Commissioner of the New Zealand Police v Eddy

[2017] NZHC 299

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2016-412-000047 [2017] NZHC 299

BETWEEN

THE COMMISSIONER OF THE NEW

ZEALAND POLICE Applicant

AND

TE AHU KEVIN EDDY First Respondent

AND

LETATIA ALICE CARR Second Respondent

Hearing:	28 February 2017
Appearances:	M J Grills for Applicant N M Laws for Respondents
Judgment:	28 February 2017

ORAL JUDGMENT OF DUNNINGHAM J

Introduction

[1]      In  July  last  year,  Mr  Eddy  pleaded  guilty  to  five  offences  involving possessing, selling, and offering to sell Class C drugs, namely cannabis and BZP. The charges resulted from an undercover police operation.   Shortly before this, in April 2016, the Commissioner of the New Zealand Police (“the Commissioner”) applied for and obtained a without notice restraining order under the Criminal Proceeds  (Recovery) Act  2009  (“the Act”).    The  restrained  property  represents Mr Eddy’s  only  significant  asset,  a  house  purchased  for  just  under  $80,000  in Milton, Otago.

[2]      As  required  under  the Act,  the  Commissioner  then  applied  on  notice  to continue the restraining order.  The on notice applications are opposed by Mr Eddy

and his partner who lives with him in the house, Ms Letatia Carr.

THE COMMISSIONER OF THE NEW ZEALAND POLICE v EDDY [2017] NZHC 299 [28 February 2017]

[3]      The respondents accept that Mr Eddy’s offending is  “significant criminal activity” as defined by the Act.   However, they do not accept that the evidence establishes a reasonable belief on the part of the Commissioner that they benefitted from this activity as is required under s 25.

[4]      The  Commissioner’s  evidence  is  that  the  police  investigation  and  the recorded conversations with Mr Eddy reveal evidence which is consistent with him running a commercial drug dealing operation from the home.  There is also financial evidence which, at least on the face of it, suggests the couple’s expenditure was not all channelled through bank accounts and that the bank accounts revealed unrealistically low  expenditure  on  items  such  as  food  and  petrol  suggesting  an alternative cash revenue.

[5]      The evidence of Mr Eddy and Ms Carr, though, is that they lived a very frugal lifestyle, often relying on assistance from friends, and that Mr Eddy was a heavy user of cannabis.   The evidence of the police, he says, is simply consistent with the fact that he purchased cannabis and shared it with his friends and they would repay him, simply covering the cost price of it, with no profit margin.

[6]      The critical issue therefore is whether the police evidence meets the threshold in s 25 of satisfying me that the Commissioner has reasonable grounds to believe that  the  respondents  have  “benefitted  from  significant  criminal  activity”,  when Mr Eddy’s evidence is that there was no profit element at all.

The preliminary legal issue

[7]      At the outset of today’s hearing, counsel suggested it would be helpful if I would hear them on a preliminary legal issue regarding the meaning of “benefitted” in the context of this legislation.

[8]      If it was to be considered in terms of receipt of money or other compensation from criminal activity, without regard to costs or expenditure incurred to obtain that money, then Mr Laws accepted he would have difficulty in opposing the restraining order application.  If, however, it referred to benefit in the usual sense of profit over and above expenses, then he would continue to oppose the order on the basis that the

Commissioner’s evidence did not satisfy the threshold of there being reasonable grounds to believe the respondent had received a benefit.1

The Commissioner’s position

[9]      In support of the Commissioner’s view that the term “benefitted” should be read more broadly than in the sense of “made a profit from”, Ms Grills referred me to a decision of Katz J in Commissioner of Police v Tang.2

[10]     Tang dealt with a profit forfeiture order application but I am satisfied that the question of how the term “benefitted” should be interpreted will be the same in the context of a restraining order application. In that decision Katz J discussed the predecessor to the Act, the Proceeds of Crime Act 1991. She referred to the majority decision in R v Pedersen where Hardie Boys and Casey JJ agreed that “benefit” equated, in effect, to proceeds or receipts rather than profits, saying:3

Accounting practices adopted in legitimate transactions have no place in the assessment of the pecuniary penalties, as is made very clear by the exclusion of expenses and outgoings from the calculation.

