COMMISSIONER OF POLICE v MILOSEVIC [2019] NZHC 1554

COMMISSIONER OF POLICE v MILOSEVIC [2019] NZHC 1554 [3 July 2019]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2018-463-000027[2019] NZHC 1554BETWEEN THE COMMISSIONER OF POLICEApplicantAND FRANK AMADEUS MILOSEVICFirst RespondentIRENE RAKISecond RespondentHearing: 29 and 30 April 2019Appearances: R Jenson for the ApplicantM Harborow for the Official AssigneeW Nabney for First Respondent Frank MilosevicN Bradley for Second Respondent Irene RakiJudgment: 3 July 2019JUDGMENT OF HINTON JThis judgment was delivered by me on 3 July 2019 at 4.00 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarCounsel/Solicitors:William Nabney, Barrister, TaurangaPollett Legal Ltd, TaurangaMeredith Connell, AucklandRobinson Law Ltd, Whakatane[1] By application dated 25 May 2018, the Commissioner seeks orders under ss 34and 35 of the Criminal Proceeds (Recovery) Act 2009 (the Act) for the sale of a numberof assets which are the subject of on-notice restraining orders made by Lang J on 30July 2018 (and prior to that, without notice orders dated 23 March 2018).[2] The assets for which a sale order is sought are:(a) A 2012 Ford Falcon F150 Raptor utility ("the Ford Raptor").(b) A kitset AC Cobra convertible car ("the Cobra").(c) A 2013 Harley Davidson motorcycle ("the Harley").(d) A 2012 Toyota Hiace van ("the Hiace").(e) A 2005 Toyota Hilux utility ("the Hilux").(f) A Kawasaki Ultra 300LX jet ski and trailer ("the jetski").(g) An Eliminator Hydroplane powerboat and 2007 boat trailer.(h) A 6.5m aluminium fishing boat with a Yamaha outboard motor andtrailer.[3] The property was seized following an investigation called Operation Notusinto criminal activity, predominantly supply of methamphetamine and cannabis on thepart of members of the Kawerau Mongrel Mob. The first respondent has been chargedwith drug-related offences, including dealing methamphetamine. His partner, thesecond respondent, has been charged with money laundering.[4] The application for sale is opposed by both respondents.[5] Both respondents have pleaded not guilty. A date for the criminal trial has notbeen set yet and is unlikely to be until mid-to-late next year. The forfeitureproceedings may not be disposed of until late 2020/mid-2021.Joint hearing with Commissioner v Parker and others – CIV-2018-463-000029[6] By agreement between the parties and order of Gordon J, this case was heardtogether with Commissioner of Police v Parker & Others because of commonality ofissues and evidence, particularly with regard to matters concerning the OfficialAssignee.1[7] The common evidence and common issues are addressed in the Parkerjudgment, a copy of which is attached to this judgment.Overview of this case[8] As is usual with an application for sale, the Commissioner relies on delay inresolution of the forfeiture proceeding. Mr Nabney, for the first respondent, says thedelay arises at least in part from the Commissioner not having filed that proceeding.However, delayed filing is common, and necessary, in matters such as this, as a resultof the ongoing investigation. Realistically the forfeiture proceeding will not beresolved until after the criminal trial, in any event. I do not consider any delay is thefault of the Commissioner.[9] Otherwise, as a consequence of my review of the law and findings in Parker,which are equally applicable and I rely on here, I can turn immediately to address eachasset.The Ford RaptorValue and depreciation[10] The Official Assignee obtained an e-valuation for the Raptor as at aboutMay 2018 of $32,000. Indicative depreciation based on the IRD schedules is 21% perannum on a straight line basis. Storage costs are $13.50 per day, or about $4,900 perannum. The compounding storage costs are settled at the time of sale of the asset, ifit is forfeited.1 Commissioner of Police v Parker [2019] NZHC 1506.[11] Although not raised in the notice of opposition, the first defendant submits thatthe actual value of the Raptor is not the figure of $32,000 placed upon it by theCommissioner, but rather is higher than that, relying on an affidavit filed by theCommissioner from James Craw who deposes to having sold the Raptor toMr Milosevic for $90,000 in February 2016. That is several years before thee-valuation.[12] The Official Assignee, Mr Sayers, accepts that the Raptor "may" sell for a lotmore than $32,000, but nevertheless the only evidence I have as to indicative value atmid-2018 is $32,000. I accept that $32,000 is likely to be a very minimum value.However, the exact value is not so material to this application, other than on anindicative basis to determine depreciation and to assess the proportion of depreciationand storage costs to value.