Commissioner of Police v Milosevic

[2019] NZHC 783

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2018-463-81

[2019] NZHC 783

BETWEEN

THE COMMISSIONER OF POLICE

Applicant

AND

TE OHORERE “LUCKY BOY” MILOSEVIC

Respondent

UDC FINANCE LIMITED

Interested Party

Hearing:

10 April 2019

Appearances:

R Jenson for Applicant D H Hall for Respondent

No appearance for Interested Party

Judgment:

11 April 2019

JUDGMENT OF LANG J

[on application for order permitting restrained property to be sold]

This judgment was delivered by me on 11 April 2019 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

COMMISSIONER OF POLICE v MILOSEVIC [2019] NZHC 783 [11 April 2019]

[1]                 During 2017 and 2018, police officers in the National Organised Crime Group carried out an investigation into suspected criminal activity by members and associates of the Mongrel Mob in Kawerau. This involved predominantly the supply of methamphetamine and the cultivation and supply of cannabis,

[2]                 The police operation terminated on 27 March 2018. On that date Mr Milosevic was arrested and charged with cultivating cannabis.

[3]                 In July 2018 the Commissioner successfully applied on a without notice basis for a restraining order under s 22 of the Criminal Proceeds (Recovery) Act 2009 (the Act) over assets owned by Mr Milosevic. These included a 2013 Ford Ranger 3.2TD utility motor vehicle, registration number GZZ937 (the vehicle). An on notice restraining order was subsequently made in relation to those assets without opposition by Mr Milosevic.

[4]                 The vehicle has remained in the custody of the Official Assignee since it was first seized in July 2018. It is currently being held in covered storage at a cost of

$13.50 per day. The vehicle is being mechanically maintained as necessary to keep it in working order, but is not being driven.

[5]                 It is unlikely that the criminal proceedings against Mr Milosevic will be resolved within the next 12 months. For that reason resolution of the present proceeding is also many months away. This means the Commissioner will continue to incur storage costs and the vehicle is likely to depreciate in value over that period. The Commissioner therefore seeks an order permitting the Official Assignee to sell the vehicle and place the net proceeds of sale on interest earning deposit.

[6]                 Mr Milosevic opposes the vehicle being sold. He wants it to be retained so that he and his family can have the use of it if he is acquitted on the charges that he faces.

The vehicle

[7]                 Mr Milosevic purchased the vehicle on 17 July 2017 at Turners Car Auctions in Auckland for the sum of $28,780 in cash. The following year he borrowed $14,000

from the interested party in this proceeding, UDC Finance Ltd (UDC), to enable mechanical repairs to be carried out on the vehicle. Mr Milosevic is continuing to make weekly payments in the sum of $80.58 to UDC in reduction of the loan. The balance currently outstanding under the loan is $17,428.02. If the vehicle is sold at this point, however, UDC would apply rebates of interest that would reduce the repayment figure to $13,293.22.

[8]                 In an affidavit sworn on 25 January 2019 Mr Milosevic deposes that he considers the current value of the vehicle to be approximately $24,000. That estimate may be optimistic because the Official Assignee has obtained advice from Turners Car Auctions that the vehicle is currently worth approximately $16,500.

The issue

[9]                 Mr Milosevic has not applied under s 30 of the Act for an order that the vehicle be severed or excluded from the existing restraining orders. The only issue to be determined at this stage is therefore whether the Official Assignee should be permitted to sell the vehicle. If that does not occur, the Official Assignee will continue to store the vehicle until the criminal charges have been resolved and the present proceeding determined. The Commissioner is likely to seek an asset forfeiture order under s 49 of the Act regardless of whether Mr Milosevic is convicted on the criminal charges. The Commissioner will argue that the cash Mr Milosevic used to purchase the vehicle is likely to have come from the sale of cannabis. This would mean the vehicle is tainted property in terms of s 49 and liable to forfeiture for that reason.

Jurisdiction

[10]              The Commissioner advances the order for sale of the vehicle under s 35 of the Act which relevantly provides as follows:

35       Types of further order

Without limiting the generality of section 34(1), a court may, on an application under section 33(1), make 1 or more of the following further orders in relation to restrained property:

…

(e)     an order relating to the Official Assignee that—

…

(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property:

[11]              In Commissioner of Police v Cavanagh, Venning J explained the rationale for the power of sale under s 35 as follows:1

[7] A sale order may be made at  any time.  Typically sale  orders are pursued by the Commissioner where the restrained assets in relation to which the sale orders are sought have high depreciation rates combined with additional costs of storage and insurance which ultimately decrease the potential return to the Commissioner and/or parties who claim an interest in the assets. There is a further additional benefit in the sale in that, once the assets are sold, the Official Assignee is able to hold the funds in an interest bearing account.

