Snowden v Commissioner of Police
[2021] NZCA 336
•26 July 2021 at 9 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA486/2020 [2021] NZCA 336 |
| BETWEEN | PAUL ANDREW SNOWDEN |
| AND | COMMISSIONER OF POLICE |
| Hearing: | 21 June 2021 |
Court: | Kós P, Brewer and Davison JJ |
Counsel: | A G Speed for Appellant |
Judgment: | 26 July 2021 at 9 am |
JUDGMENT OF THE COURT
AThe application for extension of time to cross-appeal is granted.
BThe appeal is dismissed.
CThe cross-appeal is allowed.
DThere is no order for costs.
____________________________________________________________________
REASONS OF THE COURT
(Given by Kós P)
Mr Snowden pleaded guilty to possessing methamphetamine for supply and conspiring to supply methamphetamine. Subsequently the Commissioner of Police sought civil forfeiture orders under the Criminal Proceeds (Recovery) Act 2009.[1] A trust controlled by Mr Snowden owns a rural property at Karaka. Gault J found it was tainted but gave relief against its forfeiture. Instead he made a profit forfeiture order against Mr Snowden personally, in the sum of $743,308. And he ordered the Karaka property be sold to meet that order.[2] Both parties appeal.
Background
The Karaka property
[1]We refer to the Act hereafter as the CPRA.
[2]Commissioner of Police v Snowden [2020] NZHC 2036 [High Court judgment].
In December 2001 Mr Snowden settled the Paul Andrew Snowden Family Trust. He and his parents were trustees. His children were the principal beneficiaries; Mr Snowden, his spouse and other relatives were discretionary beneficiaries. As settlor, Mr Snowden retained the power to appoint trustees.
In March 2002 the Trust purchased all the shares in Karaka Farmlets Ltd, which in turn owned the 1.6 ha rural property in Karaka referred to earlier. The vendor of the shares was an entity controlled by a Mr Kimball Johnson, himself a participant in organised crime in Auckland. The purchase price was $100,000 (funded as to two‑thirds by transfer of a Harley Davidson motorcycle to Mr Johnson — albeit the machine seems to have been worth far less)[3] and the Trust assumed responsibility for a $320,000 mortgage over the property.
[3]At [113]–[114].
Thereafter mortgage repayments of $333,615 were made by the Trust. One fundamental question in this case is the extent to which this was funded by legitimate sources. The Commissioner says less than one-tenth of this funding was from legitimate sources. The Judge found at least one-fifth was legitimately sourced.[4]
Convictions
[4]At [121], being the $32,158 the Commissioner conceded came from legitimate sources and the $34,485 in benefit payments the Judge did not accept were proven to be the result of benefit fraud. See [14] below.
In 2010 Mr Snowden was convicted on one charge of possession of cannabis for supply and one charge of possession of methamphetamine. The former involved, amongst other things, some 1.5 kg of loose cannabis plant material.
In 2013 Mr Snowden was again arrested. He later pleaded guilty to possessing methamphetamine for supply and conspiring to supply methamphetamine. On that occasion he had 93 g of methamphetamine concealed between his buttocks, worth some $93,000 or so.[5] In sentencing him, Judge Garland rejected a submission that he was just a follower, rather than a leader.[6] Mr Snowden received a sentence of imprisonment of four years and 10 months’ imprisonment on the possession charge. He was subsequently sentenced in 2015 to one year and five months cumulative on the previous sentence for the conspiracy to supply charge.[7]
True extent of criminal activity
[5]The sentencing Judge stated the value of the 93 g as being $93,000: R v Snowden DC Christchurch CRI-2013-009-4039, 22 January 2014 at [4]. The Judge below in the present proceeding proceeded on the basis it was worth $42,000: High Court judgment, above n 2, at [14].
[6]R v Snowden, above n 5, at [11].
[7]R v Snowden [2015] NZDC 2142.
The Judge’s conclusion that the convictions were unlikely to represent the full extent of Mr Snowden’s criminal activity is in our view amply sustained on the evidence.[8] The salient features of that evidence are now summarised.
[8]High Court judgment, above n 2, at [104].
First, Mr Snowden travelled some 12 times to Christchurch between December 2012 and April 2013 (on the last occasion of which he was arrested in possession of the methamphetamine referred to at [6]). In Christchurch Mr Snowden dealt with a Mr Carr — providing, Mr Snowden said, protection while Mr Carr undertook debt collection and drug-dealing. Intercepted communications between them were strongly probative of Mr Snowden supplying drugs to Mr Carr, which Mr Carr then on-sold.
Secondly, after Mr Snowden was imprisoned, intercepted communications demonstrated Mr Snowden’s capacity to arrange for Mr David O’Carroll, a senior patched member of the Head Hunters motorcycle gang, to visit Mr Snowden’s mother and provide her with funds. In evidence she acknowledged receiving $10,000 from his daughter. In October 2015 Mr O’Carroll was sentenced in the High Court to 16 years and five months’ imprisonment on three charges of manufacturing methamphetamine in early 2014.[9] We set out some of these communications in the Appendix to this judgment.
[9]R v O’Carroll [2015] NZHC 2404.
