COMMISSIONER OF POLICE v MILOSEVIC [2022] NZHC 1595

COMMISSIONER OF POLICE v MILOSEVIC [2022] NZHC 1595 [6 July 2022]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2018-463-81[2022] NZHC 1595UNDER the Criminal Proceeds (Recovery) Act 2009BETWEEN COMMISSIONER OF POLICEApplicantAND TE OHORERE MILOSEVICRespondentAND IRENE RAKIInterested PartyHearing: 27 and 28 June 2022Appearances: R Jenson for the ApplicantC Harvey for the RespondentJudgment: 6 July 2022JUDGMENT OF GORDON JThis judgment was delivered by meon 6 July 2022 at 3:30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors:Office of the Crown Solicitor, TaurangaGowing & Co, Whakatane[1] The Commissioner of Police (Commissioner) has applied for asset forfeitureorders under the Criminal Proceeds (Recovery) Act 2009 (the Act) in relation to thefollowing property (the application):(a) A residential property at 33 Newall Street, Kawerau (the house); and(b) The sum of $2,024.21 being funds remaining from the sale of a 2013Ford Ranger 3.2TD Utility, registration number GZZ937 (funds andFord Ranger respectively).[2] The application is opposed by the respondent Te Ohorere Milosevic.[3] Irene Raki, the respondent's mother, who is an interested party in relation tothe house, was served with the proceeding but has not taken any steps in theproceeding.Procedural history[4] The proceeding follows from Police Operation Notus, an investigation by theNational Organised Crime Group, which commenced in August 2017 into theactivities of the Kawerau Mongrel Mob. Te Ohorere Milosevic (Mr Milosevic), hisbrother Slobodan (Mr S Milosevic) and his father Frank (Mr Milosevic senior) are allpatched members of the Kawerau Mongrel Mob. Mr Milosevic senior is the Presidentof the Kawerau chapter.[5] The Police obtained intercepted communications during the electronicsurveillance phase of the operation. Mr Milosevic's communications were interceptedfor a two-month period between 2 October 2017 and 30 November 2018. Interceptionof the communications of Mr Milosevic senior and Mr S Milosevic continued until26 March 2018. From the perspective of the Police this electronic phase indicated alarge scale cannabis cultivation involving Mr Milosevic, Mr S Milosevic andMr Milosevic senior along with two others.[6] In September 2017, the Police Assets Recovery Unit (ARU) commenced aninvestigation into the financial activities of Mr Milosevic (as well as the otherindividuals I have referred to). The investigation identified Ms Raki as the purchaserof the house for $39,000 on 18 March 2015. This purchase was funded by earlier cashdeposits into Ms Raki's bank account. On 9 August 2016 Ms Raki transferred theownership of the house by way of gift to Mr Milosevic.[7] On 17 July 2017 Mr Milosevic purchased the Ford Ranger from Turners CarAuctions in Auckland for $28,780 and paid for it in cash.[8] On 27 March 2018 the Police executed warrants issued under the Search andSurveillance Act 2012 throughout the Eastern Bay of Plenty area including at thehouse, which is the home address of Mr Milosevic, his partner and children.[9] Mr Milosevic was charged with unlawful possession of a firearm and unlawfulpossession of ammunition. He was also charged with cultivating cannabis, togetherwith Mr Milosevic senior, Mr S Milosevic and two associates. Mr Milosevic seniorand Ms Raki were charged with money laundering.[10] On 25 July 2018 a without-notice restraining order was granted by this Courtin relation to the house and the Ford Ranger. An on-notice order was then granted on24 October 2018. Those orders have been renewed from time to time and remain inplace.[11] The Commissioner then sought the sale of the Ford Ranger. The applicationwas opposed and proceeded to a hearing. On 11 April 2019 Lang J granted theapplication for the sale order.1 The Ford Ranger was then sold and part of the salefunds were used to settle the balance owed by Mr Milosevic to a finance company forrepairs to the Ford Ranger. The Official Assignee retained control of the balance ofthe sale funds, being $2,024.21, which are now the subject of the application beforethe Court.[12] On 21 September 2020 the criminal trial for Mr Milosevic senior, Ms Raki,Mr S Milosevic and Mr Milosevic was heard in the Hamilton High Court over an1 Commissioner of Police v Milosevic [2019] NZHC 783.eight-week period.2 In relation to Mr Milosevic, at the conclusion of the Crown casethe trial Judge dismissed the unlawful possession of ammunition charge and amendedthe unlawful possession of a firearm charge to a charge of unlicensed possession of afirearm. Mr Milosevic pleaded guilty to the amended firearm charge and was foundnot guilty by the jury on the charge of cultivating cannabis.[13] The jury found Mr Milosevic senior and Mr S Milosevic guilty of jointlycultivating cannabis as well as other drug-related charges and money laundering. Thejury found Ms Raki guilty on two charges of money laundering.[14] Mr Milosevic senior was sentenced to 17 years and six months' imprisonmenton charges of drug dealing, cultivation of cannabis and money laundering. A minimumnon-parole period of eight years and nine months was imposed. He is subject toseparate proceedings under the Act.[15] Mr S Milosevic was sentenced to 15 years and nine months' imprisonment oncharges of drug dealing, cultivation of cannabis and money laundering. A minimumnon-parole period of seven years and ten months was imposed. He is also subject toseparate proceedings under the Act.[16] Ms Raki was sentenced to two years and six months' imprisonment on the twomoney laundering charges. She is also subject to separate proceedings under the Act.