THE COMMISSIONER OF POLICE V DAVID LI HC TAU CIV-2010-470-48

THE COMMISSIONER OF POLICE V DAVID LI HC TAU CIV-2010-470-48 3 March 2011IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2010-470-48BETWEEN THE COMMISSIONER OF POLICEApplicantAND DAVID LIRespondentAND ECHO YANGHearing: 5 October 2010(Heard at Rotorua)Counsel: S Simmers for the ApplicantR Zhao for the Respondent and Interested Third PartyJudgment: 3 March 2011 16:30:00JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 3 March 2011 at 4:30 p.m. pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarSolicitors / Counsel: Ms S Simmers, Ronayne Hollister-Jones Lellman, Office of the Crown Solicitor, Tauranga Mr R Zhao, Barrister, Auckland Mr F Deliu, Barrister, AucklandIntroduction[1] The Commissioner of Police applied for a profit forfeiture order under the Criminal Proceeds (Recovery) Act 2009 (the Act). This relates to a sum of approximately $186,000 in bank accounts in Mr Li's name and a car owned by Mr Li valued at $40,000 (at 10 August 2010).[2] Section 55(1) of the Act provides:55 Making profit forfeiture order(1) The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—(a) the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and(b) the respondent has interests in property.[3] The ―significant criminal activity alleged to have been engaged in by Mr Li is tax evasion. It was alleged that Mr Li unlawfully benefited in a sum of approximately $267,000, being unpaid income tax. It was further alleged that Mr Liengaged in the ―significant criminal activity of dealing in methamphetamine, but without a quantification of the benefit.[4] Mr Li opposed the application on the grounds that the applicant had failed to prove specific matters where the burden of proof is on the applicant. Mr Li did not give any evidence on his own behalf in opposition. In essence, he put the applicant to proof.[5] The interested third party, Ms Yang, is Mr Li's wife. Ms Yang filed anapplication seeking relief pursuant to s 66 or s 67 of the Act. There was an affidavit from Ms Yang in support of her application and she was cross-examined. I willconsider Ms Yang's application after dealing with the application against Mr Li.[6] Three preliminary matters dealt with at the commencement of the hearing should be noted. The first concerns the fact that Mr Li and Ms Yang were both represented by Mr Zhao. Before the hearing I had raised with counsel a question as to whether there could be a conflict between Mr Li and Ms Yang. At the beginning of the hearing Mr Zhao advised me that it had not been possible to arrange separate counsel. I said that the matter should proceed and the question could be considered further if the need arose. In the event no areas of conflict arose.[7] The second preliminary point concerned Ms Yang's level of competence withspoken English. Mr Zhao advised that he expected Ms Yang could manage without an interpreter. I was satisfied that Ms Yang was not at a disadvantage in being cross- examined without an interpreter.[8] The third point related to an application for the applicant to admit a further affidavit at the commencement of the hearing; an affidavit of Maxine Jackson. After a mild objection from Mr Zhao I admitted this affidavit. It was essentially of a formal nature.Application against Mr LiThe relevant statutory provisions[9] As noted at [2] above, the Court is bound by s 55(1) to make a profit forfeiture order if the matters specified are established on the balance of probabilities. I will repeat the criteria:(a) the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and(b) the respondent has interests in property.[10] ―Significant criminal activity is defined in s 6 of the Act as follows:6 Meaning of significant criminal activity(1) In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that ifproceeded against as a criminal offence would amount to offending—(a) that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or(b) from which property, proceeds, or benefits of a value of $30,000 or more have, directly or indirectly, been acquired or derived.(2) A person is undertaking an activity of the kind described in subsection (1) whether or not—(a) the person has been charged with or convicted of an offence in connection with the activity; or(b) the person has been acquitted of an offence in connection with the activity; or(c) the person's conviction for an offence in connection with the activity has been quashed or set aside.(3) Any expenses or outgoings used in connection with an activity of the kind described in subsection (1) must be disregarded for the purposes of calculating the value of any property, proceeds, or benefits under subsection (1)(b).