THE COMMISSIONER OF POLICE v HARRIS [2018] NZHC 3142

THE COMMISSIONER OF POLICE v HARRIS [2018] NZHC 3142 [30 November 2018]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECIV-2017-416-13[2018] NZHC 3142UNDER the Criminal Proceeds (Recovery) Act 2009IN THE MATTER of an application under ss 22, 24, 25, 33, 34,35, 43, 44, 47, 49 and 52 of the CriminalProceeds (Recovery) Act 2009BETWEEN THE COMMISSIONER OF POLICEApplicantAND BRENT CRAIG HARRISRespondentHearing: On the papersJudgment: 30 November 2018JUDGMENT OF CLARK JIntroduction[1] The Commissioner of Police has filed applications under the CriminalProceeds (Recovery) Act 2009 for restraint of property, assets and profit forfeitureorders, and immediate sale orders. Mr Harris, the respondent, has been charged witha number of dishonesty and drug-related charges, along with other charges. Theapplications are in respect of a number of vehicles, motorbikes, real property,mechanical items and cash accumulated by Mr Harris. Mr Harris has not opposed theapplications.Background[2] Following Cull J's grant of a without notice application for a restraining orderon 15 May 2017, the Commissioner then filed on notice applications for:(a) restraint (filed 17 May 2017);(b) immediate sale (filed 11 June 2018);(c) forfeiture (filed 5 July 2018).[3] By minute dated 14 September 2018 Mallon J requested the Commissioner tofile a memorandum setting out the basis for the orders sought. Although theapplications are unopposed Mallon J pointed out the need for the court to be satisfiedthe orders are appropriate. With the assistance of a memorandum providing thenecessary information, the applications could be considered on the papers by a dutyJudge. That memorandum of counsel for the Commissioner is now before me.[4] Since the filing of the Commissioner's applications and Mallon J's minute,further property was seized from Mr Harris. Three further on notice applications havebeen filed extending the property to which the applications apply:(a) further application for restraining order (filed 22 November 2018);(b) further application for order for immediate sale (filed 22 November2018);(c) amended application for asset and profit forfeiture orders (filed22 November 2018).[5] Jamie Lee Reader, Mr Harris' former partner and the interested party, has beenserved. Ms Reader disavows any interest in the property. Ms Reader has sworn anaffidavit deposing to her awareness that she may be entitled to claim under theProperty (Relationships) Act 1976 against the property sought to be forfeited. She hasno interest whatsoever in doing so. Nor does Ms Reader have any interest in theproceedings and she has no wish to be served with any papers "now or in the future".[6] Two previously named interested parties are no longer considered to beinterested parties as they have, too, disavowed any interest in any of the property atissue.Evidential basis of the applications[7] The applications rest, in large part, on the nil declared income Mr Harris andMs Reader returned for the period between 24 November 2014 and 28 February 2017.The total legitimate funds the couple had access to during the period was $28,037.58.[8] The Commissioner also relies on text messages, both received and sent byMr Harris, which indicate that during this same period of nil declared income, he infact had access to significant financial resources, in particular, cash. The text messagesare to the effect:(i) Ms Reader regularly requesting money from Mr Harris to fund routineliving expenses such as rent, food, clothing and motor vehicle runningexpenses;(ii) Mr Harris indicating to Ms Reader in a message sent on 22 November2015 that he had the financial resources to help her purchase a house;(iii) numerous messages from Mr Harris accusing Ms Reader of takingeither drugs or money that belong to him;(iv) a series of messages between 16 October 2016 and 25 October 2016indicating that Ms Reader has stolen some $15,000 in cash fromMr Harris, and suggesting that she had access to further cash alsobelonging to him; and(v) a series of messages during the same period as the discussion regardingthe above theft, in which Mr Harris indicates he will make a paymentof $25,000 regarding a motorhome.[9] During the relevant period, Mr Harris and his partner also acquired a numberof vehicles with a combined known value of $136,200. Other vehicles acquired, butfor which an exact value is not known, are estimated to have a combined value of$27,800.[10] Evidence suggests that the likely source of Mr Harris' unexplained income ishis involvement in drug dealing and methamphetamine manufacture. For example:(a) A large number of Mr Harris' text messages are indicative ofmethamphetamine dealing.(b) In a number of text messages Mr Harris tells his correspondent to becautious of what is communicated by text. Others indicate Mr Harris isaware he could go to prison in relation to what he and Ms Readerdescribe as his 'work'.(c) Mr Harris' house at 354 Matokitoki Valley Road was destroyed by fire.On attendance at the scene Police observed amongst the ruins glasswareconsistent with the manufacture of methamphetamine. A vehicle at theaddress, also partially destroyed by fire, contained a water distiller and acontainer of sulphuric acid. The water distiller was later analysed by theESR and found to have been used in the manufacture ofmethamphetamine.