BOON HOOI CHEAH v COMMISSIONER OF POLICE [2020] NZCA 253

BOON HOOI CHEAH v COMMISSIONER OF POLICE [2020] NZCA 253 [24 June 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA254/2019[2020] NZCA 253BETWEEN BOON HOOI CHEAHAppellantAND COMMISSIONER OF POLICERespondentHearing: 25 February 2020Court: Miller, Dobson and Moore JJCounsel: W D McKean and N J Hartwell for AppellantDMA Wiseman for RespondentJudgment: 24 June 2020 at 11.30 amJUDGMENT OF THE COURTAppeal dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Moore J)Introduction[1] Boon Hooi Cheah is serving a term of six years' imprisonment having pleadedguilty to charges of supplying methamphetamine.11 He pleaded guilty to one charge of possession of methamphetamine for supply and onerepresentative charge of supplying methamphetamine. On 10 February 2017 he was sentenced tosix years' imprisonment from an eight and a half year starting point.[2] On 31 October 2018 Grice J made civil forfeiture orders in favour of theCommissioner of Police ("the Commissioner") under the Criminal Proceeds(Recovery) Act 2009 ("the Act").2 These included a profit forfeiture order and anassets forfeiture order. The Judge dismissed Mr Cheah's application for an orderexcluding his half share in a residential property on the basis of undue hardship.[3] Mr Cheah appeals the profit forfeiture order on the basis that the quantum wasnot correctly valued and, to the extent the first ground of appeal is unsuccessful, thatthe Judge erred in finding that Mr Cheah had not established undue hardship.Background facts[4] Mr Cheah is a 59-year-old Malaysian man who has been living in New Zealandfor nearly 30 years. For 15 years, until 2012, he worked in sales at Duty Free Galleria,first as an employee and later as an agent for Yves St Laurent.[5] In 2001, with a friend, he purchased a half share in a property on Great NorthRoad, Avondale. This was where he was living at the time of his arrest.[6] In June 2012 his employment was terminated as a consequence of mentalhealth issues connected to his methamphetamine use. According to Mr Cheah heturned to the drug for relief from the stress of his job and to keep him awake andenergetic. He claimed that for a number of years he purchased methamphetamine forpersonal use, but in or around 2014 he started to buy from a Mr Wagener. In 2015 hesaid he met another supplier. The tables turned and he began to supply Mr Wagener.He claimed this was initially in small amounts which Mr Cheah divided in half; halffor himself and the other half for Mr Wagener. Towards the second half of 2015 hesaid the quantities increased and he was buying in one-gram amounts with the salescovering the cost of the drugs he consumed. The amount traded and consumedcontinued to increase into late 2015 and early 2016. He said that when he could, hestockpiled the drug for his own future use. He claimed that the time of his arrestcoincided with the peak of his supplying.2 Commissioner of Police v Cheah [2018] NZHC 2825 [High Court decision].[7] The charges on which Mr Cheah was convicted relate to four separate incidentsof supplying Mr Wagener between 31 May 2016 and 31 June 2016.[8] In mid-2016 the police commenced a covert operation using an undercoverpolice officer to target the activities of Mr Wagener. On four occasions Mr Wagenersold the undercover officer a total of eight grams of methamphetamine. An analysisof telephone records identified Mr Cheah as Mr Wagener's supplier. As a result, on29 July 2016, the police executed a search warrant at Mr Cheah's Great North Roadproperty. They located 293.8 grams of methamphetamine (valued at $132,000),electronic scales and numerous ziplock bags. Cash totalling $70,520 was also found.[9] Amongst the items of interest, the police also located a diary. It recordedMr Cheah's methamphetamine dealing over the 10-week period between 16 May 2016and 28 July 2016.3 Transactions totalling $99,450 were recorded.The applications and the hearing[10] The Commissioner's case before Grice J was that after Mr Cheah'semployment ended with his dismissal in June 2012, he began to deal inmethamphetamine to fund his living expenses and to support his heavymethamphetamine habit. Until his arrest on the day of the search four years later, hedid not declare any income.[11] As noted, the Commissioner sought both an assets forfeiture order and a profitforfeiture order.Assets forfeiture order[12] The assets forfeiture order was made in respect of the $70,520 of cash foundat his home and the contents of an ASB account containing $50,000.14. This order isnot subject to appeal.3 This period included the time span of the criminal charges.Profit forfeiture order[13] The profit forfeiture order of $2,102,179 was made up of four components.4These were set out in a schedule produced by the Commissioner at the hearing. It isreproduced in full below:(a) $132,000, being the value of the 293.88 grams of methamphetaminelocated at 2147 Great North Road;(b) $94,350, being the total value of Mr Cheah's earnings from his drugdealing activities in a 10-week period between May and July 2016, asrecorded in the diary located at 2147 Great North Road;(c) $1,843,856, being an estimate of the total value of Mr Cheah'searnings from the sale of methamphetamine (extrapolated from thediary), during the 196-week period that he was not in receipt of anyknown income, excluding the time period at (b) above:(i) Mr Cheah recorded earnings of $99,450 in the diary over a74-day period;(ii) $99,450 divided by 74 provides Mr Cheah's average dailyincome of $1,343.91;(iii) Mr Cheah's weekly average income is calculated bymultiplying the daily rate of $1,343.91 by seven, which equals$9,407.43:(iv) To assess Mr Cheah's earnings from the sale ofmethamphetamine, the weekly rate of $9,407.43 is multipliedby 196, (being the time period that Mr Cheah was not inreceipt of income from his employer and excluding theten-week period recorded in the diary) which equals$1,843,856.