THE COMMISSIONER OF THE NEW ZEALAND POLICE v DRAKE AND ANOR [2017] NZHC 2919 [27 November 2017]

THE COMMISSIONER OF THE NEW ZEALAND POLICE v DRAKE AND ANOR [2017] NZHC 2919[27 November 2017]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2015-409-000284[2017] NZHC 2919BETWEEN THE COMMISSIONER OF THE NEWZEALAND POLICEApplicantAND LETICIA MARGARET DRAKEFirst RespondentAND GAVIN JOHN STEWARTSecond RespondentHearing: 2-3 and 5-6 October 2017Closing submissions:Applicant: 20 October 2017Respondents: 6 November 2017Applicant in reply: 6 November 2017Appearances: K A South for the CrownM Starling for RespondentsJudgment: 27 November 2017JUDGMENT OF DUNNINGHAM JContentsIntroduction ........................................................................................................... [1]The Criminal Proceeds (Recovery) Act 2009 ....................................................... [6]Assets forfeiture orders [9]Profit forfeiture orders [13]The applications .................................................................................................. [18]Assets forfeiture order [18]Profit forfeiture orders [22]Events leading to this application ....................................................................... [29]The respondents' challenges to the admissibility of certain evidence ................ [45]Should any evidence be excluded as hearsay evidence? ..................................... [46]The respondents' submissions [49]The applicant's submissions [51]Discussion [55]Should any of the evidence be excluded on the basis it has been improperlyobtained? ............................................................................................................. [61]The credibility of the witnesses........................................................................... [66]Ms Drake [69]Mr Stewart [73]Ms Marshall [76]The issues ............................................................................................................ [79]What was the extent of Ms Drake's significant criminal activity? ..................... [81]Did Mr Stewart engage in significant criminal activity? .................................... [85]Is the property tainted? ...................................................................................... [100]The applicant's submissions [101]The respondents' submissions [104]Discussion [105]Do they each have an interest in the tainted property? ..................................... [120]Should any property be excluded from the asset forfeiture orders because of unduehardship? ........................................................................................................... [122]The respondents' submissions [122]The applicant's submissions [124]Discussion [129]Conclusions on application for asset forfeiture orders ...................................... [138]Profit forfeiture orders....................................................................................... [139]Did Mr Stewart knowingly benefit from Ms Drake's benefit payments? ......... [141]The applicant's submissions [141]The respondents' submissions [145]Discussion [147]Has the Commissioner correctly calculated the amount of the welfare benefit?........................................................................................................................... [153]The respondents' submissions [156]The applicant's submissions [160]Discussion [161]Orders ................................................................................................................ [162]Costs .................................................................................................................. [166]Introduction[1] The respondents, Leticia Drake and Gavin Stewart, are the joint owners of aproperty at 142 Emmett Street, Christchurch, and have received EQC and earthquakeinsurance payments which relate to this property. Mr Stewart also has nearly $70,000in savings.[2] These assets are currently subject to restraining orders under the CriminalProceeds (Recovery) Act 2009 (the Act) on the basis that the Court has grounds tobelieve that the respondents have unlawfully benefitted from significant criminalactivity, they have an interest in this property, and the property is "tainted" by suchoffending.[3] The applicant now seeks civil forfeiture orders under the Act. He seeks bothasset forfeiture orders in respect of the respondents' property and a profit forfeitureorder in the sum of $158,635.03, being the amount the respondents are claimed to havereceived as unlawful benefits from their offending in the seven year period prior to theapplication being made. That amount comprises money Ms Drake received byfraudulently claiming a benefit from the Ministry of Social Development ("MSD")when she was living in a de facto relationship, as well as Working for Families taxcredits she received. It also includes the amount Mr Stewart is alleged to havebenefited from through tax evasion, in that he failed to pay income tax on all of hisearnings between 1 April 2010 and 1 July 2016 as an electrician.[4] In addition to benefitting from their own offending, both Mr Stewart andMs Drake are alleged to have knowingly, directly or indirectly, benefitted from theother's significant criminal activity.[5] The applications are opposed on a number of fronts. The allegations of taxevasion by Mr Stewart are denied. He also denies having knowledge of Ms Drake'ssignificant criminal offending or that he benefitted from it, whether directly orindirectly. The respondents both deny that the property identified for the purpose ofassets forfeiture orders is tainted. They also say that, in calculating the amount of theunlawful benefit for the purpose of a profit forfeiture order, the applicant should havetaken into account the respondents' "notional entitlement" to other MSD benefits andtax credits.1 Finally, it is alleged that the making of the assets and profit forfeitureorders would result in undue hardship to the second respondent and the respondents'children and, in the circumstances, the orders should not be made.The Criminal Proceeds (Recovery) Act 2009[6] The applications for civil forfeiture orders are brought under the Act. Thepurpose of the Act is to establish a regime for the forfeiture of property that:(a) has been derived directly or indirectly from significant criminalactivity; or(b) represents the value of a person's unlawfully derived income.2[7] The objective of the regime is to:(a) eliminate the chance for persons to profit from undertaking or beingassociated with significant criminal activity; and(b) deter significant criminal activity; and(c) reduce the ability of criminals and persons associated with crime orsignificant criminal activity to continue or expand criminal enterprise.3[8] The Act provides for the restraint and forfeiture of property without the needfor a conviction in relation to the alleged criminal activity.4 Furthermore, s 10expressly provides that applications under the Act for an assets forfeiture order orprofit forfeiture order are civil proceedings.1 Notional entitlement in respect of benefit fraud is a calculation of what benefit a fraudulentbeneficiary would have been legitimately entitled to.2 Section 3(1).3 Section 3(2).4 Section 4(1)(a).Assets forfeiture orders[9] Section 50 of the Act provides that if the High Court is satisfied on the balanceof probabilities that specific property is "tainted property" the Court must make anassets forfeiture order in respect of that specific property.[10] "Tainted property" is defined in s 5 of the Act to include property that has,wholly or in part, been acquired as a result of significant criminal activity or directlyor indirectly derived from significant criminal activity.[11] "Significant criminal activity" is defined in s 6 of the Act to mean activity that,if proceeded against as criminal offending, would consist of or include:(a) one or more offences punishable by a maximum term of five years'imprisonment or more; or(b) an offence from which property, proceeds, or benefits of a value of$30,000 or more have, directly or indirectly, been acquired or derived.[12] Under s 51, the Court may exclude certain property from an assets forfeitureorder if it considers that, having regard to all of the circumstances, undue hardship isreasonably likely to be caused to the respondent if the property is included in the assetsforfeiture order.Profit forfeiture orders[13] Section 55 of the Act provides that if the High Court is satisfied, on the balanceof probabilities, that the respondent:(a) has unlawfully benefited from significant criminal activity within the"relevant period of criminal activity";5 and(b) has interests in property5 That is, within seven years of the date the application is made.then the Court must make a profit forfeiture order in respect of that property.[14] The term "unlawfully benefitted from significant criminal activity" means theperson has "knowingly directly or indirectly derived a benefit from significant criminalactivity (whether or not that person undertook, or was involved in, that activity).6[15] Section 53 provides that the value of that benefit is presumed to be the valuestated in the application if the Commissioner proves, on the balance of probabilities,that the respondent has, in the relevant period of criminal activity, unlawfully benefitedfrom significant criminal activity. The respondent, however, can rebut that presumptionon the balance of probabilities.7[16] Section 54 provides that the maximum recoverable amount is the value of thebenefit under s 53, less the value of any property forfeited to the Crown as a result of anassets forfeiture order made in relation to the same significant criminal activity. Thus, ifan assets forfeiture order is made, the terms of the profit forfeiture order must be adjustedto reflect that.[17] Just as s 51 of the Act allows the Court to exclude property from an assetsforfeiture order if it considers that undue hardship is likely to be caused to the respondent,an equivalent provision is contained in s 56 of the Act in relation to profit forfeiture orders.The applicationsAssets forfeiture order[18] The Commissioner alleges that the following property is "tainted property":(a) the property at 142 Emmett Street, Shirley, Christchurch (excluding anyinterest of ANZ Bank New Zealand Limited under its registeredmortgage). It has a current market value of $358,000 and the partieshave equity in the property of $229,597.25;86 Section 7.7 Section 53(2).8 As at 20 April 2017.(b) the EQC and earthquake insurance payments connected with theresidential property at 142 Emmett Street being:(i) a payment from the Earthquake Commission of $9,974.40; and(ii) a payment by Vero Insurance totalling $13,119.30; and(c) funds held in the custody of the Official Assignee in the name of thefirst and second respondents which, at 31 August 2017, totalled$69,951.52 including interest.[19] The significant criminal activity alleged is:(a) obtaining by deception between 31 January 2005 and April 2015 fromthe Ministry of Social Development (s 240 Crimes Act 1961, maximumpenalty seven years' imprisonment);(b) using a document to obtain a pecuniary advantage from the Ministry ofSocial Development (x 14) between 1 October 2003 and 5 April 2015(ss 229A and 228(b) Crimes Act 1961, maximum penalty seven years'imprisonment); and(c) tax evasion (s 143B of the Tax Administration Act 1994 maximumpenalty five years' imprisonment).[20] The respondents are alleged to have an interest in the property as:(a) they are the joint registered proprietors of the property at142 Emmett Street;(b) the EQC and earthquake insurance payments relate to the jointly ownedproperty at 142 Emmett Street, and the claims were made in jointnames; and(c) the funds held in the custody of the Official Assignee came from bankaccounts belonging to the second respondent, but the first respondentalso has an interest in this property in the form of a relationship propertyclaim.