Wu v Commissioner of Police
[2022] NZCA 65
•18 March 2022 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA398/2019 [2022] NZCA 65 |
| BETWEEN | CHIEN-HUI WU |
| AND | COMMISSIONER OF POLICE |
| Hearing: | 26 October 2021 (further submissions received on 17 December 2021) |
Court: | Brown, Clifford and Goddard JJ |
Counsel: | R M Mansfield QC for Appellant |
Judgment: | 18 March 2022 at 10.30 am |
JUDGMENT OF THE COURT
AThe applications for leave to adduce further evidence are granted.
B The appeal is dismissed.
CThe appellant must pay the respondent costs for a standard appeal on a band A basis with usual disbursements.
D The application for costs on the respondent’s withdrawn strike out application is declined.
____________________________________________________________________
REASONS OF THE COURT
(Given by Clifford J)
Introduction
The appellant, Chien-Hui Wu, is married to Ka Kit Yim. In March 2016 Mr Yim was arrested on suspicion of involvement in methamphetamine offending. Shortly afterwards the police searched Ms Wu and Mr Yim’s family home and other, principally storage, addresses associated with them. As a result the police seized property, comprising cash, motor vehicles, designer jewellery, handbags and other chattels. That and other property was made subject to restraining orders by the High Court in 2016.
On 18 July 2019 in the High Court at Auckland, Jagose J made civil forfeiture orders against Ms Wu and Mr Yim under the Criminal Proceeds (Recovery) Act 2009 (the Act).[1]
[1]Commissioner of Police v Yim [2019] NZHC 1681 [Judgment under appeal].
To eliminate the chance of profiting from criminal activity, the Act provides two main types of civil orders forfeiting respectively tainted assets and property more generally. The first, an assets forfeiture order, must be made by the High Court where it is satisfied on the balance of probabilities that the assets in question are tainted.[2] Assets are tainted where they have been acquired or derived wholly or in part from significant criminal activity.[3] The owner of those assets need not have been responsible for, or even aware of, that activity. The second, a profit forfeiture order, must be made where the High Court is similarly satisfied the owner of the assets in question has knowingly benefited from significant criminal activity, even though those assets are not themselves tainted.[4] The maximum recoverable amount under a profit forfeiture order is the value of the unlawful benefit less the value of any property forfeited to the Crown as the result of an assets forfeiture order made in relation to the same criminal activity.[5]
[2]Criminal Proceeds (Recovery) Act 2009, s 50(1).
[3]Section 5(1).
[4]Section 55(1).
[5]Section 54(1). The value of unlawful benefit is calculated by the Commissioner and stated in the application for profit forfeiture order, and is presumed to be correct: ss 52 and 53.
The High Court’s forfeiture orders against Mr Yim and Ms Wu comprised:
(a)assets forfeiture orders over:
(i) a residential property at 74G Ireland Road, Panmure, Auckland (Ireland Road);
(ii) 13 vehicles, including a 2015 Ferrari 458 Speciale, registered to Mr Yim (the Ferrari) and a 2014 Porsche Cayman GTS, registered to Ms Wu (the Porsche);[6]
(iii) approximately $1,883,206 cash, $386,335 in bank accounts and $167,550 in trading accounts with CMC Markets New Zealand Ltd (the CMC accounts);[7]
(iv) numerous items of personal property including jewellery, watches, handbags, bottles of wine, cameras, an iPad, bicycles and vehicle parts; and
(b)a profit forfeiture order against Mr Yim and Ms Wu with an unlawful benefit value of $5,315,521.32 (with a maximum recoverable amount of $280,259 given the assets forfeiture orders made) for which Mr Yim and Ms Wu were jointly and severally liable.
[6]For three of those vehicles it was, to be precise, the proceeds of sale that were forfeited, rather than the vehicles themselves.
[7]The funds remaining in bank accounts included (in approximate figures) $350,000 in Ms Wu’s lawyer’s Kiwibank trust account, $32,000 in ASB bank accounts held by Ms Wu and Mr Yim jointly, and $340 in ANZ bank accounts held by Ms Wu personally.
In the High Court Ms Wu argued the following property was hers and was neither “tainted” nor the fruit of significant criminal activity:
(a)Ireland Road;
(b)the Porsche and the Ferrari;
(c)the $167,550 in her CMC accounts, and $350,000 of the bank funds held in her lawyer’s trust account (the Kiwibank account);
(d)$1995.80 cash, and $18,600 in foreign currency found at Ireland Road; and
(e)42 of the 115 personal items.
Ms Wu said that property — not being tainted — should not have been the subject of assets forfeiture orders and, in addition, as she had no knowledge of any unlawful benefits she may have received, she should not be liable for the profit forfeiture order. Mr Yim, who had earlier been convicted of possession of methamphetamine for supply and sentenced to 11 years and six months’ imprisonment, supported Ms Wu’s opposition to those assets and profit forfeiture orders in the High Court. Neither of them, however, resisted the forfeiture of the other property subject to the assets forfeiture orders; namely, the 11 vehicles, the $1.8 million cash, the funds remaining in certain joint bank accounts, and the other 73 personal items.
Ms Wu now appeals the High Court orders to the extent they were made notwithstanding her opposition. Mr Yim does not appeal.
Background
Supported by her parents in Taiwan, Ms Wu came to New Zealand in 1994, aged 15, to study. She was granted New Zealand citizenship on 8 September 2003 and completed a Bachelor of Arts degree from Auckland University of Technology in 2004.
In July 2002 she purchased her first home in New Zealand, 404C Ellerslie‑Panmure Highway. She sold that property in July 2003 to fund the purchase of her second home, 37 Spalding Rise, in February 2004. In July 2005 Ms Wu committed to purchase Ireland Road, the property the subject of the assets forfeiture orders, for $630,000. That acquisition was settled on 4 November 2005. As explained later, a revolving credit facility was secured against Ireland Road in 2007.
