Commissioner of Police v Siloata
[2022] NZHC 1830
•28 July 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-332
[2022] NZHC 1830
UNDER The Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
An application under sections 21, 24, 25, 33 and 35e(v)
BETWEEN
THE COMMISSIONER, NEW ZEALAND POLICE
Applicant
AND
ALI SILOATA
First Respondent
AND
STEPHEN FRANCIS SKINNON
Second Respondent
Hearing: On the Papers Appearances:
S B McCusker and V M Rea for Applicant No appearance for Respondents
Judgment:
28 July 2022
JUDGMENT OF CULL J
[1] The Commissioner of Police (the Commissioner) seeks on-notice restraining orders and sale orders over items of property associated with the first respondent, Mr Siloata, as a result of his conviction and sentence for offences including the possession of methamphetamine for supply. The second respondent, Mr Skinnon, still awaits the determination of his criminal proceedings, on charges of money laundering and participation in an organised criminal group, but his trial is scheduled for August 2023.
THE COMMISSIONER, NEW ZEALAND POLICE v SILOATA and SKINNON [2022] NZHC 1830 [28 July 2022]
[2] On 13 June 2019, the Commissioner applied for asset and profit forfeiture orders in respect of the items of property associated with the criminal activity of both the first and second respondents. The forfeiture application, brought under the Criminal Proceeds (Recovery) Act 2009 (CPRA), was adjourned pending the outcome of the respondents’ related criminal proceedings.
[3] Although it is possible for the Commissioner to seek asset forfeiture orders over the property associated with Mr Siloata, there is an impediment to the making of such an order under s 50(4) of the CPRA. The Court is not able to make an asset forfeiture order over property held by the Official Assignee and for which no person has claimed an interest, unless that property has been the subject of a restraining order under the CPRA for a period of at least 12 months.
[4] The reason that no restraining order has been made by the court is that the seized property was held under sections of the CPRA and the Search and Surveillance Act 2012 (SSA) and Mr Siloata has not made an assertion of ownership over the assets sought for forfeiture. In relation to several motorbikes alleged to belong to him, the registered owners have formally disclaimed any interest. On that basis, the Commissioner submits that s 50(4) of the CPRA is engaged and that those assets associated with Mr Siloata must be subject to a restraining order for at least one year before they can be forfeited under an assets forfeiture order.
[5] As a consequence, the Commissioner has filed an application for on notice restraining orders on 11 May 2022 in order to preserve his position in respect of any potential application for asset forfeiture orders. The Commissioner also seeks early sale orders over the motorbikes in order to preserve the value of those assets pending forfeiture.
The restraining order application
[6] The application for restraining orders is brought under ss 24 and 25 of the CPRA. The Court may issue a restraining order under s 24, if it has “reasonable grounds to believe” that the property is tainted property. “Tainted property” is defined
as any property that has “wholly or in part” been acquired as a result of significant criminal activity, or directly or indirectly derived from significant criminal activity.1
[7] Under s 25, the Court may issue a restraining order over a respondent’s property if it has “reasonable grounds to believe” that the respondent has unlawfully benefited from significant criminal activity. As the Court of Appeal has held, restraining orders are issued on the basis of “reasonable grounds to believe rather than proof” that the respondent has unlawfully benefited from significant criminal activity or that the property is tainted property.2 It is intended as a “holding measure” to allow the Commissioner further time to gather evidence for an ongoing investigation, and which may lead to forfeiture but only on completion of further processes.3
Procedural background
[8] These proceedings stem from a Police investigation known as “Operation Benito.” The investigation identified Mr Siloata as sourcing methamphetamine for supply across the Wellington district and Mr Skinnon as facilitating related money laundering transactions. The affidavits of Detective Buckley give details of the surveillance by the Police of Mr Skinnon on 14 May 2019, when he was stopped while driving a vehicle. On searching that vehicle, Police located a suitcase in the boot containing $190,170 in cash and a further $4,975 on Mr Skinnon’s person. The proceeds of cash in the suitcase remain held in the Police Consolidated Fund in accordance with s 151 of the SSA.
[9] As a result of further searches of the addresses associated with Mr Siloata that day, three Harley Davidson motor bikes along with items of jewellery were found on Mr Siloata and seized by Police under s 123 of the SSA. Those assets were then subsequently transferred to the custody of the Official Assignee under ss 103, 111 and 112 of the CPRA. It is relevant to note that s 112(1)(b)(iii) of the CPRA provides that where a forfeiture application is made within a 28 day period of coming into the custody of the Official Assignee, that property is to be held pending determination of that application.
