COMMISSIONER OF POLICE v RICHARDSON [2022] NZHC 3184

COMMISSIONER OF POLICE v RICHARDSON [2022] NZHC 3184 [30 November 2022]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2021-409-000198[2022] NZHC 3184UNDER the Criminal Proceeds (Recovery) Act 2009IN THE MATTER of an application for forfeiture ordersBETWEEN COMMISSIONER OF POLICEApplicantAND LYNDON VAUGHAN RICHARDSONFirst RespondentAND TERRENCE AUSTIN MCFARLANDSecond RespondentAND SIMON JOHN TURNERThird RespondentHearing: 31 October – 3 November 2022Appearances: K South and C C White for ApplicantS N B Wimsett and L R Toepfer for Second Respondent andLincoln Property Investments LtdJudgment: 30 November 2022Reissued: 5 December 2022JUDGMENT OF DUNNINGHAM JThis judgment was delivered by me on 30 November 2022 at 3 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] At 31 Vickerys Road (the property), Christchurch, on the boundary betweenresidential housing and light industry, sits the clubrooms of a gang known as theHead Hunters Motorcycle Club (the Head Hunters). The property has beenextensively renovated. The main house contains a bar and lounge area, a new kitchenand bathroom, and an attic sleeping area. Outside there are two new standalonebuildings containing sleeping accommodation, along with a large steel framedworkshop for storing and repairing motorbikes. The yard is extensively hard surfacedto enable vehicle parking. There is also an outside deck area for socialising and adedicated gymnasium area.[2] The Commissioner of Police (the Commissioner) says the property wasimproved, at least in part, by funds gained from significant criminal activity. As aconsequence, the property should be forfeited to the Commissioner under the CriminalProceeds (Recovery) Act 2009 (the Act). Forfeiture orders are also sought in respectof cash totalling $6,162.30 taken from gaming or "pokie" machines at the property,and a black, 2008 Harley-Davidson VRS 08 NIGHT-R motorcycle, registrationA6YNS and registered in the name of the first respondent.[3] The respondents are the shareholders of Lincoln Property Investments Ltd(LPIL), the company which owns the property. Two of them are also directors of thecompany. The company was struck off the Companies Register on 15 May 2018, andthe property is currently vested in the Crown. However, the Commissioner says thatthe respondents have effective control over the property as they have the ongoingability to apply to restore the company to the Companies Register, which would resultin the Vickerys Road property being returned to LPIL. Indeed, counsel for therespondents states that if the application for forfeiture orders is declined, therespondents will apply to have LPIL restored to the register. As effective control bythe respondents is not disputed, there is no need to make an order confirming that thatis the case.11 Under s 58, Criminal Proceeds (Recovery) Act 2009.The Criminal Proceeds (Recovery) Act 2009[4] The Commissioner's application for an assets forfeiture order is brought unders 49 of the Act on the grounds the relevant property is "tainted property". "Taintedproperty" is defined in s 5(1) of the Act:(a) means any property that has, wholly or in part, been:(i) acquired as a result of significant criminal activity; or(ii) directly or indirectly derived from significant criminalactivity;(b) includes any property that has been acquired as a result of, or directlyor indirectly derived from, more than 1 activity if at least 1 of thoseactivities is a significant criminal activity.[5] The term "significant criminal activity" is defined, at s 6, to mean eitheroffending that if prosecuted, would consist of, or include, one or more offencespunishable by a maximum term of five or more years' imprisonment, or an offencefrom which property, proceeds or benefits of a value of $30,000 or more have beenacquired or derived directly or indirectly.[6] Section 50(1) of the Act sets out when such an order must be made:If, on an application for an assets forfeiture order, the High Court is satisfiedon the balance of probabilities that specific property is tainted property, theCourt must make an assets forfeiture order in respect of that specific property.The only exception to the mandatory requirement to make an assets forfeiture orderunder s 50, is where the Court is satisfied that "having regard to all of thecircumstances, undue hardship is reasonably likely to be caused to the respondent ifthe property is included in the assets forfeiture order".2[7] An assets forfeiture order can have a draconian effect. As long as some of thefunding which went into acquiring or improving a property came from the proceedsof significant criminal activity, the whole property is considered tainted property and2 Section 51(1).is liable to be forfeited. That was confirmed by the Court of Appeal in theCommissioner of Police v Drake when it said:3The statutory definition of "tainted property" did not require the Judge toconfine the property forfeited to an interest corresponding to the extent theproperty was tainted. The introduction of any funds derived from significantcriminal activity into a bank account taints the entire account, just as an entirehouse may be tainted even although it was only partially acquired fromsignificant criminal activity.The only avenue to avoid an assets forfeiture order being made in those circumstancesis when undue hardship can be established under s 51.[8] While seemingly harsh, I observe that such consequences were envisaged byParliament when enacting this legislation. As the then Minister of Justice said whenthe bill was introduced:4The Proceeds of Crime Act allows the Crown to confiscate the profit madefrom crime, after a person is convicted of that crime. That approach is all verywell if the criminal is the only person who profits and if the crime is readilyprovable, but in this day and age, increasingly that is quite often not the case.Organised criminal gangs – particularly those involved in large scale drugdealing – will not be called for every crime they commit. They will alsospread the profits from crime around their membership. We see a lot ofevidence of that. In the end, the person selling the $20 tinnies every day isusually not the same person who, as with their gang mates, lives a lavishlifestyle off the proceeds of such criminal activity.The Criminal Proceeds (Recovery) Bill deals with this issue. It gives theCrown the power to confiscate profits and assets obtained through criminalactivity on the civil standard of proof. That is to say that if the Crown canprove on the balance of probabilities that a person has benefited fromsignificant criminal activity, that person's property will be liable to forfeiture The bill establishes the assets forfeiture order, which targets propertythat has been acquired or directly or indirectly derived from criminal activity,regardless of who the owner is. This approach will allow us to target gangleaders who do not get their own hands dirty but in the end enjoy the benefitsof their fellow gang members' illegal activity.