Ms Wu met Mr Yim in early 2003. They married in October 2005. They lived together at Ireland Road from the time Ms Wu acquired that property in November 2005 until Mr Yim was arrested in 2016, except for a period of about one‑and-a-half years between 2010 and 2011 during which the couple had separated.
Mr Yim’s arrest
In late February 2016 New Zealand Customs intercepted some 39 kilograms of methamphetamine concealed in granite tea trays at the Auckland port. The majority of the drug was replaced with a placebo substance.
A controlled delivery of that consignment was effected on 1 March 2016. Later that day police observed Mr Yim meeting with the persons to whom that consignment had been delivered and receiving a large bag from them. Mr Yim was observed returning that bag later that same evening.
The next day, Mr Yim was found to be in possession of a snap lock bag containing the placebo substance and $2,478 in cash. The police found a further $24,895 in cash in his vehicle, together with a sum of foreign currency. The police also executed a search warrant at Ireland Road. There they found a total of $210,445 from various areas around the house in $20, $50, and $100 denominations. They also found four cellphones and numerous SIM cards for New Zealand, Chinese and Hong Kong networks.
On 3 March 2016, police executed a second search of Ireland Road. Inside the house, they found:
(a)a total of $1,995.80 in cash;
(b)cash in foreign currency including Hong Kong dollars, Japanese Yen, Chinese Yuan, and Taiwanese dollars to the value of approximately NZD $18,600; and
(c)a number of wrist watches and items of jewellery, a collection of fine wine, and over 40 handbags and wallets.
Inside the garage at Ireland Road the police found, amongst other things, the Porsche and the Ferrari. Further searches of Mr Yim’s vehicles and storage unit were executed on the 3rd and 6th of March 2016. As a result of those searches, over $1.86 million cash was located, together with a kilogram of methamphetamine, and other indicators of drug dealing (such as snap lock bags, electronic scales, cellphones and multiple SIM cards).
Shortly thereafter Mr Yim was charged with conspiracy to possess methamphetamine for supply (in relation to his meetings with the recipients of the consignment on 1 March 2016), and possession of methamphetamine for supply (in relation to the one kilogram found in his BMW car during one of the search warrants). After the Crown withdrew the conspiracy charge, Mr Yim pleaded guilty to the possession charge. He was later sentenced by Venning J to 11 years and six months’ imprisonment.[8]
The Commissioner’s investigation
[8]R v Yim [2017] NZHC 702. This Court dismissed an appeal against that sentence: Yim v R [2017] NZCA 421.
As it happens, in the months leading up to Mr Yim’s arrest police had commenced an investigation into his and Ms Wu’s financial affairs. Inland Revenue records showed Mr Yim’s only declared income in New Zealand since his arrival in 1991 had been state-funded benefits totalling $22,127.82 (gross) during the years 1995 to 2000. Ms Wu had only received declared income of $13,475.32 (gross) since she arrived in New Zealand in 1994, which had been derived mainly from bank interest.
Pursuant to production orders, police received bank statements for Mr Yim’s and Ms Wu’s accounts at ASB Bank. The couple had two joint accounts (the joint ASB-52 and 55 accounts),[9] as well as a revolving credit facility held in Ms Wu’s name and secured against the Ireland Road property. Ms Wu also had an ASB credit card.
[9]As referred to above at [4(a)(iii)], n 7.
After the offending:
(a)Police discovered that Ms Wu also held two accounts at the ANZ Bank (the ANZ-00 and 46 accounts), and that some $360,000 belonging to Ms Wu was held in the Kiwibank account.
(b)A Ms Tanya Thompson compiled, on the basis of the information obtained from that investigation, the Commissioner’s financial analysis covering the seven-year period from 18 March 2009 to 17 March 2016.
Ms Thompson calculated that during that period, Mr Yim and Ms Wu had “unknown sources of funds” in the order of $4.7 million. That figure included “unknown deposits” totalling approximately $1.4 million into Mr Yim and Ms Wu’s bank accounts.[10] “Unknown deposits”, Ms Thompson said, meant “deposits where further information is required to explain the source and nature of the deposit”. That figure comprised:
(a)9 deposits totalling $1,080,000 from money remittance companies between July 2014 and December 2015, of which $1 million went into Ms Wu’s ANZ-00 and 46 accounts, and the remaining $80,000 went into the joint ASB-52 account;
(b)10 unidentified deposits totalling $237,154.51 between May 2011 and October 2015, which went into both the joint ASB-52 and 55 accounts, and Ms Wu’s ASB Visa account;
(c)32 unexplained cash deposits totalling $80,272.51 between April 2009 and December 2015, which went into both the joint ASB-52 and 55 accounts, and both Ms Wu’s ANZ-00 and 46 accounts;
(d)a single international transfer of $16,842.49 into Ms Wu’s ANZ-46 account on 19 September 2012; and
(e)8 deposits from unknown individuals totalling $14,377 between March 2009 and April 2015 into the joint ASB-52 and 55 accounts.
[10]It also included some $3.4 million of unexplained purchases from outside the bank accounts, less unexplained withdrawals from the bank accounts (approximately $62,000), and less funds available to Mr Yim and Ms Wu from known sources, but not deposited into the bank accounts (approximately $340,000).
The analysis showed that foreign currency trading accounts used by Mr Yim and Ms Wu had also received unknown deposits. In particular, Ms Wu’s CMC accounts had received three unknown deposits totalling $49,000. Those accounts made profits in the region of $200,000 in each of the 2011, 2012 and 2016 tax years, and also exceeded $120,000 in the 2015 tax year. Mr Yim’s Rencap trading accounts, which were active between 2010 and 2012, had also received some $437,617.49 from unknown sources. For profits made on those accounts for which tax had not been paid, Ms Thompson calculated an estimated tax liability of $94,831.14.