Thirdly, Mr Snowden also paid a sum of $123,000 to his girlfriend, a Ms Jiang (of which she later returned $20,000 to his mother).
Fourthly, Mr Snowden gave evidence before the Judge. The Judge did not accept his denial of engaging in methamphetamine supply.[10] Nor his claim that his rental income from the property was as much as $488,770.[11] Although the Judge did not say so directly, we infer he found Mr Snowden’s evidence unreliable unless corroborated by documentary or other reliable oral evidence.
[10]High Court judgment, above n 2, at [84]–[87].
[11]At [89]–[99]. See also [14] below.
Fifthly, Mr Snowden declared no income in the seven years between 2010 and 2016.
Sixthly, Mr Snowden operated wholly outside the regular banking system between 2009 and 2016, apart from two Karaka Farmlets accounts used to meet the mortgage on the Karaka property.
Seventhly, and as noted above, $333,615 in mortgage repayments were made on the Karaka property.[12] In January 2018 the property was worth approximately $1 million, and the remaining debt stood at $164,258 as at 19 June 2018.[13] The Judge found $32,158 was derived from legitimate sources (conceded by the Commissioner), $34,485 from benefit payments (which while not necessarily legitimate, were at least not derived from criminal activity)[14] and a further uncertain sum derived from rent paid by third party occupants of the property.[15] The Judge found Mr Snowden proved rental income of $179,758.[16] But the Judge did not determine exact rental sum applied to the mortgage — it may be as much as $164,276.[17] (The Commissioner says that much of this was itself tainted, as it derived from an asset that became tainted at latest by September 2006.) But a balance of between $102,696 and $183,346 mortgage repayments is attributable to unexplained cash deposits and appears to be proceeds of criminal activity.
[12]The figure is not materially in contest.
[13]It follows the Trust’s equity then stood at $835,742.
[14]High Court judgment, above n 2, at [66] and [111].
[15]At [121].
[16]At [99].
[17]Namely, the rental income the Commissioner conceded was applied to the mortgage and the additional cash rental income the Judge accepted as proven by Mr Snowden.
Eighthly, Mr Snowden’s own living expenses appear to have been funded either from rental not applied to the mortgage or unexplained cash receipts then disbursed in kind.
The Judge found Mr Snowden’s drug offending extended “well beyond the instances for which he has convictions”.[18] His unexplained cash receipts over the 14‑year period between 2002 and 2016 “seem to exceed $300,000”.[19]
Statutory framework
[18]High Court judgment, above n 2, at [104].
[19]At [105].
The CPRA provides a regime for recovery of proceeds of significant criminal activity. Subpart 3 of pt 2 of the CPRA sets out the regime for civil forfeiture orders. There are two types of orders, both relevant here: assets forfeiture orders and profit forfeiture orders.
With respect to assets forfeiture orders, s 51 is relevant. It provides the High Court may, on application by the respondent, exclude certain property from an assets forfeiture order if it considers that, having regard to all of the circumstances, undue hardship is reasonably likely to be caused to the respondent if the property is included in the assets forfeiture order.
An application for a profit forfeiture order must per s 52(c) specify the value of the benefit said to have been received as a result of significant criminal activity. Section 53(1) provides that if the Commissioner proves, on the balance of probabilities, that the respondent has, in the relevant period of criminal activity, unlawfully benefited from significant criminal activity, the value of that benefit is presumed to be the value stated in the application under section 52(c). Section 53(2) provides that the presumption may be rebutted by the respondent on the balance of probabilities. As is apparent, s 53 provides for a reverse onus.
Section 55(1) of the CPRA provides the High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity and has interests in property. Section 7 defines the meaning of “unlawfully benefited from significant criminal activity”:
… a person has unlawfully benefited from significant criminal activity if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity (whether or not that person undertook or was involved in the significant criminal activity).
The CPRA provides for protection against civil forfeiture orders in two ways. First, ss 51 and 56 provide for the exclusion of the respondent’s property from an assets forfeiture order and a profit forfeiture order respectively if the High Court considers on the balance of probabilities that undue hardship is reasonably likely to be caused to the respondent if the property is included in the assets or profit forfeiture order.
Secondly, persons other than the respondent may apply for relief from a civil forfeiture order under s 61. Section 63 sets out the necessary particulars any application must contain. As to the grounds on which relief may be ordered, relevant to this appeal is s 67. Section 67(1) provides for relief where the High Court considers undue hardship is reasonably likely to be caused to the applicant if relief is not granted. Section 67(2) sets out circumstances the Court may have regard to in making that assessment.
Judgment appealed
After setting out the essential facts the Judge identified the issues to be determined. These were six:[20]
(a)whether the Karaka property was tainted;
(b)whether a sum of $2,725 cash was tainted;
(c)whether Mr Snowden unlawfully benefited from possession and sale of methamphetamine and cannabis;
(d)whether Mr Snowden had interests in the Karaka property and the $2,725 cash;
(e)whether the Limitation Act 1950 operated to exclude consideration of Mr Snowden’s criminal activities prior to 1 January 2011; and
(f)whether Mr Snowden and/or the beneficiaries of the Trust were likely to suffer undue hardship.
[20]At [18].
