COMMISSIONER OF POLICE v CLIFFORD [2014] NZHC 181

COMMISSIONER OF POLICE v CLIFFORD [2014] NZHC 181 [18 February 2014]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV-2009-419-1614[2014] NZHC 181IN THE MATTER of an application pursuant to sections 21, 25, 43, 44, 52 and 58 of the Criminal Proceeds (Recovery) Act 2009BETWEEN THE COMMISSIONER OF POLICEApplicantAND TIMOTHY ANDREW CLIFFORDFirst RespondentTHE WEST FAMILY TRUSTSecond RespondentHearing: 17 February 2014Appearances: R G Douch for the ApplicantNo appearance by or on behalf of the RespondentsJudgment: 18 February 2014JUDGMENT OF BROWN JThis judgment was delivered by me on 18 February 2014at 4.30 pm, pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors: Crown Solicitors, HamiltonChatwin Legal, HamiltonCounsel: T Stucliffe, Thackeray Chambers, HamiltonBackground[1] The first respondent, Mr Clifford, was arrested following a police investigation into his activities and a search in October 2009 of farm properties at Te Uku owned by the second respondent, the West Family Trust ("the Trust"), and occupied by Mr Clifford. The Trust was established on or about 30 September 1996 as the Timothy Andrew Clifford Family Trust. Mr Clifford was the settler, sole trustee and a discretionary beneficiary of the Trust. The name of the Trust was changed to the West Family Trust in July 2000.[2] Part of the police investigation involved an extensive analysis of the financial affairs of Mr Clifford which revealed that he had accrued significant assets over a significant period of criminal activity with no legitimate source of the funds required to obtain that asset base. The assets were held in the Trust but the analysis revealed that Mr Clifford was the source of the funds used by the Trust and that those funds must have come from the drug dealing activities undertaken by him.[3] Mr Clifford entered guilty pleas to a series of drug dealing and firearms charges and was sentenced in the Hamilton High Court on 19 December 2012 to an effective term of 12 years imprisonment. The summary of facts accepted by Mr Clifford and relied upon by Lang J recorded the fact that between 1 June 1999 and 12 October 2009 Mr Clifford had income from drug dealing of not less than $4,825,783.36.The applications[4] By application dated 21 August 2013 the Commissioner of Police (the applicant) seeks a profit forfeiture order under s 55 of the Criminal Proceeds (Recovery) Act 2009 ("the Act"). An order is also sought under s 58 of the Act that the property (the subject of the proposed profit forfeiture order) which is owned by the Trust is to be treated as though Mr Clifford had an interest in that property for the reason that he has effective control over that property.[5] In support of those orders detailed affidavits were filed from Mr B R Russell, an investigator attached to the Asset Recovery Unit of the Hamilton Police, andMr B J Vevers, a chartered accountant employed by the New Zealand Police as a forensic accountant.[6] Subsequent to the filing of a notice of opposition by Mr Clifford, no steps have been taken by either respondent or by any other person claiming an interest. Consequently when the proceeding was called on 12 February 2014 it was set down for a formal proof hearing. There was no appearance at the hearing on 17 February 2014 by or for either respondent.The relevant legislation[7] Profit forfeiture orders are made pursuant to s 55 of the Act. 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.[8] The order must specify:(a) The value of the benefit determined in accordance with s 53;(b) The maximum amount determined in accordance with s 54; and(c) The property that is to be disposed of in accordance with s 83(1), being property in which the respondent has, or is treated as having, interests.[9] The "relevant period of criminal activity" referred to in s 55(1)(a) is defined in s 5 to mean (in the case of restrained property):The period that ends on the date the application is made and starts 7 years before the date of the application for the relevant restraining order.[10] Section 52 states that a profit forfeiture order application must:(a) Name the respondent;(b) Describe the significant criminal activity within the relevant period of criminal activity from which the respondent is alleged to have unlawfully benefited;(c) State the value of that benefit; and(d) Identify the property in which the respondent holds interests and the nature of those interests.[11] It is that last requirement that gives rise to the Commissioner's application pursuant to s 58 of the Act, subsection (1) of which provides:(1) If the High Court is satisfied that a respondent has effective control over property, the Court may, on an application made by the Commissioner, order that the property is to be treated as though the respondent had an interest in the property specified by the Court.[12] Property that is subject to an order under subsection (1) may be included in any profit forfeiture order that is made against the respondent: s 58(4).The effective control order application[13] Support for the s 58 application was primarily from Mr Russell. He explained that throughout the period since the settling of the Trust in 1996 Mr Clifford had been the single constant. He was the sole continuing trustee and had been the principal provider of funds for the purchases of the land making up the Te Uku farm property. During the period of ownership by the Trust substantial improvements were made to the Te Uku farm property with funds provided by Mr Clifford. No minutes of the Trust exist reflecting that there was any arrangement between the Trust and Mr Clifford relative to funds provided by Mr Clifford for the purpose of purchase of property or for funding of improvements to the property. No gifting statements were filed with the IRD that would support an assertion that the Trust was functioning as a separate entity.