Commissioner of Police v Wright
[2024] NZHC 1531
•12 June 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-497
[2024] NZHC 1531
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER
of an application for civil forfeiture orders
BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
MARK ANDREW WRIGHT
Respondent
BANK OF NEW ZEALAND
First Interested Party
LEGAL SERVICES COMMISSIONER
Second Interested Party
AND
OFFICIAL ASSIGNEE
Third Interested Party
Hearing: 12–13 February 2024 Appearances:
C C White for Applicant P N Allan for Respondent
Judgment:
12 June 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 12 June 2024 at 11.45 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
COMMISSIONER OF POLICE v WRIGHT [2024] NZHC 1531 [12 June 2024]
Introduction
[1] In November 2019, the respondent, Mark Wright, was found guilty by a jury on three charges of importing methamphetamine. On 17 January 2020, he was sentenced to nine years and six months’ imprisonment on those charges.1
[2] In October 2020, the Commissioner applied for a restraining order over Mr Wright’s residential property at Flat 1/37 Austin Street, Sydenham, Christchurch (the Austin Street property).2 Sometime later, in July 2022, the Commissioner applied for civil forfeiture orders seeking:
(a)an assets forfeiture order in respect of the Austin Street property; or, in the alternative,
(b)a profit forfeiture order in the sum of $90,070, being the total of unexplained cash deposits made into Mr Wright’s known accounts or into third party accounts for the purchase of cryptocurrency.3
[3] The application was initially brought relying on Mr Wright having unlawfully benefitted from the importation and the supply of methamphetamine4 and from obtaining by deception by failing to disclose earnings while receiving benefit payments.5 All three of those offences meet the definition of “significant criminal activity” under the Criminal Proceeds (Recovery) Act 2009 (the CPRA). The Commissioner has, however, advised he is no longer relying on the third ground of the application. Instead, the application focuses solely on the receipt of unlawful benefits, and the consequent “tainting” of the Austin Street property, from the importation and supply of methamphetamine.
1 R v Wright [2020] NZDC 730.
2 Pursuant to ss 43, 44 and 49 Criminal Proceeds (Recovery) Act 2009.
3 While the Commissioner acknowledged there may have been a double-counting in relation to the sum of $6,000 used to buy cryptocurrency there was also likely an omission of $9,000 on a purchase of Bitcoin on 8 May 2017, plus there was other evidence of cash being used for living expenses that did not show in the bank accounts, so the Commissioner maintains the position that at least $90,070 was received in unlawful benefits but likely much more.
4 Pursuant to subs 6(1)(a), (c) and (2)(a) of the Misuse of Drugs Act 1975.
5 Pursuant to ss 240(1) and 241(a) of the Crimes Act 1961.
[4]The key issues are:
(a)Whether the Commissioner has proved, on the balance of probabilities, that the unexplained cash sums identified in the examination of Mr Wright’s financial activities are unlawful benefits derived from the importation and supply of methamphetamine?
(b)If so, are there grounds for relief against a civil forfeiture order under s 51 or s 56 of the CPRA in the particular circumstances of Mr Wright’s case?
Factual background
[5] Mr Wright is a 54 year old male with a significant criminal history. The vast majority of his offences are dishonesty offences. However, he has also been convicted of a limited range of drug-related offences. These include historic convictions for cultivating and possessing cannabis, but also the following, more relevant, offending:
(a)importing ephedrine on 27 April 2006;
(b)possession of methamphetamine on 12 June 2006;
(c)importing gamma-butyrolactone, a controlled drug, from Thailand on 22 February 2010; and
(d)possession of methamphetamine on 24 June 2016.
[6] Between 15 June 2017 and 21 September 2017, three packages were imported into New Zealand containing methamphetamine. The packages all came from California and were all packaged in a similar way, with methamphetamine concealed amongst documents. They were all addressed to fictitious recipients. They each contained large amounts of methamphetamine, namely 111.7 grams, 146.4 grams and
138.3 grams. All of the packages were intercepted by Customs.
[7] At his criminal trial, Mr Wright denied involvement in the importation of these packages and gave evidence that he was not guilty of the offending. That evidence was not accepted by the jury who convicted him on all three charges.