(d) $31,973, being the value of unknown deposits received intoMr Cheah's bank accounts:(i) $10,290 cash on 15 August 2011;(ii) $11,170 cash on 4 January 2012; and(iii) $10,458 unidentified deposits to ASB accounts and 55$ to theWestpac accounts.$132,000 + $94,350 + $1,843,856 + $31,973 = $2,102,1794 Initially the Commissioner nominated an unlawful benefit value of $2,178,103 but this wasreduced at the hearing before Grice J.[14] Mr Cheah accepted he had received unlawful benefits, but placed the value ofthose at $170,000, a figure derived from a combination of both the revenue recordedin his diary and the value of the cash seized by the police.[15] Furthermore, he did not accept that extrapolating the diary's sales figures outover the 196 weeks provided a sound basis on which to calculate his income from thepoint when he lost his employment. Instead, he claimed he only started supplyingmethamphetamine from 2015. After his job finished he said he lived off two sourcesof income. The first was in the form of cash earnings from the sale of perfume andcosmetic products which he had received from his employer as a performance bonus.He claimed he accumulated these products over time. He sold them to Asian contactsat duty free prices. The second income source was the interest earned from hisWestpac and ASB term deposits. Together these income sources allowed him to livereasonably comfortably.[16] As for undue hardship he pointed out that the Great North Road property waspurchased by him in 2001 well before any offending. He owns a half share. It is hisonly remaining asset. It will be difficult for him to extract his share from the otherparty's interest to obtain fair value. Given his personal circumstances he is unlikelyto be re-employed and will be forced to apply for the unemployment benefit.High Court judgment[17] The Judge found that under s 53 of the Act the onus was on Mr Cheah todisprove the Commissioner's claim of benefit as specified in the application. She heldthat a simple critique of the Commissioner's calculation methods was insufficient todischarge that onus. She determined that Mr Cheah was required to prove on thebalance of probabilities that the true benefit was less than that claimed by theCommissioner, noting that in order to rebut the statutory presumption he must provideevidence as to what the actual quantum of the benefit is. She found that the figuresprovided by Mr Cheah were implausible. She thus determined that Mr Cheah had notrebutted the presumption that the value of the unlawful benefit was the figure as statedby the Commissioner.[18] Mr Cheah applied under s 56 of the Act for an order excluding his half sharein the Great North Road Property from the profit forfeiture order on the basis of unduehardship. On his behalf it was submitted that the house was purchased well beforeMr Cheah became involved in the supply of methamphetamine, he had no previousconvictions prior to the present offending and he had not lived extravagantly oraccumulated substantial assets. It was also noted that he is a mature man who nowhas to restart his life and has a history of mental illness related to his methamphetamineuse.[19] The Judge found that Mr Cheah had not established undue hardship.She observed that any hardship he will suffer is not disproportionate to the extent andseriousness of his offending. While he might lose ownership of his house, he is notdisabled to the extent of being unable to work. Furthermore, he has access to fundsboth in the form of a State benefit and debts of approximately $40,000 owed to himby his father. She pointed out that Mr Cheah knowingly participated in the supply ofcontrolled drugs and ran a significant drug business.[20] The Judge ordered that Mr Cheah pay the Commissioner the value of theunlawful benefit derived using his share of the Great North Road property to meet theorder.Discussion[21] Mr McKean, for Mr Cheah, submitted that the Judge erred in her interpretationof s 53. He argued that the onus imposed on Mr Cheah under that provision simplyrequired him to rebut the value nominated by the Commissioner and that once thepresumption is rebutted, the Court should undertake its own "rough and ready"assessment of the evidence to determine the actual unlawful benefit. Had the Courtfollowed this approach it would have put Mr Cheah's unlawful benefit at $272,450,an amount which would be satisfied without the need to realise Mr Cheah's half sharein the Great North Road property.[22] Mr McKean also submitted that the Judge applied the "undue hardship" testunder s 56 too strictly. He submitted there is no requirement that the hardship be eithersevere or gross and that in all the circumstances, the loss of Mr Cheah's last remainingasset, his home, constituted "undue hardship".[23] We turn to consider both of these points in more detail.Did the Judge err in her interpretation of the requirements of s 53?