Commissioner of Police v McEnirney
[2023] NZHC 2697
•27 September 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2020-470-60
[2023] NZHC 2697
BETWEEN THE COMMISSIONER OF POLICE
Plaintiff
AND
THOMAS SAMUEL MCENIRNEY
Defendant
AND
LISA CATHERINE MCENIRNEY
Interested Party
AND
ASB BANK LIMITED
Interested Party
Hearing: 27 July 2023 Counsel:
R Jenson for Plaintiff
W T Nabney for Defendant and Interested Party
Judgment:
27 September 2023
JUDGMENT OF ISAC J
[Application for forfeiture of criminal proceeds]
Introduction and the issues
[1] In 2021 the respondent, Mr Thomas McEnirney, pleaded guilty to a range of charges involving the sale of the Class B controlled drug MDMA and prescription medicines (mainly anabolic steroids) on an online drug marketplace.1 The Commissioner of Police now seeks to recover proceeds of that illegal activity.
1 Mr McEnirney was sentenced to two years and three months’ imprisonment (R v McEnirney [2021] NZDC 17934), and his appeal against that sentence was dismissed (McEnirney v R [2021] NZHC 2732).
THE COMMISSIONER OF POLICE v MCENIRNEY & ORS [2023] NZHC 2697 [27 September 2023]
[2] On 8 February 2023, the Commissioner applied for asset and profit forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (the Act) in respect of the following property:
(a)the parcel of land at 30 Greerton Road, Tauranga, identifier SA42B/59,
South Auckland Land Registration District; and
(b)funds of $20,759.40 in an ASB bank account, together with any interest.
[3] The Commissioner submits that the above property is tainted because the proceeds of Mr McEnirney’s drug dealing business were used to pay the mortgage over the Greerton Road property and to derive the funds in the bank account. The value of the unlawfully derived benefit is said to be $762,282.71. The Commissioner’s application is supported by affidavits of 31 January and 29 June 2023 by Mr Warwick Milham, a detective with the New Zealand Police attached to the Tauranga based unit of the Waikato/Bay of Plenty Asset Recovery Unit.
[4] The sole opposition to the forfeiture order now is by Mr McEnirney’s wife, Ms Lisa McEnirney.2 She seeks relief against forfeiture under ss 66 and 67 of the Act in relation to her half share of the Greerton Road property. Ms McEnirney says she was only aware that her husband was providing steroids to some of his friends at the gym, and had no idea about the true scale of his operation. She did not, therefore, knowingly derive a benefit from his offending. In any event, Ms McEnirney submits that she and her children will suffer undue hardship if her interest in the family home is forfeited. Her application for relief is supported by an affidavit dated 5 May 2023.
[5] A contested evidence hearing was held on 27 July 2023, and Ms McEnirney and Detective Milham were called to give evidence and were cross-examined. Following the hearing, I gave counsel leave to file closing submissions. Given Mr and Ms McEnirney by their counsel had effectively conceded the application for an asset forfeiture orders, the Commissioner advised that he was content for the application to be dealt with on that basis (without need for a profit forfeiture order).
2 While Mr McEnirney initially applied for relief from the forfeiture orders, he has since abandoned that application.
[6]Two main issues fall to be determined:
(a)Did Ms McEnirney knowingly derive a benefit from her husband’s significant criminal activity?
(b)If so, will Ms McEnirney suffer undue hardship as a result of the forfeiture of her interest in the family home?
The application for forfeiture orders
[7] I first consider the Commissioner’s application for forfeiture orders which as I have noted is unopposed.
[8] In terms of s 50(1) of the Act, I am satisfied on the balance of probabilities that the property in question is tainted property. Tainted property means any property that has wholly or in part been acquired as a result of, or derived from (whether directly or indirectly), significant criminal activity.3 Given his guilty pleas and convictions, I am clearly satisfied that Mr McEnirney was engaged in significant criminal activity.4 I am also satisfied, on the basis of Detective Milham’s unchallenged evidence, that the proceeds of that significant criminal activity were applied to mortgage repayments on the family home, and that the funds in the ASB bank account were also derived from significant criminal activity.
