R v Corless

[2013] NZHC 2735

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2009-090-002181 [2013] NZHC 2735

THE QUEEN

v

SCOTT JAMES CORLESS

Hearing:                   4-6 June, 23 August and 16 October 2013

Appearances:           B D Tantrum and M R Walker for Crown

R M Mansfield, V Withy and S N B Wimsett for Prisoner
S R Jefferson QC and S D Patel for Laura Corless
D M M Dickinson for Luke Corless
H B Leabourn for Casey Corless

Judgment:                21 October 2013

JUDGMENT OF ELLIS J

This judgment was delivered by Justice Ellis on 21 October 2013 at 3.00 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date………………………

R v CORLESS [2013] NZHC 2735 [21 October 2013]

[1]      Mr Corless has pleaded guilty to, and is to be sentenced for, a number of methamphetamine related charges.  As part of the sentencing process the Police also seek an instrument forfeiture order in relation to the property at 61 Otitori Bay Rd, Titirangi, where much of his offending took place.

[2]      This  judgment  relates  to  a  number  of  issues  that  are  relevant  to  his sentencing.

[3]      The  first  relates  to  the  amount  of  methamphetamine  manufactured  by Mr Corless, which is a potentially aggravating factor that is relevant to his sentence and about which there is a dispute.1    The second group of issues arises from the application for instrument forfeiture.   Mr Corless’ ex-wife, Laura, his adult son Casey Corless and his minor son Luke Corless2 have applied for relief from any such forfeiture on the grounds that they have an “interest” in the Otitori Bay Rd property which the Court is required to recognise under s 142L of the Sentencing Act 2002 (the SA).  If any such interest is found to exist then there are further issues as to its nature, extent and value which must be considered.

[4]      And lastly, in the event that Laura and/or Luke Corless are found to have no such interest then they each apply for relief in the alternative under s 142M of the SA on the grounds that forfeiture of the property is likely to cause them undue hardship.

Disputed fact: the quantity of methamphetamine manufactured

[5]      As far as the manufacturing issue is concerned, Mr Corless pleaded guilty to one charge of manufacturing methamphetamine between 30 April 2008 and 29 April

2009  at Auckland  and  one  charge  of  manufacturing  methamphetamine  between

30 April 2009 and 7 May 2010 at Auckland.   The charges are not stated to be representative.

[6]      The charges arose out of two searches of the Otitori Bay Rd property.  The first was on 29 April 2009 and the second on 7 May 2010.  Some of the results of

1      Sentencing Act 2002, s 24.

2      Casey and Luke have different mothers, neither of whom is Laura Corless.  Luke’s mother has been appointed his litigation guardian for the purposes of these proceedings.

those searches are relevant to the disputed fact hearing and will be discussed further in that context.

[7]      As   his   guilty   pleas   indicate,   Mr   Corless   accepts   that   he   made methamphetamine at the Otitori Bay Rd address, but says that he did so only twice. And his evidence was that on neither occasion was usable methamphetamine produced.  He does not, however, dispute that the manufacturing process was, as a matter of law, completed by him in those two instances.  On the second occasion the (undisputed) evidence was that, had things gone well, a quantity of approximately

70 grams would have been yielded.  On the assumption that an equivalent amount would have been produced on the first occasion, and that (as Mr Corless contends) there were no other manufactures, he would fall within Fatu band two for sentencing purposes.3

[8]      By contrast, the Crown contends that methamphetamine was manufactured at the address by Mr Corless on a more or less continuous basis over the two periods in question and that an amount in excess of 500 grams was produced.4   The onus is on the Crown to prove that contention beyond reasonable doubt.5

[9]     As will often be the case, the Crown sought to prove the quantity of methamphetamine manufactured by relying on the cumulative power of a number of strands of circumstantial evidence. These were:

(a)       evidence of the ESR analysis undertaken at the address at the time of each of the searches;

(b)      the presence of equipment/precursor substances at the address;

(c)       intercepted communications in the form of text messages to and from

Mr Corless’ cell phone between 7 April 2010 and 7 May 2010;

3      R v Fatu [2006] 2 NZLR 72 (CA).

4      This would place Mr Corless in Fatu band 4 for sentencing purposes.

5      Sentencing Act 2002, s 24(2)(c).

(d)$85,000  cash  found  in  the  attic  at  the  address  during  the  second search;

(e)      unexplained, and largely cash, bank deposits, totalling over $500,000 made by Mr Corless between 1 January 2007 and 31 July 2010;

(f)       Mr Corless’s own heavy methamphetamine habit; and

(g)the fact that Mr Corless was found to be in possession of methamphetamine on three separate occasions during the period in question.

