COMMISSIONER OF POLICE v MCQUADE [2023] NZHC 798

COMMISSIONER OF POLICE v MCQUADE [2023] NZHC 798 [17 April 2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2020-419-154[2023] NZHC 798UNDER the Criminal Proceeds (Recovery) Act 2009BETWEEN COMMISSIONER OF POLICEApplicantAND ALAN CLINTON MCQUADEFirst RespondentRAY ALAN TYLER-WAUGHSecond RespondentGABRIELLE SUZANE LEIFTING-BULLThird RespondentContd/2Hearing: 22 March 2023Appearances: K Whyte for the ApplicantK Hogan for Alan McQuade (First Respondent) and Emna Tritar(Interested Party)No appearance by or on behalf of remaining respondents orinterested partiesJudgment: 17 April 2023JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Monday, 17 April 2023 at 3:30 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: Hamilton Legal (Office of the Crown Solicitor), HamiltonCook Morris Quinn, AucklandCounsel: J Hogan, AucklandRYAAN THOMAS SIMPSONFourth RespondentEMNA TRITARInterested PartyGREG JIMMY RAUMATIInterested PartyLESLIE KENNETH MOTLEYInterested PartyJAMES WOOLRICHInterested PartyA and S CUSTOM CONTAINERSLIMITED (6325048)Interested PartyBANK OF NEW ZEALANDInterested PartyBASECORP FINANCE LIMITEDInterested Party[1] On 3 July 2020, the Commissioner of Police (Commissioner) obtained withoutnotice restraining orders in respect of two properties, funds held in bank accounts,watches, jewellery and nine motor vehicles. On notice orders were obtained on30 September 2020.[2] On 30 August 2022 the Commissioner filed an application for the sale of thenine restrained motor vehicles to preserve their value because of on-going storagecosts and depreciation. It is this application that is for determination.[3] Five of the vehicles are said to be beneficially owned by Mr Alan McQuade(the first respondent) and/or his partner, Ms Emna Tritar (an interested party). Threeof the vehicles are beneficially owned by the second respondent, Mr Ray Tyler-Waugh,and one of the vehicles is beneficially owned by the fourth respondent, Mr RyaanSimpson.[4] The second and fourth respondents have taken no steps to oppose theapplication. However, Mr McQuade and Ms Tritar oppose the application. A jointnotice of opposition was filed on 2 November 2022. On 14 November 2022, anaffidavit sworn by Ms Tritar was filed in support of the notice of opposition.[5] In response to the notice of opposition, the Commissioner has filed a numberof affidavits from an investigator attached to the Waikato/Bay of Plenty AssetRecovery Unit based in Hamilton, Mr William Cassidy, and an affidavit dated21 November 2022 from Mr Andrew Booth, a specialist vehicle consultant and broker.[6] At the hearing before me of the application in the Hamilton High Court on22 March 2023, Mr Booth and Ms Tritar were cross-examined on their affidavits.Sale orders – the law[7] The application is brought pursuant to ss 33 – 36 of the Criminal Proceeds(Recovery) Act 2009. Section 35(e)(v) provides:35 Types of further orderWithout limiting the generality of section 34(1), a court may, on anapplication under section 33(1), make 1 or more of the followingfurther orders in relation to restrained property:(e) an order relating to the Official Assignee that—(v) directs the Official Assignee to sell restrainedproperty (including, without limitation, a business) inorder to preserve the value of the restrained property:[8] Adams on Criminal Law notes that sale orders are not automatically made inrelation to restrained assets such as motor vehicles.1 The reduction in the eventualreturn caused by the holding costs cannot be sufficient of itself to warrant an order forsale. The learned authors continue:2Factors that are taken into account include the nature and value of the asset,the length of time before the substantive proceeding will be determined, theextent to which the asset may depreciate during that period and the wishes ofthe owner of the asset and any other person who may have an interest in it Although storage and insurance costs were expressly excluded fromconsideration in Commissioner of Police v Evans (above) at [33], in othercases those costs have been recognised as relevant and considered along withother factors.History of proceeding[9] In February 2020, Police commenced an investigation into the manufacture,sale and supply of methamphetamine by a group of persons in the Waikato andAuckland regions. Without notice restraining orders were granted in the High Courtat Hamilton on 3 July 2020.