[17] On 13 February 2021 Judge Mabey QC sentenced Mr Milosevic on the firearmcharge to a $500 fine.[18] The Commissioner relies on a number of affidavits filed in support of theapplication. Two of the deponents, Laura Clay, a forensic accountant attached to theWaikato ARU and Detective Nicola Robinson were cross-examined at the hearing bycounsel for Mr Milosevic, Mr Harvey. Mr Milosevic, who swore two affidavits –dated 25 January 2019 in opposition to the Commissioner's application for a sale orderfor the Ford Ranger (first affidavit) and dated 18 November 2021 in opposition to the2 The two associates had earlier pleaded guilty.application (second affidavit) – was cross-examined by counsel for the Commissioner,Mr Jenson.The statutory context[19] The primary purpose of the Act is to establish a regime for the forfeiture of:property derived either directly or indirectly from significant criminal activity3 (assetsforfeiture orders); or property representing the value of a person's unlawfully derivedincome4 (profit forfeiture orders).[20] Significant criminal activity is defined in s 6 in the following terms:6 Meaning of significant criminal activity(1) In this Act, unless the context otherwise requires, significant criminalactivity means an activity engaged in by a person that if proceededagainst as a criminal offence would amount to offending—(a) that consists of, or includes, 1 or more offences punishable by amaximum term of imprisonment of 5 years or more; or(b) from which property, proceeds, or benefits of a value of $30,000 ormore 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 inconnection with the activity; or(b) the person has been acquitted of an offence in connection with theactivity; or(c) the person's conviction for an offence in connection with the activityhas been quashed or set aside.(3) Any expenses or outgoings used in connection with an activity of the kinddescribed in subsection (1) must be disregarded for the purposes ofcalculating the value of any property, proceeds, or benefits undersubsection (1)(b).[21] As is apparent from s 6(2)(b) this Court may find that Mr Milosevic wasundertaking a significant criminal activity even though he was acquitted on the chargeof cultivating cannabis. The maximum penalty for cultivating cannabis isimprisonment for a term not exceeding seven years.5 The same penalty applies tomoney laundering.63 Section 3(1)(a).4 Section 3(1)(b).5 Misuse of Drugs Act 1975, s 9(2).6 Crimes Act 1961, s 243(2).[22] Section 50(1) requires this Court to make an assets forfeiture order if satisfiedon the balance of probabilities that specified property is "tainted property":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 is taintedproperty, the Court must make an assets forfeiture order in respect of thatspecific property.[23] Property is defined in s 5:property—(a) means real or personal property of any kind—(i) whether situated in New Zealand or a foreign country; and(ii) whether tangible or intangible; and(iii) whether movable or immovable; and(b) includes an interest in real or personal property[24] The house and the Ford Ranger, including the balance of the sale proceeds ofthe Ford Ranger, are clearly property within the above definition.[25] Tainted property has a broad definition in s 5: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 orindirectly derived from, more than 1 activity if at least 1 of those activitiesis a significant criminal activityThe parties' respective positions[26] In summary, the position of the Commissioner is that the house is tainted byvirtue of it being funded through significant criminal activity, namely funds obtainedby Ms Raki and Mr Milosevic senior from the sale and supply of methamphetamineand/or cannabis.[27] The Commissioner says this tainting is not "cured" by the "gifting" of thehouse to Mr Milosevic. The Commissioner says in fact that transfer effectivelyconstitutes further tainting (as the Court can infer the transfer constitutes a moneylaundering transaction) or at the very least, represents Mr Milosevic deriving the houseas a result of his family's significant criminal activity.[28] With respect to the Ford Ranger, the Commissioner's position is thatMr Milosevic had insufficient legitimate means to fund such a cash purchase and thevehicle is tainted because it was purchased with illegitimately obtained cash. Thebalance of the sale funds is therefore also tainted.[29] Mr Milosevic's position is that the two items of property sought to be forfeitedare not "tainted property", and he has not benefited from "significant unlawfulactivity".Purchase of the house[30] The conveyancing files for the purchase of the house7 reveal the followingtransactions:(a) On 18 March 2015 Ms Raki attended a mortgagee auction and placed asuccessful bid of $39,000 for the purchase of the house.(b) On 20 March 2015 Ms Raki paid a deposit of $3,900 from her ANZaccount via an electronic transfer to the real estate agent's trust account.(c) On 1 April 2015 Ms Raki electronically transferred the outstandingsettlement balance (including solicitor's fees) of $35,467.44 from herCentral Credit Union account (CCU account) into the trust account heldby a Rotorua law firm; and(d) On 9 April 2015 Ms Raki was registered as the owner of the house.[31] A review of Ms Raki's bank accounts revealed that $27,300 cash was depositedinto her CCU account between 1 October 2014 and 8 April 2015:7 Obtained pursuant to production orders made under the Search and Surveillance Act 2012, from aRotorua law firm.