On the basis of those investigations, in March 2018, the Commissioner applied for assets and profit forfeiture orders in the High Court.[11] Despite their minimal declared income, Mr Yim and Ms Wu had acquired a significant asset base. That asset base, the Commissioner said, was tainted, having been acquired by them as a result of their significant criminal activity — not just for the seven years as shown by the financial investigation — but as far back as early 2003. That significant criminal activity was threefold. It included Mr Yim’s drug offending on a commercial scale,[12] Ms Wu’s laundering of the proceeds of that offending,[13] and large-scale tax evasion by both of them in respect of the proceeds of the drug offending and from trading foreign currency.[14]
Ms Wu’s account of events
[11]Criminal Proceeds (Recovery) Act, ss 43, 50 and 55.
[12]Misuse of Drugs Act 1975, ss 6 and 7.
[13]Crimes Act 1961, s 243.
[14]Tax Administration Act 1994, ss 143 and 143B.
In the High Court, Ms Wu explained that her parents, who live in Taiwan, were “[her] main source of money”. She said she had earned money through various “legitimate business interests” by purchasing luxury goods in Hong Kong to sell at a mark-up in New Zealand and vice versa, as well as by trading in foreign currency. She also explained that in 2014 she worked as an agent for Nu Skin, a cosmetics company. In addition to the money she had earned, Ms Wu said she also received loans and transfers from friends. In particular, Ms Wu said she had been provided with funds by a friend, a Ms Lilian Liu, who lives in Hong Kong. Ms Wu claimed Ms Liu had provided a total of $1 million via money remittance companies into Ms Wu’s ANZ-00 and 46 accounts (as referred to above at [20](a)]).[15]
[15]That $1 million was the total of $200,000 provided for the purchase of the Porsche, $400,000 provided for the purchase of the Ferrari, and a further $400,000 for potential property investments.
Ms Wu provided the following explanations as regards the specific property she opposed forfeiture of:
(a)Ireland Road, which she acquired in November 2005 for $630,000, was paid for by a deposit of $329,950, and the balance was largely paid from the proceeds of sale of the Spalding Drive property. The deposit, Ms Wu said, was transferred by her parents in Taiwan through a New Zealand-based money remitter called Know-All Group Ltd.[16] She claimed it was common to use a money remitter because of government limits on transferring money outside of China.
(b)The Porsche and the Ferrari, which had been purchased in September 2014 for $178,000 and in July 2015 for $510,655 respectively, were paid for by monies remitted from Ms Liu.[17] Ms Wu said she had acquired the Porsche by borrowing funds provided by Ms Liu because, at that time, she had suffered “a string of losses” in foreign currency trading but was committed to buy the car. The Ferrari, she said, was acquired as an investment with Ms Liu. Ms Wu produced handwritten agreements signed in October 2014 and June 2015 said to confirm those arrangements.
(c)The balance of $167,550.61 in her CMC accounts was lawfully earned through her foreign currency trading.
(d)The $1,995.80 cash was the proceeds from her sales as an agent for Nu Skin products in 2014;[18] and the $18,600 in foreign currency was the balance leftover from various trips to Hong Kong, Japan and Taiwan.[19]
(e)The approximately $350,000 remaining in the Kiwibank account[20] was funded in part by her friend, Ms Liu, and from her foreign currency trading. Ms Wu said $300,000 of that figure was part of the money provided by Ms Liu in late 2015 for property investments in New Zealand.[21] Those investments had not gone ahead and Ms Liu had agreed after Mr Yim’s arrest that this money could be used for legal representation. Ms Wu produced another handwritten agreement signed in January 2016 to support the existence of those arrangements. The remainder of the transfer to the Kiwibank account was sourced in part by some $50,000 transferred to her ANZ-46 account from her CMC accounts.
(f)As regards 42 of the 115 personal items, Ms Wu claimed she was the sole and lawful owner as they had either been purchased by her with her own money or been gifted to her from friends and family. She said she had a personal connection to each of them.
[16]The money received from this remittance company was not included in Ms Thompson’s $1,080,000 figure, because it predated the analysis period.
[17]Only $330,000 of the $400,000 remitted was applied to the purchase of the Ferrari. The remainder of the Ferrari’s purchase was paid for in two cheques, as discussed at [55] below.
[18]Although, Ms Wu later said at the High Court hearing this money was the balance from an overseas trip.
[19]Ms Wu does not claim the Chinese currency included in that balance. She accepts that currency belonged to Mr Yim.
[20]A total of $360,000 was transferred to the Kiwibank account from Ms Wu’s ANZ-46 account in March 2016.
[21]The other $100,000 of the $400,000 remitted by Ms Liu for property investments (see above at [23], n 15) was transferred to Ms Wu’s CMC accounts.
Ms Wu claimed she had no knowledge of Mr Yim’s criminal activity. Nor had she benefited from those activities. Accordingly profit forfeiture orders should not be made. However, if orders were to be made, she sought relief in the High Court under ss 51 and 56 of the Act on the grounds of undue hardship.
High Court judgment
Jagose J was satisfied the Commissioner had demonstrated Mr Yim and Ms Wu’s involvement in significant criminal activity, which was “more likely than not constituted by drug offending, and associated money laundering and tax evasion” since the early 2000s.[22] They had amassed significant assets despite having no declared sources of income other than bank interest, against the backdrop of drug offending.[23] Their money had been dealt with in unorthodox ways, likely explicable as being for its concealment, and despite Ms Wu’s success in foreign currency trading, there was an absence of material tax returns. While the knowledge requirements of the money laundering and tax evasion offences were matters for trial, the Judge was satisfied there was sufficient evidence to “support the allegations”.[24]
[22]Judgment under appeal, above n 1, at [25].
[23]At [16] and [18].
[24]At [18]–[19].