[21] The applicant claims that the property in respect of which these orders aresought is tainted because significant criminal activity enabled the accumulation ofequity in the Emmett Street property and the savings identified in [18](c) above. Thesavings were also contributed to by Ms Drake from the account her benefit was paidinto. In addition, cash earnings in respect of which no tax has been paid were used toimprove the Emmett Street property. Because the insurance premiums were paid withMs Drake's unlawfully obtained benefit payments, the insurance and EQC paymentsare also claimed to be tainted property.Profit forfeiture orders[22] The applicant relies on the same benefit fraud offending in relation to itsapplication for profit forfeiture orders. It notes that Ms Drake was convicted of theoffences listed in [19] above and is currently serving a two year and nine monthsentence of imprisonment. Ms Drake is also alleged to have unlawfully benefited byfraudulently obtaining Working for Families tax credits during the period 1 April 2005to April 2015, which is an offence against s 240 Crimes Act 1961 (carrying amaximum penalty of seven years' imprisonment), although Ms Drake was notprosecuted in relation to this offending.[23] While the value of the unlawful benefit from the benefit fraud totals $252,953over a 15 year period, under s 54 of the Act, the maximum amount recoverable islimited to the "relevant period of criminal activity", being seven years prior to thefiling of the restraint application.[24] The value of the unlawful benefit Ms Drake is alleged to have obtained in therelevant period of criminal activity is $136,526.31 calculated as follows:MSD benefits $91,256.33Working for Families Tax Credits $45,269.98Total $136,526.31[25] The Commissioner also seeks a profit forfeiture order in relation to alleged taxevasion by Mr Stewart, saying that he has deliberately under-reported his taxableearnings for the purpose of reducing the tax payable by him on his earnings as aself-employed electrician between 1 April 2010 and 1 July 2016.[26] Mr Stewart has recently filed tax returns claiming his taxable earnings were asfollows:(a) year ending 31 March 2011 - $0;(b) year ending 31 March 2012 - $0;(c) year ending 31 March 2013 - $7,379.74;(d) year ending 31 March 2014 - $5,100.25;(e) year ending 31 March 2015 - $15,885.25; and(f) year ending 31 March 2016 - $7,820.[27] Mr Stewart has therefore been assessed for and has paid income tax in theamount of $3,931.28 for the period 1 April 2010 to 31 March 2016. However, theCommissioner estimates that Mr Stewart has earned at least $30,000 per annumbetween those dates. If so, he would have been liable to pay $26,040 in income tax.It is therefore alleged that he has unlawfully benefited from tax evasion to the valueof at least $22,108.72.[28] These sums are sought to be recovered through the making of a profit forfeitureorder under s 55 of the Act, which would allow the disposal of some or all of theproperty listed in [18] above, in order to recover the value of the unlawful benefitreceived.Events leading to this application[29] Ms Drake had a son to Mr Stewart on 22 October 1997. In 1999 she wasinvestigated for benefit fraud commencing on the date of her son's birth. She wassubsequently convicted and sentenced on four counts of using a document forpecuniary advantage and one count of misleading a social welfare officer, on the basisthat she had been claiming a domestic purposes benefit from October 1997 toDecember 1999 while living with her de facto partner, Mr Stewart.[30] During the investigation of that offending, evidence was obtained fromneighbours and the respondents' landlord that the couple had been living together forthat two year period. Ms Drake eventually conceded that was correct. Mr Stewart,however, only ever admitted living with the first respondent for one year, from1 November 1998 to December 1999. He said that, before this, he lived somewhereelse as he knew she was on a benefit and that if they were living together "you can getdone for fraud".[31] Despite having been convicted of benefit fraud, in early 2000, Ms Drake againapplied for the domestic purposes benefit, saying that she had separated from MrStewart on 23 January 2000. The benefit was granted from 31 January 2000.However, shortly afterwards, on 10 February 2000, Mr Stewart was added as anadditional tenant to the property she leased from Housing New Zealand, at142 Emmett Street, Christchurch.[32] Over the intervening years, Ms Drake completed annual Work and Incomereview forms and on each occasion declared that she was not married or living with aperson in a relationship in the nature of marriage. She also confirmed that she wouldadvise MSD if her circumstances changed.[33] During this period Mr Stewart worked as an employed electrician atCasa Electrical Limited. He said in evidence that he worked extremely hard,sometimes putting in 12 or 14 hour days, in order to build up savings "for a decentfuture".[34] Ms Drake also undertook part-time work. Most of this was in rest homes andthen, from 2008 onwards, she worked at Countdown supermarkets where she wasearning between $12,000 and $21,500 annually. She did not advise the Ministry ofthe extent of her work and earnings while she was claiming the benefit.[35] On 9 March 2010, Ms Drake and Mr Stewart purchased the property atEmmett Street. The deposit was paid from a savings account in Mr Stewart's name,but the property was registered in their joint names.[36] Very shortly afterwards, Mr Stewart was made redundant when his employer,Casa Electrical Limited, shut down. However, Mr Stewart purchased his employer'swork van along with the electrical equipment it contained. He claims he then had nopaid employment at all for two and a half years until he commenced doing some part-time work for a registered electrician, Ambika Prasad, and which he acknowledgeswas paid for entirely in cash at the rate of $25-30 per hour. After these proceedingsconvened, Mr Stewart filed tax returns declaring that over the six year period from 1April 2010 to 31 March 2016 he earnt $60,534.25.[37] On 11 June 2011, Ms Drake and Mr Stewart unexpectedly had another child, adaughter. Notwithstanding that, Ms Drake's part-time employment with Countdowncontinued, albeit at slightly lower levels than before her daughter's birth. Her netearnings in the year following her daughter's birth were just over $12,000, but builtup to just over $18,000 in the financial year ending 31 March 2015.[38] After purchasing the Emmett Street property, the respondents embarked on anextensive programme of home renovation. The bathroom and kitchen were renovated,new stainless steel appliances were installed in the kitchen and new whiteware in thelaundry. The house was re-carpeted, new curtains were purchased for the lounge anda new front door was installed. Outside, a 53 square metre garage/workshop was builtand converted to a sleep-out with its own ensuite. At the rear of the property a newdeck was added with suspending awnings over it. To the front of the property a newwood and corrugated iron fence was built.[39] In 2015, as a result of a complaint made to MSD, an investigation was initiatedinto Ms Drake's affairs. A search warrant was obtained and taken to the Emmett Streetproperty on 13 April 2015. An MSD investigator, Mr Darran Toner, met Mr Stewartat the property, cautioned him, and then took notes of the discussion which followed,as Mr Stewart refused to have the conversation recorded. Mr Stewart called Ms Drakeon his cell-phone, telling her to come home because police and a "WINZ fraudinvestigator" had arrived and she was "going to jail".[40] Ms Drake did return to the property shortly afterwards and agreed to beinterviewed by Mr Toner. In her interview she acknowledged the following:(a) she did not believe she was entitled to any of the benefits she hadclaimed over the years 2000 to 2015;(b) she and Mr Stewart had had a loving relationship, but it went downhillwhen the earthquake struck;(c) that there were problems because she would "go out and spend moneyon anything just to feel good" and the bills were not getting paid;(d) she had had a gambling problem but got it under control aboutseven years earlier;(e) although she and Mr Stewart had had fights, he would only have leftfor a night here and there and he never moved his belongings out of thehouse before returning;(f) Mr Stewart was the father of their daughter, even though she told Workand Income that someone else was;(g) the motor vehicles they owned were all registered to her but she drovethe Mazda Familia car and he drove the Toyota Hi-Ace van, althoughhe did not have a licence; and(h) they purchased the house with money he had saved in his bank accountand he paid the mortgage and telephone account out of his accountwhile she paid the power, the rates, the insurance and the groceries.[41] In light of evidence obtained through interviews of the respondents and otherpersons with knowledge of their relationship, Ms Drake was charged with obtainingby deception and 14 charges of using a document on 3 May 2016.9 Judge Neavesentenced her to two years and nine months' imprisonment on these charges.[42] While the investigation of the respondents' affairs continued, an application forrestraining orders was made. This was granted on 12 May 2015. The substantiveapplication for civil forfeiture orders was filed in August 2016. On 28 July 2016,Mr Stewart engaged the services of an accounting firm to lodge tax returns for theperiod of his self-employment. Those returns form the basis of the claimed incomeearned which is set out at [26] above.[43] Shortly after the search warrant was exercised in May 2015, Mr Stewarttransferred ownership of the Toyota Hi-Ace van to his 68 year old mother. Heexplained that he sold the van as he needed money and his mother "held it for mynephew who paid it off".[44] The current circumstances of the respondents are that Ms Drake is still servingher jail term for benefit fraud. Mr Stewart continues to work as a self-employedelectrician, and he looks after the couple's daughter who is now six years old.9 R v Drake [2016] NZDC 7545.The respondents' challenges to the admissibility of certain evidence[45] At the hearing, the respondents raised a number of challenges as to theadmissibility of the applicant's evidence. These were confined, in closingsubmissions, to the following objections:(a) the statements made by the following individuals, which were referredto in the affidavits of witnesses, are said to be inadmissible hearsayevidence: Richard Diver, Ambika Prasad and Patrick Drury;(b) the evidence of Sergeant Rose regarding visual surveillance carried outon the second respondent by police is said to be admissible as it isirrelevant and hearsay; and(c) the evidence obtained by Mr Darran Toner from the interviewundertaken in the course of executing a search warrant on142 Emmett Street was improperly obtained because it was obtained inbreach of the Bill of Rights Act 1990. Although s 30 of the EvidenceAct 2006 only applies to criminal proceedings, the Court is notprecluded from excluding evidence in civil proceedings on the groundsit was improperly obtained and, in this case, this evidence should beexcluded.Should any evidence be excluded as hearsay evidence?[46] Despite the general rule in s 17 Evidence Act 2006, excluding hearsayevidence s 18 of that Act provides:18 General admissibility of hearsay(1) A hearsay statement is admissible in any proceeding if—(a) the circumstances relating to the statement provide reasonableassurance that the statement is reliable; and(b) either—(i) the maker of the statement is unavailable as a witness;or(ii) the Judge considers that undue expense or delaywould be caused if the maker of the statement wererequired to be a witness.(2) This section is subject to sections 20 and 22.[47] Section 19(1) also regulates the admissibility of hearsay statements andprovides for the admission of business records where:(a) the person who supplied the information used for the composition ofthe record is unavailable as a witness; or(b) the Judge considers no useful purpose would be served by requiringthat person to be a witness as that person can not reasonably beexpected (having regard to the time that has elapsed since he or shesupplied the information and to all the other circumstances of the case)to recollect the matters dealt with in the information he or shesupplied; or(c) the Judge considers that undue expense or delay would be caused ifthat person were required to be a witness.