[11] ―Unlawfully benefited is defined in s 7 as follows:7 Meaning of unlawfully benefited from significant criminal activityIn this Act, unless the context otherwise requires, a person has unlawfully benefited 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 significant criminal activity).[12] Other relevant definitions are in s 5 of the Act and are as follows:a) ―benefit includes proceeds and property;b) ―property—(i) means real or personal property of any kind—whether situated in New Zealand or a foreign country; andwhether tangible or intangible; andwhether movable or immovable; and(ii) includes an interest in real or personal property;c) ―relevant period of criminal activity, in relation to an application for a profit forfeiture order, means the period that ends on the date the application is made and starts 7 years before—(i) the date of the application for the relevant restraining order, if the application for the profit forfeiture order relates, wholly or in part, to restrained property; or(ii) the date of the application for the profit forfeiture order, if the application for the profit forfeiture order does not relate to restrained property[13] The relevant period in this case commenced on 3 February 2003 being 7 years before the date on which the applicant applied for the restraining order in respect of property to which the profit forfeiture order relates.[14] Section 53 of the Act contains provisions relating to proof:53 Value of benefit presumed to be value in application(1) If the Commissioner proves, on the balance of probabilities, that the respondent has, in the relevant period of criminal activity, unlawfully benefited from significant criminal activity, the value of that benefit is presumed to be the value stated in—(a) the application under section 52(c); or(b) if the case requires, the amended application.(2) The presumption stated in subsection (1) may be rebutted by the respondent on the balance of probabilities.The significant criminal activity alleged in this case[15] The significant criminal activity alleged against Mr Li where the value of the benefit was fully established was tax evasion from February 2003 to 2010. It was alleged that, through tax evasion, Mr Li unlawfully benefitted in the sum of$267,189.43, being unpaid income tax. The formal application also referred todealing in methamphetamine, and there was a body of evidence relating to this.However, the application against Mr Li proceeded only on the basis of the allegationof tax evasion and it is unnecessary to consider the evidence relating to the allegationof dealing in methamphetamine in relation to the application against Mr Li. (It isrelevant to Ms Yang's application.)[16] The Tax Administration Act 1994, s 143B, prescribes offences of ―tax evasion and similar offences, and the maximum penalty. The maximum penalty isrelevant to the definition of ―significant criminal activity in s 6(1)(a) of the Act. A person who is convicted of an offence specified in s 143B is liable to ―imprisonment for a term not exceeding 5 years or a maximum fine of $50,000, or both.The evidence in support[17] The application against Mr Li was supported by 10 affidavits , with a large volume of documentary evidence annexed to some of those affidavits. There was a challenge to the evidence of one deponent, Ms McDonald, a financial analyst with the Police Asset Recovery Unit in Hamilton. I accept the evidence of Ms McDonald notwithstanding the challenges made. I also accept the remaining and unchallenged evidence in respect of which there was no reason to question its reliability. In addition to proof of tax evasion based on careful financial analysis, and evidence from an employee of the Commissioner of Inland Revenue that Mr Li has never filed a tax return of any kind, tax evasion was effectively admitted by Mr Li. A policeofficer said that when he asked Mr Li why he had failed to file any income taxreturns since his arrival in New Zealand he had replied that ―he determined not to doso because he considered that if he had filed returns any information sharingarrangements between the revenue authorities and the immigration authorities wouldhave resulted in his apprehension as an overstayer.[18] There was a prima facie case requiring the order sought to be made subject toconsideration of Mr Zhao's submissions for Mr Li, to which I now turn.Submissions for Mr Li[19] Mr Zhao's first submission was founded on s 6(1) of the Act. Put into my own words it was as follows: (1) The evidence, at best from the applicant'sperspective, pointed to a series of alleged offences of tax evasion – a number of separate instances of criminal activity over the relevant period. (2) There was no evidence sufficient to prove any single instance of criminal activity resulting in a benefit as defined in s 6(1)(b) – that is to say, a benefit from the activity ―of $30,000 or more. (3) Paragraphs (a) and (b) of s 6(1) have to be read together. (4) As a consequence significant criminal activity had not been proved.