(a) 9 October 2014 $2,300 CCU Kawerau(b) 15 December 2014 $7,000 CCU Kawerau(c) 12 January 2015 $5,000 CCU Kawerau(d) 23 January 2015 $7,000 CCU Kawerau(e) 9 February 2015 $6,000 CCU Kawerau[32] At the time the above cash deposits were made between October 2014 andFebruary 2015 Ms Raki had declared a gross yearly income of $14,444 to InlandRevenue.[33] There was a further cash deposit into Ms Raki's CCU account of $30,000 on15 December 2015. The narration on the deposit slip is "Deposit on houseTe Ohorere". The bank voucher obtained from CCU recorded the $30,000 cash hadbeen deposited by Ms Raki and consisted of 600 $50 denomination notes.[34] On 9 August 2016 Ms Raki transferred the ownership of the house toMr Milosevic, recording the transaction on a sale and purchase agreement with thevalue of the house stated as $59,000. Other documents that accompanied the sale andpurchase agreement were:(a) A Deed of Acknowledgement of Debt for the sum of $59,000 dated9 August 2016; and(b) A Deed of Forgiveness of Debt by way of Gift for the sum of $59,000also dated 9 August 2016.[35] Mr Milosevic, his partner and children began living in the house after it waspurchased and continue to do so.Explanations regarding house purchase and $30,000 deposit[36] In his second affidavit and under cross-examination at the hearing,Mr Milosevic has given two different explanations regarding the $30,000 cash depositinto his mother's bank account on 15 December 2015.[37] On 27 March 2018, when the Police executed a search warrant at the house,Mr Milosevic did not mention any connection between himself and the $30,000deposit when first spoken to by a police officer. He referred to the cost of the housebeing between $30,000 and $50,000. Under cross-examination he confirmed that partof his statement to the Police was simply a reference to the purchase price.[38] Mr Milosevic also addressed his mother's acquisition of the house and thesubsequent transfer to him in his first affidavit.8 He did not mention the $30,000deposit.[39] Mr Milosevic did not give evidence in the criminal trial, but by then he wouldhave been aware of the evidence regarding the $30,000 deposit into his mother's bankaccount.[40] In his second affidavit, sworn after the completion of the trial, he referred tohis mother's purchase of the house and said:4. my mother Irene Raki purchased the property on 8 April 2015. Myfamily and I moved into the property.5. At the time there was no arrangement for me to purchase it. However aswe continued to live in it, we came to the arrangement that I wouldpurchase it for $59,000. We agreed that I would pay the remaining about[sic] at a rate of $100 per week, however that was flexible. Sometimes Ipaid more, other times I paid less. These payments were all made in cash,but can be seen in my withdrawals from my ANZ account.6. From my cash savings I paid $30,000 into my mother [sic] account on 15December 2015. That deposit was titled "Deposit on house Te Ohorere".8 Although the focus of this affidavit was on opposing the application for a sale order of the FordRanger.[41] Mr Harvey's opening submissions at the hearing were consistent with thatevidence. His submissions say:6. An arrangement was made to purchase the property from Ms Raki for$59,000. The respondent was living in the property with his family at thetime.7. Mr Milosevic maintained a significant sum of cash savings. It is fromthose savings that he paid a deposit to his mother on 15 December 2015and titled the transaction appropriately.[42] However, under cross-examination at the hearing Mr Milosevic asserted thatthe $30,000 payment into his mother's bank account was not directed at the purchaseof the house. He said " I gave her $30,000 to put away for me, okay for a deposit.It had nothing to do with 33 Newall Street". He further said that he knew "Nothingabout the $30,000 that I had given her going into her account I thought she still hadit on her". He repeated that evidence in the course of the following questions andanswers:Q So the $30,000 from your perspective has nothing to do with 33 NewallStreet?A Its got nothing to do with 33 Newall Street. It was put aside so I can saveup for a house later on, not knowing that my mother was going to gift methe house.Q So that $30,000 isn't in any way a payment for 33 Newall Street?A No.Q Your mother's just gifted you the house?A Yes.Q And as you say, you're paying her off at $100 or whatever a week?A Well its called manaakitanga, respect, I got respect from my family, mymother, so I do give her money when I can and that's an agreement thatme and her only know.[43] Mr Milosevic said that to date he had paid his mother $300 under thatarrangement.Approach[44] I will proceed to consider the application first, on the basis of Mr Milosevic'sevidence at the hearing, namely that Ms Raki provided all the funds for the purchaseof the house, and that it was gifted to Mr Milosevic (and that Mr Milosevicsubsequently paid her $300).[45] In the alternative I will consider the position on the basis that the $30,000deposited into Ms Raki's account was given to her by Mr Milosevic and was partpayment from him for the house, as appeared to be his position in his second affidavitand counsel's opening submissions.Available evidence/use of convictions[46] With respect to the convictions of Ms Raki and other members ofMr Milosevic's family, Mr Jenson for the Commissioner refers to s 47(1) of theEvidence Act 2006 which provides:47 Conviction as evidence in civil proceedings(1) When the fact that a person has committed an offence is relevant to anissue in a civil proceeding, proof that the person has been convicted ofthat offence is conclusive proof that the person committed the offence.