[9] Detective Milham’s evidence is that a forensic analysis of the parties’ bank records shows that between 4 February 2018 and 24 October 2019—the period in which Mr McEnirney was unemployed and during which Ms McEnirney was on parental leave—Mr McEnirney’s bank accounts received unexplained income by way of cash deposits and unknown direct credits totalling $341,467.53. Of that income,
$104,364.18 was received into Mr and Ms McEnirney’s shared ASB account, a revolving credit account. Funds from these bank accounts were applied toward the
3 Criminal Proceeds (Recovery) Act 2009, s 5(1).
4 Section 6(1). Both subs (1)(a) and (b) are satisfied, as supply of Class B drugs carries a maximum penalty of 14 years’ imprisonment, and it is clear from Detective Milham’s analysis of the couple’s finances that the proceeds of Mr McEnirney’s drug dealing well exceeded $30,000.
mortgage. Detective Milham’s evidence indicates that approximately $160,000 of the principal loan had been repaid by July 2020.5
[10] It also follows that I must make an order that the tainted property vests in the Crown absolutely and is in the custody and control of the Official Assignee.6 I make those orders.
Did Ms McEnirney unlawfully benefit from significant criminal activity?
[11] I now turn to consider Ms McEnirney’s application for relief from the forfeiture order.
[12] Ms McEnirney owns a 50 per cent interest in the property at 30 Greerton Road. Under s 66 of the Act, the Court must grant her relief that it considers appropriate if she proves on the balance of probabilities that she has not unlawfully benefited from her husband’s significant criminal activity.
[13] Section 7 defines “unlawfully benefited from significant criminal activity” as follows:
In this Act, unless the context otherwise requires, a person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).
[14] The test for knowledge is a subjective one, although wilful blindness is sufficient to meet the requirement. In order to be wilfully blind:7
… the person must have his or her suspicions aroused (for example, be aware that a particular state of affairs may exist) and must deliberately refrain from making any enquiry in order to avoid learning whether the suspicion was justified.
5 The McEnirneys purchased 30 Greerton Road in May 2016 for $420,000. They paid a deposit of
$80,000 (which included a $30,000 loan from Mr McEnirney’s mother) and borrowed the remainder from the ASB Bank. The evidence of Ms McEnirney and Detective Milham suggests that by 21 July 2020 the loan to Mr McEnirney’s mother had been repaid in full and the balance owing on the mortgage was $214,640.
6 Criminal Proceeds (Recovery) Act 2009, s 50(3).
7 Vincent v Commissioner of Police [2013] NZCA 412 at [52].
[15] For Ms McEnirney, Mr Nabney submits that the extent of her knowledge was that Mr McEnirney used steroids as part of his bodybuilding training, and that he supplied them to a small number of people at his gym. She was not aware of the actual state of affairs, namely that he was running a significant drug dealing operation on the dark web. Ms McEnirney’s evidence was that she had very limited knowledge of Mr McEnirney’s bank accounts or financial affairs, and did not notice anything unusual about the money coming into her accounts. During the period when he was not in regular employment in 2018 and 2019, it is said Ms McEnirney considered that her husband was deriving income from working as a personal trainer, selling second-hand caravans, and selling puppies.8 Then, from October 2019, she believed that he was earning income through his new lawn moving company. Mr Nabney submits that Ms McEnirney would not have returned to work part time following the birth of their children had she believed their family had money. The fact that she did so indicates she was not aware of the true nature of her husband’s operation, let alone its scale or profitability.
[16] In those circumstances, it is submitted that the Court cannot be satisfied that Ms McEnirney actually knew of, or was wilfully blind to, Mr McEnirney’s offending.
[17]I am unable to accept this submission for several reasons.
[18] First, given their financial positions during the relevant times, it is implausible that Ms McEnirney could have overlooked the significant amounts of money being brought in by her husband’s drug dealing operation. A Police forensic accountant, Mr David Baker, conducted an analysis of the McEnirney’s bank accounts. A summary of his key findings is included in Detective Milham’s affidavit. The analysis revealed that between 21 July 2013 and 21 July 2020 Mr and Ms McEnirney received a total of
$1,673,064.98 into their accounts from all sources,9 comprised of:
(a)salary payments totalling $297,698.69;
8 Mr Nabney points to Detective Milham’s evidence that a profit of $35,000 was in fact realised on caravan sales, and submits that Ms McEnirney could well have understood it to be more.
9 A total of $1,864,698.69 was withdrawn from the accounts over the same period.
(b)direct credits from known sources (such as from family members or from the sale of vehicles) totalling $311,018.23;
(c)business income of $25,149.70;
(d)interest credits, refunds, and payments from Work and Income and the Inland Revenue Department totalling $39,820.05;
(e)cheque deposits totalling $40,746.42; and
(f)deposits from unknown sources totalling $958,631.89, being:
(i)direct creditors from unknown sources of $536,466.51; and
(ii)cash deposits of $422,165.38.
