Commissioner of Police v Mihaka
[2017] NZHC 1474
•29 June 2017
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV-2012-463-359 [2017] NZHC 1474
BETWEEN THE COMMISSIONER OF POLICE
Applicant
AND
SHARON MARIE MIHAKA First Respondent
LIONEL JEFFREY MIHAKA Second Respondent
LEAH MARIE GREEN (AKA RAMANUI)
Third Respondent
Hearing: 19 June 2017 Counsel
C H Macklin for Applicant
P T Birks for RespondentsJudgment:
29 June 2017
JUDGMENT OF WHATA J
This judgment was delivered by me on 29 June 2017 at 5.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: Crown Solicitor, Rotorua
THE COMMISSIONER OF POLICE v MIHAKA [2017] NZHC 1474 [29 June 2017]
[1] The Commissioner of Police applied for a profit forfeiture order in the amount of $141,720, together with an order for effective control over a property at John Street, Tokoroa held in by the Mihaka Family Trust.1 Mrs Mihaka sought relief based on undue hardship. There was no opposition to the applications in respect of Mr Mihaka or Ms Ramanui.
[2] Mr Birks for Ms Mihaka accepted, correctly in my view, that the profit forfeiture order and control order had to be made. The profit forfeiture order related to the proceeds of methamphetamine offending and the three respondents are the trustees of the Mihaka Family Trust.
[3] The sole issue of substance therefore is whether, given Mrs Mihaka’s personal circumstances, the Johns St property should be excluded from the profit forfeiture order to the extent of her share in the property.
Background
[4] Mrs Mihaka was convicted and sentenced to four and a half years’ imprisonment in respect of eight charges of possession and supply of methamphetamine. The Commissioner estimates the value of the methamphetamine seized is about $141,720. This quantum is not disputed. The Commissioner seeks to satisfy this order through forfeiture of the following:
(a) properties at 6 John Street and at 5050 State Highway 1 (also known as 198 Station Road, Tokoroa);
(b) a 2003 Nissan Liberty motor vehicle, registration FMB357; and
(c) Cash in three sums: $23,680, $1,000 and $1,627.10.
[5] Mrs Mihaka currently resides at the 6 John Street property. She has a reasonably lengthy record of offending, including four convictions of possession of methamphetamine and four convictions of supply and selling methamphetamine.
She also has a charge for possession of methamphetamine in 2008. She is the
1 Criminal Proceeds (Recovery) Act 2009, s 55.
mother of two daughters aged 41 and 25 years. Mrs Mihaka was also the director and primary shareholder of Sharon Fine Leather Limited which operated from rented premises in the Tokoroa shopping centre. The Commissioner has produced IRD information relating to the income of that business. The average declared income was $8,634.78 between 2005 and 2011.
[6] Lionel Geoffrey Mihaka also has a lengthy history of offending, including for possession of methamphetamine for supply in 2013, which is the same offending for which Mrs Mihaka was convicted. According to the Commissioner, his average declared income between 2005 and 2010 was $3,823.41.
[7] The final respondent, Leah Marie Green (aka Ramanui), was convicted for selling and supplying methamphetamine in 2014. This involved the same offending as Mr and Mrs Mihaka. The Commissioner has produced information to indicate that, from 2005 to 2016, the primary source of income for Ms Ramanui was Social Welfare benefits and she averaged a declared income of $11,350.16 per year.
Operation Harvest
[8] The convictions were obtained as a consequence of Operation Harvest, which commenced in November 2011. This investigation showed that Mrs Mihaka was running an illicit drug-dealing operation and used the business premises of Sharon Fine Leathers Ltd as a front. She was sourcing large quantities of methamphetamine from a Mr Bennett (who also has multiple convictions, including for selling and supplying methamphetamine). Mrs Mihaka also used the address of 122 Billar Street, Tokoroa, occupied by Ms Denise Waddell, as a safe house to store cash and bulk quantities of methamphetamine. Ms Waddell admitted as much.
