Crown Solicitor at Auckland v Crawford-Flett

[2012] NZHC 963

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI 2010-044-4528 [2012] NZHC 963

IN THE MATTER OF     an instrument forfeiture order

BETWEEN  CROWN SOLICITOR OF AUCKLAND Prosecutor

ANDROURKE PETER GREGORY CRAWFORD-FLETT

Offender

ANDMARILYN GAY CRAWFORD-FLETT THE TRUSTEES OF THE OAKS TRUST Applicants

Hearing:         2 April 2012

Appearances: Z Johnston for Crown

M Mann for Offender
J Mather for applicants

Judgment:      9 May 2012

JUDGMENT OF ALLAN J

In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 12 noon on Wednesday 9 May 2012

Solicitors:

Crown Solicitor Auckland  [email protected]

Public Defence Service, Auckland,  [email protected]

J Mather, Auckland,  [email protected]

CROWN SOLICITOR V CRAWFORD-FLETT HC AK CRI 2010-044-4528 [9 May 2012]

[1]      On  24  June  2010,  Mr Crawford-Flett  pleaded  guilty  in  the  North  Shore District Court to charges of cultivating cannabis, possession of cannabis for supply, and  unlawful  possession  of  a  firearm.    The  first  two  of  these  are  qualifying instrument forfeiture offences.1

[2]      On   2   September   2011,   the   North   Shore   District   Court   convicted Mr Crawford-Flett but declined to sentence him and committed him for sentence in this Court.

[3]      On 15 September 2011, the prosecutor filed a statutory notice requiring the Court to consider whether or not to make an instrument forfeiture order pursuant to s 142B of the Sentencing Act 2002.  By minute dated 6 October 2011, a Judge of this Court  directed  the  prosecutor  to  take  the  steps  prescribed  by  s  142E  of  the Sentencing Act.  The prosecutor was thereupon required to take all reasonable steps to notify every person believed to have an interest in the property in question, that the  property  may  be  the  subject  of  an  instrument  forfeiture  order,  and  that applications for relief might be made.

[4] Upon service of the notices, Ms Crawford-Flett filed an application for relief on her own behalf and on behalf of the trustees of the Oaks Trust. In consequence, this Court is now required to consider whether to make an instrument forfeiture order, and if so whether to grant relief from forfeiture. In terms of the requirements of the Sentencing Amendment Act 2009 and the Criminal Proceeds (Recovery) Act

2009 (the CPR Act), these decisions are required to be made as part of the sentencing process, but prior to sentencing itself.

The instrument forfeiture regime

[5]      The current statutory scheme for instrument forfeiture is relatively new.  The

Sentencing Amendment Act 2009 and the CPR Act introduced a new regime for the forfeiture of property used to facilitate criminal activity.

1 Sentencing Act 2002, s 4.

[6]      As is noted in Brazendale v R, the explanatory note to the relevant Bill expressed the view that the previous regime was seen as inadequate.2    The regime was further discussed by the Court of Appeal in Elliot v R:3

[35]      The explanatory note to the Bill identified its policy objectives as the confiscation of property from persons who had engaged in or profited from significant criminal activity, reduction of the rewards from crime for the person concerned, reduction of the attraction of crime for potential offenders and the reduction of resources that could potentially be used for criminal activity.

[36]     The  explanatory  note  went  on  to  explain  that  in  relation  to conviction based proceedings:

As such property may have been lawfully acquired, instrument forfeiture is limited to situations where there has been a conviction and will be considered by the court as part of the sentencing process.  This avoids the possibility of someone being, in effect, more severely punished for an offence simply because he or she owns a substantial asset that was used to facilitate the offending.

(footnotes omitted)

[7]      As occurred in this case, a prosecutor has a statutory obligation to bring to the Court’s attention cases where an offender is convicted of a qualifying instrument forfeiture offence, and has used property to commit or facilitate the commission of that offence.  It is then for the Court to consider, as part of the sentencing process, whether to exercise its discretion to order instrument forfeiture.