[10]     Each will be considered in turn.

ESR evidence

[11]     Although the expert ESR evidence given at the hearing before me was very comprehensive, its upshot can briefly be stated.   In short, the evidence was that it was “very likely” that methamphetamine was manufactured at the address (a point that was not denied by Mr Corless) but it is not possible to determine either the likely quantity manufactured there nor the occasions and dates of manufacture.  This evidence does not, in my view, advance the Crown case as regards the disputed facts.

Equipment and precursor substances

[12]     Equipment,  materials  and  precursor  substances  were  found  during  both searches and Mr Corless also pleaded guilty to possession with the intention of their being used in the future manufacture of methamphetamine.  The Police also found empty ziplock bags (commonly used to package methamphetamine) and scales.

[13]     Some of the equipment and precursor substances were hidden and some were not.  Mr Corless contended that some of the items found were naturally occurring (by which  I mean  they were items he just happened to have in his  garage  for household use) and said that the items that were hidden were being stored by him for a  Mr  McCluskie,  with  whom  he  manufactured  methamphetamine  on  the  first

occasion.  Mr Corless said that McCluskie was, at that time, living with Mr Corless at the Otitori Bay Rd address.

[14]     There was no fingerprint evidence of any consequence obtained from the materials and substances and the ESR expert accepted that not everything required for the manufacture of methamphetamine was found at the property.   That said, however, the evidence of the intercepted communications (discussed below) suggests that Mr Corless may have undertaken at least part of the manufacturing process off site so I do not consider that this is a point which particularly tells against the Crown position.

Methamphetamine consumed by Mr Corless

[15]     The amount of methamphetamine consumed by Mr Corless appears to me to be of more significance.   It was accepted by him that his very significant habit involved the consumption of methamphetamine to the value of about $2,000 per week, or in excess of $100,000 per year.  He said that he was not, however, required to purchase all that methamphetamine himself because friends of his would often visit the Otitori Bay Rd property and they would share the drug amongst themselves.

[16]     While I am prepared to accept Mr Corless’ evidence that smoking was often a communal activity and that a degree of sharing did occur, I am not prepared to accept that it made any significant difference to the amount of methamphetamine he was   required   to   source   in   any   given   week.      Those   who   shared   their methamphetamine with him would have expected him to share his with them.  As friendly as everyone might have been I do not think for one minute that this would have been regarded by anyone as a charitable enterprise. Any methamphetamine that Mr Corless might have been given by others would inevitably and eventually be repaid by him in kind.  I therefore proceed on the basis that Mr Corless was, during the two years in question, consuming, and having to source, between two and three

grams of methamphetamine a week.6   Even adopting the lower (two gram per week)

figure  would  mean  that  there  was  over  200  grams  of  methamphetamine  that

Mr Corless has to have obtained from somewhere.

6      Those figures are conservatively based on the evidence that Mr Corless had a $2000 per week habit, with the price of methamphetamine being between $500 and $600 per gram.

Methamphetamine found in Mr Corless’ possession

[17]     On each of the occasions of the two searches of the Otitori Bay Rd property Mr Corless was found to be in possession of approximately one gram of methamphetamine.   That is consistent with his personal use that I have described above.

[18]     On a third occasion he was found with 28 grams of methamphetamine, which led to a possession for supply charge to which he also pleaded guilty.  Mr Corless’ evidence was  that  in  that  instance he was  acting as  a conduit  between  another manufacturer and a buyer in return for a (five gram) share.  Although the Police do not accept that version of events there are evidentiary difficulties which, in my view, require me to put that incident to one side when considering the manufacturing issue.

Intercepted communications

[19]     Following his arrest on 7 May 2010, and after the second search of the Otitori Bay Rd property, Mr Corless’ mobile telephone was analysed.  The Police were able to recover one month’s worth of his call data and text messages, for the period between  7 April  and  7  May 2010.   The Police say that  this  period  provides  a snapshot of Mr Corless’ life which, when taken together with the other strands of evidence, forms a solid basis for drawing inferences about the nature of his offending activity over the preceding two years.