[10] On 7 July 2020, the Police operation was terminated. Mr McQuade, Mr Tyler-Waugh and Mr Simpson were among those arrested and charged with the various drugoffences. All three later pleaded guilty to numerous offences. On 22 April 2021,Mr Tyler-Waugh was sentenced to 11 years and three months' imprisonment. On17 December 2021, Mr Simpson was sentenced to three years and six months'1 Simon France (ed) Adams on Criminal Law – Sentencing (online ed, Thomson Reuters) at[CP35.02].2 .At [CP35.02].imprisonment. On 25 March 2022, Mr McQuade was sentenced to five years and threemonths' imprisonment.[11] Although Mr McQuade was sentenced as long ago as 25 March 2022, theCommissioner has not yet filed a civil forfeiture application and affidavits in supportof such an application. Counsel submits that examination of Mr McQuade under s 107of the Criminal Proceeds (Recovery) Act 2009 was required, but while a number ofattempts were made to examine him earlier, Mr McQuade was only able to beexamined on 28 February 2023. It is now necessary to make further enquiries becauseof the information provided by Mr McQuade, but counsel advises the Court that theforfeiture application and affidavits in support will be filed on or before June 2023.Holding costs[12] The cost to the Official Assignee to store vehicles is currently $14.30 per day(as from 1 May 2021), which includes a daily security and administration charge of$2.30 and a daily mechanical maintenance charge of $0.80. This compounding fee issettled at the time of sale of the vehicle and detracts from the return to the communityshould the Commissioner be successful in his forfeiture application or, alternatively,preserves the position of the respondent should the Commissioner's forfeitureapplication not succeed. The total projected annual cost to store the nine vehicles is$46,975.00. This does not include insurance or additional maintenance costs.[13] As to depreciation, passage of time for a motor vehicle is generally a factor inthe depreciation of its market value with each year passing typically seeing an erosionof that value. The Inland Revenue Department (IRD) publishes a schedule ofdepreciation for individual assets. It provides various percentages for asset valuecalculation, depending on the asset being depreciated. In relation to motor vehicles,the diminishing value percentage is set at 30 per cent and straight-line value is 21 percent per annum. To take an example, one of the motor vehicles sought to be sold,NSANE8, had a valuation of $55,000 determined by Turners Auctions when it wasrestrained and placed in storage. Its value less storage and depreciation calculated ona diminishing value percentage of 30 per cent after one year would be $33,532.Opposition to application for sale orders[14] Mr McQuade and Ms Tritar oppose sale orders in respect of the five vehiclesin which they are said to have a beneficial interest. These are a:(a) 2013 Holden HSV Clubsport R8 motor vehicle, registration numberNSANE8, valued by Turners Auctions at $55,000;(b) 2014 Jeep Wrangler motor vehicle, registration number MQD96,valued at $28,000;(c) 2016 Holden HSV GTS motor vehicle, registration number JQG400,valued at $70,000;(d) 2003 Holden Monaro CV8 motor vehicle, registration numberHCD624, valued at $4,000; and a(e) 1990 Toyota Coaster van, registration number LWH95, valued at$18,500.[15] The grounds set out in the notice of opposition are:(a) There has been no application to sell the vehicles in the proceeding twoyears of restraint and the proceeding should soon be completed orresolved.(b) Some of the restrained vehicles (NSANE8, JQG400, HCD624) areappreciating in value.(c) One of the restrained vehicles (NSANE8) is of particular sentimentalvalue to the first respondent.(d) An innocent party, Mr Glenn McGlade, holds an ownership interest inLWH95.