COMMISSIONER OF POLICE v MARWOOD [2018] NZHC 458

COMMISSIONER OF POLICE v MARWOOD [2018] NZHC 458 [19 March 2018]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-Ā-KAHU ROHECIV-2012-463-79[2018] NZHC 458BETWEEN COMMISSIONER OF POLICEApplicantAND KARL LESLIE RAYMOND MARWOODFirst RespondentERANA KINGSecond RespondentKARL LESLIE RAYMOND MARWOODas trustee of THE PERRIN TRUSTThird RespondentHearing: 19 March 2018Appearances: M Jenkins for the ApplicantW M Ryan for the First and Third RespondentsAttendance by or for the Second Respondent excusedJudgment: 19 March 2018ORAL JUDGMENT OF WOODHOUSE JSolicitors / Counsel:Mr M Jenkins, Gordon Pilditch, Office of the Crown Solicitor, RotoruaMr W M Ryan, Barrister, AucklandMr A G Speed (for the second respondent), Barrister, Auckland[1] The Commissioner has applied for an order for sale of restrained property inrespect of which applications for forfeiture are pending. The advice I have receivedfrom both counsel this morning is that the forfeiture application may be heard inDecember of this year, but there is no firm fixture. The estimate for the length of thehearing is nine days, which is part of the explanation for the uncertainty on theavailability of time for the hearing.[2] The application relates to two motor vehicles, a 2008 Ford Ranger and a 2005Holden Commodore. The Ford Ranger has a current value, based on the evidence forthe Commissioner (not challenged for the defendants), of $22,000. The HoldenCommodore has a current value of around $13,000. These vehicles have been subjectto restraining orders since 17 February 2012 and have been under the direct controlof, and stored by, the Official Assignee.[3] The application is made under s 35 of the Criminal Proceeds (Recovery) Act2009. This provision relevantly provides:35 Types of further orderWithout limiting the generality of section 34(1), a court may, on an applicationunder section 33(1), make 1 or more of the following further orders in relationto restrained property:(e) an order relating to the Official Assignee that—(v) directs the Official Assignee to sell restrained property(including, without limitation, a business) in order to preservethe value of the restrained property:[4] The Commissioner submits that the vehicles should be sold, to preserve value,because of ongoing storage costs and depreciation.[5] In relation to storage costs, the evidence is that the daily cost per car has been$13.50 from 9 October 2017. The monthly figure at that daily rate is approximately$821. On my arithmetic that is, therefore, approximately $7,300 through to December2018.[6] There is evidence for the Commissioner of depreciation rates obtained fromInland Revenue. On a straight line basis Inland Revenue, it appears, allows 25.2% perannum. There are other rates with a range between 21% and 30%.[7] I will come to the arguments for the respondents after noting the relevantprinciples derived from sub-paragraph (v) of s 35. When I talk about principles I meanthe sorts of things that the Act covers in relation to preservation of value or, putting itanother way, things that may diminish value. It is clearly established by decisions ofthis Court that both depreciation and storage costs are matters that can be taken intoaccount for the purposes of this provision.1 I agree with the conclusions in those casesas to the applicability of sub-paragraph (v) to the matters at issue in this case –depreciation and storage costs.[8] The principal opposition to the application comes from Mr Marwood, the firstrespondent, and the third respondent Trust. It appears that the Trust, or the trustee ofthe Trust, may be the owner of the vehicles. The second respondent supports theopposition of the first and third respondents, but has taken no active part in theopposition.[9] One of the grounds of opposition is, in its essence, that the Commissioner hasunduly delayed this application and, implicit in that, should bear the consequences ofany further loss of value that may occur between the date of this application, whichwas filed in January of this year, and the hearing which, for present purposes, I willassume to be likely to be around about December of this year.[10] In respect of delay, to the extent that weight should be given to it, I accept thatit is, on the face of it, surprising that this application has been delayed for so long –almost six years. Some of the explanation may be found in applications made by therespondents challenging the admissibility of the evidence the Commissioner wishes to1 Commissioner of Police v Chen [2016] NZHC 322 at [30]-[31]; and Commissioner of Police vCavanagh [2017] NZHC 1863 at [7]-[9].rely on in this proceeding. There was a criminal proceeding against the firstrespondent, Mr Marwood, involving charges relating to cannabis. As I understand it,the primary evidence the Crown sought to rely on was ruled inadmissible and thecharges were subsequently dismissed pursuant to s 147 of the Criminal ProceedingsAct. In the present proceeding (which of course is a civil proceeding) the presentrespondents challenged the Commissioner's intention to rely on this evidence. In thisCourt (and again as I understand it, based on advice from counsel which I do notquestion) Cooper J held that the evidence was inadmissible. That decision wasreversed by the Court of Appeal. Mr Marwood obtained leave to appeal to theSupreme Court. I have not looked at the decision. My broad understanding is that theSupreme Court held that in principle there could be a challenge to admissibility in acivil proceeding, but held on the facts of this case that there were no grounds forexcluding the evidence. I have mentioned that detail because it has some relevance tothe exercise of my ultimate discretion as to whether to make the orders sought. Theshort point is that the evidence which resulted in the dismissal of the criminal chargeswill be available in support of the present application.