[13] I add that the Official Assignee accepts that e-valuations tend to be a minimumand says that he goes to every length possible to achieve the best price on a sale. Soif the value is higher than $32,000 and I order a sale, the e-valuation should notprejudice the respondents.[14] With regard to each asset referred to in this judgment, I recognise that the IRDrate most likely exceeds the depreciation that might apply, for the reasons set out inParker.2[15] Mr Nabney raises the point that the 2012 Raptor, if straight line depreciationof 21% is in any way correct, by 2017/2018 would have nil value, yet the 2018e-valuation is $32,000. That is fair comment, but it does not detract from the fact thatthe vehicle will be depreciating. The Commissioner's position is clear that both thee-valuation and the IRD depreciation rates are indicative only. The first is accepted aslikely to be too low, and the second as likely to be too high. The aim is to provide theCourt with some assistance in terms of general depreciation of value of chattels, whichas Venning J said, is accepted as a matter of common sense anyway.32 At [40]-[41].3 Commissioner of Police v Cavanagh [2014] NZHC 2978 at [9].[16] The evidence from the Official Assignee is that the storage/holding costs arecarefully calculated and closely watched. They are not based on costs for theindividual item, but rather the average costs incurred for a motor vehicle, motorbike,boat and so on. There is no profit element in the Official Assignee's calculations.Storage at respondents' residence[17] The first respondent says that the Raptor should not be sold as it is not acommon vehicle, and storage costs could be saved by returning it to him for storage.[18] There is no application for the Raptor to be stored away from the OfficialAssignee's secured storage unit, nor any application to remove the Raptor fromrestraint. There is therefore no need to consider that matter further, for the reasons setout in my attached judgment in Parker.4[19] In addition, I accept the evidence of the Official Assignee that the uncertainand varying proposals made as to storage at the respondents' home address atDomett Avenue, Kawerau, would in no way involve the Raptor still being under theOfficial Assignee's custody and control. Storage at Domett Avenue would also not beviable for numerous reasons, including the garage being too small to house it, andsignificant security concerns.[20] As with Parker, there is also no proof that any costs would be saved. To thecontrary, the Official Assignee's evidence, which I accept, is that storage at therespondents' home would likely result in additional costs over and above those thatwould otherwise be incurred by the Official Assignee at the secure storage unit.Mr Nabney suggested that there would be economies of scale because Domett Avenueitself is under restraint and so the property and Raptor could be checked at the sametime. However, Mr Sayers explained that different personnel are required andrestrained vehicles are maintained more regularly than properties are inspected. Therewould also be security risks for staff and contractors visiting the property.54 Commissioner of Police v Parker [2019] NZHC 1506 at [59]-[62].5 At [69].[21] The evidence is also that the likely depreciation in the Raptor will be greater ifstored with the first respondent than if it were stored securely with the OfficialAssignee, given the extensive measures taken by the Official Assignee to care forproperty and preserve value during the period of the restraint, to which I have alreadyreferred at length in Parker.Raptor not a common vehicle[22] As noted above, the first respondent also says the vehicle is not common andwould be difficult to replace. However, the evidence is that there were six or sevenFord Raptors listed on Trade Me on the day of hearing, so that point gains no traction.The fact there was only one 2012 Raptor does not detract from that.Conclusion[23] Weighing all of these matters, I consider it is appropriate to order a sale of theRaptor, given the potential depreciation and storage costs and length of time until theforfeiture proceeding is resolved. There are no special factors relating to it and storagewith the respondents is not an option.The AC Cobra[24] The Commissioner filed an affidavit by Colin Welch, who had worked on theCobra. His expertise was not disputed. His affidavit dated September 2018 recordsthat it is not an original Cobra; it is a poor copy and it has a value of between $12,000and $15,000.