The Judge dealt first with the limitation issue. He noted that counsel for Mr Snowden relied on s 4(5) of the Limitation Act, the effect of which is to bar action for recovery of a penalty or forfeiture (other than a fine) two years from the date on which the cause of action accrued. Counsel for the Commissioner submitted that s 4(5) does not apply to assets forfeiture orders under the CPRA. The Judge did not agree with the Commissioner’s submission. He considered the CPRA and s 4(5) of the Limitation Act were not irreconcilable. Parliament could be taken to have been aware of the s 4(5) time bar when it enacted the CPRA. Parliament could easily have expressly excluded s 4(5) when it enacted the CPRA if it intended to do so. More particularly, it could have done so a year later when it enacted the Limitation Act 2010, with its transitional provisions and express exclusion of the CPRA from the new Limitation Act.[21]
[21]At [57].
It followed that an action for an assets forfeiture order would be time barred by s 4(5) if the tainting occurred before 1 January 2009.[22] However, to the extent the Commissioner’s application was based on tainting prior to 1 January 2009 from proceeds of Mr Snowden’s drug offending, the Judge held the limitation period was postponed under s 28 of the Limitation Act, on the basis of a deliberate concealment. Mr Snowden had concealed his involvement in drug dealing from the Commissioner. There was no suggestion it could with reasonable diligence have been discovered earlier. Accordingly, the application for an assets forfeiture order was not time barred.[23]
[22]At [62].
[23]At [67].
The Judge then considered whether the Karaka property was tainted. That is to say, whether it had wholly or in part been acquired as a result of significant criminal activity or directly or indirectly derived from significant criminal activity.[24] That required the Judge to assess the evidence of drug offending by Mr Snowden, the essential particulars of which we have summarised at [7]–[16] above. The Judge was not satisfied that the original acquisition of the Karaka property in 2002 was acquired as a result of significant criminal activity.[25] However, based on the evidence summarised at [7]–[16] above, he concluded that substantial sums of money from significant criminal activity had been used to meet mortgage payments and that, following the decision of this Court in Doormanv Commissioner of Police, the property was thereby tainted.[26]
[24]See definition of “tainted property” in s 5(1) of the Criminal Proceeds (Recovery) Act.
[25]High Court judgment, above n 2, at [115].
[26]At [117] and [121], citing Doorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173 at [32].
Next, the Judge found that a sum of $2,725 in cash seized from the Karaka property (and located underneath a fridge-freezer) was on the balance of probabilities cash derived from Mr Snowden’s drug offending. It was therefore tainted.[27] There is no appeal from that finding.
[27]At [123].
Next, the Judge considered the Commissioner’s application for a profit forfeiture order against Mr Snowden for $754,533. The relevant period of criminal activity for the purposes of s 55(1) of the CPRA ran from 13 December 2009 to 19 July 2018, though the Commissioner’s financial analysis of Mr Snowden’s unlawful benefit only ran until 31 March 2016.[28] This was uncontroversial. A restraining order had been filed on 12 December 2016, so the seven-year backstop date was 13 December 2009.[29]
[28]At [126].
[29]At [29]. The seven-year backstop date is a result of the definition of “relevant period of criminal activity” in s 5(1) of the Criminal Proceeds (Recovery) Act.
After noting that Mr Snowden had conducted his financial affairs outside the banking system, the Judge went on:[30]
… His mortgage payments and living expenses until he went to prison (even excluding his methamphetamine use of at least $100 per week and maybe as much as $500 per week) exceeded his identifiable rental income. It is likely he was receiving substantial undeclared income to meet these expenses, including the payments from Mr O’Carroll. Given the disparity between Mr Snowden’s identifiable rental income and his access to large sums of cash, I consider on the balance of probabilities that he has unlawfully benefited from significant criminal activity in a substantial way.
[30]At [129].
The next question for the Judge was the extent of unlawful benefit received by Mr Snowden. Here, s 53 applied. We explained that provision above, at [19]. The Commissioner had an initial burden of establishing on the balance of probabilities that the respondent has unlawfully benefitted from significant criminal activity. If the Commissioner discharged that burden, it was then for Mr Snowden to rebut the statutory presumption that he had benefitted to the value claimed by the Commissioner.[31]
[31]At [131].
The Judge went on to note the recent decision of this Court in Cheah v Commissioner of Police, wherein it was said there were only two possible outcomes.[32] First, the Commissioner has the benefit of the presumption and, if the respondent fails to rebut it, the presumed value stands. The second, where the respondent succeeds in rebutting the presumption. But that will only occur if the respondent has proved, also on the balance of probabilities, a different value. As the Judge put it:[33]
Under s 53 the Court’s role is limited to deciding on the balance of probabilities whether the Commissioner has proved that the respondent unlawfully benefitted, during the relevant period of criminal activity, from significant criminal activity, and whether the respondent has rebutted the presumption that the value of that benefit is correctly stated in the application.
[32]At [132], citing Cheah v Commissioner of Police [2020] NZCA 253 at [47].
[33]At [132].