[20] The submission is not borne out by the evidence and it is founded on a misconstruction of s 6.[21] The evidence is clear. There are detailed calculations of the income tax that should have been paid but was not paid in eight financial years from 2003 to 2010. In all but two of those years the tax not paid exceeded $30,000. Generally it exceeded $30,000 by a large margin. For example, the assessment for 2009 was tax evaded of $71,962.[22] Mr Zhao's submission in respect of the evidence was directed to anacknowledgement by Ms McDonald, the forensic accountant, that individualdeposits made to Mr Li's bank accounts did not exceed $30,000. That, however, is not relevant to the assessment under s 6(1)(b).[23] Mr Zhao's submission that paragraphs (a) and (b) of s 6(1) have to be read conjunctively was a necessary submission in support of his primary submission concerning the minimum of $30,000. It was necessary because the maximumpenalty for tax evasion and similar offences is 5 years imprisonment and that would bring it within s 6(1)(a). It is clear that paragraphs (a) and (b) are to be read disjunctively. As a result, even if the benefit from each relevant activity was less than $30,000, it would nevertheless be significant criminal activity under paragraph (a).[24] Mr Zhao's second submission was that the applicant had failed to comply with s 52(b). Section 52(b) is as follows:52 Contents of application for profit forfeiture orderAn application for a profit forfeiture order must—(b) describe the significant criminal activity within the relevant period of criminal activity from which the respondent is alleged to have unlawfully benefited; and[25] The relevant part of the application in this case was as follows:[T]he respondent has in the relevant period of criminal activity (as defined in s 5(1) of the Act), namely, 3 February 2003 to 27 August 2010 [being the date of the application], unlawfully benefited to the value of $267,189.43 from significant criminal activity, namely, tax evasion.Mr Zhao submitted that the notice should have referred expressly to s 143B of the Tax Administration Act 1994.[26] I am not persuaded that there was any deficiency in the application in respect of s 52(b). The formal notice of application, quoted above, does not leave any doubt as to the offence being alleged. And in this respect Mr Zhao responsibly acknowledged, in the course of his submissions, that he was in no doubt as to thenature of the criminal activity encompassed by the expression ―tax evasion.[27] Mr Zhao's third point was, in essence, that the application was materially dependent on the evidence of Ms McDonald and this evidence failed to prove the relevant matters on the balance of probabilities. The submission was put in this way, in summary:With due respect, Ms McDonald's affidavit is insufficient to prove on the balance of probabilities that Mr Li committed the alleged tax breaches as it is largely speculation. Further, Ms McDonald does not appear to be qualified to be making such conclusions.The evidence put forward by the Crown does not prove that it is more likely than not that Mr Li evaded tax. Thus the Crown has not met their burden of proof.[28] I am satisfied that Ms McDonald was qualified to give the evidence she did give. So far as the evidence is concerned, it was the evidence to be expected from a qualified and competent forensic accountant, based on the primary evidenceavailable. The heart of the first part of Mr Zhao's submission – with the reference to speculation – was based on the premise that Ms McDonald could not herself prove the primary facts, or at least numbers of essential primary facts. The point would have weight if the relevant primary facts had not been proved by other deponents, but they had been. As I have already noted, the other deponents, dealing with the primary facts, were not challenged and I accept their evidence. Ms McDonald, as an expert, was entitled to express her opinion based on this evidence.[29] There was no application on behalf of Mr Li under s 56 of the Act for exclusion of any of the property from the forfeiture order on the grounds of hardship reasonably likely to be caused to him.[30] For these reasons I am satisfied that a profit forfeiture order must be made under s 55(1). Matters required to be specified in terms of s 55(2) are:(a) The value of the unlawful benefit, determined in accordance with s 53 is $267,189.43.(b) The maximum recoverable amount determined in accordance with s 54 is $267,189.43.