(d) All of the vehicles and generators located in the padlocked container atMr Harris' home tested positive for traces of ephedrine,pseudoephedrine, amphetamine, or methamphetamine.(e) A person driving the Ford Territory vehicle that is owned by Mr Harriswas observed purchasing caustic soda and dust masks from the RD1 farmsupply retail store at Opotiki on 27 November 2015. Those are itemscommonly used in the manufacture of methamphetamine.(f) Mr Harris is linked to the occupants and items located at 189 Te WaitiRoad, where Police found a number of buried plastic containerscontaining methamphetamine, cannabis, and $27,000 in cash. One ofthose containers was marked with the nickname of "Mongol", a namelinked to Mr Harris via a list of phone numbers located at that address.Text message data later confirmed his link to the occupant of thataddress, and indicated that Mr Harris was aware of the Police search asit was occurring. Moreover the messages indicate that Mr Harris laterimposed a 'tax' on the occupant as compensation for what had beenseized by Police.(g) When searched the vehicle in which Mr Harris was arrested on24 September 2018 was found to contain small quantities ofmethamphetamine, cannabis, and a methamphetamine pipe. Mr Harrishad $4,521 cash on his person.[11] Mr Harris also has a history of dishonesty offending having incurred23 convictions for receiving since 2007. A Honda trail bike (valued at $800) andHonda 3000 Inverter EU generator (valued at $650) located at the Matokitoki ValleyRoad address, had their identifying serial numbers ground off or altered. Mr Harriswas unable to satisfactorily explain how he came to be in possession of these items,or explain the source of cash used to fund a supposedly legitimate acquisition of theitems. At the time of Mr Harris' arrest on 24 September 2018, he was driving a ToyotaHilux utility vehicle reported stolen two days earlier. A subsequent search of his mostrecent residential address of 696 Takaputahi Road located a trailer-mountedcommercial water blaster valued at $15,000 and a Can Am 4x4 motorbike valued at$17,000, both of which had been reported stolen and in relation to which Mr Harrishas been charged with burglary, theft, and in the alternative, receiving.Leave to amend applications[12] The Commissioner seeks to amend the previous applications for restraint, saleand forfeiture on the basis the additional property seized was not reasonably able tobe identified at the time the original applications were made.[13] The High Court may amend an application for forfeiture at the request of theCommissioner.1 The Court must not amend an application to include additionalproperty, proceeds or benefits unless satisfied the additions were not reasonably ableto be identified when the application was first made or the evidence necessary to1 Criminal Proceeds (Recovery) Act 2009, s 47(1).support the application became available after the application was first made.2 If theCourt amends an application the Court must direct service on the respondent andinterested parties.3[14] I am satisfied the applications should be amended. The evidence supports theinclusion of the additional property in the applications. There has been no responsefrom Mr Harris and no prejudice arises from the amendments. It appears servicerequirements pursuant to s 47(3) have been complied with.Asset forfeiture orderApplication[15] The Commissioner applies for an assets forfeiture order in respect of thefollowing property which is said to be tainted in that it has been acquired as a resultof, or directly or indirectly derived from significant criminal activity.(i) Kawasaki quad bike (YIN: RGSWE07A4EB700101);(ii) 2003 LVVTA Iron Horse Texas Chopper (Registered No: A2UUW);(iii) 2003 Ducati BIP Testas (Registered No: A1KSZ);(iv) Honda trail bike (VIN: 8TTE365120U4HW);(v) Suzuki quad bike (VIN: JSAAL41A562109880);(vi) Honda 3000 Inverter EU generator;(vii) Dunlite generator (Serial No: 1836016GCBCTVZX8);(viii) AEG 50HZ generator (Serial No: TYR A 1375);(ix) Yamaha 700 Kodiak quad bike (YIN: 5Y4AMA2W6GA500949);2 Section 47(2).3 Section 47(3).(x) 1999 Toyota Hilux 3.0D 4WD X utility vehicle, registered numberYF7732.Principles[16] An application for assets forfeiture is determined in accordance with s 50(1) ofthe Criminal Proceeds (Recovery) Act:50 Making assets forfeiture order(1) If, on an application for an assets forfeiture order, the High Court issatisfied on the balance of probabilities that specific property istainted property, the Court must make an assets forfeiture order inrespect of that specific property.