[9] The above sets out the legislative framework within which the Commissioner'sapplication is made. I now turn to the evidence advanced to support, and oppose, thatapplication.3 Commissioner of Police v Drake [2020] NZCA 494 at [73].4 (20 March 2007) 638 NZPD 8120.The Vickerys Road property[10] The Vickerys Road property was originally the clubrooms for anothermotorcycle gang, the Epitaph Riders. By 2015, there were only a couple of membersof that gang left and the clubrooms at Vickerys Road were largely abandoned. One ofthe last members, Simon Turner, patched over to the Head Hunters, and it was agreedwith Mr Turner and another that the Head Hunters would take over running theclubrooms at Vickerys Road. The clubrooms were owned by LPIL, and the transferwas effected by changes to the directors and shareholders of LPIL. Mr Turner explainsthat the property transfer was not a result of any animosity or "taxing", but was morelike a "patch over or a merger" because most of the Epitaph Riders had left that cluband moved to the Head Hunters.[11] In January 2016, once ownership of LPIL was effectively transferred to theHead Hunters, that gang set about fixing up the property. The scope of the renovationswere extensive. As Lyndon Richardson explains, there was a massive hedge aroundthe property when they took over and it was a major project to remove it. The hedgewas taken away to a farm and burnt so no dump fees were incurred. The hedge wasreplaced with a fence which Mr Richardson says he installed along withCarrick Broadley, who at the time was working as a project manager for Nor WestContracting, undertaking outdoor hard landscaping projects on residential propertiesand larger civil developments. The site was then scraped and levelled using diggerswhich were borrowed from Mr Broadley and Nor West Contracting. The fence waslargely constructed from panels which are used in cool stores. These comprised metalouter panels with a layer of insulation sandwiched between them. Mr Richardson saysthe panelling which they used was donated by Lyall Anderson. The same panellingwas also used to build the sleepout units.[12] Large metal gates were also constructed for the vehicle entrance to theproperty. While the pedestrian gate was existing, the vehicle gate was said byMichael Murphy to be constructed by him using scrap metal and using his experienceas a metal worker. He then painted the gates and put gang insignia on them.[13] A large timber deck was built using the services of gang members andassociates, some of whom were qualified builders. Mr Richardson explains that thepine timber which was used for the external construction was obtained throughKori Loper. Mr Loper worked at Shands Road Sawmills Ltd and had a trade account.Mr Richardson says they paid about $2,000 for the timber used for fence posts, deck,interior framing and french doors, which Mr Loper confirmed in evidence.[14] A large part of the external area had new concrete laid. Mr Richardson saidthe outdoor concreting was completed by Mr Broadley and a friend of Benjamin Kney.He says the Head Hunters brought two loads of cement from Concut, a firm whichwas located across the road from the property, and each load cost about $400. He alsosays that concrete was obtained from another concrete business close by, and theowner would drop off his leftover loads whenever they needed concrete for fenceposts. The owner also got some of his workers to drop them off gravel for mixingconcrete. Mr Broadley also confirms that he laid all the outdoor concrete. He saysthe concrete which came from the company across the road were leftovers which thecompany had in their mini mixers and that he would box the concrete and put a stopend in it, or they also made their own concrete in a mixer with hardfill and a couple ofbags of cement. He also installed the drainage works on the property saying, "I didnot use any new pipe or materials. They were all leftover from the contractlandscaping jobs I did".[15] Inside the house was fully renovated. Walls were lined with GIB board andplastered. A new kitchen was installed which Mr Richardson says was an ex-displaykitchen that was given to him by a former business partner. The tongue and groovelaminate in the kitchen was also donated, and the new shower was bought off TradeMefor around $750. He says the red carpet which was installed was bought for $1 fromTradeMe and laid by a friend of a friend, who was a carpet layer. The sleepouts werebuilt from scratch with the leftover cool store panelling. The four sets of sliding doorsused on the sleepout units were second-hand ones which were either donated or boughtoff TradeMe.[16] The metal framing for the motorcycle workshop was already there when theHead Hunters took over the property. Mr Richardson says they put corrugated iron onthe roof and the walls, using iron donated from a member who was a roofer. He alsosays there was a lot of materials left at the property, when it was transferred to themincluding scrap metal and Pink Batts insulation, as well as a caravan and two trailers.Much of this was sold and the money went towards any building materials they had topurchase. The GIB board which was used was either donated or sourced as offcutsthrough Facebook. Donated windows were used to replace the rotten ones and all thelabour was free because the property was worked on by members, friends and family.Mr Richardson estimates they spent no more than $10,000 in total to purchase itemssuch as concrete, timber, paint and paint brushes. He denies that any of the moneyspent was from the proceeds of criminal activity. He says the funds were raisedthrough the $25 a week club membership fees, $50 a week boarding fees, weeklyfundraising raffles run by his wife, and selling the items that the Epitaphs had leftbehind.[17] The Commissioner called evidence from Stewart Harrison, a registeredquantity surveyor, who prepared estimates of what the improvements would have coston a commercial basis. His estimates were based on viewing an extensive body ofphotographs which police had provided of the unrenovated and then renovatedproperty, along with a visit to the site to take measurements of the dwelling and itssurrounds and to take further photographs. On a commercial basis, Mr Harrisonestimates that the improvements which occurred between 10 February 2016 to6 December 2016 would have cost $159,520, and the further improvements carriedout to 20 October 2017 would have cost a further $22,978. These works do not includeworks which were carried out after this period, including replacing the kitchen andputting hot mix down one side of the property.[18] While Mr Harrison acknowledged that he was simply pricing items on acommercial basis and could not comment on whether those labour or product costswere actually incurred, he did cast doubt on the evidence that the concrete hardstandhad been poured over multiple days using the leftover concrete from other concretejobs. In his view, it was clear that what was seen at Vickerys Road was a "professionaljob" which had a consistent colour and texture. His evidence was that "I don't thinkfor a moment that it's been poured as smaller, smaller loads or smaller areas". He said"if it was poured in batches there'd be a lot more joints visible, you'd see a lot of coldjoints between the concrete pours". Other indicia Mr Harrison saw of professionalwork was the exterior fence, which was regularly spaced with everything having beenput in place at once, rather than in a piecemeal fashion. Similarly, the flashing usedon the external sleepouts appeared to him to be purpose made or bought for this job.