(c) The property that is to be disposed of in accordance with s 83(1) is the property subject to the restraining order, including accrued interest, and being the proceeds of the bank accounts and the BMW carspecified in the application. Disposal of this property is subject todetermination of Ms Yang's application for relief.Ms Yang's application for reliefStatutory provisions[31] Ms Yang applied for relief under s 61 of the Act, which provides:61 Person (other than respondent) may apply for relief before civil forfeiture order made or declinedAt any time after an application for a civil forfeiture order has been made and before the civil forfeiture order is made or declined, a person (other than the respondent) who claims an interest in the property sought to be forfeited under a civil forfeiture order may apply for an order for relief.[32] Sections 66 and 67 contain substantive provisions for relief on alternative grounds. The provisions are as follows:66 Making order for relief from civil forfeiture order where person has interest and was not involved in significant criminal activity(1) On receipt of an application for an order for relief from a civil forfeiture order under section 61 or 62, the High Court must grant the relief that the Court considers appropriate if the applicant proves on the balance of probabilities that the applicant—(a) has an interest, or would but for any civil forfeiture order have an interest, in the property to which the application relates; and(b) has not unlawfully benefited from the significant criminal activity to which the application relates.(2) The High Court may make an order for relief under this section at or after the time the associated civil forfeiture order is made.67 Making order for relief from civil forfeiture order on grounds of undue hardship(1) On an application for an order for relief from a civil forfeiture order under section 61 or 62, the High Court may grant the application if it considers that, having regard to all of the circumstances, undue hardship is reasonably likely to be caused to the applicant if relief is not granted.(2) The circumstances the Court may have regard to under subsection (1) include, without limitation,—(a) the use that is ordinarily made, or was intended to be made, of the property that is, or is proposed to be, the subject of the civil forfeiture order; and(b) the nature and extent of any person's interest in the property; and(c) the degree, if any, to which the person had knowledge of the significant criminal activity to which the property relates; and(d) the circumstances of the significant criminal activity to which the property or order relates.[33] ―Interest, in respect of an interest claimed in property, is defined in s 5 as follows:interest, in relation to property of any kind (including, without limitation, restrained property or forfeited property), means—(a) a legal or equitable estate or interest in the property; or(b) a right, power, or privilege in connection with the propertyMs Yang's application : the evidence for the applicant[34] Ms Yang was born in the Peoples' Republic of China (China) on 9 July 1975. Mr Li was born in China in May 1970. Ms Yang and Mr Li were married in China in 1998.[35] In November 2000 Ms Yang and Ms Li travelled from China to Nauru. They arrived on 22 November 2000. Mr Li travelled on his Chinese passport and I assume Ms Yang travelled on her Chinese passport. On the date of arrival both of them were issued with passports of the Republic of Nauru. In her affidavit Ms Yang said that this was arranged by an immigration agent in Beijing and they acquired Nauruan nationality through an ―investment migrant scheme. Their given names on theNauruan passports are different from their given names on their Chinese passports.[36] Ms Yang and Mr Li arrived in New Zealand on 11 February 2001. They have lived in New Zealand since then, using the names on their Nauruan passports.[37] On arrival they were granted visitor permits. From that date until 30 July 2004 each of them held either visitor or student permits following grants or renewals of such permits. No permit has been issued since 30 July 2004 and in consequence, since then, Ms Yang and Mr Li have been unlawfully in New Zealand. More recently, removal orders have been issued pursuant to s 54 of the Immigration Act 2009.[38] Ms Yang said that when she and Mr Li came to New Zealand they broughtUSD150,000, without indicating the form in which that was brought, and traveller'scheques worth USD$46,000. Mr Bruce Russell is an investigator attached to the asset recovery unit of Hamilton Police. He was the officer in charge of the investigation to determine how Mr Li had accumulated the money found in the bank accounts and how he had paid for the BMW car. Mr Russell said that the police investigations established that a US dollar account was opened in the names of Mr Li and Ms Yang in March 2001. He said that, apart from credits of interest, there weretwo deposits ―approximating a total of USD100,000 in 2001 and one deposit approximating USD30,000 in 2003. He further said that ―progressive withdrawalsfrom the account throughout the 2001-2008 period resulted in all funds beingdepleted by mid 2008.