The specified amount nominated by the Commissioner was calculated as follows:[34]
(a) cash deposits $ 66,087
(b) cash seized $ 2,725
(c) cash expenditure $ 32,613
(d) Karaka property capital gain and rental income $189,108
(e) methamphetamine use $ 86,000
(f) approximate value of methamphetamine supply $378,000
We comment briefly on (e) and (f). The calculation of methamphetamine use was based on expenditure of $500 per week from December 2009 to April 2013. The value of the methamphetamine supply was based on nine trips to Christchurch (from the 12 identified), each allegedly to the value of $42,000 per trip. This, the Judge noted, was “said on behalf of the Commissioner to be conservative”.[35]
[34]At [133].
[35]At [133], n 44.
The Judge considered the Commissioner’s presumed value had not been rebutted by Mr Snowden in evidence (or by cross-examination of the Commissioner’s witnesses) except in one respect.[36] Namely, in relation to the Karaka property capital gain and rental income benefit. The Judge was concerned about the potential need to apportion some of the capital gain, and some of the repayment of mortgage, on the basis that initially at least, funding was not tainted. However, applying Cheah, the Judge considered that Mr Snowden had not proved a different value.[37] Accordingly, the Judge accepted the prescribed benefit of $754,533 for the profit forfeiture order.[38]
[36]At [138].
[37]At [139].
[38]At [140].
Next, the Judge considered whether Mr Snowden had interests in the Karaka property (and the cash found in it). This conclusion he reached readily, based on s 58(1) of the CPRA, concerning whether the respondent had effective control over the property. We have set out at [2] above the control which Mr Snowden had over the Trust. Based on that evidence, the Judge considered that although the property was legally owned by Karaka Farmlets Ltd, Mr Snowden had effectively treated the Karaka property as his own and held effective control over it.[39]
[39]At [147].
Finally, the Judge turned to an application made by Mr Snowden for relief from forfeiture under ss 51 and 56 of the Act. The application here was based on Mr Snowden’s assertion that he had no other place to live, and that he had put his whole life savings into the Karaka property. The Judge noted that there was no application for relief by other beneficiaries of the Trust.[40] Although there was some suggestion that his mother would suffer hardship, losing her “retirement home”, the evidence did not support that claim, given she owned and lived elsewhere in her own freehold property — and preferred living there than at Karaka.[41] However, the Judge went on to say:[42]
Having regard to these circumstances, particularly the ownership of the Karaka property and the limited extent of the tainting, I consider that relief from assets forfeiture is appropriate. The beneficiaries of the Trust – particularly the primary beneficiaries, Mr Snowden’s children – would suffer undue hardship if the Karaka property was asset forfeited.
[40]At [151].
[41]At [157].
[42]At [158].
Although not expressed in that reasoning, it is what the Judge did next that really explains what he was doing here. Having given relief against asset forfeiture, he denies relief against profit forfeiture. He reasoned this as follows:[43]
I do not consider that the beneficiaries of the Trust – including Mr Snowden but particularly the primary beneficiaries, Mr Snowden’s children – would suffer undue hardship if the Karaka property is sold and part of the proceeds forfeited to meet a profit forfeiture order. They will suffer hardship, but it would not be not out of the ordinary. It is not out of the ordinary for offenders who have gained substantially from significant criminal activity to lose their residence. Although Mr Snowden claimed he has nowhere else to stay, he acknowledged he has previously lived with his mother and could return there. Only one of Mr Snowden’s children has been living at the Karaka property. He is an adult and has been paying rent. I have addressed Ms Snowden’s position. The loss of trust equity due to a profit forfeiture order reflects the prescribed unlawful benefit and is not out of the ordinary, particularly when it appears the Karaka property has not really been treated as a trust asset to date.
[43]At [161].
The practical effect of the Judge granting relief against asset forfeiture was to allow the Trust to retain the margin between the equity in the property and the profit forfeiture sum. That is said to be a sum of $90,000, more or less.
Appeal and cross-appeal
As noted earlier, both parties contend the Judge erred.
Appeal
In his appeal, Mr Snowden contends that the Judge erred in finding that he had unlawfully benefitted from significant criminal activity to the extent of $754,533 such that a profit forfeiture order should be made. Two associated submissions were made: first, that the Judge was wrong to find that rental income was insufficient to explain cash deposits paid in, and secondly that the Judge was wrong to find that Mr Snowden had not proved a different value under s 53 of the CPRA.
A further appeal point is taken by Mr Snowden as to postponement of limitation, it being contended that the two-year time bar was not displaced.
Mr Snowden seeks this Court direct an adjusted maximum recoverable amount under s 54(1) of the CPRA.
Cross-appeal
The Commissioner wishes to cross-appeal the Judge’s decision to grant relief against the asset forfeiture order made over the Karaka property. The Commissioner contends the threshold of undue hardship was not satisfied by evidence as to the appellant’s circumstances or those of any interested party. The Court erred in assessing the extent to which the Karaka Road property was tainted and in finding that Mr Snowden did not have a personal, legal or equitable interest in that property. Further, the application for relief was not advanced by beneficiaries of the Trust. The Commissioner seeks this Court discharge the order for relief.
The cross-appeal was filed eight working days out of time. Extension of time is sought under r 29A(1) of the Court of Appeal (Civil) Rules 2005. Mr Speed opposes the application. Counsel for the Commissioner take responsibility for the delay — due to oversight — in their written submissions. But an affidavit in support demonstrates the real cause was an oversight by the Commissioner’s investigative staff. Be all that as it may, there is no prejudice to Mr Snowden from the short delay, apart from the fact of revival itself. Extension of time to cross-appeal is granted.
