Solicitor-General v Cavanagh HC Auckland Civ-2002-404-3798

[2005] NZHC 1700

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2002-404-003798

IN THE MATTER OF

an application pursuant to the Proceeds of Crime Act 1991

BETWEEN

THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

AND

MICHAEL CAVANAGH

First Respondent

AND

SHANNON STEVENS

Second Respondent

AND

DEBORAH HENRY

Third Respondent

Hearing:

24 January 2005

Appearances: David Johnstone for Applicant

Peter Neutze and David Maclaurin for First and Second Respondents Judgment:     24 January 2005

JUDGMENT OF HARRISON J

SOLICITORS

Meredith Connell (Auckland) for Crown

Armstrong Murray (Auckland) for First and Second Respondents

THE SOLICITOR-GENERAL OF NEW ZEALAND V MICHAEL CAVANAGH And Ors HC AK CIV-2002- 404-003798 24 January 2005

[1] On 23 December 2004 the first and second respondents, Mr Michael Cavanagh and Ms Shannon Stevens, filed an application under s 42(2) Proceeds of Crime Act 1991 for an order varying a restraining order made in this Court on 24 November 2004. On that date Heath J restrained disposition of any of the property of either Mr Cavanagh or Ms Stevens wherever situated. The variation sought by Mr Cavanagh and Ms Stevens is to release property worth about $275,000 constituted by the following amounts:

(a)Cash in the sum of $27,000 seized from 105 Burswood Drive, Pakuranga on 6 August 2002;

(b)Bonus bonds in the sum of $52,210 seized from Security Deposits, 17 Farnham Street, Parnell on 7 August 2002;

(c)Cash in the sum of $125,000 seized from Box 496 at Security Deposits, 17 Farnham Street, Parnell on 7 August 2002;

(d)Cash in the sum of NZ$49,920 and US$14,744 seized from Royal Wolf Storage, 4 Ormiston Road, East Tamaki on 5 November 2003; and

(e)Compaq laptop computer and cash in the sum of $7000 seized from 7/21 Armoy Drive, Howick on 5 November 2003.

[2]    The primary purpose of the application is to free funds to pay costs incurred and to be incurred by Mr Cavanagh and Ms Stevens in defending a number  of serious charges brought by the Crown under the Misuse of Drugs Act 1975. The Crown alleges that Mr Cavanagh and Ms Stevens were dealing in methamphetamine on a substantial scale. Trial is due to commence in this Court on 21 February 2005. Its estimated duration is five weeks.

[3]    This latest application is part of an extensive proceeding initiated by the Crown in an application for restraining orders first made on 6 September 2002. Essentially the Solicitor-General alleges that the restrained funds represent the proceeds of extensive criminality by Mr Cavanagh and Ms Stevens. The  source of its evidence is apparently intercepted communications, both telephonic and text, and an analysis of Mr Cavanagh’s financial transactions in recent years.

[4]    Frater J heard the application on 11 January 2005. Her minute delivered  on 14 January 2005 sets out the costs then incurred in preparation of Mr Cavanagh’s

defence. In summary they were counsels’ fees for Messrs Neutze and Maclaurin respectively of $31,500 and $5705 for Mr Cavanagh and Mr Neutze’s fee of $7000 for Ms Stevens. Mr Neutze sought release of funds to cover the following  anticipated costs (presumably prior to trial):

(a)       Mr Neutze’s fee	$75,000.00
(b)       Mr Maclaurin’s fee	$31,785.00
(c)       Accounting analysis	$65,000.00
(d)       Formatting file and investigations	$52,000.00

[5]    Frater J declined to make an order. She was not satisfied that Messrs Neutze and Maclaurin had provided sufficient information to justify their accounts. Similarly she had reservations about the estimates of costs for accountants and other experts who are to be engaged.

[6]Frater J concluded on this basis:

[9]        Mr Neutze was naturally concerned about disclosing too much information to the Crown. I can understand that concern. However, the general information of the type required should not compromise his clients’ position. I indicated that provided adequate information was given, I would be prepared to release up to $50,000 on account of both expenses incurred to date and further expenses, with the apportionment of that figure between counsel and other consultants to be agreed between defence and the Crown.  I was quite clear that whatever sum was released would be regarded as a payment on account only, made without prejudice to the final sum released by the Court when full information was available. The determination of the exact sum payable will probably be a task for the Judge who presides at the trial.