[47] In exceptional circumstances a judge may permit a party to offer evidencetending to prove that the person convicted did not commit the offence.9 Mr Milosevicdoes not seek to do so.[48] This being a civil proceeding, the convictions of Mr Milosevic's familymembers referred to earlier in this judgment are conclusive proof that each of themcommitted the offences I have referred to.[49] Mr Jenson properly brought to the Court's attention that in relation to Ms Rakithe $30,000 deposit made into her CCU account was included in one of the tworepresentative money laundering charges on which she was found guilty andconvicted.9 Evidence Act 2006, s 47(2).[50] Mr Jenson accepts that proof of that particular transaction was not essential toproof of the money laundering charge at trial, given that the charge was based on anumber of cash transactions, any one of which would have justified the guilty verdict.[51] However, having made that acknowledgement, Mr Jenson notes that JudgeMabey QC was in no doubt that the offence had been committed with respect to the$30,000 transaction when he sentenced her following the trial. Mr Jenson, relying onCommissioner of Police v Filer,10 submits that this Court can take Judge Mabey'sfactual findings in his sentencing notes into account.[52] In Filer, Gilbert J after referring to s 47 of the Evidence Act 2006, said:[31] The factual findings made by Keane J regarding the extent of Mr Filer'sinvolvement in the manufacture and supply of methamphetamine wereessential to his sentencing decision. These findings are admissible as evidencein this proceeding as proof of the benefit he is likely to have received. Iconsider that this is admissible hearsay evidence under s 18 of the EvidenceAct, and possibly also under s 19. The exclusionary rule in s 50 only appliesto factual findings in civil proceedings. It does not apply to factual findingsin a criminal proceeding, no doubt because of the much higher standard ofproof required.[53] Proceeding on the basis that Judge Mabey's factual findings are admissible, Iset out the relevant passages from his sentencing notes:11[1] Ms Irene Raki is before the Court today in person to be sentenced on twocharges of money laundering. Those charges were preferred against herjointly with her husband, Frank Milosevic, and are charges 62 and 63 in theCrown charge list. That list related to a trial conducted in Hamilton last yearwhen Ms Raki, together with her husband, two sons and a number of otherpeople, were charged as a result of the Operation Notus inquiry. That inquiryinvestigated suspected drug dealing by the Mongrel Mob in the Kawerau area.[2] Frank Milosevic and Slobodan Milosevic were convicted and have beensentenced as the leaders of that activity. Ms Raki and her husband wereconvicted of two charges of money laundering involving approximately$260,000 over a period from December 2015 to March 2018. Mr SlobodanMilosevic's partner, Ms Tawera, was jointly charged with him in moneylaundering allegations and was also convicted. She is yet to be sentenced.[3] The charges brought by the Crown involved two representativeallegations, which were particularised as charge 62,46 individual cashdeposits into accounts controlled by Ms Raki and her husband, and charge 63,a number of cash purchases made by them both. At trial the Crown was able10 Commissioner of Police v Filer [2013] NZHC 3111.11 R v Raki [2021] NZDC 2567.to provide a comprehensive analysis of the bank accounts and the transactionsall said to be from an unexplained cash source.[4] The deposits into the bank accounts were numerous and the purchaseswere substantial and involved, for example, the purchase of an expensive Fordvehicle for Mr Milosevic, a Harley Davidson motorcycle for one of the sons,a substantial deposit on a house for that son and a Hilux vehicle for anotherson. There was some concession at trial that a transaction concerning acaravan was wrongly included in the cash availability statement but after anyadjustments the total amount laundered, the subject of the jury verdicts, is inthe range of $250,000.[5] At trial the charges were defended on the basis that the money wasexplained from legitimate sources. Attempts were made to establish thesesources included salary or wages but the total amount of income establishedwas a fraction of the money laundered. Mr Frank Milosevic gave evidencethat there were substantial funds coming in such as trading in crayfish,whitebait or meat, but the jury rejected that evidence as shown by theconvictions entered on drug dealing allegations against Mr Frank Milosevicand the other defendants who relied upon his evidence.[6] As trial Judge it was plain to me that the evidence to support the moneylaundering allegations was overwhelming. There was no legitimate source forthe money. The money was substantial and was unexplained. The onlyinference available to the jury and to me as trial Judge assessing the factsconsistent with the verdicts, is that Mr Frank Milosevic and Ms Raki wereobtaining money from the sale of drugs and laundering it. To suggestotherwise is completely unrealistic. The charges were defended as a matter ofright but Ms Raki is here today to be sentenced without the benefit of a guiltyplea and I must establish a start point for the charges and arrive at an end pointhaving regard to any personal factors that might be available.[11] Ms Raki, the long-term partner of Mr Milosevic and the matriarch of herown family was involved in the receipt and laundering of money from drugdealing by her family. She dealt with that money and the jury verdicts makethat plain. The fact that she might not have been present when sometransactions were undertaken, as advanced by Ms Webby, is beside the point.The jury found that she was a party to those transactions but Ms Webby saysthat conferring benefits on immediate family, being partner and sons, is not apersonal benefit to Ms Raki. They get the benefits and she does not, but I donot accept that submission at all.