[14] Mr Russell's evidence on this point concluded in the following way:26. The use of the [Trust] was simply a mechanism to attempt to distance [Mr Clifford] from ownership of property funded by the activity disclosed in the summary of facts.27. All of the available evidence points towards [Mr Clifford] making day to day decisions in respect of the Te Uku Farm Property nominally owned by the [Trust] and to [Mr Clifford's] criminal activities funding improvements to that land....29. The levels of income returned by [Mr Clifford] to the IRD reflected that at no time was he in a financial position to have generated income from legitimate sources at the levels required to have enabled the purchase of the Te Uku Farm Property or the funding of improvements.[15] Similarly it was Mr Clifford who negotiated various arrangements with certain power companies whereby payments were made in consideration for the grant of access and easement rights in connection with the conveyance and generation of electricity.[16] Mr Douch submitted that the affidavit evidence established that Mr Clifford in reality had complete control over the Trust and thereby property owned by the Trust. Thus the only reasonable conclusion was that the Trust was a front for Mr Clifford.[17] I agree. I am satisfied that Mr Clifford had effective control over the five properties listed in the draft order attached to this judgment (and consequently over the cash sum being the net proceeds of sale of those properties plus interest accruing) and over the cash sum (plus interest accruing) in respect of the amounts paid by the power companies in respect of the access and easement rights.The profit forfeiture order applicationValue of the benefit determined in accordance with s 53[18] Section 53(1) provides: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 criminal activity, unlawfullybenefited from significant criminal activity, the value of that benefit is presumed to be the value stated 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 by the respondent on the balance of probabilities.[19] Mr Vevers explained that in July 2007 he became involved with an analysis of the financial affairs of Mr Clifford, which analysis established that Mr Clifford had access to income from an unidentified source and that he had derived financial benefit from that same unidentified income source. Then, with the benefit of documents provided to him by Mr Russell, Mr Vevers calculated that Mr Clifford had had access to income from drug dealing of not less than $4,825,783.36.[20] Mr Vevers' affidavit then explained that in order to assess the benefit derived from significant criminal activity by Mr Clifford during the relevant period of criminal activity he had made a series of calculations which were evidenced in schedules attached to his affidavit. His conclusion was that, once an allowance was made for cash and ATM withdrawals, total drug dealing income over the seven year period that ended on 7 December 2009 equated to $931,711.83.[21] It was that value that was stated in the profit forfeiture order application in respect of the item required by s 52(c).[22] There has been no attempt to disprove or rebut the presumption in s 53(2) that the value stated in the application is the benefit to Mr Clifford. Consequently I hold that on the balance of probabilities in the relevant period of criminal activity Mr Clifford had unlawfully benefited from significant criminal activity, the value of which benefit is presumed to be $931,711.83.Maximum recoverable amount[23] Section 54(1) provides in material part:54 High Court must determine maximum recoverable amount(1) Before the High Court makes a profit forfeiture order, the Court must determine the maximum recoverable amount by—(a) taking the value of the benefit determined in accordance with section 53; and(b) deducting from that the value of any property forfeited to the Crown as a result of an assets forfeiture order made in relation to the same significant criminal activity to which the profit forfeiture order relates.(2) In determining the value of any property under subsection (1)(b), the Court may, at its own discretion or at the request of either party to the proceedings, seek an independent valuation as to the value of the property.[24] There have been no other forfeiture orders made in relation to the same significant criminal activity to which the profit forfeiture order is directed. Consequently I determine that the maximum recoverable amount under s 54 is $931,711.83.Property to be realised[25] On the basis of the evidence before me I am satisfied on the balance of probabilities that Mr Clifford has unlawfully benefited from significant criminal activity within the relevant criminal period. I am also satisfied on the balance of probabilities that Mr Clifford has interests in the following property:(a) The cash sum of $797,376.74 plus interest accruing being the net proceeds of sale of the five properties specified in the draft Profit Forfeiture Order annexed; and(b) The cash sum of $21,933.00 plus interest accruing being the amount due and owing to the Trust by MEL (Te Uku) Limited.