evidence was to prove that the “Tim” referred to in communications between Mr Anderson and Ms Burt is Timothy Dryland and that he had access to and was willing to sell drugs.
[6]“Hearsay statement” is defined in s 4 of the Evidence Act 2006 as a statement that:
(a) was made by a person other than a witness; and
(b) is offered in evidence at the proceeding to prove the truth of its contents.
[7]The purpose of adducing the evidence is the focus: for example, if a statement is offered for a purpose other than to prove the truth of its contents such as merely to show that the statement was made or uttered it will not be a hearsay statement.
Hearsay statements are not admissible unless one of the statutory exceptions applies (or a provision of another Act allows its admission).[8] The only relevant exception in this case is contained in s 18 – the general admissibility exception to the hearsay rule.[9] Section 18 contains two requirements for admissibility: reliability and unavailability (or that “undue expense or delay would be caused”). The Judge must therefore be satisfied that the circumstances relating to the statement provide reasonable assurance that the statement is reliable and that the witness is either unavailable or that undue expense or delay would be caused if the statement maker was required to be a witness.
[8]Evidence Act, s 17. See R v Gwaze [2010] NZSC 52, [2010] 1 NZLR 646 at [44].
[9]The other exceptions in the Evidence Act (admissibility of hearsay statements contained in business records (s 19); admissibility of hearsay statements in documents related to applications, discovery or interrogatories (s 20); and admissions made by a party to a civil case adverse to interests (s 34)) do not apply.
Arguably, the hearsay statements attributed to Mr Anderson and Ms Burt are sufficiently reliable. The circumstances relating to them provide reasonable assurance of their reliability, given that there was no apparent motivation to lie, the evidence was obtained through interception and generally there is no cause for concern about the accuracy of what was said. However, the Commissioner did not attempt to satisfy the second requirement by establishing unavailability. On that basis the evidence of the intercepted communications was inadmissible. It follows that Mr Dryland’s admissions that he was the “Tim” referred to are not of themselves admissible evidence.
Mr Johnstone submits that the evidence was not hearsay but of a relevant circumstantial nature. He relies on R v Holtham[10] where Simon France J held that unanswered text messages sent to a telephone operated by Mr Holtham fell outside the definition of hearsay statements because they were “implied assertions”. The unanswered texts contained coded orders, using jargon, for methamphetamine. The Judge was satisfied that the statements themselves did not amount to assertions by the senders that Mr Holtham was a drug dealer; but were relevant circumstantial evidence to support such an inference.
[10]R v Holtham [2008] 2 NZLR 758 (HC).
However, Holtham is distinguishable from this case. The intercepted communications contained assertions of fact – for example, “he’s keen to do the deal”, “he’s got it on him”, and “he’s got the wickedness”. All refer to Tim. The Commissioner relied on them to prove that the “Tim” referred to is Timothy Dryland and he is willing to sell drugs. The conversations were not implied assertions falling outside the definition of hearsay; rather, they were actual assertions falling squarely within the definition. Accordingly, the Holtham analysis does not apply.
The question then is this: do the proved facts as at 15 April 2010 provide a reliable basis for drawing an inference that Mr Dryland derived or acquired the cash from significant criminal activity? The starting point is Mr Dryland’s unexplained income in the preceding three years amounting to $158,148. Significant criminal activity, involving a large cash transaction, is the only likely option if the money was not lawfully earned.
When questioned by police officers, Mr Dryland asserted that he was using the cash to buy a property which he had never seen and was not for sale; that he was advised about the property by a man who had died a month earlier; and that he bought the car from the same man – a man whose partner said had never owned the car. The objective evidence pointed to all of these explanations as being untrue.
Mr Dryland also gave inconsistent statements about his earnings from selling firewood. For example, originally he told the police he saved between $80,000 and $100,000 from firewood sales in the previous two and a half years. At trial he changed his account to say he had earned over $150,000 in the year before he was apprehended. The only inference available from this change is that Mr Dryland was attempting to negate Mr Vevers’ evidence of an explained substantial excess of income based on records which he had supplied for the previous three years. Also he was unable to give any details about the source of a payment of $45,000 in cash (comprising only $20 and $50 notes) which was allegedly included within the cash found in his car.[11] Taken together, and in conjunction with the other evidence, these inconsistencies suggest a pattern of untruths fabricated for the purpose of concealing the true source of the cash.
[11]At [15](d) above.
Moreover, Gilbert J gave weight to a finding which cannot be sustained – namely, that Mr Dryland acquired large sums of cash from lawful business activities. Whatever amount he acquired, on Mr Dryland’s own evidence it could not have constituted all or part even of the cash found in his possession after taking into account his expenditure.
We are satisfied that the cash was not gained from lawful activities. The disparity between what Mr Dryland originally told the police he earned from selling firewood and cash items and the amount found in his possession was substantial and unexplained. The evidence supporting a conclusion that the cash came from methamphetamine manufacturing or selling is:
(a)Mr Dryland’s lengthy criminal history including offences for drug dealing, use of methamphetamine since 2007 and being found in possession of broken glass methamphetamine pipes in 2009.
(b)When apprehended, Mr Dryland was in possession of a large number of knives and three SIM cards which are consistent with criminal activity. The cards were likely for the purpose of communicating with others involved in the dealing. The knives were likely for self-defence.
(c)When apprehended, Mr Dryland’s cellphone showed that he had missed 23 phone calls from a landline used by two methamphetamine dealers, consistent with an inference that they were in an unusually intense degree of contact.
We are satisfied that the Judge erred in dismissing the Commissioner’s application. The only inference logically available from these facts in combination is that, on the balance of probabilities, the money found in Mr Dryland’s possession was acquired or derived from manufacturing or selling drugs, probably methamphetamine. This conclusion makes it unnecessary for us to consider the Commissioner’s third ground of appeal that the Judge erred in finding that Mr Dryland did not acquire or derive the money through tax evasion.
New evidence
The Commissioner applied for leave to adduce new evidence on appeal from Constable Fraser Simpson, a detective based in Hamilton. The officer arrested Mr Dryland on 5 February 2013 following a search of the family property which Mr Dryland shared with his mother and brother. The police found large quantities of material and equipment which are used as precursors for the manufacture of methamphetamine. Additionally, a report prepared by a scientist concluded that methamphetamine had been manufactured in a trailer unit found on the property.
Mr Dryland has been committed for trial but a fixture is yet to be allocated.
While we accept that the evidence is fresh in that it did not exist when Gilbert J heard the Commissioner’s application, it relates to events which occurred nearly three years after the cash was discovered. In these circumstances, we dismiss the application.
Result
The appeal is allowed. The order made in the High Court is set aside and the sum of $104,620 is vested in the Crown absolutely and is to be under the Official Assignee’s custody and control.
Mr Dryland is to pay the Commissioner costs on a band A basis for a standard appeal together with usual disbursements.
The application for leave to adduce further evidence is dismissed.
Solicitors:
Meredith Connell, Auckland for Appellant
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