In reaching those conclusions, the Judge made adverse credibility findings against Ms Wu. Her affidavit opposing the forfeiture orders was, he said, a “work of advocacy” prepared by another person, unable to be explained by her orally.[25] No records were kept and no evidence had been tendered from her family, friends or clients to support her contention she had received money or loans from them.[26] In particular, the Judge did not accept Ms Wu’s account concerning Ms Liu’s involvement in remitting the $1 million, finding the handwritten acknowledgements said to confirm their arrangements were manufactured after the fact.[27] He also found reason to question Ms Liu’s identity.[28]
[25]At [21].
[26]At [22]–[23].
[27]Referred to above at [24](b)].
[28]At [24].
The Judge went on to reject Ms Wu’s evidence as regards all of the property in dispute.[29] Rather, the Judge found that the property was tainted by significant criminal activity. In particular, the deposit on the purchase of Ireland Road in 2005 was likely to have been derived from significant criminal activity. In any event, the Judge said, Ireland Road had been tainted by the revolving credit facility secured against it, as the drawdowns exceeding $900,000 had been met by transfers from the joint ASB-52 and 55 accounts, and some $90,000 cash, despite no legitimate sources of income.[30]
[29]At [30], [33], [36], [37], [39] and [44].
[30]At [30].
Having rejected Ms Wu’s account as regards the purchases of the Porsche and the Ferrari, and in respect of the $1,995.80 cash and the $18,600 in foreign currency found at Ireland Road, the Judge was satisfied those vehicles and that money were tainted.[31]
[31]At [33]–[36].
The funds in the CMC accounts were tainted by the $49,000 which had been deposited from unknown sources. Given those funds were likely derived from drug offending, their use in currency trading supported the allegation of money laundering, and the failure to report Ms Wu’s profits supported the allegation of tax offending.[32] The $350,000 in the Kiwibank account was also tainted by the CMC accounts, because some $50,000 had been used to fund the transfer to the Kiwibank account.[33]
[32]At [37].
[33]At [38].
As regards the personal items, they were acquired during the course of Mr Yim and Ms Wu’s relationship, the whole of which had been “contemporaneous with, and financially indistinct from” the significant criminal activity.[34] That rendered all their relationship property tainted. Moreover, the Judge did not accept the personal items were gifts and they were accordingly tainted, with the possible exception of a watch Ms Wu claimed to have been given by her father.[35]
[34]At [42].
[35]At [43]–[44].
Finally, the Judge considered Ms Wu had either known, or been wilfully blind to the fact, that she had received unlawful benefits from significant criminal activity, and as she was not reasonably likely to suffer undue hardship in granting the Commissioner’s applications,[36] the Judge made assets forfeiture orders, and a profit forfeiture order for $280,259, the maximum recoverable amount.
This appeal
[36]At [46] and [54]; and Criminal Proceeds (Recovery) Act, ss 51 and 56.
In this Court, Ms Wu argues that the evidence could not sustain the assets forfeiture orders over Ireland Road, the Porsche and the Ferrari, the CMC accounts, the $1995.80 cash and $18,600 in foreign currency, and the personal items. Ms Wu says she had advanced credible explanations as to the source of the monies applied to that property, and the Commissioner had not met the burden of proving that property was tainted on the balance of probabilities. The Judge’s factual findings as to the extent of the significant criminal activity “since the early 2000s” were wrong, and his “wholesale disregard” of her evidence was unwarranted. As the Judge had erred as regards the assets forfeiture orders, it followed that the calculations of the profit forfeiture orders were also wrong. In addition, Ms Wu says she did not know, nor was she wilfully blind to the fact, that she had unlawfully benefited from significant criminal activity. She should not therefore have been jointly liable for the profit forfeiture order.
Ms Wu made two applications for further evidence to be adduced in support of her appeal:[37]
(a)An affidavit of Dr Mhairi Duff, a consultant psychiatrist, which attaches a report as to Ms Wu’s physical and mental health. Dr Duff notes that Ms Wu’s family upbringing was such that people had money when it was needed without having to work in a traditional sense. The provision of money for her needs was managed by her parents and then, following her marriage, by Mr Yim. There was, accordingly, in Dr Duff’s view, a “strong sense of pampered naivety” in Ms Wu’s life experiences. In the absence of opposition from the Commissioner, we admit that evidence.
(b)An affidavit of Mr Robin McCusker, a consultant specialising in transnational crime in the United Kingdom. He explains the use of money remittance schemes is common amongst the Chinese and Taiwanese populations. The Commissioner opposes the admission of this evidence, not only because it has been filed a year out of time without any explanation, but because the purpose of money remittance schemes was before the High Court and so Mr McCusker’s evidence is not fresh.[38] At the hearing of the appeal, we indicated we would deal with this application de bene esse because a Registry error meant we only saw Mr McCusker’s evidence shortly before the hearing. As matters have transpired, the evidence has provided helpful background and we admit it accordingly.
[37]Court of Appeal (Civil) Rules 2005, r 45.
[38]Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 192–193.
In terms of the appeal, the Commissioner says Ms Wu’s credibility was for the Judge to determine and this Court should not lightly depart from his findings. The Judge, being entitled to draw together the strands of circumstantial evidence, was right to find there was evidence of significant criminal activity since the early 2000s. Finally, the Commissioner supports the Judge’s findings as regards the tainted property and Ms Wu’s wilful blindness to justify the making of the assets and profit forfeiture orders.
Analysis
The law
The basic aim of the Act’s regime for the forfeiture of property is, as this Court described it in colloquial terms, to “make sure that crime does not pay”.[39] The Act itself provides the regime was enacted to, as relevant:[40]
(a)eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity; and
(b)deter significant criminal activity; and
(c)reduce the ability of criminals and persons associated with crime or significant criminal activity to continue or expand criminal enterprise …
[39]Commissioner of Police v Harrison [2021] NZCA 540 at [7].