[24] The principles relevant to the making of a profit forfeiture order are found inss 53 to 58 of the Act. We begin by observing that the term "profit forfeiture order" issomething of a misnomer, because what is forfeited under s 55 of the Act is the valueof an unlawful "benefit". The Act defines benefit as including "proceeds andproperty" and specifies that any "expenses or outgoings used in connection with"qualifying significant criminal activity must be disregarded when calculating the valueof any qualifying property, proceeds or benefits.5 In R v Pedersen this Court observedthat the predecessor Act, the Proceeds of Crime Act 1991 ("the 1991 Act"), was "notan income tax statute, nor is it one concerned with lawful commercial operations".6In other words, "benefit" means gross receipts rather than profits.7[25] Unlike the 1991 Act, the new legislation does not prescribe how the amount ofany unlawful benefit is to be assessed by the Court.8 Instead, the criteria under the1991 Act have been replaced by a statutory presumption. This is found in s 53 whichprovides:53 Value of benefit presumed to be value in application(1) If the Commissioner proves, on the balance of probabilities,that the respondent has, in the relevant period of criminalactivity, unlawfully benefited from significant criminalactivity, the value of that benefit is presumed to be the valuestated in—(a) the application under section 52(c); or(b) if the case requires, the amended application.(2) The presumption stated in subsection (1) may be rebutted bythe respondent on the balance of probabilities.5 Criminal Proceeds (Recovery) Act 2009, ss 5(1) and 6(3).6 R v Pedersen [1995] 2 NZLR 386 (CA) at 390.7 At 391.8 See Proceeds of Crime Act 1991, ss 27 and 28.[26] Thus, under s 53(1) the Commissioner carries the initial burden of proving onthe balance of probabilities that Mr Cheah unlawfully benefitted from significantcriminal activity.9 It is then for Mr Cheah to rebut the statutory presumption that hebenefitted to the value claimed by the Commissioner, that is $2,102,179.[27] One of the questions raised on this appeal is: what is required of him to rebutthe presumption? Is it sufficient for him to critique the Commissioner's method ofcalculation, or is something more required, such as adducing evidence that the truevalue is less than that nominated or, as the Judge determined, proving the value of theactual benefit received? To answer that question, it is necessary to review thelegislative background.[28] The purpose of the reverse onus was discussed in the Explanatory Note to theCriminal Proceeds (Recovery) Bill 2007 in the following way:10The Crown will not be required to establish the value of the profit derivedfrom significant criminal activity, as this would be too onerous a test. Rather,the onus will be on the respondent to an order to establish, on the balance ofprobabilities, that the value specified in the application is too great.The justification for this reverse onus is the difficulty of obtaining evidenceshowing the unlawful origins of property, as against the expectation that ifproperty is derived from lawful activity the owner should be able to establishthat.[29] The legislative intentions behind the new Act were helpfully discussed byKatz J in Commissioner of Police v Tang.11 She said:[21] The Explanatory Note to the Criminal Proceeds Recovery Bill notedthat civil forfeiture regimes in overseas jurisdictions were provingconsiderably more effective than previous laws "in terms of the value of thecriminal proceeds (confiscated)". The Note recorded that "this Bill willintroduce a similar approach in New Zealand". The new legislation wasclearly intended to make proceeds of crime recovery more effective, ratherthan less so [22] I note the observations of Cooke P in Pedersen that [the Proceeds ofCrime Act] 1991 was intended to deter serious crime by demonstratingemphatically that it does not pay. "It should therefore be judiciallyadministered in that spirit". The general tenor of the Explanatory Note andthe Parliamentary debates which preceded the passage of the [Criminal9 Criminal Proceeds (Recovery) Act, s 53(1).10 Criminal Proceeds (Recovery) Bill 2007 (81-1) (explanatory note) at 3.11 Commissioner of Police v Tang [2013] NZHC 1750 (footnotes omitted).Proceeds (Recovery) Act] suggest that Cooke P's observations apply equallyto the interpretation of the [Criminal Proceeds (Recovery) Act], arguably evenmore so.[30] Some interpretative assistance may also be found in s 3 which sets out the Act'spurpose. Stated as primary under s 3(1)(b), is the establishment of a regime to forfeitproperty which represents the value of a person's unlawfully derived income.Mr Wiseman, for the Commissioner, also drew our attention to s 3(2)(a) whichprovides that the proceeds and forfeiture regime established under the Act proposes to"eliminate the chance" for persons to profit from undertaking significant criminalactivity and that s 53 should be interpreted in that light; language which the SupremeCourt recently described as "aspirational', giving a "clear and emphatic signal as tothe legislative purpose".12[31] However, the Act is all but silent on what, in practice, is required of arespondent to rebut the presumption. The High Court has considered this issue in twocases. There is no appellate authority directly on point.[32] In Tang, Katz J, in discussing the Commissioner's presumed value of unlawfulbenefit, approached the question in the following way:[33] The Commissioner is not required to prove the extent to whichMr Tang has benefited from significant criminal activity. It is for Mr Tang torebut the statutory presumption that the amount of benefit he received was$360,000, by providing evidence as to what he says the actual amount ofbenefit he received was.[39] How the Commissioner calculated the $360,000 figure is strictlyirrelevant. It is the figure itself that is important. It is not for the Commissionerto prove, on the balance of probabilities or otherwise, the amount of benefitMr Tang received or to justify how the benefit amount he relied on wascalculated. The figure of $360,000 is presumed to be the correct benefitamount unless and until Mr Tang proves otherwise. Mr Tang cannot do thisby simply "critiquing" aspects of the Commissioner's methodology as,ultimately, precisely how the Commissioner calculated his benefit figure isirrelevant. Mr Tang must adduce his own evidence to establish, on the balanceof probabilities, that the true benefit figure was less than $360,000.12 Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [12].