Commissioner of Police v Foulds

[2025] NZHC 2116

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-488-000023

[2025] NZHC 2116

UNDER

the Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

STEPHEN ARTHUR FOULDS

First Respondent

AND

LEONNA CAROLINE FOULDS

Second Respondent

Hearing:

on the papers

Counsel:

M R Harborow and A J H Wilson for applicant W D McKean for respondents

K E Hogan for interested party (Bailee Foulds)

Judgment:

31 July 2025

JUDGMENT OF JOHNSTONE J

(approval of settlement between Commissioner and respondents and interested party)

This judgment was delivered by me on 31 July 2025 at 2pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

MC, Auckland WRMK, Whangārei

COMMISSIONER OF POLICE v FOULDS [2025] NZHC 2116 [31 July 2025]

[1]    On 12 December 2023, police executed a search warrant at a property in Opua, owned by Stephen and Leonna Foulds. They found a sophisticated indoor cannabis cultivation.  Mr and Mrs Foulds were both charged with cultivating cannabis, and  Mr Foulds was charged with selling it. They both pleaded guilty, and they were sentenced in the District Court at Kaikohe to serve periods of home detention.

[2]    In     this     proceeding,     brought     in     reliance     on     the    Criminal Proceeds (Recovery) Act 2009, the Commissioner of Police has obtained restraining orders in respect of the Opua property and two vehicles. One of the vehicles was registered in the name of their daughter, Bailee Foulds. The total value of the restrained property is estimated at around $1,200,000.

[3]    Relying on s 95(1) of the Act, the Commissioner, Mr and Mrs Foulds and Bailee Foulds have now settled, between themselves, the question of what forfeiture order is appropriately made. They ask the Court to approve their settlement so that, under s 95(2), it becomes binding. The Court must approve the settlement if satisfied it is consistent with the purposes of the Act and the overall interests of justice.1

The settlement

[4]    The settlement contemplates the forfeiture of a sum of $450,000 (the Settlement Sum), with the Court making orders in two stages:

(a)first, orders enabling the sale of the Opua property; and

(b)second, a profit forfeiture order in respect of $450,000 of the sale’s proceeds.

[5]    The  first-stage  orders  would   vary   the   restraining   orders   to   allow   Mr and Mrs Foulds to sell the property for the exclusive purpose of raising the Settlement Sum. In default of sale by Mr and Mrs Foulds, the Official Assignee would undertake the sale.

1      Criminal Proceeds (Recovery) Act 2009, s 95(3).

[6]    The second-stage orders would be sought upon completion of the sale, by consent. Mr and Mrs Foulds, and Bailee Foulds, would abandon all claims they may have (under the Act or otherwise) to the $450,000 to be forfeited. The Commissioner would not pursue any other forfeiture application. The vehicles would be discharged from restraint when the profit forfeiture order is made. And costs would lie where they fall.

Is the settlement consistent with the purposes of the Act and the overall interests of justice?

The Commissioner’s case (absent settlement)

[7]The Commissioner says that:

(a)Mr and Mrs Foulds unlawfully benefited from significant criminal activity, comprised of the cultivation and sale of cannabis; and

(b)the Opua property and one of the vehicles (a Mazda CX-5) are likely “tainted property”, deriving directly or indirectly (or at least in part) from that activity.2

[8]    The Commissioner initially alleged that the other vehicle, registered in the name of another family member (Bailee Foulds), is also tainted property. He has since resiled from that proposition.

[9]    The cannabis cultivation at the Opua property is said to form part of an organised and commercial enterprise. Attending police found 20 maturing cannabis plants in one grow room, and one large cannabis plant and 32 smaller cannabis plants propagated from cuttings in a second grow room. Both rooms were fitted to maintain an optimum growing temperature, including with an automated hydroponic system, artificial lights, fans and air conditioning. The smaller plants appeared destined to be rotated into the first grow room following harvest of the mature plants. The agreed summary of facts, to which guilty pleas were entered, noted the set up was capable of

2      Criminal Proceeds (Recovery) Act, ss 5 and 49.

producing five cannabis crops per year, with an average yield of 70.5 ounces of cannabis per crop rotation.

[10]   Mr and Mrs Foulds lived together at the Opua property, and previously at a property at Te Aroha. Electricity records suggest both properties were used for cannabis cultivation. The daily power usage at the properties is said to have been between three and four times the national daily average.

[11]   For the purpose of calculating Mr and Mrs Foulds’ apparent unlawful benefit, the Commissioner refers to three components, assessed with reference the period of seven years prior to 19 April 2024. In that period:

(a)a total of $300,799 in cash was deposited into their bank accounts;

(b)electricity bills to the tune of $57,403.50 were paid in cash; and

(c)receipts for other expenses incurred outside the banking system suggest cash spending of $125,279.70.

[12]   The total of these amounts — $483,482.20 — is the amount the Commissioner would likely assert as the appropriate value of any contested profit forfeiture order. This amount is not much larger than the amount the parties have agreed should be forfeited. However, contested proceedings might well see the Commissioner pursue an application for an assets forfeiture order in respect of the entire Opua property and the Mazda. The Commissioner’s case that they are tainted property is founded on the basis that:

(a)The Opua property was purchased, without a mortgage, for $1,050,000, using the proceeds of sale of the Te Aroha property. The borrowing secured by mortgage on the latter property was paid in part from bank accounts that had received cash deposits. And Mrs Foulds admitted using the proceeds of cannabis sales to renovate the Opua property.

