Commissioner of Police v Ross aka Smith
[2022] NZHC 1757
•21 July 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-688
[2022] NZHC 1757
IN THE MATTER of an appeal under the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
CONNIE ELIZABETH ROSS (aka SMITH)
Second Respondent
AND
RICHARD WILLIAM ROSS
Third Respondent
AND
BANK OF NEW ZEALAND
First Interested Party
Hearing: 7, 8 June 2022 Appearances:
C C White for Applicant
P J Kaye for Second and Third Respondents
Judgment:
21 July 2022
JUDGMENT OF OSBORNE J
This judgment was delivered by me on 21 July 2022 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
COMMISSIONER OF POLICE v ROSS [2022] NZHC 1757 [21 July 2022]
Introduction
[1] The Commissioner of Police applies for civil forfeiture orders against Connie Ross (also known as Connie Smith) and her husband, Richard Ross. He seeks either a profit forfeiture order pursuant to s 55 Criminal Proceeds (Recovery) Act 2009 (the Act) or an assets forfeiture order pursuant to s 50 of the Act.
[2] The application is made as an outcome of a criminal investigation named Operation Volcano conducted into sales of the Class A controlled drug, methamphetamine, by members and associates of the Tribesmen Motorcycle Gang (Tribesmen). A number of convictions were secured before trial.
[3] Mrs Ross’s son, Andrew Smith, pleaded guilty to four offences, including two of supplying methamphetamine and two of possessing methamphetamine for supply. Mr Smith was sentenced to five years and nine months’ imprisonment.
[4] Mrs Ross, as a co-offender, pleaded guilty in November 2019 and was sentenced to two years and nine months’ imprisonment on five offences:
(a)unlawful possession of a firearm;
(b)obstructing or perverting the course of justice;
(c)breach of the Passports Act 1992;
(d)selling methamphetamine; and
(e)possessing methamphetamine for supply.
[5] Mr Ross did not face any charges in relation to the offending. His being a party to this proceeding comes about because of transactions involving the bank accounts of him and his wife and their ownership of a property at 751 Lower Sefton Road, Sefton, Waimakariri (comprising four hectares) (the Sefton property). Mr and Mrs Ross own the Sefton property as tenants-in-common in equal shares. Its rateable valuation in mid-2021 was $290,000. The Bank of New Zealand (an interested party
in this proceeding) has a debt secured by mortgage over the Sefton property in the order of $118,000. Mr and Mrs Ross’s net equity in the Sefton property is approximately $172,000.
[6] The Commissioner seeks forfeiture orders not only in relation to the Sefton property but also in relation to a sum of $2,800 cash seized from the property by Police in the course of Operation Volcano.
[7] The Commissioner previously obtained a restraining order in relation to both the Sefton property and the $2,800 cash.
The issues
Profit forfeiture order
[8]Under s 55(1) of the Act, the first questions are whether:
(a)each respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity, namely 25 November 2012 to 28 November 2017; and
(b)that each respondent has interests in property.
[9] If those tests are satisfied, the Court must make a profit forfeiture order unless undue hardship is reasonably likely to be caused to the respondent.1
[10] If the test for a profit forfeiture order is satisfied, the value of the “benefit” the relevant respondent must forfeit is presumed to be the value stated in the Commissioner’s application (“at least $350,000”) unless that is rebutted by the respondents on the balance of probabilities.2 The Commissioner’s preferred form of relief in this proceeding is a profit forfeiture order.