Proof and rebuttal
We here address Mr Snowden’s first appeal point.
Submissions
For Mr Snowden, Mr Speed set about challenging individual parts of the Judge’s analysis. It is perhaps best to take these in order of importance, although that was not the order in which they were taken by Mr Speed. One of his primary challenges was to the approximate value of methamphetamine supply calculated at $378,000, based on a notional figure of $42,000 supplied per trip based on the 93 g Mr Snowden was caught with on the last occasion. No evidence was offered to support the proposition that on eight other occasions he carried 93 g. Mr Carr appeared to be a “low level street dealer”, and allegations made by counsel for the Commissioner that Mr O’Carroll was Mr Snowden’s supplier were “entirely speculative”. Secondly, Mr Speed challenged the calculation of methamphetamine use by Mr Snowden, based on use at $500 a week from December 2009 to April 2013. It was also said that there was “an obvious case of double counting” in relation to the alleged proceeds of sale (just dealt with). Thirdly, the Judge was wrong to find that rental incomes were insufficient to explain cash deposits made.
It is unnecessary for us to go through the detail here given the conclusion we reach on the basis of authorities we set out at [47] below. However, in relation to discharge of the reverse onus on Mr Snowden, we note Mr Speed’s submission that Mr Snowden’s inability to recall many details in relation to rental income “should not have been to the Commissioner’s advantage” given the passage of time.
Discussion
We are unable to accept this submission, which runs directly contrary to other decisions of this Court, most notably that in Cheah v Commissioner of Police.[44] In that case this Court gave approval to prior High Court decisions, namely the decisions of Katz J in Commissioner of Police v Tang[45] and Gilbert J in Commissioner of Police v Filer.[46] The tenor of these decisions is that once the Commissioner discharges the initial onus under s 53(1), the onus of proving the correct figure rests with the respondent under s 53(2) and does not pass back to the Commissioner.[47] That interpretation best serves the purposes of the forfeiture regime, including eliminating the chance for persons to profit from undertaking or being associated with significant criminal activity and deterring such activity. As Gilbert J noted in Filer, the respondent will know what the benefit was and will have access to the witnesses and records that may be needed to prove this, whereas the Commissioner does not.[48] If the respondent fails to prove the benefit on the balance of probabilities, the amount stated in the Commissioner’s application stands, even if its accuracy is questionable.[49]
[44]Cheah v Commissioner of Police, above n 32.
[45]Commissioner of Police v Tang [2013] NZHC 1750.
[46]Commissioner of Police v Filer [2013] NZHC 3111.
[47]Commissioner of Police v Tang, above n 45, at [33] and [39]; and Commissioner of Police v Filer, above n 46, at [13].
[48]Commissioner of Police v Filer, above n 46, at [13].
[49]At [13].
Applying those authorities, this Court said in Cheah:[50]
Under s 53 there are only two possible outcomes. The first is that the Commissioner enjoys the benefit of the presumption and the respondent fails to rebut the presumption. In that case the presumed value stands. The second is where the respondent succeeds in rebutting the presumption. As for the latter, by necessary construction, it follows that the respondent must prove a different value.
[50]Cheah v Commissioner of Police, above n 32, at [47].
That conclusion was based on four essential sources. First, the explicit statutory wording in s 53, but also s 54. The latter provision tasks the court with determining the maximum recoverable amount by taking the value determined under s 53 and deducting it from the value of any property forfeited to the Crown as a result of an assets forfeiture order. So in that situation, the court draws a distinction between values which are for the court to assess and others which are for others to prove.[51] Secondly, this Court noted the importance of the distinction made in the CPRA from the previous Proceeds of Crime Act 1991. Under that Act, the court had been required to assess the value of benefits derived from the commission of a serious offence. Instead of the previous criteria for analysis, the presumption in s 53 has been installed.[52] Thirdly, as we have said, this Court’s conclusion in Cheah was based in part on the earlier analysis of Katz and Gilbert JJ in Tang and Filer. Fourthly, there is the important potential qualification, albeit one seldom used, that s 47(1) of the CPRA permits the court to amend an application for a civil forfeiture order, such that in an appropriate case the High Court might opt to reduce the value of the benefit claimed in a civil forfeiture application. So that provision is available in the case of executive overreach.
[51]At [47].
[52]At [40]
In this case Mr Snowden was always going to be in serious difficulty in rebutting the presumption. His denial of dealing in methamphetamine at all (other than the occasion of his arrest) plainly did not impress the Judge, who must have found that in this and other respects the evidence Mr Snowden gave under oath was false. To meet the reverse onus in s 53(2), Mr Snowden needed to lead cogent evidence either effectively valuing the benefit of the unlawful activity or, conversely, establishing to that standard those parts of the asserted sum that must have come from lawful, untainted sources (so that the unlawful sum is definitively a figure less than that asserted by the Commissioner). As Mr Harborow submitted, in the High Court Mr Snowden did not put forward an alternative value at all. He merely sought to chip away at the accuracy of the sum asserted by the Commissioner. As we said in Cheah, that approach is not sufficient to engage s 53(2).