[20]     The evidence of the text messages was supported in the usual way by expert evidence as to the meaning of certain common words in the context of methamphetamine dealing or manufacture.  I accept that evidence subject only to the obvious qualification that it remains possible that, in some contexts, words such as “working” or ‘cooking” might be used in their ordinary sense.

[21]     But there can, in my view, be little question that the text messages sent to and from  Mr  Corless  over  the month  in  question  disclose  reasonably frequent  drug transactions in which he is the supplier or seller [and others, the buyers].   The messages evidence numerous visits to his property, often for short time periods at a

range of times during the day and night.  By way of example only, on 21 April he received a text which said:

Wud i b able 2gt sme off u plz? Wil bring u bac da coin 4it.

[22]     Mr Corless’ reponse was:

Ul have 2 brng coin wen u gt it.

[23]     There are quite a considerable number of communications of this kind during the one month period at issue.   And in terms of the scale of the dealing activity which such communications suggest, it is also relevant that Mr Corless was plainly cautious in his use of texts, on one occasion saying to a Mr Tawaawa:

U owe Nthng i tld frd [Fred] its square and we leave it at that.  Im on charges an dnt nd 1000 txts a day.  Fu wnt smethng ani say yea al gd if idnt ansa its nt.

[24]   The conclusion that Mr Corless was regularly supplying others with methamphetamine over this time is further supported by the quantity of stolen property found in Mr Corless’ possession and the expert evidence was that such property  is  often  the  means  by  which  payment  is  made  for  drug  purchases. Mr Corless’ explanation of how he came to be in possession of such property was vague, at best.   I also take into account the presence of security/surveillance equipment at the property and Mr Corless’s possession of a firearm.   Although individually such facts might be capable of alternative and “innocent” explanations, in combination the inference of reasonably serious drug dealing activity is overwhelming.  Again, there is an obvious question about where Mr Corless sourced the methamphetamine he supplied.

[25]     As far as the more direct evidence of manufacturing activity is concerned, there are the texts sent by Mr Corless in relation to the (failed) manufacturing incident  that  he accepts  occurred,  on  or about  1  May 2010.    On this  occasion Mr Corless sent texts to his girlfriend, Jasmin Jones, and to another person (“Fred

R”) that:

2 and a half big ones up n smoke so it was a fckn expnsive 35k snooze.

and:

Ive got this beautiful brnt g that was scrapd out of the 70 that are smoked out up all ova my daughters room hard an al I can do is laugh and thnk fck it cld of ben million times worse …

and:

Fell a sleep and lost the blouldy lot last nigh.

[26]     I largely accept Mr Tantrum’s submission that these texts demonstrate a level of confidence that is not consistent with Mr Corless being a failed, novice, manufacturer (as Mr Corless himself would have it).   There is, for example, no inference to be drawn from the content or tenor of the texts that Mr Corless did not know what he was doing; the failure of the exercise was the sole result of his falling asleep.

[27]     There are other texts that the Crown says contain direct references to Mr

Corless’ involvement in manufacturing during the month in question (other than on

1 May).   However on one such occasion, when Mr Corless referred to being at “work” and on another occasion when he talks about “cooking,” I consider the texts are open to the explanations given by Mr Corless.   In particular, on 18 April he speaks about being “stl at wrk” and having a “disaster”.  Mr Corless said that on that day he had been working (unsuccessfully) on his son’s quad bike.  That explanation is, in fact, supported by one of the texts sent by him a bit later on which reads:

Hey! How did ur day end up, we didn end up goin was tryn to gt that quad goin al day!

[28]     Similarly, when Mr Corless said to Jasmin Jones on 3 May:

IT AINT COOL SAYN AL THE im cookn etc and jst nt evn trning up.

I am inclined to accept his explanation that either Ms Jones or Mr Corless had offered to cook dinner but Ms Jones had then failed to show up.  It occurs in a long sequence of texts between the two of them which indicate that they are having an argument and, immediately before sending the “cookn” text Mr Corless refers to Ms Jones already having eaten KFC while he was defrosting meat “like a fckn idiot”.

[29]     I am therefore prepared to give Mr Corless the benefit of the doubt about those two occasions.

[30]     There are other texts that are more ambiguous, however, and yet others that in my view clearly indicate methamphetamine manufacturing is afoot.