[40]Criminal Proceeds (Recovery) Act, s 3(2).
Sections 50 and 55 of the Act confer jurisdiction on the High Court to make assets and profit forfeiture orders. Those sections provide, as relevant:
50 Making assets forfeiture order
(1)If, on an application for an assets forfeiture order, the High Court is satisfied on the balance of probabilities that specific property is tainted property, the Court must make an assets forfeiture order in respect of that specific property.
…
55Making profit forfeiture order
(1)The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—
(a)the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and
(b) the respondent has interests in property.
…
It is not necessary for the respondent to have personally engaged in the significant criminal activity. It is enough that the property was derived, wholly or in part, by such activity.[41] Significant criminal activity must be proved to the civil standard: that is, on the balance of probabilities. Section 6 of the Act defines “significant criminal activity” as:
[41]Doorman v Commissioner of New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173 at [23].
6 Meaning of significant criminal activity
(1)In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending—
(a)that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or
(b)from which property, proceeds, or benefits of a value of $30,000 or more have, directly or indirectly, been acquired or derived.
(2)A person is undertaking an activity of the kind described in subsection (1) whether or not—
(a)the person has been charged with or convicted of an offence in connection with the activity; or
(b)the person has been acquitted of an offence in connection with the activity; or
(c)the person’s conviction for an offence in connection with the activity has been quashed or set aside.
…
In this case, the Commissioner says the significant criminal activity involves drug offending, money laundering and tax evasion.
Mr Mansfield QC first took issue with what he perceived to be the Judge’s framing of the degree to which significant criminal activity had to be proved. The Judge said:[42]
[18] Certainly the presence of unexplained funds alone is insufficient. But both Mr Yim and Ms Wu had very substantial amounts of money in their control – without plausible explanations as to its source, against a backdrop of drug offending – and dealt with it in unorthodox ways likely explicable as being for its concealment in terms of s 243 of the Crimes Act 1961. That is enough to support an allegation of money-laundering, sufficient to enable their conduct to be prosecuted as such, whether or not in fact pursued. The question is if there is activity that, “if proceeded against as a criminal offence”, would amount to the qualifying offending. The quality of Ms Wu’s knowledge falls to be determined at a trial. It cannot be said she could not have a requisite quality of knowledge.
[19] The same response may be made to Ms Wu’s resistance to the Commissioner’s allegations of tax evasion. The availability to Mr Yim and Ms Wu of $4.66 million in funds over the seven-year period prior to the restraining orders, Ms Wu being engaged in foreign exchange investment and trading with some success, and the absence of any material tax returns is again sufficient to support the allegations, Ms Wu’s requisite knowledge falling to be determined at a trial.
[42]Judgment under appeal, above n 1 (footnotes omitted and emphasis added).
Mr Mansfield submitted the Judge erred in his legal assessment of the standard of proof for significant criminal activity by effectively holding that the Commissioner need only allege that activity, not prove it. We do not agree. In our view, the Judge used that phrasing to reflect the scheme of the Act. As s 6(2) provides, a person may have undertaken significant criminal activity irrespective of whether they have been charged with or convicted for that activity.[43] That is, the Commissioner can apply for civil forfeiture orders without criminality having been established beyond reasonable doubt. To that extent, when the Commissioner applies for such an order, he or she is alleging such unlawful activity which must then be established in terms of the requirements of the Act.
[43]See further Criminal Proceeds (Recovery) Act, ss 15–16.
For an assets forfeiture order to issue, the property proposed to be forfeited must have been “tainted” by the significant criminal activity made out. Section 5(1) of the Act defines “tainted property” as:
tainted property—
(a) means any property that has, wholly or in part, been—
(i)acquired as a result of significant criminal activity; or
(ii)directly or indirectly derived from significant criminal activity; and
(b)includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity.
While the “tainted property” requirement is central to an assets forfeiture order, there is no such requirement for the making of a profit forfeiture order. Rather, profit forfeiture orders target respondents who have “unlawfully benefited from significant criminal activity”. That phrase is defined in s 7 of the Act:
7Meaning of unlawfully benefited from significant criminal activity
In this Act, unless the context otherwise requires, 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).
As can be seen, knowledge of having derived a benefit from significant criminal activity is a requirement for the making of a profit forfeiture order, but not for the making of an assets forfeiture order. Moreover, wilful blindness is sufficient to meet that knowledge element; that is, where a person’s suspicions have been aroused (for example, by being made aware that a particular state of affairs may exist) but that person deliberately refrained from making enquiry in order to avoid learning whether their suspicion was justified.[44]
Identifying the significant criminal activity and tainted property
[44]Vincent v Commissioner of Police [2013] NZCA 412 at [52].
We think it is significant that, in the High Court, Ms Wu did not challenge the forfeiture of the funds in the joint ASB-52 and 55 accounts (some $32,000). Moreover, while she did challenge the forfeiture of the funds in her ANZ-00 and 46 accounts (some $340), in the High Court those funds were forfeited. She has not challenged that order on appeal. While we do not put as much weight on the fact that forfeiture of the funds in her ANZ-00 and 46 accounts was not challenged, it is apparent from the financial analysis that there has been significant co-mingling of funds between the joint ASB-52 and 55 accounts and the CMC accounts and Mr Yim’s Rencap accounts, and between Ms Wu’s ANZ-46 accounts and her CMC accounts. To the extent the assets, the forfeiture of which is challenged, were paid for or represent wholly or in part the application of funds from Ms Wu and Mr Yim’s bank accounts, directly or indirectly, those assets are also tainted.