[10]      Mr Neutze seemed to agree to that approach and indicated that he could let me have the necessary information by Thursday 13 January 2005. Unfortunately, it is not yet to hand and I am to be on leave for the next two weeks. I am concerned that the matter be addressed as soon as possible so that there is no justification for delaying the commencement of the trial. Accordingly, this matter will have to be considered by the Duty Judge once a response is received from Mr Neutze. If counsel agree, the matter can be dealt with on the papers.

[7]    Subsequently Mr Neutze has filed a comprehensive memorandum itemising the accounts submitted by himself and Mr Maclaurin. I must record at once  that  I am satisfied that those fees are both justified and reasonable. Additionally he has filed affidavits from Mr Cavanagh and Ms Stevens relating to ownership of some of the monies seized, namely cash of $125,000 found in Box 496 at Security Depositions in Parnell. Originally a jurisdictional issue arose about whether or not

Mr Cavanagh and Ms Stevens were beneficially entitled to those particular funds. However, it is now of no consequence for two reasons. First, Messrs  David Johnstone and Neutze agree that Mr Cavanagh is beneficially entitled to that sum of

$125,000, although of course the Crown’s case is that he only acquired legal ownership through illegal drug dealing. Second, there are sufficient funds available from property of which Mr Cavanagh is indisputably or incontestably the owner to meet an order of the type I have in contemplation.

[8]    The criteria on which I should exercise my discretion are well settled (Solicitor-General v Panzer [2001] 1 NZLR 224). In essence they constitute:

(a)  The apparent strength of the prosecution case;

(b)  The size of the fund and the nature of the property restrained;

(c)  The probable amount of legal expenses;

(d)  The effect of any exemption upon the achievement of the purposes of the Act, which is to restrain the disposal of property to abide orders under the Act following the completion of proceedings;

(e)  The ability of the person to meet the legal expenses out of property that is not subject to a restraining order.

[9]    Additionally I accept Mr Neutze’s submission that in exercising  my discretion I am entitled to take into account ownership of the property in question (Panzer (supra) at para 12).

[10]   To date Mr Cavanagh and Ms Stevens have incurred obligations for legal  fees of about $43,000. I repeat that they are both fair and reasonable. Frater J anticipated that, subject to provision of further information justifying those accounts, she would release up to $50,000 on account of past and future expenses, subject of course to adjustment when full information is available. Mr Neutze advises that he and Mr Maclaurin have since incurred about a further $30,000 in preparing for trial.

[11]   Mr Neutze anticipates that costs of engaging a forensic accountant and a private investigator will be substantial. I endorse Mr Cavanagh’s right to engage an independent expert to review the Crown’s analysis of all his financial transactions over some years, but in my judgment an estimate of $65,000 for this exercise is

excessive. With careful briefing I am satisfied that an accountant could undertake a representative or sampling analysis of the relevant transactions for a much smaller fee but with similar effect. Mr Neutze has explained that Mr Cavanagh’s financial dealings have been complex over a lengthy period, covering a range of commercial activities. However, they cannot be of such complexity as to justify accounting expenditure of $65,000 or anywhere near that sum. Also, an estimate of $52,000 for a private investigator’s costs is grossly excessive. Nevertheless, it is not for me to pass any final judgment on the actual charges that each expert will make. I simply record these observations because they are directly relevant to the scope of my jurisdiction.

[12]   Taking all factors into account I make an order varying the restraining order made on 24 November 2004 by directing the Police, and to the extent necessary the Official Assignee, to release the sum of $85,000 to Armstrong Murray & Co forthwith to meet reasonable legal and experts expenses to the date of trial. All questions over payment of future expenses shall fall into the discretion of the trial Judge.

[13]   I appreciate the assistance of both Messrs Johnstone and Neutze in resolving this issue today. I am conscious of the importance of ensuring that funds are immediately available to meet defence costs. There will be no order for costs on this application.

Rhys Harrison J