[31]     Texts  in  the  former  category  are  the  following  sent  by  Mr  Corless,  on

17 April, at approximately 9 and 11 pm:

Im nt home yet im workn il cl u as soon as im home.

...

Im just clenin up il txt u wen i gt home.

[32]     In the latter category is the 22 April text which says:

Coking wens the litre coming.

[33]     I accept that the expert evidence that “the litre” referred to here was a litre of one of the chemicals used in the manufacturing process.   I note that many of the chemicals found at the Otitori Bay Rd property in both the searches were in volumes of one litre.

[34]     There is also the following sequence of texts sent on 4 May:

Cme round n 13s red car lets go to work.  Mrs cn phne me f walopers trn up.7

...

Im at work miles away.  Understand cnt cme here neway bud.  I wnt be bk for bout 20 hours … cn head out to manurwa or else tomorrow arvo when im bk8

...

… dnt let her smke al my crck! And jst as lng as they go as soon as I gt back cos id like to try and get fnshd be4 dnna 2mro nite.9

7      Sent at 18:30. “Wallopers” are police officers (Mr Corless was bailed to his home address at this

time).

8      Sent at 21:19.

9      Sent at 22:20.

[35]     The Crown says that the reference to “getting finished” was a reference to completing the manufacturing process at his home and that the text indicates that Mr Corless didn’t want others to be present when he did so.  Although I accept that methamphetamine addicts do not keep regular hours and stay awake for long periods of time I consider Mr Corless’s explanation that he was in Manurewa working on vehicles is implausible.

[36]     The short point is that, in my view, these texts evidence that Mr Corless’ manufacturing activity was not limited to the two specific occasions accepted by him.    They also strongly suggest that Mr Corless was not just sharing methamphetamine with, but selling methamphetamine to, others.  Again, I merely observe that that methamphetamine had to come from somewhere. It also seems to me to be notable that the text messages over that month do not appear to disclose any buying activity on Mr Corless’ part.

Unexplained bank deposits

[37]     Detective  Sergeant  Gray  undertook  an  analysis  of  Mr  Corless’ financial position (both personally and for his company and trusts) and concluded that during the period of 1 January 2007 and 31 July 2010 he had made “cash deposits” in the amount of $568,456.00.  That amount was said to be the total value of cash deposits made by Mr Corless into various bank accounts.

[38]     Under   cross-examination   the   Detective   accepted   that   his   figure   of

$568,456.02 could more accurately have been described as “unexplained deposits” rather than “cash deposits” (some appear to have been cheques).  That said, however, it seems that the vast majority of them were, indeed, cash.

[39]     Less controversially,   Detective  Gray  also  deposed  that  during  this  same timeframe Mr Corless or his painting company (CPS) imported from the United States 17 motorcycles and two cars (a Ford-150 and Ford Mustang), paying a total purchase price of NZ$357,356.03 together with importation costs.

[40]     Mr Corless did not deny this.  Rather, his position was that he would buy the motorbikes online and, when settlement was required, he would deposit sufficient

cash into his bank account so that it could be transferred to the US seller.  Mr Corless would then (if necessary) convert the bikes so that they could be driven in New Zealand and advertise them for sale on Trade Me.  It was a term of such sales that the price be paid in cash and, indeed, some 11 of the motorcycles were sold in this way. His explanation for this was that gang members comprised the principal market for the motorcycles.  Mr Corless freely admitted the absence of most, if not all, relevant documentation relating to the sales by him.

[41]     I accept this part of Mr Corless’ evidence so far as it goes.   There was documentary evidence to support (and the Police do not deny) the importation of the vehicles.   There was also limited documentary support (in the form of an advertisement from Trade Me) for the motorcycles being onsold by Mr Corless for cash only.  And while there is an absence of documentation around those onward sales the reality appears to be that Mr Corless is no longer in possession of 11 of those motorcycles; I doubt very much that he gave them away.  At least some of the cash deposits are, in my view, explained by his evidence.

[42]     That said, however, I have little doubt that some, or even a good deal, of the cash that passed through Mr Corless’ accounts was derived from drug offending.  I do not accept that his motorcycle business was entirely self funding and nor do I accept his evidence that, prior to 2007, he had “savings” from his painting business of any moment that he could then use for “start up” capital.

