R v Hakaraia

[2020] NZHC 2668

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2019-004-2282

[2020] NZHC 2668

THE QUEEN

v

WIWINI HIMI HAKARAIA

Hearing:	30 September 2020
Appearances:	D G Johnstone and E Smith for Crown P Wicks QC and K Hogan for Defendant
Ruling:	30 September 2020
Reasons:	12 October 2020

REASONS FOR RULING (No. 5) OF LANG J

[re application by Mr Hakaraia for discharge under s 147 Criminal Procedure Act 2011]

This judgment was delivered by me on 12 October 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:
Crown Solicitor, Auckland

R v HAKARAIA [2020] NZHC 2668 [30 September 2020]

[1]    Mr Hakaraia faced a charge of participating in an organised criminal group and three charges of money laundering. At the conclusion of the Crown case he applied for an order under s 147 of the Criminal Procedure Act 2011 discharging him on all charges that he faced. He based his argument on the proposition that no properly directed jury could reasonably convict him on the basis of the evidence adduced by the Crown.1

[2]    Mr Johnstone conceded on behalf of the Crown that Mr Hakaraia should be discharged on Charges 3 and 4, which related to alleged money laundering in connection with the purchase of two concrete pumps. Mr Johnstone contended there was sufficient evidence to enable a properly directed jury to reasonably convict     Mr Hakaraia on the remaining two charges.

[3]    In a ruling delivered following argument on 30 September 2020 I granted both remaining applications for discharge. I now give my reasons for doing so.

Charge 2 – Participating in an organised criminal group

The charge

[4]    This charge is laid under s 98A of the Crimes Act 1961, which materially provides as follows:

98A     Participation in organised criminal group

(1)Every person commits an offence and is liable to imprisonment for a term not exceeding 10 years who participates in an organised criminal group—

(a)knowing that 3 or more people share any 1 or more of the objectives (the particular objective or particular objectives) described in paragraphs (a) to (d) of subsection (2) (whether or not the person himself or herself shares the particular objective or particular objectives); and

(b)either knowing that his or her conduct contributes, or being reckless as to whether his or her conduct may contribute, to the occurrence of any criminal activity; and

1      R v Flyger [2001] 2 NZLR 721, (2000) 18 CRNZ 624 (CA); Parris v Attorney-General [2004] 1 NZLR 519(CA) at [14].

(c)either knowing that the criminal activity contributes, or being reckless as to whether the criminal activity may contribute, to achieving the particular objective or particular objectives of the organised criminal group.

(2)For the purposes of this Act, a group is an organised criminal group if it is a group of 3 or more people who have as their objective or one of their objectives—

(a)obtaining material benefits from the commission of offences that are punishable by imprisonment for a term of 4 years or more; or

(b)obtaining material benefits from conduct outside New Zealand that, if it occurred in New Zealand, would constitute the commission of offences that are punishable by imprisonment for a term of 4 years or more; or

(c)     the commission of serious violent offences …; or

(d)conduct outside New Zealand that, if it occurred in New Zealand, would constitute the commission of serious violent offences ….

(3)A group of people is capable of being an organised criminal group for the purposes of this Act whether or not—

(a)     some of them are subordinates or employees of others; or

(b)only some of the people involved in it at a particular time are involved in the planning, arrangement, or execution at that time of any particular action, activity, or transaction; or

(c)     its membership changes from time to time.

[5]The charge that Mr Hakaraia faced was framed as follows:

That [N] and WIWINI HIMI HAKARAIA, between 16 May 2017 and 11 April 2019, at Auckland, knowing that a group of three or more people shared as one of their objectives the obtaining of material benefits from the commission of offences

punishable by four or more years’ imprisonment, participated in that group, knowing or being reckless as to whether their conduct contributed to the occurrence of

criminal activity; and that criminal activity might contribute to the above objective.

Particulars of group of three or more: Pasilika Naufahu, Tyson Daniels, Samuel Vaisevuraki, Donald Vuisevuraki, Connor Clausen, Jarome Fonua.