Sentencing
[9] Mrs Mihaka was convicted of possessing 254.25 grams of methamphetamine, of which only 73.2 grams was located at the time of her arrest and the termination of Operation Harvest. Ultimately, Mrs Mihaka pleaded guilty to the five charges of possession and supply of methamphetamine and was convicted of a further three
methamphetamine related charges. She was then sentenced for having possession of
254.25 grams. The sentencing Judge noted:2
…your offending was not especially sophisticated. But it was shrewdly calculated. You dealt from your shop but you kept your methamphetamine and cash proceeds in safe keeping with Ms Waddell. You were also an active retail supplier, as your offences illustrate; and your offending engaged and implicated your family and friends. In the network you created, even though it was relatively modest, you were a central player.
Assessment of value of methamphetamine
[10] The Commissioner produced evidence that the street value of 0.1 grams of methamphetamine at the time of the conclusion of Operation Harvest was between
$100 and $120 and a single gram of methamphetamine was between $600 and
$1,000. Using the lower end value of methamphetamine, the Commissioner calculates that the total benefit of 177.15 grams (being the 254.25 gram total, less the
73.2 grams located at upon termination of Operation Harvest and a further 3.9 grams located at Sharon’s Fine Leathers Ltd) equates of $177,150 if sold in 0.1 gram quantities. If Mrs Mihaka had sold the methamphetamine in gram quantities, then the amount realisable comes to $106,290. The Commissioner has then calculated the benefit at $141,720, being an average of the two. This is not disputed.
The properties
[11] The John Street property was transferred to the names of the respondents as trustees of the Mihaka Family Trust on 7 August 2008. The second property, at 5050
State Highway 1, was similarly transferred into their names on 5 November 2011. The third property, the 2003 Nissan Liberty motor vehicle, was registered to Mrs Mihaka.
[12] The fourth property, being the cash, was located at the home of Ms Waddell. The fifth property, namely the $1,000 cash, was found at the home of the first and second respondent. The last remaining property, $1,727, was located in Mr Mihaka’s wallet during the search of the property.
Profit forfeiture and control
[13] As noted Mr Birks did not challenge the applications for profit forfeiture and control, except in terms of the hardship claim which I address below. I briefly address these applications for completeness.
[14] The relevant statutory frame in relation to profit forfeiture was helpfully set out by Brown J in Commissioner of Police v Clifford.3 I adopt it:
[7] Profit forfeiture orders are made pursuant to s 55 of the Act. The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that:
(a) The respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and
(b) The respondent has interests in property. [8] The order must specify:
(a) The value of the benefit determined in accordance with s 53;
(b) The maximum amount determined in accordance with s 54;
and
(c) The property that is to be disposed of in accordance with s
83(1), being property in which the respondent has, or is treated as having, interests.
[9] The “relevant period of criminal activity” referred to in s 55(1)(a) is
defined in s 5 to mean (in the case of restrained property):
The period that ends on the date the application is made and starts 7 years before the date of the application for the relevant restraining order.
[10] Section 52 states that a profit forfeiture order application must: (a) Name the respondent;
(b) Describe the significant criminal activity within the relevant period of criminal activity from which the respondent is alleged to have unlawfully benefited;
(c) State the value of that benefit; and
(d) Identify the property in which the respondent holds interests and the nature of those interests.
[11] It is that last requirement that gives rise to the Commissioner’s
application pursuant to s 58 of the Act, subsection (1) of which provides:
(1) If the High Court is satisfied that a respondent has effective control over property, the Court may, on an application made by the Commissioner, order that the property is to be treated as though the respondent had an interest in the property specified by the Court.
[12] Property that is subject to an order under subsection (1) may be included in any profit forfeiture order that is made against the respondent: s
58(4).
