COMMISSIONER OF POLICE v MILOSEVIC [2019] NZHC 783

COMMISSIONER OF POLICE v MILOSEVIC [2019] NZHC 783 [11 April 2019]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2018-463-81[2019] NZHC 783BETWEEN THE COMMISSIONER OF POLICEApplicantAND TE OHORERE "LUCKY BOY"MILOSEVICRespondentUDC FINANCE LIMITEDInterested PartyHearing: 10 April 2019Appearances: R Jenson for ApplicantD H Hall for RespondentNo appearance for Interested PartyJudgment: 11 April 2019JUDGMENT OF LANG J[on application for order permitting restrained property to be sold]This judgment was delivered by me on 11 April 2019 at 3.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] During 2017 and 2018, police officers in the National Organised Crime Groupcarried out an investigation into suspected criminal activity by members and associatesof the Mongrel Mob in Kawerau. This involved predominantly the supply ofmethamphetamine and the cultivation and supply of cannabis,[2] The police operation terminated on 27 March 2018. On that date Mr Milosevicwas arrested and charged with cultivating cannabis.[3] In July 2018 the Commissioner successfully applied on a without notice basisfor a restraining order under s 22 of the Criminal Proceeds (Recovery) Act 2009 (theAct) over assets owned by Mr Milosevic. These included a 2013 Ford Ranger 3.2TDutility motor vehicle, registration number GZZ937 (the vehicle). An on noticerestraining order was subsequently made in relation to those assets without oppositionby Mr Milosevic.[4] The vehicle has remained in the custody of the Official Assignee since it wasfirst seized in July 2018. It is currently being held in covered storage at a cost of$13.50 per day. The vehicle is being mechanically maintained as necessary to keep itin working order, but is not being driven.[5] It is unlikely that the criminal proceedings against Mr Milosevic will beresolved within the next 12 months. For that reason resolution of the presentproceeding is also many months away. This means the Commissioner will continueto incur storage costs and the vehicle is likely to depreciate in value over that period.The Commissioner therefore seeks an order permitting the Official Assignee to sellthe vehicle and place the net proceeds of sale on interest earning deposit.[6] Mr Milosevic opposes the vehicle being sold. He wants it to be retained sothat he and his family can have the use of it if he is acquitted on the charges that hefaces.The vehicle[7] Mr Milosevic purchased the vehicle on 17 July 2017 at Turners Car Auctionsin Auckland for the sum of $28,780 in cash. The following year he borrowed $14,000from the interested party in this proceeding, UDC Finance Ltd (UDC), to enablemechanical repairs to be carried out on the vehicle. Mr Milosevic is continuing tomake weekly payments in the sum of $80.58 to UDC in reduction of the loan. Thebalance currently outstanding under the loan is $17,428.02. If the vehicle is sold atthis point, however, UDC would apply rebates of interest that would reduce therepayment figure to $13,293.22.[8] In an affidavit sworn on 25 January 2019 Mr Milosevic deposes that heconsiders the current value of the vehicle to be approximately $24,000. That estimatemay be optimistic because the Official Assignee has obtained advice from Turners CarAuctions that the vehicle is currently worth approximately $16,500.The issue[9] Mr Milosevic has not applied under s 30 of the Act for an order that the vehiclebe severed or excluded from the existing restraining orders. The only issue to bedetermined at this stage is therefore whether the Official Assignee should be permittedto sell the vehicle. If that does not occur, the Official Assignee will continue to storethe vehicle until the criminal charges have been resolved and the present proceedingdetermined. The Commissioner is likely to seek an asset forfeiture order under s 49of the Act regardless of whether Mr Milosevic is convicted on the criminal charges.The Commissioner will argue that the cash Mr Milosevic used to purchase the vehicleis likely to have come from the sale of cannabis. This would mean the vehicle istainted property in terms of s 49 and liable to forfeiture for that reason.Jurisdiction[10] The Commissioner advances the order for sale of the vehicle under s 35 of theAct which relevantly provides as follows:35 Types of further orderWithout limiting the generality of section 34(1), a court may, on anapplication under section 33(1), make 1 or more of the followingfurther orders in relation to restrained property:(e) an order relating to the Official Assignee that—(v) directs the Official Assignee to sell restrained property(including, without limitation, a business) in order to preservethe value of the restrained property:[11] In Commissioner of Police v Cavanagh, Venning J explained the rationale forthe power of sale under s 35 as follows:1[7] A sale order may be made at any time. Typically sale orders arepursued by the Commissioner where the restrained assets in relation to whichthe sale orders are sought have high depreciation rates combined withadditional costs of storage and insurance which ultimately decrease thepotential return to the Commissioner and/or parties who claim an interest inthe assets. There is a further additional benefit in the sale in that, once theassets are sold, the Official Assignee is able to hold the funds in an interestbearing account.