[33] Katz J determined that Mr Tang had not discharged the onus. His evidence didnot credibly establish what the total benefit received was; it was thus not possible todetermine whether it was $360,000 or a greater or lesser sum.13[34] Mr McKean submitted that these comments are not authority for theproposition the Commissioner contends. He accepted that a respondent must do morethan merely critique the Commissioner's methodology. A respondent must adduceevidence that the amount of the unlawful benefit claimed by the Commissioner isgreater than that actually received. However, he considered that proof theCommissioner's methodology was flawed would go some considerable way towardsrebutting the presumption.[35] In Commissioner of Police v Filer, Gilbert J observed that the statutorypresumption means it does not matter how the Commissioner assesses the benefit.14He said:[13] Section 53(2) of the Act does not make clear whether the respondenthas to go further than show that the Commissioner's assessment is wrong andprove what the actual benefit was. However, in my view, this is the correctinterpretation. Once the Commissioner discharges the initial onus unders 53(1), the onus of proving the correct figures rests with the respondent unders 53(2) and does not pass back to the Commissioner. This interpretation servesthe purposes of the forfeiture regime which include eliminating the chance forpersons to profit from undertaking or being associated with significantcriminal activity and deterring such activity. These objectives could befrustrated if the legislation is interpreted so as to require the Commissioner toprove the benefit in all cases where a respondent can establish some error inthe Commissioner's assessment. The respondent will know what the benefitwas and will have access to the witnesses and records that may be needed toprove this, whereas the Commissioner does not. I conclude that if therespondent fails to prove the benefit on the balance of probabilities, theamounts stated in the Commissioner's application must stand, even if thecorrectness of the underlying assessment is questionable.[36] Mr McKean submitted that this approach is simply wrong. Given thepotentially dire consequences for a respondent, the nature and extent of the onus mustbe clear on the face of the section. It is not appropriate to read into the provision wordswhich are not there. To adopt the Judge's interpretation can impose an insuperableburden on a respondent. The practical difficulties for someone in Mr Cheah's position13 Commissioner of Police v Tang, above n 11, at [52].14 Commissioner of Police v Filer [2013] NZHC 3111 at [5].are so formidable and unfair that a less stringent test must be favoured. Judicial andparliamentary observations that respondents are best placed to prove the source ofacquired assets assume situations where a respondent has accumulated identifiableproperty such as land, a house or a car. In those circumstances it is self-evident thatthe respondent will be better placed than the Commissioner to explain the provenanceof the property. But in Mr Cheah's case there is no such property. He has virtually noassets. He operated in a cash economy, with minimal accounting records and wasoften under the influence of methamphetamine. The values recorded in the diary wereused to estimate the presumed figure on what Mr McKean described was an entirely"speculative basis". All Mr Cheah could say in rebuttal was, "I did not make$1.8 million in benefits from drug dealing". He could go no further.[37] Mr McKean also submitted that the less onerous interpretation he favours isconsistent with observations of this Court in Nicholas v Commissioner of Police andDoorman v Commissioner of Police.15[38] In our view neither of these decisions provides the support which Mr McKeanclaims. In the passage relied on from Nicholas, this Court described the onus,commenting that the starting point will be the value of the unlawful benefit calculatedby the Commissioner with the respondent being required to prove that theCommissioner's figure "is wrong".16 Contrary to Mr McKean's submission, thatstatement is not one of interpretive principle. It goes no further than paraphrasings 53. The same point may be made in respect of Doorman, where this Court statedthat the onus was to prove that the value in the Commissioner's application was "notcorrect".17 The appellant in that case had suggested a portion of the figure proposedby the Commissioner was actually from money "recycled" through different bankaccounts. The Court held that this was not a plausible suggestion, noting that theappellants had provided no evidence to support it.18 Clearly, this case does not supportMr McKean's submission either.15 Nicholas v Commissioner of Police [2017] NZCA 473, [2017] NZAR 172; andDoorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173.16 At [24].17 At [48].18 At [46].[39] Mr McKean submitted that once a respondent has proved the Commissioner'sassessment of presumed value is wrong, the Court would be required to make its own"rough and ready assessment on the basis of all the evidence of what the benefit fromcriminal offending was". He said that such an approach is fair given the practicalimpossibility of proof.