Commissioner of Police v Unknown
[2024] NZHC 2016
•24 July 2024
NOTE: THIS JUDGMENT HAS BEEN REDACTED IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2024-409-000081
[2024] NZHC 2016
BETWEEN COMMISSIONER OF POLICE
Applicant
AND
UNKNOWN
Respondent
AND
X
Interested Party
AND
Y
Interested Party
Hearing: 16 July 2024 Appearances:
K A Courteney and O J Welsh for Applicant
M T Lennard for Respondent and Interested Parties
Judgment:
24 July 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 24 July 2024 at 10.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
COMMISSIONER OF POLICE v UNKNOWN [2024] NZHC 2016 [24 July 2024]
[1] The Commissioner of Police (the Commissioner) applies for a restraining order under the Criminal Proceeds (Recovery) Act 2009 (CPRA) in quite unusual circumstances.
[2] A large sum of money was found in the roof space of a house which is owned by the interested parties. The Commissioner seeks a restraining order in respect of the money on the grounds that there is reason to believe the money constitutes the proceeds of significant criminal activity.
[3] Whether or not that is the case, the respondents say they have an interest in the money which should be recognised, either by not making a restraining order, or by excluding their “severable interest”, which they say is the entirety of the cash sum.
[4] Alternatively, the interested parties say there are not reasonable grounds to believe that the money is tainted property and consequently no restraining order should be made.
[5] Finally, the interested parties also say that even if there are grounds to make the restraining order, their interests would prevail in a subsequent forfeiture order application, and so the discretion that the Court has over whether to make a restraining order should be exercised in their favour.
The factual background
[6] In order to understand how these arguments arose, it is necessary to set out, more fully, the factual background to this matter.
[7] The interested parties are a married couple, with one child, who originate from [ ]. They purchased the property at [ ] Christchurch in December 2021. An electrician was working in the ceiling space in May 2022, using a manhole accessible from a porch on the exterior of the property to gain access. When he lifted the ceiling insulation, he found five sealed plastic bags of cash hidden underneath. It appeared the bags had been there for some time because dust had accumulated on the insulation above them. The electrician passed the cash to the interested parties, and they decided to call the police.
[8] The cash located was $232,440 comprising predominantly $50 notes, but also around $20,000 in $20 notes and a handful of $10 and $100 notes.
[9] Subsequent enquiries made of a currency scientist with the Reserve Bank of New Zealand established that the notes were issued between May 2016 and October 2018 and there were 63 different issue bar codes, meaning the cash was collected from a wide range of sources.
[10] The police then made enquiries of the previous owners of the property, being RL and his father, ML. They owned the property from 6 December 2013 to 17 December 2021 as trustees of the RL Family Trust. Mr RL understood the beneficiaries of the trust were him and possibly his late brother, AL.
[11] Through those enquiries, the police established who the tenants were during the L’s ownership. None of the tenants claimed any knowledge of the money, nor did any of them have a criminal history which might suggest they acquired the money through significant criminal activity.
[12] Mr AL did have a criminal history, including one drug conviction for possession of cannabis in 2019, and had known connections to the Mongrel Mob. However, he is now deceased and the evidence of his brother was that it was unlikely that AL visited the property and he may not have even been aware the property was owned by the family trust.
[13] The interested parties have applied for, and obtained, an interim suppression order suppressing their names and identifying particulars, including their address, on grounds including that the money was probably derived from criminal activity such as large-scale drug dealing, and they “fear that someone may pursue the money if the circumstances of this case … are publicised”.
These proceedings
[14] On 19 February 2024 the Commissioner filed an on notice application for a restraining order in respect of the funds found in the roof space. The order was sought on the grounds the property identified was “tainted property” as defined by the CPRA.
[15] The interested parties were named as parties to the application, although the primary respondent was described as “unknown”, given the Commissioner’s inability to identify the person who acquired the funds and placed them in the roof space.
[16] On 5 March 2024 the interested parties filed a notice of opposition to the application for a restraining order and, simultaneously, an application for an order excluding the sum of money found, in its entirety, from any restraining order that the Court may make on the grounds that they have an interest in the whole of that property and have not unlawfully benefitted from the significant criminal activity to which the restraining order related.
[17]It is those competing applications which are determined in this judgment.