[25] The IRD depreciation rate, and the Official Assignee's storage/holding costsare at the same rates as for the Raptor.[26] Mr Welch materially backtracked on his affidavit evidence duringcross-examination from Mr Nabney, for the first respondent. He said that he had erredin his appraisal of value. Rather extraordinarily, he reassessed the Cobra as having avalue of about $45,000. He said further that it was unlikely to depreciate. It wouldeither hold value, or appreciate in value.[27] In light of the material change in Mr Welch's evidence, Mr Jensonacknowledged that the Commissioner had to rely in regard to this vehicle solely onstorage or holding costs. I note even then Mr Sayers acknowledged that thestorage/holding costs may be less than the standard amount because as I understand it,the Cobra is not functioning. There would still be mechanical issues, but themaintenance costs would be less than usual.[28] Further, the first respondent gave evidence of his longstanding interest inowning a Cobra and the fact that he acquired the body in 2012. I am also persuadedthat the Cobra, while not unique, is relatively rare.[29] I have to conclude that the AC Cobra will likely not decrease in value, and mayeven increase in value. Given the first respondent's evidence as to the significance ofthe Cobra for him and given that the vehicle is uncommon, I do not consider that thestorage costs alone would justify a sale.[30] I therefore decline the application for sale of the Cobra.The Harley Davidson[31] The Harley has an indicative value of $20,000. The IRD schedule depreciationcost is 21% per annum on a straight line basis. The storage/holding cost is $5.80 perday or about $2,100 per annum.[32] The first respondent opposes the sale of the Harley Davidson on the basis thatit is held by him as a bare trustee and belongs to the collective membership of theKawerau Mongrel Mob. It is claimed to be a memorial to Tahu Kingi, a longstandingMongrel Mob member who died last year. The first respondent says it therefore oughtnot to be sold.[33] Up to the time of seizure, nothing had been done to physically memorialise orchange the vehicle since it was purchased other than to add the Mongrel Mob logo onthe top of the fuel tank. Mr Conroy, the first respondent's best friend, said they weregoing to add a photo of Mr Kingi "at some stage".[34] I also note that although it is claimed Mr Milosevic holds the Harley in trust,there is no objective evidence in support. Mr Milosevic and his younger son appearto be the only people who have been seen riding the bike. There is no documentaryevidence to support the claim of alternative ownership. The fact that it has a gang logosticker on it is not surprising when it is alleged that Mr Milosevic is the President ofthe Kawerau chapter. I note that there is no application on behalf of the Mongrel Mobasserting their interest.[35] Such evidence as I do have regarding the claimed Mongrel Mob ownership, Ifound unconvincing. For example, the evidence from Mr Conroy really addednothing. As he himself said, he lives and works six days a week in Te Puke and goesto Kawerau for the occasional meeting but he was not in attendance at meetingsrelevant to the acquisition of the Harley. His evidence seemed to be entirely hearsay.As Mr Jenson pointed out, Mr Te Rito's affidavit was word-for-word the same asMr Conroy's.[36] I also do not consider there is any particular sentimental value or other specialvalue attached to this vehicle on account of its alleged memorial status, in particularbecause it has not been personalised, or "memorialised".[37] If it is correct that the Harley belongs to the Kawerau Mongrel Mob, they willin fact be better off if it is sold, rather than it depreciating pending resolution. Theproceeds will then earn interest and a substitute "memorial" Harley can be purchasedin the event their claim prevails.[38] I am satisfied that the combination of the potential depreciation and storagecosts in the case of a vehicle worth about $20,000, and the likely period of time downto disposal of the forfeiture application, justifies an order for sale.The Toyota Hiace van[39] The Hiace has an indicative value of $30,000. The same depreciation rate andstorage costs apply as for the other motor vehicles, namely 21% per annum on astraight line basis and storage/holding costs of $4,900 per annum.