Commissioner of Police v Hunt
[2020] NZHC 1692
•14 July 2020
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE
CIV-2017-443-61
CIV-2017-443-62 [2020] NZHC 1692
UNDER THE Criminal Proceeds (Recovery) Act 2009 BETWEEN
THE COMMISSIONER OF POLICE
Applicant
AND
DION JAMES HUNT
First Respondent
ADA SHARON PUE
Second RespondentANZ BANK NEW ZEALAND LIMITED
First Interested Party
LEROY JAMES HUNT
Second Interested PartyTARA LEE HUNT
Third Interested PartyCARRINGTON & YOUNG TRUSTEES LIMITED
Fourth Interested PartyANA DIONNE PUE
Fifth Interested Party
DAVID CHARLES ROSS HUNT
Sixth Interested Party
Hearing: 2 March 2020 Appearances:
J E Bourke for Applicant
R A A Weir for First Respondent
S L Abdale for Second Respondent and Fifth Interested Party N P Bourke for Second, Third and Fourth Interested Party
Judgment:
14 July 2020
THE COMMISSIONER OF POLICE v HUNT, PUE & ORS [2020] NZHC 1692 [14 July 2020]
JUDGMENT OF CLARK J
Introduction
[1] This judgment concerns applications by the first and second respondents for orders discharging restraining orders made under the Criminal Proceeds (Recovery) Act 2009 (the Act). Additionally, there is an application by the second, third and fourth interested parties for an order excluding a severable interest in property subject to a restraining order made under the Act.
[2] To avoid confusion with those respondents and interested parties whose applications are determined by this judgment, I refer to the applicant in the substantive proceedings simply as “the Commissioner”.
Procedural background
[3] An aspect of the respondents’ case is that there has been a lack of progress towards a final hearing and determination of the Commissioner’s application for forfeiture. For that reason, this background includes a level of detail that would not otherwise be relevant.
[4] An application without notice for a restraining order was made by the Commissioner of Police on 11 September 2017. On 21 September 2017 the application was granted and the Court ordered that the property to which the order applied was not to be disposed of, or dealt with, other than as provided in the order. The order continued:
…
The property to which this order applies is as follows:
(a)All interests in the lifestyle and vacant property at 180 Foreman Road, Waitara, New Zealand registered in the name Dion James Hunt and described in certificate of title 476791, legal description Lot 1 DP 420181. (First Foreman property).
(b)All interests in the dwelling and pastoral property at 180 Foreman Road, Waitara, New Zealand registered in the names Leroy James
Hunt, Tara Lee Hunt and Young and Carrington Trustees Ltd as the Trustees for the Hunt Family Trust and described in certificate of title 476792, legal description Lot 1 DP 420181, which is shown as having a mortgage over it held by ANZ Bank New Zealand Limited (Second Foreman property).
(c)All interests in the property at 31 Leyton Place, Nawton, Hamilton registered in the name Dion James Hunt and described in certificate of title SA15C/587, legal description Lot 12 DPS 17247, which is showing as having a mortgage over it held by ANZ Bank New Zealand Limited (Nawton property).
(d)$4,825.40 cash (the cash). The cash is made up of $3,000.00 in $50.00 and $20.00 notes found on the kitchen bench at a Foreman Road property; $1,160.00 found in a wallet; $498.00 in notes and coins found in a handbag; Just over $100.00 in coins found in a sock.
Date: 21 September 2017
…
Note
1.As this order has been made without notice to you, it will cease to be in force on 28 September 2017, unless before it expires an application for another restraining order is made on notice in relation to the same property to which this order relates, in which case this order continues in force until the application on notice is finally disposed of. At the hearing of the application on notice you or your counsel or solicitor may appear and adduce evidence in opposition to that application.
[5] The address recorded in order (a) is accepted to be incorrect. The correct address for the “First Foreman property” is 134 not 180 Foreman Road.
[6] On 27 September 2017 the Commissioner applied on notice for restraining orders. An application for forfeiture was also made.
[7] At a first conference on 24 October 2017 the matter was scheduled for a timetabling conference which took place before Simon France J on 20 November 2017. The filing of notices of opposition and evidence was timetabled. The Judge resisted the tight timetable the respondents sought. He was not satisfied the restraining orders were causing any difficulties. They only prevented dealing in the property. On the other hand, the proper presentation of the Commissioner’s case for restraint should not be unduly constrained. No steps were timetabled for the forfeiture application except that a telephone conference was to be scheduled one month after determination of the restraining orders application.