[54] Both counsel agreed that the reference in [4] of the sentencing decision aboveto "a substantial deposit on a house for that sum" is a reference to the $30,000 depositunder consideration in this proceeding.Is the house tainted property?[55] Mr Jenson submits that the law is clear that there is no requirement thatMr Milosevic be personally engaged in the significant criminal activity that taints theproperty or that he has been charged with or convicted of any such offence.12[56] Mr Jenson further submits that the evidence clearly makes out that the purchaseof the house was funded, at least in part, by significant cash deposits into Ms Raki'sbank account which, based on her convictions, can be inferred to have come fromsignificant criminal activity, namely the sale and supply of methamphetamine and/orcannabis.[57] As already noted, at the time cash deposits were made into Ms Raki's bankaccount between October 2014 and February 2015, Ms Raki had declared to InlandRevenue receipt of a gross yearly income of $14,444. Further, Ms Clay's evidencewas that from 2015 to 2018 Mr Milosevic senior and Ms Raki had access to anunexplained cash source of at least $263,758.90; a broader analysis starting from 2011through to 2018 reveals a total unexplained cash source of $582,440.20.[58] The presence of a quantity of unexplained cash can warrant an inference that aperson has been engaged in significant criminal activity at the time the money wasacquired.13[59] In Commissioner of Police v Drake, the High Court considered the word"tainted":14[110] The word "tainted" is generally understood to mean that somethinghas been touched, tinged or imbued with some bad or undesirable quality.Thus, when the definition of tainted property refers to property which is"indirectly derived from significant criminal activity", I consider there mustnevertheless be some traceable connection between the proceeds of crime andthe property so acquired or retained. ...12 Criminal Proceeds (Recovery) Act 2009, s 6(2) and Commissioner of Police v Doorman [2013]NZCA 476 at [23].13 Commissioner of Police v Jeffries [2014] NZCA 566 at [49].14 Commissioner of Police v Drake [2017] NZHC 2919 at [110] (footnotes omitted).[60] This Court has held that deposit of funds earned through significant criminalactivity into a bank account will taint the entirety of the funds in the bank account.Even modest contributions to an asset is sufficient to taint the asset.15[61] I am satisfied on the balance of probabilities, having regard to all the aboveevidence, that the house was tainted property in Ms Raki's hands. That is the onlylogical inference to be drawn from the combination of the evidence I have referred to.It was acquired as a result of significant criminal activity, namely laundering of moneyobtained from cultivating cannabis.[62] The question then arises as to whether the acquisition of the house byMr Milosevic somehow "cures" the tainting of the property.[63] Mr Harvey submits that the transfer was a genuine transaction. He takes issuewith the submission on behalf of the Commissioner that the house was gifted toMr Milosevic. He says there was consideration by way of Mr Milosevic agreeing topay his mother $100 a week as and when he could.[64] Mr Jenson submits that Mr Milosevic must have known that Ms Rakipurchased the house using illegitimate funds by virtue of the close family relationship.He submits that the "gifting" constitutes a further tainting of the property. He submitsthe Court can conclude that Mr Milosevic has engaged in a money launderingtransaction : he has been involved in dealing with the house which is the proceeds ofoffending, while knowing or believing that all or part of the property (the house) is theproceeds of an offence or being reckless as to the same.16 That satisfies the first partof the definition of tainted property in s 5.[65] Alternatively, Mr Jenson submits that Mr Milosevic knowingly but indirectlyderived the property from significant criminal activity: a close family member, hismother, purchased the property using illegitimate funds and gifted it within the familyunit in order to disperse those funds. He says that proceeds of the significant criminalactivity were distributed to family members in this way.15 Commissioner of Police v Cheah [2018] NZHC 2825 at [25]–[26].16 Crimes Act 1961, s 243.[66] First, I accept that the phone calls and other communications between thefamily, which were put in evidence before the Court, indicate they were a close familyand involved in each other's lives.[67] I also have no doubt that if Mr Milosevic was not actually involved in thefamily's cannabis growing operation he was, on the balance of probabilities, at leastaware of the operation. I make this finding on the basis of the interceptedcommunications. I will later refer to this evidence in combination with other evidencein order to consider whether Mr Milosevic was actually involved in significantcriminal activity (rather than simply being aware of the involvement of his familymembers).