The offending

[8]      On 21 April 2010, police conducted a search at 1257 Ahuroa Puhoi Road, Ahuroa, where Mr Crawford-Flett was living.  The property is a rural 10 acre block divided into a number of paddocks, together with buildings comprising chiefly a villa style dwelling, a large shed, and an additional small outbuilding.  The police found approximately 200  cannabis  plants  growing outdoors  in  various  states  of maturity, the majority being mature plants which appeared to have been recently cultivated.   In the shed were two rooms set up specifically for drying cannabis, complete  with  drying  racks  and  dehumidifiers.    At  various  points  in  the  main

dwelling house, shed and outbuilding, the police located a total of 9.3 kg of usable

2 Brazendale v R [2011] NZCA 494 at [13].

3 Elliot v R [2011] NZCA 386; [2011] 3 NZLR 811 at [35]-[36].

dried  cannabis  head  material.     They  also  found  a  pump  action  shotgun  in

Mr Crawford-Flett’s bedroom.

[9]      Mr Crawford-Flett was co-operative with the police and explained that the cannabis was for his personal use and that he grows a year’s supply at a time.  The shotgun was said to be for his protection.  He is 51 years old and unemployed.

[10]     It  is  not  in  dispute  that  the  property  has  been  used  to  commit  the  two qualifying instrument forfeiture offences, and that as such it is an “instrument of crime” for the purposes of s 4 of the Sentencing Act.

Further factual background

[11]     Ms Crawford-Flett is now aged 62 years.  She married Mr Crawford-Flett in October  1986.     In  September  1992  the  present  property  was  purchased  by Ms Crawford-Flett for cash.  It is not in dispute that she contributed the whole of the purchase price.  By May 1995, the parties had separated and Mr Crawford-Flett left the property.  In a separation and matrimonial property agreement dated 2 October

1995, it was agreed that the Ahuroa property would become Ms Crawford-Flett’s

separate property.

[12]     In  1995  Ms Crawford-Flett  entered  into  certain  property transactions  and partnership arrangements which proved ultimately unsuccessful.   She suffered significant  financial  losses.    As  a  result,  she  was  obliged  to  raise  funds  by mortgaging the Ahuroa property.  In 1997 or 1998, Mr Crawford-Flett moved back onto  the  property,  although  both  he  and  Ms Crawford-Flett  say that  they never thereafter lived together as man and wife;  rather, he was effectively a boarder, they claim.  Initially, Mr Crawford-Flett held a good position in the television industry in which he earned as much as $1600 a week at times.   But he suffered a serious accident in the late 1990s and has been on ACC compensation since then.

[13]     In 2000, Ms Crawford-Flett made a serious suicide attempt.  She has suffered from depression ever since.  On 24 February 2000, she was placed on a benefit and has remained a beneficiary since that time.

[14]     On 3 December 2001, Ms Crawford-Flett settled the Oaks Trust, to which she transferred the Ahuroa property, taking back an acknowledgment of debt.  The trust deed provided that:

(a)      The trust fund would vest 80 years after the date of the trust deed, that is on 3 December 2081, or such earlier date as the trustees may select in their absolute discretion;

(b)The  final  beneficiaries  were  Mr Crawford-Flett  and  his  children, together with any child or children of the settlor who might thereafter be born or adopted before the vesting day;

(c)      The    discretionary    beneficiaries    were    defined    as    including Ms Crawford-Flett, any one or more of the final beneficiaries except Mr Crawford-Flett, any grandchildren of the settlor and various other beneficiaries who are immaterial for present purposes.

[15]     The initial trustees were Ms Crawford-Flett and Gaze Burt Trustees Ltd, a

solicitor’s trustee company.

[16]     On that same day, 3 December 2001, Ms Crawford-Flett received a payment by way of an inheritance of $AU57,729.84.

[17]     In February 2002, Mr Crawford-Flett was sentenced to a term of five years imprisonment for drug related offending.  In April 2004, he was released from prison on  parole.     On  11  November  2005,  Ms Crawford-Flett  as  settlor  appointed Mr Crawford-Flett to be an additional trustee of the trust.

[18]     By late 2009, the relationship between the Crawford-Fletts had deteriorated once  more,   to   the  point   at   which   Ms Crawford-Flett   left   the  property  on

19 December and spent a week at the Uretiti Camp Ground in North Auckland.  She arrived home on 26 December 2009, but virtually immediately left again to stay with a friend in Russell.  She did not return until 18 April 2010, just a few days before the police search which uncovered Mr Crawford-Flett’s cannabis offending.