[40] In this case, the respondents claim that the vehicle is held by the secondrespondent as a bare trustee. They say it is actually owned by the Putauaki StagsRugby League Club, of which it seems their grandchildren or other relatives weremembers.[41] The evidence is that the second respondent bought the vehicle in cash. Thevendor swore an affidavit to that effect. I accept that there is evidence of use by theRugby League Club, supported by two photos. In addition, the van had the clubinsignia on the side and the vendor said Ms Raki told him it was for a sports club. Itseems fairly clear that the Club was intended to use it, and did use it. I understand thatMs Nuku, the Club's secretary, swore an affidavit dated 18 July 2018 saying that theClub has an interest in the vehicle.6 However, she did not attend Court followingnotice that she was required for cross-examination. Her affidavit evidence has to beput to one side. There is no independent evidence therefore on behalf of the Clubregarding any ownership claim, as opposed to use.[42] I have some sympathy for the Club (at least in terms of their not being able touse the vehicle) but the Toyota Hiace is subject to the restraining order and the Clubhas made no application in respect of it. Further, regardless of who is the true owner,it will clearly depreciate in the meantime. There is no particular sentimental or non-monetary value attached to it. If the van is sold, the Club could still file an applicationand, if successful, would ultimately receive greater funds than if unsold. The proceedsremain "restrained property" in terms of s 36(4) of the Act.[43] I am satisfied that, given the value of the vehicle, the quantum of likelydepreciation and storage costs, and the other matters discussed above, it is appropriateto order a sale.6 I was advised of this affidavit, but have not been able to locate it on the Court file. There is asecond affidavit filed by Ms Nuku, dated 9 August 2018 in which she refers to the first. Thesecond affidavit annexes the photos which in the end were produced by Ms Raki. It does notmatter that the July 2018 affidavit is missing as whatever its contents, it is not part of the evidence.The Toyota Hilux[44] This vehicle has an estimated value of $9,000 and the same potentialdepreciation rate and storage costs as for the other motor vehicles. It is registered inthe name of the second respondent.[45] The second respondent opposes sale on the basis the Hilux has effectivelybottomed-out in value and is unlikely to depreciate further. She also opposes salebecause she says it is the only vehicle she had and she intends to apply under s 51 ofthe Act for it to be excluded from forfeiture on the basis of undue hardship. She doesnot claim that the vehicle has any special or individual status.[46] I agree that the vehicle has a low value and correspondingly low depreciation.It no doubt is nearing the end of its depreciable life. However, I also agree withMr Jenson that where an asset has such low value, the storage costs move into sharperfocus.[47] I note Ms Raki's claim that the Hilux was, until it was restrained in May 2018,the only vehicle she had. But there is no claim before the Court for release on thegrounds of hardship. She also accepted that at the time she swore her affidavit, she infact had the use of a blue Mini which it seems she continued to use for some time. Shesays the Mini belonged to Nelson Milosevic (who I believe is her brother-in-law), andhe sold it in January this year, on a brief trip back to the country. In the meantime, sheknew the Commissioner had become aware that she was driving the Mini. I foundMs Raki's evidence overall to be implausible, to say the least.[48] I consider the Hilux should be sold. For a vehicle with such low value, thestorage costs alone will likely eat up any equity in the event forfeiture is ordered andthere are no good reasons for keeping it. I rely in this regard on s 34 of the Act andrefer to my reasoning in Parker.77 Commissioner of Police v Parker [2019] NZHC 1056 at [51]-[55].Kawasaki ultra jetski and trailer[49] The jetski and trailer have been assessed as having a value of $7,000. The IRDstraight line depreciation rate is 30% and storage costs are $4,900 per annum.[50] The particular opposition to sale is based on a claim that the jetski and trailerwere gifted to and really owned by the respondents' daughter. However, the daughter'sevidence did not support that claim. Her evidence suggests that the jetski is owned byher father, or by the family, and that her father just came home with it at some point.