[12]              In Commissioner of Police v Evans, Brown J was not prepared to take into account the ongoing costs associated with storage and insurance when considering whether to order restrained assets to be sold because such costs were the “inevitable by-product of asset seizures”.2 In Commissioner of Police v Blance, however, Dobson J observed that he would “not go so far as to disregard the relevance of holding costs in all cases”.3 In certain cases the reduction in eventual return caused by ongoing holding costs will not be sufficient of itself to warrant an order for sale. These include cases where a vehicle may properly be regarded as an investment, or where the rate of depreciation has bottomed out.

[13]              As I observed in Commissioner of Police v Drummond, the point to be taken from these cases is that the Commissioner cannot assume sale orders will be made as a matter of course in relation to retrained assets such as motor vehicles.4 All relevant factors will need to be considered. These are likely to include the nature and value of the asset, the length of time that will elapse before substantive proceedings are determined, the extent to which the asset may depreciate during that period and the wishes of the owners of the asset and/or those who may have an interest in it.

1      Commissioner of Police v Cavanagh [2014] NZHC 2978.

2      Commissioner of Police v Evans [2015] NZHC 1240 at [33].

3      Commissioner of Police v Blance [2018] NZHC 477108 at [52].

4      Commissioner of Police v Drummond [2018] NZHC 1730 at [15].

Decision

[14]              The thrust of the evidence and argument for Mr Milosevic is that he and his family will suffer undue hardship if they do not have the use of the vehicle. They have a five year old son who has been diagnosed as having an autistic spectrum disorder. This requires him to attend appointments with a speech therapist and other health professionals on a regular basis. In addition, their nine year old daughter needs to attend sporting and other school events. Until last month the family had been using another vehicle for some of these purposes, but this vehicle was not suitable for his son to travel in because the rear doors could not be locked. That vehicle is in any event no longer roadworthy. Efforts to borrow vehicles from family members have proved fruitless. Mr Milosevic therefore wants to have the restrained vehicle returned to him so that he and his wife can meet their obligations to their children.

[15]              I have considerable sympathy for the difficult situation in which Mr Milosevic and his family find themselves. As matters currently stand, however, there is no application before the Court to have the vehicle released from restraint so that it can again be available for family use. Any such application would no doubt face strong opposition from the Commissioner in any event given the fact that Mr Milosevic purchased the vehicle using cash. The police have now gone to considerable lengths in an effort to disprove his explanations as to how he acquired that cash. The reality of the situation is that Mr Milosevic and his family will continue to suffer hardship for some considerable time because they will not regain the use of the vehicle regardless of the outcome of the present application.

[16]              In Blance, the respondents attributed sentimental or other forms of non- monetary value to two vehicles.5 Associated criminal proceedings were also likely to be resolved in the near future. As a result, the length of time until the substantive forfeiture application could realistically be assessed was not great in comparison to the period for which holding costs had already been incurred. These factors were sufficient to persuade Dobson J not to make an order permitting the vehicles to be sold.

5      Commissioner of Police v Blance, above n 3 at [54].

[17]              None of those factors is present in this case. Resolution of the criminal proceedings and any associated forfeiture proceedings is months if not years away. Furthermore, Mr Milosevic does not have any sentimental attachment to the vehicle other than the fact that he says it comprises an asset acquired through hard work and considerable thrift over a lengthy period. The sale of the vehicle at this point will also allow the debt owing to UDC to be repaid in full and may even generate a small surplus. In addition, the vehicle will inevitably continue to depreciate in value if it remains in storage for a further lengthy period. This creates a risk that any future sale will not realise sufficient funds to repay the loan. Storage costs will also continue to accrue at the rate of approximately $400 per month.

[18]              Finally, the repayment of the UDC loan at this point will avoid the need for Mr Milosevic to devote approximately $320 of his income each month to loan repayments. This saving may go some way towards meeting the cost of meeting his family’s transport needs.

[19]              Taking all of these factors into account I am satisfied that it is appropriate to grant the Commissioner’s application. I make orders accordingly.

Lang J

Solicitors:

Crown Solicitor, Tauranga Counsel:

D H Hall, Barrister, Rotorua