Commissioner of Police v Hayward
[2013] NZHC 1358
•10 June 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-002371 [2013] NZHC 1358
IN THE MATTER OF an application under the Criminal
Proceeds (Recovery) Act 2009
BETWEEN THE COMMISSIONER OF POLICE Applicant
ANDJENE CHE TEWANA HAYWARD Respondent
ANDMARIANA NATALIA CRISTEA HAYWARD
First Interested Person
ANDRANDAL CAREY FINLAYSON Second Interested Person
Hearing: 8-9 May 2013
Appearances: M R Harborow for Applicant
C F L Godinet for Respondent
D R I Gay for First Interested Person
P H H Tomlinson (granted leave to withdraw) for Mr Finlayson(in person) Judgment: 10 June 2013
JUDGMENT OF VENNING J
This judgment was delivered by me on 10 June 2013 at 3.45 pm, pursuant to Rule 11.5 of the High
Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Crown Solicitor, Auckland
Craig Griffin & Lord, Auckland
Copy to: D R I Gay, Auckland
P H H Tomlinson, Auckland
THE COMMISSIONER OF POLICE v HAYWARD [2013] NZHC 1358 [10 June 2013]
The applications
[1] The respondent, Mr Hayward pleaded guilty to three charges of being in possession of cocaine for supply. The Commissioner seeks asset forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (the Act) in relation to a number of motorbikes, commemorative coins and cash belonging to Mr Hayward or under his effective control. The Commissioner also seeks a profit forfeiture order together with a related order that a property at 44 Archibald Road owned by Mr Hayward and occupied by him and Mrs Hayward be realised to meet the profit forfeiture order to the extent it is not met by the other assets that may be forfeited to the Crown.
[2] Mrs Hayward applies for relief from any forfeiture order that may be made and seeks to have her interest in the property excluded from such order.
[3] Mr Finlayson says he is the owner of one of the motorbikes, a Ducati. He seeks to have that motorbike excluded from any forfeiture order and released to him.
The parties’ positions
[4] The Commissioner considers that Mr Hayward was involved in drug dealing before December 2009 and that his involvement extended up until arrest on 23
March 2011. The Commissioner also believes Mr Hayward profited from his drug dealing which enabled him to purchase the motorbikes and coins and that it explains the cash on hand of $3606.50 when Mr Hayward was arrested. The Commissioner relies partly on statements of other offenders involved in the cocaine dealing and partly on an analysis of Mr and Mrs Hayward’s financial position and dealings.
[5] While the Commissioner considers that the motorbikes, coins and the cash seized when Mr Hayward was arrested are tainted property in terms of the Act and seeks their forfeiture, he does not say that the Archibald Road property is tainted property. But the Commissioner does consider that Mr Hayward has unlawfully benefited from his significant criminal activity as disclosed by, inter alia, payments into his various bank accounts which have been applied to reduce the mortgage owing over the Archibald Road property. The Commissioner’s case is that it would
be fair and just to require the Archibald Road property to be realised to meet the profit forfeiture order.
[6] Mr Hayward opposes the asset and profit forfeiture orders. He denies the motorbikes, coins, and cash are tainted property. Mr Hayward’s position is that the only significant criminal activity he was involved in was the offending to which he pleaded guilty. In pleading guilty to the drug offending, Mr Hayward admitted he obtained a total of 18 ounces of cocaine on three occasions between 18 and 24
December 2009. Mr Hayward says he paid $102,000 for the cocaine. However, he denies that he made any profit himself or that his offending extended beyond the three instances he admits. He says he was a middle man, using other’s money and that he just passed the drugs on. He says that he was effectively stood over by others and was required to undertake the offending at their direction. He has also sought to explain the deposits into his various bank accounts over the years. As a last resort, Mr Hayward seeks relief on the grounds of undue hardship.
[7] Mrs Hayward says she has an interest in the property and has not unlawfully benefited from Mr Hayward’s criminal activity. She also seeks relief on the grounds of undue hardship.
[8] Mr Finlayson says that even though the Ducati was in Mr Hayward’s
possession, he had retained ownership of it.
The profit forfeiture order
[9] To make a profit forfeiture order, the Court must be satisfied that Mr Hayward unlawfully benefited from significant criminal activity within the relevant period and also that he has interests in property.1
[10] Mr Hayward has interests in property, and was undoubtedly engaged in significant criminal activity within the relevant period as confirmed by his conviction. However, Mr Hayward puts in issue whether he unlawfully benefited from that criminal activity.
[11] The onus is on the Commissioner to prove on the balance of probabilities that Mr Hayward has unlawfully benefited from significant criminal activity. If the Commissioner establishes this, then the value of the benefit is presumed to be the value stated in the application. The value stated in the application is $404,293. That presumption may be rebutted by Mr Hayward on the balance of probabilities.2
[12] So the issues for determination in relation to the profit forfeiture order are:
(a) whether Mr Hayward unlawfully benefited from the December 2009 offending;
(b)whether Mr Hayward was engaged in significant criminal activity in addition to the December 2009 offending; and,
(c) the value of any unlawful benefit.
Did Mr Hayward unlawfully benefit from his significant criminal offending in
December 2009?
[13] It is convenient to first address whether Mr Hayward unlawfully benefited from his significant criminal activities in December 2009. As noted, Mr Hayward pleaded guilty to purchasing 18 ounces of cocaine in total and admits paying
$102,000 for it. However, Mr Hayward denies that he benefited from that offending.
[14] The background to Mr Hayward’s case on this point lies in his business dealings with a Mr Michaels. Mr Michaels is a convicted fraudster. Mr Hayward says that during 2007, he sold a car and his firewood business to Mr Michaels. Mr Michaels did not pay the full purchase price for the firewood business and, on Mr Hayward’s evidence still owes him $20,000. However, Mr Hayward says that a friend (who he is unable to name) borrowed $10,000 from Mr Michaels. The friend left New Zealand without repaying Mr Michaels. Mr Hayward says Mr Michaels considered that he had vouched for his friend and was responsible for repaying the
$10,000. He says he was “stood over” and beaten up in August 2009 by people sent
by Mr Michaels who demanded $20,000 from him for extorting money from Mr
Michaels, and also demanded he repay the $10,000 debt of his friend. In November
2009 a café Mr Hayward owned, Tiki Boy Café, had its windows smashed. Mr
Michaels considers the incident had something to do with Mr Michaels.