[51] In any event, I am not deciding who is the owner, but rather whether the jetskishould be sold, in which case the argument becomes one over proceeds of sale. Thereis nothing special about the jetski that would mean it should be preserved on accountof the ownership claim.[52] Although the asset is of relatively low value, I consider it is the sort of assetthat will depreciate. Given those factors, the storage costs, and lack of any specialvalue, I agree with Mr Jenson it is appropriate that the jetski and trailer should be sold.The Eliminator powerboat and associated trailer[53] The Eliminator powerboat has an estimated value of $16,000. The IRDdepreciation rate is 8.5% per annum on a straight line basis, and storage costs are$17.80 per day, or $6,500 per annum.[54] I note the points made by Lang J in Commissioner of Police v Drummond withregard to a boat, where he questioned whether there would truly be depreciation in thecase of a boat that was not being used.8 While I agree that a boat would depreciateless than a car in circumstances where it is sitting in storage, I see no reasonnonetheless why there would not be some depreciation through age, especially with aboat of this nature.8 Commissioner of Police v Drummond [2018] NZHC 1730 at [6].[55] The real point in the case of the powerboat is the significance of high storagecosts, which I have already held in Parker can be taken into account.9 Mr Sayersaccepted that ongoing maintenance costs would be minimal, but that clearly appliedto all boats, so I do not see that evidence affecting the Official Assignee's calculationof the average storage/holding cost per day for a boat. That average cost would takeaccount of the fact that ongoing maintenance costs would be minimal for boats ingeneral. The bulk of the storage/holding costs I expect relates to storage of what willbe a sizeable asset that has to be kept inside.[56] Mr Milosevic says that the powerboat is unusual because it is ahigh-performance version. He claims it would not be easily replaced if it were sold,but accepts it is not rare.[57] This is not a high-value boat, even allowing for $16,500 being a minimum.The storage costs coupled with some depreciation are such that I consider itappropriate to order a sale. The fact that it is unusual does not dissuade me from thatview. There was no evidence to show it could not be replaced – just the assertion thatit would not be easy.The 6.5m Fishing Boat with Yamaha outboard motor[58] This boat has been assessed at $2,500. Theoretically straight line depreciationruns at 8.5% per annum. The storage costs are $17.80 per day or $6,500 per annum.[59] The first respondent says the boat and trailer have significant emotional valueto himself and his family because they were originally his father's. They had beenowned by other members of the family for some time, but then came to him through aswap. Also, he says the age of the vessel is such that it has likely bottomed-out interms of depreciation.[60] I agree the fishing boat is of very low value and therefore depreciation is oflittle, if any moment. However, again, there is a high level of storage costs. While Iam not unsympathetic to the first respondent's claim of sentimental value, the very9 Commissioner of Police v Parker [2019] NZHC 1506 at [52].high proportionate storage costs, in my view, leave no option but that the boat shouldbe sold.[61] I did raise with the Commissioner whether consideration is given to notrestraining an item of such low value and was advised that such consideration is andwas given, but the Commissioner decided nonetheless to restrain it. I am not in aposition to second-guess that. Also, I can appreciate that there were a large number ofitems being seized here and so it would have been somewhat difficult to distinguishbetween them.[62] I consider an order for sale of the fishing boat to be appropriate.[63] I would add that I can see nothing to prevent the first respondent "purchasing"the boat given the low amount involved. Even though the first respondent has hadextensive assets seized, I expect he can lay his hands on $2,500. The sum paid willstill be subject to restraint and the first respondent's "emotional value" concerns aboutthe boat would be addressed with relatively low outlay. If the first respondent prevailson the forfeiture application, he will get his money back.Conclusion[64] Other than with regard to the AC Cobra, where an order for sale is declined, Imake orders in accordance with the Commissioner's application for sale dated 25 May2018. To be clear, those orders are made under s 34 of the Act.-------------------------------------------------Hinton J