[8] In this hearing Mr Wright acknowledged that he organised the importation of those packages. In respect of the first one containing 111.7 g of methamphetamine, he had the package redirected to be collected from a Kiwibank Post Shop, but it was intercepted by Customs before he could pick it up. In respect of the latter two, containing a total of 284.7 g of methamphetamine, he had them redirected to be picked up from the FedEx Depot. He then attempted to pick them up, but, again, he did not receive them because they had been intercepted.
[9] Shortly before the first of these three packages was intercepted, Customs intercepted two other packages containing large amounts of methamphetamine which were also sent to Christchurch addresses from California and in similar packaging to the packages Mr Wright imported. While Mr Wright denies any connection to these packages, the Commissioner submits it can be inferred that these were also importations by Mr Wright, noting both were sent on 8 June 2017, the same day as Mr Wright purchased further Bitcoin.
[10] On 22 November 2017, a search warrant was executed at the Austin Street address. A small amount of methamphetamine was located, along with two glass pipes for methamphetamine use. Mr Wright acknowledged that these belonged to him. Police also found nine cellphones and several SIM cards. The number of one of the cellphones was given as the contact number for the request to divert the first package to be collected from Kiwibank Post Shop. Another of the phone numbers was used to call FedEx to arrange the collection of the parcels from the FedEx depot in September 2017. Also found at Mr Wright’s address was a document which contained a guide on how to use the dark web to import drugs using Bitcoin.6
[11] Further investigations carried out by Customs officers revealed that Mr Wright uses encrypted applications on the phones and there were frequent references inviting
6 The dark web is a part of the internet that cannot be found through conventional web browsers, but which is only accessible via specialised web browsers, allowing users to remain anonymous.
the person contacting him to use the messaging app “Wickr” to ensure the communications were confidential. When the phones were analysed, there were also text messages, one of which suggested that Mr Wright was dealing in drugs and others which showed that he was buying Bitcoin. At his trial, it was the Crown’s case that Mr Wright was using Bitcoin as a means to purchase methamphetamine for supply and that some of the profit earned from this was either put into his bank account in cash or was used to fund his living expenses.
[12] Although in the present case Mr Wright has only been convicted of importing methamphetamine, the Commissioner argues that the totality of the evidence points to Mr Wright also being involved in the commercial supply of methamphetamine, leading to him receiving an unlawful benefit which justifies making the civil forfeiture orders sought.
The legal framework
[13] The primary order sought by the Commissioner is an asset forfeiture order in respect of the Austin Street property. Under s 50(1) of the CPRA, the Court “must make a type 1 assets forfeiture order” if it is “satisfied on the balance of probabilities that specific property is tainted property”.
[14]“Tainted property” is defined in s 5 of the Act as:
(a)… any property that has, wholly or in part, been–
acquired as a result of significant criminal activity; or
(ii)directly or indirectly derived from significant criminal activity; and
(b)includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity.
“Significant criminal activity” is defined in s 6 of the CPRA as:
(1)… an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending–
(a)that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or
(b)from which property, proceeds, or benefits of a value of the threshold amount or more have, directly or indirectly, been acquired or derived.
[16] As both the importation and supply of methamphetamine are punishable by a maximum of life imprisonment, it is not disputed that they constitute significant criminal activity. The CPRA does not require there to be a conviction for such offending before the forfeiture provisions apply.7 The Court need only be satisfied, on the balance of probabilities, that such activity occurred.
[17] The application for the assets forfeiture order in respect of the Austin Street property is based on the claim that this is tainted property as defined under the Act. As was recognised in Drake v Commissioner of Police, the introduction of any funds derived from significant criminal activity into a bank account, taints the entire account.8 Furthermore, a legitimately acquired property will become tainted property if money derived from significant criminal activity is used to meet mortgage payments.9
[18] In this case, there is no dispute that if the unexplained cash sums identified in the examination of Mr Wright’s financial activities are found to be derived from the importation and supply of methamphetamine, then the Austin Street property is tainted property as defined under the CPRA, because:
(a)the mortgage was paid from the same bank account (the BNZ -083 account), that a significant amount of the impugned cash deposits were paid into; and
(b)impugned cash deposits were paid into the BNZ -030 account and there were subsequent transfers from that account to the BNZ -083 account from which the mortgage was paid.
