The Queen v James Rex Banks
[2002] NZCA 23
•19 March 2002
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA374/01 CA386/01 CA403/01 |
THE QUEEN
V
JAMES REX BANKS
DIANE ROSE MARTIN
MELITA MARTIN
| Hearing: | 13 March 2002 |
| Coram: | Keith J Robertson J Gendall J |
| Appearances: | T M Petherick and C M Riddell for the Appellants S E Lynn as intervener for ANZ Banking Group D J Boldt for the Crown |
| Judgment: | 19 March 2002 |
| JUDGMENT OF THE COURT DELIVERED BY KEITH J |
These appeals are against a forfeiture order made by the District Court at Napier under the Proceeds of Crime Act 1991 and against the Court’s refusal to make certain orders for relief from that forfeiture.
Mrs Diane Rose Martin, on a guilty plea on indictment, was convicted of cultivating cannabis and having cannabis in her possession for the purpose of sale. She was sentenced to two years imprisonment. Those offences are “serious offences” for the purposes of the 1991 Act and on that basis the Solicitor-General applied for an order that a property at 147 Meeanee Road, Taradale, be forfeited to the Crown. The Court has the power to make such an order if it is satisfied that property specified in the application is “tainted property”. That is defined as including property used to commit or to facilitate the commission of the offence. The cannabis which was the subject of the prosecution was cultivated and stored at the Taradale address. A forfeiture order was made.
The property is owned by the Martin Family Trust and is registered in the names of the trustees who are Mrs Martin, her husband Mr James Rex Banks, Mr Graeme Stuart Knobloch, an accountant unrelated to the beneficiaries of the trust, and Mr John Ernest Bonica, Mrs Martin’s brother and not a beneficiary of the trust. The respondents named in the Solicitor-General’s application were Mrs Martin, Mr Banks and the family trust.
Mr Banks for himself and other beneficiaries of the trust, the ANZ Bank as first mortgagee of the property and Mr David William Nichol as second mortgagee applied for relief from any forfeiture under ss17 and 18 of the Act. Mr Banks’ application failed. Since the orders made in favour of the mortgagees were not in fact in issue in the hearing of the appeal we say nothing more about them.
The forfeiture order
The conditions for making an order under s15(1) existed. There was and is no dispute about that : Mrs Martin had committed a “serious offence” and the property was “tainted” in terms of the definitions in the Act. The satisfying of those conditions is not however the end of the matter since the Court has a discretion to make an order under subs (1) – “may … order” – and subs (2) sets out matters to which it may have regard.
The District Court Judge reviewed the facts relating to the offending. They included Mr Banks pleading guilty to, and being convicted of, knowingly permitting the property to be used for the commission of the offences of which Mrs Martin was convicted. He was sentenced to two months periodic detention. The total value of the cannabis plant was between $237,000 and $355,000. By any standards, said the Judge, “this was large scale production for dealing”. He then considered the reasons given by Mrs Martin to the police for her offending, concluding that
The purpose of the activity carried on by Mrs Martin on the property was two-fold. Firstly, for her personal benefit, and secondly in respect of the welfare of her son, Troy.
The reference to Mrs Martin’s son Troy was to his need for a kidney transplant. Sadly, he has died since the District Court hearing; his appeal was abandoned and is dismissed accordingly.
The Court then referred to s15(2):
(2)In considering whether or not to make an order under subsection (1) of this section in respect of particular property, the Court may have regard to—
(a)The use that is ordinarily made, or was intended to be made, of the property; and
(b)Any undue hardship that is reasonably likely to be caused to any person by the operation of such an order; and
(c)The nature and extent of the offender's interest in the property (if any), and the nature and extent of any other person's interest in it (if any); and
(d)In addition to the matter referred to in section 14(1)(b) of this Act, any other matter relating to the nature and circumstances of the offence or the offender, including the gravity of the offence.
(Section 14(1)(b) provides that the Court is to take into account a sanction in the return of a pecuniary penalty or forfeiture of property imposed pursuant to the conviction. No such sanction had been imposed in this case and the provision is accordingly not relevant.)