[12] In Commissioner of Police v Evans, Brown J was not prepared to take intoaccount the ongoing costs associated with storage and insurance when consideringwhether to order restrained assets to be sold because such costs were the "inevitableby-product of asset seizures".2 In Commissioner of Police v Blance, however, DobsonJ observed that he would "not go so far as to disregard the relevance of holding costsin all cases".3 In certain cases the reduction in eventual return caused by ongoingholding costs will not be sufficient of itself to warrant an order for sale. These includecases where a vehicle may properly be regarded as an investment, or where the rate ofdepreciation has bottomed out.[13] As I observed in Commissioner of Police v Drummond, the point to be takenfrom these cases is that the Commissioner cannot assume sale orders will be made asa matter of course in relation to retrained assets such as motor vehicles.4 All relevantfactors will need to be considered. These are likely to include the nature and value ofthe asset, the length of time that will elapse before substantive proceedings aredetermined, the extent to which the asset may depreciate during that period and thewishes of the owners of the asset and/or those who may have an interest in it.1 Commissioner of Police v Cavanagh [2014] NZHC 2978.2 Commissioner of Police v Evans [2015] NZHC 1240 at [33].3 Commissioner of Police v Blance [2018] NZHC 477108 at [52].4 Commissioner of Police v Drummond [2018] NZHC 1730 at [15].Decision[14] The thrust of the evidence and argument for Mr Milosevic is that he and hisfamily will suffer undue hardship if they do not have the use of the vehicle. They havea five year old son who has been diagnosed as having an autistic spectrum disorder.This requires him to attend appointments with a speech therapist and other healthprofessionals on a regular basis. In addition, their nine year old daughter needs toattend sporting and other school events. Until last month the family had been usinganother vehicle for some of these purposes, but this vehicle was not suitable for hisson to travel in because the rear doors could not be locked. That vehicle is in anyevent no longer roadworthy. Efforts to borrow vehicles from family members haveproved fruitless. Mr Milosevic therefore wants to have the restrained vehicle returnedto him so that he and his wife can meet their obligations to their children.[15] I have considerable sympathy for the difficult situation in which Mr Milosevicand his family find themselves. As matters currently stand, however, there is noapplication before the Court to have the vehicle released from restraint so that it canagain be available for family use. Any such application would no doubt face strongopposition from the Commissioner in any event given the fact that Mr Milosevicpurchased the vehicle using cash. The police have now gone to considerable lengthsin an effort to disprove his explanations as to how he acquired that cash. The realityof the situation is that Mr Milosevic and his family will continue to suffer hardship forsome considerable time because they will not regain the use of the vehicle regardlessof the outcome of the present application.[16] In Blance, the respondents attributed sentimental or other forms of non-monetary value to two vehicles.5 Associated criminal proceedings were also likely tobe resolved in the near future. As a result, the length of time until the substantiveforfeiture application could realistically be assessed was not great in comparison tothe period for which holding costs had already been incurred. These factors weresufficient to persuade Dobson J not to make an order permitting the vehicles to besold.5 Commissioner of Police v Blance, above n 3 at [54].[17] None of those factors is present in this case. Resolution of the criminalproceedings and any associated forfeiture proceedings is months if not years away.Furthermore, Mr Milosevic does not have any sentimental attachment to the vehicleother than the fact that he says it comprises an asset acquired through hard work andconsiderable thrift over a lengthy period. The sale of the vehicle at this point will alsoallow the debt owing to UDC to be repaid in full and may even generate a smallsurplus. In addition, the vehicle will inevitably continue to depreciate in value if itremains in storage for a further lengthy period. This creates a risk that any future salewill not realise sufficient funds to repay the loan. Storage costs will also continue toaccrue at the rate of approximately $400 per month.[18] Finally, the repayment of the UDC loan at this point will avoid the need for MrMilosevic to devote approximately $320 of his income each month to loanrepayments. This saving may go some way towards meeting the cost of meeting hisfamily's transport needs.[19] Taking all of these factors into account I am satisfied that it is appropriate togrant the Commissioner's application. I make orders accordingly.Lang JSolicitors:Crown Solicitor, TaurangaCounsel:D H Hall, Barrister, Rotorua