7 Drake v Commissioner of Police [2017] NZHC 2919 at [98]–[99].
8 Drake v Commissioner of Police [2020] NZCA 494 at [73].
9 Duncan v Commissioner of Police [2013] NZCA 477, (2013) 26 CRNZ 796; Doorman v Commissioner, New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173.
[19] If the Court reaches the view that the property at Austin Street is tainted, Mr Wright seeks that the property be excluded from forfeiture, relying on s 51 of the CPRA. That section provides as follows:
51 Exclusion of respondent’s property from assets forfeiture order because of undue hardship
(1)The High Court may, on an application made by the respondent before an assets forfeiture order is made, exclude certain property from an assets forfeiture order 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 is included in the assets forfeiture order.
(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 assets forfeiture order; and
(b)the nature and extent of the respondent’s interest in the property; and
(c)in the case of a type 1 assets forfeiture order, the circumstances of the significant criminal activity to which the order relates.
[20] In considering an application to exclude property from forfeiture, the Court may consider a range of factors. However, the section specifically directs the Court to the following factors:
(a)the use that is ordinarily made of the property;
(b)the nature and extent of the respondent’s interest in it; and
(c)the circumstances of the significant criminal activity.
[21] However, as the Court of Appeal has noted in relation to s 56 (which provides equivalent relief against a profit forfeiture order), undue hardship “must entail more than hardship inherent in forfeiture”.10
10 Zhou v Commissioner of Police [2023] NZCA 137 at [64].
[22] I do not need to consider the legal framework for making a profit forfeiture order here. This is because, if I am satisfied that some or all of the unexplained cash deposits received in Mr Wright’s bank account are from significant criminal activity, it is accepted that the property at Austin Street is tainted and liable to an assets forfeiture order. The only question then is whether the application for relief under s 51 should be granted.
Did Mr Wright derive income from the supply of methamphetamine?
[23] The first issue to address is whether Mr Wright derived income from the significant criminal activity of methamphetamine dealing, noting he has not been convicted of supplying this drug, only of importing it. In the absence of conviction for supply I must decide whether there is sufficient evidence from which I can be satisfied, on the balance of probabilities, that at least some of the cash deposited into Mr Wright’s bank accounts was derived from the supply of methamphetamine.
Submissions for the applicant
[24] In submitting that Mr Wright was engaged in the supply of methamphetamine both prior to, and at the time of the importation of the three packages, the Commissioner says:
(a)It is unlikely that the intercepted packages comprise Mr Wright’s only attempts at importation of methamphetamine. The three importations all contained large amounts of methamphetamine totalling
396.4 grams, with a street value of $268,800 and it was inherently unlikely that Mr Wright would have commenced importing methamphetamine with these three separate significant quantities of methamphetamine of such high value.
(b)Mr Wright’s importations were sophisticated, involving the use of false names, addresses and redelivery requests. Mr Wright also used nine cellphones, multiple SIM cards and encrypted applications such as Wickr to conceal his illegal activity.
(c)Prior to the intercepted importations Mr Wright had large amounts of cash which he deposited into his bank accounts and into third party bank accounts which he does not have a credible explanation for.
(d)Mr Wright would only hold Bitcoin purchases for a brief period of time before selling them to third parties, and it is a reasonable inference that Bitcoin was being bought in order to purchase methamphetamine.
[25] The Commissioner also relies on an analysis of Mr Wright’s financial activity, insofar as it could be ascertained from accessible sources such as bank accounts, between the financial years ending 31 March 2014 to 31 March 2020, to support the assertion that, particularly in 2017 and 2018, Mr Wright was making significant unexplained income, even though he became unemployed during this time.
[26] In October 2021, Mr Wright was examined on the sources of the unexplained cash and he explained that they were from:
(a)withdrawals from his Xapo account (an account for trading crypto currency);
(b)vehicle trading and Trade Me sales; and
(c)income from boarders.
[27] However, Mr White, for the Commissioner, submits that the Commissioner’s expert accounting evidence disproves each of the sources of income as plausible as:
(a)A transaction history was obtained from Xapo bank which did not disclose any transactions with merchants from which cash withdrawals could have been made.