(b)The Mazda was purchased with a cash deposit and with the balance being paid from tainted bank accounts.

The Act’s purposes and the overall interests of justice

[13]   The Act’s primary purpose, set out in s 3(1), is to establish a regime for the forfeiture of property that has been derived directly or indirectly from significant criminal activity or that represents the value of a person’s unlawfully derived income. Ancillary purposes are to "eliminate the chance" for persons to profit from undertaking or being associated with significant criminal activity,3 and to "deter" significant criminal activity.4

[14]   The reference in s 95(3) indicates that a broad enquiry into the merits of settlement is required, reflective of the strong public interest in litigation under the Act being brought to a prompt conclusion, and the desirability of such proceedings being settled on economic and pragmatic grounds reflective of common-sense compromise.5

[15]   Consistency with the Act’s purposes and the overall interests of justice requires that the settlement achieves a satisfactory balance between the objectives of potential profit elimination (and deterrence) and prompt and cost-effective resolution.6

Assessment

[16]   In my view, the Commissioner is right to accept that, should  he  pursue assets forfeiture orders in respect of the Opua property, he would face appreciable litigation risk. The tainting of that property by its purchase with the sale proceeds of the Te Aroha property relies on the part-payment from tainted bank accounts of the loan secured by mortgage of the latter property. But the precise amount of criminally derived funds applied to the loan is  unclear.  And  further,  the  tainting  of  the  Opua property by criminally funded renovations is limited by the cost of those renovations: $191,000. The success of an application for asset forfeiture of the entire Opua property, valued at around $1,200,000, based on its in-part taintedness, would be far from assured.

3      Section 3(2)(a).

4      Section 3(2)(b).

5      Commissioner of Police v Zhang [2016] NZHC 930 at [8]; Commissioner of Police v Kree [2013] NZHC 2972 at [11]; Commissioner of Police v Douglas [2015] NZHC 1293 at [6]; Commissioner of Police v Venn [2014] NZHC 361.

6      Commissioner v Cavanagh [2023] NZHC 3311 at [9].

[17]   Also, assets forfeiture of the Mazda would serve only to reduce the amount payable under a profit forfeiture order.

[18]   On this basis, it is appropriate that the parties should quantify the value of an appropriate settlement by reference to the value of property likely forfeited by way of profit forfeiture order. Broadly speaking, the proposed settlement does that, stripping Mr and Mrs Foulds of almost all their ill-gotten gains.

[19]   Also, modest deduction from the value that the Commissioner would nominate in contested proceedings is justifiable in circumstances where, as here, a marginal degree of risk of relief from forfeiture might arise in light of Mr and Mrs Foulds’ circumstances. They are both nearing retirement age. Mr Foulds does not work due to chronic pain. Mrs Foulds works in retail. Their borrowing options are limited.

[20]   The two-stage structure of the settlement meets the Court’s concern to ensure it has jurisdiction to make orders sought as a consequence of settlement.7

[21]   Overall, I find that the settlement is consistent with the Act’s purposes and the overall interests of justice.

Result

[22]The settlement is approved.

[23]   The restraining order made in this proceeding in respect of a property at Opua is varied, to provide as follows:

(a)Mr and Mrs Foulds may sell the property, exclusively for the purpose of raising a sum to be forfeited in the amount of $450,000, and on the following conditions:

7      Commissioner of Police v Phan [2024] NZHC 2952; Commissioner of Police v Nguyen

[2025] NZHC 893.

(i)Prior to attempting any sale, Mr and Mrs Foulds must instruct a conveyancing solicitor, and obtain from them an undertaking to deal with the proceeds of sale as follows:

(1)   first, by paying all reasonable costs associated with the sale, including legal costs, real estate agency fees, and outstanding rates, upon approval by the Official Assignee;

(2)   second, by paying the sum of $450,000 directly to the Official Assignee’s trust account (to be held as restrained property pending further Court order); and

(3)   finally, by paying the balance to Mr and Mrs Foulds;

(ii)Mr and Mrs Foulds, and their conveyancing solicitor, must provide information requested by the Official Assignee;

(iii)No sale may be accepted unless the Official Assignee confirms their satisfaction, in writing, that the net sale proceeds will exceed $450,000;

(b)If the property is not sold by 5 pm  on  30  January  2026,  the  Official Assignee shall, as soon as reasonably practicable, sell the Property at its fair market value and deal with the proceeds of the sale as follows:

(i)first, by deducting the Official Assignee’s actual costs in effecting the sale;

(ii)second, by holding $450,000 of the sale proceeds as restrained property, pending further Court order; and

(iii)finally, by returning the balance of the sale proceeds to any trading bank account nominated by Mr and Mrs Foulds.

(c)For the purposes of effecting the sale described at [23](b), the  Official Assignee, including any person delegated his functions and powers under the Act, shall have the power to execute any deed or instrument in the name of the registered proprietor(s), and to do anything necessary to give validity and operation to the deed or instrument.

[24] The Commissioner has leave to apply informally for a profit forfeiture order in respect of the sum of $450,000 once it is realised in accordance with the order at [23].

Johnstone J