[68] Some of the intercepted phone calls were played during the course of thehearing and Mr Milosevic was cross-examined about their content. In one phone callon 14 December 2017 between Mr Milosevic and Mr S Milosevic, Mr Milosevic askedhis brother "Did you already go out to grab those things". He clarified that the thingswere from someone called Nate. Mr Milosevic said "the old man" had said they hadto go and grab them. Mr S Milosevic said that the old man had said he (that isMr S Milosevic) had to go grab Nate "to do these cuttings". It is accepted that thename Nate referred to Nathan Waikato, who was one of the associates charged withcultivating cannabis.[69] Mr S Milosevic further said " it wasn't the ones he was bagging, it was theseother ones. Cos he had to put them under the lights a bit longer I think".Mr Milosevic acknowledged that saying "Okay".[70] In his second affidavit Mr Milosevic said he didn't know what he and hisbrother were talking about in that conversation, but they were "not talking aboutcannabis or anything related".[71] However, under cross-examination he said that he and his brother werereferring to having "bagged a couple of deer the night before". They were the "things".He denied that "the things" were cannabis cuttings. The reference to "cuttings" hesaid was cutting up the meat. The use of lights he said was because "when you catchsomething you don't cut it up straight away, you let it dry". I do not believe thisexplanation. It is implausible in the context of a cannabis growing operation, giventhat Mr S Milosevic was found guilty of this activity by a jury.[72] There was a second phone call on 4 January 2018, played during cross-examination. It was between Mr Milosevic and Mr Milosevic senior. Mr Milosevicsenior said " we'll do an afternoon one tomorrow instead aye". Mr Milosevicreplied saying "okay then". Mr Milosevic senior said "We'll start tomorrow afternoonand whack them all out". Mr Milosevic replied "sweet as".[73] It was put to Mr Milosevic in cross-examination that the first phone callindicated that in December 2017 he and his brother were assisting the cannabisgrowing operation by obtaining cuttings from Mr Waikato. It was also put to him thatat the phrase "whack them all out" in the second phone call, in January 2018, indicatedhe was going up into the bush with his father to plant those cuttings.[74] Mr Milosevic said that was not the case. They had a couple of deer hanging inthe chiller and his father needed a hand to "whack them out". He said his father wasteaching him to butcher meat. This was a new explanation not mentioned in his secondaffidavit. I do not accept this is a plausible explanation. The two phone calls takentogether, at the very least, indicate a knowledge on the part of Mr Milosevic that hisfather and brother were involved in cannabis cultivation along with Mr Waikato.[75] With that knowledge Mr Milosevic took ownership of the house. I considerthe gifting was simply a device to move the house out of Ms Raki's hands. The allegedconsideration of $100 a week was also simply a device. Despite Mr Milosevic'sassertion that he provided consideration by way of weekly payments of $100 to hismother (as and when he could afford it) he only ever paid her, on his evidence, $300,since the transfer to him on 9 August 2016. This does not seem plausible given hisassertion that he had access to large amounts of cash acquired through legitimatemeans, an issue I will come to shortly.[76] In my view, Mr Milosevic's acquisition of the house from his mother was itselfa significant criminal activity. That acquisition falls within money laundering unders 243 of the Crimes Act 1961. The house was the proceeds of an offence;Mr Milosevic dealt with the house within the terms of the definition of "deal with" ins 243; and I draw the inference that Mr Milosevic knew or believed that all or part ofthe house was the proceeds of an offence or was reckless as to the same. That is moneylaundering.[77] In short, the transfer of the house into Mr Milosevic's name did not in any way"cure" the tainting of the property in Ms Raki's hands. On the balance of probabilitiesthe house is tainted property. The Court must make an assets forfeiture order (therebeing no application for relief against forfeiture).17Alternative basis – the $30,000 provided by Mr Milosevic[78] As already noted, Mr Milosevic said in his second affidavit that he providedthe $30,000 deposit for the house. He effectively abandoned this explanation at thehearing, when he said he gave his mother $30,000 cash for a house deposit in the futurebut that had nothing to do with the house in Newall Street. For completeness, I willnevertheless consider his earlier explanation.[79] Inland Revenue records show Mr Milosevic declared a gross income of$32,461.15 for the year ending 31 March 2016. He declared an average gross annualincome of $34,120.83 for the six years between 2013 and 2018.[80] A review of Mr Milosevic's bank account statements from 2014 and 2015 didnot identify any withdrawals to reflect the cash deposit recorded on 15 December 2015into Ms Raki's CCU bank account. At the time of the $30,000 deposit, Mr Milosevichad an account balance of $149.98 in his ANZ account.[81] Inland Revenue records for Mr Milosevic's partner, Tara-Lee Murray, showshe declared an average gross annual income of $6,693.80 for the six years between2013 and 2018.17 Section 51.[82] Mr Milosevic says he had further money available to him from three cashsources: withdrawals from his bank account, the sale of opossum fur and the breedingand sale of puppies.[83] As to the first source, Mr Milosevic said in his second affidavit that:10. From 2009 to 2018 I have withdrawn $77,275.88 from my account. Atthe time that I purchased 33 Newell [sic] Street from my mother, I hadroughly $48,000 saved. I would keep the cash in zip lock bank bags, andhide them in my clothing draws [sic]. I would take them with me whenI had to move houses.