[15] Mr Hayward says that about this time he was approached by a customer of his café seeking cocaine. Although he refused initially, when he was approached on a fourth occasion, he thought he could make his problem disappear by introducing the customer who wanted drugs to Mr Michaels and his associates. He considered they might then leave him alone. However, he says when he did so, he was then required to take part in the drug deals in December 2009.
[16] Mr Hayward’s explanation for his involvement in the offending is not credible. It is entirely implausible. On his evidence, he had a number of prior business dealings with Mr Michaels. He says he sold him a Dodge car (a “General Lee” of Dukes of Hazzard fame) and his firewood business. Mr Michaels paid a deposit for the business and made various other payments over time. On his evidence Mr Michaels still owed him approximately $20,000 for the firewood business. That background of dealing between the two and the fact Mr Michaels still owed him money is inconsistent with Mr Hayward’s case that he was frightened of Mr Michaels. He also had a clear answer to Mr Michaels’ demands for money. Mr Michaels owed him $20,000. Also, if, as Mr Hayward says, he was frightened of Mr Michaels, he would have wanted to have nothing further to do with him. To suggest that he thought he could solve the difficulties he had with Mr Michaels by further embroiling himself with him in relation to serious drug dealing is just not credible. Next, in his second affidavit, in an attempt to explain two deposits to his bank account in May 2010, he attributes them as further payments from Mr Michaels. That is entirely inconsistent with his evidence of the dealing with Mr Michaels in late 2009.
[17] Further, on Mr Hayward’s explanation he was not involved in any criminal activity prior to December 2009. If so, when he was subject to the stand-over and threatening tactics he attributed to Mr Michaels in August 2009 and later the obvious answer was for him to go to the Police. Mr Hayward says he could not go to Police, but there was no legitimate reason why he could not do so if he and his family were
threatened. While the broken windows at the café were reported to the Police, Mr
Hayward made no suggestion at the time that it was due to Mr Michaels’ threats.
[18] Next, Mr Hayward withdrew $30,000 cash on the same date as the offending of the first count he admits. His explanation for the withdrawal is again not credible. He says that he withdrew the money as part of the debt and tax imposed on him by Mr Michaels. He says he was told to “get the money or else” but after he had got the money out says he managed to give the people standing over him (who had followed him to the bank) the slip and hid the $30,000. He then lent $20,000 of it to a friend looking to buy a motorbike but the friend decided ultimately to buy one of Mr Hayward’s so, in February 2010, the friend paid him back in two amounts of approximately $10,000 in cash. After retaining some cash, Mr Hayward says he banked $9,750 and $8,750 on two separate occasions in early February 2010. Mr Hayward says he used the balance of $10,000 towards his trip to Europe. He relies on that explanation to account for the withdrawal of the $30,000 and some of the deposits to his bank account in 2010. Again, Mr Hayward’s story is inherently improbable. He gives no details of how he gave the people standing over him at the bank “the slip”. I do not accept Mr Hayward’s evidence. The far more likely explanation, given the timing of the initial withdrawal, is that Mr Hayward withdrew the money from his account to purchase the drugs, and used it for that purpose. The later deposits to his bank accounts in early 2010 were part of the proceeds of sale of the drugs.
[19] For the above reasons I reject Mr Hayward’s explanation. The Commissioner satisfies the Court that Mr Hayward unlawfully benefited from his offending in December 2009.
The value of the benefit of the 2009 offending
[20] As noted, the Commissioner assesses the value of that benefit at $404,293. That is presumed to be the value subject to rebuttal by Mr Hayward.3 The Commissioner’s calculation of the benefit of $404,293 is based on a 2007 World
Drug Report on cocaine prices, which valued a gram of cocaine in New Zealand at
3 Section 53(2).
$714.30.4 Twenty ounces, (which equates to 566 grams) has a potential street value of $404,293 on that basis.
[21] However, I note that for sentencing purposes it was accepted Mr Hayward dealt in 18 ounces (510 grams) of cocaine. I also note that correspondence between the Crown Solicitor and counsel for Mr Hayward records the Commissioner was prepared to accept Mr Hayward’s assertion he purchased 18 ounces of cocaine and that he had paid a total of $102,000 for it. While I accept Mr Harborow’s submission that the Commissioner is not bound by that concession to accept that the benefit Mr Hayward received was limited to the $102,000 (being what Mr Hayward said he paid) I do consider the Commissioner is bound to accept that 18 ounces was the quantity involved.
[22] Mr Godinet queried the reliance on the 2007 report and referred to other reputable drug reports which placed different values on cocaine in New Zealand in
2009. He referred to a 2008 report of the New Zealand National Drug Bureau, which placed the street value of cocaine between $141,500 and $339,600 (for 20 ounces), and also referred to a report from Massey University which, for cocaine, placed the mean price of a gram of cocaine in 2009 at $560.5 The median price was lower.
[23] While Mr Godinet argued the Court should accept the median price, I accept Detective Gray’s evidence that the mean price is more accurate than the median price. That is likely to be the case with distributions in the illegal drug market. Further, while Mr Hayward challenged the purity of the cocaine involved, a gram of cocaine will sell for the retail price of a gram of cocaine. The argument Mr Hayward sought to raise as to the purity of the cocaine does not assist him.
[24] On balance, I consider the best evidence of the value of cocaine in New
Zealand in 2009 is the mean price in the Massey University report, which covers the relevant period in the New Zealand market. For present purposes, I conclude the
4 2007 World Drug Report (United Nations Office on Drugs and Crime, Vienna, June 2007) at
231. Although during the evidence Detective Gray confirmed that the figure of $714.30 was US
rather than New Zealand dollars.
5 C Wilkins and ors Recent Trends in Illegal Drug Use in New Zealand, 2006-2011 (Massey
University, Auckland, July 2012) at 201.
value of the benefit to Mr Hayward of his significant criminal activity in December
2009 was $285,600.6
[25] There was, of course, a cost to Mr Hayward in purchasing the cocaine, but the benefits are to be assessed on the immediate proceeds rather than net profits.7
Did Mr Hayward unlawfully benefit from other drug offending?
[26] However, that is not an end of the matter. The Commissioner says that, apart from the offending to which he pleaded guilty, Mr Hayward unlawfully benefited from other significant criminal activity during the relevant period. The Commissioner relies on the statements by a Messrs Tipene and Moses that implicate Mr Hayward in further offending during 2010 in particular, but also relies on what, he says, are unexplained deposits to Mr Hayward’s bank accounts during part at least of the extended relevant period.