[19] During that period, Mr McEnirney received over $800,000 into his personal Kiwibank account from unknown sources, of which he transferred about $485,000 into the shared ASB bank account. Even if the Court were to accept that Ms McEnirney had little knowledge of her husband’s bank accounts and finances, it is clear that over a seven-year period, Mr McEnirney paid money into their shared account far in excess of that which he might be expected to earn as a stevedore.
[20] In particular, as noted above at [9], in the 19 month period between February 2018 and October 2019 during which Mr McEnirney was not in regular employment and Ms McEnirney went on parental leave, over $100,000 in cash deposits and direct credits from unexplained sources was received into the joint ASB account, together with more than $280,000 in transfers from Mr McEnirney’s personal account. In addition, as Ms McEnirney accepted during cross-examination, Mr McEnirney was making fortnightly automatic payments of $400 to Ms McEnirney for her expenses. He also made payments to enable her to pay her credit card balance, including four payments totalling $9,040 between 25 June and 19 September.10 It strains belief to
10 In total, it is said Mr McEnirney deposited $26,280 into Ms McEnirney’s account in the period of his unemployment.
consider that Ms McEnirney did not question where this money was coming from given their financial situation at the time.
[21] Further, Detective Milham’s evidence is that credit card activity and enquiries with Immigration New Zealand indicate that Mr and Ms McEnirney went on overseas trips at a time when Mr McEnirney was apparently unemployed. In May 2018, they went on an 11-day trip together during which they visited Houston and Honolulu. Then, Mr McEnirney travelled out of New Zealand for a 12-day period in June 2019, leaving and returning through Dubai. His credit card activity indicated he was in England for a period of time during the trip. Finally, in early 2020, the pair travelled to the Gold Coast in Australia for five days to attend Ms McEnirney’s brother’s wedding. The flights and accommodation were paid for in July 2019. If Ms McEnirney believed her husband was not working, it is difficult to believe that she would not have questioned how they were able to afford those trips.
[22] I also consider, given the scale of Mr McEnirney’s operation, Ms McEnirney’s evidence that she had no knowledge or suspicion of his illegal activities is simply not credible. When Police executed a search warrant at the family home in July 2020, they located in a spare room of the house significant quantities of bottled liquids and plastic bags containing powders, a range of prescription medicines, including anabolic steroids, and unused glass vials. Police also found a diary which appeared to be a record of transactions for the online drug dealing business containing 288 entries, each including a name, address, product code with a quantity and a NZ Post courier label with tracking number. Feedback left in relation to the NZAnabolics username indicates that there were at least 197 separate sales of MDMA or prescription medicines in the six-month period from 20 April to 24 October 2019.
[23] Ms McEnirney maintains that she never saw any couriers or suspicious packages arriving at the house. She says that she barely ever went into the spare room, and that the first she learnt about all the drug related paraphernalia there was after Mr McEnirney’s arrest when she found it in the cupboard. Ms McEnirney says that she only saw her husband mixing steroids at the kitchen bench on two occasions, and that this was consistent with the limited scale of use and supply she believed he was engaging in.
[24] I do not consider Ms McEnirney’s evidence in this respect to be credible. Mr McEnirney’s enterprise was clearly significant and must have involved him preparing and couriering a large volume of orders on a regular basis from the family home. He also needed to import the controlled substances themselves, as well as a range of other incidental items and ingredients, such as glass vials and benzyl alcohol. In short, there is likely to have been a significant amount of courier traffic entering and exiting the home. Moreover, given Mr McEnirney stored the products for his business in the spare room, and was seen by Ms McEnirney mixing steroids at the kitchen bench on at least two occasions, it seems likely that he did much of the preparation and packaging of orders at home. I cannot accept in the circumstances that Ms McEnirney, whose job involves preparing and dispensing prescription medications, never saw anything which gave her reason to suspect that her husband was engaged in significant criminal activity.
[25] Stepping back and viewing the evidence as a whole, I consider the answer is inescapable. Given Ms McEnirney acknowledgement that she knew her husband was supplying steroids to others (even if on a small scale), together with the nature and scale of his operation, the amounts of money that were coming into the couple’s bank accounts when Mr McEnirney was unemployed, and Ms McEnirney’s credit card and travel expenditure during the relevant periods, the overwhelming inference is that Ms McEnirney, at the very least, must have suspected that her husband was profiting from significant criminal activity and turned a blind eye to it.