[19]     By  a  notice  dated  29  November  2010,  Ms Crawford-Flett  exercised  her power as settlor to remove Mr Crawford-Flett as both a trustee and beneficiary of the Oaks Trust with immediate effect.  However, he remains on the title to the property because an extant restraining order prevents any dealings being registered on the title.

The forfeiture discretion – statutory factors

[20]     Section 142N(2) of the Sentencing Act sets out a number of factors to which the Court may (but not must) have regard in determining whether or not to make an order. The subsection provides:

(2)       In considering whether or not to make an instrument forfeiture order under subsection (1) in respect of particular property, the court may have regard to—

(a)      any matter raised in an application for relief under section

142J; and

(b)       the use that is ordinarily made, or was intended to be made, of the instrument of crime; and

(c)       any undue hardship that is reasonably likely to be caused to any person by the operation of such an order; and

(d)       the  nature  and  extent  of  the  offender's  interest  in  the instrument of crime (if any), and the nature and extent of any other person's interest in it (if any); and

(e)       in addition to the matters referred to in section 77(1) of the Criminal Proceeds (Recovery) Act 2009, any other matter relating to the nature and circumstances of the qualifying instrument forfeiture offence or the offender, including the gravity of the qualifying instrument forfeiture offence.

[21]     In addition, a number of other factors have been taken into account in cases determined under the new legislation.4

[22]     I consider first the statutory factors.

The use that was ordinarily made or intended to be made of the property

[23]     The   property   has   been   Ms Crawford-Flett’s   residence   since   1992. Mr Crawford-Flett has resided there also, save between 1995 and 1998 and then again between 2002 and 2004, when he was in prison.  Ms Crawford-Flett says she lives a simple lifestyle.  She drives an imported Japanese car that is more than 10 years old.  She grows her own vegetables, and has hens which supply eggs.  She gets milk from her cow or the next door neighbour.  She does not eat meat.  She cooks most of her own meals.   I gather from this evidence that this is a lifestyle block upon which Ms Crawford-Flett has lived for 20  years, and which provides  all of her limited needs.  There is no suggestion, as in some cases, that the property was used principally, or even significantly, for drug related activities.

Undue hardship that is reasonably likely to be caused to any person

[24]     Quite properly, Ms Johnston accepts that the loss of an asset, as well as a home, is naturally concerning and creates hardship.  However, she says, hardship of this nature is an intended consequence of the instrument forfeiture regime.   The imposition of significant hardship on offenders is one of the principal means by which the regime seeks  to achieve its stated purpose of deterring persons from

engaging in significant criminal activities.5

[25]     Having said that, there is evidence to suggest that a forfeiture order is likely to cause Ms Crawford-Flett considerable hardship.  She says that she has no other assets  and  at  her  age,  and  with  her  health  difficulties,  she  has  no  prospect  of acquiring any more.   She says she will be “destroyed”, even if she is granted a degree of relief by the Court.  I consider there to be substance in what she says.

[26]     On the other hand, it is difficult to identify any undue hardship in respect of the other beneficiaries under the trust, and none is asserted.   In the event that a forfeiture order is made, the trust will receive a sum from the sale equivalent to its

interest that can then be distributed to the beneficiaries or otherwise applied for their benefit by the trustees.

The nature and extent of the offender’s interest and of any other person’s interest

[27]     The expression “interest” is widely defined in s 5 of the CPR Act.  It means:

(a)       a legal or equitable estate or interest in the property, or

(b)      a right, power or privilege in connection with the property.

[28]     Until removed by Ms Crawford-Flett on 29 November 2010, Mr Crawford- Flett  was  both  a  trustee  and  final  beneficiary  of  the  Oaks  Trust.     I  accept Ms Johnston’s submission that the  task of identifying relevant interests must be undertaken as at the time of the offending.  To hold otherwise would be to enable owners of property potentially the subject of an instrument forfeiture order to deal with the property in order to avoid the operation of the statutory regime.