[27] Mr Hayward does not accept the evidence of Messrs Tipene and Moses. Neither Mr Tipene nor Mr Moses was called to give evidence. Detective Gray, however, referred to their statements to support the statement of belief in his affidavit that Mr Hayward had been involved in further offending. The Crown relies on r 7.30 of the High Court Rules and submits that the evidence is admissible under ss 18, 19, and 34 of the Evidence Act 2006.
[28] Rule 7.30 of the High Court Rules provides:
7.30 Statements of belief in affidavits
(1) A Judge may accept statements of belief in an affidavit in which the grounds for the belief are given if—
(a) the interests of no other party can be affected by the application; or
(b) the application concerns a routine matter; or
(c) it is in the interests of justice.
6 $560 x 510 grams (18 ounces) = $285,600.
7 R v Pedersen [1995] 2 NZLR 386 (CA); Solicitor-General v Rhodes HC Auckland CIV-2007-
404-3773, 16 February 2010.
(2) Subclause (1) overrides rule 7.29.
[29] Clearly Mr Hayward’s interests are affected if the Detective’s statement of belief is accepted without Mr Hayward having the ability to cross-examine Messrs Moses and Tipene. Nor can it be said that the application in issue concerns a routine matter. The statements of belief are directly concerned with one of the ultimate issues the Court must determine. Finally, it cannot be in the interests of justice to permit otherwise hearsay and inadmissible evidence to be led in these circumstances, particularly where I am not satisfied there is a situation of urgency.
[30] Section 18 of the Evidence Act 2006 provides:
General admissibility of hearsay
(1) A hearsay statement is admissible in any proceeding if—
(a) the circumstances relating to the statement provide reasonable assurance that the statement is reliable; and
(b) either—
(i) the maker of the statement is unavailable as a witness; or
(ii) the Judge considers that undue expense or delay would be caused if the maker of the statement were required to be a witness.
(2) This section is subject to sections 20 and 22.
[31] Mr Harborow submitted that the fact the statements were taken during the course of a police investigation, and concluded with the usual warning as to the use of the statement, including the possibility of perjury, provided reasonable assurance that the statements were reliable. While he accepted that it could not be said either Messrs Moses or Tipene were unavailable as witnesses, he submitted that undue expense or delay would be caused if they were required to attend Court for the hearing, noting that it was only when counsels’ submissions were exchanged prior to the hearing that the Crown was formally aware this point was going to be taken.
[32] In considering the circumstances in which the statements were taken, it is proper to consider the nature of the statements, their contents, the circumstances relating to their making, and other circumstances relating to the veracity of Messrs
Moses and Tipene.8 I accept the statements, especially Mr Tipene’s, are detailed. They are in part consistent with Mr Hayward’s admission of guilt in relation to the December 2009 transactions. However, while I note Mr Harborow’s point as to the circumstances in which the statement was taken, insofar as the statements go beyond what Mr Hayward has admitted to, I consider the balance of the statements to be too unreliable for admission under s 18. The statements can be seen as self-serving. Both Messrs Tipene and Moses had an incentive to set Mr Hayward up and to maximise his involvement, either to minimise their own involvement or to achieve a credit in sentence for assistance. If the matter was before a jury the Court would be required to give a warning as to the reliability of their evidence.
[33] Further, while I accept that formal notice of the objection to the evidence may not have been given prior to the exchange of submissions, the Crown should have been aware of the possibility the point would be taken. Mr Hayward has always sought to have Messrs Moses and Tipene give evidence. Mr Hayward issued subpoenas seeking to have Messrs Moses and Tipene give evidence. The Crown successfully had them set aside. While that issue concerned the purity of the cocaine, the Crown would have been aware Mr Hayward wanted Messrs Tipene and Moses as witnesses. Next, this hearing was scheduled for two days. There is no evidence, even by way of a job sheet, as to the inquiries made about the ability or otherwise of Messrs Moses or Tipene to attend Court for this hearing. It appears no inquiries were made. There is no evidence to confirm the hearing would have had to be adjourned. For those reasons, I do not consider s 18 can apply.
[34] Next, Mr Harborow relied on s 19 of the Evidence Act 2006. He submitted the statements were business records. Section 19 provides:
Admissibility of hearsay statements contained in business records
(1) A hearsay statement contained in a business record is admissible if—
(a) the person who supplied the information used for the composition of the record is unavailable as a witness; or
(b) the Judge considers no useful purpose would be served by requiring that person to be a witness as that person cannot
8 Evidence Act 2006, s 16.
reasonably be expected (having regard to the time that has elapsed since he or she supplied the information and to all the other circumstances of the case) to recollect the matters dealt with in the information he or she supplied; or
(c) the Judge considers that undue expense or delay would be caused if that person were required to be a witness.
(2) This section is subject to sections 20 and 22.
[35] A business record includes a document made to comply with a duty. Mr Harborow submitted that the Police had a duty to take the statements. While he accepted s 19(a) and (b) did not apply, he again submitted that undue expense or delay would be caused if Messrs Tipene and Moses were required to be witnesses.
[36] I accept that in R v Hovell,9 the Court of Appeal held that police statements taken in the course of normal practice are taken as part of a duty. However, where the information is unreliable s 8 of the Evidence Act 2006 may apply to exclude the evidence even if prima facie admissible under s 19.10 Even accepting that reliability and probative value are different concepts, unreliable information will tend to have a much lower probative value.
[37] In any event, for the reasons given above, I am not satisfied that it can be said that undue expense or delay would have been caused if Messrs Tipene or Moses had been required to give direct evidence on the limited issue of Mr Hayward’s further involvement.
[38] Finally on this point, I address s 34 of the Evidence Act 2006. It provides:
Admissions in civil proceedings
(1) Subpart 1 (hearsay evidence), subpart 2 (opinion evidence and expert evidence), and section 35 (the previous consistent statements rule) do not apply to evidence of an admission offered in a civil proceeding that is—
(a) given orally by a person who saw, heard, or otherwise perceived the admission being made; or
(b) contained in a document.