1 Criminal Proceeds (Recovery) Act 2009, s 5.
2 Vincent v Commissioner of Police [2013] NZCA 412 at [47].
3 Yan v Commissioner of Police [2015] NZCA 576, [2016] 2 NZLR 593 at [7].
[10] The Commissioner filed a forfeiture application on 14 June 2019. No formal opposition to the forfeiture application was made by either Mr Siloata or Mr Skinnon.
[11] On 13 September 2019, Counsel for Mr Skinnon sought leave to withdraw as he had no instructions. Mr Skinnon has taken no steps in the proceeding since then.
[12] On 13 January 2020, both the Commissioner and Mr Siloata agreed that the forfeiture application should be adjourned pending the outcome of his criminal proceedings. Adjournments were made on that basis until leave was granted by the Court for Mr Siloata’s Counsel to withdraw on 31 May 2021.
[13] On 1 November 2021, the Commissioner sought a direction from the Court that Mr Siloata be personally served with a copy of the new call date of this matter on 6 December 2021 to enable him to take further steps. No steps were taken despite service on Mr Siloata.
[14] A first interested party, Mr W, is the registered owner of the red and bronze Harley Davidsons. In a joint memorandum of Counsel dated 31 January 2020, Mr W disclaimed any interest in those vehicles. Mr W’s name has been suppressed by order of the Court. The registered owner of the blue Harley Davidson has also disclaimed any interest in the motorbike.
Tainted property/unlawful benefit
[15] From the affidavit of Detective Buckley, there appears to be ample grounds to believe that Mr Siloata has unlawfully benefited from significant criminal activity. In addition to having been convicted of offences in connection with the possession and supply of methamphetamine, his total declared income for the period between 2012 to 2019 was $8,019.03. However, the jewellery seized from Mr Siloata’s person, the motorbikes alleged to belong to him, and the $190,170 seized from Mr Skinnon are inconsistent with his declared income.
[16] The Commissioner invites the Court to draw a strong inference that Mr Siloata has unlawfully benefited from significant criminal activity and/or that the restrained
assets sought are tainted property in that they were acquired through a significant criminal activity.
[17] The three Harley Davidsons are not registered in the name of Mr Siloata but all were located at an address associated with him. Both registered owners have disclaimed interest in those vehicles. The Commissioner relies on Detective Buckley’s evidence to assert that there are reasonable grounds to believe that the three bikes have been acquired from the profits of Mr Siloata’s methamphetamine dealing and are under his effective control.
[18] In relation to Mr Skinnon, his personal taxable income for the period of 23 May 2012 to 23 May 2019 was $55,841.14. The Commissioner again submits that his declared income is inconsistent with the cash found on him on 14 May 2019 and invites an inference that such cash is either tainted property and/or that Mr Skinnon has unlawfully benefited from significant criminal activity.
[19] I accept the Commissioner’s submission that, based on the material set out above, namely the inconsistencies in the respondents’ declared income and the cash seized, Mr Siloata’s convictions, and Detective Buckley’s evidence, there are reasonable grounds to believe the property is tainted property and/or the respondents have unlawfully benefitted from significant criminal activity.
The reason for a restraining order
[20] The Commissioner accepts that the circumstances of seeking a restraining order at this late stage of the proceeding are unusual. This is partly due to the fact that the profit forfeiture order application contemplates a joint benefit between Mr Siloata and Mr Skinnon. Because Mr Skinnon’s charges have not been resolved, asset forfeiture orders could be taken over the assets alleged to belong to Mr Siloata, namely the motorbikes and jewellery seized. However there is a further impediment. Section 50(4) of the CPRA states that the Court may not make an assets forfeiture order in relation to property that no person has claimed an interest in unless a restraining order has been in place for a period of at least one year. In the circumstances of this case, given the disclaiming of any interest in the motorbikes by the registered owners and the absence of any positive assertion of ownership over the motorbikes or jewellery
by Mr Siloata, it is arguable that s 50(4) of the CPRA is engaged and those assets must be subject to a restraining order for at least one year before they can be forfeited.
[21] I consider in these circumstances that it is appropriate to make a restraining order over the restrained assets, which are described in the schedule to this judgment. The restraining orders will enable the Commissioner to forfeit those assets associated with Mr Siloata after the expiration of one year, when an assets forfeiture order may be made on the profit forfeiture application.
The sale order
[22] The Sale Order application is made in reliance on ss 33 and 35(e)(v) of the CPRA, the latter of which empowers the court to make an order directing the Official Assignee to “sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property.”