Submissions for the Commissioner
[18] The Commissioner applies for a restraining order under ss 21 and 24 of the CPRA. Section 24(1) provides as follows:
(1)A court hearing an application for a restraining order relating to specific property may, if the court is satisfied it has reasonable grounds to believe that any property is tainted property, make an order that the property [be restrained]
[19] “Tainted property” is defined as any property that has, wholly or in part, been acquired as a result of, or directly or indirectly derived from, significant criminal activity.1
[20] Ms Courteney, counsel for the Commissioner, notes that a restraining order only requires “reasonable grounds to believe, rather than proof, that the target has unlawfully benefitted from significant criminal activity”.2 As Ms Courteney points out, this is a lower threshold than for forfeiture of the property which requires the Commissioner to prove, on the balance of probabilities, that the property is tainted.3 This is because a restraining order is a temporary order which gives “the police time
1 Criminal Proceeds (Recovery) Act 2009, s 5.
2 Vincent v Commissioner of Police [2013] NZCA 412 at [47].
3 Criminal Proceeds (Recovery) Act, s 50.
to gather further evidence, and may lead to forfeiture but only on the completion of further processes.”4
[21] In asserting that the money found at the interested parties’ property is tainted property, Ms Courteney first points out that if the property in question has been acquired from significant criminal activity, it is all tainted property even if there are innocent interests in it. Furthermore, even where there is an unknown respondent, as here, that is not an impediment to making a restraining order. That circumstance is expressly provided for under s 24(2) of the CPRA.
[22] In asserting that the circumstances warrant the making of a restraining order under s 24 of the CPRA because the money is tainted property, Ms Courteney relies on the cumulative effect of the factual circumstances relating to the finding of the money, along with the evidence filed in support of the Commissioner’s application. In particular, Ms Courteney points to the following:
(a)The fact the cash was located in five vacuum sealed plastic bags which were hidden under the insulation in the roof space.
(b)The cash was hidden at the furtherest point in the roof space from the manhole entry above the porch.
(c)The evidence of Detective Senior Sergeant Dunhill which states that when cash is transacted in large volumes during drug deals, it is usually arranged in uniform bundles of corresponding amounts and secured by rubber bands and the most frequently used denominations of cash are
$20, $50 and $100 notes.
(d)The cash located in the roof space was likewise packaged in bundles secured by rubber bands and was predominantly in $20 and $50 denominations. Indeed, the majority of the cash, some $212,100, was in $50 bank notes.
4 Vincent v Commissioner of Police, above n 2, at [47].
(e)Detective Senior Sergeant Dunhill’s evidence also confirmed that when commercial quantities of drugs are packaged they are often packaged in vacuum-sealed plastic bags, like the vacuum-sealed bags found here.
(f)Detective Constable Allan Newton gives evidence of specific cases where cash located alongside evidence of commercial drug dealing has been packaged in the same manner as the cash located in the roof space in this case.
(g)Analysis of the serial numbers of the bank notes demonstrate the cash was issued into circulation on a range of dates and in a range of places between May 2016 and October 2018. There is a reasonable inference then, that the cash was packaged up shortly after 2018 and placed in the roof space, particularly given the dust that had subsequently accumulated on the insulation covering the bundles.
(h)The fact that the cash was all acquired in a short space of time given the small range of dates of issue of the bank notes, points against it having been obtained from legitimate sources.
(i)The fact nobody has come forward to claim an interest also supports it being tainted property. The person who placed the cash there does not wish to claim or admit ownership, as to do so would implicate them in significant criminal activity.
(j)Other possible explanations for why the cash has not been collected is that it was placed by someone who is currently in prison, or who has left New Zealand and cannot return, and this also supports the proposition that the funds were derived directly or indirectly from significant criminal activity.
(k)The interested parties themselves considered the source of the money was likely some illegal activity which is why they decided to call the police as soon as it was discovered. It is also why they expressed
concerns for their safety should someone come looking for the money. The interested parties told Detective Constable Russell that they had moved to New Zealand to get away from crime and did not want to have anything to do with the money if it was the proceeds of crime.