(b)While a number of vehicles were transferred from Mr Wright’s name in the relevant period, he also acquired a significant number of vehicles. None of these sales and purchases appear to be reflected in the bank accounts. He appears to have had access to cash outside the banking
system to fund these activities and it does not explain the cash deposits, noting the pattern of cash deposits was generally regular lower value deposits, rather than a singular large value deposit which might result from the sale of a vehicle.
(c)An analysis of Mr Wright’s Trade Me records demonstrate that while he may have derived some cash from Trade Me sales, this was largely offset by purchases which did not have a corresponding transaction record (that is, they were also likely made in cash).
(d)Finally, in respect of income from boarders, the bank accounts reveal a total of $14,160 in electronic transfers which likely related to rental income from Mr Wright’s then girlfriend, Anna Steedman, but these have been excluded from the analysis of unexplained cash deposits and Mr Wright does not describe receiving rental income from any other person.
[28] The Commissioner also points out that Mr Wright regularly used methamphetamine in the relevant period. Even on Mr Wright’s assessment of spending “a couple of hundred [dollars]” each week on it, this suggests a significant expenditure on that drug which is not reflected in traceable expenditure.
[29] To the extent that Mr Wright’s explanations for the source of the unexplained cash differed when giving his oral evidence in hearing from those given in his examination, Mr White, for the Commissioner, submits that this underscores Mr Wright’s lack of credibility and it is safe to infer that most, if not all, of the cash deposits were from drug dealing.
Submissions for the respondent
[30] Mr Allan, counsel for Mr Wright, submits that the mere presence of unexplained cash deposits, or the use of cash payments is insufficient to prove that these represent benefits from significant criminal activity. Importantly, none of Mr Wright’s convictions during this period are for supply of methamphetamine and the applicant must prove, on the balance of probabilities, that such cash deposits
represent the benefits from significant criminal activity before the Court can consider making civil forfeiture orders. As was said in Wu v Commissioner of Police “[t]he mere presence of “unknown deposits” does not necessarily mean such deposits have been derived from significant criminal activity.”11
[31] Mr Allan acknowledges that if the Court is satisfied that some or all of the cash deposits made into the bank accounts (particularly the BNZ -083 bank account) are the unlawful benefits from significant criminal activity, then the Austin Street property is tainted and the Court must order forfeiture, subject to any application for relief.
Discussion
[32] The Commissioner’s application relied on evidence of the investigation undertaken by Steven Robert Williams, an authorised officer, attached to the Southern Asset Recovery Unit of the New Zealand Police and of Andrew Robert Hugill, a forensic accountant, also attached to the Southern Asset Recovery Unit. Mr Hugill undertook an analysis of the information obtained about Mr Wright’s financial affairs during the period which was investigated, being from the tax year ending 31 March 2014 to the financial year ending 31 March 2020. These records show that Mr Wright had been employed in various jobs but his last formal job terminated during the financial year ending 31 March 2017. He began receiving payments from Work and Income New Zealand in 2017.
[33] Mr Wright’s declared income from either employment or benefits was always modest. It reached a high point of $47,935.66 in the financial year 2014/2015. In the 2016/2017 tax year Mr Wright received less than $23,000 in income from employment or benefits. In the years 2018 through to 2020, he received between $11,759.43 and
$17,693.35 per year in benefits and was not working at all.
[34] While Mr Wright has been convicted of importing methamphetamine, which is significant criminal activity as defined in the CPRA, for the purposes of this application it is necessary to find that he also engaged in the supply of methamphetamine which was the source of some or all of the cash deposits which
11 Wu v Commissioner of Police [2022] NZCA 65 at [46].
ultimately found their way into the BNZ -083 account from which mortgage payments were made on the Austin Street property.
[35] In terms of whether Mr Wright engaged in methamphetamine for supply, I accept the Commissioner’s submission that there is sufficient evidence to conclude that this was occurring. I reach this conclusion for a number of reasons.
[36] First, Mr Wright acknowledged he was a user of methamphetamine during this period. On his own admission, he was using it regularly between 2013 and when he was arrested. His responses to the questions on this issue when he was examined on 20 October 2021 by Steven Williams were as follows:
[SW]so in the period we’re looking at 2013 through til the time you were arrested, were you using methamphetamine that whole period of time?