[23] The Commissioner seeks sale orders to preserve the value of the motorbikes in question, which have depreciated since their seizure in May 2019. Detective Buckley asserts that they will continue to depreciate pending determination of the forfeiture application, which is unlikely to occur before August 2023 given Mr Skinnon’s trial date.
[24] The Commissioner submits that there may be some tension between the application for sale orders under s 35 and s 50(4) of the CPRA which requires ownerless property to remain under restraint for a year, and for the Commissioner to take reasonable efforts to contact any person he believes may have an interest in the property in addition to requiring the property remain under restraint for a period of a year. However, in the absence of any person claiming an interest in the motorbikes, the Commissioner submits there are strong ground to believe that the bikes are under the effective control of Mr Siloata and not any other person. In these circumstances, and considering the depreciation of the motorbikes likely incurred since their seizure, the Commissioner submits that a sale order is in the overall interests of justice.
Sale orders
[25] Dealing with early sale orders in general, the Court in Commissioner of Police v Chen observed: 4
The underlying purpose of the restraining order is to preserve the subject property because it represents a monetary value of the parties concerned. The legislature can be taken to have appreciated that property may be subject to a restraining order for a considerable time and that circumstances may change over the life of the order so as to put the property at risk. Some risks may be of a kind that action including disposition of the property itself, may be needed to preserve the value that the property represents. If there were no mechanism for responding to such risks the rational for the scheme would be significantly undermined.
Section 35(e)(v) specifically recognises the need to preserve the value of the restrained property through the sale of it. There are many foreseeable circumstances that might justify such an order. These include a significant drop in the property market, the risk of a mortgagee sale and the reduction in value cause by a lack of funds to maintain the property.
[26] However, sale orders will not automatically be made where restrained assets are depreciating in value. This Court must consider the nature and value of the asset(s), the length of time before the substantive proceeding will be determined, the extent to which the asset(s) may depreciate during that period and the wishes of the owner of the asset(s) and any other person who may have an interest in it.5
[27] In regard to the early sale of vehicles specifically, Venning J in Commissioner of Police v Cavanagh remarked:6
(a)Sale orders can be made at any time.
(b)Sale orders are typically pursued where restrained assets have high depreciation rates, combined with additional storage and insurance costs.7 This decreases the amount that may be returned to the Commissioner or interested parties.
4 Commissioner of Police v Chen [2013] NZHC 2259 at [30]–[31].
5 Commissioner of Police v Drummond [2018] NZHC 1730 at [15]. See also Commissioner of Police v Farrell [2022] NZHC 310.
6 Commission of Police v Cavanagh [2014] NZHC 2978 at [7]–[9].
7 The Commissioner refers to the decision of Commissioner of Police v Marwood [2014] NZHC 1866 Woodhouse J considered the ongoing costs of storing and the balancing of competing interests inherent in an application for early sale. He noted that storage costs represented one fifth
(c)There is an additional benefit in sale, as once the assets are sold the Official Assignee may hold the sale funds in an interest bearing account.
(d)Evidence disclosed in that case indicates that the Inland Revenue Department applies depreciation rates to motorcycles at 30 per cent per year.8
[28] Here, the motorcycles were found in Mr Siolata’s possession at one of his addresses. Mr Siloata has already been convicted for this offending. The motorcycles have not been claimed by anyone. The registered owners have disclaimed interest in the vehicles, and Mr Skinnon has not claimed an interest in them either.
[29] Attached to Detective Buckley’s affidavit dated 11 May 2022 are the Official Assignee Restrained Vehicle forms setting out the value of the motorcycles as determined on 28 May 2019. Detective Buckley’s affidavit sets out the depreciation these motorcycles have experienced since valuation, based on an indicative depreciation of 30 per cent per annum:
(a)2015 Harley Davidson V-ROD, registration B9CHN: valued at $18,500 on 28 May 2019; depreciated value of $6,572.14.
(b)2013 Harley Davidson V-ROD, registration B----- valued at $17,500 on
28 May 2019; depreciated value of $6,216.89.
(c)2007 Harley Davidson Dyna Super Glide, registration B7FGU: valued at $7,500; depreciated value of $2,664.39.
[30] Since May 2019, the motorcycles have depreciated in value from $42,500 to approximately $15,500.
of the total value of the vehicles in that case. I note that there has been inconsistent treatment in the High Court as too the relevance of associated holding costs to this assessment: see Commissioner v Police v Evans [2015] NZHC 1240; and Commissioner v Blance [2018] NZHC 108 at [52].