[19] I am satisfied that the renovation works cost nothing like the commercialcosting that Mr Harrison presented to the Court. However, for reasons I will come tolater, I am also satisfied that considerably more money was spent on the renovationsthan was evident from the evidence of Mr Richardson and others. While theHead Hunters were no doubt given a huge amount of materials for free and wereassisted by people who had experience as roofers, carpet layers, builders, tilers andconcrete layers, they also had to pay for professional expertise at times, including, forexample, electricians and plumbers.[20] I am also satisfied that not all the evidence given about how the Head Hunterssaved or avoided cost was correct. In particular, while Mr Richardson gave evidenceof the concrete hardstand being poured in multiple pours using end lots, Mr Murphy'sevidence was that "you didn't want to have part pours", and his recollection was thatthey laid all the exterior concrete in two pours. That evidence was far more consistentwith the evidence of Mr Harrison, which I accept, that the concrete was professionallypoured and was not poured over multiple days with multiple small lots of concrete.The significant criminal activity alleged[21] The Commissioner alleges the members of the Head Hunters gang whofrequented the Vickerys Road property were involved in the following significantcriminal activity:(a) sale and supply of controlled drugs and in particular,methamphetamine, contrary to s 6 Misuse of Drugs Act 1975;(b) theft under s 219 Crimes Act 1961 and/or demanding property withmenaces and intent to steal under s 239(2) Crimes Act 1961; and(c) facilitating illegal gambling under s 19(1) Gambling Act 2003, fromwhich benefits in excess of $30,000 accrued.Sale and supply of drugs[22] Ms South submitted that it was abundantly clear that the Christchurch-basedmembers and associates of the Head Hunters were deeply enmeshed in the sale andsupply of methamphetamine.[23] In 2006, when Mr Richardson and Darrin Baylis were members of theRoad Knights gang, before they became members of the Head Hunters, they wereconvicted of conspiracy to supply 406 g of methamphetamine.[24] As a result of a police investigation known as "Operation Block" carried outin 2016, Mr Richardson ultimately pleaded guilty to a charge of participating in anorganised criminal group. When Mr Richardson was sentenced, the sentencing judgedescribed his offending as follows:5[4] Between August and December 2016, you, together with otherHead Hunters and associates, regularly sold methamphetamine. The dealswould be organised over the phone followed by a meeting. Some of yourcustomers would on-sell the methamphetamine for a profit. You received ashare of the proceeds from some of your associates' methamphetamine sales.In addition, you received a share of any drug debt recovered by yourassociates.[25] Ms South notes that the period of this offending coincided with the timesignificant improvements were being made to the property.[26] Mr Turner, the third respondent, was convicted of being in possession ofmethamphetamine for supply in February 2016.[27] Steven Strickland, another patched member of the Head Hunters inChristchurch, also pleaded guilty to participating in an organised criminal group andconspiring to supply methamphetamine as a result of Operation Block. Other5 R v Richardson [2021] NZHC 1160.associates of the gang who were charged with, and convicted of, participating in anorganised criminal group were Mr Kney and Mr Broadley.[28] Mr Broadley also pleaded guilty to charges of supplying methamphetamine,offering to supply methamphetamine, and possession of firearms and ammunition. Intotal, Mr Broadley offered to supply 102.75 g of methamphetamine. Mr Broadley'soffending included dealing methamphetamine from 31 Vickerys Road, as wasdemonstrated by the content of intercepted phone conversations.[29] In August 2016, Mr Baylis was pulled over while driving a Range Rover, at atime when he was acknowledged to be the gang's treasurer. Located in the vehicleconsole was, among other things, $26,770 in cash, a notebook containing accountingrecords related to the Vickerys Road pokie machines, electronic scales, a meth pipe,and 22 g of methamphetamine packed in 18 individual zip lock bags. Anotheroccupant of the vehicle pleaded guilty to possession.[30] On 23 September 2020, while Mr Baylis was still a patched member of theHead Hunters and their treasurer, his residential home was searched and 12.7 g ofmethamphetamine remnants were located along with the gang accounting notebooks,electronic scales, zip lock bags and Mr Baylis' gang patch.[31] A search at Vickerys Road on the same day located 38.7 g ofmethamphetamine, digital scales, snap lock bags and around $1600 in cash.[32] Other evidence which supports the fact that methamphetamine consumptionand supply took place at Vickerys Road is recorded in the photographs of the propertytaken by police in both 2016 and 2020. For example, a wall clock was constructed sothat it concealed a hidden cavity in which meth pipes and a small set of electronicscales were stored. Meth pipes were also located in the sleepouts and the maindownstairs lounge area of the pad, and small plastic snap lock bags were located inthe attic space.[33] On 30 March 2021, Mr Baylis's residential property was again searched and12.10 g of methamphetamine was found, along with other indicia ofmethamphetamine supply. He pleaded guilty to possession of methamphetamine forsupply.[34] Mr Broadley confirmed in evidence that he was regularly sellingmethamphetamine in the period August 2016 and December 2016, albeit he said hedid so to support his own habit, and acknowledged that some of his supply wouldcome from Mr Strickland. While he denied he sold on behalf of Mr Richardson orgave the proceeds of sale to Mr Richardson, that was not consistent with the summaryof facts that he pleaded guilty to, and I was not persuaded that the denials he gave inthis hearing were correct. He did, however, acknowledge that Mr Richardson was"higher up" the chain of command in the meth dealing business.[35] Witnesses called for the respondents sought to distance the evidence ofcommercial methamphetamine dealing by Head Hunter members and associates fromthe activities of the clubrooms. For example, Mr Richardson's wife,Lynda Richardson, said she did not see any drug dealing or manufacturing at theproperty and club members would have been in trouble if they were caught doing thatsort of thing in the clubrooms. She did, however, acknowledge that there was"recreational" methamphetamine use at the club and that she was involved in suchuse. Similarly both Mr Broadley and Mr McFarland said the Club had rules againstmethamphetamine dealing in the club. However, Mr Broadley's intercepted telephonecalls and texts did not support that. They demonstrate he was using the clubrooms asa place to complete drug transactions. In addition, the evidence of methamphetaminedealing, such as electronic scales and numerous small plastic snap lock bags, whichwere found on searches of the clubrooms, made those claims implausible.