[48] There is no obligation on a party adducing a hearsay statement in a civilproceeding to file an application to admit it. However, High Court r 9.11 requires thatany challenge to the admissibility of a brief, in whole or in part, be notified within 20working days after receipt of the brief. If the issue is not resolved between counsel ina further 10 working days, notice must be given to the Court by the challenging partythat there is an admissibility issue. No challenges regarding admissibility were madeprior to hearing.The respondents' submissions[49] Notwithstanding r 9.11, the respondents point to r 9.14 which states that,among other things, nothing in that subpart of the High Court Rules "changesinadmissible evidence into admissible evidence". Relying on this, the respondentsstill challenge the following evidence as inadmissible hearsay:(a) the evidence of Wendy Susan Riach, the investigating police officer ofwhat she was told by a commercial property developer, Richard Diver,about Mr Stewart's former employment as an electrician withSteve Winter, his current work for Ambika Prasad on Mr Diver'sproperty development projects and the current hourly going rate for anelectrician;(b) her evidence of a conversation with the branch manager of RadcliffeElectrical, Patrick Drury, in which he outlines Gavin Stewart'semployment history with Mr Winter and then Mr Prasad, his belief asto the number of hours Mr Stewart is working, and his understandingof the going hourly rate for an unregistered electrician in Christchurch;(c) her evidence of her interview with Mr Ambika Prasad, Mr Stewart'scurrent employer, which also discusses his employment history and thefact that he pays Mr Stewart in cash by way of withdrawals from ATMmachines; and(d) Sergeant Rose's evidence about the results of visual surveillancecarried out by police in August 2017 on Mr Stewart when the Sergeantdid not personally conduct all the surveillance.[50] Mr Starling submitted that this evidence should not be admitted because thestatements were relied on as proof of the truth of their contents. The circumstancesrelating to the statements in Ms Riach's evidence did not provide reasonable assurancethat they were reliable and, in particular, Mr Prasad's veracity was in question. Theevidence of Sergeant Rose was also irrelevant.The applicant's submissions[51] In response, the applicant notes that, in Vincent v Commissioner of Police, theCourt of Appeal allowed some latitude in this sort of investigation where evidence wasgiven from a police officer setting out the background and the results of the policeinvestigation.1010 Vincent v Commissioner of Police [2013] NZCA 412.[52] In any event, the applicant says that, to the extent the comments from Mr Diverare relied upon, Mr Stewart confirmed their reliability. He accepted that he hadworked at various of Mr Diver's sites as an electrician contracting to Ambika Prasad.The applicant also did not rely upon the going rate of $40 to $50 per hour given by MrDiver, but had calculated Mr Stewart's earnings on the much lower rate of $25 perhour.[53] Similarly, in relation to the reputed statements of Mr Prasad, he merelyconfirms Mr Stewart's evidence which is that he worked as a cash paid electrician forMr Prasad. The applicant also notes that he does not rely on Mr Prasad's businessrecords as he considers those are unreliable.[54] Finally, in relation to the statements attributed to Mr Drury ofRadcliffe Electrical, the applicant says that he does not rely on these. He accepts thatthe opinion evidence of Mr Drury about the number of hours Mr Stewart works is oflittle weight and the Court will need to determine the true number of hours Mr Stewartworked from other evidence.Discussion[55] It is regrettable that the respondents did not comply with the requirement in theHigh Court Rules to notify challenges to admissibility in advance of the hearing. Thepurpose of this rule is to identify such disputes well in advance of the hearing so if theparty adducing the evidence accepts the concerns about its admissibility, it may takesuch steps as it thinks appropriate to adduce the evidence in admissible form beforethe hearing is underway. It avoids the possibility of parties deferring a challenge toadmissibility until the hearing is underway in order to gain some form of strategicadvantage for the party challenging the evidence.[56] In this case, I accept that the statements of persons which are relayed throughMs Riach's evidence are, prima facie, hearsay statements. However, to the extent thatMr Diver and Mr Prasad's evidence is confirmed by Mr Stewart himself, this providesreasonable assurance that the statement is reliable and I consider it would cause undueexpense or delay if they had been required to be brought to Court (presumably, undersubpoena) to confirm what they had said to Ms Riach. Thus, I consider that theirevidence is admissible to the extent that Mr Stewart has confirmed that evidence inhis own evidence.[57] In relation to the statements by Mr Drury, I accept that these, too, are hearsaystatements as they are adduced for the purpose of relying on the truth of their contents.As I have no way of assessing that, I accept that they are inadmissible and my decisionis made without any reliance being placed on them.[58] The evidence of Sergeant Rose regarding visual surveillance carried out on thesecond respondent by police in August 2017 is challenged as being at least, in part,hearsay, and as failing to meet the requirement of relevance under s 7 of the EvidenceAct 2006.[59] However, the applicant explains that the purpose of this evidence was todemonstrate that, despite Mr Stewart's claim he had sold his van to his mother on19 May 2015, Mr Stewart in fact continued to have the daily use of the van, he kept itat his house at 142 Emmett Street, and was seen driving it on every occasion policeobserved it. The evidence went to Mr Stewart's credibility, and to his willingness toarrange his affairs in order to defeat a possible claim to his assets. I accept it wastherefore relevant evidence.[60] The respondents concede that the evidence of Sergeant Rose is reliable andfurthermore, Mr Stewart accepted under cross-examination that the policeobservations of him using the van regularly after its purported sale were correct. Therewould, therefore, have been no utility in calling each individual officer who made theobservations to attend personally, as the accuracy of the surveillance records was notin doubt. I therefore conclude that this evidence is admissible under s 18 of theEvidence Act.Should any of the evidence be excluded on the basis it has been improperlyobtained?[61] The respondents challenge the admissibility of the evidence obtained byMr Toner, the investigator who interviewed the respondents during the course ofexecuting a search warrant at 142 Emmett Street. One of the key statements reliedupon by the applicant was a statement that Mr Stewart was said to have made toMr Toner during his interview about the number of hours he worked as an electrician.[62] The respondents' submission is that any evidence obtained by Mr Toner fromthese interviews was improperly obtained because the respondents had been cautionedusing a standard client caution script and that did not offer the opportunity to speak toa lawyer. The text of the caution was produced in evidence and it read as follows:This is a voluntary interview, you are not being detained and you are free toleave at any time. You do not have to answer my questions; however, anythingyou do say may be given in evidence.[63] I was therefore invited to exclude the evidence given in the interviews applyingthe approach in Marwood v Commissioner of New Zealand Police, where evidencewhich was ruled inadmissible in criminal proceedings on the basis it was improperlyobtained, was also held to be inadmissible in subsequent civil proceedings.11[64] Mr Starling did not specify why he considered this evidence was obtained inbreach of the New Zealand Bill of Rights Act 1990, but I infer he was referring tos 23(1) which provides as follows:23 Rights of persons arrested or detained(1) Everyone who is arrested or who is detained under any enactment—(a) shall be informed at the time of the arrest or detention of thereason for it; and(b) shall have the right to consult and instruct a lawyer withoutdelay and to be informed of that right; and(c) shall have the right to have the validity of the arrest ordetention determined without delay by way of habeas corpusand to be released if the arrest or detention is not lawful.[65] The only concern raised about the caution given was the failure to offer theinterviewee the opportunity to speak to a lawyer. However, that is only required wheresomeone is arrested or detained. In this case, the respondents were advised that theinterview was voluntary, that they were not being detained and that they did not haveto answer Mr Toner's questions. Section 23 therefore did not apply. As there was no11 Marwood v Commissioner of New Zealand Police [2016] NZSC 139.breach of the New Zealand Bill of Rights Act, I do not have to go on to consider theissues which arose in Marwood v Commissioner of New Zealand Police regarding theadmission of improperly obtained evidence in civil proceedings. The evidence givenin the interviews is admissible.The credibility of the witnesses[66] In this case, it was not in contention that Ms Drake had committed benefitfraud. She acknowledged, at the very least, that she had been working while she hadbeen claiming a benefit and the receipt of those funds could be tracked through bankaccount records. What was more contentious was whether Mr Stewart knowinglybenefitted from her benefit fraud, and whether Mr Stewart's assertions as to hisearnings over the period 2010 to 2015 were truthful. Both depended very much on thecredibility of the witnesses.[67] In closing, Mr Starling submitted that the evidence of the respondents shouldbe believed, particularly as Ms Drake and Mr Stewart had been unable to communicateprivately before the case, and they had voluntarily excluded themselves from theCourtroom when the other was giving evidence. Despite being unable to collude ontheir answers, he said, they gave answers that were "almost identical on matters thatindicated they were being truthful". For example, he noted that they both gave thesame evidence about how they came to own a framed Crusaders jersey and about howthe renovations to the house involved Mr Stewart making use of second-hand and freedemolition materials. He also said when questioned about how they could afford topurchase the decking timber for the new deck, they independently gave an answerwhich set out how Mr Drake got timber from free roadside timber bins and, over time,got enough to complete the deck. Consequently, he submitted, they should be believedwhen their evidence was that Mr Stewart did not know that Ms Drake was receiving abenefit and she hid this from him. This was consistent with Mr Stewart being "a proudman who did not want to accept any government help because he did not believe thathe needed it".[68] Given these submissions, and the significance of credibility to my findings, itis appropriate to make some general observations on the credibility of the respondents,and on a key fact witness for the applicant, before turning to the evidence on therelevant issues.Ms Drake[69] Unfortunately, I formed the clear view that Ms Drake was not a truthfulwitness. She would alternate between telling the truth and then fabricating evidence,without hesitating, depending on what seemed most advantageous to her at the time.There were numerous inconsistencies between the evidence she gave in interviews toMr Toner, her evidence provided in her affidavit, her evidence given in this Court, andthe statements she made in other recorded conversations. For example, her descriptionof her relationship with Mr Stewart varied from asserting they had lived together since2000 and had had a "loving relationship" until the stress of the Canterburyearthquakes, to they lived together "for small amounts of time", to simply assertingshe did not live with Mr Stewart and she was only guilty of benefit fraud because shefailed to declare she was also working.