[43]     Mr  Corless’  own  forensic  accounting  expert,  Mr  Osborn,  accepted  that following the purchase of the Otitori Bay Road property by Mr Corless’ family trust in late 2005, the funds available to Mr Corless (from the sale of another property and from an inheritance from his mother) had effectively been exhausted.10   In addition, Mr Osborn accepted that between 2006 and 2009 Mr Corless’ painting business had been  significantly  wound  down  and,  indeed,  that  Mr  Corless  was  a  sickness

beneficiary during that period.

[44]     Mr Osborn also accepted that although in the three year period immediately

before this Mr Corless’ painting business recorded an average turnover of $420,000,

10     Aside from a $35,000 debt owed to him by the Tapa Tohunga Trust.

virtually none of that turnover constituted profit.   For example only $4,810 of the

$398,000 turnover in 2004 was profit.

[45]     But the difficulty with all this is that the period covered by Detective Gray’s analysis does not coincide with the period of the offending that I am presently considering. To the extent that it appears that he had unexplained, not inconsiderable funds (in excess of $100,000) at the beginning of the period analysed I cannot take that into account.  On the present state of the evidence I am not able to draw any particular correlation between the amount of the unexplained deposits and the level of Mr Corless’ manufacturing activity.    I therefore only take this evidence into account in the most general way.

$85,000 cash found in attic at Otitori Bay Rd

[46]     During the second search of Mr Corless’ property, NZ$84,281 and AU$1,800

in cash was found hidden in the attic.

[47]     Mr Corless’ explanation was that most of this money was $80,000 in cash that he had received from the sale of the Ford Mustang he had imported to a Mr Frederick Bishop.  I note that Mr Corless did not, however, seek to make a claim on the money when it was first seized by the Police.

[48]     But Mr Bishop gave evidence in support of Mr Corless.  Mr Bishop said that he had arranged to pay Mr Corless $77,000 in cash through an intermediary.  An intermediary was necessary because Mr Bishop was himself in custody at the time and, indeed, he remained in custody at the time he gave evidence.

[49]     But I do not believe Mr Bishop.  First, the amount he says that he paid for the car exceeds by some considerable sum what Mr Corless said it was worth.  Secondly, it is inconsistent with the registration history of the vehicle in New Zealand which shows that it was first registered to a Mr Mikahere and later transferred to a Mr Vousden.  And thirdly, it is telling in my view that although the car had disappeared and the cash was restrained shortly after Mr Corless’ arrest Mr Bishop did not at any time (until 27 May 2013) make an application to the Court or indicate that he had any interest in the money.

[50]     I  also  reject  Mr  Corless’  explanation  that  the  remainder  of  $85,000 represented  “savings”  from  the  sale  of  his  business.     I  have  dealt  with  the unlikelihood of that explanation above.   In my view it was derived from his methamphetamine related activities.    $85,000 would represent the sale of approximately 140 grams of methamphetamine.  That also seems consistent with the evidence of the text message that suggest that there had been two further cooks in the

7 April to 7 May 2010 period (which would have yielded approximately 140 grams).

Conclusion: the quantity of methamphetamine manufactured

[51]     The burden of proof is on the Crown to prove beyond reasonable doubt that Mr Corless manufactured in excess of 500 g of methamphetamine during the period in question.

[52]     I begin by noting that the evidence of the text messages, together with the cash found in the attic, strongly suggests that between 7 April and 7 May 2010 he was involved in manufacturing methamphetamine three times.   One of those occasions is admitted by him.  Three cooks would yield approximately 200 grams (including the 70 that were lost).11

[53]     If the text message evidence could confidently be taken to be representative of his manufacturing activity over the whole two year period covered by the charges, then that would suggest that well over a kilogram was produced.  By itself, however, the text message evidence does not prove to the requisite level that that would be a fair or accurate picture of Mr Corless’ level of offending over those two years.  On the other hand, I do not for one moment consider it likely that, as a matter of unhappy chance, the intercepts just happened to capture his only additional manufacturing activity during that two year period.  The Court can, in my view, be sure that it took place on other occasions.