[39] Ms McDonald's analysis established that, over the period 2003 to 2010, a total income of $865,308 was obtained and this was all deposited to the bank accounts located by the police. These accounts, over the period, were, from time to time, in Mr Li's sole name and in the other periods in the joint names of Mr Li and Ms Yang. The total of $865,308 excluded all items which might arguably not be income. The assessment in that regard was conservative, in the sense that, where there was a doubt as to whether or not an item might not be income, the benefit of the doubt was given to Mr Li and Ms Yang.[40] It is this total of income in respect of which the assessment of unpaid income tax has been made. There was no documentary proof from Mr Li or Ms Yang of the source of any of this income. There is some evidence of legitimate business activities undertaken by Mr Li which may account for some of the income, but well short of the total.[41] Ms Yang made two statements to police in 2010. These interviews occurredfollowing Mr Li's arrest for a number of assaults on Ms Yang. Based on Ms Yang'sstatements to police, neither she nor Mr Li worked in New Zealand from 2007. The assessment of income in 2008 was $135,536 and in 2009 $198,840. That is a total of $334,376 in two years from no known legitimate source. There were statements byMs Yang, including in evidence in this proceeding, that Mr Li got money fromgambling. He may have gambled, but I reject this bald statement as a believableexplanation for the source of the money.[42] Analysis, based on bank records, of the expenditure by Mr Li and Ms Yangindicated, in Mr Patterson's unchallenged assessment, a ―high end lifestylethroughout the period 2003 to May 2009, with the bank records after May 2009 not enabling an analysis of that sort. Amongst other things, the BMW car subject to the application for the forfeiture order was purchased by Mr Li in March 2009 for $69,000. $55,000 of that sum was paid in cash. The $55,000 was not withdrawnfrom any of the respondent's bank accounts that police are aware of. The balance of$14,000 was met by two payments of $7,000 on a credit card.[43] Police investigations of the affairs of Mr Li and Ms Yang began on 12 January 2010 following Ms Yang's complaint of assault. Those investigations led to evidence that Mr Li was involved in dealing in methamphetamine. The evidence is set out in detail in the affidavits in support of the application. It is unnecessary to summarise this evidence. It is unchallenged. This evidence, as it stands, is sufficient to satisfy me on the balance of probabilities that Mr Li was involved in dealing in methamphetamine, that Mr Li made profits from these dealings, and that the money in the bank accounts and for the car was derived, at least in part, from this significant criminal activity.[44] The evidence from police enquiries included communications from December 2009 until Mr Li's arrest on 13 January 2010. There werecommunications between Mr Li and other persons already known to police to be involved in dealing in methamphetamine and other criminal activities. Over theperiod 8 to 29 December 2009 a total of $169,000 was withdrawn from Mr Li's bankaccounts. On 13 January 2010 a sum of $50,980 was banked into one of Mr Li'saccounts. On that occasion Mr Li was accompanied by a man who at that date was awaiting trial on possession of methamphetamine for supply. When arrested, Mr Li had $4,485 in cash in his possession (together with four SIM cards). Assuming the cash, and the $50,980 deposited the previous day, came from the total of $169,000 withdrawn in December, there is $113,535 unaccounted for. In the absence of any evidence from Mr Li, and having regard to all of the evidence for the applicant, I do not consider there is any reasonable basis to make an assumption in favour of Mr Li in respect of the $50,980 that was deposited. As a result there is a sum in excess of $160,000 unaccounted for.