Profit forfeiture
[15] There can be no doubt that the respondents benefited from their methamphetamine dealings or that the beneficial value of the dealings for which they were convicted was $141,720. This is the maximum amount for the purpose of s 54 of the Criminal Proceeds (Recovery) Act 2009 (the Act). I am also satisfied that the respondents have relevant interests in the property listed in the application and summarised at [4].
Control
[16] The claims against the car and the cash are not opposed. The two properties are held in trust. The respondents are the trustees. Relevant factors, for the purposes of the control threshold test, include the wording of the trust deed and the influence and involvement of the respondent in the operations of the trust.4
[17] The respondents, as trustees, plainly controlled the trust assets in the four year period prior to the first restraining order on 22 June 2012. Relevant passages of the Mihaka Family Trust deed provides that:
(a) Mrs Mihaka and Mr Mihaka are the preferred beneficiaries;
(b) the final beneficiaries are their children including Ms Ramanui; and
(c) the trustees may distribute income and capital at any time.
4 See Criminal Proceeds (Recovery) Act 2009, s 58 and Commissioner of Police v Read [2015] NZHC 2055.
[18] Clause 8 also notes:
8.1You may, despite anything at law or equity to the contrary, resolve any conflict between the wishes or interests of the preferred beneficiary in the interest of the other beneficiary by giving preference to the wishes or interests of the preferred beneficiary.
[19] Mrs Mihaka also produced minutes of family meetings. While they were not formal minutes of the Trust, they show that the respondents were actively involved in the management of trust assets, which is unsurprising given that it was a family trust.
[20] I am satisfied therefore that, based on the evidence before me, the basis for the property forfeiture order has been established, as has an order for control.
Undue Hardship
[21] Section 56 states:
56 Exclusion of respondent’s property from profit forfeiture order
because of undue hardship
(1) The High Court may, on an application made by the respondent before a profit forfeiture order is made, exclude certain property from being able to be realised under section 55(2)(c) if it considers that, having regard to all of the circumstances, undue hardship is reasonably likely to be caused to the respondent if the property were realised.
(2) The circumstances the Court may have regard to under subsection
(1) include, without limitation,—
(a) the use that is ordinarily made, or was intended to be made, of the property that is, or is proposed to be, the subject of the profit forfeiture order; and
(b) the nature and extent of the respondent’s interest in the
property; and
(c) the circumstances of the significant criminal activity to which the profit forfeiture order relates.
(3) After a profit forfeiture order is made, nothing in this section prohibits a respondent from realising the property that was excluded from being able to be realised under section 55(2)(c) if—
(a) after realising other property under that section there is still a debt owed to the Crown under section 55(4); and
(b) the respondent agrees to realise the excluded property in order to pay all or part of that debt.
[22] It is common ground that the observations of Collins J in Ranga provide helpful guidance in this case.5 He stated:6
[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 legitimate equity may be taken into account when assessing undue hardship.
[23] The main hardship grounds raised by Mr Birks were:
(a) the St John’s property was legitimately acquired with proceeds of sale
from another property;
(b)the sentencing Judge was unable to take into account forfeiture at the time of sentencing (because no assets had been forfeited);
(c) there is no suggestion that Ms Mihaka is leading a high life – she is unemployed at present;
(d)when she completed her sentence she returned to find her property is a dire state and she has been slowly repairing it out of limited funds; and
(e) her business assets had been stolen, so she has been unable to re- establish herself.
5 Commissioner of Police v Ranga [2013] NZHC 745.
6 At [38]-[39]; citing Lyall v Solicitor-General [1997] 2 NZLR 641 (CA).
[24] I also explored with counsel whether Mrs Mihaka’s age was a factor. She is
60 and approaching retirement.
[25] Mr Macklin accepted that the St John Street property was not acquired using the proceeds of the methamphetamine enterprise and that Mrs Mihaka will face hardship as a consequence of having her property forfeited. But he contends that this falls well short of grossly disproportionate, particularly given the seriousness of the offending.