[17] Tainted property is property that is acquired as a result of significant criminalactivity or derived from significant criminal activity.4[18] "Significant criminal activity" means an activity engaged in by a person that ifproceeded against as a criminal offence would amount to offending punishable by amaximum term of imprisonment of five years or more; or from which property,proceeds, or benefits of a value of $30,000 or more have, directly or indirectly, beenacquired or derived.5 A person may undertake significant criminal activity whether ornot the person has been charged with or convicted of an offence, or acquitted, or hashad a conviction quashed or set aside.6Assessment[19] In the present case, the Commissioner seeks forfeiture of the property listed at[15](i)–(x) above. The Commissioner submits the property is tainted property in thatit was directly or indirectly derived from activity that, if charged as criminal offending,would constitute tax evasion, supply of methamphetamine, manufacture ofmethamphetamine, or receiving.4 Criminal Proceeds (Recovery) Act, s 5, definition of "tainted property".5 Section 6(1).6 Section 6(2).[20] The evidence satisfies me on the balance of probabilities Mr Harris has beenengaged in significant criminal activity. Mr Harris' acquisition of the property isinexplicable in the context of his declared income for the relevant period. I also takeinto account the evidence implicating Mr Harris in serious drug offending. I amsatisfied the only logical inference to be drawn from the evidence is that the propertywas purchased or derived from significant criminal activity.Profit forfeiture orderApplication[21] The Commissioner applies for an order Mr Harris has knowingly, directly orindirectly, derived a benefit from significant criminal activity to the value of$289,538.10 and that the maximum recoverable amount is $289,538.10. The propertyto be realised is any of the property (listed at [15] above) not subject to an assetforfeiture order and, in addition:(i) all that parcel of land containing 2.559 hectares more or less being Lot1 on Deposited Plan 8980 situated in Block XV Waimata SurveyDistrict commonly known as 354 Matokitoki Valley Road, Gisborne;(ii) $3,650 cash seized from 136 Te Waiiti Road, Torere, Opotiki on19 April 2017;(iii) $2,902 cash seized from the respondent on 24 September 2018;(iv) a 2001 Ford F150 Lightning utility vehicle, registered number IVD150;and(v) an XQ38F Pulsar Helion Thermal Scope, serial number 91004687.Principles[22] An application for profit forfeiture is determined in accordance with s 55(1) ofthe Criminal Proceeds (Recovery) Act:55 Making profit forfeiture order(1) The High Court must make a profit forfeiture order if it is satisfied onthe balance of probabilities that—(a) the respondent has unlawfully benefited from significantcriminal activity within the relevant period of criminalactivity; and(b) the respondent has interests in property.[23] The meaning of "unlawfully benefitted from significant criminal activity" isprovided in s 7:In this Act, unless the context otherwise requires, a person has unlawfullybenefited from significant criminal activity if the person has knowingly,directly or indirectly, derived a benefit from significant criminal activity(whether or not that person undertook or was involved in the significantcriminal activity).[24] If the Commissioner proves the respondent has unlawfully benefited fromsignificant criminal activity, the value of the unlawfully obtained benefit is presumedto be the value stated by the Commissioner, unless rebutted by the respondent on thebalance of probabilities.7[25] In Pulman v Commissioner of Police Lang J summarised the process fordetermining an application for profit forfeiture:8The making of a profit forfeiture order under s 55 potentially requires theCourt to take four separate steps. First, it must determine whether theCommissioner has proved, on the balance of probabilities, that the respondenthas unlawfully benefited from significant criminal activity during the relevantperiod. If the court is so satisfied, the value of that benefit is presumed to beone of the values prescribed by s 53(1). The respondent may, however, rebutthat presumption on the balance of probabilities.Second, the Court is required to determine the maximum recoverable amount.It does that by taking the value of the benefit and deducting from that figurethe value of any property already forfeited to the Crown by virtue of any assetsforfeiture order made in relation to the same criminal activity as that to whichthe profit forfeiture application relates.Third, the Court must determine whether any property should be excludedfrom the operation of the profit forfeiture order because undue hardship islikely to be caused to the respondent if such property were realised.7 Criminal Proceeds (Recovery) Act, s 53.8 Pulman v Commissioner of Police HC Auckland CIV-2010-404-5666, 27 May 2011 at [10]–[13].Once the Court has undertaken such of these exercises as may be relevant, itmust make a profit forfeiture order under s 55(1) if it is satisfied on the balanceof probabilities that the respondent has interests in property. Any such ordermust specify the value of the benefit, the maximum recoverable amount, andthe property that is to be disposed of.Assessment[26] The basis for the Commissioner's application is that Mr Harris has directly orindirectly derived a benefit from activity that, if charged as criminal offending, wouldconstitute tax evasion, supply of methamphetamine, manufacture ofmethamphetamine, or receiving (all of which are punishable by more than 5 years'imprisonment). For the reasons which I have set out for my determination of the assetsforfeiture application, I am satisfied Mr Harris has derived an unlawful benefit fromsignificant criminal activity. I am also satisfied Mr Harris has an interest in theproperty.