[70] The fabricated evidence related to both significant and insignificant matters.By way of example, she explained in her interview with Mr Toner that some of thefriction in her relationship with Mr Stewart arose because she would go out and spendmoney on items for their new baby "like clothing, nappies, wet wipes and babyproducts", to the point that bills were not getting paid. However, when cross-examinedshe denied that having their daughter put any additional strain on their finances,saying:I had a lot of agencies help me out, I had family come from Australia, theyhelped me out, I had friends help me out, I didn't have to buy clothing for thefirst two years of my daughter's life. I got given baby formula from peoplewhen they had kids and the kids didn't like it, because I could not breastfeedmy child. I was given wet wipes, I was given anything through the midwifewho helped me.[71] Similarly, when being questioned how the family survived on the modestdeclared income, Ms Drake was asked, flippantly, whether she and Mr Stewart werevegetarians, to which she said that she was, both now and "back then". However,when Mr Stewart was questioned as to whether either of them were vegetarians, heresponded with puzzlement and confirmed that they were not and had never beenvegetarians. Even one of the examples used by Mr Starling in submissions to supportthe respondents' credibility, which was that they both agreed the deck was built fromwood salvaged from free firewood bins actually pointed against their credibility.When questioned on the source of the decking timber, Mr Stewart made no referenceto the wood coming from free firewood bins as Ms Drake had said, and he acceptedthat some of the decking timber was purchased new.[72] Having heard Ms Drake's evidence, I consider much greater weight could beplaced on her statements made at the beginning of the investigation, when she was notaware that she was at risk of a civil forfeiture order. At that time, I consider she wasaware, from her earlier conviction, that she would be penalised for her benefit fraud,and the most advantageous position was to be as frank and helpful as possible tominimise that penalty. However, once she realised there could be furtherconsequences for the family, including forfeiting the family home, she retracted earlieradmissions and started fabricating explanations for the evidence being relied on by theCommissioner.Mr Stewart[73] Mr Stewart was a more careful witness than Ms Drake and I assessed him tobe the more focused and level-headed of the two respondents. He was clearlyhardworking and goal-oriented and it was through his efforts and planning that thecouple had managed to save a deposit for the house. Indeed, my impression was thathe found Ms Drake's lack of financial discipline frustrating.[74] That said, I am satisfied that he, too, was not truthful on key matters. He openlyresiled from his affidavit evidence where he had said that he had not lived with MsDrake for half the relevant period, acknowledging that was not true. However, hemaintained that his declared income from 2000 onwards was no more than shown inhis recently filed tax returns, despite compelling evidence to the contrary, which isdiscussed further below.[75] He also denied knowing that Ms Drake was receiving a benefit when I amsatisfied from the evidence, including in particular the statements he made intelephone calls with Ms Drake, that he knew she was in receipt of a benefit in additionto her part-time wages. My reasons for reaching these conclusions are set out morefully below.Ms Marshall[76] The applicant called Julie Marshall, an ex-work colleague of Ms Drake, as awitness to give evidence which supported the applicant's position that Mr Stewartknowingly benefitting from Ms Drake's benefit fraud.[77] Ms Marshall worked with Ms Drake at Countdown for between 18 months totwo years around 2011 to 2013. She gave evidence that Ms Drake said Mr Stewart:was earning money but he would only pay for their mortgage and some oftheir food and so she had to be on the benefit to afford to be able to pay forthe kids' clothes and then they'd go out at the weekends and that was whenthey actually got along was when they were out shopping for things for thehouse or the kids.She also said that Ms Drake said she had told Mr Stewart that she should not have tobe on the benefit while he was working and earning money, and he had responded withwords to the effect "well if you can be on the benefit then why should I give you anymoney? You are getting your own money".[78] Ms Marshall explained that she was motivated to make a call to MSD aboutthis because she and some of her colleagues got tired of hearing Ms Drake boastingabout how much money they had and she found it grating to hear Ms Drake talkingabout buying new beds, new clothes and couches. My clear impression was thatMs Marshall was a truthful and straightforward witness who was motivated to givethis evidence by an understandable sense of resentment that Ms Drake was claiming abenefit unlawfully, while she and her colleagues were trying to make ends meet ontheir modest legitimate incomes.The issues[79] There are a number of disputed issues in this case. In relation to the assetforfeiture orders sought, the following issues arise:(a) What was the extent of Ms Drake's significant criminal activity?(b) Did Mr Stewart engage in significant criminal activity?(c) Does Ms Drake have an interest in the proceeds of Mr Stewart's bankaccounts?12(d) Was the identified property "tainted", that is, was it acquired as a resultof significant criminal activity or directly or indirectly derived fromsignificant criminal activity?(e) Are there grounds for excluding any of the respondents' property fromsuch an order because of undue hardship?[80] In relation to the profit forfeiture orders the disputed issues are:(a) Has each respondent unlawfully benefitted from significant criminalactivity within the relevant period?(b) Can the applicant rely on its calculations of unlawful benefit in light of:(i) Mr Stewart's recently filed tax returns; and(ii) the respondents' claim to "notional entitlements" (that is,deductions to take account of such MSD benefits and Workingfor Families tax credits that the respondents would have beenlegally entitled to)?(c) Are there grounds for excluding any of the respondents' property fromsuch an order because of undue hardship?12 It is clear that both respondents have an interest in the jointly owned Emmett Street property andthe EQC and insurance payments made in respect of the property.What was the extent of Ms Drake's significant criminal activity?[81] Significant criminal activity is defined in the Act to include an activity engagedin by a person that, if proceeded against as a criminal offence, would be punishable bya maximum term of imprisonment of five years or more.13[82] The applicant relies on the conviction of Ms Drake on one charge of obtainingby deception between 31 January 2005 – April 2015, and on 14 charges of using adocument to obtain a pecuniary advantage from the Ministry of Social Development.All these charges carry a maximum penalty of seven years' imprisonment. Thoseconvictions are conclusive against Ms Drake. The applicant also says that theevidence she has fraudulently obtained $45,269.98 in Working for Families TaxCredits during the relevant period of criminal activity is evidence that she hascommitted a further crime of obtaining by deception under s 240 Crimes Act 1961,which also has a maximum penalty of seven years' imprisonment.[83] The respondents concede that the first respondent has committed significantcriminal offending in relation to the convictions for dishonestly using a document.However, they say that her other convictions are for a charge of obtaining by deceptionwhich has a sliding scale of maximum penalty dependent on the value of the losscaused, or benefit obtained, which ranges from three months' imprisonment toseven years.14 They submit that the applicant did not apportion the unlawful benefitderived to the individual charges.15[84] However, I accept, as the applicant submitted, that s 47 of the Evidence Actprovides that in civil proceedings proof of conviction is conclusive proof that theperson committed the offence. No leave was sought to go behind that evidence by therespondents. Furthermore, the sliding scale which applies to the current version ofs 241 of the Crimes Act 1961 does not apply to the obtaining by deception chargeMs Drake pleaded guilty to. That charge under s 240 Crimes Act covered the loss ofover $180,000 and the charge list specifically particularised s 241(a), being a13 Section 6(1).14 Crimes Act 1961, s 241.15 It appears the respondents mistakenly understood that there was more than one charge of obtainingby deception.seven year maximum penalty. Similarly, the historic charges under s 229A of theCrimes Act 1961, which applied to offending between 2000 and 2003, and the chargesunder s 228 of the Crimes Act 1961, all carried seven year maximum penalties. Thisalso disposes of the argument that there should have been an apportionment of theunlawful benefit between individual charges. The applicant has therefore correctlyidentified Ms Drake's significant criminal offending.Did Mr Stewart engage in significant criminal activity?[85] The applicant alleges that Mr Stewart engaged in tax evasion during the period2010 to 2016 and that the tax returns belatedly filed by Mr Stewart for this period areincorrect and understate his actual income.[86] A person who is convicted of tax evasion is liable to imprisonment for a termnot exceeding five years,16 so this offending constitutes significant criminal activityfor the purpose of the civil forfeiture order regime.[87] The Commissioner estimates that Mr Stewart has earned at least $30,000 perannum between 1 April 2010 and 31 March 2016, and was thus liable to pay a total of$26,040 in income tax. In contrast, Mr Stewart claims he earned nothing in thefinancial years ending 2011 and 2012, and for the years 2013 to 2016 he earned$36,185.24 and he has been assessed for and paid income tax in the amount of$3,931.28 on those earnings. The Commissioner claims the difference betweenMr Stewart's calculated tax debt and the tax he has paid is $22,108.72, which is theamount of his unlawful benefit from tax evasion.[88] The Commissioner's assessment that Mr Stewart was a self-employedelectrician earning an estimated income of $30,000 per year relies on a number ofstrands of evidence. He points to Ms Drake initially acknowledging in evidence that,after 2010, Mr Stewart always earnt more than she did and he was the mainbreadwinner. This was supported by statements made during prison telephone callsbetween the two, where Ms Drake acknowledged to Mr Stewart that:16 Tax Administration Act 1994, s 143B.you have been supporting me, through and through, given me moneywhenever I needed it, getting me anything I wanted, you even went and boughtme a new car. I didn't pay for it.[89] The applicant also points to the implausibility of Mr Stewart incurring theexpense of purchasing an electrician's van and tools on 18 April 2010, immediatelyafter being made redundant and shortly after having bought the house atEmmett Street, and then not using the van for electrical work. Indeed, the fact that hewas working as an electrician straight away was reinforced by Ms Drake referring toMr Stewart doing "cash jobs" in a Facebook messaging thread in April 2010. In cross-examination Ms Drake sought to minimise this statement by saying it referred to nomore than helping some elderly neighbours fix a light socket for $5 or $10. However,I do not consider this explanation was plausible in the context of the Facebookexchange where a friend was enquiring whether Mr Stewart had had any luck "jobwise" and Ms Drake replied "not yet he has had a few cash jobs though".