[8] On 8 December 2017 the respondents filed notices of opposition and the application for restraining orders was scheduled to be heard on 2 July 2018.
[9] In February 2018 the Commissioner applied for examination orders. On 21 March 2018 Thomas J made orders for examination under s 106 of the Act. Service was effected on the first and second respondents who, as the order notified, were to be examined between 3 and 6 April 2018.
[10] The first and second respondents then commenced judicial review proceedings in relation to that order. On 17 April 2018 Cull J issued a minute confirming the High Court had no jurisdiction to entertain an application to judicially review orders of the High Court.1
[11] In a joint memorandum of counsel filed 23 May 2018 the parties sought an adjournment of the examination scheduled for 2 to 4 July 2018, until after the criminal trial. The examination hearing was vacated on 29 May 2018 with the matter to be called by way of telephone conference on 19 November 2018.
[12] On 14 November 2018 counsel for the Commissioner filed an updating memorandum rehearsing the sequence of events to that point and advising the status of the criminal proceeding:
(a)A trial date in the District Court was yet to be set.
(b)The next call over was scheduled for 11 December 2018.
(c)A trial date of 26 August 2019 was proposed but was yet to be confirmed.
(d)The respondents had appealed a number of pre-trial matters. The decision of the Court of Appeal was awaited at the time of filing the memorandum.
1 Pue v Commissioner of Police HC New Plymouth CIV-2018-443-20, 17 April 2018 [“Minute of Cull J”].
(e)Although the examination order made by Thomas J on 21 March 2018 was extant, the Commissioner was mindful of Cull J’s observation that the Court of Appeal had upheld a High Court decision to adjourn examination of the defendants until after their criminal trial in order to preserve their fair trial rights.2 Accordingly, the Commissioner acknowledged the likely adjournment of the examination hearing, but suggested a timetable be set for the filing of the respondents’ evidence in support of their opposition to the Commissioner’s applications for restraining and forfeiture orders.
(f)Given all of the circumstances however the Commissioner considered that “holding off” progress of the applications might be appropriate until determination of the criminal proceedings.
[13] The respondents and all interested parties agreed. Accordingly, the hearing of the applications was adjourned by consent but to be called on a date to be set by the registrar.
[14]As at 9 September 2019 when the matter was called:
(a)Pre-trial applications (propensity, challenge to search warrant, change of venue, admissibility of conviction, and challenge to interception warrant) had been heard and the trial had a firm date of “first trial in session beginning 28 April 2020”.
(b)Counsel for the respondents and all interested parties (except ANZ Bank), voiced concern in a joint memorandum about the lack of progress with the opposed restraining and forfeiture order applications. Noting that two years had passed without progress, counsel sought to have the application for a restraining order against all property struck out and discharged or, in the alternative, discharged except in relation to the bare farmland owned by Dion Hunt, the first respondent.
2 Minute of Cull J, above n 1, at [5] citing Commissioner of Police v Burgess [2012] NZCA 436.
[15] Telephone conferences were convened on 9 September 2019, 29 October 2019 and 1 November 2019. Beyond the return of two vehicles, a tractor and accessories all of which had been retained but were not the subject of the restraining order, there had been no resolution of matters. The upshot was the timetabling of these applications and notices of opposition.
The applications
[16]There are three applications:
(a)an application by the second, third and fourth interested parties for an order revoking the restraining order in relation to all interests in the dwelling and property at 180 Foreman Road, Waitara (“the second Foreman property”);3
(b)an application by the first respondent for an order discharging the restraining order in respect of all interests in the property at 31 Leyton Place, Nawton (the “Nawton property”);4 and
(c)an application by the first and second respondents for an order discharging the restraining order in respect of cash in the sum of
$4,825.40 (“the cash”) and any interest derived on the sum since being restrained.5
[17]I turn to each application.