Particulars of offences: dealing in controlled drugs contrary to section 6 of the Misuse of Drugs Act 1975.

[6]    As is evident from the charge and the wording used in the section, the key elements the Crown must establish are:2

(a)Participation by Mr Hakaraia in an organised criminal group having the objective of deriving material (in this case financial) benefits derived from or arising out of the commission of drug dealing offences punishable by a term of at least four years imprisonment.

(b)Knowledge by Mr Hakaraia that at least three other persons in the group shared that objective.

(c)Knowledge by Mr Hakaraia that his participatory conduct contributed to the occurrence of any criminal activity, or being reckless as to whether it might so contribute.

(d)Knowledge by Mr Hakaraia that such criminal activity contributed to achieving the objective of the organised criminal group, or being reckless as to whether it might so contribute.

The Crown case

[7]    In broad terms the Crown alleges the persons named in the particulars shared the common objective of deriving financial benefits from criminal activity, namely dealing in controlled drugs.3  Mr Naufahu, Mr Fonua, Mr Vetekina  Naufahu  and   Mr Daniels have already pleaded guilty to this charge.4

[8]    Although Mr Vaisevuraki and Mr Vuisevuraki originally faced this charge the Crown ultimately withdrew it against them. Mr Clausen has never faced a charge of participating in an organised criminal group.

2      Te Kahu v R [2012] NZCA 473 at [14].

3      During Mr Johnstone’s opening address he left open the possibility that the group may have derived material benefits from other forms of criminal activity but there is no evidence to suggest that this is the case.

4      The defendants have entered their pleas on the basis that, although the material benefits they derived were the product of criminal offending of the type alleged by the Crown, they did not commit such offences themselves.

[9]    Unlike the persons named in the particulars, the  Crown does  not  contend Mr Hakaraia was a member of the organised criminal group. Rather, it says he participated in the activities of that group in circumstances giving rise to liability under s 98A. It is common ground that a person can participate in an organised criminal group without being a member of the group.5

[10]   The Crown says Mr Hakaraia participated in the group in several ways. First, he is an accountant by occupation and provided accounting and advisory services to a company called Heavy Heavy Ltd, a provider of concrete pumping services established by Mr N on 16 May 2017. The Crown contends Mr N incorporated that company as a vehicle to launder cash derived by members of the group through criminal offending. It also contends Mr Hakaraia provided substantial financial assistance to Heavy Heavy Ltd from the outset. This took the form of advances totalling approximately $300,000 to Mr N and the company to enable the company to acquire two concrete pumps and to meet its operating expenses. The advances were never formally documented as loans and a total sum of just $25,000 was repaid.

[11]   In addition, Mr Hakaraia provided Mr Naufahu with funds to assist him in purchasing a residential property at Bucklands Beach. He also arranged for funds to be contributed towards the purchase of a Range Rover motor vehicle for Mr Tyson Daniels.

Could a properly directed jury reasonably find that Mr Hakaraia knew that three or more members of the group shared the specified objective?

[12]   I deal with this issue at the outset because it is determinative of the present application. The issue is whether a properly directed jury could reasonably conclude Mr Hakaraia knew that three or more members of the organised criminal group shared the same objective, namely the derivation of financial benefits from criminal offending in the form of drug dealing. In this context the wording of s 98A makes it clear that actual knowledge is required. Recklessness will not suffice.

5      R v Robinson HC Auckland CRI 2004-004-10413, 23 June 2006 at [67].

[13]   Mr Wicks concedes there is evidence Mr Hakaraia knew and dealt with both Mr Naufahu and Mr Daniels. As I have already recorded, Mr Hakaraia contributed sums of money to assist both men to acquire assets. Through his companies HKS Investments Ltd and Three Little Birds Childcare Ltd he contributed the sum of

$90,000 towards the purchase by Mr Daniels of a Range Rover motor vehicle on     3 April 2019. He also arranged for the sum of $20,000 to be transferred from his partner’s bank account towards the purchase of that vehicle.