As we have explained, Mr Yim and Ms Wu’s bank accounts and currency trading accounts received significant amounts of unknown deposits. The mere presence of “unknown deposits” does not necessarily mean such deposits have been derived from significant criminal activity. As the High Court said in Commissioner of Police v Zhu:[45]
Establishing that deposits into a bank account are unidentified is only the start of the exercise. The applicant does have the benefit of the civil standard of proof and the statutory presumptions as to the quantum of any alleged unlawful benefit. But the applicant also has the onus of establishing facts which enable the inference to be drawn, as a logical and reasonable conclusion from facts proven to the civil standard, that the deposits are the fruits of criminal activity.
[45]Commissioner of Police v Zhu [2015] NZHC 2175 at [66].
However, in our view the Commissioner has established facts enabling us to infer the deposits are the fruits of significant criminal activity. We, like the Judge, are satisfied that includes the drug offending to which Mr Yim pleaded guilty; the tax evasion, based on significant profits made through the foreign currency trading which were not declared and accordingly not taxed; and the money laundering, judging by the significant amount of money from unknown sources that has been deposited into Ms Wu’s CMC accounts and into the money remittance companies.
IE Money, the money remittance company which deposited the $1 million said to have come from Ms Liu, confirmed the remittances made came from two Chinese bank accounts. However, IE Money said it could not provide any evidence of who “physically made the deposit to [those] bank accounts” because the bank accounts had been given to them by a Mr Wong, the counterparty responsible for providing and maintaining the Chinese accounts, with whom they had stopped doing business in September 2016.
Mr McCusker’s evidence is that money remittance schemes are commonly used in jurisdictions with Chinese populations including Taiwan. He says there is nothing inherently unlawful about such schemes and that, because they are highly trusted, it is common for them not to be supported by documentary records.
However, we need only quote from the Commissioner’s submissions which, in our view, properly capture the implausibility of Ms Wu’s account as regards Ms Liu:
Ms Wu alleged a total of $1 million was transferred to her by her friend, ‘Lilian’ (Ms Liu), in 2014 and 2015. In the information provided by Ms Wu there were fundamental mistakes in the spelling of Ms Liu’s name, appearing to be an amalgamation of Chinese and Hong Kong language spellings (including in Ms Liu’s personal email address). Somewhat amazingly, Ms Wu invited the Court to believe that Ms Liu misspelt her own name. When the Commissioner contacted Ms Liu to verify her identity, she refused to provide verification. Ms Wu provided the Commissioner with notes which purported to record the loan of funds but Ms Wu accepted these had been hand written by her after the funds had been received. She said the original notes were stored in a drawer at 74G Ireland Road but the Police must have overlooked them when searching the property. Under cross-examination, Ms Wu contended the Police dismissed the notes as “love letters”, despite a senior searching officer being a native mandarin speaker. Ms Liu failed to take any steps in either the High Court or appellate proceedings. Ms Wu alleges this is because Ms Liu violated the limits on the transfer of funds out of China and Hong Kong – but there are in fact no limits on the amount of funds that can be transferred out of Hong Kong. …
(Footnotes omitted.)
Furthermore, we do not agree with Mr Mansfield’s submission that the Judge was not entitled to make the credibility findings he made. This Court is normally reluctant to intervene in or revisit factual findings where the trial Judge has had the benefit of seeing and hearing the witnesses.[46] The Judge noted, in particular:[47]
Her affidavits were presented directly in English language; her oral evidence in Chinese language, through translators. It is plain at least her second affidavit was a work of advocacy prepared by another, the most graphic example being the affidavit’s use of automotive technology terms derived from English-language publicity material provided by Ms Wu to her lawyers, not able orally to be explained by Ms Wu. The best Ms Wu could say of the affidavit was she understood “most of it”. That falls a long way short of the requirement in s 83(3) of the Evidence Act 2006 the affidavit be Ms Wu’s “personal statement”, and risked its exclusion.
[46]Commissioner of Police v Dryland [2013] NZCA 247 at [24].
[47]Judgment under appeal, above n 1, at [21] (footnote omitted).
To explain, Ms Wu said in her affidavit opposing the making of civil forfeiture orders that the Ferrari was:
9.4… a collectable car because it has the original V8 Ferrari naturally aspirated engine. This makes it special because it is the last naturally aspirated car that Ferrari will manufacture.
…
At the High Court hearing, Ms Wu gave the following evidence:
Q.Did you use the words “naturally aspirated” in your affidavit”? …
A.When I was working with my lawyer to prepare this affidavit, my explanation was this is the vehicle, this model of vehicle is no longer in production, so you would never be able to buy the same model of vehicle anymore.
Q.You never used the words yourself “naturally aspirated” is that your evidence?
A.I wonder if I can get to know the meaning or the interpretation, translation of the word “aspirated” then I might be able to explain what it was.
Q.Did you not write paragraph 9.4 of your affidavit?
A.This is my affidavit but I was providing the information using my basic and simple English to explain that this vehicle is of significant value because it’s the end of line model and you will not be able to buy it in the future anymore.
Q.My question was, did you write paragraph 9.4 of your affidavit?
A.Looking at it, like it is now, it’s – I did, I wrote it.
Q.Do you know what “naturally aspirated” means?
A.I’m not really familiar with this word and it’s difficult to explain my meaning in Chinese in to English.
…
As that exchange demonstrates, the evidence in Ms Wu’s affidavit is not entirely her own account and her responses to questioning were unhelpful. Moreover, it appears one of Ms Wu’s claims before the High Court has since turned out to be false. Ms Wu claimed a particular watch subject to forfeiture had been gifted to her from her father in 2002. The Judge accepted the possibility that watch may not have been tainted property.[48] However, the Commissioner has since confirmed following enquiries with the watchmaker that Ms Wu’s explanation cannot be right, since the watch’s model was not marketed until 2004 and, in particular, the version owned by Ms Wu was not marketed until 2007.
[48]At [43].