[40] There are, however, a number of difficulties with that submission. First, itinvites a return to the law as it was under the 1991 Act. That was a conviction-basedregime which required the Court to assess the value of benefits derived from thecommission of a serious offence.19 Unlike its predecessor, the present Act is silent onthe matters the Court is to have regard to in assessing the amount of any benefitreceived. Instead, the previous criteria under the 1991 Act have been replaced withthe presumption in s 53.20 The obvious perils of the Court embarking on an accountingaudit of criminal activity, even a rough and ready one, were commented on by thisCourt while the 1991 Act was still in force.21[41] Secondly, no justification for that course is to be found anywhere in the Act.Mr McKean's submission would require us to read into the Act a reasonably complexprocedural mechanism.[42] Thirdly, Mr McKean's submission implies a distinction should be madebetween those cases which involve identifiable and real assets and those such asMr Cheah's, which do not. Nowhere in the Act is there any justification for such adistinction.[43] Another factor Mr McKean submitted operates in favour of his interpretationis that otherwise there is no fetter or control over what figure the Commissioner mightnominate in his s 52 assessment. With an onus on the respondent which is effectivelyimpossible to answer, the Commissioner will be "encouraged" to nominate inflatedfigures in the knowledge of how difficult it is for a respondent to rebut them.19 Proceeds of Crime Act, s 25(1)(a).20 Commissioner of Police v Tang, above n Error! Bookmark not defined., at [9].21 R v Pedersen, above n 6, at 392.[44] While we accept there is a potential for harshness, there are two aspects of thelegislation which provide some comfort against an unfair or oppressive result.The first is s 53(1) which deals with the value of the benefit being presumed in theCommissioner's application. Before that figure may be presumed the Commissioneris required to prove, on the balance of probabilities, that the respondent has unlawfullybenefitted from significant criminal activity during the relevant period. This is a notinsignificant evidential hurdle. It requires the Commissioner to specifically turn hismind to quantifying the level of value of the unlawful benefit.[45] The second is s 47(1) which permits the High Court to amend an applicationfor a civil forfeiture order either on its own initiative or on the application of theCommissioner. Section 47(2) prohibits any amendment to include additional property,proceeds or benefits unless the Court is satisfied the additional assets were notreasonably identifiable when the application was made or the evidence to support theapplication in relation to the additional assets only became available after the orderwas made. This suggests that s 47(1) contemplates a situation where the Court electsto reduce the value of the benefit claimed in the application. A similarly wordedprovision was contained in the 1991 Act.22 It would seem that neither s 47 nor itspredecessor has yet been used to amend an application to reduce the Commissioner'sclaim to proceeds, property or benefits. Presumably the power to do so would beexercised in accordance with the Act's purpose of permitting forfeiture of the direct orindirect proceeds of significant criminal activity.[46] We accept that for respondents such as Mr Cheah, who have accumulated few,if any, identifiable assets, the task of displacing the statutory presumption in s 53 mayprove challenging. Mr McKean referred to it as proving the counterfactual; namelythat Mr Cheah was not involved in drug dealing to the extent claimed. But we do notaccept it is as onerous or impossible a task as Mr McKean submitted. The respondentwill always be best placed to explain not only in what respects the Commissioner'sassessment is wrong, but also what the correct figure should be. If believed, this willusually result in a successful rebutting of the onus. In this case Mr Cheah filedaffidavit evidence. He gave oral testimony at the hearing. He disclosed the existence22 Proceeds of Crime Act, s 12.of offshore funds which had not, until that point, been known to the Commissioner.As is discussed in more detail below he gave explanations for his sources of legitimateincome and what his expenses were. This body of evidence went well beyond a balddenial that he received $1.8 million in benefits from his drug dealing.[47] Under s 53 there are only two possible outcomes. The first is that theCommissioner enjoys the benefit of the presumption and the respondent fails to rebutthe presumption. In that case the presumed value stands. The second is where therespondent succeeds in rebutting the presumption. As for the latter, by necessaryconstruction, it follows that the respondent must prove a different value. Under s 53the Court's role is limited to deciding on the balance of probabilities whether theCommissioner has proved that the respondent unlawfully benefitted, during therelevant period of criminal activity, from significant criminal activity, and whether therespondent has rebutted the presumption that the value of that benefit is correctlystated in the application. That may be contrasted with s 54, where the High Court isspecifically tasked with determining the maximum recoverable amount by taking thevalue determined under s 53 and deducting from it the value of any property forfeitedto the Crown as a result of the assets forfeiture order. In other words, the Act draws adistinction between values which are for the Court to assess and others which are forothers to prove.[48] We are satisfied that the Judge was correct to determine that it was forMr Cheah to rebut the statutory presumption by adducing evidence as to what theactual amount of his benefit was.23 As discussed, this approach reflects the legislativepurpose and is consistent with the statutory scheme and the wording of s 53.