[36] I am satisfied that the fact key individuals associated with Vickerys Road wereconvicted of methamphetamine dealing, along with the evidence of methamphetaminedealing found at Vickerys Road, shows the gang was heavily involved inmethamphetamine dealing at the time of the renovations, including from theVickerys Road property.Theft and/or robbery through gang "taxings"[37] The second type of significant criminal activity alleged by the Commissioneris theft,6 or demanding property with menaces and intent to steal,7 through the practiceof gang "taxings".[38] The Commissioner adduced evidence from Detective Inspector KevinMcNaughton regarding gang organisation, structure and activities. DetectiveInspector McNaughton explained that the Head Hunters members who are based inChristchurch report to the West Chapter of the gang located in Henderson in Auckland.Mr Richardson was the senior member based in Christchurch, reporting to theWest Chapter hierarchy.[39] One of the activities undertaken by the gang involves "taxing" where, forexample, a portion of the sales made of drugs is paid to a representative of the gangas a tax. Another activity is a "standover", which "relates to the process of extricatingpayment for [a] real or imagined debt". Detective Inspector McNaughton explainedthat the activity of taking property, whether for a debt or in retribution for a slight onthe gang, would likely constitute a crime such as aggravated robbery, aggravatedburglary, or kidnapping and demands with menaces. However, even where the policeare called, the victim is rarely prepared to sign a formal statement to be used in court.He says, therefore, quantifying taxings or standovers is difficult due to significantunderreporting to police.[40] The topic of taxings or standovers was explored in cross-examination. Forexample, Ms South questioned Mr Broadley on a text he sent to an unknown numberwhere he said "seems you ended up with cash that's the clubs and owed to me formonths" and which, "should've been paid before". Mr Broadley denied this was himchasing up gang money, although I consider this is a logical inference from the text ofthe exchange.6 Crimes Act 196, s 219.7 Crimes Act, s 239(2).[41] Similarly, in an intercepted telephone call between Mr Broadley and Mr Kney,a gang prospect, on 13 November 2016, Mr Kney repeatedly said that he had to be"Stove's guard" (Stove being the nickname for Mr Strickland who was beingde-patched from the gang at the time), and the reason proffered was so thatMr Srickland could "pay for that [f ] ticket bro". A little further on, Mr Kney saidto Mr Broadley that Mr Strickland was "gone" and "he's gonna lose a lot more thanjust that [fing] you know".[42] It was put to Mr Broadley that he was being told Mr Strickland was out of thegang, and Mr Kney was guarding the property because he was about to have thatproperty taken off him, or taxed, but Mr Broadley claimed not to comprehend orremember what this conversation was about. However, there was evidence that atleast a utility vehicle and a motorcycle were taken from Mr Stickland at this time. On15 November 2016, intercepted text messages and phone calls betweenMr Richardson and another associate revealed that they were discussing the sale ofMr Strickland's Harley-Davidson V-Rod and his ute. The associate sent a textmessage to Mr Richardson which read:Hey bro I don't know if this is a bit early or cheeky but what's happeningwith Stove's V-rod and what sort of price would it be.Mr Richardson subsequently replied, "13k for vrod bro". Mr Richardson later phonedanother associate and asked if he was interested in the V-Rod. He told the associatethat he did not know how much it would be, but the arrangement would be "halves",with half the sale price going to "the boys up top". Again, prices of between $12,000and $14,000 were mentioned.[43] In a later discussion between Mr Richardson and the associate, he enquiredabout the sale of the V-Rod and asked "who got the ute", to which Mr Richardsonreplied, "Terry got the ute". When Mr Richardson was asked what the recipient paidfor the ute, Mr Richardson replied, "Oh 10". A few days later, on 26 November 2016,Mr Strickland's 2003 Holden Utility, registration JZA96, was seen parked outside31 Vickerys Road. Later the vehicle was stopped driving north near Hanmer SpringsRoad and Lewis Pass Road. Mr McFarland, the second respondent, was driving it andhe told police he had purchased the vehicle off Mr Strickland and was taking it toAuckland. On 19 November 2016, Mr Strickland sent Mr Broadley a text saying "ivlost dam near everythn this week im in debt & broke as fuk, with no income 2 speakoff 4 obvious reasonz".[44] The logical inference that the vehicles were taken from Mr Strickland as apenalty for the circumstances which led him to being ousted from the gang, and thevehicles then sold with half the proceeds going to the West Auckland chapter, wassupported by records in the gang's accounting notebooks (which will be discussedlater). On 16 November 2016, the notebooks recorded "red ute – $5,000" in the "in"column. Mr Richardson confirmed in cross-examination that that representedsomeone paying $10,000 for the ute with $5,000 going to the Christchurch funds and$5,000 to Auckland West.[45] Similarly, the records show that there is a notation, "Night Rod", by an entryfor income of $6,000 which is half of the price of $12,000 discussed for the sale ofMr Strickland's motorcycle. While Mr Richardson was cagey about saying exactlyhow Mr Strickland's vehicles came to the gang, he did acknowledge that a vehicle anda motorcycle were taken off Steve Strickland saying, "[y]eah I believe that was thecase" and confirming that Mr Strickland was ejected from the gang.[46] The Commissioner also alleges Mr Broadley was involved in the taxing of aFord Falcon utility registration BCN158. On 30 September 2016, Mr Broadley sent aphoto of a blue XR6 Ford Falcon ute to Mr Strickland and sent a text saying "That'sthe xr6 bro that Natt had". Later that night in an intercepted phone call, he spoke toMr Strickland about the blue Falcon belonging to Nate and said, "the boys went andtook it this morning bro".[47] Mr McFarland, the second respondent, acknowledged "taxing" in hisexamination interview.TM Aw, I've taxed a few people.WR Okay, now, by taxing, w-, what do you mean by that?TM Well made them pay for their errors, yeah.WR Okay, and what's that, tell me about that business?TM Well, it, it, it could just be a matter of, dropping names and bad talkingyou know. And then, and then getting caught out so, yeah, they pay.WR But what would happen to them if they don't pay you?TM Well they can go live somewhere else.Ms South submits the clear inference from this is that if the gang member wants tocontinue living where they are living, they cannot keep the property which is claimedas a tax.