[84] Mr Milosevic attached to his affidavit a summary of what he says were thetotal withdrawals from his account. The amount he allegedly withdrew is close to butnot exactly the same as that referred to in paragraph 10 of his affidavit. He thenpurports to attach details from his bank statements. However, these documents are notin fact bank statements; they are typed documents with the dates and the amounts ofalleged withdrawals and deposits. The Court therefore gives those schedules noweight in the absence of the underlying evidence.[85] Further, Mr Milosevic has given inconsistent evidence about his practice ofwithdrawing money from the bank. In his second affidavit he said he didn't keep hissavings in the bank. He said he doesn't trust banks since they can run into trouble andhe might not be able to get his money back. However, when he spoke to a policeofficer on 27 March 2018 he said he had no cash on hand and that "everything goesinto my bank account".[86] Additionally, the assertion that he had significant sources of cash isinconsistent with his own financial activities: his bank account went into "unarrangedoverdraft" on 82 occasions between 2011 and 2018, attracting a bank fee each time;he was also charged $20 for dishonoured payments, with 12 individual fees totalling$220 between 2011 and 2013; and in 2013 he made monthly repayments of $351.03,to a total of $3,862.30, to service a debt to Motor Trade Finance. All of this isinconsistent with a person having a large source of cash readily available.[87] In relation to the alleged sales of opossum furs, a police officer, Detective Watt,carried out inquiries with two commercial opossum fur traders in the Bay of Plentyregion, Basically Bush and Dawson Furs. Those inquiries are as follows:(a) On 13 February 2019 Detective Watt spoke to Kim Saunders, agent forBasically Bush, who covers the area from Opotiki to Bombay, includingWhakatane. Mr Milosevic is not known to Mr Saunders;(b) On 14 February 2019 Detective Watt spoke to Bruce Dawson, owner ofDawson Furs, Rotorua. Mr Milosevic is not known to Mr Dawson; and(c) On 19 February 2019 Detective Watt spoke to Alec McIver, agent forBasically Bush who covers the Rotorua area. Mr Milosevic is notknown to Mr McIver.[88] Agents for both Basically Bush and Dawson Furs confirmed it takesapproximately 20 opossums to obtain a kilogram of plucked fur, which had an averageprice of $130 per kilogram at the date of the inquiries. Both businesses say that detailsof suppliers are obtained at the time of purchase and that payment is made by way ofcheque or direct credit and never in cash.[89] A review of Mr Milosevic's ANZ bank account does not record anytransactions consistent with payments received from either Basically Bush or DawsonFurs.[90] Under cross-examination and faced with the evidence obtained by DetectiveWatt, Mr Milosevic said he trapped or shot opossums with friends or family members,who obtained payment by cheque from Dawsons (in their own name) and then paidhim his share in cash.[91] In relation to alleged puppy breeding, Detective Watt carried out inquiries withthe Kawerau District Council to establish whether any dogs over the age of threemonths had been registered by Mr Milosevic as is required in the Kawerau area. On13 February 2019 Detective Watt spoke to Lisa Springfield, Team Leader, AnimalControl and Compliance, Kawerau District Council. Ms Springfield confirmed theKawerau District Council had a record of only one dog registered by Mr Milosevic.[92] Detective Watt also carried out inquiries with Bay Vets, Kawerau, whichconfirmed they did not hold any records of Mr Milosevic ever purchasing goods andservices consistent with the breeding of puppies. Bay Vets confirmed they held onerecord of treating an injured dog brought into their veterinary clinic by Mr Milosevicon 7 July 2014.[93] Under cross-examination and faced with this evidence, Mr Milosevic said thathis dog was a male and he used him to breed with female dogs owned by his friends.He said if they got a good litter he would go half and half with his friends.[94] In the four years since this proceeding has been on foot, not a single witnesshas been located to give evidence in support of Mr Milosevic's explanations ofsignificant cash income from selling opossum fur and breeding puppies. The failureto adduce any such evidence enables the Court to draw an adverse inference that suchevidence is not available because no such activities were undertaken and no suchincome streams were available to Mr Milosevic.[95] This conclusion is supported by the analysis of Ms Clay and DetectiveRobinson which did not find any evidence of Mr Milosevic engaging in an "off thebooks" business. Further, I note that on 28 February 2018 Mr Milosevic did notmention any income from the sale of opossum fur or breeding puppies when seekinga $10,000 loan from the ANZ Bank.[96] I do not consider Mr Milosevic's explanation of legitimate, but undeclared,sources of cash income to be plausible. However, the evidence does establish thatMr Milosevic had an unexplained source of income. The evidence of Ms Clay, whoconducted a thorough review of the outgoings from the bank account of Mr Milosevicand Ms Murray identified gaps in expected lifestyle costs. She charted the basic costsof grocery and dairy items, takeaways and alcohol for Mr Milosevic and Ms Murray.She says the trend seen in the data is inconsistent with that expected from bankingtransactions. She says essentially the gaps identified are consistent with anothersource being used to fund these expenses. Ms Clay's analysis covered the period fromApril 2011 through to February 2018. She says the highest month of transactions wasApril 2016. There were 56 transactions in that month, totalling $2,767.18. The lowestmonth of transactions was September 2012, with a single transaction made at theBakehouse Café totalling $9.