[90] I also accept that it was entirely improbable that Mr Stewart would not workat all for the two years immediately following the house purchase. Mr Stewart wasacknowledged in evidence to be a hard worker and a self-reliant man, and it wouldhave been entirely out of character for him to have spent such long periods of timeunemployed or doing almost no work at all, when the couple had a mortgage to payand a child to support, and when he had been earning $36,000 net in the year beforehe had been made redundant.[91] In any event, I accept that he admitted to Mr Darran Toner that he worked20-40 hours per week as an electrician, paid mainly in cash. While Mr Stewartasserted that Mr Toner had misunderstood what he said, and that he had only said thathe would "like" to work at that level, this does not sit easily with Mr Toner'scontemporaneously made notes which stated "working 20-40 hours. Weekendsincluded – mainly cash jobs". It is implausible that an expressed desire to work 20-40hours would include a reference to working weekends and doing cash jobs. I preferredMr Toner's recollection that this was a statement regarding Mr Stewart's actual hoursof work, which included weekends and were paid for in cash.[92] I also consider that there was clear evidence of a significant cash incomecoming into the household. Mr Stewart's bank accounts disclosed negligibleexpenditure on living costs, which pointed to the high probability of cash spending tocover these. Furthermore, the level of cash deposits banked and home improvementsundertaken during this period were impossible on the couple's earnings unless MrStewart had substantial undisclosed cash earnings. Since buying the Emmett Streetproperty in 2010 the couple had:(a) installed a new bathroom;(b) installed new curtains and carpets;(c) installed a new log burner, albeit with an ECan subsidy;(d) purchased new whiteware;(e) installed a new kitchen with new stainless steel appliances;(f) erected a new front fence;(g) installed a new front door;(h) built and paid for, in cash, a new 53 square metre garage/sleepout thatwas fully lined and had an ensuite with heatpump; and(i) installed new decking and shade sails.[93] While the couple claimed that many of these items were obtained second-handor were surplus from jobs Mr Stewart worked on, there were also a number ofpurchases where it was acknowledged that the items were bought new. Furthermore,I consider the explanations given for how new purchases were funded were notcredible. The couple had significant cash deposits going to bank accounts whichgenerally exceeded Mr Stewart's stated earnings in each financial year. For example,in the financial years from 1 April 2010 to 31 March 2014 cash deposits into MrStewart's accounts totalled $40,753.77, while his declared income for the same periodwas just under $12,500.[94] These discrepancies were explained by Mr Stewart as resulting from his fathergiving him money "to hold on to". Thus, the cash deposits which went into his VISAcard of $14,915 between 1 April 2012 and 31 March 2014, and which allowed him tospend approximately $8,500 at building supply stores, was explained as being fundedfrom his father. Similarly, the 53 square metre garage and workshop bought fromTotalspan, and which was paid for by several cash payments, was said to be from asum of money that Mr Stewart's father had saved for his funeral and which he gave toMr Stewart in cash in amounts of $2,500 or $3,000 at a time. However, when it wasput to him in cross-examination that his father's bank account had been emptied byApril 2012, which was long before the garage got built or was paid for, Mr Stewartwas unable to explain how his father was in a position to continue to provide him withlarge cash sums.[95] I am satisfied that the explanation that the cash deposits which went into bankaccounts or the Visa card, or which were used to pay for home improvements, werenot funds given or lent by Mr Stewart's father. This is reinforced by the fact that hisfather was not called to give evidence to explain how this could be the case,particularly when he had no surplus funds in his bank account from April 2012onwards.[96] I also consider that the extracts from Mr Stewart's partially filled in 2015 diarysupport the conclusion that he has underreported his earnings in his tax returns. Thediary recorded various job locations, including on Mr Diver's commercialdevelopments in Victoria Street. Each job entry would bracket a time period whichwas marked in half hour amounts on the left-hand side of the page. There was then asummary of hours set out in a table in the diary. The hours recorded in this diary boreno relation to the sparse record of payments Mr Prasad gave Mr Stewart's accountantfor the purpose of preparing tax returns.[97] Mr Stewart explained that the diary entries related to jobs he was "quoting forMika". He said that he wrote them in the diary because he had to provide a quote forthe hours, but he maintained that the jobs did not all go through. However, I did notconsider Mr Stewart's explanation of the diary entries was plausible. There wouldhave been no need to mark a start and finish time on a particular day if he was simplyquoting for a job. The only plausible explanation of the table was that it summarisedthe hours he worked for the purpose of claiming payment for those hours from MrPrasad.[98] I am therefore satisfied, on the totality of the evidence, that Mr Stewartcommenced work as a self-employed electrician shortly after he was made redundantin early 2010. I consider that work continued throughout the six year period from2010 to 2016, with living expenses and home improvement expenses being paid forwith the cash Mr Stewart earned. I am also satisfied that the tax returns filed byMr Stewart were not accurate and, in most cases, significantly understated his actualincome.[99] It is clear that evading tax is significant criminal activity.17 Section 143B(2)of the Tax Administration Act 1994 provides that "A person who evades or attemptsto evade the assessment or payment of tax by the person commits an offence underthis Act". It attracts a term of imprisonment not exceeding five years.18 The fact thatMr Stewart has not been charged with this offence is immaterial for the purposes ofdetermining whether a civil forfeiture order can be made.19Is the property tainted?[100] Section 5 of the Act defines "tainted property" as follows:(a) means any property that has, wholly or in part, been—(i) acquired as a result of significant criminal activity; or(ii) directly or indirectly derived from significant criminalactivity; and(b) includes any property that has been acquired as a result of, or directlyor indirectly derived from, more than 1 activity if at least 1 of thoseactivities is a significant criminal activity unlawfully benefited fromsignificant criminal activity has the meaning given to it in section 7.17 Commissioner of Police v Li HC Tauranga CIV-2010-470-48, 3 March 2011.18 Section 143B(4).19 Criminal Proceeds (Recovery) Act, s 6(2).The applicant's submissions[101] The applicant relies on the Emmett Street house being directly or indirectlyderived from significant criminal activity, or "tainted", because:(a) Mr Stewart was only able to accumulate the savings which he used topay the deposit on the house, and from which he funded mortgagepayments, because a significant portion of the family's living expenseswere sustained through Ms Drake's benefit fraud;(b) in the 18 months before they purchased the house, Ms Drake madedirect contributions from her Kiwibank account (into which her benefitwas paid) into one of Mr Stewart's savings account, which was thenused to fund the house deposit and mortgage payments; and(c) significant improvements were made to the property by using the cashearnt (which included the unpaid tax) of Mr Stewart.[102] The claim that the insurance proceeds are tainted is based on the fact that theAA insurance premiums were paid, by direct credit, from the Kiwibank account inwhich Ms Drake received her unlawfully obtained benefit payments.[103] Mr Stewart's savings are claimed to be tainted property because they were, inpart, enabled by the fact Ms Drake's benefit payments were used to fund householdexpenses, allowing him to accumulate and retain these savings.The respondents' submissions[104] The respondents submit that none of the property identified is tainted by thefirst respondent's benefit fraud. This is because:(a) the first respondent gave evidence that she has a gambling addictionand she used all the money she obtained from her benefit fraud ongambling;(b) this was supported by Mr Stewart's evidence that there was no extramoney in the household and they were strained financially;(c) even if some of the proceeds of the first respondent's benefit fraud wasspent on household expenses, this did not taint the Emmett Streetproperty as there is no evidence that the funds in the secondrespondent's savings accounts, or the equity in Emmett Street, wereacquired or increased by using those proceeds;(d) the deposit on the house was paid for by the second respondent fromsavings he legitimately accumulated over several years;(e) the mortgage payments on the house were met from Mr Stewart'sindividual bank account which was made up of earnings fromemployment and the proceeds from his share of the sale of a house atQuinns Road that he had owned with his father; and(f) the improvements to the property were carried out largely by the secondrespondent with scavenged or salvaged materials.Discussion[105] The definition of tainted property is broad and only requires there to have beensome contribution from the proceeds of criminal activity to the acquisition of propertyin order to taint the property. Indeed, a property can be tainted by virtue of theproceeds of criminal activity being used to increase an interest in property, such aspaying off a mortgage. This was the outcome in Commissioner of Police v Winsor,where the Court held: 20The Commissioner asserts that because the criminal activity enabled thetrustees to retain the property through the payment of interest on the mortgage,thereby keeping the mortgagee at bay, the capital gain realised on the propertymeant that it was acquired, in part, as a result of that significant criminalactivity. I accept that the payment of interest effectively preserves amortgaged property both in terms of the existing equity and by allowing theregistered proprietor or beneficial owners to increase their equity throughcapital gain over the period the property is retained. Were it not for the20 Commissioner of Police v Winsor [2014] NZHC 161 at [33].ongoing payment of interest on the mortgage the equity would be at risk in amortgagee sale. As a result, I find that the property is tainted property[106] Property can also be tainted through the use of the proceeds of crime toimprove a property. In Commissioner of Police v Ranga, renovations paid for bycriminal activity were found to have contributed to the property's value and thereforeto have tainted the property.21 There, the renovated property was then sold and theproceeds used to purchase a further property. The new property was also consideredto be tainted because the proceeds of crime had contributed to its purchase.[107] In the present case, I accept that the deposit for the property was paid fromlegitimately sourced funds, being savings Mr Stewart had accrued during hisemployment at Casa Electrical Limited, and which were held in one of two ANZsavings accounts in his name, being the account with the suffix 46 (ANZ 46).However, I consider the property was subsequently tainted because Mr Stewart'ssecond ANZ savings account, with the suffix 30 (ANZ 30), was always in credit andwas used to make weekly automatic payments of between $240 and $280 to therespondents' joint ANZ mortgage servicing account. In 2008, Ms Drake commencedpaying direct debits to Mr Stewart's ANZ 30 account from her Kiwibank account of$110. In late 2009 through to early 2010, the payments were increased to $120. Whileboth respondents were questioned about why Ms Drake was paying this money intoMs Stewart's account, and each gave different explanations for what the money wasbeing transferred for, in the end I consider this does not matter. Money from theaccount which Ms Drake's benefit payments were deposited in were paid directly tothe account from which mortgage reduction payments commenced being made inearly March 2010. While only a modest contribution, I am satisfied that this isevidence of tainted funds being used to acquire the Emmett Street property.