The particular matters are to be looked at, said the Judge, in the light of the deterrent purpose of the Act, citing the judgment of this Court in R v Dunsmuir [1996] 2 NZLR 1, 6.
On the use of the property – s15(2)(a) – the Judge mentioned its use as a family home and to carry out some commercial small farming operations, although Mrs Martin had agreed in her evidence it was never an actual commercial operation. For the Judge it was abundantly clear on a comparison of that evidence and that relating to the cannabis cultivation what the major and substantive use of the property was. That cultivation was a very substantial use of the property. “Clearly the proportionate use was such that the whole property was tainted.”
In oral argument, Mr Petherick, for Mrs Martin, challenged the Judge’s finding under s15(2)(a) on the ground that it did not cover the “intended” use of the property as well as the present use. The intended use he put forward was however no more than its use as trust property held for the benefit of the beneficiaries under a discretionary trust. The use contemplated by the Act is more immediate and concrete than that.
Mr Petherick also referred to the other, lawful uses of the property including the planting of trees, asparagus and bulbs. But those facts were plainly taken into account in the Judge’s overall assessment of use. Attention was also called to the differing relative assessments made in the sentencing and forfeiture decisions of Mrs Martin’s purposes : personal advantage or assisting her ill son. But that slight difference in wording has no consequence for the assessment of actual use made by the District Court.
Under the heading of undue hardship – s15(2)(b) – the Judge recalled that the primary purpose of the Act is deterrence. Inevitably hardship will result when orders are made. In terms of Lyall v Solicitor-General [1997] 2 NZLR 641 the hardship must be at a level higher than that ordinarily contemplated as a result of the conviction. The Judge accepted Mrs Martin’s explanation about obtaining a kidney for her son as one of the purposes. But even accepting it, the hardship resulting from the loss of equity valued at about $160,000 could not be viewed as undue hardship against the sums expected from the offending. Lyall was cited for the proposition that the reason for committing the crimes will be immaterial. Mrs Martin deliberately ignored the deleterious effect her offending would have on other beneficiaries of the trust. Further, it was not possible, because of the terms of the trust deed, to assess what she stood to lose. All that could be said was that the greatest individual loss could be $160,000, the equity in the property, and the individual loss (sharing it among eight beneficiaries) would be $20,000 each or nothing at all, depending on the actions of the trustees and the progress or otherwise of the trust. In the present circumstances, the Judge concluded, there was not undue hardship in respect of the forfeiture application. Whether relief from forfeiture might be claimed arises under s18 (considered later).
It was under the relief provision that, in the oral argument, both Mr Petherick for Mrs Martin and her daughter and Ms Riddell for Mr Banks took up the matter of undue hardship and as well the following one, the nature and extent of their clients’ interests in the property (s15(2)(c)).
The District Court Judge carefully recorded his reasoning when considering the forfeiture application under s15(2)(c). He referred to another judgment of this Court, Tareha v Solicitor-General (1996) 13 CRNZ 487, in which the draconian nature of the power in respect of innocent parties was seen as ameliorated by s15(2)(b) and the relief provisions. But on the facts of this case the only persons who had contributed to the trust property financially in any way were Mrs Martin and Mr Banks. They were also the only persons who were receiving benefit from it, and, we would add, they were not innocent. The trust accounts did not support the contention that part of the trust assets had been contributed from moneys bequeathed to or held in trust for Mrs Martin’s children or beneficiaries of the trust. We were taken to no reason for upsetting those conclusions.
Mr Petherick’s written submissions in respect of forfeiture also referred to s14(1)(b), but as noted in para [7] that provision is not in point in this case. They also referred to the any other matters heading of s15(2)(d) and criticised the District Court’s earlier comment about the relative insignificance of purpose and operation of the Act and to other facts about the offering.
The comment on purpose is however based on what this Court said in Lyall. And the facts about the offending were carefully considered by the Judge in reaching his conclusion that the forfeiture order should be made. We can see no error in his approach which in large measure involves a discretionary assessment. His conclusion is perfectly straightforward. The challenge to the forfeiture order fails.