[16] The affidavit by Ms Tritar confirms the grounds of opposition relied upon. Asto the purported appreciation in value of three of the vehicles, Ms Tritar relies onHolden retiring its branded vehicles from New Zealand and referred to a privatevendor listing on the website Trade Me in respect of a Holden HSV only.[17] As to the sentimental value of NSANE8, Mr McQuade did not file an affidavit.Ms Tritar claims on his behalf that he "always wanted to own a vehicle like this". Inaddition, some of his father's ashes are in the vehicle. As to Mr McGlade's interest inLWH95, that is to be for unpaid work undertaken by him on the van to the value of$15,000. Ms Tritar annexes an agreement apparently signed in March 2019.Mr McGlade has not filed an affidavit, but has made a statement to Police.Evidence of value[18] Mr Booth is a specialist vehicle consultant and broker. He has providedhigh‑end and specialist vehicle consultation, valuation and sales broking services tothe Ministry of Business, Innovation and Employment since 2016. In October 2022,he inspected two of the five vehicles at issue and gave wholesale values for them both.[19] As to JQG400, Mr Booth states:The subject vehicle is a 2016 model HSV GTS sedan first registered new inNew Zealand in February 2016. It is optioned with the more desirable manualtransmission. HSV models, in particular the GTS variant, have experiencedan increase in desirability since manufacture of all Holden/HSV vehiclesceased in 2017. Values climbed sharply throughout 2020/21 as certain modelscame to be viewed as collectable combined with a general uplift in prestigeand classic vehicle values due to COVID influenced market factors.Throughout 2022 these values have shown a steady decline with examplesmarketed at premium prices remaining unsold for long periods.[20] Mr Booth was of the opinion that an achievable wholesale price for JQG400was $55,000 to $60,000 including GST. He later updated the valuation followingresponses sought from two motor vehicle dealers, both very active in the HSV market,on current market conditions for this vehicle. Mr Booth revised the expectedachievable wholesale value for JQG400 to $64,000 to $69,000 including GST.[21] As to NSANE8, Mr Booth stated:The subject vehicle is a 2013 model HSV Clubsport R8 first registered new inAustralia in June 2013 and imported to New Zealand in 2017. The vehicledisplays several mechanical and bodywork modifications as well as evidenceof previous accident damage. Many vehicles have been imported into NewZealand from Australia as damaged or ex insurance statutory write-offs andwhilst no importation related document was provided there is a very highchance that this vehicle was imported in a damaged condition.[22] Mr Booth was of the opinion that an achievable wholesale price for NSANE8was $20,000 to $25,000 including GST. He noted that the vehicle's value would besignificantly higher in original factory specification, including return to originalcolour, however it would not be economic to undertake the work required to achievethis and the obvious damage history has a permanent impact on saleability.[23] In her affidavit, Ms Tritar refers to appreciation in value of Holden motorvehicles. She states:On 17 February 2020, General Motors announced that the Holden brandwould be retired by 2021. GM stated it would no longer make right-handdrive vehicles globally, leaving the Australia and New Zealand marketaltogether.As a result, certain Holden vehicles have become collectors' items and areappreciating in value.For example, a 2016 Holden HSV GTS motor vehicle odometer 32258, butnot supercharged (which JQG400 is) was recently valued by Trade Me at$107,750.Because it is supercharged JQG400 will be significantly more valuable thanthat.[24] She further states that similar vehicles are current advertised on Trade Me forprices of $164,900 and $119,990. Unlike these vehicles, JQG400 is a manual, whichmakes it more valuable. She then notes that JQG400 was valued by Turners Auctionsin February 2022 at $70,000.