[MW] I would’ve been, but, yeah [SW] yep
[MW] yeah. It increases when there’s two of you…? Ultimate downfall I suppose
[SW] you were spending it, I understand its quite expensive [MW] well it was a thousand dollars a gram back then
[SW] a gram a week or a gram a day?
[MW] I’d be in denial to try and suggest that sort of amount, when there’s two of you’s its so hard. You might not be the source of it each time, but they may be. Their expense. I don’t know. It’s not cheap though, I couldn’t break that down for you, there’s just no memory of it. It’s ridiculous.
[Unknown – OO]
[OO] would it be fair to say a not more than or not less than number for how much roughly you think you were using or spending
[MW] oh Christ, its hard to. No more than a couple of hundred, I suppose [OO] a week?
[MW] yeah something like that? Someone else could have suddenly have a lot of it and you’re using a lot of it. I’m going right back though, this is 10 years ago
[37] In this hearing, when Mr Wright was cross-examined on his methamphetamine use, he accepted that his methamphetamine use increased once he became unemployed but resiled from the estimate of spending $200 a week on it, saying that he only spent “probably $100 a week, if that”, because during that period, he had someone “who was sharing what they got which was quite regular.”
[38] However, I found it inherently implausible that someone who was regularly using methamphetamine, as he acknowledged, would only spend $100 a week on it, or that a fellow user would be providing him with sufficient methamphetamine that he was only needing to spend $100 a week on it. I am satisfied Mr Wright was regularly using methamphetamine particularly once he ceased working and was spending a minimum of $200 a week on it but likely much more and could not have funded this from his lawful sources of income.
[39] That said, the fact he had a motive to supply methamphetamine to feed his increasing habit is not sufficient, on its own, to satisfy me that he was dealing in methamphetamine. However, there was considerable other supporting evidence which satisfied me that he was doing so.
[40] In that regard, there was some evidence of dealing in his texts. I note the text evidence is limited given that Mr Wright, as is common with drug dealers, used encrypted applications and multiple cellphones. There are a number of texts where he directs the other party to communicate with him on the encrypted app, Wickr. However, on 10 June 2017 someone texted Mr Wright saying “Do u have any? I need to be normal lol”. When Mr Wright advised that he could be there in about an hour, the texter responded saying “I have a sweat in anticipation”. They then discussed where to meet, with the texter saying that they were at the cemetery gate which Mr Wright described as being “we’re [sic] you usually go”, suggesting this was not the only time the two had liaised in this way. I found Mr Wright’s explanation for this text exchange, being that a visitor left a tin of pot in the house which he simply wanted to get rid of and which he would otherwise have thrown out, was implausible and entirely inconsistent with the content of the text exchange.
[41] I also consider Mr Wright’s Bitcoin transactions were for the purpose of paying for methamphetamine. This was supported by the timing of a Bitcoin transfer just before the first intercepted package was sent and the fact he had an instruction sheet on how to buy drugs on the dark web using Bitcoin.
[42] I do not accept Mr Wright’s explanation given in evidence, that the large cash sums he received was from trading with people who wanted Bitcoin in their wallets but did not want to trade through an established platform to maintain their anonymity and who were prepared to pay a premium to achieve this. It had not been mentioned previously, including when he was examined financially. He only raised this possibility when the other explanations he gave for having large amounts of cash were disproved through further police investigations.
[43] I also accept that the evidence surrounding the cash deposits had all the hallmarks of them coming from illegitimate sources. The Bitcoin transactions took place on dark web markets such as AlphaBay and Hansa. He was making these purchases of Bitcoin using direct cash deposits to third parties and then, shortly afterwards, was transferring the Bitcoin to third parties. The amount of cash deposits that he received in his bank accounts reached its high point between March and October 2017 when Mr Wright was not working, but when he received $51,400 in cash deposits into his bank account. This coincides with the period when the Commissioner asserts that Mr Wright was importing and dealing in large amounts of methamphetamine, noting the interception of the three packages he was charged with importing but also the two other packages sent to Christchurch in the same way in the same period which were also intercepted.