We turn now to assess the specific challenges to quantum advanced by Mr Speed for Mr Snowden. First, the asserted value of the methamphetamine supplied during Mr Snowden’s dealing. Taking a more realistic view of the facts than his client, Mr Speed suggests $189,000, half the value nominated by the Commissioner. He sought to challenge the evidential foundation of the gross profit figure for each of Mr Snowden’s trips and for the conclusion Mr Snowden played a more than minor role in the operation. As to the latter, Mr Speed sought to justify the 50 per cent reduction on the grounds the Judge found Mr Snowden took money to Auckland, where Mr Carr took it and passed it on to a third party — meaning the benefit to Mr Snowden was lesser. But that was plainly not the Judge’s finding.[53] And there is simply no sufficient evidential foundation compelling the reduced figure over any other. The mere assertion of a 50 per cent reduction on the overall amount adopted is indicative of the fundamental issue with this ground of appeal.
[53]High Court judgment, above n 2, at [76] and [84].
Secondly, the value of the rent with respect to the cash deposit sums. Strictly speaking, the Judge’s analysis on this point went to the assessment of whether Mr Snowden engaged in significant criminal activity. We take the appeal point to be relevant to assessing the extent to which Mr Snowden’s cash deposits were attributable to significant criminal activity rather than rental income. The rental sums alleged are sums at large. Probative records do not exist. The Judge correctly doubted the credibility of the rental payments summary provided by Mr Snowden’s accountant, Mr Clive Johnson.[54] It was both dependent on Mr Snowden’s instructions and included demonstratable errors both as to the amount of rent paid and dates for which some rent payments were received.[55] Even if some weight might be placed on the oral evidence of tenants, this source suffers the fatal problem of bootstrapping. The unreliability of Mr Johnson’s summary is particularly damaging given that summary was the only alternative amount put forward by Mr Snowden.
[54]At [90]–[93].
[55]In particular, those identified at [90(b) and (c)] and [94(a) and (b)].
As to the supporting affidavit and signed statement evidence, Mr Speed focussed his criticism on the Judge’s rejection that Ms Debbrah Repia paid $300 rent per week between January 2004 and May 2010.[56] But Mr Speed does not explain why the Judge’s doubts as to the possibility of that amount given her income and likely expenses at that time was wrong. To the contrary, we agree with the Judge. Mr Speed sought to bolster the reliability of Ms Debbrah Repia’s evidence, arguing her signed statement was admissible as a business record under s 19 of the Evidence Act 2006 and corroborated by her previous consistent statement to police to the same effect. Self-evidently, neither statement is a business record within the meaning of s 16(1) of the Evidence Act. The Judge also did not discount the signed statement. But the mere act of repetition does not add anything to the reliability of the evidence.[57]
[56]At [95].
[57]Hart v R [2010] NZSC 91, [2011] 1 NZLR 1 at [8]; and Wallace v R [2018] NZCA 2 at [37].
Thirdly, and more importantly, is the capital gain and rental income attributable to the Karaka property. Mr Speed challenged whether this could qualify as an unlawful benefit under s 7 of the CPRA.[58] Payment of outgoings on a mortgage so as to keep a mortgagee at bay provides the benefit of a capital gain.[59] Keeping the mortgagee at bay also provides the benefit of rental income. The Judge considered that if, in the absence of Cheah, the Court had to assess the benefit, he would need to consider what proportion of capital gain and rental income was attributable to the unexplained mortgage payments.[60] We however consider that where the application of proceeds of significant criminal offending is necessary to maintain ownership of an otherwise legitimately acquired property, the entirety of the capital gain and rental income for the relevant period should in principle be treated as indirect benefits of that significant criminal offending. Here, there is no suggestion the rent generated by third party occupants was sufficient to pay the mortgage. Very substantial sums, inexplicable other than as proceeds of crime, were found by the Judge to have been applied by Mr Snowden to the mortgage. But for those sums propping up the mortgage, the property could not have been occupied and the rent generated. Shorn of inessentials, the rent is itself the laundered proceeds of the crime.
[58]See s 7 set out at [20] above.
[59]Commissioner of Police v Winsor [2014] NZHC 161 at [33]; and Commissioner of Police v Snook [2018] NZHC 2537 at [72].
[60]High Court judgment, above n 2, at [139].
Fourthly, we are not persuaded the Judge erred in his analysis of the value of methamphetamine consumed by Mr Snowden, itself paid for by proceeds of crime. Mr Speed sought to challenge the admissibility of the Provisional Advice to Courts (PAC) report — on which the calculation was based — as a business record on the basis the report writer was not unavailable as a witness. The Judge did not specify which s 19 ground the PAC was admissible under.[61] Unavailability is only one of three grounds.[62] We are satisfied the PAC was properly admissible as a business record. The Judge’s calculation of the value of methamphetamine accords with Mr Snowden’s recorded statements in the PAC report. As to the reliability of the PAC report — also challenged by Mr Speed — there is no evidence that Mr Snowden challenged that report at the time of sentencing. In our view that is the appropriate time to do so. He now seeks to resile from the facts on which assumedly his sentence was assessed.[63] We are disinclined to place any weight in the evidence of an offender reporting significant methamphetamine use for sentencing purposes,[64] only then to assert a lesser scale of use in subsequent criminal proceeds recovery proceedings. We note Mr Speed’s submission that the value of the methamphetamine use was wrongly double-counted, any use being paid for out of the proceeds from the $378,000 profit we discuss at [51] above. That is possible but Mr Speed provided no evidence that that was the case. The presumption was not and could not be rebutted.