[14]   HKS Investments Ltd also deposited funds totalling $250,000 into the trust account of Mr Naufahu’s lawyer, Mr Andrew Simpson, to assist Mr Naufahu to purchase the Bucklands Beach property as a residence for himself and his family. In addition, Mr Hakaraia attempted to assist Mr Naufahu to obtain mortgage finance by writing a letter saying he was gifting the sum of $300,000 to Mr Naufahu. He then wrote another letter for the same purpose purporting to confirm Mr Naufahu would realise a substantial profit or payout from an investment relating to the 2018 FIFA World Cup.

[15]   By the time Mr Hakaraia made his contribution to the purchase of the Buckland Beach property Mr Naufahu had already arranged for cash deposits totalling approximately $600,000 to be paid into Mr Simpson’s trust account to fund the purchase of the property. I consider a properly directed jury could reasonably conclude Mr Hakaraia would have been aware of this fact before he made his own contribution to the purchase price. It could also conclude that he knew such a significant quantity of cash must have represented the proceeds of criminal offending given the fact that Mr Naufahu had very limited sources of legitimate income during this period.

[16]   The position is different in relation to the purchase of the motor vehicle by Mr Daniels because the Crown does not contend the vehicle that he traded in to fund the balance of the purchase price was  derived from  criminal  offending.  Even  if Mr Hakaraia knew Mr Daniels was a member of the organised criminal group, however, the Crown must still establish that he also knew a third member of the group who shared the objective of deriving material benefits from criminal offending.

[17]   There is no evidence to suggest Mr Hakaraia ever knew or came into contact with Mr Samuel Vaisevuraki or his half brother Mr Donald Vuisevuraki or that he would have had any cause to believe they were members of the group nominated by the Crown. This leaves Mr Connor Clausen and Mr Jarome Fonua as the only other members of the group named in the particulars to the charge.

[18]   The Crown in this context relies on photographs obtained from cellphones seized at the termination of the police investigation when they searched Mr Naufahu’s address. On one of his cellphones the police found photographs of a Christmas function held on 10 December 2017 for staff members and associates of Heavy Heavy Ltd. The function was held on a chartered boat on the Waitemata Harbour. Mr Hakaraia attended the function, as did Mr Naufahu. Mr Johnstone submits that the photographs demonstrate that Mr Hakaraia is likely to have learned of the involvement of other members of the group on this occasion.

[19]   This reasoning underpinned the Crown’s concession that Mr Hakaraia should be discharged on Charges 3 and 4. The events giving rise to those charges occurred prior to the Christmas function on 10 December 2017. The Crown therefore accepted Mr Hakaraia could not be guilty of money laundering to further the objectives of the organised criminal group at that time.

[20]   I consider Mr Hakaraia’s attendance at the Christmas function to be of little probative value in the present context. It is not surprising he attended the function because he advanced significant sums of money to Mr N and the company to fund the company’s operations. He also looked after its accounts. Wives and partners also attended the function, however, and it seems inherently unlikely that criminal activities would be openly discussed at such a gathering when others might overhear the discussion.

[21]   All the evidence is to the effect that Mr Naufahu in particular was extremely cautious about the manner in which he discussed criminal activity with others. Generally it involved the use of encrypted devices and applications or meetings in person in open spaces where his conversations could not be recorded or overheard. I consider it highly unlikely that Mr Naufahu would have permitted any discussion

about the group’s criminal activities at the function with other persons who were not already privy to them.

[22]   Mr Fonua is not shown in the photographs taken at the function. The evidence suggests he had nothing to do with Heavy Heavy Ltd and this indicates it is unlikely that he was present.

[23]   Photographs of members of the Comanchero organisation, of which Mr Naufahu, Mr Fonua and Mr Clausen are members or associates, were posted on social media from time to time but Mr Hakaraia is not shown in any of these and there is nothing else to connect him with them. In the absence of any further evidence to connect the two men I do not consider a properly directed jury could reasonably conclude Mr Hakaraia knew Mr Fonua was a member of any organised criminal group.