The use of tainted funds flowed through to the purchases of the Porsche and the Ferrari, because both purchases were funded through monies provided by the remittance companies. In our view an additional basis for the tainted status of the Ferrari is that, while $330,000 was paid using remittance funds, two other cheques of $30,000 and $150,000 were paid which originated from unknown sources.[49] In the High Court hearing, Ms Wu said both cheques were received from unknown males in March and July 2015 respectively. When questioned about those events, Ms Wu said both cheques were arranged by her friend Ms Liu, but she did not know the males’ names and nor did she ask for them. Ms Wu was cross-examined on those events:
Q. So we’ve talked about these two men you collected cheques from and if we scroll through to page 33 [of Ms Wu’s second examination interview transcript], you’ve said now in fact, “One was a male the other was from female.” So do you mean the other one was a female?
A. I was actually confused during the interview, I was searching through my memory in order to answer the questions. What I recall from my recollection is that a female friend of hers took the cheque out of her handbag, however it was a male that handed the cheque to me. During the interview Detective Sun was constantly testing me about the cheques amounted $150,000. I believe I have mixed up the amount, mixed up the cheques with the different amounts. But I recall the two discrete locations.
…
We, again, consider Ms Wu’s account lacks credibility. We acknowledge Dr Duff’s evidence about Ms Wu’s mental and physical health but, in view of the clear inconsistencies and implausibility of her evidence, we are not persuaded to depart from the Judge’s credibility findings.
Turning to the personal items, Ms Wu explained that some of them were hers, either because she had purchased them herself, or because they were received as gifts from friends or family. Those she sought the return of had sentimental value to her. However, we agree with the Judge that we cannot accept Ms Wu’s “bare contentions of gifts from third persons” because of our view of her credibility, particularly when the truth about the watch has come to light.[50] Moreover, Ms Thompson’s analysis showed the total estimated value of all the jewellery restrained in this proceeding was approximately $260,000, and payments of approximately $34,000 were made from Mr Yim and Ms Wu’s bank accounts. We consider it is probable these items were purchased with funds likely to have derived from significant criminal activity.
[50]At [43].
As regards the cash Ms Wu opposes the forfeiture of, in her affidavit of 20 July 2018, Ms Wu claimed the NZD $1,995.80 was the proceeds of sales of Nu Skin products. There was no documentary evidence to support that claim. Notwithstanding that, at the High Court hearing Ms Wu’s account became confused, as Ms Wu claimed that cash was money remaining from a trip in 2016 to Taiwan, Japan and Hong Kong.[51] As regards the $18,600 in foreign currency claimed to have been from her other overseas trips, Ms Wu claims the Singaporean Dollars were given to her by Mr Yim’s grandmother “many years ago”, and refers to one particular holiday to Taiwan when her parents had provided her with approximately NZD $20,000 in spending money. In our view, both explanations lack credibility and, viewed in the context of the substantial amount of cash found at Ireland Road and cash Mr Yim and Ms Wu had available to them more generally, we are satisfied the $1,995.80 and $18,600 cash constitutes tainted property.
How far back does the significant criminal activity go?
[51]At [35].
In support of his view that Mr Yim and Ms Wu’s significant criminal activity extended back to the “early 2000s”, the Judge noted their links to China and Hong Kong and that neither had declared material sources of income since their arrivals in New Zealand in the 1990s. Ms Wu says there was insufficient evidence of significant criminal activity extending back to the early 2000s, and that it was only so alleged for the Commissioner to seek forfeiture of Ireland Road.
Ms Wu agreed to purchase Ireland Road in July 2005 for $630,000. As noted, Ireland Road was the third New Zealand property to be owned by Ms Wu.
The Commissioner focuses on the lack of evidence supporting Ms Wu’s account about the initial acquisition of Ireland Road, and raises questions about the purchase of Ms Wu’s second property, Spalding Rise, for $269,000. After payment of the deposit on Spalding Rise, the balance of $243,241.60 was paid with an ASB bank cheque issued from the joint ASB-52 account which appears to have been funded in part through significant cash deposits.
Ireland Road was then purchased using the proceeds of sale of Spalding Rise of $308,000. While the agreement for sale and purchase for Ireland Road only required a $100,000 deposit, over the course of two days in August 2005 some $329,950 was paid in two separate transactions on Ms Wu’s behalf by Mr San Wan Sze. Ms Wu said that money was remitted from her parents, having been transferred by her uncle’s wife’s family in repayment of her father’s investment in her uncle’s business in China. However, Know-All Group Ltd, the company of which Mr Sze was a part, was involved in the laundering of proceeds of drug offending between 1998 and 2008.[52]
[52]Commissioner of Police v Know-All Group Ltd HC Auckland CIV-2010-404-403, 7 November 2011.
We accept the circumstances surrounding these transactions are questionable. However, it is for the Commissioner to prove the existence of significant criminal activity on the balance of probabilities from the early 2000s as alleged. We are not satisfied to that degree that significant criminal activity existed at that time. Accordingly we cannot say the funds for the initial acquisition were tainted funds.
Notwithstanding that, we are prepared to accept on the basis of Ms Thompson’s financial analysis that there was significant criminal activity from the beginning of her analysis period in March 2009. The clear impression from those accounts is that significant criminal activity was in existence at that time. It was also around that time that Ms Wu opened her CMC accounts (February 2008), that Mr Yim started purchasing the vehicles which have been forfeited (June 2010), and that Mr Yim opened his Rencap account (September 2010). We are satisfied there is sufficient evidence of significant criminal activity around that time on the balance of probabilities.
Is Ireland Road tainted by the repayments to the loan?
At the hearing, we sought further submissions from the parties on the subject of whether the use of a secured revolving credit facility could taint property (where the facility was not used for the initial acquisition of the property).
In July 2007, Ireland Road was used to secure a revolving credit facility in favour of Ms Wu for $300,000. Between July 2007 and December 2015, a total of $903,803.57 was drawn down and $842,329.73 was repaid. Those repayments were primarily funded by transfers from Mr Yim and Ms Wu’s joint ASB-52 and 55 accounts.