[54]     That  position  is  further  confirmed  by  the  amount  of  methamphetamine

Mr Corless himself consumed and shared over the two year period prior to the month to which the intercepted texts relate.  I am satisfied that this amount falls somewhere

11     The $85,000 would represent approximately 140 grams, or two successful cooks.

between 200 and 300 grams.  To that must be added the quantities that he sold.  As I have said, I have little difficulty in concluding (on the basis of the intercepted text messages)  that  Mr  Corless  was  involved  in  longstanding  and  ongoing  dealing activity. As I have said earlier in this judgment, the methamphetamine he consumed, shared and sold must have come from somewhere and there was no evidence to suggest that Mr Corless purchased, rather than manufactured, it.

[55]     I have found the financial evidence too confused, and confusing, to be of any assistance other than in the most general way.   While (as I have found) there are other plausible explanations for some of the cash that Mr Corless deposited in the bank over the time in issue I also have no doubt that some of it was also derived from his offending.

[56]     In the end, I have no hesitation in concluding that the Crown has proved beyond reasonable doubt that Mr Corless manufactured over 500 grams in total during  the  period  in  question;  even  the  amounts  that  can  fairly  precisely  be quantified add up to that amount.  A robust approach, based on the combined effect of the evidence I have summarised, would suggest that he manufactured a good deal more.

[57]     For sentencing purposes Mr Corless therefore falls into Fatu band four.

Instrument forfeiture application in relation to 61 Otitori Bay Rd

[58]     As I noted at the beginning of this judgment, the Crown has applied for an instrument forfeiture order in relation to the Otitori Bay Rd property as part of Mr Corless’ sentencing.

[59]     As  I understand it, Mr Corless quite rightly accepts that the property at Otitori Bay Rd is an “instrument of crime” as defined because it is property that was used to commit or facilitate the commission of a qualifying instrument forfeiture offence, namely his manufacturing of methamphetamine.12

[60]     Section 142N(2) of the SA states:

12     See the definition in s 4 of the Sentencing Act 2002.

(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.

…

[61]     Section 142J in turn provides that applications for relief may be made on either of the grounds specified in s 77(1) of the Criminal Proceeds (Recovery) Act

2009 (the CPRA), namely that the applicant has an interest in the property concerned or is likely to suffer undue hardship if forfeiture is ordered.

[62]     In the present case applications for relief have been made on both these grounds by Laura and Luke Corless.   Casey Corless relies only on his asserted “interest” in the property and it is the issue of whether he, or Luke, or Laura Corless have such an “interest” that I propose to consider first.

[63]     The relevant definition of “interest” is contained in s 5 of the CPRA:

interest, in relation to property of any kind (including, without limitation, restrained property or forfeited property), means—

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

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

[64]     A materially identical definition was contained in s 2 of the Proceeds of

Crime Act 1991.

[65]     The interests in the property claimed by Mrs Corless and Mr Corless’ two sons are different and so need to be separately considered.   First, however, it is necessary to say a little more about the history and ownership of the property.

[66]     Mr Corless began a relationship with Laura Corless in early 2003.  At that time he owned other property.  In October 2003 Mr Corless and Laura married and on 30 October 2003 he settled the Soul Mate Trust.  His evidence was, and I accept, that the name of the Trust was a reflection of his feelings for Laura at the time.

[67]     The trustees named in the trust deed are Laura and a trustee company, Ed Johnston  &  Co  Trustees  Ltd.    That  company  was,  until  recently,  owned  and controlled by Mr Ed Johnston, who was Mr Corless’ lawyer.   I understand that Mr Johnston may now  be bankrupt, has been  suspended from practice and is a disqualified director.  I shall return to the consequences of these matters later.

[68]     The   trust   deed   provides   that   the   discretionary   beneficiaries   include Mr Corless, Laura Corless and the final beneficiaries.  The final beneficiaries are Mr Corless’ children living at the date of the deed and any other children of his born or adopted  after  that  date.    It  is  not  in  dispute  that  Luke  and  Casey  are  final beneficiaries and also therefore discretionary beneficiaries.

[69]     Mr Corless, as settlor, has the power to appoint and remove trustees.   The trustees have a discretion to pay out all or part of the trust fund to or for one or more of the beneficiaries or to any parent or guardian of a beneficiary who is a minor.  The class of discretionary beneficiaries is not closed.   The trustees are required to act unanimously.