[24]   Mr Clausen is not present in the photographs taken at the Christmas function. This is not surprising given the fact that appears to have had no involvement in Heavy Heavy Ltd.   There is no evidence Mr Hakaraia had any contact or dealings with    Mr Clausen throughout the very lengthy period covered by the police investigation. They do not appear to have mixed socially and there is no reason to suggest Mr Hakaraia must have known about Mr Clausen’s involvement in the group through his interaction with either Mr Naufahu or Mr Daniels.

[25]   The only evidence about Mr Clausen’s activities relates to a charge that he conspired to supply the Class B drug pseudoephedrine. This was laid following an incident that occurred on 20 September 2018, some ten months after the Christmas function. On this occasion Mr Clausen was a passenger in a vehicle allegedly delivering cash to pay for a quantity of pseudoephedrine on Mr Naufahu’s behalf. The Crown does not allege Mr Hakaraia had any involvement in the incident.

[26]   Given the absence of evidence of any discernible connection between Mr Hakaraia and Mr Clausen I do not consider any properly directed jury could reasonably consider Mr Hakaraia knew Mr Clausen was a member of the organised criminal group.

[27]   During oral argument Mr Johnstone argued the Crown could rely on the fact that Mr Hakaraia  clearly  knew  and  had  dealings  with  Mr  Naufahu’s  brother,  Mr Vetekina Naufahu. Mr Johnstone suggested the Crown could maintain the charge against Mr Hakaraia on the basis that Mr Vetekina Naufahu was the third person known by Mr Hakaraia to be a member of the organised criminal group.

[28]   An immediate difficulty with this argument is that the particulars relating to the charge do not name Mr Vetekina Naufahu as being a member of the organised criminal group in which Mr Hakaraia is alleged to have participated. Furthermore, Mr Vetekina Naufahu pleaded guilty to a charge of participating in an organised criminal group in which the members were Mr Pasilika Naufahu, Mr Tyson Daniels, Mr Vaisevuraki, Mr Vuisevuraki, Mr Fonua and Mr Clausen. This means the Crown has never alleged Mr Vetekina Naufahu was a member of the group in which he participated. The particulars of the charge against Mr Hakaraia reflects the same approach. I do not consider it is now open to the Crown to allege for the first time that Mr Vetekina Naufahu was a member of that group rather than a mere participant in the group’s activities.

[29]   It  follows  that  no  properly  directed   jury   could   reasonably  conclude Mr Hakaraia knew that three other persons shared the common objective of deriving material benefits from criminal offending.

Charge 9 – Money laundering

[30]   The offence of money laundering is created by s 243(2) and (4) of the Crimes Act 1961, which provide as follows:

(2)Subject to sections 244 and 245, every one is liable to imprisonment  for a term not exceeding 7 years who, in respect of any property that is the proceeds of an offence, engages in a money laundering transaction, knowing or believing that all or part of the property is the proceeds of an offence, or being reckless as to whether or not the property is the proceeds of an offence.

…

(4)For the purposes of this section, a person engages in a money laundering transaction if, in concealing any property or by enabling any person to conceal any property, that person—

(a)     deals with that property; or

(b)assists any other person, whether directly or indirectly, to deal with that property.