[49] We acknowledge that the result in this case is severe. The Commissioner'sprojection of profits fails to make a reasonable concession for the fact that Mr Cheahwas probably not supplying on the same scale over the 196 weeks. The vast majorityof dealing cases which come before the Court involve dealing which increasesincrementally over time. Nevertheless, this is what is required by the statutory onus23 High Court decision, above n 2, at [84].on a defendant in such proceedings. Section 53 would not result in such a toughoutcome if the figures put forward by the Commissioner had been credibly challenged.[50] This finding leads to the next question and that is whether the Judge was correctin determining that Mr Cheah had not rebutted the presumption. It is to that issue wenext turn.Was the Judge correct to find that Mr Cheah had not rebutted the presumption?[51] As earlier noted, the Commissioner's assessment was made up of fourcomponent parts; first, $132,000 being the value of the methamphetamine found atMr Cheah's address, secondly, $94,350 being the total receipts recorded in the diary,thirdly, $31,973 being the total of unexplained cash deposits into his bank accountsand $1,843,856 being the estimated total receipts earned from drug dealing after hewas dismissed from his job. For the purposes of this appeal it is only the last amountwhich is challenged.[52] The Judge summarised Mr Cheah's rebuttal evidence in relation to the valueof his unlawful benefit in the following way:24[68] Mr Cheah's rebuttal amounts to the following. Mr Cheah said in hisaffidavit that the total income from his drug dealing was $100,000 (the valueof the methamphetamine found) together with the cash. Therefore, his total is$170,000. He said that is what he received from drug dealing over a one yearperiod. He claims the figure produced by the Commissioner of $1,843,856 asan estimated value of Mr Cheah's profit from the sale of methamphetamine isfar too high. This number was calculated using the monetary amountsrecorded in Mr Cheah's diary from a 74-day period extrapolated out over the196 weeks Mr Cheah was not receiving income. Mr Cheah argues the diarywas kept at the height of his methamphetamine dealing and to extrapolate thisover a long period is inaccurate.[69] Mr Cheah says his methamphetamine sales did not begin until 2015,and that there is no evidence to show otherwise. He had admitted usingmethamphetamine before that, and was able to sustain both his own supply ofmethamphetamine and living expenses largely out of his bank accounts andthe sales of the luxury perfume and cosmetic products he had stock piled fromhis previous employment. Mr Cheah claims that as was typical he progressedto dealing over time.24 At [68] and [69].[53] In finding that Mr Cheah had failed to rebut the presumption in favour of theCommissioner's figure, the Judge made adverse credibility findings against him. Shedismissed Mr Cheah's account of his income and expenditure as implausible. Herfindings on that conclusion are reproduced, in part, below:[74] In my view Mr Cheah was not slow to lie about matters when they didnot suit his interests. He lied about his involvement in the drug dealing whenhe was initially arrested. He said he did that because he was so shocked atbeing arrested. At that stage, he blamed all the dealing on his associate.He now accepted he was guilty of supplying, albeit he said he was onlysupplying his associate Mr Wagener. He maintained he had weaned himselfoff methamphetamine after he became unemployed but had been lured backby Mr Wagener sometime in 2014 and started selling in 2015. I find it isunlikely he stopped using methamphetamine when he left his employment.He was clearly in a bad state in the period leading to his dismissal and it isunlikely he changed his behaviour. He failed to mention that he stopped usingmethamphetamine to the probation officer but instead had gone into somedetail about his reliance on methamphetamine and the mental health issuesthat flowed from that. Further Mr Cheah also initially said that only part ofthe $70,520 cash found in his wardrobe was from his drug supplying activities.He said some was from product sales. However, he agreed at the hearing thecash was from drug sales.[75] I am of the view that while he did concede a number of matters in thewitness box, he was not generally a credible witness.[54] The evidence of unlawful benefit came from Mr Cheah's claim he wasMr Wagener's drug supplier for modest amounts for just two months before his arrest,the methamphetamine (valued at $132,000), $70,520 in cash found on his arrest andthe diary showing sales of $99,450 of methamphetamine sales over the 10-week periodprior to his arrest. He admitted to the author of the pre-sentence report that he hadbeen a heavy user of methamphetamine. He had not been employed since June 2012and had spent $155,000 through his bank for living expenses. Statistically, an averageNew Zealander would have needed $205,000 to $296,000 in living expenses over theperiod. Thus, Mr McKean submitted that Mr Cheah, compared to the averageNew Zealander, spent just $50,000 less on living expenses over the relevant period.25Furthermore, Mr McKean submitted there was no evidence of drug dealing beyondthe 10-week period or that he was selling to anyone other than Mr Wagener.Significantly, he acquired no assets over the period in question.25 The evidence was that the average New Zealander spends $564 per week on living expenses. Ananalysis of his bank account revealed that Mr Cheah spent $427 per week on living expenses.