[61]See at [136].
[62]Evidence Act 2006, s 19(1)(b) and (c).
[63]See R v Snowden, above n 5, at [11].
[64]Which may cause them to attract a greater discount on sentencing, though Mr Snowden did not receive such a discount: Zhang v R [2019] NZCA 507, [2019] 3 NZLR 648 at [143]–[150], in particular [148] emphasising the need for persuasive evidence of addiction.
Finally, the assessment of Mr Snowden’s cash expenditure — namely on rates and electricity payments. Mr Snowden’s mother gave evidence the rent from the Karaka property usually covered rates payments and any shortfall was made up by her or her husband. The evidential issues as to the value of rent payments has been well‑traversed. There is also little explanation of where Mr Snowden’s mother’s funds came from — problematic given the evidence of significant money transfers from Mr Snowden to his mother detailed at [9]–[10] above. As to the electricity payments, some of Mr Snowden’s tenants stated in sworn statements that they paid their own share of any power bill. This evidence suffers the same problem reliability issue identified at [52] with the rental income evidence. We also note some of those statements are sworn by tenants not identified on Mr Johnson’s rental payments summary, while some of the tenants listed in the summary have provided no written statement. That alone raises questions of reliability. More fundamentally there is no evidence corroborating those cash payments being received and then put towards the cash payments of electricity bills. Again, Mr Snowden cannot advance some other value as being more likely.
Finally, this not a case in which the evidence was either sufficiently reliable or sufficiently cogent to make an order substantially amending the Commissioner’s application under s 47 of the CPRA. The Judge was right not to do so.
Limitation
We turn now to the secondary appeal point taken by Mr Snowden. It concerns the postponement of limitation, he contending that the two-year time bar was not displaced.
Submissions
Mr Speed advanced a number of challenges to the Judge’s conclusion that the time bar was extended under s 28(b) of the Limitation Act.[65] That provides limitation is postponed where a right of action is “concealed by … fraud”. First, Mr Speed challenged the Judge’s conclusion that the prior drug dealing could not with reasonable diligence have been discovered earlier. Secondly, that fraud should in this context mean active dishonesty to achieve an advantage by wrongful means. Thirdly, that there was no breach of duty by Mr Snowden and no duty at common law or statute law to voluntarily confess criminal conduct.
Discussion
[65]See [25] above.
We do not accept this argument, which was not pressed with particular vigour by Mr Speed. “Fraud” in limitation terms has an equitable meaning,[66] involving deliberate or reckless concealment of a cause of action.[67] Moral turpitude is not required.[68] We agree with Mr Harborow that fraud is used in the Limitation Act in the equitable sense to denote conduct by the defendant such that it would be against good conscience for him to avail himself of the limitation. The effect of this is not to require Mr Snowden to volunteer his illicit activity. Rather, it is simply that without
doing so, he impairs his ability to advance a defence of limitation.[69] Finally we do not accept Mr Snowden’s submission that his tainting of property from the proceeds of drug offending could have been with reasonable diligence discovered materially earlier. In our view that submission lacks any cogent evidential underpinning.
Relief from forfeiture (cross-appeal)
[66]Applegate v Moss [1971] 1 QB 406 (CA) at 413 per Lord Denning MR.
[67]Cave v Robinson Jarvis & Rolf [2002] UKHL 18, [2003] 1 AC 384 at [20], quoting King v Victor Parsons & Co [1973] 1 WLR 29 (CA) at 33–34.
[68]Applegate v Moss, above n 66, at 413.
[69]It may also be noted that the opportunity to rebut given by s 53(2) of the CPRA does not require self-incrimination either; it can be fulfilled in the disclosure of lawful activity, as we point out at [50] above.
We turn now to the cross-appeal.
Submissions
As noted at [42] above, the Commissioner challenges the Judge’s decision to grant relief against the assets forfeiture order made over the Karaka property. The Judge’s reasoning is set out at [35]–[36] above.
The Commissioner submits that as Mr Snowden was the only party seeking relief, undue hardship would have to have been caused to him personally in order for relief to be granted under s 51. But, and appropriately, the Judge made no such finding. Instead relief was granted on the basis that the beneficiaries of the Trust, particularly Mr Snowden’s children, would suffer undue hardship. Yet the Commissioner says no application for relief was brought by them under ss 61 and 67 of the CPRA. In addition, s 63 requires an application brought by a person other than a respondent to specify the applicant’s interest in the property and the reason why they should be given relief, and that did not occur here. Mr Snowden’s children took no steps in the proceeding. They did not give evidence, and no proper assessment of factors relevant to them could be made. For instance, s 67(2) provides that an applicant’s knowledge of the significant criminal activity to which the property relates, and the use intended to be made of the property, are relevant, but these considerations were not (and could not be) addressed.