“Second Foreman Property”
Applicants’ position
[18] By their application dated 30 September 2019 the second, third and fourth interested parties (the applicants) apply to vary the restraining order as it relates to all
3 See Restraining Order (b).
4 See Restraining Order (c).
5 See Restraining Order (d).
interests in the dwelling and pastoral property at 180 Foreman Road. The application is made in reliance on ss 33, 34 and 35 of the Act.6
[19] While the application itself simply seeks “revocation of the restraint” applying to the second Foreman property the written submissions of counsel for the applicants make it clear that the second, third and fourth interested parties apply for exclusion of a severable interest under s 30 of the Act. Mr Bourke submitted that as the property is registered in the names of the applicants they plainly have an interest; the Commissioner has filed no evidence suggesting the applicants are involved in the qualifying instrument of forfeiture of offending to which the restraining order relates; and the Commissioner does not suggest the applicants have unlawfully benefited from the significant criminal activity to which the restraining order relates.
[20] In oral argument Mr Bourke submitted the Commissioner’s reliance on the test for control of property is misplaced. The relevant question is not whether the first respondent has effective control of the property but whether the grounds for severance under s 30 of the Act are made out. Mr Bourke submitted the applicants met the legal test for exclusion of a severable interest under s 30(2). As the applicants have demonstrated on the balance of probabilities their interest in the property, and that they have not unlawfully benefited from the significant criminal activity to which the order relates, and that they were not involved in the qualifying offence to which the order relates, the Court must exclude the severable interest.
Commissioner of Police
[21] The Commissioner’s notice of opposition dated 21 October 2019 opposes revocation of the restraining order (that being the order sought in the application) on the grounds that the first respondent has effective control over both the Foreman properties and the respondents have unlawfully benefited from the alleged significant criminal activity from which they have generated income and, in turn, purchased, maintained and improved the property. The detailed written submissions on behalf of
6 I note that the application was not, as it was required to be, in form 6 of the Criminal Proceeds (Recovery) Regulations 2009. Regulation 5 states the application “must” be in the form specified. The Commissioner did not take the point. Nor do I take the point any further in light of the conclusions ultimately reached.
the Commissioner focus on provisions in the Hunt Family Trust Deed demonstrating the first respondent’s capacity to control the Trust and his interest in this property. The essential argument is that given the first respondent’s effective control and substantial interest in the property “it is difficult to see how the interested parties can maintain their position”.
[22] The Commissioner accepts, however, that the second, third and fourth interested parties have an interest in the property. It is also accepted they are not involved in any significant criminal activity to which the restraining order relates. But the Commissioner submits the respondents have unlawfully benefited from their significant criminal activity and through the first respondent there has been an unlawful benefit to the applicants.
Discussion
[23]The operative provision is s 30 of the Act. Section 30 provides:
30 Excluding severable interest from restrained property
(1)A person (other than the respondent) who has a severable interest in proposed restrained property or restrained property may apply to the court that is to consider, or has considered, the application for a restraining order to have that person’s severable interest excluded from—
(a)a restraining order that the court may make; or
(b)a restraining order the court has made.
(2)The court must exclude a severable interest from proposed restrained property or restrained property at, or after, the time a restraining order is made if the applicant proves on the balance of probabilities—
(a)that the applicant has an interest in the property to which the restraining order relates; and
(b)if the order was or is to be made under section 24 or 25, that the applicant has not unlawfully benefited from the significant criminal activity to which the restraining order relates; and
(c)if the order was or is to be made under section 26, that the applicant was not involved in the qualifying instrument forfeiture offence to which the restraining order relates.
(3)The court may exclude a severable interest from proposed restrained property or restrained property at, or after, the time a restraining order
is made if it considers that it is in the public interest to do so, having regard to all the circumstances, including, without limitation,—
(a)any undue hardship that is reasonably likely to be caused to any person by the severable interest in property being made or having been made restrained property:
(b)the gravity of the significant criminal activity or qualifying instrument forfeiture offence with which the property in which the person has a severable interest is associated:
(c)the likelihood that the interest will become subject to a forfeiture order.
[24] I agree with counsel for the applicants. The test for “effective control over property” as demonstrating a relevant interest in the property so that it may be subject to a restraining or profit forfeiture order,7 is not relevant to a determination of whether a person, other than the respondent, has a severable interest in property such that the person may apply to have that interest excluded from a restraining order under s 30(1).