[45] On 15 January 2010 Mr Li was spoken to by a Mandarin speaking New Zealand police officer. Mr Li would not discuss any details of his involvement, oralleged involvement, with methamphetamine but he did say to the police officer thathe had knowledge of criminal matters that he would divulge if his safety wasguaranteed. In that regard it may be noted that some of the names that came up inthe course of the police enquiry, although not all directly linked to Mr Li, includedChinese nationals convicted for dealing in large quantities of methamphetamine.Ms Yang's evidence[46] Ms Yang swore an affidavit in support of her application. The contents of the affidavit may be described in three main sections. The first section consists of MsYang's statements of lack of knowledge and lack of involvement in Mr Li'sactivities. She said, amongst other things, she had involvement in Mr Li's businessactivities only to a limited extent and in the earlier years in New Zealand; she had noknowledge of the source of most of his income; she was a dutiful wife who did notseek to interfere with her husband's affairs or make enquiries. The way Ms Yang putit in her affidavit was:15 I never enquired as to what my husband did for a living nor would I because in my Chinese upbringing, the man brings home the ‗breadand butter' to the family and the wife does not question him. Itwould be hugely disrespectful in my culture if I made my husbandaccount for his job and I would never do any such thing. A little earlier in her affidavit Ms Yang said:9 While my husband and I have been in New Zealand, we lived in a way that I tried to be a good wife with my husband working to make money for our living.10 My daily activities consist of mostly cooking, reading and taking quiet walks along the street.[47] The second main part of Ms Yang's affidavit contains responses to some ofevidence for the applicant. Some of this involves responses to statements concerning Ms Yang, or responses in respect of matters which Ms Yang might be expected to have knowledge. However, other responses belie the earlier contention that Ms Yanghad no knowledge of her husband's business affairs. Some of this part of the affidavit amounts to purported responses to the applicant's evidence against her husband which she could not credibly make if she had no knowledge of his affairs and which, in part, amounted to inadmissible submission rather than evidence.[48] The third part of the affidavit is directed to the application for relief because of hardship. The essential contention is that Ms Yang and Mr Li were facing removal from New Zealand to Nauru and this would be likely to result in hardship because they would have no money and no means of earning an income in Nauru. Ms Yang said this could not be alleviated by returning to China because she and her husband had lost their Chinese nationality. There was a further affidavit from a New Zealand lawyer who had qualified in law in China. She provided expert evidence that, by Chinese law, a Chinese national who acquires foreign nationality automatically loses Chinese nationality.[49] In cross-examination Ms Yang acknowledged that, over a period from January 2007 to December 2008, she deposited a total of approximately $101,000 to the bank accounts which later became subject to the restraining order. At the beginning of this period the accounts were in the joint names of Ms Yang and Mr Li, from February 2007 to August 2008 they were in Mr Li's sole name, and at the endof the period, from September to December 2008, they were again in joint names. All of the deposits made by Ms Yang over this period were in cash. All but four of the deposits were for sums in excess of $1,000. There were eight deposits in excess of $5,000.Ms Yang's application : discussion[50] Ms Yang's application for relief recorded reliance on ss 61 and 67 of the Act. There was no express reference to s 66. However, Mr Zhao's submissions covered an alternative application under s 66.[51] The starting point is that an applicant, under s 66 or s 67, must establish an―interest in the property as defined in s 5. If an interest is not established, further enquiry in terms of s 66 or s 67 is not required. The need to establish an interest under s 66 is express: s 66(1)(a). It is not explicitly stated in s 67, but the requirement is clear from s 61, which provides the foundation for the application, and from s 67(2)(b).[52] The only basis upon which Ms Yang claimed to have an interest in the proceeds of the bank accounts and the car was under the Property (Relationships) Act 1976. The submission was made that Ms Yang ―has a 50% interest in all relationship property. In consequence, it was submitted, she had a 50% interest in the proceeds of the bank accounts and the car.[53] On the authority of Solicitor-General v De Bruin1 Ms Yang's claim is notsustainable. In De Bruin the Solicitor-General sought, amongst other things, an order forfeiting a property that was occupied as the family home by Mr De Bruin and his de facto partner, Ms Delaney. Ms Delaney had an established equitable interest in the family home of 3.5%. She claimed an increased interest, up to 50%, in respectof the remainder of the equitable estate held by Mr De Bruin. Mr De Bruin's sharein the home was purchased with the proceeds of crime.