[55] Mr McKean also placed considerable emphasis on the Commissioner'sproposition that in the four-year period after Mr Cheah left his employment he earned$1.8 million and spent that sum on purchasing methamphetamine to feed his habit.That assumption rests on the contents of the diary which indicated Mr Cheah wasreceiving approximately $9,400 per week from drug dealing and he was using thosefunds to purchase his drugs. In the absence of acquiring any other property,the Commissioner assumed the funds were spent on drugs. Mr McKean wasparticularly critical that no allowance was made for any variation in Mr Cheah's rateof earning, noting that the progression of addiction to methamphetamine and thenceto dealing typically starts off in small amounts before growing incrementally. MrMcKean illustrated this point by observing that if Mr Cheah was earning about $9,400per week from drug dealing and was using that money to spend on drugs for bothpersonal use and sale it meant he was consuming approximately four grams ofmethamphetamine a day for four years. That amount, by any measure, would be aphenomenal quantity of drugs.26 There was no evidence to contradict Mr Cheah'sevidence that he stopped taking drugs in 2012 and only recommenced once he met MrWagener online.[56] However, as Mr Wiseman pointed out, the unlawful benefit figure must alsoinclude the expenses of Mr Cheah's drug dealing operation which included purchasingthe product he was on-selling. It also funded his living expenses. Viewed that way,Mr Cheah's personal methamphetamine consumption would have been considerablyless than Mr McKean's figure, which we agree suggested extremely high volumes.[57] Mr McKean was also critical that insufficient weight was given to the evidenceMr Cheah received considerable income from the private sale of cosmetic products hehad acquired during the course of his employment. We do not agree. The Judgereasoned that these sales would not have been sufficient to generate the fundsnecessary for Mr Cheah to purchase drugs not only for his own use and also fordealing, noting that his tax records revealed substantially declining earnings in theyears preceding his employment termination.2726 This was on the basis that $9,400 is approximately what would be paid for an ounce ofmethamphetamine, that is, 28 grams which equates to four grams of methamphetamine a day.27 This was explored in Mr Cheah's cross-examination which revealed he declared $53,683 for theyear ending 31 March 2011, $29,000 in 2012 and $6,635 for 2013 (which covered three months[58] Nor is it correct to say that the Commissioner's assessment was entirelyarbitrary and unfair. An example is the criticism that the Commissioner assumed thatMr Cheah's drug dealing activity was constant throughout the four years when, in fact,the figures relied on related to the final phases of his offending over the last 10 weeks.The criticism is that no allowance was made for the likely scenario that the level ofhis trading increased incrementally from a relatively low base. There is, however,force in Mr Wiseman's contrary submission that it is plain Mr Cheah was addicted andwas dealing to support his habit for some time, from at least 2011, before hisbehavioural issues led his employers to terminate his employment. Mr Cheah wasunable to explain the origin of two substantial cash deposits paid into his accounts inAugust and November 2011 before his termination. These suggest that he was asubstantial dealer for some time before he left his work, a period which theCommissioner has not included in the retrospective extrapolation.[59] Mr McKean was also critical of the Judge's rejection of Mr Cheah's claim thathe stopped taking drugs in 2012 and only recommenced once he met Mr Wageneronline. In our view this was a factual finding which was open to the Judge and forwhich she gave reasons. These included Mr Cheah's evidence relating to hismethamphetamine use and addiction which led him to lose his job. It also includedhis omission to mention to the probation officer that his methamphetamineconsumption had abated until 2014 or 2015. Given the Judge's strong credibilityfindings against Mr Cheah, her rejection of his account is understandable.[60] For these reasons we are unable to conclude the Judge erred in findingMr Cheah had not rebutted the Commissioner's presumption.Was the Judge wrong not to make a finding of undue hardship?[61] Because we have decided that the Judge was correct in her interpretation andapplication of s 53 it is necessary to consider the second ground of appeal, namelywhether the Judge applied the undue hardship test under s 56 too strictly and failed totake into account Mr Cheah's personal circumstances in the event he was to lose hispart interest in the Great North Road property.of his employment from April to June 2013).[62] Mr McKean's criticism is that the Judge elevated the relevant test to onerequiring severe or gross hardship, rather than applying the statutory wording.[63] Under s 56 the Court may exclude certain property from a profit forfeitureorder if it considers that, having regard to all the circumstances, undue hardship isreasonably likely to be caused to the respondent if property was realised. Section 56provides:56 Exclusion of respondent's property from profit forfeiture orderbecause of undue hardship(1) The High Court may, on an application made by therespondent before a profit forfeiture order is made, excludecertain property from being able to be realised under section55(2)(c) if it considers that, having regard to all of thecircumstances, undue hardship is reasonably likely to becaused to the respondent if the property were realised.