[25] The issue raised by this application is whether the applicants have a severable interest in the second Foreman property. “Severable” is to be given its natural and ordinary meaning namely “able to be severed”.8 The principle that an interest must be “affixed to or form part of an existing interest” before it can be severed was applied in Commissioner of Police v Briggs9 and, more recently in Commissioner of Police v Johnson in which Lang J took a view of the issue before him10 that was similar to the view Ellis J had taken of the issue before her in Briggs.
[26] In expressing concern about the prospect that innocent parties could not seek exclusion under s 30, Ellis J made the following observations:
[42] The proposition that the position of innocent third parties with such a strong and clear interest in tainted property cannot be protected at the restraining order stage is intuitively unattractive. That unattractiveness might be thought to justify the exercise of the Court’s discretion against granting the order sought.
[43] If, on the other hand, the view I have formed about the property’s tainted status prevails at the asset forfeiture stage (bearing in mind the apparently higher standard of proof) then the Court will have no choice but to
7 Criminal Proceeds (Recovery) Act 2009, s 58.
8 Commissioner of Police v Johnson [2020] NZHC 1317 at [50].
9 Commissioner of Police v Briggs [2012] NZHC 2324.
10 Above n 8, at [51].
order the property forfeit. Because the third parties’ interests would still not be severable the only relief that could (and must) be ordered is that the Crown is to pay compensation to those third parties in the sum of the value of their interests in the property. As I understand it, there might be at that point scope for arrangements to be made for those third parties effectively to repurchase the property from the Official Assignee.
[44] On balance, it seems to me that I am required to make the restraining order sought. Restraint now does not prevent the issue of whether the property is tainted being revisited at the asset forfeiture stage and, even if its status is maintained, third party interests will be protected in the fashion allowed by the Act. The only real benefit to [the registered proprietors of a restraining order not being made at this stage is that there would be no impediment in the interim to the sale of the property.] But, of course in light of my finding that the property is tainted, restraint would certainly be justified if there was any suggestion that a sale was in prospect.
[27] In Briggs the parties applying under s 30 to have their interests excluded were the registered proprietors of a parcel of land on which a member of their family, Mr Briggs, had built a second house. The land was not subdivided and there was no separate title. Mr Briggs paid for the construction of the house using funds derived from criminal offending. Ellis J concluded that the new house, and therefore the entire property was partly derived from significant criminal activity. Legal title remained with the registered proprietors but the precise nature of an equitable interest held by Mr Briggs remained “inchoate and unknown”. Therefore, while the nature of the registered proprietors’ interests were both “indisputable and capable of clear legal definition” there was no other interest in the property from which the interests could be severed and s 30 could not apply.11
[28] In Commissioner of Police v Johnson, Mr Johnson had withdrawn a large sum of money which the Commissioner believed was derived from illegal activity. The money was given to his parents who used it to repay a loan secured by a mortgage over their property. The Commissioner sought and was granted a restraining order over the property. Citing Commissioner of Police v Briggs Lang J dismissed the application by Mr Johnson’s parents for exclusion of their interests.
[29] The present applicants are trustees of the Hunt Family Trust (the Trust). The second, third and sixth interested parties and their children are also final beneficiaries under the Trust deed although I accept the Commissioner’s submission that the first
11 Commissioner of Police v Briggs, above 9 , at [41].
respondent as “[a]ppointor” under the trust deed may exclude or appoint any person as a beneficiary and may appoint new trustees and remove trustees providing there are two trustees at any time.
[30] The property was transferred from the first respondent to the Trust in April 2014. The powers of the first respondent, as “appointer”, do not amount to a legal or equitable interest over the property nor do they amount to a right, power or privilege in connection with the property, but a right or power in relation to the Trust. As “appointer”, the first respondent does not directly have a right or power over the property itself.
[31] The applicants claim a severable interest over the whole property but, as in Briggs, there is no other interest in the property from which the applicants’ interest may be severed at the relevant time, that is, when the Commissioner applied for a forfeiture order.12 Accordingly, the application must be dismissed.
[32] For completeness I note that even if the applicants’ interest was severable the three limbs of s 30(2) would have to be satisfied.
[33]Under the Act an “interest” in relation to property of any kind means:13
(a)a legal or equitable estate or interest in the property; or
(b)a right, power, or privilege in connection with the property.