[23] The Commissioner also submits that other explanations for the source of the cash are implausible. If the cash was obtained by legitimate means, it is unlikely the person placing it there would have simply forgotten about it. Alternatively, if it was legitimately earned income, it seems likely it is undeclared income for GST and income purposes, also making the property tainted.
[24] If it was concealed by a person who has since died, the only person linked to the property during the relevant time who is known to have died is AL. Both his brother and father have dismissed the possibility that he would have placed anything in the roof space. However, if these denials are wrong, then given AL’s criminal history and association with the Mongrel Mob from late 2018, this also supports the proposition that the cash was derived from significant criminal activity.
[25] In respect of the interested parties’ application to sever their claimed 100 per cent interest in the property pursuant to s 30 of the CPRA, the Commissioner says this section can only be engaged where there is a severable interest, that is, when the applicant has an identified interest in part of the property proposed to be restrained.
[26] In support of this submission Ms Courteney relies on Commissioner of Police v Johnson, where Lang J expressed the view that the word “severable” is to be given its natural and ordinary meaning, being that which is “able to be severed”.5 She also relies on Crown Solicitor at Auckland v Bourne, where Gordon J expressed a similar view saying:6
A person with a 100 per cent innocent interest cannot avail themselves of s 30 because such interest is not severable. Section 30 only applies to severable interests and a 100 per cent interest is not severable from anything.
5 Commissioner of Police v Johnson [2020] NZHC 1317 at [50].
6 Crown Solicitor at Auckland v Bourne [2021] NZHC 1078 at [31].
[27] Ms Courteney notes that even though a person claiming an interest in the totality of the property may be unable to avail themselves of s 30 at the restraint stage, they are still able to bring an application for relief from forfeiture at the forfeiture stage.
[28] Even if an interest in 100 per cent of the property, as claimed by the interested parties, could be a severable interest for the purposes of s 30(2)(a), the Commissioner says the Court cannot be satisfied, on the balance of probabilities, that the interested parties are not people who have unlawfully benefitted from significant criminal activity.
[29] To meet that definition, the person must have “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).7 Here, the Commissioner says the interested parties demonstrated they appreciated the cash was likely to be the result of significant criminal activity given their response on finding it, by calling the police, and by the concerns they expressed for their safety should the person who placed the cash there come to retrieve it. Given that knowledge, the interested parties are seeking to benefit from significant criminal activity even though they were not involved in it, and that, too, precludes their application under s 30.
[30] In summary, the Commissioner says that the statutory criteria for making an order for restraint exist. Furthermore, the public interest clearly favours restraint in these circumstances, and so the restraining order should be made.
Submissions for the interested parties
[31] The submissions for the interested parties challenge each step of the reasoning process adopted by the Commissioner and rely on the overarching principle that the interested parties have a recognised interest in the cash and are innocent of any significant criminal activity, so no restraining order should be made, or alternatively, their interest should be recognised under s 30 CPRA.
7 Criminal Proceeds (Recovery) Act, s 7.
[32] In Mr Lennard’s submission, the starting point is that, as owners of the property on which the money was found, and in the absence of a claim by the legal owner, the interested parties have an interest in the property which should be recognised.
[33]In asserting this interest, they rely on the legal principles articulated in
Tamworth Industries Ltd v Attorney-General.8 Those are:
(a)the finder of a chattel obtains a possessory title which enables the finder to keep the article against all but the rightful owner;9
(b)the occupier of a building has right superior to those of a finder of a chattel provided that the occupier has manifested an intention to exercise control over the building;10
(c)in the case of a householder, such intention to exercise control can be assumed.11
[34] Furthermore, the fact the item found was not lost or mislaid, but deliberately placed, does not make any difference. In Chairman, National Crime Authority v Flack, the Australian National Crime Authority executed a search warrant and found a locked suitcase containing $433,000 in cash in Mrs Flack’s house.12 She disavowed all knowledge of the cash, and no prosecution was ever taken against anyone. In circumstances where she had exclusive possession of the house, although she was unaware of the presence of the cash, and where it had not been established that any other person had a better claim to possession, Tamberlin J acknowledged her interest saying:
… the position immediately prior to discovery was that the respondent had possession and intended to exercise control over both the briefcase and its contents.