[48] Ms South submits that the fact there are no complainants in relation to these orother taxings is unsurprising as the victims are themselves associated with illegalconduct, and the gang uses intimidation, threats of violence and actual violence toenforce these transactions, so the victims do not go to police.[49] Ms South notes that the gang accounts books records $40,650 in income asbeing related to various vehicles. There is no evidence that the gang was trading invehicles commercially and there are no sums recorded for vehicle purchases. Instead,it is far more probable that the source of the $40,650 was through taxed vehicles thatthe gang then sold. She submits that individuals either wronged the gang or incurreddebt to the gang, most likely for methamphetamine, and were then threatened orintimidated into relinquishing their vehicles to the gang.[50] The Commissioner also relied on the activities of a debt collecting companyrun by Mr Richardson called Ironclad Securities to demonstrate that the gangunlawfully stole property from individuals using actual or threatened violence.Ironclad was not a licensed repossession company as required by the Private SecurityPersonnel and Private Investigators Act 2010, nor were any of its directors. Instead,Ms South submitted that they embarked on debt collection work utilising gangmembers as a means of intimidation. Up until the Head Hunters took over theVickerys Road property, the premises of Ironclad Securities also operated as the defacto gang pad for the Head Hunters, and Mr Richardson's office contained itemswhich were associated with the Head Hunters.[51] Mr Wimsett was critical of the suggestion that Ironclad Securities was involvedin illegal activity. He pointed out there was no evidence of Mr Richardson everemploying improper tactics during his debt collection work. Where the activity is debtcollecting, without threats of violence or actual violence and the debt is lawfully owed,then that too does not amount to a crime. In that regard, Mr Richardson's evidencedemonstrates that Ironclad had "the correct paper work". Mr Richardson explainedthat he would buy the debt so the debt was that of Ironclad Securities and, "anybodycan collect their own debt".[52] While Mr McFarland acknowledged taxing was a feature of gang life,Mr Wimsett submitted that there was no certainty that the activity amounted to a crimein any particular case. However, there was evidence that if a person joined theHead Hunters and was helped with the purchase of a motorbike, then it was on theclear understanding that if they left, it had to be returned. In such a scenario therewould be a "claim of right" defence. Furthermore, the respondents had no convictionsfor offences arising out of the alleged taxings.[53] In short, Mr Wimsett submits that none of the circumstances relied on have asufficient evidential basis to show that the individual taxing amounted to "significantcriminal activity".[54] I accept there is insufficient evidence to demonstrate Ironclad Securities andMr Richardson were engaged in activities that would amount to theft or demandingwith menaces under ss 219 or 239 of the Crimes Act. However, I do not consider thetransactions involving Mr Strickland's two vehicles or the blue Ford Falcon(registration BCN158) can reasonably be coloured as anything other than the illegaltaking of those vehicles, without colour of right, and through direct or implied threatsif the vehicles were not relinquished. It is quite clear from Mr Strickland's text thathe did not voluntarily relinquish the vehicle, nor was it plausible that he would do so.Indeed, that is why Mr Strickland's vehicles had to be guarded in the interim. Nothingwas paid for the vehicles. Their proceeds were simply divided between the localHead Hunters and the West Auckland branch. I am satisfied that, on the balance ofprobabilities, these vehicles were stolen from their owners, most likely under threat,with the proceeds of sale going to the gang.Breach of the Gambling Act 2003[55] When the Vickerys Road property was searched by police on6 December 2016, the police located six gaming or "pokie" machines at the address,three of which were operational. The Commissioner says the pokie machines atVickerys Road were not authorised for use as required by the Gambling Act 2003 andthus, by permitting the machines to be used at the property, the owners wereconducting illegal gambling contrary to s 19 of the Gambling Act.[56] While offences under that section of the Gambling Act do not amount tosignificant criminal activity by virtue of the maximum sentence available, where morethan $30,000 of unlawful benefit is derived, the offending is defined as significantcriminal activity.[57] The Commissioner's claim that such a benefit was received relies largely onthe evidence contained in a red notebook seized from Mr Baylis's car when it wasstopped on 27 August 2016 (the pokies notebook). The first page of the pokiesnotebook said: "This note Book is for the Pokie Machines Only". It then includesfinancial records, starting from the rear of the book and moving forward, which spanthe time period from 14 July 20168 to 26 August 2016, which is the day before thepokies notebook was seized.[58] Each page in the pokies notebook records what the Commissioner asserts tobe the volume of cash removed from each of the three machines by the gang.Detective Sergeant Patten says this totalled $13,640 in the period 14 July to 26 August2016, averaging $317.21 a day. Assuming the pokie machines operated at this ratebetween 14 July 2016 (which is the first record in the pokies notebook) and5 December 2016, when the search on Vickerys Road was conducted, then the takingsfrom the machines in this period would be $45,678. When the search was conducted,cash totalling $6,162.30 was seized from the unlicenced pokie machines and that, too,is the subject of an application for a forfeiture order.8 There are some miscellaneous entries with earlier dates, but the records which relate to the threegambling machines commence on 14 July 2016.[59] Mr Wimsett, however, challenged whether the records in the pokies notebookcould be relied on in this way to calculate the total "benefit" as defined under s 6 ofthe Act. Section 6 states that significant criminal activity includes offending "fromwhich property, proceeds, or benefits of a value of $30,000 or more have, directly orindirectly been acquired or derived". Section 6(3) requires any expenses or outgoingsin connection with an activity of the kind described as significant criminal activity tobe "disregarded for the purposes of calculating the value of any property, proceeds, orbenefits under subsection (1)(b)".[60] Mr Wimsett says, in a gambling context, a person does not benefit in the totalamount that is gambled. It is the amount that is retained, that is above the float orinitial amount of money in the machine, that represents the amount of a benefit. Inhis submission, turnover does not equal the benefit.