[70]     The property at 61 Otitori Bay Rd is the only asset of the Soul Mate Trust.  It was purchased by the trust on 22 November 2005.  Laura Corless did not contribute to the purchase price.  The Crown does not contend that the funds with which it was purchased are tainted.  Nor is it in dispute that the property became effectively the family home for Mr Corless, Laura and their daughter Brooke, who was born in

2006.  Brooke is also both a final and a discretionary beneficiary under the trust.

[71]     It is against that background that  I turn to consider the three “interests”

claimed.

Laura Corless

[72]     In  2008,  Laura  and  Mr  Corless  parted  ways,  largely  as  a  result  of  his addiction and offending activity.  The Crown accepts that she played no part in his offending  and  thus  is  not  disqualified  from  claiming  an  interest  by virtue  of  s

142L(3).   In 2012 Mr Corless and Laura were divorced.   Since their separation

Mr Corless has provided no financial support to Laura or to Brooke and the fact of

his incarceration both presently and in the future means that no child support will be payable by him for some considerable time.

[73]     Because the home is held in trust it is not relationship property and Laura accepts she has no claim to it under the Property (Relationships) Act 1976 (the PRA).13   Instead, in 2012, she has filed a claim in the Family Court under s 182 of the Family Proceedings Act 1980 (the FPA) and it is on the basis of her rights under the PRA that she says she has an interest in the property.

[74]     For reasons that will shortly become clear I do not propose to set out in any great detail the very helpful submissions made by Mr Jefferson QC on the operation of s 182.  Suffice it to say that he referred me to the Supreme Court’s decision in Ward v Ward14 and said that the settling of the Otitori Bay Rd property into the Soul Mate Trust  constituted a post-nuptial  settlement  of the kind  which  engaged  the section.  I accept that proposition.

[75]     Once that point is reached s 182 makes it clear that the Family Court may make orders with  reference to  the application  of the whole or any part  of any property settled or the variation of the terms of any such agreement or settlement, for the benefit of (inter alia) the parties to the marriage.   The Court may take into account any change of circumstances since the settlement was made.

[76]     Mr  Jefferson  also  very  properly  said  that  the  Courts  have  consistently recognised that s 182 is not a substitute for or analogous to the PRA regime and it does not give rise to the same presumption of equal sharing, although he suggested that equal sharing might nonetheless be the likely outcome under s 182 where the property at issue is (as here) the family home.  Indeed 50:50 sharing was the result in Ward.   A 50 per cent share is what Laura seeks in the Family Court and  what Mr Jefferson said represented her interest in the Otitori Bay Rd property for the

purposes of the present proceeding.

13     It is accepted that neither ss 44 or 44C of the PRA apply.

14     Ward v Ward [2009] NZSC 125, [2010] 2 NZLR 31.

[77]     After  hearing  Mr  Jefferson’s  submissions,  Mr  Tantrum  for  the  Crown accepted that the Court could properly recognise Laura Corless’ interest as sought.  I see no reason for me to second-guess that concession which seems to me to have been fairly and appropriately made.  I do not therefore propose to consider the matter further.   In terms of s 142L, therefore, I am satisfied that Laura Corless has an interest in the Otitori Bay Rd property that is derived from her claim and rights under s 182 of the FPA and that the value of that interest is 50 percent of that property.  I am also satisfied that she was not involved in the relevant offending.  The precise way in which that interest is to be recognised is a matter upon which I will require further submissions from the Crown at sentencing.

Luke and Casey Corless

[78]     I begin by noting that there are distinctions that can be drawn between Luke and  Casey  in  terms  of  their  connection  with  the  Otitori  Bay  Rd  property.    In particular Luke has lived in the property under the shared care arrangements that existed between Mr Corless and Luke’s mother.15    Luke still has contact with his father in jail, and visits him there.  Luke’s mother receives no financial support from Mr Corless.

[79]     By contrast, Casey (who is an adult) lives in Australia and has had minimal contact with his father during his life.  He has not lived with Mr Corless since he was very young.

[80]     But for the purposes of an application for relief that engages s 142L, the potential “interests” of Luke and Casey are the same.  That is because they are both final and discretionary beneficiaries of the Soul Mate Trust.   No other relevant “interest” has been identified on their behalves.