9 R v Hovell [1986] 1 NZLR 500 (CA).
10 R v Kereopa HC Tauranga CRI-2007-087-411, 11 February 2008.
(2) Evidence of an admission that is a hearsay statement may not be used in respect of the case of a third party unless—
(a) the circumstances relating to the making of the admission provide reasonable assurance that the admission is reliable; or
(b) the third party consents.
(3) In this section, third party means a party to the proceeding concerned, other than the party who—
(a) made the admission; or
(b) offered the evidence.
Section 34 does not apply to the present circumstances. Section 34(1)(a) allows hearsay evidence of an admission where the person giving evidence is one degree removed from the original maker of the statement. However, the hearsay in the present case is double hearsay at least. Detective Gray purports to give evidence of what he has been told by others about alleged admissions made by Mr Hayward. The section does not permit that. Next, the document reference in s 34(1)(b) must be a document authored by the person making the admission, in this case Mr Hayward. It is not.
[39] For those reasons I am not prepared to accept the evidence of Messrs Moses and Tipene about Mr Hayward’s offending other than to the extent their evidence confirms the offending in December 2009 to which he pleaded guilty.
The unexplained deposits
[40] However, the Crown also refers to a number of unexplained deposits to Mr Hayward’s bank accounts during the relevant period and invites the Court to infer they are the proceeds of drug dealing as they cannot be explained by legitimate means. During cross-examination Detective Gray confirmed that in this case, the Commissioner’s focus was on the period from 1 January 2008 to arrest.
[41] The Commissioner’s argument is that during that period Mr Hayward’s income was limited, yet there were a large number of deposits to Mr Hayward’s bank accounts and he was also able to acquire the motorbikes, coins and cash. Detective
Gray notes that Mr Hayward’s declared legitimate income as per income tax returns
between 2005 and 2010 was minimal. In summary, those records disclose:
(a) Personal income: income totalling $8,983 in the years ending March
06 and March 07 with losses totalling $31,344 in other years.
(b) Business income: $18,480 profit declared with $20,132 loss declared. [42] Further, as at the time of Mr Hayward’s arrest in March 2011, both Mr and
Mrs Hayward were in receipt of welfare benefits.
[43] Despite that very limited income the Commissioner identifies the following
large substantial cash deposits were made into Mr Hayward’s bank accounts between
2009 and his arrest in March 2011:
Transfer from Romania 27/9/10 $62,085.96
Transfer from Romania 27/9/10 $57,616.91
Deposits from Australia on four occasions: 24/11/08,
24/12/08, 14/01/09, 13/05/09 totalling:
$11,667.89
Other large cash deposits to a Westpac 01 account
between October 2008 and 25 May 2010 totalling: $34,940.00
Cash deposits to a Westpac 00 account between
February 2009 and 1 February 2011 $4,200.00
Total: $170,510.76
[44] In addition, a further $48,405 was deposited to Mr Hayward’s bank account on 25 March 2009. Mr Hayward explains it as the proceeds of the sale of a Rolex watch ($42,655) and a coffee machine.
[45] Taking those deposits, together with the value of the motorbikes, coins and cash accumulated by Mr Hayward during this period, Mr Harborow submitted that the benefit not explained by Mr Hayward’s declared income was approximately
$370,000 to $380,000, even without taking account of any profit Mr Hayward would have made on sale of the cocaine.
[46] Mr and Mrs Hayward seek to explain the deposits referred to in the following ways:
(a) profits and proceeds of sale of a bungy business;
(b)profits and proceeds of sale of the Auckland firewood business and other dealings with Mr Michaels; and
(c) profits and proceeds of sale of the Tiki Boy café business.
The Archibald Road Property
[47] While, as noted, the Commissioner does not suggest the Archibald Road property is itself tainted property, the background to its purchase is, however, relevant because Mr Hayward contributed a substantial sum to its purchase and the mortgage principal has been significantly reduced over time. Mr Hayward purchased the Archibald Road property in late 2007 for $375,000. At the time, he contributed $70,000 and borrowed $305,000 from Westpac. However, the Westpac loan has been substantially repaid so that by March 2011, only $9,000 approximately remained owing.
[48] In particular, the mortgage principal was substantially reduced by $140,000 on 24 November 2010, which reduced the then loan balance at the time from
$238,104.65 to $98,104.65. Following Mr Hayward’s arrest on 31 March 2011, the bank credited a further $86,951.09 held in Mr Hayward’s 00 account to the mortgage account reducing the mortgage principal to $9,340.00 approximately. So from late
2007 until Mr Hayward’s arrest in 2011, approximately $295,000 has been paid off
the mortgage principal. That requires explanation.
[49] Mrs Hayward says Mr Hayward financed the purchase of the Archibald Road property by $50,000 of savings built up from Auckland City Firewood income, the business established and run by Mr Hayward and the $20,000 that Mr Michaels paid as a deposit on the “General Lee” car which Mr Michaels agreed to buy from Mr Hayward for $75,000.
[50] Mrs Hayward produced photographs of the “General Lee” car, with Mr Hayward in the photograph. For present purposes, and in the absence of further evidence, I accept that Mr Hayward owned the “General Lee” car he and Mrs Hayward have referred to, and sold it to Mr Michaels in late 2007 for $75,000 and further, that the $20,000 deposit for it went towards the deposit on the house.
[51] Although Detective Gray was not convinced the Auckland firewood business was a genuine business, I also accept for present purposes Mr Hayward operated a firewood business. Mr Hayward produced copies of the Yellow Pages advertisements for Auckland City Firewood Supplies with his name and telephone numbers for the years for 2005 and 2006. The issue is the income obtained from the business and its sale price.
[52] I am not able to accept Mrs Hayward’s evidence that the balance of the deposit of approximately $50,000 came from income accumulated in the Auckland City firewood business between 2005 and 2007. Mr Hayward was not able to provide any detail or evidence to support that. Mr Hayward’s declared income over the relevant period, both personal and net profit from the business for all three years from 2005 to 2007 inclusive totalled $26,053. Given the parties’ living expenses at that time I am unable to accept Mrs Hayward’s bare assertion, without more, that Mr Hayward was somehow able to accumulate $50,000 in savings from the firewood business during that time.