[108] While the above disposes of whether the proceeds of ANZ account suffix 30and the Emmett Street property are tainted property, the applicant has also claimedthat these items of property and the funds in Mr Stewart's ANZ 46 savings account aretainted because Ms Drake, with agreement from Mr Stewart, used her unlawfullyreceived benefit income to meet household costs, thus enabling him to accumulate21 Commissioner of Police v Ranga [2013] NZHC 745 at [29].these savings and pay the mortgage. He would have been unable to keep and retainthe money he was accumulating in the ANZ 30 and 46 savings accounts without thebenefit payments being used to fund the household in this way. As a consequence, theunlawful benefit payments indirectly facilitated the accumulation of the savings andthe acquisition of the house.[109] This is a rather different set of circumstances from those which are usuallyrelied on to give rise to tainted property. Essentially the applicant argues that whereproperty is acquired through legitimately earned funds, but that is only possible byusing illegitimately obtained funds for day to day living expenses, that property shouldfall within the definition of tainted property.[110] While the provisions of the Act are harsh, I do not consider that the definitionof tainted property can be read so broadly that it would include property fundedentirely from legitimately sourced funds, even where that has been enabled by theoffender's other living costs being met by the proceeds of crime. The word "tainted"is generally understood to mean that something has been touched, tinged or imbuedwith some bad or undesirable quality.22 Thus, when the definition of tainted propertyrefers to property which is "indirectly derived from significant criminal activity", Iconsider there must nevertheless be some traceable connection between the proceedsof crime and the property so acquired or retained.23 If that were not so, it is difficultto see why the Act would also need to provide for the profit forfeiture regime whichis able to address cases where the proceeds of crime have not been channelled towardsthe acquisition of tangible property, but have been used to fund the offender's lifestyleand where there is other property available to meet the value of the unlawful benefitreceived.[111] Limiting the definition of tainted property in this way does not undermine theprimary purpose of the Act as the availability of the two types of forfeiture orders stillallows for the forfeiture of property:22 Borrowing one of the definitions of "taint" from the Shorter Oxford English Dictionary, ThirdEdition.23 As was the case in Commissioner of Police v Ranga, above n 22.(a) that has been derived indirectly or indirectly from significant criminalactivity; or(b) that represents the value of a person's unlawfully derived income.24[112] For these reasons, I do not consider that the funds in ANZ 46 are taintedproperty. There is no evidence that the funds in this account were contributed to byMs Drake's unlawful benefit payments or Mr Stewart's unpaid tax. The deposits intothis account are simply interest earned on the existing balance, as well as a sum whichwas transferred into this account in November 2010 from another on-call accountowned by Mr Stewart which appeared to predate the period of tax evasion. For thisreason, unlike the funds in ANZ 30, I do not consider these funds are tainted property.[113] I accept, however, that the proceeds of the insurance payments are taintedproperty as the house insurance premiums were paid directly from Ms Drake'sKiwibank account from her unlawfully obtained benefit payments.[114] Because I have reached these conclusions, I do not need to go on to considerthe balance of the respondents' arguments which essentially minimise the contributionof unlawfully received payments to the acquisition of these assets. It is clear that aslong as it can be shown that any proceeds of significant criminal activity contributedto the acquisition or increase in value of the property, it will become tainted propertyunder the Act.[115] However, for completeness, I do not accept that all, or even a large part, of MsDrake's benefit was gambled away. There was clear evidence in the records of herbank account transactions that most of her benefit went on household expenses ratherthan gambling.[116] A further issue which was not addressed head on was whether money retainedas a result of tax evasion can taint property. It is clear that tax evasion constitutessignificant criminal activity.25 However, there is some uncertainty as to whether it can24 Section 3(1).25 Commissioner of Police v Li, above n 18.taint property. In Commissioner of Police v Dryland, the respondent was guilty of taxevasion as he was paid in cash which he did not declare.26 When considering theimplications of this illegal act, Gilbert J held that: does not mean that the cash is tainted property. Mr Dryland did not acquireor directly or indirectly derive the money through tax evasion. Rather, heacquired it through his lawful activities but has subsequently evaded taxobligations in respect of the money he has earned. He is vulnerable topenalties and to prosecution under the Tax Administration Act but this doesnot mean that the money is tainted property.[117] However, in Commissioner of Police v Winsor, the Commissioner relied onboth drug dealing and tax evasion to support an asset forfeiture order. Courtney J heldthat the asset forfeiture order was successful because the property was tainted throughthe application of illegal profit from drug dealing and the evasion of tax.27 Thus, sheeffectively held that the money retained by evading tax can taint subsequently acquiredproperty.[118] It may be that a distinction can be drawn between a fund of money which islegitimately earned, because that was obtained legally and not as the result ofsignificant criminal activity, and property which is subsequently purchased with thosefunds. That is because if the respondent retains those funds, it is the retention whichis the act of significant criminal activity and the property then acquired has been"acquired as a result of significant criminal activity". However, in the present case, Ido not need to decide whether that distinction is legitimate, as I have already held thatthe identified items of property are tainted by Ms Drake's benefit fraud.Do they each have an interest in the tainted property?[119] It is a pre-requisite to an order being made against a respondent that therespondent has an interest in the tainted property. That test is readily met in respect ofthe Emmett Street property and the insurance payments made in relation to it, as bothare held in the joint names of Ms Drake and Mr Stewart. Mr Stewart does, however,say that Ms Drake does not have an interest in his bank accounts as they are in his solename.26 Commissioner of Police v Dryland HC Auckland CIV-2012-419-000242, 30 August 2012 at [22].27 Commissioner of Police v Winsor, above n 21, at [33].[120] For practical purposes this does not matter, as an order sought against himalone is sufficient, and he undoubtedly has an interest in that property. However, Iaccept the applicant's submission that, on the balance of probabilities, Ms Drake alsohas an interest in these accounts as she has the right to bring a relationship propertyclaim in respect of them.28 The bank accounts include a mixture of income earnedduring the course of the relationship and property which may be separate property,being the proceeds of the sale of Quinns Road. Given the intermingling of such fundsand the use to which the accounts have been put, including payment of the jointlyowned house deposit and of the mortgage, I consider that both savings accounts arerelationship property and therefore both respondents have an interest in them.Should any property be excluded from the asset forfeiture orders because ofundue hardship?The respondents' submissions[121] The respondents have applied to have property excluded from both a profitforfeiture order and an assets forfeiture order, if either or both are made, because ofthe undue hardship that is likely to result for Mr Stewart and his children. Theapplications are made in reliance on s 51 and s 56 of the Act, both of which permitexclusion of certain property from a civil forfeiture order if, having regard to all of thecircumstances, undue hardship is reasonably likely to be caused to the respondent ifthe property is included in the order.[122] In this case Mr Stewart's application is supported by his affidavit evidenceexplaining that he lives with his two children, a son who is 19 and a daughter who isfive, at their house in Emmett Street, Shirley and he is supporting them both whileMs Drake serves her prison sentence. In relation to his daughter he says:Our daughter has had a lot of difficulties since her mother went to prison.It took her two months to be comfortable around me without her mother [she] has had to have counselling. I noticed an improvement after [she]started counselling, but she suffered a big setback when my mother died lastyear. She has become withdrawn again. She is in a very fragile state. Idon't want to have to move her from the home she has lived at for three years.28 Hayward v Commissioner of Police [2014] NZCA 625.[123] He also deposes to his own limited income of $400 per week and the fact hedoes not have a family who can support them. He also says that he owes his father$20,000 which he will be unable to repay if his savings are forfeited. That would meanhis father would have to "rely on superannuation alone for the rest of his life".The applicant's submissions[124] The applicant opposes the application for relief from the civil forfeiture ordersin light of the factual circumstances of the case, and having regard to the statutoryconsiderations at ss 56(2) and 67(2). In terms of the matters required to be consideredunder those sections, the Commissioner places particular weight on the circumstancesof the significant criminal activity to which the civil forfeiture orders relate. He assertsthat the evidence demonstrates highly premeditated and cynical benefit fraud over a15 year period which resulted in the respondents' enrichment by more than $250,000over the period of their offending. He considers that the structuring of the couple'sfinancial affairs was the result of conscious decision-making following Ms Drake'sprosecution for benefit fraud in 1999.[125] It is also submitted that it would be contrary to the purposes of the Act to makea finding of undue hardship which would enable willing participants in systematicbenefit fraud to retain equity in property that they have accumulated as a result of thatfraud, simply because they now find their financial circumstances constrained andhave to live within their legitimate means.[126] The Commissioner accepts that the couple's daughter has been badly affectedby her mother's offending and her consequent imprisonment. However, Ms Southpoints out that the evidence submitted relates primarily to the consequences ofMs Drake's incarceration on the daughter, rather than on the effect on her daughtershould they have to move house. She points out that children frequently have to movehouse for all manner of reasons, including relationship breakdowns, job loss orparental job transfer. Whether or not hardship results comes down to how the parentsor caregivers manage the transition. Thus, the fact of moving alone does not equateto undue hardship and demonstrates hardship no more severe than any person losingtheir home under the Act would encounter.