8 Tamworth Industries Ltd v Attorney-General [1991] 3 NZLR 616.
9 At 621.
10 At 620.
11 At 622.
12 Chairman, National Crime Authority v Flack (1998) 156 ALR 501 (FCA).
[35] In that case, as the statutory rights of the appellants to retain possession of the briefcase under the warrant had expired, her claim to possession of the money prevailed.
[36] Mr Lennard submits that, similarly, in this case, the only person who could have a better interest in the cash is the person who left it there. However, police enquiries have failed to identify that person. Furthermore, with the passage of time, that person, even if they have not abandoned the cash, will lose the right to sue the interested parties for the return because of the operation of limitation provisions.13
[37] For those reasons, Mr Lennard says the interested parties have a 100 per cent interest in the cash and it seems exceedingly unlikely that anyone will establish a better claim.
[38] Mr Lennard then submits, as his second issue, that the interested parties are entitled to relief from both restraint,14 and forfeiture,15 if they have not unlawfully benefitted from significant criminal activity, a state he describes as “innocence”.
[39] The CPRA provides that a person has “unlawfully benefitted” from significant criminal activity if the person has knowingly, directly or indirectly, derived benefit from that activity whether or not they were involved in it.16 Mr Lennard emphasises that the requirement of knowledge must attach to all the elements of the statutory requirement, that is, the person has to know that they have benefitted and also to know that that benefit comes from significant criminal activity. By way of example, he refers to Kiwi v Commissioner of Police, where the Court considered the case of fixtures being made to land without the owner’s knowledge or consent which were paid for with the proceeds of serious criminal activity, saying in such a case, the person would not have knowingly, directly or indirectly, derived a benefit and would be entitled to relief against forfeiture.17
13 Limitation Act 2010, s 30.
14 Criminal Proceeds (Recovery) Act, subs 30(2).
15 Criminal Proceeds (Recovery) Act, s 66.
16 Criminal Proceeds (Recovery) Act, s 5.
17 Kiwi v Commissioner of Police [2023] NZCA 106, [2023] 2 NZLR 776 at [127].
[40] Equally, while accepting that wilful blindness can amount to knowledge for the purpose of this section, Mr Lennard says the test is “quite … demanding”, requiring a deliberate failure to enquire when the person knows there is reason to enquire,18 but, in any event, the interested parties’ actions were the antithesis of a failure to enquire. Rather, they immediately called the police on finding the money.
[41] In all the circumstances, the interested parties should be viewed as “truly innocent” interest holders who have not knowingly benefitted from significant criminal activity.
[42] The third issue raised by Mr Lennard is that there is no reasonable ground to believe the property is tainted because, once it passes to an unrelated innocent party, such as his clients, it loses its taint. By way of example, he says when a drug dealer who sells a car to an innocent third party or pays for clothing from a tailor, the car, or the payment to the tailor, can no longer be tainted. Similarly, if the Commissioner of Inland Revenue receives tax from money earned from a drug deal, that money is not tainted in the hands of that Commissioner.
[43] While he acknowledges there are cases where tainted funds are applied to, say, a parents’ mortgage, thereby tainting the mortgage properties, he says those cases can be distinguished because the payment gives the criminal a benefit of some sort and the derivation of increased equity in the parents’ house is part of the criminal’s continued dealing with criminal proceeds.19
[44] That then leads on to the submission that any prior tainting of the cash “disappeared” when they, as innocent parties, acquired it. Thus, even if it was tainted beforehand, when it reached them as wholly innocent recipients, it is no longer tainted.
[45] Mr Lennard then turns to whether the Court can have reasonable grounds to believe that anyone but the interested parties have title to the cash, noting that “reasonable grounds to believe” is a higher standard than “reasonable grounds to suspect”,20 and that if the Court simply does not know whether the property is tainted
18 R v Martin [2007] NZCA 386 at [10].
19 For example in Commissioner of Police v Johnson, above n 5.
20 Campbell v Police HC Rotorua CRI-2006-463-87, 7 June 2007 per Asher J at [21].
or not, that will not be enough. Here, Mr Lennard says there are no reasonable grounds to believe that anyone but the interested parties have title to the cash, saying that it would need to be established that:
(a)the leaver of the cash was still alive;
(b)the leaver wanted to take action;
(c)the leaver could establish that they had not abandoned the cash despite the effluxion of time (at least two and a half years); and
(d)the fact they have left it in someone else’s house.