[54] Venning J said:[31] The problem for the submissions advanced on behalf of Ms Delaney that rely on her obtaining an increased interest in the property from the interest held by Mr De Bruin, is that Mr De Bruin has no right to maintain an interest in the Riddell Road property given the source of the money he contributed to it. Ms Delaney, claiming through Mr De Bruin cannot be in any better position than the person she claims through, Mr De Bruin. The submission that Ms Delaney should be entitled to a fifty percent1 [2004] 3 NZLR 540.under the Property (Relationships) Act or on the basis of a constructive trust argument cannot succeed for that reason. The rights she may have against Mr De Bruin, as a consequence of their relationship do not translate into a right or interest in the Riddell Road property. When the statutory regime is involved, new property rights operate from the date of the Court order or agreement. They are not retrospective: Fisher on Matrimonial and Relationship Property, para 1.26.This passage was expressly approved by the Court of Appeal.2 It was indirectly affirmed by the Supreme Court.3[55] The definition of ―tainted property in the Act is as follows:tainted property—(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 criminal activity; and(b) includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity[56] I am satisfied that all of the property at issue in this case is tainted property. All of it may be treated as the portion of income obtained by Mr Li, from whatever source it may have come, which should have been paid by him to the Commissioner of Inland Revenue for income tax. On that basis it is, in my judgment, property―directly or indirectly derived from significant criminal activity. The word―derived should not be given a narrow meaning, equivalent to ―obtained. Thenarrower meaning is captured by the preceding part of the definition – ―acquired as a2 De Bruin v R; Delaney v R [2007] NZCA 600 at [108]-[112].3 De Bruin v R; Delaney v R [2008] NZSC 32, dismissing applications for leave to appeal against the Court of Appeal decisions. The appeals of Mr De Bruin and Ms Delaney to the Court of Appealfollowed a retrial and conviction of Mr De Bruin. Venning J's decision followed Mr De Bruin'sconviction at the first trial. Although Mr De Bruin appealed against the conviction there was noappeal against Venning J's decision. Between the first trial and the second trial Mr De Bruin and MsDelaney entered into a purported agreement under the Property (Relationships) Act 1976 recordingMs Delaney's interest in the family home at 55%. In subsequent proceedings under the Proceeds ofCrime Act 1991 this agreement was held to be void under s 47(1) of the Property (Relationships) Act as an agreement intended to defeat a creditor, namely the Crown. In dismissing Ms Delaney's application for leave to appeal the Supreme Court said, at [5], in respect of the Court of Appeal's conclusion on the agreement: ―The Court held, in effect, that Ms Delaney could not acquire throughMr De Bruin more than he could ultimately be entitled to himself. We agree. Tainted at purchase byMr De Bruin's crimes, the property could not pass untainted from him, save to the extent of Ms Delaney's untainted contribution.result of significant criminal activity. I am also satisfied on the balance ofprobabilities, and as an alternative, that the property now restrained was alsoacquired, or derived directly or indirectly, from Mr Li's involvement inmethamphetamine dealing.[57] This conclusion is sufficient to dismiss Ms Yang's application for relief,whether assessed under s 66 or under s 67. However, in case that conclusion is wrong, I will briefly discuss some further considerations. The first relates to the commentary in Fisher on Matrimonial and Relationship Property at paras 1.26 and 1.27, cited with approval in the High Court and Court of Appeal in Solicitor-General v De Bruin. In my respectful opinion the principle stated in Fisher needs to be applied with caution when dealing with questions under the Criminal Proceeds (Recovery) Act. For example, the Court of Appeal said at [109]:As Venning J pointed out, rights under the Property (Relationships) Act only crystallise from the date of the Court order or agreement. Unperfected rights do not constitute existing equitable estates or interests in property: Fisher on Matrimonial Property at [1.27].[58] The Court there referred only to equitable estates or interests in property(and, implicit in that, the legal estate). However, the definition of ―interest in the Act extends to ―a right, power, or privilege in connection with the property. Inother words, ―interest as defined in the Act is much wider than ―interest as appliedin the general law of property. It is, for example, arguable that the ―protected interest of each spouse prescribed by s 20B of the Property (Relationships) Act is a right in connection with the relationship property as defined in the Criminal Proceeds (Recovery) Act. This question was not considered by the Courts inSolicitor-General v De Bruin. And the question was not argued before me. It maybe noted that the ―interest, or right, pursuant to s 20B is quantified if, pursuant to s 20B(3), the value is the ―specified sum prescribed under s 53A. It may also be noted that, pursuant to s 20A(3) of the Property (Relationships) Act, the general rule that the rights of creditors prevail over rights under the Property (Relationships) Act does not apply in respect of the protected interest under s 20B.