[127] Ms South also points to other comparable cases where the Court held that theconsequences of civil forfeiture orders being made did not result in undue hardship.By way of example, she referred to Commissioner of Police v Duncan, where AndrewsJ held that undue hardship must be more than hardship inherent in forfeiture, saying:29[156] In terms of the undue hardship that Ms Duncan says that she willsuffer, she has said that if the house and car are forfeited, she will havenothing; her only income is domestic purposes benefit and she has the care ofa young child. I am not satisfied that this hardship would be more than mostpeople would suffer if they were to have their home confiscated under the Act.[128] Finally, the Commissioner points out that the children themselves have no legalor equitable claim or interest in a living parent's property and therefore could notindependently apply for relief on the basis of undue hardship under ss 66 and 67.30Discussion[129] Both ss 51 and 56 allow the Court to exclude certain property from an assetsforfeiture order or a profit forfeiture order if it considers that, having regard to all ofthe circumstances, undue hardship is reasonably likely to be caused to the respondentif the property is included in the order.[130] One of the matters that these sections direct the Court to is the use ordinarilymade of the property. Thus, use of the property by the respondent and possiblyinnocent third parties for legitimate purposes could be a relevant factor. However,where, as here, the equity in the family home has largely, if not entirely, been acquiredthrough benefit fraud and tax evasion, I consider the purpose of the Act must still beconsidered. The extent of Ms Drake's benefit fraud alone exceeds the equity in theEmmett Street property, and I am not persuaded that its use as the family house is, initself, sufficient to trigger considerations of undue hardship.[131] These sections also direct the Court to consider the nature and extent of therespondents' interest in the property. Thus, it would be open to the Court to considerthat undue hardship would be caused by, for example, making asset forfeiture ordersin respect of items of significant value where only a small portion of their value was29 Commissioner of Police v Duncan HC Tauranga CIV-2010-470-00933, 11 October 2011.30 Commissioner of Police v Li, above n 18 at [51].obtained illegitimately. However, as already explained, the equity in the identifiedassets was largely, if not entirely, gained by supplementing the family's income withan unlawfully obtained benefit and tax credits, and by evading tax.[132] Similarly, I accept the applicant's submissions that the circumstances of thesignificant criminal activity to which the orders relate point against an undue hardshiporder being made, again because the value of the items being forfeited iscommensurate with the extent of the benefits gained from significant criminal activity.[133] That only leaves the question of whether undue hardship arises because of thepersonal circumstances of the family. Despite a child not having independent statusto seek an order for relief on the grounds of undue hardship, the Court of Appeal inDuncan v Commissioner of Police accepted that:31There may be cases where the forfeiture of the family home, or even an interestin it, could cause undue hardship for a child which ought to be influential inthe disposition of an application under s 51 of the Act.[134] However, the Court went on to say:32Whether or not undue hardship arises however, must be a matter of fact anddegree and an argument that forfeiture of the family home will always resultin undue hardship cannot be sustained in the face of the relevant provisions ofthe Act.[135] As it was said in Commissioner of Police v Nelson, Williams J noted:33The statute requires much more than mired inconvenience or difficulty.Ms King needs to show that forfeiture of AQT455 would, for her, go wellbeyond those concepts and into privation to be regarded as excessive in thecircumstances for her and her children. She has to show the hardship to herwould be "grossly disproportionate" to the circumstances of acquisition of thevehicle or "extreme want of privation" to which is added the necessity thatsuch privation must be "undue".31 Duncan v Commissioner of Police [2013] NZCA 477 at [57].32 At [57].33 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010 at [75].[136] In the present circumstances, I accept the Commissioner's submissions that theevidence does not demonstrate that Mr Stewart and his children will suffer unduehardship as a result of having to relinquish the Emmett Street property. The hardshipset out in the evidence is existing hardship as a consequence of Ms Drake'sincarceration, and future hardship which will arise because the family will have to livesolely on legitimate sources of income. I do not consider those consequences reachthe threshold of being undue hardship caused by the making of the orders, nor do Iconsider that they outweigh the legislative policy that makes it clear wrongdoersshould be stripped of proceeds of crime.34[137] For all these reasons, I do not consider the threshold for undue hardship hasbeen reached and I am not prepared to exclude property from the assets forfeitureorder.Conclusions on application for asset forfeiture orders[138] In light of all the matters discussed above, I am satisfied that asset forfeitureorders should be made against both respondents in respect of:(a) the property at 142 Emmett Street, Shirley, Christchurch (excluding anyinterest of ANZ Bank New Zealand Limited under its registeredmortgage);(b) the EQC and earthquake insurance payments totalling $23,093.77 (plusany accrued interest); and(c) the funds held in Mr Stewart's ANZ 30 account.Profit forfeiture orders[139] The applicant seeks a profit forfeiture order against each respondent on thebasis that both Ms Drake and Mr Stewart have each, during the relevant period ofcriminal activity, unlawfully benefitted from significant criminal activity and bothhave interests in the property identified in the application. The same criminal activity34 Lyall v Solicitor-General [1997] 2 NZLR 641 (CA).is relied on as for the assets forfeiture order, although the profit forfeiture order soughtis to recover the sum of $158,635.03. Importantly, the Act provides that propertysubject to a profit forfeiture order does not need to be tainted by significant criminalactivity.[140] It seems from the respondents' submissions that the challenges to making aprofit forfeiture order which have not already been addressed in the discussion relatingto the assets forfeiture order, are:(a) whether an order for the full amount can be made against eachrespondent on the basis that they have both unlawfully benefitted fromthe claimed significant criminal activity; and(b) whether the amount of the unlawful benefit been appropriatelycalculated taking into account issues of notional entitlement.Did Mr Stewart knowingly benefit from Ms Drake's benefit payments?The applicant's submissions[141] The applicant accepts that for Mr Stewart to have unlawfully benefited fromMs Drake's significant criminal activity, s 7 of the Act requires him to have"knowingly, directly or indirectly, derived a benefit from significant criminal activity".In this case, given the couple were in a long term relationship and given the limitedextent of Ms Drake's legitimate income, the applicant says that Mr Stewart could nothave been ignorant of, or must have known about, Ms Drake obtaining benefitpayments from MSD.[142] The relevant facts which the applicant relies on are that:(a) Mr Stewart admitted to living with Ms Drake while knowing that shewas unlawfully claiming a benefit when she was convicted for benefitfraud in the late 1990's. The applicant says this demonstratespreparedness by Mr Stewart to live with Ms Drake while she committedbenefit fraud.(b) Ms Drake had substantial periods of unemployment between 2000 and2005, totalling some 16 months, and Mr Stewart could not have missedthe fact that Ms Drake had money available to her during these periodsof unemployment which clearly pointed to her being in receipt of abenefit during this time. Her evidence that she dressed in a uniformand pretended to go to work during these periods of unemployment wasimplausible, particularly given the age of their son and the fact that MrStewart was working full time.(c) The evidence supports the fact that, from the early 2000's onwards, thecouple deliberately chose to structure their financial affairs so as toenable Mr Stewart to claim "plausible deniability" of Ms Drake'sbenefit fraud. The evidence supporting this included the fact the couplemaintained separate bank accounts throughout for no apparent reason.Even after they obtained a mortgage with ANZ and Ms Drake beganpaying her wages into an ANZ account, she maintained her separateKiwibank account.(d) The explanation that they separated their bank accounts becauseMs Drake had stolen from Mr Stewart in the past, was inconsistent withMr Stewart's practice of giving her large sums of cash to bank, or topay for items such as the Totalspan garage/sleepout installed on theproperty.(e) Finances were discussed in the household, with Ms Drake admittingthat one of the things they argued about was money.(f) Ms Drake continually had access to funds well in excess of whatMr Stewart could realistically expect she had earned. Over the years inquestion, the applicant calculates that between 43 and 72 per cent ofher available spending money was received from benefits. Given thata large part of her legitimate income was used to meet automaticpayments for power, insurance and the like, the couple simply couldnot have lived on the balance of her legitimate income and met all livingcosts, such as fuel, groceries, household needs and clothing, and thatmust have been apparent to Mr Stewart.(g) The evidence of Ms Marshall provided independent support forMr Stewart knowing that Ms Drake was in receipt of the benefit.[143] Finally, the transcripts of telephone calls between them while Ms Drake wasin prison contained what the applicant says are clear admissions of Mr Stewart's priorknowledge of Ms Drake's receipt of the benefit. For example, in one such call thefollowing exchange occurs:Mr Stewart What's the, what's the life lesson out of this?Ms Drake Life's lesson is don't fuck with the government, and listen toyour partner when he says so.(emphasis added)[144] A similar exchange occurred in another telephone call where the transcript ofthe call reads as follows:Ms Drake One good reason, so I can show that I, so I can prove to youguys that I have changed, and show that I have learned mylesson.Mr Stewart It's not about learning lessons Letitia, it's about movingforward in the future, at the end of the day is that, what, youhave put our lives on hold for fucken nearly two years Letitia,and it is still going. At the end of the day is that, what, is itreally worth the fucking money?Ms Drake No its not actually. Not it isn't.Mr Stewart For the amount of fucking money each week that you weregetting, or whatever the fuck it was Letitia, it's not even worththe fucken hassle. I fucking told you that for years.(emphasis added)The respondents' submissions[145] The respondents in reply submit that notwithstanding their intermittentadmissions that they were in a relationship in the nature of marriage, the Court shouldaccept their evidence that, if the test in Ruka was applied, this was not a relationshipin the nature of a marriage as there was no mutual financial commitment and "almostno intermingling of money". It followed that neither Ms Drake or Mr Stewart wasaware of what the other did in regard to work or other payments.