[46] Furthermore, while the limitation period has not expired, once it has, then s 30 of the Limitation Act would deny title to the leaver.
[47] Mr Lennard goes on to submit that, in this case, there is no basis to believe the cash was ever tainted. The onus is on the Commissioner to adduce evidence that the cash is tainted, not that it is merely likely. The evidence adduced to date simply raises a possibility and is not sufficient to establish “grounds to believe” it is tainted.
[48]In criticising the evidence adduced by the Commissioner, Mr Lennard says:
(a)The fact the cash was hidden proves nothing. There are a variety of explanations for hiding cash in this way.
(b)The evidence of Detective Dunhill is not helpful opinion evidence because he approaches the question from his experience as a drug detective. Just because drug dealers might tie up money this way does not mean that everyone who ties up money this way is a drug dealer.
(c)He rejects the suggestion that the places of issue of the notes, the amount and the short time between their having been issued and stashed, are necessarily pointers to criminality. They could equally be
consistent with, say, a hospitality operator who has a high percentage of cash payments.
(d)The fact the leaver of the cash has not come forward can be for a host of other reasons, including the leaver having died, left New Zealand, become incapable, or simply not wanting to reclaim the money.
(e)Finally, he submits that relying on the interested parties’ inadmissible and hearsay opinion on the source of the money is of no assistance to the Commissioner.
[49] Mr Lennard says there are a range of other explanations for hiding the cash, including someone converting relationship assets to cash to avoid the effect of the Property (Relationships) Act, someone concealing cash from creditors, someone with a distrust of banks or someone whose ethnic and social background leaves them to favour cash.
[50] In summary, Mr Lennard says the Court is left with a range of possibilities, but with no reason for a positive belief one way or another, so that there are not reasonable grounds to suspect, let alone to believe, that the property was ever tainted. If that is the case, there is no ground to restrain the cash under s 24 CPRA.
[51] The next issue covered by Mr Lennard is whether relief is available under s 30 if the Court is satisfied there are reasonable grounds to believe the cash is tainted. That section relevantly provides:
(2)The court must exclude a severable interest from proposed restrained property or restrained property at, or after, the time a restraining order is made if the applicant proves on the balance of probabilities—
(a)that the applicant has an interest in the property to which the restraining order relates; and
(b)if the order was or is to be made under section 24 or 25, that the applicant has not unlawfully benefitted from the significant criminal activity to which the restraining order relates;
…
[52] Mr Lennard acknowledges that the decisions in Crown Solicitor at Auckland v Bourne 21 and Commissioner of Police v Johnson22 suggest the 100 per cent interest is not a severable interest under this section. However, he seeks to distinguish those cases. Mr Lennard points out that in Bourne the Court said it was following Commissioner of Police v Briggs23 as applied in Johnson. However, in Briggs the issue was not whether a 100 per cent interest could be severed. Instead it was a case where the innocent parties sought to sever their interest in residential property from that of the guilty parties. Ellis J declined to do so because the guilty parties’ interest was “inchoate and unknown” and thus the innocent parties’ interest was not capable of severance from the remaining interest.24
[53] In Johnson, where a son had used allegedly tainted funds to pay his parents’ mortgage, there was a genuine doubt over the parents’ claim that they had a 100 per cent interest in the house.
[54] Finally, in Bourne, the property in question was a motor vehicle which had been used to allegedly carry out a murder and which was the subject of a restraining order pending forfeiture as an instrument of crime, pursuant to s 26 of the CPRA. There, again, the Court expressed considerable doubt about the assertion that the defendant’s mother had a 100 per cent interest in the motor vehicle and which would warrant relief from restraint.
[55] Mr Lennard submits that none of the cases had to decide whether a 100 per cent interest in property was severable because that was not what was claimed or, if it was, there was doubt over the veracity of the claim. Furthermore, as Lang J noted in Johnson, it would be absurd if an innocent party who owns an identified proportion of an interest in a property could seek relief under s 30, but a party who owns the whole of the property could not. Here, there was no dispute over the extent of the interest claimed by the interested parties; it is a 100 per cent interest and this distinguishes it from the cases where the Court declined to sever a claimed interest.