Assessment
[26] I do not consider that forfeiture in this case will lead to undue hardship, in the sense that it would be disproportionate, having regard to both the severity of the offending and Mrs Mihaka’s personal circumstances.
[27] First, as Mr Macklin rightly notes, methamphetamine dealing is very serious offending. The clear policy of the Act is to discourage repeat offending of this nature by seizing the property of the wrongdoer, whether or not it was legitimately obtained. Second, the loss of the John Street property is (and other property) commensurate with the benefit obtained by Mrs Mihaka as a consequence of her offending. Third, I am not satisfied that the absence of consideration of a forfeiture order at sentencing is material in this case. There is in my view nothing excessive about the combined effect of the sentence imposed and forfeiture, bearing in mind also that Mrs Mihaka has only a partial interest in the John Street property. Fourth, Mrs Mihaka’s other misfortunes, including the damage to the house, alleged theft of business assets while incarcerated and difficult financial circumstances are not sufficiently exceptional to warrant the Court’s intervention on hardship grounds.
[28] One final consideration, not advanced by Mr Birks at length but explored with counsel, is Mrs Mihaka’s age. She is 60 and nearing retirement. Her capacity to rebuild her assets will be limited before retirement. I consider this to be the strongest factor in support of relief. Ultimately however I accept Mr Macklin’s submission that her financial difficulties and the inevitable hardship caused are not sufficient to outweigh the seriousness of her criminal offending as described by Keane J at sentencing for the purpose of the proportionality assessment. While her ability to
rebuild is limited, it is not non-existent. No evidence was given, for example, about serious health issues that might make it impossible for her to earn a living, or mean that loss of her home will be disproportionately severe for her.7
Result
[29] I make the profit forfeiture orders sought together with an order pursuant to s
58 of the Act for control of the properties subject to the application. The exact terms of the orders are set out in Appendix A.
[30] I decline to grant relief pursuant to s 56.
7 Mr Birks recorded in written submissions that Mrs Mihaka is being treated for Hypertension, but its severity and implications for Mrs Mihaka were not explained.
APPENDIX A
[31] The following orders are made:
(a) The value of the benefit determined in accordance with s 53 of the
Criminal Proceeds (Recovery) Act 2009 is $141,720.00.
(b) The following property is to be realised in accordance with s 55 of the
Criminal Proceeds (Recovery) Act 2009:
(i)All the land and buildings of 6 John Street, Tokoroa, described in Certificate if Title SA69A/675 South Auckland Land Registration District being 812 square metres more or less being Lot 26 Deposited Plan 6272.
(ii)All the land and buildings of 5050 State Highway 1, Kinleith, Tokoroa, described in Certificate of Title SA48A/711 South Auckland Land Registration District being 1/7th share of
2.1242 hectares more or less being Lot 1 Deposited Plan
55068.
(iii) 2003 Nissan Liberty motor vehicle, registration number
FMB357.
(iv)Cash amounting to $23,680, located by Police during the execution of a search warrant at 122 Billah Street, Tokoroa, on
20 December 2011.
(v)Cash amounting to $1,000 located by Police during the execution of a search warrant at 6 John Street, Tokoroa on 20
December 2011.
(vi) Cash amounting to $1,627.10 located by Police in the second
respondent’s wallet during the execution of a search warrant at
6 John Street, Tokoroa on 20 December 2011.
(c) The following property is to be treated as though the respondents had an interest in the property in accordance with s 58 of the Criminal Proceeds (Recovery) Act 2009:
(i)All the land and buildings of 6 John Street, Tokoroa, described in Certificate if Title SA69A/675 South Auckland Land Registration District being 812 square metres more or less being Lot 26 Deposited Plan 6272.
(ii)All the land and buildings of 5050 State Highway 1, Kinleith, Tokoroa, described in Certificate of Title SA48A/711 South Auckland Land Registration District being 1/7th share of
2.1242 hectares more or less being Lot 1 Deposited Plan
55068.
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