[11] I regard the length of the delay by the Commissioner in bringing thisapplication as being in broad measure a fairly neutral factor. What the Court needs tolook at is the application of s 35(e)(v) to the substance of the application now made.[12] Addressing those matters, Mr Ryan submitted that any diminution in valuethrough depreciation between now and a hearing in, or hopefully soon after, December2018, will not be substantial. I am inclined to agree with that submission, applying adegree of judicial knowledge relating to the depreciation in value of motor vehicles.The Inland Revenue rates are tax rates. However, I believe it is generally acceptedthat the greatest actual depreciation in the value of standard motor vehicles tends to bein the period soon after purchase, and the actual diminution in value as the vehiclesget older in itself diminishes as a percentage of value.[13] Mr Jenkins, for the Commissioner, accepted that that is a reasonable positionto take. He submitted that, nevertheless, there is likely to be some diminution in value.[14] Of greater consequence are the storage costs. In the scheme of things, thefurther storage costs are reasonably significant in relation to the total value of thevehicles. The total value, based on the evidence I have, is $35,000. The further storagecosts represent about (in round figures) one-fifth of that present value.[15] What the Court is required to do is balance the competing interests of theCommissioner to seek to preserve value against the possibility that the Commissionerwill succeed, and the interests of the respondents who are the owners of the vehiclesand in the end may be held to have been entitled to them. In this regard, and havingput aside the argument for the respondent based on delay by the Commissioner, it isin substantial measure an economic exercise. This is not a case of an application forsale of an asset which has some special value to the owner. There is no suggestion inthe affidavit evidence from Mr Marwood that that is the case. Both vehicles areutilitarian. Both vehicles, on the face of it, have been acquired for normal uses. If, atthe end of the day, the respondents are successful, but there has been an order for sale,the value currently represented in these vehicles will be available, subject to a furtherapplication I will come to. That is to say, the current value will be likely to be available(and subject to any specific statutory provisions of relevance) and with someadditional interest arising from investment of the proceeds of sale on an interestbearing account. If the respondents are ultimately successful and the total proceeds ofsale plus accrued net interest goes to them, they can buy similar vehicles in the marketat market prices. It is simply an exchange of value.[16] In this regard I note one other submission from Mr Ryan, arising from MrMarwood's evidence, relating to the fact that Mr Marwood (or the Trust) borrowedmoney on mortgage to buy the cars (and perhaps other things). There is no loss to therespondents in that regard if the vehicles are sold now and the proceeds of sale are puton an interest bearing deposit and, at the end of the day, the money goes back to therespondent. That money, if it is not used to buy other cars, can be used to repay partof the mortgage.[17] For these various reasons I am satisfied that the order sought for sale of thevehicles should be made. The Official Assignee should obviously seek to ensure thatthe vehicles are sold for the best market price available and bearing in mind theevidence we have heard on current value. However, that will of course depend on themarket.[18] The remaining issue which I adverted to is whether the storage costs alreadyincurred should be reimbursed to the Official Assignee out of the costs of sale. I cansee no justification for that order. There will be no loss to the Official Assignee, or theCommissioner, if the vehicles are sold and the net proceeds are put on an interestbearing deposit and the decision in the end is in favour of the Commissioner. Thefunds will be there to meet the storage costs. The earlier observations about theeconomic analysis applies both ways. In consequence, I decline the application for anorder that the storage costs be reimbursed. The total proceeds of sale, less anyreasonable costs of sale, are to be retained by the Official Assignee.[19] The Commissioner has also sought costs. Mr Ryan has advised that MrMarwood is in receipt of legal aid. On that basis there can be no order against him.There is an issue as to whether that can apply to the third respondent, bearing in mindthat he is the trustee of a Trust. There is also the position of the second respondent,although costs may not have been sought against the second respondent. Inconsequence, and with no opposition from Mr Jenkins, the question of costs is reservedpending determination of the substantive proceeding.__________________________Woodhouse J