21 Crown Solicitor at Auckland v Bourne, above n 6, at [31].
22 Commissioner of Police v Johnson, above n 5, at [50]–[51].
23 Commissioner of Police v Briggs [2012] NZHC 2324 at [41].
24 At [41].
[56] Mr Lennard’s final submission focuses on the discretionary nature of an order made under s 24 of the CPRA, noting that the Court “may, if the Court is satisfied … make an order …”.
[57] The interested parties submit that while the restraint and forfeiture regime in the CPRA is “draconian”,25 the CPRA also seeks to protect the private property rights of innocent parties. This is done in a number of ways including through:
(a)the exercise of the discretion whether or not to make a restraining order;
(b)the relief provision in ss 28 and 30; and
(c)relief at the forfeiture stage under s 66(1), which is applicable regardless of whether the interest is a “severable interest” or not.
[58] As the applicant acknowledges, even if a person is unable to avail themselves of s 30 at the restraint stage, they are still able to bring an application for relief from forfeiture at the forfeiture stage. Here, if the ultimate forfeiture application will inevitably lead to the innocent parties getting relief, as they submit, then waiting for that to happen is a needless prolongation of the proceedings.
[59] For all these reasons, the interested parties submit this is one of those cases where the Court should not exercise its discretion to order restraint.
Discussion
[60] The starting point for considering this application is to decide whether the property is tainted property as that is only pre-requisite to making an order under s 24. Issues of ownership are irrelevant at this stage as the term “specific property” used in that section is defined as “identifiable property” although there “need not [be] an identifiable owner”.26
25 Yan v Commissioner of Police [2016] NZSC 41 at [5].
26 Criminal Proceeds (Recovery) Act, s 5.
[61] Furthermore, at this stage, I am only required to be satisfied there are “reasonable grounds to believe” that the property is tainted property.27 This is to be contrasted with the higher threshold, being on the balance of probabilities, which is required before making a forfeiture order.28
[62] I am satisfied, by some margin, that the threshold of having “reason to believe” the property is tainted property is met, essentially for the reasons put forward on behalf of the Commissioner. The circumstances in which the money was found, including where it was concealed, its packaging, the large denominations of the notes and the large total sum are all indicative of money acquired through significant criminal activity, most likely drug offending, being offending which tends to generate large sums of cash.
[63] Beyond the circumstances and facts of the discovery, I also consider the short period over which the funds appear to have been accrued, as indicated by the date of issue of the bank notes, supports them being the proceeds of criminal offending. As a matter of common sense, there are very few ways by which an individual could accrue this much legitimate cash income, over and above their normal outgoings, in such a short period of time.
[64] I also note that while a likely source of the income is drug dealing, the amount found, so long as derived from criminal offending would meet the definition in s 6(1)(b) of the CPRA of significant criminal activity, being offending “from which property, proceeds or benefits of [$30,000] or more have … been acquired or derived”.
[65] Having determined that there is reason to believe the funds are tainted, as defined by the CPRA, I turn to consider Mr Lennard’s argument that they lost their taint once in the hands of the “innocent” third parties.
[66] The definition of tainted property does not specify the point at which property loses its “taint”. Rather, the CPRA has a regime where an offender’s illegitimate income is followed into the assets they acquire with the income (rather than following
27 Criminal Proceeds (Recovery) Act, subs 24(1).
28 Criminal Proceeds (Recovery) Act, ss 50 and 55.
the money once paid to innocent third parties) or if the asset is acquired by a person who has no reason to believe it was acquired from significant criminal activity, the person holding the property will be able to obtain relief from forfeiture through the CPRA’s various provisions.
[67] Mr Lennard’s first example of a vehicle brought by an innocent third party represents the classic case of a bona fide purchaser for value. Cars are legitimately sold every day and, so long as there is nothing to put the purchaser on notice that the car was acquired through the proceeds of significant criminal activity, their interest in the vehicle will be protected. Similarly, in the case of a tailor providing clothes to a drug dealer, the payment will be protected from the assets forfeiture regime, in the absence of knowledge (although the goods acquired by the drug dealer with the money would, in turn, be tainted property). Finally, the example of tax received by the Commissioner of Inland Revenue on the earnings from drug dealing, is money received pursuant to the relevant tax legislation, with nothing to alert that Commissioner that it was received as a consequence of drug dealing. For that reason, it would not be subject to the asset forfeiture regime.