[53] Rather, the bank accounts produced to the Court show the two payments making up the $70,000 (approximately) contributed by Mr Hayward came from his National Bank 01 account. That account had two deposits totalling $51,000 paid into it on 21 September 2007 transferred from Mr Hayward’s National Bank 00. The bank accounts produced by consent through Mr Gay have the notation (presumably Mr or Mrs Hayward’s) identifying these funds as from the “General Lee”. The 00 account itself had a deposit of $51,000 on 18 September 2007. Mr Hayward says he received a cheque for that amount from Mr Michaels for the “General Lee”. I conclude that Mr Hayward’s contribution of $70,000 to the purchase of the Archibald Road property was entirely from the sale of the “General Lee”, not from accumulated profits from the firewood business.
[54] A number of questions remain. How was the mortgage principal reduced to just under $243,000 by January 2008 (a reduction of $62,000 in just three months)? Next, what was the source of the $140,000 repayment in November 2010? Finally, what was the source of the $87,000 (approximately) applied by the Bank from Mr Hayward’s 00 account to the mortgage account on his arrest in March 2011?
[55] The $140,000 was funded by three deposits to Mr Hayward’s Westpac 00 account, $57,616 and $62,085 (the Romanian transfers) deposited on 27 September
2010 and a further $27,000 deposited on 29 October 2010. The issue is the source of those funds.
The bungy operation
[56] Mr Hayward seeks to explain the Romanian transfers as being the remittance of moneys from the bungy business that he formerly operated in Mykonos. Both Mr and Mrs Hayward deposed that Mr Hayward was a partner in a bungy operation in Mykonos, Greece. Mrs Hayward has produced photographs of Mr Hayward’s involvement in the operation of such a business. Detective Gray was prepared to accept that Mr Hayward may have been involved in operating or working in such a business but considered there was insufficient evidence that he was a partner in the business as he said he was. The detective noted there was no documentary evidence to support either the establishment or the dissolution of the partnership.
[57] Mr Hayward said that the bungy business was started in 2003, but in 2005 he fell out with his partner and arranged to sell his share of the partnership to a bar owner on the beach.
[58] Mrs Hayward’s evidence about the sale of the business is ambiguous. On the first reading of her affidavit, it suggests the business was sold in 2010. However, she sought to change that when giving her oral evidence and confirmed Mr Hayward’s evidence that the bungy business was sold in 2005. Mrs Hayward was not able to give any details as to the sums involved in establishing the business or the income from it.
[59] Mr Hayward says that although it only operated during the summer season the business was successful from the start and increased substantially in 2004. He says he sent home €10,000 (NZD$16,000 approximately) and in addition brought home €5,000 (NZD$8,000 approximately) in cash in 2004. When he returned in
2005 and the partnership was terminated, the business was sold for €70,000 and he received €35,000 (approximately NZD$56,000). He says he banked €20,000 into his account with the Bank of Tiriac and brought a further €9,000 home. In answer to questions from the Court Mr Hayward clarified that the €35,000 was for his one-half share of the business.
[60] For present purposes, even with a lack of documentation, on the balance of probabilities, I am prepared to accept that Mr Hayward had a financial interest in the bungy business. However, despite that, I am not able to accept that former interest in the business can explain all of the substantial sums remitted from Romania in 2010.
[61] On Mr Hayward’s evidence he brought €24,000 in total back to New Zealand during 2004 and 2005. On the exchange rates at the time, that would have been between NZD$40,000 and NZD$50,000. That may explain the $56,750 (approximately) in Mr Hayward’s National Bank account in March 2006, but it does not explain the remittances from Romania in September 2010. Mr Hayward says they were from the business, but on his evidence only €20,000 was banked when he sold the business in 2005.
[62] The €20,000 initially deposited with the Bank of Tiriac together with some of the other euro Mr Hayward says he took back to Europe may explain the transfer and remittance of the €34,377 in 2010, but it cannot explain the remittance of the additional USD$40,000 from Romania in 2010. From the accounts produced to the Court there were two US accounts, each opened in July 2008 with US$20,000. There is no explanation for the source of those deposits. For the above reasons the sale of the bungy business does not explain them.
[63] There are further difficulties for Mr Hayward’s evidence in relation to the moneys he says he received from the bungy business. He seeks to explain the four deposits by telegraphic transfer from Australia in November and December 2008 and
January and May 2009 totalling NZD$11,667.00 as being further payments for the business. Mr Hayward says that his former partner from the bungy business Mr Sullivan was living in Australia, knew people in common with Mr Hayward and paid them those sums of money on account of further money that he owed Mr Hayward from the business. That explanation is simply not credible. Mr Hayward said he had fallen out with Mr Sullivan and had terminated his business relationship with him in
2005. Mr Hayward had no further contact with him. There was no reason for Mr Sullivan to then, three years later in 2008, begin to remit money to Mr Hayward from Australia when there was no compulsion on him to do so. Further, if he had wished to remit money to Mr Hayward, there was no reason for him to use an intermediary in the way Mr Hayward suggested. I reject Mr Hayward’s explanation for those transfers of money. Absent any other proper explanation, I consider them to be the proceeds of Mr Hayward’s drug dealing.
[64] In summary on this point, I accept that the bungy operation explains the remittance of €34,500 (approximately) or NZD$62,085.96, but it does not and cannot, explain the remittance of USD$42,000 (approximately) or NZD$57,616.91 in 2010. Nor does it explain the remittance of $11,667 from Australia.
The Auckland firewood business
[65] Mr Hayward next says the firewood business provided an explanation for some of the deposits to his various accounts.
[66] Mr Hayward says he bought a truck for $15,000 and established a firewood business which he operated from 2005, until he sold it to Mr Michaels in 2007. He says Mr Michaels wanted the truck, so he agreed to sell the firewood business (including the truck) to Mr Michaels for $120,000 in 2007. Mr Michaels paid a deposit of $20,000. Mr Hayward says the balance of $100,000 was reduced from time to time by Mr Michaels making a number of cash payments and giving him a Rolex watch. He says $20,000 is still owing. (Mrs Hayward says there is about
$30,000 still owing.)
[67] Mr Hayward’s evidence about the firewood business is generally
unsatisfactory. In the absence of documentation, I do not accept Mr Hayward’s
evidence that he sold the firewood business to Mr Michaels for $120,000. A business returning the very limited returns disclosed by Mr Hayward could not possibly support a sale price of $120,000. Mr Hayward accepted Mr Michaels had a restaurant, and was not interested in the firewood business. He said Mr Michaels bought the business for the truck which he wanted. But Mr Hayward had bought the truck for $15,000. It makes no sense for Mr Michaels to agree to pay $120,000 to obtain a truck that was worth $15,000. Even on Mr Hayward’s evidence, Mr Michaels did not operate the firewood business. The evidence leads to the conclusion that Mr Hayward simply ceased running the firewood business in 2007 when he bought the Tiki Boy Café. Mr Hayward has used his relationship with Mr Michaels in an attempt to explain deposits of money that he is otherwise unable to explain legitimately.