[44] On some days multiple deposits were made to different accounts or at different branches suggesting an attempt to avoid unwanted scrutiny from the bank. The most obvious example is when, on 31 May 2017, he made five separate deposits into his bank accounts of between $1,000 and $3,650.
[45] Importantly, the alternative explanations given by Mr Wright as to the origin of the cash were disproved by the Commissioner’s evidence. For example, there is no evidence to support the cash coming from vehicle trading or Trade Me sales. In the
2017 year only one vehicle was transferred from Mr Wright’s name and the pattern of cash deposits into his bank accounts does not tie in with any vehicle sale and are generally of smaller amounts below the $10,000 limit that might attract enquiries from the bank as to its source.
[46] Similarly, an analysis of Mr Wright’s Trade Me records undertaken by Mr Hugill showed that while he could have derived some cash from Trade Me sales, this was largely offset by purchases made through Trade Me which did not have a corresponding transaction, meaning they were also likely paid for in cash.
[47] The suggestion that some of the cash income related to board payments was also not supported by the evidence. An analysis of Mr Wright’s bank accounts identified $14,160 in electronic transfers that related to income from Mr Wright’s then girlfriend. Mr Wright does not suggest he received rental income from any other person and this cannot explain the large cash sums he received, particularly in 2017.
[48] The suggestion that some of the cash deposits were withdrawals from his Xapo account was also countered by the Commissioner’s evidence. The Xapo transaction report did not disclose any transactions with merchants from which Mr Wright could have made cash withdrawals.
[49] I have also considered whether the importation of at least three large amounts of methamphetamine from the United States was likely done for the purposes of supply and was indicative of this having occurred on previous occasions. In evidence, Mr Wright denied that he imported these three packages for the purpose of supply and denied that he had done so previously. However, his explanation for how he had come to import these three packages was entirely implausible. He said he was looking for a cheaper supplier when he came upon a post on a public chat forum like Reddit (although he could not remember exactly which chat forum), where free samples of methamphetamine were being offered. He said because he was a user at a time, he took up the offer of a free sample and imported approximately three grams. Following receipt of that sample, he decided he would make a purchase of methamphetamine from the supplier and arranged to do so on the encrypted application Wickr and paying for it with Bitcoin. However, implausibly, he says he cannot remember how much he
ordered. He says when the first package was intercepted by Customs and he did not receive it, the supplier contacted him asking if he wanted to purchase further methamphetamine and he agreed to a replacement package along with a further package. But again Mr Wright says he does not recall how much he ordered, and says the supplier sent much larger quantities than he ordered or paid for.
[50] I do not accept Mr Wright’s explanation as to how he came to import the three packages which were intercepted. It defies belief that the source of the methamphetamine would:
(a)offer methamphetamine for supply on a publicly visible chat forum; and
(b)send significantly more methamphetamine on each occasion than Mr Wright paid for.
[51] In my view, the totality of the evidence suggests that at least in 2017, Mr Wright had established a pattern of purchasing methamphetamine on the dark web using Bitcoin and selling it, albeit generally through encrypted communications. While he has no prior criminal convictions for importing methamphetamine, he has two convictions for importing other drugs so can not claim to have no experience in such activities.
[52] The likelihood he was importing and then dealing methamphetamine is supported by him having large quantities of cash deposits, many of which were used for personal spending, noting his bank account did not show evidence of a normal amount of personal expenditure in this period. For example, in 2014 Mr Wright spent
$1,564.26 at service stations and $5,812.16 on food and alcohol, but the traceable amounts spent on those items of expenditure reduced drastically over the next three years so that by 2017, he spent a total of $108.50 from his accounts at service stations and a total of $501.83 on food and alcohol over that year. The logical inference is that he was meeting most of his day to day expenditure in cash.
[53] Having considered the evidence, I accept that the Commissioner has proved, on the balance of probabilities, that Mr Wright benefited from the importation and supply of methamphetamine during the relevant period, and all the unexplained cash deposits are, on the balance of probabilities, earned from that source.
[54] That being the case, I now turn to the respondent’s application for relief against forfeiture.
Should the Austin Street property (or some part of its net value) be excluded from forfeiture?
[55] Mr Wright applies for relief against forfeiture saying that, having regard to all of the circumstances, undue hardship is reasonably likely to be caused to him if the Austin Street property is forfeited.