[29]     Section 167 of the CPR Act provides:

167     Arrangements to avoid operation of this Act or Sentencing Act

2002

(1)      In this section, arrangement means—

(a)      any agreement, arrangement, understanding, promise of undertaking whether express or implied and whether or not enforceable or intended to be enforceable at law; and

(b)       any  scheme,  plan,  proposal,  action,  course  of  action,  or course of conduct.

(2)       If the High Court (or if the matter relates to an instrument of crime in relation to which proceedings were commenced in the District Court,  the  District  Court)  is  satisfied  that  a  person  has  an arrangement for the purposes of directly or indirectly defeating, avoiding,  preventing,  or  impeding  the  operation  of  this  Act  or sections 142A to 142Q of the Sentencing Act 2002 in any way, the Court may—

(a)      make an order declaring the arrangement to be void wholly or in part; or

(b)       make an order varying the arrangement in whole or in part.

(3)       The High Court or District Court may also make other orders that it considers necessary in the circumstances to give effect to an order made under subsection (2), including, without limitation, an order to do all or any of the following:

(a)      dispose of property (including selling property): (b)         pay money to any person:

(c)      dispose of the proceeds of any disposal of the property:

(d)      create a charge on property in favour of a person and enforce that charge.

(4)       The High Court or District Court may rescind or vary any order made under this section.

[30]     Under this section the Court may declare  void any arrangements for the purposes of directly or indirectly defeating the operation of the CPR Act, or ss 142A to 142Q in the Sentencing Act 2002.

[31]     The  notice  under  which  Mr Crawford-Flett  was  removed  as  trustee  and beneficiary explicitly refers to the possibility of forfeiture proceedings, and it is a proper inference that he was removed for the purpose of endeavouring to lessen the impact of a possible order.

[32]     The applicant has not sought to invoke s 167 because, Ms Johnston submits, the Court is able to reach a conclusion by having regard to the position as it stood as at the date of the offending.   I adopt that course.   I therefore take into account Mr Crawford-Flett’s status as a registered proprietor of the property in his capacity as a trustee of the Oaks Trust, and also as a final beneficiary under the trust.

[33]     The weight to be accorded these interests for present purposes is not easily determined.  In his capacity as a registered proprietor, Mr Crawford-Flett has, at least notionally, some ability to control the disposition of the property, but he could not do so alone and must act unanimously with other trustees who include Ms Crawford- Flett.   His interest as final beneficiary is somewhat complex in that it would be difficult to quantify.  Mr Crawford-Flett was one of three named final beneficiaries, yet if the trust inured until vesting day, it is extremely unlikely that he would be alive to take any benefit.

[34]     Moreover, the trustees have a discretion to make distributions of capital and income to discretionary beneficiaries during the existence of the trust, and so the corpus of the trust may have been entirely distributed by the time it came to an end. Further, the trustees of the trust were entitled to sell the property at any time, so brining  to  an  end  Mr Crawford-Flett’s  interest  in  the  property,  although  not necessarily in the trust.

[35]     Finally, as in fact occurred, there was always the risk that Mr Crawford-Flett could have been removed as a final beneficiary by Ms Crawford-Flett in her capacity as settlor.

[36]     Although Mr Crawford-Flett’s interest as final beneficiary was vested and not contingent, it was nevertheless subject to the occurrence of any one or more of a number of events that could have the effect of bringing to an end, wholly or partially, his entitlements under the trust.   It follows that his interest in the property in his capacity as a final beneficiary of the trust, is of somewhat uncertain ambit, although I accept that it is undoubtedly an “interest” for the purposes of s 142N.

[37]     I  accept  that  there  are  further  dimensions  to  the  nature  and  extent  of Mr Crawford-Flett’s interest.  First, he has resided at the property since about 1998 (with brief absences) and has an undoubted ability to control, at least in part, the use to which the property is put.  The circumstances of the offending make that clear. Ms Crawford-Flett left him in control of the property at a time when he was clearly devoting considerable energy to the cultivation of cannabis of an appreciable scale.

[38]     In addition, he has made significant financial contributions to the property. Over a period of many years he made payments averaging $164 a week, first to Ms Crawford-Flett and later to the bank account of the Oaks Trust that was used to service the mortgage.  In all, these payments totalled a little more than $75,000.