[34] As beneficiaries the applicants have an equitable interest in the property. As trustees they also have a right or power in connection with the property. Thus, the applicants satisfy the first of the three limbs of s 30(2) in that they have proved on the balance of probabilities they have an interest in the property to which the restraining order relates.
[35] The applicants also satisfy the third limb of subs (2). The Commissioner accepts they are not individually involved in any offences to which the restraining order relates.
12 Commissioner of Police v Johnson, above n 8, at [53].
13 Section 5.
[36] The applicants have not, however, satisfied the second limb. They have not proved on the balance of probabilities that they have not unlawfully benefited from the significant activity to which the restraining order relates. The original Foreman property owned by the first respondent was subdivided and split into two parcels of land in 2012. As stated earlier, one parcel, the second Foreman property, was sold to the Trust on 17 April 2014. The first Foreman property remained in the name of the first respondent and is mortgage free. The second Foreman property was purchased by the Trust for $316,390.00. As at 1 September 2013 it had a valuation of $720,000.
[37] On 14 June 2016 the properties were refinanced with loans from the ANZ Bank. There are two separate loans: one for $300,000 and the second, $28,000. The two loans were drawn from the Trust ANZ account and used to pay an existing TSB loan. The first respondent’s effective control over both properties is relevant at this point. At the stage when the investigation was completed both respondents were living at the second Foreman property.
[38] I accept that the evidence shows the applicants have derived an unlawful benefit in terms of s 30(2)(b). Through the first respondent and his significant criminal activity, there has been unlawful benefit to the applicants.
The Nawton property
The parties’ respective positions
[39] The first respondent applies to have the restraining order discharged on the grounds that the value of all the property restrained is grossly disproportionate to any profit from the alleged offending and that the disproportionality constitutes undue hardship for the first respondent.
[40] In written submissions counsel for the first respondent makes the following essential points:
(a)The total net value of the restrained property is $874,218. This sum contrasts to the Commissioner’s assertion that withdrawn cash in the
sum of $30,038.09 was unaccounted for at the time the application for restraining orders was made.
(b)On the Commissioner’s own evidence, the alleged profits (approximately $59,000 of cash unaccounted for) are at the “high point” in contrast to the net value of the restrained property (approximately $874,218). The net effect of the applications for variation is that the restraining orders in relation to the first Foreman property would remain and the equity in that property ($166,000) more than adequately secures what the Commissioner claims as “the unexplained cash”.
(c)The figures show that the current restraining orders are grossly disproportionate, even at the high point of $59,000, a figure that is not in any event accepted by the first respondent.
[41] The Commissioner’s position is that there is no disproportionality. Based on intercepted communications $55,000 has been spent on renovations at the property. The Commissioner alleges that the funds used to pay for the renovations have been sourced from cash obtained through the manufacture and sale of methamphetamine.
[42] The Commissioner’s written submissions began with a reminder of the purpose of the Act and the nature of the restraining order as a “holding device” of limited duration. The assistance potentially afforded by the written submissions was compromised somewhat by the attribution of quoted passages from case law, to the wrong authorities.14
Discussion
[43] Restraining orders are indeed temporary measures. Restraining orders are “effectively interim orders of limited duration” which may be made “to preserve
14 The written submissions were not prepared by Mr Laurenson who appeared at short notice on the day of the hearing. I adjourned the matter in the morning for some 30 minutes to enable Mr Laurenson to return to his office in order to obtain specific instructions in relation to matters which arose during the course of the hearing and in relation to which Mr Laurenson was not fully briefed.
property while the Crown is gathering evidence to support an application for forfeiture”.15
[44] Restraining orders may lead to forfeiture orders but to obtain a forfeiture order the Commissioner must file and serve a further application and the Court cannot make the order unless it is satisfied the relevant property is tainted property.16
[45] Before making a restraining order, the judge must be satisfied “there are reasonable grounds to believe” the property is tainted property or that the relevant person “unlawfully benefited from significant criminal activity”.17
[46] It is sometimes the case that restraining orders restrain assets of a value well beyond the value of the property that might eventually be subject to forfeiture orders.18 It has been observed that an entire house may be tainted even though it was only partially acquired from significant criminal activity.19
[47] It is to be expected that between the restraining order stage and the hearing of an application for forfeiture, investigations will be ongoing but there is no requirement that the Commissioner “sustain” restraining orders.20
[48] The evidence relied upon by the Commissioner is contained in the affidavit of Detective Mark Sutton sworn on 6 September 2017 in support of the Commissioner’s application for restraining and forfeiture orders.