[25] In cross-examination, Ms Tritar stated that her understanding of the value inpart of JQG400 comes from a Trade Me listing of another vehicle.DiscussionJQG400[26] In the end, the opposition to the sale order focused on the value of one vehicle,JQG400. What is important, however, is not the actual wholesale or retail price, butthe trend in value. In October 2022, Ms Tritar obtained a Trade Me valuation forJQG400 of $107,750 (medium value). Mr Booth commented that such a valuationgives absolutely no consideration to the condition of a vehicle as it was not inspectedby Trade Me. He also assumes that Trade Me creates a value by some algorithm basedon an average of asking prices for vehicles for sale on Trade Me. He commented "[s]oa Trade Me valuation that is averaging asking prices is not directly reflective of whatvehicles are selling for".[27] Mr Booth also pointed out that the stated odometer reading of 32,258kilometres was incorrect as when he inspected the vehicle the odometer reading was65,970 kilometres. He said that the value should therefore be discounted by 15 to20 per cent. This would bring the Trade Me value down to a range of $86,200 to$91,587.50.[28] Mr Booth also produced an updated valuation obtained from Trade Me on17 March 2023, five months after the valuation obtained from Ms Tritar. It gave a(medium) value of $79,400. This was "high indicative" of the dropping in marketvalues for these vehicles, according to Mr Booth.[29] Although there had been a significant increase in value for the vehicle in2020/2021, I accept Mr Booth's evidence that there is now a substantial correctionunderway. In these circumstances, it is preferable to sell JQC400 now before furthervalue is eroded.NSANE8[30] The circumstances around "some of" Mr McQuade's father's ashes being "inthe vehicle" are unclear. No ashes were identified when the vehicle was seized,notwithstanding a thorough examination, but it is to be assumed that some of his asheswere scattered inside the vehicle. If so, this case is similar to Commissioner of Policev Drummond,3 in which Lang J accepted that the respondent had a sentimentalattachment to the vehicle which formerly belonged to the respondent's deceased wife,but nonetheless made sale orders.[31] When compulsorily examined by the Commissioner on 28 February 2023under s 107 of the Criminal Proceeds (Recovery) Act, Mr McQuade said he acquiredNSANE8 after a number of trade-ins and it was his "forever" car. That is why he wasstoring it, as well as other investments, at his sister's address. He had previouslycrashed NSANE8 while driving it and he wanted it to be out of his reach.[32] There is nothing particularly unique about this vehicle. It has been accidentdamaged and, according to Mr Booth, it would be uneconomic to return it to itsoriginal condition in an attempt to extract more value from it. Mr McQuade had storedthe vehicle and was not using it. In these circumstances it is preferrable to sellNSANE8 to retain what value it does have.LWH95[33] Mr McQuade and Ms Tritar oppose a sale order for LWH95 on the basis ofwhat Ms Tritar says is an ownership interest held by Mr McGlade. She states she andMr McQuade contracted Mr McGlade to undertake a significant restoration of LWH95to turn it into a house bus for them. The basis of the contract was that Mr McQuadewould later pay Mr McGlade in kind by giving him a refurbished container.Mr McQuade's arrest meant that he could not refurbish and provide the container toMr McGlade as agreed. Ms Tritar confirms that they have not otherwise paidMr McGlade for any of his work.[34] Police have contacted Mr McGlade, who confirmed that he was going tosupply labour and materials to an agreed value of $15,000 and in return he was toreceive a $5,000 shipping container and a $10,000 bank deposit. He estimates he isowed approximately $10,000 for the work he has done to date. The Police confirmedwith Mr McGlade that he was okay with selling LWH95 so long as he could "have a3 Commissioner of Police v Drummond [2018] NZHC 1730.crack at the money from it". The Police have accordingly now made application onnotice for a new parties order that Mr McGlade be made a party to the currentproceedings. This will enable him to make his case for recognition of a legal interestin the proceeds of sale of LWH95.MQD96/HCD624[35] These are two further vehicles in which Mr McQuade is said to have abeneficial interest, the first being a Jeep