Submissions for the respondent
[56]In that regard, Mr Allan submits:
(a)the property has always been used for residential purposes and has been the respondent’s home until his remand in custody;
(b)the property forms an integral part of the respondent’s proposal for release on parole;
(c)the respondent owns the property with a relatively modest mortgage (the property is currently valued at approximately $300,000 and the mortgage is approximately $25,000);
(d)the vast majority of the value of the property was not derived directly or indirectly from unlawful benefits;
(e)while the offending was serious, there are no identifiable victims of the offending because it was intercepted before supply;
(f)Mr Wright has had no credit applied in sentencing to reflect the possibility that he would also be forfeiting his home;
(g)given his age, Mr Wright has little hope of re-establishing home ownership in his remaining years; and
(h)despite his current situation and notwithstanding the property is restrained, Mr Wright has continued to make payments on the mortgage.
[57] For all these reasons, if the Court decides the evidence is sufficient to make a civil forfeiture order it should only order payment of a financial sum and exclude the property from an asset forfeiture order, allowing Mr Wright the option of refinancing and retaining the house.
Submissions for the applicant
[58] The Commissioner opposes Mr Wright’s application for relief from forfeiture on the grounds of undue hardship. Having regard to the factors listed in s 51(2), Mr White submits that none of them are sufficient to justify relief on the grounds of undue hardship.
[59] The Commissioner acknowledges that the Austin Street property is Mr Wright’s primary place of residence. However, this has been held to be insufficient, in itself, to justify relief from forfeiture. In Cheah v Commissioner of Police the Court of Appeal made the following observations:12
[64] The threshold for relief under s 56 is high. Hardship for offenders and third parties is to be expected. For the Court to grant relief an applicant must show not merely inconvenience or difficulty, but that any hardship will be so disproportionate as to require the objectives of recovery and deterrence to be subordinated to the particular needs of the wrongdoer.
[65] The loss of equity in a home acquired from legitimate sources before the criminal activity, and the consequent prospect the respondent will need to rely on State assistance for housing, has been held not to constitute undue hardship; the risk of losing a home ought to have been contemplated at the time the respondent embarked on the criminal activity.
12 Cheah v Commissioner of Police [2020] NZCA 253.
[60] The Commissioner submits that Mr Wright has not put forward any evidence to suggest the hardship he would suffer is any greater than the hardship any other offender would experience in similar circumstances. While Mr Wright claimed that the address was a critical part of his plan to obtain parole, in fact his first parole address will be at a friend’s house in the settlement of Pegasus. There was no evidence to suggest that the Austin Street property was crucial to Mr Wright’s prospects of parole.
[61] In terms of the nature and extent of Mr Wright’s interest in the property, the BNZ mortgages at the time of the hearing was approximately $26,000 and the property was valued at $300,000. While that indicates Mr Wright’s estimated equity is approximately $275,000, Mr White points out that almost $100,000 of that equity was capital gain and the evidence suggests that approximately $110,000 was proven to have been earned through unlawful activities. This figure is reached by the combination of the pleaded unlawful benefit of $90,070, the additional Bitcoin purchases of $9,680 which were not included in the unlawful benefit figure and further fiat deposits to the Xapo account of approximately $11,500 which were also not included in the unlawful benefit figure.
[62] Mr White also says that there was also approximately $31,200 expended on methamphetamine (taking Mr Wright’s estimate of his expenditure) which was not funded from lawful sources. Furthermore, there was likely additional cash earned unlawfully as demonstrated by the decrease in expenditure through bank accounts during the years of high cash deposits. Thus, overall, only a small portion of the equity Mr Wright has in the property is likely to have been derived from lawfully earned income. Furthermore, the Legal Services Commissioner has a caveat over the Austin Street property securing not less than $50,000 in legal aid fees which will be recovered if the property is sold, meaning the amount of equity Mr Wright will lose if the property is forfeited is less than might otherwise appear.
[63] Mr White submits that when all these factors are taken into account, the forfeiture of the property would not result in undue hardship as Mr Wright’s equity is less than the overall value of the unlawful benefits he has earned during the period in question.