Mr Mansfield submits that the definition of “tainted property” is clear: the relevant significant criminal activity must precede the acquisition or derivation of the property; that is, property “acquired” or “derived” before that activity occurs cannot be tainted by that subsequent activity. Accordingly, since Ireland Road was acquired before the credit facility was taken out, and before any significant criminal activity took place, it cannot be tainted.
The Commissioner says the fact Ireland Road was purchased outright prior to the facility being secured does not preclude that property subsequently becoming tainted. Rather, the repayments of the revolving facility using the proceeds of crime taint Ireland Road. Referring to the broad definitions of “property” and “interest” in the Act,[53] the Commissioner says that Ms Wu has increased her interest in the property by using those proceeds, whilst decreasing the mortgagee’s interest.
[53]Criminal Proceeds (Recovery) Act, s 5(1).
The Commissioner refers to this Court’s decision in Duncan v Commissioner of Police.[54] In that case, the land was lawfully acquired using legitimate funds and a mortgage was subsequently registered against the property to secure borrowed funds used to build a house. The High Court found the mortgage payments could not have been made but for the significant criminal activity, and accordingly the property was tainted. This Court, in upholding assets forfeiture orders made against the land, held:
[18] We have already set out the definition of “tainted property”. We note here that para (a) of that definition refers to property that has “wholly or in part” been acquired or derived as set out in the paragraph. Andrews J found that, since 2005, funds for the mortgage payments were derived from “significant criminal activity”, a finding that is not now challenged. The result of the mortgage reductions increased Mr Duncan’s equity in the property by reducing the principal sum owed. His interest as the registered proprietor was thereby increased. It follows that his interest was in part derived from significant criminal activity …
[19] We accept … that it does not matter that the interest has been acquired in a process of successive payments towards the mortgage; acquisition can clearly occur in stages. With each stage the extent of the interest increases.
(Footnote omitted.)
[54]Duncan v Commissioner of Police [2013] NZCA 477, (2013) 26 CRNZ 796.
That approach was also taken by this Court in Doorman v Commissioner of New Zealand Police.[55] There, the Commissioner sought forfeiture of a property initially acquired by Mr Doorman’s partner, Ms de Leon, who had contributed all of the original equity with untainted funds. A mortgage was subsequently secured over the property and Mr Doorman had paid a significant part of the mortgage repayments using funds from the cultivation, sale and possession of cannabis. This Court, in upholding the High Court’s assets forfeiture orders, held that Mr Doorman’s interest in the property was, at least in part, tainted property.[56] This Court also said it was not possible to separate out Ms de Leon’s initial contribution to the property which had not been derived from drug offending.[57]
[55]Doorman v Commissioner of New Zealand Police, above n 41.
[56]At [36].
[57]At [32].
In this case, repayments on the drawdowns were made from Mr Yim and Ms Wu’s joint ASB-52 and 55 accounts during the seven-year analysis period. In particular, as Ms Thompson’s analysis shows, over $450,000 was repaid from the joint ASB-55 account in 2015 alone: that is, the equivalent of over half of the total drawdowns between 2007 and 2015. As Ms Wu did not challenge the forfeiture of the joint ASB-52 and 55 accounts, and because we are satisfied the unexplained sources of funds were likely derived from significant criminal activity, the repayments to the revolving credit facility were themselves tainted. With each repayment on the drawdown from the joint ASB-52 and 55 accounts, Ms Wu’s interest in Ireland Road has derived, at least in part, from significant criminal activity. We are therefore satisfied Ireland Road is tainted property.
We accordingly do not consider the Judge erred in making the assets forfeiture orders.
Finally, as regards the profit forfeiture orders, we consider Ms Wu had the requisite knowledge of significant criminal activity. Mr Mansfield emphasised before us that much of the cash was located away from Ireland Road, and so Ms Wu did not know about Mr Yim’s criminal activity. We have already found the monies put through the CMC accounts and the money remitters were more likely than not derived from significant criminal activity, and that Ms Wu had a role in that process of money laundering. That satisfies the knowledge requirement. Moreover, Ms Wu — who had been in a relationship with and married to Mr Yim for the better part of 12 years, with significant amounts of money and luxury assets with no explained sources of legitimate income — had to have known about that activity.[58]
[58]Vincent v Commissioner of Police, above n 44, at [52].
We record for completeness that Ms Wu’s initial grounds of appeal had challenged the Judge’s undue hardship finding, but by the hearing that ground was no longer pursued.
The Commissioner’s withdrawn strike-out application: costs
We note one final matter. On 25 November 2020, the Commissioner filed an application to strike out Ms Wu’s appeal for want of prosecution and failure to comply with procedural directions. In particular, the Commissioner referred to two breaches of timetabling orders, one by a few days, but the second by over two months. The second of those breaches was the failure to apply for leave to adduce further evidence from Dr Duff, as to Ms Wu’s mental health, by 28 September 2020. The application was eventually made on 2 December 2020, filed along with an unsworn affidavit from Dr Duff.
The Commissioner subsequently withdrew the strike out application on 16 December 2020. Nevertheless, in a memorandum of 28 January 2021, the Commissioner sought costs on the application. That being opposed by Ms Wu, this Court said it would deal with the issue of costs at the hearing. Ms Wu’s counsel explained the delay in filing the application for further evidence was a result of the pressures caused by two COVID-19 lockdowns. In those circumstances, we think the breaches of timetable directions are excusable, and decline costs on that application accordingly.
Result
The applications for leave to adduce further evidence are granted.
The appeal is dismissed.
The appellant must pay the respondent costs for a standard appeal on a band A basis with usual disbursements.
The application for costs on the respondent’s withdrawn strike out application is declined.
Solicitors:
Dominion Law, Auckland for Appellant
Meredith Connell, Auckland for Respondent
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