…

[31]The terms used in ss 243(2) and (4) are defined by s 243(1) as follows:

act includes an omission

conceal, in relation to property, means to conceal or disguise the property; and includes, without limitation,—

(a)to convert the property from one form to another:

(b)        to conceal or disguise the nature, source, location, disposition, or ownership of the property or of any interest in the property

deal with, in relation to property, means to deal with the property in any manner and by any means; and includes, without limitation,—

(a)to dispose of the property, whether by way of sale, purchase, gift, or otherwise:

(b)to transfer possession of the property:

(c)to bring the property into New Zealand:

(d)to remove the property from New Zealand

interest, in relation to 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

offence means an offence (or any offence described as a crime) that is punishable under New Zealand law, including any act, wherever committed, that would be an offence in New Zealand if committed in New Zealand

proceeds, in relation to an offence, means any property that is derived or realised, directly or indirectly, by any person from the commission of the offence

property means real or personal property of any description, whether situated in New Zealand or elsewhere and whether tangible or intangible; and includes an interest in any such real or personal property

…

[32]The money laundering charge is framed as follows:

That TYSON DANIELS and WIWINI HAKARAIA on or about 3 April 2019 at Auckland engaged in a money laundering transaction in respect of property that was the proceeds of an offence, knowing or believing that all or part of the property was the proceeds of an offence, or being reckless as to whether or not the property was the proceeds of an offence.

Particulars: $110,000 used as part of the purchase price of a Range Rover vehicle with the registration 1917

[33]   As will be evident from the particulars, the Crown alleges Mr Hakaraia is guilty of money laundering because he contributed the sum of $110,000 towards the purchase by Tyson Daniels of the Range Rover motor vehicle on 3 April 2019. It does not allege Mr Hakaraia combined his funds with other funds criminally acquired by Mr Daniels so as to conceal those funds by converting them from cash to the motor vehicle.

[34]In order to prove this charge the Crown must establish three elements:

(i)Mr Hakaraia engaged in a money laundering transaction by virtue of the contribution he made to the purchase of the vehicle.

(ii)The contribution he made was the proceeds of criminal offending.

(iii)Mr Hakaraia knew or was reckless as to whether the contribution he made was the proceeds of an offence.

[35]   In opening the case for the Crown Mr Johnstone told the jury that by contributing the funds Mr Hakaraia participated in the activities of the organised criminal group. He then expanded this proposition as follows:

[50] As I have said to you, Mr Hakaraia was responsible for in effect all of the payments that were made ultimately to Archibald & Shorter. The first lot went through Tyson Daniels’ partner Ammie Brown’s account. I have already mentioned to you the drugs that were found just over a week later. I do suggest it is likely Mr Hakaraia sourced his drugs from this organised criminal group. There is no other source of his drugs apparent in the evidence. But in any event whether or not Mr Hakaraia’s payment was in recognition of the drug supplies the Crown argument here is that at the point that Archibald & Shorter had that combination of funds in its bank account at the point that they were about to turn those funds into Tyson Daniels’ interest in that vehicle those funds were the proceeds of Mr Hakaraia’s participation in the organised criminal group by amongst other things doing the funding in this way. So when they released the Range Rover converting the funds from an entry in

their bank account into a vehicle owned by Mr Daniels who was Mr Hakaraia, who along with Tyson Daniels engaged in a money laundering transaction.

(Emphasis added)

[36]   An argument clearly arises as to whether the Crown’s reasoning can survive Mr Hakaraia’s discharge on the charge of participating in an organised criminal group. Even if that argument is resolved in favour of the Crown, however, a more fundamental issue arises. This arises out of the fact that Mr Wicks was able to demonstrate  through  cross-examination  of  the   Crown’s   forensic   accountant, Ms Endean, that the funds Mr Hakaraia contributed to the purchase of the vehicle were derived legitimately. They were not the proceeds of criminal offending.

[37]   The Crown’s argument as explained during the opening address rests on the proposition that legitimately derived funds will become the proceeds of an offence when they are used to further the activities of an organised criminal group. I readily accept that a person might participate in an organised criminal group if he or she knowingly or recklessly applies lawfully derived funds to assist or enable the group to achieve its specified objective and thereby contributes to criminal offending. The real issue, however, is whether the Crown is correct in arguing that the offence of money laundering is also committed occurs as soon as a person applies legitimately derived funds for that purpose.