(2) The circumstances the Court may have regard to undersubsection (1) include, without limitation,—(a) the use that is ordinarily made, or was intended to bemade, of the property that is, or is proposed to be, thesubject of the profit forfeiture order; and(b) the nature and extent of the respondent's interest inthe property; and(c) the circumstances of the significant criminal activityto which the profit forfeiture order relates[64] The threshold for relief under s 56 is high. Hardship for offenders and thirdparties is to be expected. For the Court to grant relief an applicant must show notmerely inconvenience or difficulty, but that any hardship will be so disproportionateas to require the objectives of recovery and deterrence to be subordinated to theparticular needs of the wrongdoer.28[65] The loss of equity in a home acquired from legitimate sources before thecriminal activity, and the consequent prospect the respondent will need to rely on Stateassistance for housing, has been held not to constitute undue hardship; the risk of28 Nicholas v Commissioner of Police, above n 15, at [57]; and Lyall v Solicitor-General [1997]2 NZLR 641 (CA) at 646 and 647.losing a home ought to have been contemplated at the time the respondent embarkedon the criminal activity.29[66] On the question of undue hardship and Mr Cheah's application, this is what theJudge said:30[96] In my assessment, the hardship Mr Cheah will suffer is notdisproportionate to the extent and seriousness of his offending. While hemight lose ownership of his house, he is not disabled to the extent of beingunable to work. He may be eligible for a state benefit and he has funds whichhe has lent to his father from advances made in the vicinity of $40,000 whichare outside this jurisdiction. It is unclear what the returns are on this moneybut there is at least part remains outstanding. Mr Cheah knowinglyparticipated in the supply of controlled drugs. He had a significant drugbusiness operating at the time he was arrested. While the home was derivedfrom legitimate sources that in itself does not constitute undue hardship.[67] Mr McKean's criticisms are several. First, he submits the Judge read into s 56the requirement that the hardship must be severe or gross. He also submitted the Judgefailed to take into account or give sufficient weight to Mr Cheah's personalcircumstances; his age, his history of mental illness, that he has no family inNew Zealand and has just completed a lengthy term of imprisonment. Given hiscircumstances, his chances of getting back on his feet are limited. He is likely to haveto apply for a State benefit and, if he loses his home, seek State housing assistance.His home is his sole remaining asset and it will be difficult to extract his share fromthat of his co-owner to receive fair value. Furthermore, given the absence of concreteevidence supporting the profit forfeiture order, its severity may be taken into accountas part of the "all of the circumstances" evaluation under s 56.[68] We cannot agree with these points. Read in context, the Judge was not sayingthat Mr Cheah must suffer extreme or gross hardship before the relief under s 56 isavailable. What the Judge was correctly focusing on was the disproportion betweenMr Cheah's offending and the value of his half share in the Great North Road property.In doing so she applied the law reflected by this Court in Lyall and Nicholas. We agreethat forfeiture in this case will not lead Mr Cheah to suffer undue hardship in the29 Commissioner of Police v Ranga [2013] NZHC 745 at [45].30 High Court judgment, above n 2, at [96].correct legal sense, having regard to both the severity of the offending and Mr Cheah'spersonal circumstances. Our reasons follow.[69] First, the offending was extremely serious. Both charges carry lifeimprisonment and the sentence imposed on Mr Cheah reflects that seriousness.[70] Secondly, although the property was acquired well before Mr Cheah'soffending commenced, it was used by Mr Cheah to facilitate the commission of thecrimes he was convicted of. Found at the property was a substantial quantity ofmethamphetamine, items associated with drug dealing, a large quantity of cash andthe diary recording substantial sales. Furthermore, the modus operandi involvedMr Wagener meeting his purchaser near Mr Cheah's home, taking the order, obtainingthe drugs from Mr Cheah and then delivering them to the waiting purchaser. This isnot a case where the asset at risk has no connection to the index offending.[71] Thirdly, the loss of Mr Cheah's interest in the property is tempered by otherassets he will have available to him which have not been forfeited. These were referredto by the Judge who in our view correctly summarised the relevant factors whenmaking the proportionality assessment.[72] Fourthly, Mr Cheah's mental health issues need to be viewed in context.He lost his job due to performance issues related to his drug use, including bizarreconduct. However, the assessment of undue hardship is to be made at the time theapplication is judicially considered. It is relevant the pre-sentence report recordedMr Cheah is no longer addicted and no longer suffers from suicidal ideation.[73] Finally, we do not overlook the various other personal factors advanced byMr McKean. There is little doubt that the loss of equity in the Great North Roadproperty will cause hardship to Mr Cheah. He will lose his home. While there is nodirect evidence on this point, it seems reasonable to infer he will struggle to secureemployment given his age and circumstances. He will likely be reliant on financialsupport from the State. But these factors, taken singly or in combination do notpersuade us that he will suffer undue hardship for the purposes of s 56.Result[74] The appeal is dismissed.Solicitors:WRMK Lawyers, Whangarei for AppellantMeredith Connell, Auckland for Respondent