[81]     I note at this point that, ordinarily, any claim on behalf of beneficiaries under a trust would be made by the trustees of that trust.  It appears that this has not been possible  in  the  present  case,  largely  because  of  Mr  Johnston’s  present  difficult

circumstances.   He is, by all accounts, uncontactable.   The trustee company has

15     Luke is a minor.  His interests in these proceedings are represented by his mother, as litigation guardian.

made no attempt to consult with the co-rustee (Laura Corless) or to take any steps in these proceedings.   The matter has therefore been pursued by the beneficiaries on their own behalf.16    No point has been taken by the Crown in that respect and I do not propose to make anything of it.

[82]     But the difficulty that exists for both Luke and Casey is that the Courts have declined to recognise the mere “expectation” possessed by beneficiaries under a trust as coming within even the wide definition of “interest” that I have set out above. That would be so whether or not the matter were to be pursued on their behalf by the trustees or not. As Venning J said in Solicitor-General v Monk at [31]:17

[31] Even given the extended definition of “interest” under the Act, the individual discretionary beneficiaries do not have individual interests in the property.  As discretionary beneficiaries they may have certain expectations but in Hunt v Muollo the Court of Appeal confirmed that a discretionary beneficiary has no interest, legal or equitable, in the assets of the trust.18   The discretionary beneficiary only acquires an interest in the property on the making of the distribution and then only to the extent of the distribution.

[83]     Even  if,  as  was  urged  upon  me  by  Mr  Leabourn  (for  Casey)  and  Mr Dickinson (for Luke) I were prepared to reject Venning J’s analysis and regard their clients’ respective beneficial interests as falling within the wide statutory definition, the reality would be that those interests are incapable of valuation for the purposes of granting relief.  While both counsel rather optimistically suggested that between 25 and 30 per cent of the value of the property was appropriate that is simply not correct.  The only expectation that either of Mr Corless’ sons had as beneficiaries under the trust is that they might receive some unspecified sum at some point in the next 70 years.  This expectation is all that they will lose in the event that the property is forfeited.  A contingency of this kind (effectively a loss of chance) cannot in my view be valued for the purposes of s 142L; it would, in any event, be de minimis at

best.

16     The late recognition by Luke and Casey that they might have a claim is the principal reason for the rather protracted hearing of the matters that are the subject of this judgment.

17     Solicitor-General v Monk  HC Whangarei CIV-2011-488-10, 11 October 2011. Although that case arose under the Proceeds of Crime Act 1991, the relevant definition of “interest” is materially identical.

18     Hunt v Muollo [2003] 2 NZLR 322 (CA) was not a forfeiture case.

[84]     Equally, I do not accept that the highly contentious, so-called “bundle of rights”  doctrine  could  constitute  an  interest  (or  an  interest  that  is  capable  of valuation) for the purposes of s 142L.  The claim for relief by Luke and Casey under s 142L must therefore fail.

[85]     That leaves Luke’s alternative claim for relief under s 142M.   In order to succeed he must demonstrate that the forfeiture of the property will cause him undue hardship.

[86]     While I have every sympathy for Luke’s position and for that of his mother I do not consider he is able to meet that high threshold.   I have already found that Luke had no relevant interest in the property, or at least no interest that is capable of valuation.   While I accept  that  he did  live there on  and  off under the custody arrangement between his parents, it could not fairly be said to be his family home; Luke’s mother has never lived there.19

[87]     I accept that Mr Corless has not been and will not be financially supportive of Luke, but that is a pre-existing (and future) circumstance that has no relationship with the operation of the instrument forfeiture order.  Mr Corless’ failings as a parent are not something that can be taken into account.  Luke’s application for relief under s 142M must also fail.

[88]     In light of the relief that is to be granted to Laura Corless under s 142L, I do not need to consider her alternative application under s 142M.

Summary: applications for relief

[89]     I  am  satisfied  that  Laura  Corless  has  an  interest  in  the  Otitori  Bay  Rd property that is derived from her claim and rights under s 182 of the FPA and that, in general terms, the value of her interest is 50 percent of the market value of that property.  As I have said, the precise way in which that interest is to be articulated and recognised is a matter upon which I will require further submissions from the

Crown.

19     This is a relevant factor under s 142M(3)(a).

[90]     The other applications for relief are declined.

[91]     As indicated by me at the hearing last week, Mr Corless will need now to consider his position in light of this judgment.  In particular, I direct that he is to file a  memorandum  advising whether  he  intends  to  pursue  an  application  for  relief against forfeiture himself at, or before, sentencing and (in that event) how he wishes

to proceed.

Rebecca Ellis J