[11] Katz J then discussed the purpose of this Act, noting it intends to make proceeds of crime recovery more effective rather than less so. She considered that a narrower interpretation of benefit under this Act would, however, make the legislation less effective than the Proceeds of Crime Act 1991, saying:4

As Lang J noted in Pulman the purpose and objectives of the CPRA suggest that Parliament endorsed the approach taken in this area under POCA 1991. As observed in both Pederson and Pulman, interpreting benefit as profits rather than proceed/receipts would require the Court to engage in a complex accounting exercise in order to determine the profits of a criminal enterprise. It seems unlikely that this was intended by Parliament.

[12]     Katz J also considered support for this approach was gained from considering s  6  of  the Act.    That  section  defines  significant  criminal  activity  as  including

1      And  notwithstanding my observations that,  given the  interim nature of the  order, and  the competing allegations of the Commissioner and his clients, there would be some difficulty in displacing the Commissioner’s assertion that there were “reasonable grounds” to believe the respondents had benefitted on either legal test.

2      Commissioner of Police v Tang [2013] NZHC 1750.

3      R v Pederson [1995] 2 NZLR 386 (CA) at 391.

4      Commissioner of Police v Tang, above n 2, at [21].

offending from which property, proceeds or benefits to a value of $30,000 or more have been acquired or derived.  She noted that in determining whether the $30,000 threshold is met, the legislation expressly says that any expenses or outgoings are to be disregarded.5

[13]      In Commissioner of Police v Read, Moore J accepted Tang as setting out the correct position of the law on assessing benefits for the purpose of the Act.6

The respondent’s position

[14]   Mr Laws, however, directs me to an earlier decision of Williams J in Commissioner of Police v Nelson.7     In it there was an issue as to whether the offender’s brother should obtain an order for relief from forfeiture in relation to a Harley Davidson motorcycle and a car, in respect of which he gave evidence he had purchased from his brother for significant sums of money.

[15]     In that decision, Williams J considered the meaning of benefit saying:8

[104]    There can be no doubt that Mr H Deer was a “person” who was engaged  in  “significant  criminal  activity”  and  was  “undertaking”  that activity in terms of s 6(2).  On this branch of the case, therefore, the question is whether Mr K J Deer has knowingly derived a benefit from his brother’s significant criminal activity directly or indirectly.

[105]    Because “benefit” is inclusively defined, it is not limited by the Act. Dictionary definitions give it as meaning “advantage, profit, good” and “pecuniary advantage profit gained” but, even so, it could not be said that there  is  anything  in  the  facts  of  this  matter  which  would  amount  to  a “benefit” obtained by Mr K J Deer from his brother or, more particularly, his brother’s drug dealing, still less that he “knowingly” benefited from that significant criminal activity.

Discussion

[16]     I do not consider that the facts of the Nelson case directly address the issue of whether benefits from criminal activity exclude the costs incurred to receive that benefit.  What the case does say is that, in the circumstances in which the person had

purchased, with his own resources, the vehicles in question, he received no benefit

5      Section 6(3).

6      Commissioner of Police v Read [2015] NZHC 2055.

7      Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010.

8      At [104]-[105].

from his brother’s drug dealing, let alone did so knowingly.   In my view, the observations in Nelson are factual ones and do not directly address the legal question in dispute in this case.  It therefore does not assist in supporting Mr Laws’ position.

[17]     I accept that the decision by Katz J correctly sets out the interpretation of “benefit” in the context of this Act.  She looked directly at the issue in light of the purpose of the Act and the breadth of the statutory language.   Therefore, for the purposes of this hearing, I will be looking to evidence of receipts from criminal activity and will not be taking into account evidence of costs or expenses incurred in achieving that.

Procedure for this hearing

[18]     I accept that will reflect on how this hearing proceeds and what I suggest is that an adjournment is taken to allow the parties to discuss where to from here.  We will reconvene at 2.00 pm and in light of the parties’ consideration of this decision, will decide how this matter is to proceed.

Solicitors:

RPB Law, Dunedin

Ross Dowling Marquet Griffin, Dunedin