1 Criminal Proceeds (Recovery) Act 2009 [CPRA], ss 55(1), 55(3) and 56.
2 CPRA, s 53.
Assets forfeiture order
[11] The Commissioner here focuses on the Sefton property and the $2,800 cash as specific property under s 50 of the Act. To obtain orders against those two items of property, the Commissioner must establish that each is “tainted property” as that term is defined in the Act.3 Unless undue hardship is reasonably likely to be caused, the Court must make an assets forfeiture order in respect of specific property that is tainted property.4
Exclusion of respondent’s property from orders — undue hardship
[12] Shortly before the hearing, Mr Ross filed applications under ss 51(1) and 56(1) of the Act for his interests in the Sefton property and the $2,800 cash to be excluded from the operation of any civil forfeiture orders because of undue hardship.5 The issue for the Court to determine on those applications is whether undue hardship is reasonably likely to be caused to Mr Ross if those interests are included in the forfeiture orders.
Profit forfeiture order
The regime
[13] The Court, in making a profit forfeiture order, assesses the benefits the respondent derived from significant criminal activity. Once the figure is identified, the respondent stands to forfeit any property in which they have an interest up to that value. Rather than tracing tainted property (as occurs on an assets forfeiture order), a profit forfeiture order involves an equivalent value regime.6
3 CPRA, s 5.
4 CPRA, ss 50 and 51.
5 At the same time, Mr Ross purported to file an application for relief under s 67 CPRA — that application was misconceived and was not pursued because the right of application does not apply to respondents (see CPRA, ss 61–62).
6 Commissioner of Police v Whakatihi [2014] NZHC 1774 at [18].
Significant criminal activity — Mrs Ross
[14] Mrs Ross’s convictions for possession of methamphetamine for supply and supplying methamphetamine constitute conclusive proof that she has so offended.7
[15] The nature and scale of Mrs Ross’s offending was reflected in the summary of facts which she (and co-offenders) accepted for the purpose of their sentence indication hearing and subsequent sentencing.8 As described by Judge Neave at sentencing, Mr Smith was at the helm of the drug dealing operation, ably assisted by Mrs Ross.9
[16] Mr Smith would often sell drugs on credit, having considerable sums owing to him, at times in excess of $372,000. Ms Ross assisted by procuring places to hide methamphetamine, cash and assets and organising Mr Smith’s finances. She stored at the Sefton property and disbursed from there large amounts of cash which she recorded in a ledger book. She arranged payment and organisation of tradesmen to conduct renovations of the Tribesmen’s gang pad in Ohoka.
[17]Judge Neave described her role in the offending thus:10
… she clearly had an operational or management function. She was essentially the treasurer or the bookkeeper, even if she did not have a hands- on role in the distribution of the drugs, she was an essential lynchpin to the operation. …
[18] In summary, Mrs Ross engaged in “significant criminal activity” as that term is used in the Act.11
An unlawful benefit from significant criminal activity — Mrs Ross
[19] Jennifer McCone is a forensic accountant attached to the Southern Asset Recovery Unit (SARU) of the Police Financial Crime Group at Christchurch. The
7 Evidence Act 2006, s 47(1).
8 R v Smith [2020] NZDC 3140 at [2].
9 At [2].
10 R v Smith, above n 8, at [9].
11 CPRA, s 6(1) — that includes offences punishable by a maximum term of imprisonment of five years or more.
SARU investigates persons who appear to have accumulated wealth or assets as a result of involvement in significant criminal activity.
[20] Ms McCone provided extensive affidavit evidence in relation to her investigation of Mr and Mrs Ross and others arising out of Operation Volcano. The respondents did not adduce any expert evidence in response.
[21] Ms McCone had comprehensive access to the financial records of Mr and Mrs Ross, including Inland Revenue records and bank details. Those included details in relation to a farming-related partnership conducted by Mr and Mrs Ross under the name “C & R Ross Partnership”.
[22] For the seven-year period over which Ms McCone analysed the Rosses’ Inland Revenue records,12 she found the following:
(a)Mr Ross had an annual net income of $56,020.86, totalling
$368,803.97;
(b)Mrs Ross had an average annual net income of $7,337.57 totalling
$50,140.05; and
(c)the partnership had losses totalling $87,268 (arising in the years ending 31 March 2014 to 31 March 2017, representing income of $9,124 offset by expenses of $96,392).