[61] He submits this approach is supported by the decision in Commissioner ofPolice v Snook, where Ellis J declined to make a profit forfeiture order, saying thatthose were:9 concerned with "profit" which, like "benefit", connotes a gain or surplus.The purpose of such an order is to ensure that a respondent is not better off asa result of the relevant offending than he or she was before. It seems to methat the word "benefit" must also be interpreted in that context and in thatlight.[62] However, Snook involved a case where the respondent sold her lawfully ownedhouse to a drug dealer and received payment in cash which she then used, in part, tobuy another property with the balance being funded by a mortgage from the ANZ[b]ank. Ellis J rejected the Commissioner's position that the $270,000 she received incash for her property was a benefit as defined in the Act, saying the definition "canand, in my view, must also be read consistently with the ordinary meaning of that termwhich (as the relevant dictionary definition makes clear) means "pecuniary advantage,profit or gain."[63] In my view, the decision in Snook is clearly distinguishable from the facts inthe present case, but in any event, I am satisfied the money recorded in the notebook9 Commissioner of Police v Snook [2018] NZHC 2537 at [63].and used in Detective Sergeant Patten's calculations is profit in the conventional sense.For that reason, I do not need to decide whether, if it was turnover, it could still becaught by the statutory definition. By way of example, in Mr Murphy's examinationinterview, he confirmed there was "probably three to four grand a week going throughthose machines". Mr Murphy confirmed in evidence that the content of thatexamination interview was true and correct. However, it is not clear fromMr Murphy's evidence whether that was net income or simply turnover. The phrase"going through those machines" suggests it is turnover. That would explain why it isa greater amount than the sums recorded in the pokies notebook which represent whatwas taken out of the machine. The fact that the three machines were found to containover $6,000 when the search was conducted also supports the Commissioner'sassertion that the sums recorded in the notebook, which only totalled a few hundreddollars on each occasion, were the sums removed from the machines as profit. Finally,the fact the pokies notebook recorded what the sums from the machines were spenton, and in each case were largely consumed by other gang expenses, also supports thefact the $317 drawn out per day was net profit and readily fits within the definition of"benefit".[64] I am satisfied that significant money went through the machines, and thecalculation of net profit which exceeds $30,000 from the operation of the pokiemachines was proved on the balance of probabilities.Were any of the improvements funded from significant criminal activity?[65] The respondents' position was that minimal money was expended on theimprovements, and the Commissioner cannot prove that the funds came from anyother source than member subscriptions, sale of materials and items left at theproperty, and fundraising activities including raffles and sale of Head Hunters brandedclothing.[66] Mrs Richardson explained how she ran a weekly lottery raffle over six monthswhich raised $400 a week for the club building fund. Mr McFarland spoke about therequirement to pay a subscription to the gang although he acknowledged the numberof members who paid subs was small, sometimes as few as only three or four, but upto 10 at other times.[67] However, the Commissioner relies heavily on the gang's own accountingrecords to support the claim that tainted money was used to fund some of theimprovements to the Vickerys Road property. The primary document relied on is anaccounting notebook which was seized from the home address of Mr Baylis on23 September 2020. The accounting notebook covers the period from10 November 2016 to 20 January 2020 and records total income and expenditure overthis period. The Commissioner notes that the main income sources are as follows:(a) vehicles: $40,650;(b) no reference: $20,345;(c) "Mag book": $18,963 (Mr Baylis was known by the gang as Mag orMaggot);(d) loan repayments: $11,980;(e) "donations": $11,300;(f) drinks: $13,725;(g) raffles: $3,380;(h) club fines: $560[68] The Commissioner submits that the money which is coded as "donations", orwhich does not have a reference, and which totals $31,645, is money derived frommembers who have engaged in significant criminal activity such as the sale ofmethamphetamine and taxings. This all went into the same pool of cash which fundedthe gang's outgoings on the property. Indeed, $24,125.16 of the outgoings is directlyidentified as funding improvements to Vickerys Road. The accounting notebookcontains a number of references to expenditure on improvements to the propertyincluding:(a) gravel: $220(b) cable: $260(c) concrete: $600(d) sleepouts: $1,000, $4,000 and $500(e) asphalt: $3,500(f) sliding door: $250(g) swimming pool: $1800(h) fence posts: $50(i) moving digger: $85 plus $120(j) panels: $1,800(k) Concut payments: $3,000(l) building supplies: $720(m) sleepout wheels: $240(n) sleepouts: $500(o) electrician: $1,000, $400, $200 and $100(p) builder: $500 and $700[69] I am satisfied that the income was not all legitimate and that improvements tothe property were met, at least in part, using the proceeds from significant criminalactivity. The starting point is that where income was from rent, repayment of loans,payment from sale of gang clothing or gang subscription fees, it was entered as suchin the accounting notebook. For example, on 16 September 2017, there is an entry for"Benji fees" and for "Si rent" and "Si fees". There are also a number of entries forT-shirts which were sold at $40 each and for the sale of goods, such as an entry whichrecords the sale of scrap metal for $380 on 2 November 2017.[70] However, there are also large sums of money which are either related to vehicletaxings, for example, the sale of the Night Rod, or which are recorded as income withno source given or as "donations". I do not consider the description of "donations"was accurate. As Mr Richardson candidly acknowledged, the likelihood of peoplesimply making cash donations to the Head Hunters was "pretty slim but notimpossible".[71] These sums are then quickly expended on work on the property. For example,on 26 November 2016, $3,850 is showing as income with no source given and beforethe next date entry, which is 29 November 2016, a payment of $600 is made forconcrete. Similarly, on 1 June 2017, $1,580 is recorded as income followed byexpenditure of $1,000, on 4 July 2017, to an electrician. On 7 July 2017, $2,000 isrecorded as a donation. It is followed, on 17 July 2017, by payment to an electrician.