8 See also Commissioner of Police v Drummond, above n 5, at [10].
[31] Before making the current assessment, it is helpful to set out the facts of two contrasting cases in which sale orders were considered. In Commissioner of Police v Blance,9 no sale order was made because:
(a)The respondents opposed the order for sale, and attributed sentimental/non-monetary value to the vehicles.10
(b)The vehicles were classic cars. Dobson J found that while high depreciation rates may be associated with relatively new vehicles, this is not the case with classic cars. The Judge was not persuaded that there was a material risk of their value depreciating substantially before the forfeiture orders could be made.11
(c)The associated proceedings were likely to be resolved within the near future.
(d)The length of time until the substantive forfeiture applications could be assessed was not extensive. The forfeiture applications were to be determined only seven months after the determination of the sale orders.12
[32] This differs from the facts here. The motor vehicles are all relatively new and there is little prospect that they will hold their value. There is also a longer period before Mr Skinnon’s criminal proceedings will be determined and the determination of the forfeiture applications, being over a year away.
[33] A sale order was made in Commissioner of Police v Drummond. Lang J noted that while the “vehicle had only recently been restrained” the associated criminal proceeding would “take well over a year to resolve” and accordingly the forfeiture proceeding would not be determined for some time.13 The Judge raised concerns as to the depreciation of the vehicle over this time.14 Even though the respondent had a
9 Commissioner of Police v Blance, above n 7.
10 At [54].
11 At [48].
12 At [55].
13 Police v Drummond, above n 5, at [16].
14 At [16].
sentimental attachment to the vehicle, the Judge still concluded a sale order was appropriate, noting this attachment did not justify the significant period the vehicle would spend in storage.15
[34] Although there is a one year restraint period before restrained property can be sold, the restriction does not apply to sale orders. The one year restraint period relates to the time restriction under s 50 of the CPRA when the Commissioner can seek a forfeiture order. Sale orders are made under ss 33 and 35 in relation to restrained property and proceeds of sale are held by the Official Assignee as restrained property, until the making of a forfeiture order.16
[35] Given the already significant depreciation of the motorbikes, that Mr Skinnon’s proceedings are a year away (and the forfeiture application will likely follow the resolution of those charges), and the lack of interest in the motorcycles by other parties (the sale order is unopposed), I consider the interests of justice favour selling the motorcycles and the application for the sale order is granted.
Result
[36]The applications for restraining and sale orders are granted.
[37]Orders are made as follows:
(i)The on-notice restraining orders are made in respect of the seized assets itemised in Schedule A annexed to this judgment.
(ii)The Official Assignee is directed to sell items (a), (b) and (c) in Schedule A at a fair market value and hold the proceeds of those sales, after paying all associated costs, in accordance with the restraining orders made above.
Cull J
Solicitors:
Crown Solicitor, Wellington for Applicant
15 At [17].
16 Commissioner of Police v Cavanagh, above n 6, at [26].
Schedule A
(a)A red 2015 Harley Davidson V-ROD 15 Muscle motorcycle including ignition keys, registration B9CHN, currently registered to Mr W and under the effective control of the first respondent (Siloata).
(b)A bronze 2013 Harley Davidson V-OD 15 Night Rod Special motorcycle including ignition keys, registration B----, currently registered to Mr W and under the effective control of the first respondent (Siloata).
(c)A blue 2007 Harley Davidson Dyna 07 Superglide INJ motorcycle, registration B7FGU, currently registered to Brian Robert Jensen and under the effective control of the first respondent (Siloata).
(d)Cash to value of $190,170.00 New Zealand Dollars located and seized on 14 May 2019 from the boot of a Toyota Highlander motor vehicle driven by the second respondent (Skinnon), registration JNM613 and currently being held by the Official Assignee.
(e)Cash to the value of $4,975.00 New Zealand Dollars located and seized on 14 May 2019 from the person of the second respondent (Skinnon) and currently being held by the Official Assignee.
(f)Cash to the value of $2,440.00 New Zealand Dollars located and seized on 14 May 2019 from Flat 2, 85 Nevay Road, Miramar, Wellington and currently being held by the Official Assignee.
(g)A large gold chainlink necklace, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(h)A large gold chainlink bracelet, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(i)A small gold chainlink bracelet, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(j)A gold fob chain Dee375, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(k)A Michael Hill diamond watch located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(l)A large gold ring with multiple diamonds around the band and top place, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(m)A gold sovereign ring with circular diamond cluster, located and seized on 14 May 2019 from the person of the first respondent (Siloata).
(n)A gold Krugerrand coin ring located and seized on 14 May 2019 from the person of the first respondent (Siloata).
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