Relief from forfeiture
We now turn to the applications for relief made by Mr Banks and on behalf of the beneficiaries of the trust.
The District Court proceeded on the basis that Mr Banks’ application related to his beneficial interest in the property and not his legal interest as trustee.
Mr Banks has no claim which does not merge with his beneficial interest. What efforts he has made in respect of the property have been directed at benefits not only for himself but for the beneficiaries in general. He has received benefit from his occupation of the property and there is no evidence of any claim for compensation for his work on the property prior to the application for forfeiture. Financial contributions made by him have been recorded as advances reflecting in increased sums owing to him by the trust.
The Solicitor-General had submitted that even if such an interest could be valued for the purpose of s18(1)(c), the Court should refuse to make an order because of s18(2)(a):
(2)The Court may refuse to make an order under subsection (1) of this section if it is satisfied that—
(a)The applicant was, in any respect, involved in the commission of the offence in respect of which forfeiture of the property is or was sought;
…
but nothing in this subsection shall be taken to require such a refusal.
The Judge referred to Lyall and continued:
In this case Mr Banks’ involvement was that he knew of the cultivation, he certainly expressed his disapproval, but he did nothing further such as threatening to go to the police because, his evidence was, of the effect it may have had on his marriage. He said interference by him would have been regarded by Mrs Martin as an interference in her attempt to obtain life saving treatment for her son. Mr Banks was one of four trustees. He had a responsibility not only to his wife but to the remaining two trustees and to the beneficiaries whose interests he was responsible for protecting. There were practical steps he could have taken to prevent the offending or to stop it continuing. He could and should have informed the other trustees, particularly the independent professional trustee, but he did not. Nor did he, in failing to take any steps, consider the effect of his inaction on the beneficiaries who, legally, had no rights in respect of the use of the property at that time.
In those circumstances, his involvement within the meaning of section 18(2)(a) was serious to the point at which the Court should exercise its discretion to refuse relief to him.
Ms Riddell, for Mr Banks, submitted to this Court that the District Court did not apply the correct test on the degree of involvement required by s18(2)(a) as interpreted in Lyall. What the Court said there was that something less than participation as a party may amount to involvement. A material association with the offending is enough. Mere knowledge does not amount to involvement. In terms of those tests, Mr Banks’ acknowledged action in knowingly permitting premises to be used for the commission of a serious offence fully justified the District Court refusing to grant relief under s18(2)(a). We also agree with Mr Boldt’s submission that Mr Banks’ conduct needs to be viewed in the light of the scale of a large scale commercial enterprise that would have yielded substantial profits. Mr Banks’ appeal is accordingly dismissed.
The District Court identified three matters as leading to the conclusion that relief could not and should not be granted to the beneficiaries. First, they had made no financial contribution to the trust assets and had no responsibility for its debts. Their potential loss was of the possibility of receiving an unspecified sum within the following 53 years. Secondly, if, as Mrs Martin and Mr Banks testified, the beneficiaries did some work around the property they could not have been unaware of the cannabis cultivation. Thirdly, granting relief simply on the basis that they were innocent victims would be an incentive for those considering criminal activity involving the use of property to set up trusts in respect of it.
Mr Petherick could make no effective challenge to that reasoning which, in addition, involves the exercise of a discretion. Further, like Ms Riddell in respect of Mr Bank’s application for relief, he was not able, in terms of s18(1), to identify the value of his clients’ interest in the property.
The appeal on behalf of the beneficiaries must also fail.
Result
All appeals fail. The orders made by the District Court relating to the mortgagees are unaltered.
The case is an unremarkable application of the Act. We recall that as “a measure designed to deter serious crime by demonstrating emphatically that it does not pay … [ it] should be judicially administered in that spirit”; R v Pedersen [1995] 2 NZLR 386, 391.
The question of costs was not mentioned in the course of the hearing. If any issue arises, it can be the subject of memoranda.
Solicitors
Carlile Dowling, Napier for the first Appellant
Gresson Grayson & Calver, Hastings for the second and third Appellants
Bell Gully, Wellington for the intervener, ANZ Banking Group
Crown Law Office, Wellington
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