[72] It is, in my view, implausible that the income which is not coded to a specificsource is income generated from one of the legitimate sources identified by witnessesfor the respondents. The gang was reasonably careful about record keeping, notingaccountability to each other was important, so if it was income from rent, subscriptionsor sale of gang property, I expect they would have recorded it as such. Furthermore,I note that the accounting records cover only the later stages of the renovations. It canbe inferred that even more money was expended in the early phase of renovationsduring 2016 where it can be expected that similar, if not greater expenditure was madeon labour and materials.[73] While the expenditure will be far less than that anticipated by Mr Harrison'sevidence because the gang did, indeed, rely on a great deal of donated goods andlabour, it is an inescapable conclusion that the renovations were, at least in part, fundedby the proceeds of drug sales and the theft of motor vehicles from those whom thegang had fallen out with.[74] A particularly stark example of this is found in the text messages betweenMr Broadley and Samuel Lowsley. On 14 October 2016, Mr Broadley offeredmethamphetamine for sale to Mr Lowsley saying, "can do ten at 650 lowest I can go.I'm paying 6". A little later Mr Broadley sends a further communication toMr Lowsley where he says, "just when ya get ya first 650 could I grab mate I got apay for some concrete for the morning." While Mr Broadley said he could not recallwhat was going on at the time, I am in no doubt that this was an example of moneyfrom drug sales being spent directly on improvements to the gang pad.[75] The same pattern is replicated in the pokies notebook records. That notebookcovers the period from 14 July 2016 to 26 August 2016 and records outgoings onbuilding related expenses. For example, on an undated page in the notebook, between21 July 2016 and 27 July 2016, $2,200 is recorded as being expended on concrete and$750 on carpet. On another undated page between those two dates, $400 is recordedas being expended on concrete. On 18 August 2016, $610 is recorded for a plumber,and on 26 August, three rolls of electrical wire were purchased at a cost of $150. Thereis a clear connection between income earned from the illegal pokie machines andexpenditure on improving the property.[76] It is an inescapable conclusion, clearly supported by the accounting and pokienotebooks, that the improvements to the gang pad were not paid for solely fromlegitimate sources of income but were also paid for from significant criminal activity.[77] The property at 31 Vickerys Road is therefore tainted and I am satisfied anasset forfeiture order should be made in respect of it.Undue hardship[78] If I reached the conclusion that the property should be forfeited as taintedproperty, then the respondents say that I should exercise the power under s 51 to grantrelief from forfeiture on the grounds of undue hardship. Mr Wimsett submits that thevalue of any unlawful expenditure on 31 Vickerys Road is an extremely smallproportion of the total value of the property. It would therefore be disproportionatelyharsh if an asset forfeiture order were made in respect of the property when only asmall portion of its value was tainted or obtained illegitimately. The Crown would bereceiving a "serious windfall", and "disproportionate" forfeiture would be contrary tothe principles of the Criminal Proceeds Act which is not intended, in his submission,to be punitive.[79] In particular, Mr Wimsett says that undue hardship is likely to be caused to therespondents if they are not granted relief because:(a) If tainted, there is a significant disproportion between any unlawfulfunds applied to the property and the total value of the property, beingsomething less than 10 per cent of its total value.(b) The gravity of the offending involved is low and occurred over a shortperiod. In particular, the offence under the Gambling Act only attractsa maximum penalty of one year imprisonment, and here, the gamingmachines were on private property and were only open to be used bymembers or their associates. The methamphetamine offences of therelevant parties at the relevant time are also at the lower end of thespectrum.(c) Improvements to the clubroom were a labour of love. People broughtskills and materials to the project over many working bees in order tobuild something meaningful for the group.(d) The clubroom is a place where members and associates of the HeadHunters can spend time, socialise, exercise and seek accommodation ifnecessary. Members of the club are often ostracised from societybecause of their tattoos and general appearance. The clubroom,however, provides a space for them to relax and socialise and so is ofpsychological benefit to such a group.Discussion[80] The term "undue hardship" is a term well understood by the Courts. Merehardship resulting to the respondent as a consequence of the execution of the forfeitureorder is not sufficient. The word "undue" means something more. The applicant forrelief must show much more than mere inconvenience or difficulty, but that thehardship would be "grossly disproportionate" or amount to extreme and undueprivation.10[81] In determining whether relief should be granted on the grounds of unduehardship, the Court may have regard to:11(a) the use that is ordinarily made, or was intended to be made, of theproperty that is, or was proposed to be, the subject of the assetsforfeiture order; and(b) the nature and extent of the respondent's interest in the property; and(c) the circumstances of the significant criminal activity to which the orderrelates.In my view, none of these factors support the respondents' submission that unduehardship will result to them.[82] In terms of the use that the property is put to, it is not a family home, nor doesanyone reside there on a permanent basis. It is a clubroom for a small number of gangmembers and their associates, the membership of which changes over time asmembers leave the gang or join it. There is nothing to suggest the current respondents10 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010 at [73]–[75];and Commissioner of Police v Winsor [2014] NZHC 161 at [57].11 Section 51(2).have any particular connection to the clubrooms. Both Mr Richardson and Mr Turnerare no longer members of the Head Hunters. While Mr McFarland remains in thegang, he is based in Auckland, where the West Chapter of the Head Hunters have otherclubrooms. No persons other than the respondents have applied for relief fromforfeiture, so it is not clear to me that I can take account of hardship (undue orotherwise) to any other individual, but in any event, no evidence has been adducedwhich suggests other gang members would lose anything more than the benefit ofaccess to the clubrooms which is only available to them as a result of theirpredecessors' efforts.[83] In terms of the nature and extent of the respondents' interest in the property,they are, of course, shareholders of a company which owns the property, andMr Wimsett appeared for the company. While the company owns the property intotality, it did not fund the acquisition of the property. The evidence showed that thenamed respondents had shares in the company transferred to them at no cost.Furthermore, while I have found tainted money was used to fund the renovations tothe property, I accept entirely that nothing like the sum which Mr Harrison calculatedwas actually spent on the renovations, and the three respondents have not injectedsignificant, if any, amounts of personal money into the property.