[68] Nor do I accept that the Rolex watch referred to as part-payment provided by Mr Michaels was provided as part-payment for the firewood business. Mr Hayward suggests that Mr Michaels provided the jewel studded Rolex watch to him as a credit for $8,000 towards payment. He says Mr Michaels said it was worth $20,000. Mr Hayward then sold the watch at auction for $49,000 in March 2009. It is simply not credible that a fraudster, such as Mr Michaels, would part with a watch worth almost
$50,000 for consideration of $8,000. The far more likely explanation is that a watch of that nature would be parted with as part of an illegal transaction involving drugs. I consider the net proceeds of sale of $42,655 (approximately) from the watch to be unlawful proceeds from drug dealing.
The Tiki Boy Café
[69] That leaves the Tiki Boy Café. I accept Mr Hayward’s evidence about the purchase and sale of the Tiki Boy Café. While the income returns from that café were limited, I accept the agreement for sale of the business in October 2009 confirms that it was sold for $59,000 plus stock.
[70] Mrs Hayward says that the net proceeds of the sale of the Tiki Boy Café, received in December 2009, were used to reduce the amount owing under the Westpac mortgage. Mrs Hayward is mistaken. The Westpac mortgage account does
not disclose any substantial reduction during the period from November 2009 through to mid 2010. The proceeds from the sale of the café were not applied to reduce the mortgage principal at that time. However, I accept that in early December
2009, $63,613 was deposited to Mr Hayward’s Westpac 00 account from the sale of the Tiki Boy Café. That sum formed part of the monies subsequently applied to reduce the mortgage when the bank closed that account in March 2011 and credited
$80,000 approximately to the mortgage account.
Conclusion – value of the benefit from significant criminal activity
[71] Given Mr Hayward’s convictions for dealing in cocaine in December 2009, the substantial amounts of money deposited to his bank account between early 2009 and during 2010, I infer that Mr Hayward was engaged in significant criminal activity, namely drug dealing during the relevant period and particularly after 1
January 2008 and up until his arrest. The number of unexplained deposits and cash purchases (even accepting there is an acceptable explanation for some deposits and purchases), lead me to further conclude that he has unlawfully benefited from that significant criminal activity. Mr Hayward retains interests in property, namely the Archibald Road property and several motorbikes.
[72] I determine the value of the benefit to be approximately $397,540 calculated as follows:
(a) Benefit from drug dealing Mr Hayward
pleaded guilty to: $285,600.00 (b) Unexplained US remittance from Romania in 2010: $57,616.91 (c) Proceeds of Rolex watch: $42,655.00 (d) Money forwarded from Australia: $11,667.89
$397,539.80
[73] In arriving at that figure, I have not taken into account the unexplained deposits to Mr Hayward’s bank account in the months after December 2009, as I accept they are likely to be proceeds of those drug deals and so will be reflected in the figure of $285,600 as the assessed benefit from those deals.
[74] Before making a profit forfeiture order, the Court must determine the maximum recoverable amount by deducting the value of any property forfeited to the Crown as a result of any assets forfeiture order. I turn to the assets sought to be forfeited.
Assets forfeiture
[75] The Commissioner seeks to forfeit the following: (a) 1983 Ducati motorcycle;
(b) 1974 Norton Commando; (c) 1970 Norton Commando; (d) 2007 Triumph Thruxton; (e) 2007 Triumph Scrambler;
(f) nine Sir Edmund Hillary commemorative coins; and
(g) $3,606.50.
[76] I return to the issue of the Ducati in a moment as Mr Finlayson claims an interest in that motorbike.
[77] The motorbikes and commemorative coins were bought with cash. The Commissioner considers that the motorbikes and coins were, on the evidence, bought by Mr Hayward at a time he had insufficient legitimate income to afford their
purchase. The Commissioner invites the Court to infer that the cash was the proceeds of Mr Hayward’s criminal activity.
[78] Mr Hayward accepts that the motorbikes were purchased with cash. He again sought to explain the source of the cash as from the sale of the Auckland City firewood business in 2007.
[79] When interviewed, Mr Hayward said that the Triumph Thruxton was purchased in January 2007, for between $13,000 and $14,000 from Auckland Motorcycles. While January 2007 is within the relevant period defined by the Act, as Detective Gray has said, the focus has been on transactions after 1 January 2008. I am not satisfied the Triumph Thruxton was purchased using proceeds of unlawful activity. There is no particular evidence that Mr Hayward is involved in serious drug offending as early as 2007. Also, at that time he had brought home cash from the bungy business.
[80] The position, however, is different in relation to the other motorbikes. They were bought during 2008 or 2009 and at a time when I infer from the evidence of the unexplained deposits to his various bank accounts that Mr Hayward was involved in serious drug offending. Both Nortons were purchased in July 2009. I accept that at the time Mr Hayward had insufficient legitimate income to finance the purchase of these motorcycles. I note they were purchased prior to the sale of the Tiki Boy Café in December 2009 and some years after the sale of the bungy business and, even on Mr Hayward’s explanation, after the sale of the firewood business.
[81] The Triumph Scrambler was purchased on 22 March 2010. Again, I draw the inference, given the proximity and the timing to the offending for Mr Hayward was convicted of and the deposits to his accounts which have not been satisfactorily explained that the purchase of the Triumph Scrambler was financed by his significant criminal activity.
[82] Similar reasoning applies to the investment coins and cash. I reject Mr Hayward’s explanation in relation to those items. He was not a credible witness. I draw the inference from the purchases (by cash) of the motorbikes, coins and the
cash on hand at a time when Mr Hayward’s legitimate sources of income and capital were limited that the assets were purchased from the proceeds of significant criminal activity.
Ducati
[83] Mr Finlayson seeks to exclude the Ducati from the forfeiture order on the basis that it belongs to him or rather, a company controlled by him, Global Trustee Company Ltd. Both Mr Finlayson and Mr Hayward have given evidence that Mr Hayward agreed to purchase the Ducati for $6,500 and paid a $2,000 deposit. The balance was due and owing and, on their evidence, title was not to pass until full payment had been made. Mr Finlayson said he retained a key for the Ducati.