[26] It follows that Ms McEnirney has failed to prove on the balance of probabilities that she has not unlawfully benefited from significant criminal activity, and I must dismiss her application for relief under s 66 of the Act.
Will Ms McEnirney suffer undue hardship if she is not granted relief from forfeiture of her share of the family home?
[27] Section 67(1) of the Act provides the Court with a discretion to grant relief from a civil forfeiture order if it considers that, having regard to all the circumstances, undue hardship is reasonably likely to be caused to the applicant if relief is not granted. Under s 67(2), the circumstances the Court may have regard to include:
(a)the use that is ordinarily made of the property;
(b)the nature and extent of the applicant’s interest in the property;
(c)the degree to which the applicant had knowledge of the significant criminal activity; and
(d)the circumstances of the significant criminal activity.
[28] Whether undue hardship arises as a consequence of the execution of the forfeiture order is a matter of fact and degree.11 Much more than “mired inconvenience or difficulty” is required;12 there must be “gross or severe disproportion between the gravity of offending and the value of the property sought to be forfeited coupled with the other punishment inflicted on the offender”.13 In cases involving the forfeiture of a family home, undue hardship for a child may well be relevant to the Court’s assessment.14
[29] Mr Nabney submits that Ms McEnirney would experience undue hardship if she lost the entirety of her half share of the equity in the house, and that she should be granted relief by excluding her equity in the property from the forfeiture order. He submits that the considerations in s 67(2) support such an outcome:
(a)the property is the house family home, and is the only house their two young children have known;
(b)Ms McEnirney owns half of the property, and refusing relief would deprive her of her only asset of any significance;
(c)she had a low degree of knowledge of her husband’s drug dealing activity (at most, she was wilfully blind);
11 Duncan v Commissioner of Police [2013] NZCA 477, (2013) 26 CRNZ 796 at [57].
12 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010 at [75].
13 Lyall v Solicitor-General [1997] 2 NZLR 641 at 647.
14 Duncan v Commissioner of Police, above n 11, at [57].
(d)there is no evidence she was actually involved in the offending, and the benefits she derived from it were indirect. It is said that her involvement was not even “peripheral” and fell below the level of the applicant in Duncan v Commissioner of Police.
[30] In response, the Commissioner submits that forfeiture of the whole home is a proportionate response to Mr McEnirney’s significant criminal activity and Ms McEnirney’s knowledge of it. That activity enabled them to accrue considerable financial benefits, including increasing the equity in the home, which were well beyond their legitimate means.
[31] Ms McEnirney’s evidence is that she contributed $30,000 from her KiwiSaver to the deposit for the house. Together the couple also received a Home Start grant of
$10,000.15 Taking her KiwiSaver contribution and half of the Home Start grant,
Ms McEnirney contributed $35,000 to the equity in the property, equal to 8.33 per cent of the $420,000 purchase price.
[32] Relief has been granted in similar situations. In Commissioner of Police v Burgess, Mr Burgess made significant profits operating as a “fence” of stolen property.16 Venning J granted his wife, Mrs Burgess, relief in respect of her half share of the “untainted equity” in the family home, approximately $372,000. In doing so, his Honour noted that Mrs Burgess may not have been aware of the full extent and value of her husband’s offending,17 and placed particular weight on her personal situation and poor health.18 However, Venning J noted that Mrs Burgess’ relief should exclude any capital gains or improvements to the property secured through the proceeds of crime:19
Mrs Burgess should not benefit from the maintenance and improvements to the property which were from the sale of stolen gold, and nor should she benefit from the inflationary increase in the value of the property, given that the property was sustained in part by the proceeds of criminal activity.
15 The remainder of the $80,000 deposit was made up of $10,000 from Mr McEnirney’s KiwiSaver and a loan from his mother of $30,000.
16 Commissioner of Police v Burgess [2016] NZHC 2625.
17 That is despite an earlier finding at [49] that “Mrs Burgess was well aware of Mr Burgess’ illegal activity”.
18 At [104]–[105].
19 At [106].
[33] In Lyall v Solicitor General, a forfeiture order was made in respect of a property operated as a “tinnie house”. Mr Lyall owned a two-thirds interest in the property, with his equity worth about $80,000. The Court of Appeal held that there would be a severe disproportion between Mr Lyall’s involvement, which was held to be “relatively slight”,20 and the value of the interest he would lose if relief were not granted.21 The Court declared Mr Lyall’s two-third interests in the property, and ordered that the Crown pay him accordingly.