[38]   The Crown relies for its argument on R v Haque, a decision of the English Court of Appeal (Criminal Division).6 In that case fraudsters had telephoned elderly and vulnerable victims pretending to be police officers who were investigating allegations of bank fraud. The victims complied with the fraudsters’ requests to transfer funds from their bank accounts into bank accounts controlled by the fraudsters. Some of these were paid into a bank account in the name of the appellant and his wife. The appellant then made cash withdrawals from the account. He was subsequently arrested and found guilty by a jury on a charge of acquiring criminal property under s 329(1)(a) of the Proceeds of Crime Act (UK).

6      R v Haque [2019] EWCA Crim 1028, [2020] 1 Cr. App. R. 12.

[39]   The trial judge ruled that money obtained by fraud constituted “criminal property” for the purposes of s 329 and that the jury could properly infer the appellant had acquired it when he made withdrawals from the account. On appeal the appellant argued that the money was not criminal property when it was paid into his account because it remained the lawful property of the victims at that point. He accepted he could, however, have been charged under another section with retaining or using the money once it was deposited into his bank account.

[40]   The Court of Appeal upheld this argument. It held that for the purposes of s 329 it was necessary for the money to be criminal property at the time the appellant acquired it. It considered the money remained the lawful property of the victims at that point and the transfer into the appellant’s account could not of itself suffice to convert it into criminal property.7 In reaching this conclusion the Court cited8 the following passage from the earlier decision of the Court of Appeal in R v Loizou:9

“In our view, the natural meaning of section 327(1) of the 2002 Act is that the property concealed, disguised, converted or transferred, as the case may be, must be criminal property at the time it is concealed, disguised, converted or transferred (as the case may be). Put the other way round, in a case of transfer, if the property is not criminal property at the time of the transfer, the offence is not committed.

[41]   The facts and legislative provisions in Haque are obviously different from those in the present case. The case confirms, however, that lawfully acquired funds do not become criminal property merely by being transferred to the bank account of another even through fraud. To the extent that the case is analogous I do not consider it assists the Crown’s argument.

[42]   I consider a more helpful authority to be R v Harris, a decision of the New Zealand Court of Appeal referred to me by Mr Wicks.10 In that case the appellants had been convicted of both benefit fraud and money laundering under the predecessor to s 243, s 257A of the Crimes Act 1961. The bank deposits the Crown relied on to prove the money laundering charge were the same deposits that underpinned the charges

7      At 19.

8      At 18.

9      R v Loizou [2005] EWCA Crim 1579, [2005] 2 Cr. App R. 37 at [30].

10     R v Harris CA 15/00, CA 16/00, CA 19/00, CA 120/00, CA121/00 and CA 122/00, 1 August 2000.

alleging benefit fraud. The Court of Appeal allowed the appeal against conviction on the money laundering charge for the following reason:

[53]   Mrs Stevens submitted that the form of the indictment was defective  in treating the receipt of the credit into Mrs Harris senior’s account as a concurrent act of money laundering. It is unnecessary for us to analyse s 257A in detail; we accept the simple argument that the conduct here alleged as laundering is the very conduct constituting the “serious offence” and relied on as “the proceeds of [a] serious offence”. For 257A to be infringed the laundering must follow a discrete antecedent “serious offence”. Since that did not occur the conviction of Mrs Rochelle Harris on Count 13 is set aside.

[43]   If that reasoning is applied to the present situation it becomes clear there was no antecedent offending that caused the funds contributed by Mr Hakaraia to become the proceeds of criminal offending. Up until the point where they were paid to the car dealer the funds were entirely legitimate. In order to become the proceeds of criminal offending they needed to be derived or realised, directly or indirectly, from the commission of a discrete antecedent offence. Only one transaction is alleged here. This is the payment of the funds to the car dealer. In terms of the reasoning in Harris the conduct relied on to establish the offence of participating in an organised criminal group cannot also convert the funds into the proceeds of an offence so as to enable a charge of money laundering to be proved.

[44]It follows that there was no legal basis for the Crown’s argument on this charge.

Lang J