[64] Finally, looking at the circumstances of the significant criminal activity, Mr White points out that Mr Wright was importing and supplying methamphetamine for his own benefit and it is well recognised that methamphetamine causes social harm within New Zealand. Where significant criminal activity involves selling methamphetamine for financial gain, Mr White submits that the threshold for relief should be very high. Mr White is also critical of Mr Wright first denying that he has benefitted from significant criminal activity but then, on the other hand, arguing that if he has, he would suffer undue hardship if an order for forfeiture of the Austin Street property was made.
[65] For all these reasons, he says the application for relief from forfeiture should be dismissed.
Discussion
[66] I start with considering the use that is ordinarily made of the property that is to be subject of the asset forfeiture order. As Mr White noted, the fact that it is Mr Wright’s home and he will lose it, is not sufficient to establish undue hardship. Something more is required. Here, Mr Wright is the sole occupant. There are no innocent third parties who reside there and would be adversely affected by the forfeiture of the property nor is there any reason raised why Mr Wright needs to retain this particular property instead of renting a property.
[67] In terms of the nature and extent of Mr Wright’s interest in the property, I accept that he has a significant interest in the property, as he only has a mortgage of around $25,000 on a home worth $300,000. However, I need to consider the extent to which that interest was acquired through legitimate income or through unlawfully obtained benefits (including to meet other expenditure so that lawful income could meet mortgage payments). I accept the submissions for the Commissioner that Mr Wright must have derived significantly in excess of $100,000 from significant criminal activity during the period covered by the investigations, taking into account the unexplained cash deposits in his bank account, the fact cash must have been used to meet a lot of his expenditure on fuel and groceries, and the fact he sustained a regular methamphetamine habit during this period. Mr Wright was making sufficient profit
that despite not working from 2017 onwards, he was still able to meet his mortgage payments and increase his equity in the property. Furthermore, the cash deposits and other evidence of available cash was clearly profit earned on his supply of methamphetamine, not gross income. As Davidson J observed in Commissioner of Police v C, when considering hardship, “the benefit actually received is relevant”.13
[68] This is also not a case, as in Commissioner of Police v Keen, where any unlawful benefit from the offending had been spent feeding the drug addiction of one of the respondents, or where a respondent was suffering from severe physical and mental health issues.14 Much of the unlawful benefit received simply enabled Mr Wright to live and meet his expenses without working.
[69] In terms of the circumstances of the offending, I accept this was serious offending which should normally attract the deterrent effect of the CPRA. Furthermore, because I am satisfied Mr Wright was involved in methamphetamine dealing, and not just importation, I reject the submission that there were no victims of the offending.
[70] In terms of the other submissions made in support of the application for relief, I reject the suggestion that had it be known Mr Wright might forfeit his home, there would have been credit applied for it by way of a reduction in sentence. There is no requirement for the Courts to take account of the possibility of forfeiture when sentencing a defendant. Indeed, ordinarily, the criminal process will be completed before an application for a profit forfeiture order is heard. Furthermore, in this case, the unlawful benefit was derived from supplying methamphetamine, an offence he was neither charged with, nor sentenced for.
[71] Even if Mr Wright had been sentenced in relation to the supply of methamphetamine, I do not consider the impact of a civil forfeiture order being made is a matter which could be taken into account under the Sentencing Act 2012. This
13 Commissioner of Police v C [2018] NZHC 3334 at [149].
14 Commissioner of Police v Keen [2020] NZHC 3365.
submission was advanced on a sentence appeal in Henderson v R, and rejected by the Court of Appeal.15
[72] I also do not consider the suggestion that the Commissioner may get a “windfall” is relevant. Relief under s 51 is only available where there is undue hardship to the respondent, and the extent of benefit received by the Commissioner is not relevant.
Conclusion
[73]The Commissioner’s application is granted.
[74] The following property is to vest in the Crown absolutely and to be under the Official Assignee’s custody and control:
(a)Flat 1/37 Austin Street, Christchurch, being a property legally described as Flat 1 DP 49825 on Lot 1 DP 49775 having a share in 700 m².
[75] The respondent’s application to exclude the property described above from forfeiture is declined.
Solicitors:
Crown Solicitor, Christchurch
Copy to:
P N Allan, Barrister, Christchurch
15 Henderson v R [2017] NZCA 605 at [42] to [44].
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