[39]     Mr and Ms Crawford-Flett each say that these payments were, in effect, made by way of board, in consideration for Mr Crawford-Flett’s residence on the property as a member of the household.  Ms Johnston submits that a practical and realistic approach must be taken.   The greater proportion of these payments were made

directly into the account that financed the loans secured against the property, and so have been directly applied to the trust property.   It follows, she submits, that the contributions may properly be regarded as contributions to the property itself.  She stopped short of contending that a constructive trust arose in Mr Crawford-Flett’s favour arose.   Mr Mann argues that the Crown is in reality contending for a constructive trust.  It is difficult to see that all the elements of a constructive trust as explained in Lankow v Rose have been met, but I accept that in the wider sense these payments,  made  over  a  long  period  and  for  the  very  purpose  of  assisting Ms Crawford-Flett to service the mortgage, are of some relevance in determining the

extent of Mr Crawford-Flett’s interest in the property.6     In my view, he had an

interest in the property that was by no means insignificant.

[40]     The Court is entitled also to take into account the interests of other persons. First,  there  is  of  course  Ms Crawford-Flett  who  purchased  the  property,  quite legitimately, using entirely her own funds.  Later she formed the trust and transferred the property to it, taking back an acknowledgement of debt.  The evidence, although not conclusive, suggests that on one or more occasions she has made gifts to the trust for the purpose of reducing the debt outstanding in respect of the property.  But the debt remains substantial.  Of course she has an interest also in her capacity as the person entitled to occupy the property under her present arrangements with the trustees, and as a discretionary beneficiary of the trust.   Because she is herself a trustee and is entitled as settlor to appoint and remove other trustees, she remains in effective control of the trust and is in a position to ensure that she occupies the property for as long as she wishes.  Her interest is, in my opinion, more significant than that of Mr Crawford-Flett.

[41]     The much less significant interests of the other financial beneficiaries do not require consideration for present purposes.   The interests of the discretionary beneficiaries, being entirely contingent, do not amount to an interest in the property.7

Sophistication/gravity of the offending

[42]     Ms Johnston submits that, while this was not the most sophisticated cannabis growing operation, it is apparent from the number of plants (200), the quantity of dried cannabis found (9.3 kg) (sufficient for six years of personal use), and the drying room set up, that the operation was relatively well established.   If sold in ounces, the quantity of dried cannabis found would have a potential value of $99,600 to $132,800, or if sold in pounds, between $61,200 and $81,600.

[43]     Ms Johnston submits that this was a commercial operation on a moderate scale.  She notes that in Brazendale,8  the quantity of cannabis involved (62 plants), was likely to have produced about $55,800 per annum.  There, an order forfeiting a

$465,000 property was upheld.

[44]     On the other hand, Ms Johnston responsibly and fairly draws the Court’s attention  to  cases  where  the  absence  of  sophisticated  systems,  or  significant alterations to properties for cultivation purposes, has weighed against forfeiture.9

[45]     I accept that this was a case of moderate gravity, but I accept also that it was not so serious that forfeiture is virtually inevitable.

The forfeiture discretion:  other factors

Whether the applicants for relief own any other property

[46]     The fact that the parties owned no other property was a factor weighing against instrument forfeiture in Sheehan and Harrison.   Correspondingly, the fact that the appellant in Brazendale owned other property, weighed against him in the final  outcome.    In  the  present  case,  it  is  common  ground  that  neither  Mr  nor Ms Crawford-Flett had any other significant assets.

The age of the parties and whether they are able to build up sufficient capital to purchase another property or be able to purchase part of the subject property

[47]     In some cases this may be a relevant factor.10     Given the age of Mr and Ms Crawford-Flett, and their health and financial situations, there is little prospect that either of them would ever be able to purchase an alternative property if they were required to start afresh.

Evidence of sentimental value

[48]     Ms Johnston argues that this factor is of little significance given that the property has only been owned since 1992.11    I am however inclined to think that there is rather more to this point than she allows.   Ms Crawford-Flett’s evidence satisfied me that the property has become a haven for her.  It is a place where she is able to live in peace without significant expenditure and in a way that minimises her health difficulties.