In response, Mr Speed submits that the jurisdictional basis for relief lay under s 51 of the Act, which he said conferred a broad discretion. Mr Snowden was a beneficiary of the Trust, and sought relief in his own right. Subject to that clarification, Mr Speed sought to uphold the judgment as to relief in its own terms.
Discussion
We start with the question of jurisdiction. We do not find s 51 of the CPRA to avail Mr Snowden here.[70] As is evident however, that provision only applies in relation to undue hardship caused to the respondent. That is, Mr Snowden. As Mr Harborow submitted, the Judge made no finding that Mr Snowden specifically would suffer undue hardship if the property was forfeit. Nor could he have, given the fact that the Judge had concluded that Mr Snowden had unlawfully benefitted from significant criminal activity in a substantial way, and that a large portion of the equity in the Karaka property must have been acquired by tainted funds. The relevant facts are those we set out at [7] to [16] above. It is distinctive that in the passage of the judgment quoted at [36] above, the Judge did not frame the perceived undue hardship in terms of Mr Snowden at all. The hardship, to the extent it existed, was identified in relation to Mr Snowden’s children. The child that lived at the Karaka property between 2016 and 2017 is however an adult. Mr Snowden’s other two children are approximately 15 and 13 but do not live at the Karaka property. There was no evidence that they acquired any interest in the property for valuable consideration (as discretionary beneficiaries, they had an equitable expectation only) and nor in the absence of application could findings be made as to whether they had any knowledge of the significant criminal activity their father had benefited from.
[70]See [21] above.
If relief was to be granted on the basis of the interests of other beneficiaries (in contradistinction to Mr Snowden), then we consider an application under s 61 was required. No such application was here made. Had it been, it would have needed to be supported by evidence by the applicant, and the Commissioner would ordinarily be entitled to cross-examine the deponent in relation to the matters provided for in s 67(2).
In these circumstances, we have no option but to set aside the relief granted by the Judge.
That is sufficient to deal with the cross-appeal but we make two further points in light of the argument advanced by Mr Harborow. First, we agree with his submission that the Judge’s determination that Mr Snowden had effective control over the Karaka property, but did not have a legal or equitable interest in it, understated his degree of interest for the purposes of the CPRA. That is because the CPRA has its own particular definition of “interest” which goes beyond legal or equitable interest in the conventional sense to include “a right, power, or privilege in connection with the property”.[71] The powers of Mr Snowden as settlor, which we note at [2] above, meet that requirement.
[71]Definition of “interest” in s 5(1)(b) of the Criminal Proceeds (Recovery) Act. See also s 58, further extending the effective meaning of “interest” to include “effective control”.
The second point we note is that the approach taken by the Judge in relation to relief from assets forfeiture appears inconsistent with that taken by him in relation to profit forfeiture. We have described the approach taken by the Judge at [36]–[37]. The practical effect of the Judge’s order is that the Karaka property will be sold, despite assets forfeiture relief, but leaving the Trust with the equity, a sum of approximately $90,000 noted in [37]. That will be accessible to all beneficiaries, including Mr Snowden. Why the Judge opted for that course is not clear to us, but for present purposes it does not matter given our conclusion on jurisdiction.
Result
The application for extension of time to cross-appeal is granted.
The appeal is dismissed.
The cross-appeal is allowed.
Costs not being sought, no order is made.
Solicitors:
Keam Law, Auckland for Appellant
Meredith Connell, Auckland for Respondent
APPENDIX
The intercepted communications concerning funding from Mr O’Carroll, referred to at [9] above, include the following between Mr Snowden (PS) and his mother (LS):
On 2 November 2014:
PS: You got the money eh, Dave got you some money eh mum
LS: I’ve been using mine for that
PS: No just use that money mum
LS: I know
PS: How much did he give you?
LS: I’m not saying
PS: Heaps?
LS: No
PS: Well fuck get heaps off him
LS: Oh yeah no just let it go
PS: I’ll write another letter mum I’ll write another letter tell him to give
you fucking heaps look I’m in here for fucking years
LS: I know
PS: I’m going to need money I’m not going to sit in here and fucking rotwith no money
On 5 October 2015:
PS: Ok just remember there’s more money there when you need it
mum
LS: Yeah
PS: I don’t… I don’t want… I know there’s a lot on but at least I’ve gotmoney to… to… you know what I mean
…PS: Cause I don’t wanna worry like that I’ve got Dave…
LS: No I know
PS: You know what I mean mum and I know you’ve got a lot on but ifthere’s money that you need the money’s there
On 4 December 2015:
PS: Okay well that’s another… I’ll talk to him about that now but what
I’m gonna do is I’m gonna get Dave to um maybe give you a big whack
of money to put it in my account to ensure that my mortgage neverruns because if my mortgage ever runs out and because I’m in jail.
…PS: What I’ll need you to do… what I’ll do is I’ll get some money
dropped off to you, yeah, I’ll get you to put possibly like that three
grand in the bank.
LS: My three grand?
PS: Yep and I’ll get some more money dropped to ya or even more and
um it’s just to ensure that there’s always money in the bank, likethere’s always like a couple of months ahead.
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8
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