[23] Ms McCone analysed Mr and Mrs Ross’s banking transactions. A particular focus was on cash transactions, having regard to the fact that drug offenders often have significant amounts of cash at their disposal. Ms McCone, after accounting for explained deposits, identified during the analysis period unexplained deposits of
$386,876.39, comprising $351,378.20 in cash deposits and $35,498.19 in electronic deposits (in all, 470 deposits).
12 Between the tax years ended 31 March 2012 and 31 March 2018.
[24] Of the 370 cash deposits, 287 (representing $254,344.99) did not have any reference included in the bank data, contrary to what would be expected in relation to a business transaction which would typically require some type of invoice number to assist with book-keeping.
[25] From the unexplained cash deposits, Ms McCone set aside deposits which could potentially relate to legitimate business activities of the Partnership (such as dog-breeding and firewood or silage sales).
[26] Mr and Mrs Ross filed joint affidavits in opposition to the application. They gave background evidence as to their relationship and their income. That included in the case of Mr Ross a lengthy period of employment reflected in Ms McCone’s analysis. They referred also to activities such as dog-breeding and firewood sales, but without providing any detail as to the extent of income from such activities.
[27] In their affidavit they repeatedly rejected assertions that either of them had been involved in handling cash or banking transactions in relation to the Tribesmen or that either of them took part in any drug dealing. The tenor of their relatively short affidavit is that they were putting the Commissioner to proof, as reflected in this statement:
We believe that there is absolutely no proof that any of this money came from any significant criminal activity such as the supply of methamphetamine and we deny the connection entirely.
[28] Both Mr and Mrs Ross were cross-examined. In the course of her evidence, Mrs Ross elaborated as to her dealings with her son, Mr Smith. This arose particularly in relation to evidence the Police had obtained through intercepted conversations between the pair. Ms Ross explained some methamphetamine involvement with her son on the basis that she personally had a methamphetamine habit and from time-to- time stole methamphetamine from her son’s supply. She also stated that bank accounts in her name had been used and operated by others in the family, including her son, who needed access to bank accounts.
[29] In his cross-examination, Mr Ross denied knowledge of any involvement with the drug offending that was the subject of Operation Volcano or earlier criminal
involvement of Mrs Ross. In relation to their joint denial that she had been involved in drug offending, Mr Ross repeated his belief that she had no involvement, stating that she was “falsely charged” and that she pleaded guilty as the only way she could get out of it.
[30] Accordingly, the respondents’ approach to any benefit obtained from significant criminal activity was, first, to deny that Mrs Ross had been so involved and, secondly, to put the Commissioner to proof in relation to the deriving of any benefit.
[31] The first ground of opposition fails for the reason that Mrs Ross stands convicted of the drug offending. The nature of her involvement is reflected in the summary of facts which she accepted and it is amply evidenced in the affidavits filed for the Commissioner.
[32] On the second issue, the Commissioner has clearly proved on the balance of probabilities that the respondents benefited from that significant criminal activity. There is no reasonable explanation for the very substantial cash dealings which took place through the respondents’ bank accounts other than that the vast majority of it derived from drug dealing. The benefit was received into and utilised through the bank accounts of both respondents (including the Partnership account).
Value of benefits
[33] The Commissioner, by his application for civil forfeiture orders, stated that the value of the benefit obtained by the respondents from significant criminal activity was at least $350,000. That figure is accordingly presumed to be the benefit unless the respondents have rebutted that figure on the balance of probabilities.13
[34] The figure of at least $350,000 was fully explained in the evidence of Ms McCone. The evidence adduced by the respondents did not weaken the overall conclusions reached by Ms McCone or the detail underlying those conclusions. What was arguably most notable about the evidence of the respondents was their failure to
13 CPRA, s 53(2).
engage with the detail of Ms McCone’s analysis. Their evidence was structured so as to point to other possibilities, such as that the persons who benefited from money in the respondents’ bank accounts may have been other family members or that there may have been further (unidentified) particular receipts coming into the bank accounts from legitimate activities such as dog-breeding. But in relation to all those suggestions, the respondents failed to identify with any specificity what particular transactions and sums might have been involved and what particular financial impact they might have had on Ms McCone’s analysis. The respondents failed to establish on the balance of probabilities that the figure of at least $350,000 was overstated.