Wrangler valued at $28,000 and the second aHolden Monaro CV8 valued at $4,000. No particular submissions were directed atthese vehicles. As to the latter, I note that being valued at $4,000, it would have alreadystarted to cause loss to the Official Assignee through annual storage costs ofapproximately $5,000 since it was restrained in 2020 and placed under the OfficialAssignee's control. I see sale orders as necessary to preserve whatever value thesetwo vehicles currently have.Remaining motor vehicles[36] Of the nine motor vehicles, subject to the Commissioner's application for saleorders, three are beneficially owned by Mr Tyler-Waugh and one by Mr Simpson. Nosteps have been taken by them to oppose the sale orders.[37] The vehicles beneficially owned by Mr Tyler-Waugh are a:(a) 2014 Mercedes C63 AMG motor vehicle, registration numberMTS482, valued by Turners Auctions at $36,000.(b) 2016 Mercedes E63 AMG motor vehicle, registration numberMUN685, valued at $41,000.(c) 2007 Holden Commodore SV6 motor vehicle, registration numberHFA744, valued at $5,000.[38] The vehicle beneficially owned by Mr Simpson is a:(a) 1997 Toyota Hilux motor vehicle, registration number 1NVADR,valued at $6,000.[39] Of these four vehicles, two are valued at $5,000 and $6,000 respectively andhave already started to cause loss to the Official Assignee through annual storage costsof approximately $5,000 each since they were restrained in 2020 and placed under theOfficial Assignee's control. It is time for the Official Assignee to cut its losses onthese two vehicles.[40] As to the other two Mercedes motor vehicles beneficially owned by Mr Tyler-Waugh, no steps have been taken by him to oppose the sale order. The vehicles arenow nine and seven years old. If storage costs for a year are taken into accounttogether with depreciation on a diminishing value percentage of 30 per cent, they nowhave values of $23,732 and $20,232 respectively. They too should be sold to preservetheir value.[41] I am of the view that the delay in making an application for sale orders until30 August 2020, when the Police operation was terminated over two years previouslyis a neutral factor. A sale order can be made at any time, even after a forfeiture orderhas been made. The delay has not been detrimental to Mr McQuade or Ms Tritar. Infact, it may have benefited them in as much as Mr Booth gave evidence that valuesclimbed sharply throughout 2020/2021, but since 2022 these values have shown asteady decline. The decline in value seems, however, not as fast as the rise in values.[42] Furthermore, it seems that there will be a considerable length of time beforethe Commissioner's civil forfeiture application can be heard. If not filed in Court untilJune this year, a defended hearing date will probably not be available until sometimein 2024. This is not a neutral favour, but one which favours the making of sale ordersnow, when three of the motor vehicles have already incurred storage costs whichexceed their value.Result[43] The Commissioner's application for early sale orders is granted. There willbe:(a) An order directing the Official Assignee to sell the following restrainedproperty in order to preserve the value of the restrained property:Alan Clinton McQuade – first respondent(i) 2013 Holden HSV Clubsport R8 motor vehicle, registrationnumber NSANE8;(ii) 2014 Jeep Wrangler motor vehicle, registration numberMQD96;(iii) 2016 Holden HSV GTS motor vehicle, registration numberJQG400;(iv) 2003 Holden Monaro CV8 motor vehicle, registrationnumber HCD624; and(v) 1990 Toyota Coaster van, registration number LWH95.Ray Alan Tyler-Waugh – second respondent(vi) 2014 Mercedes C63 AMG motor vehicle, registrationnumber MTS482;(vii) 2016 Mercedes E63 AMG motor vehicle, registrationnumber MUN685; and(viii) 2007 Holden Commodore SV6 motor vehicle, registrationnumber HFA744.Ryaan Thomas Simpson – fourth respondent(ix) 1997 Toyota Hilux motor vehicle, registration number1NVADR.(b) An order directing the Official Assignee to hold any remaining fundsderived from the sale of the property listed above in an interest-bearingtrust account until the resolution of the proceedings.____________________________Woolford J