[84] The Ducati was in the possession of Mr Hayward when he was arrested. In his interview he said it had a non-running engine, he got it off a friend, paid a $2,000 deposit and still owed him $4,500. The motorbike was still in his friend’s name. However, in his affidavit evidence, Mr Hayward said that he had sold the bike and was holding it to complete some minor touch-up work on it, and that the bike no longer belonged to him. Mrs Hayward gave similar evidence in her affidavit. During 2010, Mr Hayward sought to have the bike removed from registration.
[85] Mr Hayward’s actions of seeking to deregister the bike, and more importantly of on-selling it, are inconsistent with Mr Finlayson retaining ownership of the motorbike. Mr Hayward had effective control of the Ducati. He exhibited and exercised capacity to control, use and dispose of the Ducati and treated it as his own.11
[86] In contractual terms, unless there is sufficient evidence to the contrary, title passed when the contract is made, and Mr Finlayson is an unpaid vendor.12 In terms of the Act, s 58 also applies. Because Mr Hayward had effective control over the Ducati, the Commissioner is entitled to an order that the Ducati is to be treated as though Mr Hayward had an interest in it to the exclusion of Mr Finlayson. Mr
Finlayson’s rights are against Mr Hayward.
11 Solicitor-General v Bartlett [2008] 1 NZLR 87 (HC) at [27].
12 Sale of Goods Act 1908, ss 19 and 20 r 1.
[87] The Court is then required to place a value on the motorbikes. Mr Finlayson estimated the value of the Ducati to be $6,500 in its current state.
[88] As to the value of the other motorbikes, I take, from the evidence of Mr Hayward, either the bikes have been disposed of to third parties, are no longer in his possession or are broken down in parts. There is no evidence of their current value. Accordingly, I do not ascribe any particular value to them. I decline to make asset forfeiture orders in relation to the motorbikes other than the Ducati, which is valued at $6,500. The coins are valued at $5,175.
The asset and profit forfeiture orders
[89] For the reasons given above, the Commissioner satisfies the Court both asset and profit forfeiture orders are appropriate.
[90] The Ducati, the coins and the cash of $3,606.50 are to be forfeited to the
Crown. The value of the property forfeited is $15,281.50.
[91] The maximum recoverable amount under the profit forfeiture order would accordingly be $382,259. Subject to the applications for relief, that sum is to be recoverable from the sale of the Archibald Road property.
Mr Hayward’s application for relief
[92] Mr Hayward has made application for relief and to exclude the Archibald Road property from being realised in order to meet the proposed profit forfeiture order.
[93] Mr Hayward says he will suffer undue hardship, the property is not tainted property, and the value of the benefit he received from his unlawful criminal activity was limited.
[94] I have rejected Mr Hayward’s submissions as to the value of the benefit from his unlawful activity. Even on the value of the December 2009 offending alone, the unlawful benefit exceeds $285,000.
[95] As noted, the Commissioner accepts the Archibald Road property is not itself tainted property, but that does not prevent the profit forfeiture order being directed towards it. Mr Hayward’s equity in the Archibald Road property has been increased, in part at least, by the unlawful benefits from his criminal offending.
[96] That leaves undue hardship as the remaining ground for excluding the Archibald Road property. If the Court considers, having regard to all the circumstances, undue hardship is reasonably likely to be caused to Mr Hayward, the Court may exclude certain property from being realised. However, undue hardship in this context means more than ordinary hardship arising as the consequence of the
execution of the forfeiture order.13
[97] I have regard to the fact the house is ordinarily used as Mr and Mrs Hayward’s home. Mr and Mrs Hayward will lose their home if the Archibald Road property is sold to meet the profit forfeiture order. I am not able to accept that would be unreasonable, given that Mr Hayward’s interest in the equity has been increased in part at least by his criminal activity. While I accept the mortgage was reduced in part from legitimate sources, there are other sums which were ultimately applied to reduction of the mortgage from his criminal activity. Mr Hayward does not have assets other than the Archibald Road property from which he could meet the profit forfeiture order. I decline his application for relief.
Mrs Hayward’s application for relief
[98] Mrs Hayward applies for relief pursuant to ss 61–64 of the Act. She claims an interest in the Archibald Road property, the family chattels, the coins, the cash, the motorcycles and proceeds in Mr Hayward’s bank account. Alternatively she seeks relief under s 67 of the Act on the grounds of undue hardship.
The relief claimed on the basis of an interest
[99] Section 66 directs the Court to grant the relief it considers appropriate if the applicant, in this case Mrs Hayward, proves on the balance of probabilities that she
13 Lyall v Solicitor-General [1997] 2 NZLR 641 (CA).
has an interest in the property and has not unlawfully benefited from the significant criminal activity.
[100] I first address whether Mrs Hayward has proved that she has not unlawfully benefited from the significant criminal activity of Mr Hayward to which the application relates. Mrs Hayward must prove she did not, knowingly, derive a benefit from Mr Hayward’s criminal activity. Although Mr Harborow submitted otherwise, I accept Mrs Hayward’s evidence that she was unaware of Mr Hayward’s criminal activity. While I have drawn the inference Mr Hayward was involved in serious criminal activity because of the unexplained deposits to his bank accounts, the bank accounts were in his sole name. Mr Hayward was generally careful to keep bank accounts in his sole name, so that Mrs Hayward would not necessarily have had access to and information as to the funds and transactions involved with them. I also accept that, even from his legitimate business interests, Mr Hayward was, from time to time, in receipt of varying sums of cash. Also Mr Hayward had a practice of regularly buying and selling assets such as the “General Lee”, the bungy business and the café. Mrs Hayward would not have considered the cash transactions unusual.
[101] I further accept that from Mrs Hayward’s point of view the parties were living quite simply in that she worked for a clothing design business and received a modest wage. While she worked she applied her wage towards the interest payments on the mortgage. On balance, I accept Mrs Hayward’s evidence that until the arrest of Mr Hayward she was unaware of Mr Hayward’s criminal activity so that she did not knowingly derive a benefit from it.
[102] I return to the issue of whether Mrs Hayward has an interest in the property to which the application relates.