[49] As a result of investigations by the New Plymouth Organised Crime Group the first and second respondents have each been charged with:
(a)conspiracy to deal in methamphetamine;
15 Vincent v Commissioner of Police [2013] NZCA 412 at [45].
16 At [45](a) referring to sub-pt 3 of the Act dealing with civil forfeiture orders.
17 Vincent v Commissioner of Police, above n 15, at [45](b) referring to ss 24 and 25 of the Act.
18 Commissioner of Police v Singh [2012] NZHC 344 at [46].
19 Commissioner of Police v Jiang [2016] NZHC 2782 at [19] and Commissioner of Police v Doorman HC Nelson CIV-2010-442-169, 15 December 2011, upheld in part in Doorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173 at [36].
20 Commissioner of Police v Debreceny [2016] NZHC 3152 at [19].
(b)supply methamphetamine; and
(c)possession of methamphetamine for supply.
[50] When the first and second respondents were released in (respectively) 2008 and 2007 from custodial sentences for previous methamphetamine offending, they had assets of $62,535.35 in cash and a yacht valued at $21,000.21
[51]The first respondent purchased the Nawton property in January 2015 for
$390,000. As at March 2017, $304,233.47 was owing to the ANZ Bank on the mortgage. Detective Sutton deposes to the police noting renovations were in progress on the bottom floor of the two-storey property when a search warrant was executed. Detective Sutton deposes to the following further matters:
(a)From the accounts viewed as at the day the affidavit was sworn there was no evidence that the money for the renovations was from a legitimate source and it was “likely that cash from the sale of methamphetamine was used to finance the alterations to the Nawton property”.
(b)No purchases or payments to tradesmen or withdrawals from the first respondent’s bank accounts were associated with renovations of the scale being undertaken at the property. In total, since 2010, $45,116 had been withdrawn and Detective Sutton had identified $15,077.91 in cash spending outside the accounts, leaving unaccounted cash withdrawals of $30,038.09.
(c)The timeframe over which the cash had been withdrawn led to the belief the cash was spent rather than re-banked, If re-banked only $25,325 had been identified as cash banked into the respondents’ accounts. (I note that there are imprecise references in Detective Sutton’s affidavit to the “respondents’” and “respondent’s” accounts with no
21 The respondents had been ordered to forfeit cash and assets to a value of $711,000.
identification at times as to which respondent the particular evidence refers.
(d)Ultimately, Detective Sutton “[did] not believe the [r]espondents have used the cash withdrawals to meet the $55,000 in renovations completed at the Nawton property” that being the figure stated in the intercepted calls. Therefore, it was believed the respondents used cash from beyond their bank accounts to pay for the renovations and it was believed the cash was sourced to the sale of methamphetamine.
[52] The first respondent’s yearly gross income for the years ending 31 March 2012 to 31 March 2018 averaged approximately $54,000. The second respondent’s yearly gross income for the years 31 March 2012 to 31 March 2015 was declared to be
$67,214. No income has been declared since 2015.
[53] Before leaving the Commissioner’s evidence, I record that a further affidavit was filed on behalf of the Commissioner on 26 February 2020. The affidavit, sworn by Anna Swaine, a forensic accountant attached to the Central Asset Recovery Unit, provided the results of her analysis of the financial affairs of the first and second respondents that Ms Swaine had been asked to complete as part of the police investigation. The analysis covered the period of financial activity beginning seven years prior to the date on which the application for the restraining order was made.22 The purpose of the affidavit was to convey the findings of the financial analysis as at February 2020.
[54] Ms Abdale objected to the evidence on the basis it had been filed after the “close of pleadings” but also because the evidence was technical, and Ms Abdale was in no position to take instructions. The solicitor for the Commissioner had advised Ms Abdale and Mr Weir that an affidavit was forthcoming and was in turn advised by counsel that an application for leave would be required. Ms Swaine’s affidavit had been filed without any application to do so.