[59] In this case, however, assuming Ms Yang was entitled to advance a claim to a protected interest under s 20B, I would not have concluded that that provided afoundation to advance the application for relief. This is because the protected interest sought by Ms Yang would have to be established under s 11B(2) of the Property (Relationships) Act. Where there is no family home – the Court must award each spouse or partner an equal share in such part of the relationship property as it thinks just in order to compensate for the absence of an interest in the matrimonial home.If this provision were to be applied, the result earlier arrived at by application ofSolicitor-General v De Bruin is reached by another route. It would not be just to provide compensation from property derived from significant criminal activity.[60] There are further difficulties for Ms Yang. Relief can only be granted under s 66 if, amongst other things, the applicant ―has not unlawfully benefited from thesignificant criminal activity: s 66(1)(b). This provision required Ms Yang to establish, on the balance of probabilities, that she did not knowingly, directly or indirectly, derive a benefit from the tax evasion or the drug dealing. There is need, in effect, to prove a negative; absence of relevant knowledge.[61] The way this was approached by and on behalf of Ms Yang was the way in which such an issue is generally approached; she denied any relevant knowledge. Allowing for the relative difficulty of proving a negative, I was not sufficiently persuaded by Ms Yang on this point. The preliminary view I had on reading MsYang's affidavit, before she was cross-examined, was that it was disingenuous and contrived, and there were inconsistencies. Aspects of these features are contained in the summary of the affidavit above. These impressions were re-enforced by the cross-examination of Ms Yang, and notwithstanding sympathy for Ms Yang'spersonal predicament.[62] The evidence adduced for the applicant, if unanswered by Ms Yang, provided sufficient to come to a positive conclusion on the balance of probabilities that Ms Yang did have relevant knowledge. She assisted her husband in handling substantial sums of cash. She was a joint owner of the bank accounts at various times. For a period Mr Li had a business importing cars. Some of the importation documentswere in Ms Yang's name. It is likely Ms Yang would have been told by Mr Li to takecare not to alert the Inland Revenue Department, or any other government authority,because they were overstayers. She plainly knew she had been an overstayer since 2004. The acquisition of the Nauruan passports, with the change of given names, arouses suspicion and Ms Yang directly participated in that. In China, as she put it,she was ―working as an IT person earning a good salary. She is an intelligent andalert woman. I accept that it was reasonably probable that Ms Yang was subject to direction from Mr Li, but that does not assist Ms Yang on the question of knowledge.[63] Had the preliminary grounds been established to justify assessment of the application for relief under s 67, I would not have granted relief in exercise of the discretion. The factors that the Court may have regard to that are set out in s 67(2)do not favour Ms Yang's application. The essential foundation for the applicationraised a separate matter; this was the proposition that Ms Yang and Mr Li may be deported to Nauru and, if that happens, they will have no means of supporting themselves. The short answer to that is that there is a sum well in excess of $100,000 that was withdrawn from the bank accounts in December 2009, just before Mr Li was arrested, and which is unaccounted for. Although Mr Li was convicted for serious assaults on Ms Yang, Ms Yang's own evidence in her affidavit was to theessential effect that the relationship remains. Further, although there is uncontradicted evidence that Ms Yang's Chinese nationality may have been lost on acquiring Nauruan nationality, there was no evidence from or on behalf of Ms Yang that she could not return to China, renounce the Nauruan nationality and resume her nationality of birth.[64] For this range of reasons I am not satisfied that grounds for relief have beenmade out under s 66 or s 67 and the application is dismissed.________________________________Peter Woodhouse J