[35] The Commissioner has therefore established that the respondents in the relevant period of criminal activity unlawfully benefitted from significant criminal activity to the extent of at least $350,000.
Exclusion of respondents’ property from profit forfeiture order?
[36]Mrs Ross has not applied for an order excluding the Sefton property or the
$2,800 cash from being able to be realised on the grounds of undue hardship — it is therefore unnecessary to consider any matters of undue hardship that might have been asserted by Mrs Ross.14
[37] Mr Ross, on the other hand, applied for an order excluding the Sefton property and the $2,800 cash from the profit forfeiture order because of undue hardship. His application was filed on the eve of hearing, 6 June 2021. Unsatisfactorily, the application was not supported by specific affidavit evidence. That left, as the only affidavit evidence from the respondents, their earlier joint affidavits setting out the background of their personal circumstances, which was not focused on issues of hardship.
[38] Section 56 of the Act provides for the making of such applications when a profit forfeiture order is being considered:
14 CPRA, s 56(1).
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.
[39] Under the provisions of s 56 (and the parallel provision, s 51, in relation to assets forfeiture orders), there is an evidential onus on a respondent to place before the Court evidence of hardship — a failure to do so will mean there is no evidence that would allow the Court to be satisfied that undue hardship is reasonably likely.15
[40] Shortly before the hearing, counsel for the respondents, Mr Kaye filed a synopsis of opening submissions. In that synopsis he indicated it would be Mr Ross’s case that (however the financial details are considered) he had minimal involvement and that it would be appropriate that his interests be identified and excluded from any civil forfeiture orders.
15 R v Thompson CA404/04, 19 October 2005 at [15]. See Simon France (ed) Adams on Criminal Law (online ed, Thomson Reuters) at [CP51.02].
[41] Notwithstanding Mr Ross’s failure before the hearing to file evidence focused on his assertion of undue hardship, evidence emerged at the hearing as to his circumstances:
(a)Mr and Mrs Ross around March 2022 moved from the Sefton property to live with Mrs Ross’s son and daughter-in-law at a Rangiora address rent-free. Mr Ross said he and Mrs Ross were living “in a sleepout”;
(b)Mr Ross, apart from his interest in the Sefton property and in the $2,800 cash, has no assets apart from a vehicle and furniture worth approximately $30,000;
(c)Mr Ross is retired and his income is from government superannuation; and
(d)Mr Ross is 65 years of age.
[42] Towards the end of his evidence, I offered Mr Ross the opportunity to explain his state of belief in relation to the amount of money that came through his bank accounts in cash. (Ms McCone’s analysis showed 147 unexplained cash deposits through Mr Ross’s bank accounts totalling $120,110 and 34 transactions through the partnership accounts, totalling $22,065). The cash deposits through those accounts accounted for approximately 40 percent of the couple’s total cash deposits of some
$350,000 as calculated by Ms McCone. The notes of evidence record:
Q.What do you think I should take from your evidence, you were thinking about that money coming through?
A.That I would have been personally seeing that amount of money, I would have been showing naiveté because I honestly didn’t think there – that would ever have happened you know.
[43] Following Mr Ross’s late reference to “living in a sleepout”, the Crown sought leave to refer the Court to evidence of the residential arrangements at the address where Mr and Mrs Ross now live. For the Crown, Mr White understandably referred to the property as a “somewhat palatial five-hectare lifestyle block”. The main residence used by the primary occupiers is a 246 m2 four-bedroom home. The
“sleepout” to which Mr Ross referred is a self-contained one-bedroom dwelling with a kitchen and ensuite.