22 Criminal Proceeds (Recovery) Act 2009, s 5; the “relevant period of criminal activity” being from 7 September 2010 to 6 September 2017.
[55] Following the brief adjournment to which I have referred Mr Bourke confirmed that Ms Swaine’s evidence was not required for the purpose of the hearing of the three applications. For the purpose of the interlocutory hearings the Commissioner relied on Detective Sutton’s evidence.
Discussion
[56] The first respondent adduced no evidence of hardship. Mr Weir submitted “the disparity between alleged profit/taint in itself can be a measure of hardship”. Mr Weir argued the Commissioner had merely sought to restrain all property owned by the first respondent or in which he had an interest regardless of the benefit (which is disputed) from the alleged criminal activities and the greater the disparity the hardship.
[57] For the following reasons I am not persuaded that this application should be granted.
[58] First, the observations of Whata J in Commissioner of Police v Mihaka to which Mr Weir refers are made in the context of a forfeiture order.23 The issue before Whata J was whether, given Mrs Mihaka’s personal circumstances, a property held by the Mihaka Family Trust should be excluded from a profit forfeiture order to the extent of Mrs Mihaka’s share in the property.24 In that context Whata J stated in the passage on which Mr Weir relies:
[22]It is common ground that the observations of Collins J in Ranga
provide helpful guidance in this case. He stated:
[38] In Lyall v Solicitor-General the Court of Appeal held that undue hardship should be assessed in light of the legislative policy that wrongdoers should be stripped of proceeds of crime. Therefore any disproportion between a respondent’s offending and the value of the property sought to be forfeited must be gross or severe before relief can be justified.
[39] Decisions of this Court recognise that a regime which allows the Crown to seize all the equity in a property, when only a fraction of that has been built up by unlawful means, is harsh, and effectively operates as an additional punishment to that already imposed through the criminal justice system. However, in cases where only a fraction of the property is “tainted” by the proceeds of crime, the extent of
23 Commissioner of Police v Mihaka [2017] NZHC 1474.
24 At [3].
legitimate equity may be taken into account when assessing undue hardship (footnotes omitted).
[59] Those principles are inapplicable in the present context of an application to discharge a restraining order. The arguments advanced on behalf of the first respondent as to “disproportionality” will be relevant to and considered at the hearing of the Commissioner’s application for forfeiture orders. At that time the Court will have the benefit of the Commissioner’s completed evidence and the evidence of the respondents in reply.
[60] Secondly, I do not accept s 3(1)(b) of the Act is to be read as Mr Weir suggests. Mr Weir submitted s 3(1)(b) is of central importance because it relates to the fundamental issue of proportionality.
[61] Section 3 is the purpose provision. It provides that the primary purpose of the Act is to establish a regime for forfeiture of property that has been derived from significant criminal activity or “that represents the value of a person’s unlawfully derived income”. This broad statement of the primary purpose of the legislation is not to be confused with the specific provisions pursuant to which restraining orders are sought and made. Those specific provisions are ss 24 and 25. I have set out the principles that govern their application. There is no requirement for “proportionality” at the “restraint” stage. The application for a restraining order is made at a very preliminary stage in the police investigations and on the basis of “reasonable grounds” to believe the property is tainted property rather than on the basis of proof of either the “significant criminal activity” or the extent of the “tainted property”.25
[62] The first respondent has not established that the discretion the Court undoubtedly has to vary or discharge a restraining order should be exercised in this case.26
25 As those terms are defined in ss 5 and 6 of the Act.
26 See for example Commissioner of Police v Burgess [2015] NZHC 1008; Commissioner of Police v Burgess [2015] NZHC 2026 and Commissioner of Police v Yan [2015] NZHC 2544.
The Cash
[63] On 18 October 2019, the first and second respondents applied to have the restraining order in respect of the cash sum of $4,825.40 discharged on the grounds the value of all the property restrained is grossly disproportionate to any profit from the alleged offending and that the disproportionality constitutes undue hardship for the respondents.
[64] The further ground is that the restrained property has not been derived from or tainted by criminal activity:
(a)The $3,000 found in an envelope on the kitchen bench was paid by Craig McEldowney on 26 July 2017 for the purchase of the second respondent’s Ford Mondeo vehicle.
(b)The $498 in notes and coins found in the second respondent’s bag came from her winnings at the casino in Hamilton.