[84] Finally, I accept that the offending under the Gambling Act is not at the mostserious end of criminal activity. Nevertheless, for the reasons given, it does constitutesignificant criminal activity. More importantly though, the methamphetamineoffending which was used to fund improvements is serious offending, regardless ofthe quantities involved.[85] For these reasons, none of the circumstances listed in s 51(2) persuade me thatthe respondents will suffer "undue hardship". I therefore decline to exclude theVickerys Road property from the assets forfeiture order I will make.Night Rod motorcycle[86] The Commissioner seeks an assets forfeiture order in relation to a 2008 Harley-Davidson Night Rod motorcycle registered to Mr Richardson. Mr Richardsonpurchased the motorcycle in late May 2013 and paid the purchase price by trading ina 2003 Harley-Davidson Softail motorcycle for $12,000 and paying the balance of$8,969.69 in cash.[87] The Commissioner points out that in the years prior to purchase,Mr Richardson had declared the following net income:(a) year ending 31 March 2011: nil(b) year ending 31 March 2012: $8,579.34;(c) year ending 31 March 2013: $35,874.98; and(d) year ending 31 March 2014: $27,488.77.[88] The Commissioner says in the years before Mr Richardson purchased themotorcycle, he was either incarcerated or declared a very modest income which wouldnot have permitted him to acquire significant savings or disposable income.Mr Richardson was sentenced on 14 March 2008 to nine years and four months'imprisonment of charges of conspiracy to supply methamphetamine, firearms chargesand receiving charges, and he was released from custody on 10 August 2011. At thetime of his offending, Mr Richardson was associated with the Road Knightsmotorcycle gang but shifted allegiance to the Head Hunters in 2014. The balanceMr Richardson paid for the motorcycle was paid in cash and the Commissioner pointsout that cash is frequently utilised by those who are involved in criminal activity. Inall the circumstances, the Commissioner submits that the motorcycle is taintedproperty, having been paid for, at least in part, from the proceeds of significantcriminal activity.[89] Mr Richardson filed an affidavit responding to this aspect of the applicationand opposing forfeiture of the motorcycle. In it he says he cannot remember exactlywhere the cash he used to pay for the balance came from because it was a long timeago. However, he said it was not from the proceeds of any criminal activity. He sayshe had been working for Fulton Hogan around that time so had an income. He alsosaid he sold his Ford XR8 ute and XR8 van in the period, so had money from thosesales. In cross-examination, Mr Richardson said that he had borrowed the balancebecause "the ute hadn't sold and we just covered the rest, and I had money myself, meand my wife, and she was working fulltime."[90] It is clear from Mr Richardson's examination interview that neither he, nor hiswife, had significant sources of income during this period. They lived in rentedproperties and had, at various times, both been on a benefit. While he said he earnedincome from Ironclad Securities while it was operating, that company was notincorporated until 2014, which is after he acquired the motorcycle. When his wifewas working, it was for Brinks Chickens, and there is no evidence to suggest this wasa job which enabled the family to generate surplus cash, particularly when the couplehad two teenage children to support at home at the time of purchase.[91] In my view, there is no evidence which supports the possibility thatMr Richardson had access to nearly $9,000 in legitimately acquired cash at the timehe paid for the Harley-Davidson Night Rod motorcycle. The family had limitedsources of legitimate income and the normal outgoings of a family with two children.I also do not accept that the cash contribution was funded from the sale of othervehicles. Mr Richardson's oral evidence was that he borrowed the money until one ofhis vehicles sold, which was not suggested in his original affidavit evidence.However, he did not get finance through the dealer who sold the motorcycle to him,nor is there any evidence to explain how borrowed funds were converted into cash.[92] Given his history of methamphetamine dealing and the access this gave him tolarge cash sums, I consider the most likely explanation for the source of the cashpayment is money made from methamphetamine dealing. Accordingly, I am satisfiedthat the motorcycle was, at least in part, paid for from the proceeds of significantcriminal activity and is therefore tainted.Cash from the pokie machines[93] I have already set out my reasons for finding that the money seized from thepokie machines represented money gained from significant criminal activity.Accordingly, the cash sum of $6,162.30 seized from those machines on6 December 2016 is also tainted money.Form of the orders[94] Counsel for the Commissioner presented a draft assets forfeiture order whichalso sought ancillary orders to assist in the process of effecting the sale of the propertyby giving the Official Assignee, or his delegate, the power to execute any deed orinstrument in the name of the registered proprietors for the purpose of effecting theseorders.[95] I consider the draft order was appropriate. In order to sell the property theOfficial Assignee will need authority to execute certain documents or take otherassociated steps. Accordingly, pursuant to s 50 of the Criminal Proceeds (Recovery)Act 2009;(1) I make an assets forfeiture order as sought:(2) The property to which this order applies;(a) vests in the Crown absolutely; and(b) is to be in the Official Assignee's custody and control.(3) This order applies to the following property:(a) the residential property at 31 Vickerys Road, Wigram,Christchurch, described in Certificate of Title 234777,registered proprietor being Lincoln Property Investments Ltd, acompany now struck off the Companies Register;(b) cash totalling $6,162.30 seized on 6 December 2016 from31 Vickerys Road, Wigram, Christchurch, being the proceedsobtained from unlicensed gaming machines; and(c) a black, 2008 Harley-Davidson VRS 08 NIGHT R motorcycle,registration A6YNS, registered in the name of the firstrespondent, Lyndon Vaughan Richardson.(4) To give effect to the assets forfeiture order I make the followingancillary orders:(a) an order directing the Official Assignee to sell the propertylisted at, 3(a) and (c) above;(b) an order for the purpose of effecting the sale of the property inaccordance with 3(a) above, the Official Assignee (including aperson delegated who has functions and powers under theCriminal Proceeds (Recovery) Act 2009) has the power toexecute any deed or instrument in the name of the registeredproprietors and to do anything necessary to give validity andoperation to the deed or instrument.Solicitors:Raymond Donnelly & Co., ChristchurchCopy To:S N B Wimsett, Barrister, Auckland