[27] In the absence of any contest from Mr Harris, the value of the unlawfullyobtained benefit is presumed to be $289,538.10. There has been no application fromMr Harris with respect to any claim of undue hardship, nor any indication in thatregard. Accordingly, the maximum recoverable amount is $289,538.10 less the valueof the property that is forfeited under the assets forfeiture application. On the basis ofMr Russell's affidavit sworn 8 June 2018, the value of the assets forfeited is$25,650.00.[28] I am satisfied a profit forfeiture order should be made to the value of$263,888.10. The property to be disposed of is that listed at [21](i)–(v) above.Sale orderApplication[29] The Commissioner seeks an order for the immediate sale of those vehicles andmechanical items at risk of devaluation, namely:(i) 2001 Ford F150 Lightning utility vehicle, registered number IVD150;(ii) XQ38F Pulsar Helion Thermal Scope, serial number 91004687;(iii) Kawasaki quad bike (YIN: RGSWE07A4EB700101);(iv) 2003 LVVTA Iron Horse Texas Chopper (Registered No: A2UUW);(v) 2003 Ducati BIP Testas (Registered No: A1KSZ);(vi) Honda trail bike (VIN: 8TTE365120U4HW);(vii) Suzuki quad bike (VIN: JSAAL41A562109880);(viii) Honda 3000 Inverter EU generator;(ix) Dunlite generator (Serial No: 1836016GCBCTVZX8);(x) AEG 50HZ generator (Serial No: TYR A 1375);(xi) Yamaha 700 Kodiak quad bike (YIN: 5Y4AMA2W6GA500949);(xii) 1999 Toyota Hilux 3.0D 4WD X utility vehicle, registered numberYF7732.Principles[30] The question for my determination in relation to these items of property iswhether orders for sale are necessary to preserve their value.9 The principles thatemerge from the case law in analogous contexts and that have relevance to thisapplication are the following:10(i) Sale orders are typically pursued where restrained assets have highdepreciation rates combined with additional costs of storage andinsurance which ultimately decrease the potential return to the partieswho claim an interest in the property.119 Criminal Proceeds (Recovery) Act, s 35(e)(v).10 The principles are summarised in Commissioner of New Zealand Police v Smith [2017] NZHC 10at [30].11 Commissioner of Police v Cavanagh [2014] NZHC 2978 at [7].(ii) Where the evidence suggests the value of the vehicle is not depreciatingit may not be appropriate to take into account costs associated withinsurance and storage. Such costs may be regarded as the inevitable byproduct of asset seizures.12(iii) The onus lies upon the Commissioner to adduce an evidential basis toestablish sale of the property is necessary to preserve its value. Ofrelevance will be evidence as to the value of the property at the time ofthe application, likely rate of depreciation between the hearing and finaldetermination of the proceeding and associated costs.Assessment[31] The cost to the Official Assignee to store vehicles is:i. $13.50 per day per car; andii $5.80 per day for motorcycles.[32] The Official Assignee has arranged for the vehicles to be drug tested. Eachitem of property tested positive for traces of methamphetamine. At the time of thepreparation of the affidavit in support of the application for sale the total costs incurredby the Official Assignee amounted to:i $15,658.40 time costii $18,099.03 recoveriesiii $17,849.30 storage.[33] Thus the costs to the Commissioner levied by the Official Assignee as at June2018 amounted to $51,606.73. Storage costs will continue to mount on a weekly basis.12 Commissioner of Police v Evans [2015] NZHC 1240 at [32]–[33].[34] I have not been provided with any particular evidential basis upon which tomake an assessment of the need to immediately sell the forfeited property in order topreserve its value from depreciation. Mr Russell's evidence is that each of the vehiclesand items is "expected to depreciate in value over the passage of time". And there isno expectation any of the motorbikes (none of which could be described as collectors'items or having special characteristics) will appreciate in value.[35] I am satisfied in the circumstances of this case that an order for sale isappropriate. I am particularly influenced by the apparent disinterest on the part ofMr Harris and the consequential lack of prejudice to him of this particular order. Thevehicles and mechanical items are depreciating assets and are incurring storage costs.Result[36] The assets forfeiture application is granted. The property listed at [15](i)–(x)vests in the Crown absolutely and is in the custody and control of the OfficialAssignee.[37] The profit forfeiture application is granted. The value of the benefit is$289,538.10. The maximum reservable amount is $263,888.10. The property that isto be disposed of and in which Mr Harris has interests is that listed at [21](i)–(v).[38] The application for immediate sale orders is granted. The Official Assignee isdirected to sell the property listed at [29](i)–(xii).[39] In light of the assets and profit forfeiture orders made it is not necessary todetermine the restraint application._____________________________Karen Clark JSolicitors:Elvidge & Partners, Napier for Applicant