[146] They also say I should accept Ms Drake's evidence that she lied to Mr Stewartthroughout their relationship about the source of her income. This extended to herpretending to go to work when she was unemployed, or claiming to be in receipt ofmaternity leave for the period she was not working after her daughter's birth. MsDrake also says she was careful to ensure correspondence about her benefit was hiddenfrom Mr Stewart, saying "I hid the mail. I used a PO Box address. I would alwaysmake sure I was home when I knew the mail was coming or I had family go and getthe mail for me". I should also take account of the fact that, because they kept separatebank accounts, each was not privy to what the other earned.Discussion[147] I do not accept as credible that Mr Stewart did not know that Ms Drake wasreceiving the benefit for the 15 years they were living together at Emmett Street. Therespondents' evidence on this relies on a combination of a complete lack ofcommunication between each other over their financial affairs and Ms Drakemaintaining elaborate and sophisticated lies as to the extent of her employment.[148] Having heard Ms Drake in the witness box and compared the inconsistency ofher statements there with other statements she has made, both formally and informally,I simply do not consider her capable of maintaining a sophisticated double life overthat entire period. Furthermore, I accept Ms Marshall's evidence that Ms Drakedisclosed to her and her other work mates that she was on a benefit. Her naivety indoing that accords with my assessment of her and highlights the implausibility of herdeceiving her de facto partner for 15 years on the same issue.[149] Despite the respondents' submissions that under the Ruka test they were not ina relationship in the nature of marriage, as there was no financial interdependence, MsDrake pleaded guilty in 2016 on the basis of a summary of facts which made it clearshe accepted they were in a relationship in the nature of a marriage throughout therelevant period. Even if this had not been the case, the evidence that they were in sucha relationship was compelling. These included both Ms Drake's and Mr Stewart'sadmissions to Darran Toner, and Mr Stewart's mother's statements to Darran Toner,where she confirmed that the respondents had "been together for 20 years" and thatshe had never known them to break up, nor did she know of any physical violencebetween them. There is also clear evidence that they did support each other financially,with Ms Drake meeting most of the family's living costs, and Mr Stewart providingthe funding for their jointly owned home.[150] Furthermore, despite the testy nature of some of the transcribed telephone callsbetween Ms Drake and Mr Stewart while she was in prison, the exchanges wereconsistent with there being an ongoing relationship between them. They discussedsuch things as like what their daughter was doing, how the family was going to survivefinancially, when their next phone calls will be, and that they loved and missed eachother.[151] In light of all the evidence relied on by the applicant, and my own assessmentof the respondents' credibility, I am satisfied by some margin that the couple sharedinformation about their finances, Mr Stewart knew that Ms Drake was receiving thebenefit, and they deliberately maintained a degree of separation in their bankingarrangements in an attempt to avoid implicating him in her benefit fraud.[152] For completeness, although it was not actively denied, I also consider thatMs Drake knowingly benefitted from Mr Stewart's tax evasion. Mr Stewartacknowledged Ms Drake knew he was being paid in cash and that she would have noreason to think he was paying tax on those earnings.Has the Commissioner correctly calculated the amount of the welfare benefit?[153] In accordance with s 53 of the Act, the value of the benefit is presumed to bethe value stated in the application if the Commissioner proves, on the balance ofprobabilities, that this respondent has, in the relevant period of criminal activity,unlawfully benefitted from significant criminal activity.[154] The respondent can rebut the presumption. However, the onus then falls onthe respondent to prove that a different amount should be taken as the actual benefit.As was said by Gilbert J in Commissioner of Police v Filer:35Once the Commissioner discharges the initial onus under s 53(1), the onus ofproving the correct figure rests with the respondent under s 53(2) and does notpass back to the Commissioner. This interpretation serves the purposes of theforfeiture regime which include eliminating the chance of persons who profitfrom undertaking or being associated with significant criminal activity anddeterring such activity. These objectives could be frustrated if the legislationwas interpreted so as to require the Commissioner to prove the benefit in allcases where a respondent can establish some error in the Commissioner'sassessment. The respondent will know what the benefit was and all of theaccess to the witnesses and records that may be needed to prove this, whereasthe Commissioner does not. I conclude that if the respondent fails to provethe benefit, on the balance of probabilities, the amount stated in theCommissioner's application must stand, even if the correctness of theunderlying assessment is questionable.[155] I have already discussed the Commissioner's calculation of the unlawfulbenefit Mr Stewart received from tax evasion.36 He has failed to displace thepresumption that the Commissioner's calculation is correct. The requirement that MsDrake knew about his tax evasion is also satisfied. She acknowledged on Facebookin 2010 that he was doing "cash jobs", she received significant cash payments fromhim to pay into bank accounts or to Totalspan, and she must have been aware of thesubstantial investment in home improvements over this time.The respondents' submissions[156] In challenging the application for a profit forfeiture order in relation toMs Drake's benefit fraud, the respondents argue that the Commissioner failed tocalculate the family's "notional entitlement" to benefits and tax credits, that is, whatthey would have been lawfully entitled to if the respondents' true position was known.If he had done so, the benefit derived from the first respondent's significant criminalactivity was materially less than that calculated by the Commissioner.[157] In advancing this position, Mr Starling referred to the report byFrances Joychild which reviewed how the Department of Work and Income had35 Commissioner of Police v Filer [2013] NZHC 3111 at [13].36 At [88] to [99] above.implemented the Court of Appeal decision in Ruka, and which endorsed removing theresidual discretion in respect of whether notional entitlement was taken into account.37He also referred to Ioane v Department of Social Welfare, where Robertson J held thatin determining the degree of criminal culpability for the purposes of sentencing forbenefit fraud, the Court should have regard to the difference between the sum receivedand what the appellant would have been legally entitled to in terms of benefits.38[158] A similar view was expressed in Moody v The Chief Executive of theDepartment of Work and Income, where Young J said:39My instinctive reaction is that the liability of the beneficiary to the Departmentcannot exceed the extent of the overpayment, that is the difference betweenwhat the beneficiary received less the amount that the beneficiary is entitledto.[159] However, the respondents did not adduce any evidence to quantify what, if any,entitlement they would have had to benefits or tax credits during the period in question.It appears that the suggestion there would have been some entitlement was based onthe assertion that Mr Stewart was either unemployed or earning a minimised incomefor several years, a proposition I have rejected.The applicant's submissions[160] The applicant submitted that there was, in fact, no notional entitlement to anyWINZ/MSD benefit and, furthermore, to the extent the respondents asserted thatWINZ had an obligation to assess any notional entitlement, it was clear from there-examination of Mr Toner that this had, in fact, occurred. A letter was sent toMs Drake, dated 3 June 2015, which squarely raised the issue of notional entitlementand Ms Drake failed to reply to it. Furthermore, Mr Toner confirmed inre-examination that there was no entitlement to a MSD benefit in Ms Drake'scircumstances where she was living with her partner throughout and earning anincome. Ms Drake has also not demonstrated that she was entitled to any family tax37 Frances Joychild Review of Department of Work and Income Implementation of the Court ofAppeal decision: Ruka v Department of Social Welfare [1997] 1 NZLR 154 (18 June 2001).38 Ioane v Department of Social Welfare (1994) 11 CRNZ 489.39 Moody v The Chief Executive of the Department of Work and Income [2001] NZAR 608 at [10].credits. In those circumstances, the presumption that the applicant has correctlycalculated the value of the benefit received by the respondents must apply.Discussion[161] I accept, in principle, that the issue of notional entitlement could reduce thevalue of the benefit held to have been wrongly received by the respondents for thepurposes of a profit forfeiture order. However, in this case, the respondents have notdemonstrated, on the balance of probabilities, that they would have been lawfullyentitled to benefits or tax credits in the circumstances as I have found them to be. Forthat reason, they have failed to discharge the onus that falls on them under s 53. Iaccept the applicant's quantification of the value of the benefits received by therespondents from significant criminal activity.Orders[162] In light of these findings, I now turn to what orders should be made. I addressthe application for asset forfeiture orders first as s 54(1)(b) requires any profitforfeiture order to take account the value of any property forfeited under an assetsforfeiture order.[163] The Commissioner's application for asset forfeiture orders is largely successfuland I make asset forfeiture orders in respect of the following property:(a) the residential property at 142 Emmett Street, Shirley, Christchurchcomprising 673 square metres more or less, Lot 357 DP 16154 ofCanterbury District, Certificate of Title CB8B/1310 (excluding anyinterest of ANZ Bank New Zealand Limited under its registeredmortgage);(b) EQC and earthquake insurance payments connected with the residentialproperty at 142 Emmett Street, Christchurch, namely a payment by theEarthquake Commission in the sum of $9,974.40, and a payment byVero Insurance, on behalf of AA Insurance, totalling $13,119.30;(c) funds held in the custody of the Official Assignee in the names of bothrespondents that represents the savings from ANZ Bank accountnumber 11-8001-0927859-30 (including interest accrued).[164] Given I have made an asset forfeiture order, an issue arises as to whether aprofit forfeiture order can also be made.40 This is because, before the High Court canmake a profit forfeiture order, the Court must determine the maximum recoverableamount. That is done by:(a) taking the value of the benefit determined in accordance with s 53; and(b) deducting from that, the value of any profit forfeited to the Crown as aresult of an asset forfeiture order made in relation to the samesignificant criminal activity to which the profit order relates.[165] I am satisfied that the value of the benefit received by the respondents is$158,635.03. However, the value of the property forfeited to the Crown as a result ofthe assets forfeiture orders I have made, as set out above, clearly exceeds the value ofthe benefit as the assessed joint equity in the property, as at 20 April 2017, is$229,597.25. In the circumstances, where the maximum recoverable amount wouldbe zero, it is inappropriate to make a profit forfeiture order. Therefore, I decline tomake a profit forfeiture order because the value of the unlawful benefit received bythe respondents is clearly met as a consequence of the making of the asset forfeitureorders.Costs[166] I can see no reason why the Commissioner would not be entitled to costs as thesuccessful party. If costs cannot be agreed, leave is given to the parties to filememoranda in relation to this issue. If no application for costs is received within40 Doorman v Commissioner, New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173 at[49]-[66].20 working days of the date of this judgment, I order that costs are to lie where theyfall.Solicitors:Raymond Donnelly & Co., ChristchurchM Starling, Barrister, Christchurch