[68] I do not consider any of the examples, which all relate to transactions where the recipient of the property has no reason to be suspicious, can be compared to the present case, where the real possibility that the funds were the result of significant criminal activity was recognised at the point of discovery.
[69] In my view, property derived directly or indirectly from criminal activity must be treated as tainted, both in the hands of the person undertaking the criminal activity and any recipient, unless they can demonstrate they neither knew, nor were wilfully blind to, the likelihood the property was derived from significant criminal activity.
[70] My conclusion that there is reason to believe the property is tainted property means I have jurisdiction to make a restraining order under s 24, subject to the exercise of the discretion which I come to later. As there is jurisdiction to make a restraining order, the next issue is whether s 30 would allow the interested parties claimed interest in the totality of the property to be excluded.
[71] It is worth noting at this juncture that the Commissioner does not dispute that the interested parties have a potential interest in the property through their status as owners and occupiers of the property on which the money was found. At issue in this hearing is whether that is sufficient to decline the Commissioner’s application for a restraining order in respect of that property, whether under s 24, s 30 or, in the exercise of my discretion.
[72] In respect of the interested parties’ claim under s 30, I am unpersuaded that that section was intended to deal with a claimed 100 per cent interest in property and concur with Lang J’s observations in Johnson, where he said he did not:29
… consider there is any justification for placing a gloss on, or ascribing an alternative meaning to, the word “severable”. It is [to] be given its natural and ordinary meaning, which is “able to severed”.
[73] Section 30 clearly envisages the exclusion of some property from property that is, or is going to be, made subject to a restraining order. It is not designed to exclude the entirety of the proposed restrained property from the restraining order. The wording of s 30 can be contrasted with the wording of s 66 which would allow an innocent interest holder to apply for relief from the making of a civil forfeiture order in its entirety. The need to delay the determination of which parties’ interests should prevail is heightened in this case where the original owner of the property has not been located. The CPRA encourages that a reasonable time should elapse in such cases between the making of a restraining order and determining an asset forfeiture application.
[74] The fact the interested parties are not claiming a severable interest in part of the cash sum precludes the operation of s 30 and I do not need to make a finding on whether the applicant has not unlawfully benefitted from the significant criminal activity to which the restraining order relates.
[75] However, should I be wrong on the issue of whether s 30 contemplates excluding a 100 per cent interest in property, I would add that I am not satisfied, given the breadth of the definition of “unlawfully benefitting” from significant criminal
29 Commissioner of Police v Johnson, above n 5, at [50].
activity, that the interested parties can exclude receiving such benefit. The word “benefit” conveys receiving an advantage or gain and would exclude someone receiving property as a bona fide purchaser for value. Here, the interested parties seek to retain cash which was not earned through work, or derived through sale of some other property. If they retain it, it is a genuine windfall or benefit to them. However, from the moment they found the cash, they were also aware of its potential criminal source. This is quite distinct from acquiring tainted goods or money through a transaction that gave no cause for suspicion or concern. Given the breadth of the definition of unlawful benefit and the fact it requires no involvement by the individual in the criminal activity, I am unpersuaded, at least for the purposes of excluding the cash from a restraining order, that the interested parties could claim they met the requirements of s 30(2)(b).
[76] Finally, I address the issue of whether notwithstanding the test for making a restraining order being met, I should decline to make one on the basis that the interested parties claim to the money will inevitably prevail. In my view, I cannot safely conclude that that is the case. Those arguments are for another day and to be determined in light of the current evidence and any further information that comes to light in the ensuing 12 months. In that regard, I remind myself that this is simply a temporary order and, given this is not money the interested parties had earned or were relying on using, there can be no hardship to them if the question of whether an asset forfeiture order is made is deferred in the interim.
Result
[77] The application for a restraining order in respect of the sum of $232,440 cash located in the roof space at [ ] Christchurch is granted on the terms sought.
[78] The application to exclude this sum from any restraining order made is dismissed.
[79]Costs are reserved.
Solicitors:
Crown Solicitor, Christchurch Cameron & Co, Christchurch
Copy to:
M Lennard, Barrister, Wellington
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