[34] Commissioner of Police v Winsor also concerned forfeiture of a tinnie house. Courtney J held that Ms Hansen, Mr Winsor’s wife, had a significant interest in the property by virtue of both her relationship property entitlement and contributions she had made to the property.22 Having accepted that Ms Hansen had limited involvement in the drug dealing and had been manipulated and controlled by her husband, the Judge concluded that forfeiture would result in grossly disproportionate hardship and awarded Ms Hansen 40 per cent of the balance of the sale proceeds.23
[35] A similar outcome was achieved in Hayward v Commissioner of Police, albeit the wife there was found to have no knowledge of any significant criminal activity by her partner.24 Mrs Hayward was entitled to 50 per cent of the untainted equity in the property under s 66 in accordance with her relationship property entitlement.
[36] Overall, I consider that requiring forfeiture of Ms McEnirney’s equity in the property would be grossly disproportionate in the circumstances for several reasons.
[37] First, there is no suggestion that Ms McEnirney’s initial contribution to the property was tainted. I also accept that her KiwiSaver is likely to be her only asset of significance. Given she already stands to lose the family home and has the responsibility of caring for two young children, depriving her of legitimately sourced funds unconnected with Mr McEnirney’s offending would be an unduly harsh outcome.
20 Lyall v Solicitor General, above n 13, at 649. The Court observed that Mr Lyall’s involvement may have only amounted to permitting the property to be used for dealing cannabis.
21 At 648–650.
22 Commissioner of Police v Winsor [2014] NZHC 161 at [51] and [61].
23 At [61]–[62].
24 Hayward v Commissioner of Police [2014] NZCA 625.
[38] Second, the evidence indicates that Ms McEnirney’s knowledge of the criminal activity was constructive rather than actual. There is no evidence she was directly involved in the criminal activity. With reference to the cases described above, her level of knowledge and involvement was certainly less than that of Mrs Burgess, and more likely in my view to be on par with that of Mr Lyall.
[39] Finally, it is relevant that Ms McEnirney continued working throughout the period of her husband’s offending, full time at first and then part time following the birth of their first child in 2019. She contributed to the maintenance of the family and, whether directly or indirectly, her income assisted in paying down the mortgage. Given her continued employment, I see no reason why the McEnirneys would not have been able to service the mortgage (albeit at a much lower rate) even without Mr McEnirney’s criminal activity.
[40] The question then is how to quantify Ms McEnirney’s equity in the property. In Burgess, the Court excluded capital gains on the applicant’s equity on the basis that the mortgage was likely sustained through the proceeds of significant criminal activity. The increase in value was therefore a direct or indirect benefit of that activity. The Court adopted a valuation of the property around the time it was purchased and fixed the applicant’s half share at that time. In Lyall and Winsor, the courts awarded the applicants a proportion of the sale proceeds reflecting their interest in the property. That approach would, in theory, enable the applicant to obtain the benefit of any capital gains on the property.
[41] For the reasons given at [37]–[39] above, the fairest outcome in my view is to award Ms McEnirney an 8.33 per cent interest in the property. This interest represents the bulk of her KiwiSaver, and will no doubt be vital in providing for her young family. Her low level of knowledge coupled with her continued contributions to the family’s income would make it unduly harsh to deprive her of what is likely to be a fairly modest return. Viewed from a different perspective, I do not think it would be just for the State to benefit from the capital gain derived from Ms McEnirney’s untainted equity in the family the home.
[42] I therefore allow Ms McEnirney’s application for relief. I declare that she has an 8.33 per cent interest in 30 Greerton Road, Tauranga.
Conclusion and orders
[43] The following assets are subject to an assets forfeiture order and are to vest in the Crown absolutely and be in the custody and control of the Official Assignee:
(a)the property at 30 Greerton Road, Tauranga, subject to:
(i)the interest of Mortgage Holding Trust Company Limited under its registered mortgage;
(ii)Ms McEnirney’s 8.33 per cent interest in the sale proceeds, after expenses;
(b)funds of $20,759.40 held in Mr and Ms McEnirney’s ASB Bank account and any interest accrued thereon.
Isac J
Solicitors:
Pollett Legal Ltd, Crown Solicitor, Tauranga
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