[97] Her evidence was that in total there were 37 months involving transactions ofless than $500. She says this is an extremely low threshold, particularly for a familyof two adults and one to three children depending on the year, and would equate toexpenditure of less than $125 weekly.[98] Ms Clay further says that if all of the cash withdrawn over the years was savedand used for the two large "spends" ($30,000 for the house and $28,780 for the FordRanger) it can only be presumed that Mr Milosevic and Ms Murray had access to acash income source outside of cash withdrawals in order to fund their lifestyle, evenat a basic level. Ms Clay says she did not see any evidence which aligned with alegitimate available cash source. She says the bank accounts clearly show thatMr Milosevic and Ms Murray were conducting day to day transactions with a sourceother than their EFTPOS card. She says that if the Court accepts that this source is thecash withdrawals from their account, then there is no explanation for the $30,000 paidto Ms Raki (and the $28,780 for the Ford Ranger). The only remaining possibility isthat Mr Milosevic and Ms Murray had access to an unknown cash income source.[99] Under cross-examination and faced with Ms Clay's evidence, Mr Milosevicinsisted that he was a careful shopper and would do a large shop from time to time.This, he said, explained the gap in spending identified by Ms Clay. He also said hishunting supplemented his family's purchases of food.[100] Overall, I found Mr Milosevic to be an unconvincing witness. I consider hisevidence was designed to try and explain away the evidence for the Commissioner,rather than being anything approaching the truth.[101] Given the lack of a plausible explanation for a legitimate source of cash incomeand the intercepted communications (referred to above), I am satisfied on the balanceof probabilities that Mr Milosevic's cash income was derived from his family'scannabis growing operation. The $30,000 (or at least a significant part of that sum)can only have come from that source.[102] Accordingly, proceeding on the alternative basis as stated in his secondaffidavit, namely that Mr Milosevic provided the $30,000 for the purchase of thehouse, the house is tainted property.Purchase of Ford Ranger[103] On 17 July 2017 Mr Milosevic purchased the Ford Ranger from TurnersVehicle Auctions in Auckland for $28,780 in cash.[104] An analysis of Mr Milosevic's banking transactions between 1 January 2014and 22 March 2018 confirmed the following:(a) There were no significant cash withdrawals from his bank accountsaround the time of the Ford Ranger purchase;(b) Mr Milosevic did not have any savings in accounts held by the ANZBank; and(c) Mr Milosevic appeared to be living week to week on Government-funded benefit payments supplemented by an irregular income fromIntergroup Ltd.[105] For the years ending 31 March 2017 and 2018, Mr Milosevic declared anannual income of $15,608.57 and $8,101.59 respectively. In his affidavit of 25 January2019 Mr Milosevic said the following in relation to the purchase of the Ford Ranger:I purchased the vehicle on 17 July 2017 at Turners Car Auction in Aucklandfor $28,780 in cash The source of the funds that was used for the purchase of the vehicle was fromten years of personal savings derived from the sale of possum furs andbreeding and selling puppies for pig hunting. I earned approximately $100per week over a ten-year period. These earnings were all received in cash andnot deposited into bank accounts. The income [sic] quite variable dependingon the amount of animals trapped or bred.[106] I have already rejected Mr Milosevic's explanations as to his three sources ofcash. Based on my findings above, the only conclusion available on the balance ofprobabilities is that funds used to purchase the Ford Ranger were from an illegitimatesource, namely the growing and sale of cannabis. The Ford Ranger and the fundsremaining from its sale are tainted property.Conclusion[107] If the Court concludes that the two items are tainted property, it must make anasset forfeiture order. I have reached that conclusion both in relation to the house andthe remaining proceeds from the sale of the Ford Ranger.Result[108] I make an order that the following property vests in the Crown absolutely andis to be in the Official Assignee's custody and control:(a) The property situated at 33 Newall Street, Kawerau comprised anddescribed in Certificate of Title SA25B/1333, South Auckland LandRegistry, of 749 square metres more or less being Lot 85, DepositedPlan South Auckland 4716; and(b) $2,024.21 being the funds remaining from the sale of the 2013 FordRanger 3.2TD Utility registration GZZ937.Costs[109] I did not hear from the parties as to costs. Costs are therefore reserved. TheCommissioner as the successful party is prima facie entitled to costs. If the parties areable to reach agreement a joint memorandum is to be filed no later than 20 workingdays from the date of this judgment. If there is no agreement as to costs theCommissioner may file and serve a memorandum within five working days of the datefor the joint memorandum. Mr Milosevic is to file and serve his memorandum in replywithin five working days of the date of service of the Commissioner's memorandum.[110] Costs memoranda should not exceed four pages (excluding attachments). Iwill determine costs on the papers._____________________________Gordon J