[103] I understood Mr Gay to accept the statement of principle in Fisher on
Matrimonial and Relationship Property that:14
14 Bill Atkin and ors Fisher on Matrimonial and Relationship Property (online looseleaf ed, LexisNexis, Wellington) at [5.25].
The relationship property regime created by the Act, crystallises only in the event of a future Court order or compromise. Until then, the statutory relationship property regime has no immediate effect on the conventional proprietary interests of the parties in law and equity.
See also Vergeest v Baldwin and Solicitor-General v de Bruin.15
[104] In the absence of any order or matrimonial agreement under the Act, Mrs Hayward must rely on the general equitable principles as established in Lankow v Rose16 to make out her interest in the property.
[105] In accordance with those principles, Mrs Hayward must show: (a) contributions, direct or indirect to the property;
(b) the expectation of an interest in the property;
(c) that her expectation of an interest is a reasonable one; and
(d)that Mr Hayward should reasonably expect to yield her an interest in the property.
[106] On application of those principles, Mrs Hayward has no interest in the motorbikes, nor in the commemorative coins or cash. She did not contribute, directly or indirectly to them. Although she claims an interest in other family chattels, such chattels are not the subject of any orders sought by the Commissioner. Her interest in them is unaffected.
[107] The principal issue arises in relation to Mrs Hayward’s claim to an interest in the Archibald Road property. Although Mrs Hayward is married to Mr Hayward, the Archibald Road property was bought in Mr Hayward’s sole name and remains in his
sole name.
15 Vergeest v Baldwin (1990) 6 FRNZ 284 (HC); R v de Bruin CIV-2002-404-3302, 28 May 2004 at [31].
16 Lankow v Rose [1995] NZFLR 1 (CA).
[108] Mr Gay submitted Mrs Hayward directly contributed to the Archibald Road property by paying part of the mortgage payments. I accept that submission. From approximately April 2009, Mrs Hayward began making payments to the Westpac 00 account, and from June 2009, she put in place regular weekly contributions of at least $300 a week. Her payments only ceased in June 2010 when she and Mr Hayward went overseas. When they returned, she was unable to obtain further employment and made no further direct financial contribution to the property after that date. By making those payments Mrs Hayward undoubtedly assisted in maintaining the property by helping Mr Hayward meet the mortgage payments.
[109] However, Mrs Hayward’s contributions were limited in terms of value. As noted the property was purchased for $375,000 in 2007. For a time, Mr Hayward had a tenant in the property while he and Mrs Hayward house sat elsewhere. The tenant paid rent of $23,000. On Mrs Hayward’s evidence, she contributed just under
$18,000, some $5,000 less than the tenant had paid. Further, it must be borne in mind that Mrs Hayward received the benefit of living in the home. The only evidence of other, indirect, contributions by her to the property is from her work in the Tiki Boy café, which arguably increased the value of that business. Mrs Hayward worked in the café on her days off university and during the university holidays. As noted, the proceeds of sale of that business ($63,613) were applied to increase Mr Hayward’s equity in Archibald Road property.
[110] I am satisfied that Mrs Hayward expected to have an interest in the Archibald Road property. She and Mr Hayward were married. Ultimately, the Archibald Road property was used as their family home. She expected it would remain the family home for them and their daughter. She made the contributions to the mortgage from her salary on that basis. She also helped in the Tiki Boy Café. The proceeds of sale of that business were applied to increase Mr Hayward’s equity in the Archibald Road property.
[111] In those circumstances, I consider that Mrs Hayward’s expectation of an interest in Mr Hayward’s equity in the Archibald Road property to be a reasonable one, and one to which Mr Hayward would reasonably expect to yield to her.
[112] The issue is the quantification of that interest. Arithmetical precision is unnecessary, and analogy with the Property (Relationships) Act 1976 regime is not appropriate.17 Nevertheless, the Court must do its best to reflect the value of the contributions.
[113] On the evidence, Mr Hayward’s initial contribution of approximately $70,000 was untainted (from the sale of the General Lee). The reduction in the mortgage by a further $62,000 by January 2008 was also likely to have been from a legitimate source, given the $56,000 in Mr Hayward’s bank account in 2006. Further, I have accepted his explanation for the $62,085 from Romania, and also that the $63,613 from the sale of the Tiki Boy Café was legitimate. In round figures, approximately
$260,000 of the money applied towards increasing his equity in the Archibald Road property can be seen as coming from legitimate sources. Given that approximately
$10,000 remains owing to the bank, that leaves $100,000 (approximately) as unexplained and, I infer, sourced from unlawful activity.
[114] On the evidence before the Court, Mrs Hayward’s interest in the Archibald Road property, taking the value of her contributions (both direct and indirect) from its purchase in late 2007 could not be put at higher than 20 per cent of Mr Hayward’s notional legitimate equity in the property. She cannot claim an interest in the equity which Mr Hayward gained from unlawful means. Mrs Hayward’s interest accordingly equates to approximately $52,000. The practical effect of that is addressed below.
[115] I turn to consider Mrs Hayward’s application for relief under s 67(2) on the grounds that undue hardship would be likely to be caused to Mrs Hayward if the relief is not granted.
[116] As noted, something more than ordinary hardship arising as a consequence of the execution of a forfeiture order is required. Given that Mrs Hayward’s interest in the property has been recognised and can be provided for, it cannot be undue
hardship if the property is required to be sold to meet Mr Hayward’s obligations to
17 Lankow v Rose, above n 16, at 295.
the Crown arising from the unlawful benefits he has obtained from his criminal activity.
Result/Orders
Asset forfeiture order
[117] The Ducati motorbike, commemorative coins and cash of $3,606.50 are forfeited to the Crown.
Profit forfeiture order
[118] (a) The value of the unlawful benefit is $397,540.00. (b) The maximum recoverable amount is $382.259.00.
(c) The Archibald Road property is to be realised to meet the maximum recoverable amount.
Relief
[119] From the net proceeds of sale of the Archibald Road property and after repayment of the Westpac mortgage, the Crown is to pay to Mrs Hayward the sum of
$52,000 before applying the balance to recovery of the maximum recoverable amount.
[120] Leave is reserved to apply further in the event of any issues arising out of implementation of the order.
Costs
[121] Costs to the Commissioner on a 2B basis against Mr Hayward. I make no order in relation to the applications for relief by Mrs Hayward and Mr Finlayson.
Venning J
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