[44] As the evidence stands, Mr Ross has not satisfied me that undue hardship is likely to be caused to him if the Sefton property and/or the $2,800 cash are forfeited.
[45] The starting point is that, having regard to the cash sums which flowed into and through Mr Ross’s own bank accounts over the analysis period, there was wilful blindness in the way Mr Ross facilitated the very arrangements by which Mrs Ross was enabled to perform her operational role “as an essential lynchpin” in the drug dealing enterprise. On the evidence, Mr Ross’s now self-recognised “naivety” can be equally described as wilful blindness.
[46] Because he and his wife were co-mortgagors of the Sefton property, with equal liability for making principal and interest repayments on their mortgage debt, the benefits that accrued from the money that came into their bank accounts through Mrs Ross’s offending were, at least in part, benefits enjoyed by the two of them.
[47] The extent to which Mr Ross permitted his bank accounts to be utilised as part of the significant criminal activity must impact upon the assessment of whether any hardship resulting from a civil forfeiture order is “undue”.
[48] The matters of hardship Mr Ross would have the Court take into account in relation to his personal circumstances are those he came to in the course of his oral evidence (summarised at [41] above). In short, if civil forfeiture orders are made so as to deprive him of his interest in the Sefton property and the $2,800 cash he will, at 65 years of age, have few assets and his income will be entirely derived from superannuation.
[49] As a tenant-in-common of the Sefton property in equal shares, the value of his lost equitable interest would be in the order of $86,000. That would be the extent of the combined equity of himself and Mrs Ross as Mrs Ross’s share in the equity will in any event be forfeited.
[50] Mr Ross has not established that the loss of his equity will alter the living circumstances that he (and Mrs Ross) might reasonably anticipate in the future. I must also have regard to the fact that, without any qualification in the evidence, it appears that Mr and Mrs Ross have at least for the time being the benefit of rent-free accommodation on a family property.
[51] Nothing in the circumstances now confronting Mr Ross amounts to a gross or severe disproportion between the events in which Mr Ross was involved and the value of the property sought to be forfeited.16
[52] Mr Ross’s application to have his property excluded from being realised will be dismissed.
Assets forfeiture order
[53] As the Commissioner’s preferred order will be granted, it is unnecessary to determine whether the Commissioner would equally have obtained on assets forfeiture order.
[54] Having regard to Ms McCone’s analysis of the way in which funds received into Mr and Mrs Ross’s bank accounts were then used to sustain mortgage debt over the Sefton property, I would have concluded that the Commissioner was also entitled to an assets forfeiture order. Mr Ross’s application for exclusion of his property from an assets forfeiture order would have failed for the same reasons as did his application in relation to the profit forfeiture order.
Orders
[55]I order:
(a)the value of the benefit determined in accordance with s 53 Criminal Proceeds (Recovery) Act 2009 is, as the case requires, at least
$350,000;
16 Lyall v Solicitor-General [1977] 2 NZLR 641 (CA) at 647; Cheah v Commissioner of Police
[2020] NZCA 253 at [64].
(b)the maximum recoverable amount is $350,000;
(c)the following property has to be realised:
(i)751 Lower Sefton Road, Sefton, Waimakariri (identifier 625165, being an estate in fee simple of an area 4.0000 ha more or less, Lot 3, Deposited Plan 444619), other than any interests of the Bank of New Zealand under registered mortgage 9648390.3;
(ii)$2,800 cash seized by Police from 751 Lower Sefton Road, Sefton, Waimakariri on 28 November 2017, which is currently in the possession of New Zealand Police; and
(d)the applications of the third respondent for exclusion of certain property from being realised are dismissed.
Osborne J
Solicitors:
Crown Solicitor, Christchurch
Jennifer Connell, Newmarket, Auckland Counsel: P J Kaye, Barrister, Auckland
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