How the property was acquired

[49]     It is common ground that Ms Crawford-Flett purchased the property in the first instance with funds legitimately obtained.  Of itself, that is not a determinative factor because Parliament must be taken to have intended  legitimately acquired property to be subject to the instrument forfeiture regime.12    But it is a matter of relevance.

Discussion

[50]     Ms Crawford-Flett is not an offender.  I do not consider either that she was “involved” in the qualifying instrument forfeiture offence (to borrow a term used in s 142J which governs applications for relief from forfeiture).  I accept she was absent

from the property between December 2009 and March 2010, when much of the

10 Sheehan and Harrison at [27].

11 Brazendale at [31].

offending activity was taking place.  But I also accept that a quantity of cannabis was under cultivation before December 2009.  Indeed, Ms Crawford-Flett says she was aware that Mr Crawford-Flett was growing cannabis for what she calls “medicinal” purposes.

[51]     When considering applications for relief against forfeiture, the Court will not generally regard wilful blindness as a sufficient involvement to justify the denial of relief.13   To the extent that Ms Crawford-Flett’s knowledge of what was going on is a relevant factor in determining whether or not a forfeiture order ought to be made (Ms Johnston does not list it among her factors), I consider that it can be regarded as of  only limited  significance  having  regard  to  Ms Crawford-Flett’s  evidence  that Mr Crawford-Flett  “can  be  a  bully  and  there  was  no  way  I  could  control  his activities”.   I do not consider that Ms Crawford-Flett’s failure to put a stop to the

offending, or to report it to the police, should be weighed in the balance.

[52]     Ms Johnston accepts that, in the usual way, Mr Crawford-Flett would be entitled to an appropriate reduction in his sentence if a forfeiture order is made.  That consideration illustrates the difficulty in this case.  Viewed realistically, it is simply not possible to make an adjustment to his sentence in order to take into account the financial impact of any forfeiture order.   That is because, at a practical level the impact will simply not fall upon him at all.  While, as previously discussed, he has an interest in the property, the interest is not reflected in a vested right of occupation or in any entitlement to share in the value of the property upon realisation if sold now, or indeed, at any time in the foreseeable future.  If the property is sold he will simply lose the residence in which he has been living for some years.   The real impact of any forfeiture order would fall heavily upon Ms Crawford-Flett and only to a much lesser extent on the trust.  She would lose her home of 20 years and with it, a lifestyle which both suits her and is advantageous to her health.  The benefit would accrue entirely to Mr Crawford-Flett, in that presumably he would be entitled to a reduction in the sentence that it would otherwise be proper to impose.

[53]     I accept that, as Ms Johnston submits, the asset forfeiture regime is intended

to have a deterrent effect, and is “intended by Parliament to be something of a blunt

instrument”.14    But in my view the instrument is not so blunt as to require me to catch Ms Crawford-Flett and the beneficiaries of the Oaks Trust.

[54]     A number of the matters listed in s 142N(2) of the Sentencing Act are similar to the matters relevant to a determination as to whether to grant relief on the grounds of undue hardship under s 142N.  Ms Johnson argues that where these matters relate to a person other than the offender, they are likely to weigh against the making of an order only when an order for relief would not suffice.  There is, I think, substance in that submission.  But I consider that an order for relief would not suffice, and that the application for a forfeiture order must therefore be refused.  An order for forfeiture would need to be accompanied by an order granting relief on such a scale as to render the forfeiture order practically ineffective.

Result

[55]     The application for an instrument forfeiture order is refused.  Mr Crawford- Flett is currently remanded on bail pending the delivery of this judgment.   The Registry is asked to make sentencing arrangements in the light of the outcome of this application.

[56]     I conclude by thanking counsel for their assistance.  The legal and financial background had its complexities.  At the conclusion of the hearing I granted leave to counsel to file further submissions.  Detailed further memoranda were received.

[57]     I am grateful especially to Ms Johnston for her comprehensive and cogent submissions, which were particularly helpful in this developing area of the law.  This application was properly brought and carefully argued.  Ms Johnston went to some pains to ensure I was aware of all relevant matters, including those that tended to favour the refusal of the application.

C J Allan J