(c)The $1,160 in notes found in the first respondent’s wallet came from the balance of funds withdrawn as cash from his ANZ bank account on 21 October 2016, deposited into his account as a loan from Central Finance, New Plymouth on 20 October 2016 for the renovation of the Nawton Property.
[65] Mr McEldowney swore an affidavit on 17 October 2019. He deposed to knowing the first respondent through work, although they had not been in contact with each other for approximately two years. He did not know the second respondent personally. He has never met her but “know[s] of her”. Mr McEldowney says he needed a car for work and the first respondent said his partner was going to sell hers and Mr McEldowney agreed to purchase it for $3,000 which he would pay over time. Mr McEldowney had the car for about a month before he paid for it in full. He did so by driving to the first respondent’s place on 26 July 2017 and handed him an envelope containing $3,000 in notes which he had recently earned in a “large gambling win”.
[66] In the written submissions of the solicitor for the Commissioner the following ambiguous statement appears:
Submissions with respect to this aspect will be advanced following hearing. However, in short the [Commissioner] submits … (emphasis added)
[67] The thrust of the written submissions that followed was that methamphetamine had been located when police executed a search warrant at the second Foreman property; intercepted communications showed the respondents organised and supplied methamphetamine to Tony Pue and the cash located during the search was acquired or derived in whole or in part from the respondents’ drug dealing. It was found at the second Foreman property where the respondents were living and at which the respondents produced and stored methamphetamine before supplying it.
[68] The Commissioner did not refer to Mr McEldowney’s evidence which conflicts with Detective Sutton’s statements of belief. Ms Abdale argued that, as the Commissioner has not challenged Mr McEldowney’s evidence, his evidence should be persuasive.
[69] Ms Abdale has a point. However, the point is more appropriately taken at the actual hearing of the on notice application for restraining orders. The present applications to vary are directed to an order that was made without notice. Notwithstanding the passage of time, the matter has not advanced beyond the most preliminary stage. I return to that point at the end.
[70] I am satisfied the restraining order ought not to be discharged or varied in relation to the cash. Since September 2017 when the order was made, progress towards the hearing of the on notice application has been interrupted by the various agreements to adjourn and the parties’ agreement to put the matter “on hold” pending the criminal trial. In that context it is premature to vary the orders in the manner sought when the arguments advanced in support of variation (including those at [64](b) and
(c) above) can be made at the hearing of the application.
[71] It may well be that the Commissioner wishes to cross examine Mr McEldowney on his evidence. He has not said so, but cross examination can take place in the context of an application for restraining orders.
[72]The application is dismissed.
Result
[73]For the foregoing reasons the three applications are dismissed.
[74]I make the following observations about delay.
[75] As at 2 March 2020 when these applications were heard the criminal trial was scheduled to be the first trial in the session beginning 28 April 2020. That date will have been disturbed by the adjournments to court proceedings resulting from the global pandemic but I have no knowledge of the current state of play.
[76] The procedural background27 courses the truncated progress towards a hearing of the on notice application for restraining orders. The respondents acquiesced in the delay which, as at September 2019 when the matter was called, it seems they relied upon when they signalled applications to strike out28 although of course the applications ultimately filed were framed differently.
[77] The delay is concerning. I observe that the Commissioner is not on solid ground in assuming an indefinite “holding position” in reliance on Commissioner of Police v Burgess.29 The Court of Appeal did not state that in every case, examination must be delayed until after the criminal trial has occurred. Rather, “[w]hat is required is a careful analysis of the matters about which the Commissioner wishes to examine the potential examinee and the likely impact of answering those matters on the subsequent criminal trial”.30 I do not understand the necessary assessment and analysis to have been undertaken in this case.
27 Paragraphs [3]–[15] above.
28 See [14](b) above.
29 See above [12](e) and (f).
30 Commissioner of Police v Burgess above n 2 at [63].
[78] Without knowing the timetable for the next steps I am in no position to take the matter further. But I bring to the Commissioner’s attention the fragility of a continuing “holding position” even with the respondents’ acquiescence.
Karen Clark J
Solicitors:
Crown Solicitor, New Plymouth, for First Respondent
Carrington Young & Ussher, New Plymouth for Second Respondent and Fifth Interested Party
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