[26] The property identified in (a) and (b) above is the property to be disposed of as referred to in s 55(2)(c).Orders[27] For the reasons given above I grant:(a) An order under s 58(1), in terms of the draft order attached to this judgment, that the property specified in that draft order is to be treated as though Mr Clifford had an interest in such property; and(b) A Profit Forfeiture Order under s 55(1) in the terms of the draft order attached to this judgment.________________________________Brown JAPPENDIXPROFIT FORFEITURE ORDER1. The application for a profit forfeiture order made by The Commissioner on 21 August 2013 was determined by the Honourable Justice Brown on 18 February 2014.2. The determination was made following a hearing held on 17 February 2014 at which the following people appeared:Mr R G Douch Counsel for the applicant3. As a result of the determination the High Court made the following order:(a) The value of the benefit is $931,711.83;(b) The maximum recoverable amount is $931,711.83;(c) The following property is to be realised-(i) The cash sum of $797,376.74 plus interest presently accruing being the net proceeds of sale (being proceeds of sale following repayment of mortgage, payment of commission and payment of direct sale costs) of the following properties:i. All that parcel of land containing 15.8622 hectares more or less being Section 22 Block XI Karioi Survey District and Defined On Survey Office Plan 52435 and being all that land comprised and described in Certificate of Title SA67D/603 South Auckland Land Registration District.ii. All that parcel of land containing 2.5430 hectares more or less being Section 24 Block XI Karioi Survey District being all that land comprised and described in Certificate of Title SA31C/940 South Auckland Land Registration District.iii. All that parcel of land containing 15.3781 hectares more or less being Part Moerangi 1A2 Block being all that land comprised and described in Certificate of Title SA1274/43 South Auckland Land Registration District.iv. All that parcel of land containing 638.0600 hectares more or less being Lot 3 Deposited Plan 309860 being all that land comprised and described in Certificate of Title 38984 South Auckland Land Registration District.v. All that parcel of land containing 429.2751 hectares more or less being Lot 2 Deposited Plan South Auckland 89686, Lot 3 Deposited Plan South Auckland 34203 and Lot 1-2 Deposited Plan South Auckland 85711 being all that land comprised and described in Certificate of Title SA70D/964 South Auckland Land Registration District.("the Properties")(ii) The cash sum of $21,933.00 plus interest presently accruing being the amount due and owing to the second respondent by MEL (Te Uku) Limited.ORDER THAT RESPONDENT'S EFFECTIVE CONTROL OVER PROPERTY BE TREATED AS INTEREST IN PROPERTY1. The application to treat Timothy Andrew Clifford's effective control over property as an interest in property made by The Commissioner on 21 August 2013 was determined by the Honourable Justice Brown on 18 February 2014.2. The determination was made following a hearing held on 17 February 2014 at which the following people appeared:Mr R G Douch Counsel for the applicant3. As a result of the determination the High Court made the following order –The following property is property over which the Court is satisfied that Timothy Andrew Clifford has effective control:(a) The cash sum of $797,376.74 plus interest presently accruing being the net proceeds of sale (being proceeds of sale following repayment of mortgage, payment of commission and payment of direct sale costs) of the following properties:i. All that parcel of land containing 15.8622 hectares more or less being Section 22 Block XI Karioi Survey District and Defined On Survey Office Plan 52435 and being all that land comprised and described in Certificate of Title SA67D/603 South Auckland Land Registration District.ii. All that parcel of land containing 2.5430 hectares more or less being Section 24 Block XI Karioi Survey District being all that land comprised and described in Certificate of Title SA31C/940 South Auckland Land Registration District.iii. All that parcel of land containing 15.3781 hectares more or less being Part Moerangi 1A2 Block being all that land comprised and described in Certificate of Title SA1274/43 South Auckland Land Registration District.iv. All that parcel of land containing 638.0600 hectares more or less being Lot 3 Deposited Plan 309860 being all that land comprised and described in Certificate of Title 38984 South Auckland Land Registration District.v. All that parcel of land containing 429.2751 hectares more or less being Lot 2 Deposited Plan South Auckland 89686, Lot 3 Deposited Plan South Auckland 34203 and Lot 1-2 Deposited Plan South Auckland 85711 being all that land comprised and described in Certificate of Title SA70D/964 South Auckland Land Registration District.("the Properties")(b) The cash sum of $21,933.00 plus interest presently accruing being the amount due and owing to the second respondent by MEL (Te Uku) Limited.and is to be treated as though Timothy Andrew Clifford has a 100% interest in it.