THE COMMISSIONER OF THE NEW ZEALAND POLICE v CHRISTOPHER PHILLIP RONALD BROWN [2014] NZHC 990

THE COMMISSIONER OF THE NEW ZEALAND POLICE v CHRISTOPHER PHILLIP RONALD BROWN [2014] NZHC 990 [14 May 2014]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV 2013-409-001045[2014] NZHC 990BETWEEN THE COMMISSIONER OF THE NEWZEALAND POLICEApplicantAND CHRISTOPHER PHILLIP RONALDBROWNFirst RespondentTINA MARIA PEDLEYSecond RespondentHearing: 11 March 2014Additional submissions: 26 March 2014 (Applicant)Additional submissions: 28 March 2014 (Respondents)Counsel: H F McKenzie and K B Bell for ApplicantR G Glover for RespondentsJudgment: 14 May 2014JUDGMENT OF WHATA J[1] Mr Brown was caught cultivating 44 cannabis plants at various stages of maturity. The estimated value of the cannabis once fully grown, if sold, would be in the order of $19,800. The Commissioner says that this formed part of a cannabis business spanning at least three years, and that this amounts to significant criminal activity. The Commissioner claims that available records also show that Mr Brown had at least $80,000 in income from unidentified sources applied to (among other things) the purchase of a Hilux truck, a Triumph motorbike, and $15,000 of Bonus Bonds. The Commissioner wants Mr Brown to forfeit those items and/or a profit forfeiture order against him in the sum of $82,273.66.[2] Mr Brown says that cannabis was grown for personal use. He also says that he had saved at least $100,000 from cash payments over a period of several years when he had no outgoings such as rent or electricity. He says he spent these savings over time on various items, including the assets now sought to be seized by the Commissioner.[3] In response, the Commissioner initially claimed that if I accept Mr Brown'saccount of his income, he has evaded his taxes and his assets should still be seized. The Commissioner, sensibly in my view, withdrew this claim during the hearing.[4] I must therefore resolve the following questions:(a) Did Mr Brown sell cannabis? And if so,(b) Did this amount to significant criminal activity? And if so,(c) Are the Hilux, Triumph and Bonus Bonds tainted by this alleged criminal activity? Or if not,(d) Did Mr Brown benefit from the cannabis sales (in the relevant period)?Facts[5] Mr Brown converted part of his garage into grow boxes. In April 2013 the Police found in those boxes:(a) 10 small cannabis cuttings growing under a 400 watt HID light; and(b) 20 mature cannabis plants and 14 medium sized plants growing under four 600 watt HID light with timing spans and filters.[6] He pleaded guilty to one charge of cultivating cannabis and was sentenced to 200 hours of community work and a fine of $1000. The sentencing Judge acceptedMr Brown's explanation that the cannabis was grown for personal use.[7] The estimated value of the cannabis was helpfully set out in a table produced by Detective Hill (and not seriously challenged by Mr Brown) as follows:Number ofcannabis plantslocated at 115Marshland RoadPotential cannabishead yieldsPotential value(profit) at a saleprice of $300.00per ounce20 mature plants 30 ounces 9,000.0015 medium plants 21 ounces 6,300.0010 smaller plants 15 ounces 4,500.0045 plants in total 66 ounces $19,800.00[8] Also found in the house were two boxes of "Glad" snaplock bags, a set of Jennings digital scales with a maximum weight of 150 grams, specialized nutrients, ballasts, carbon filters and a drying rack. These are items that are commonly associated with cannabis dealing. Numerous fertilisers and growing chemicals were also found.[9] Based on information supplied by Mr Brown,1 Detective Beswick estimatedthat Mr Brown's cannabis cycle equates to a minimum of five harvests per yearassuming a continuing enterprise as the power usage of the dwelling suggests. In this regard, electricity records show an average monthly consumption of 1624 units in the period 24 September 2011 to 20 March 2013. By comparison, after the policeraid on Mr Brown's house, the average monthly consumption between 19 April 2013and 14 October 2013 is 658 units. The difference is explained by the use of the HID lights, though Mr Brown says he grew vegetables under these lights before he moved to growing cannabis in February 2013.[10] Balanced against this various indicators of commercial dealing were not present, including old cannabis root balls, or old dried stems of cannabis, or used buckets which cannabis has been grown in.[11] Also missing were items associated with active dealing including:1 Mr Brown noted in an interview that the lighting cycle was 12 hours on and 12 hours off.(a) Instruments and utensils for cannabis use, including pipes, bongs, knives, tinfoil.(b) Cash in similar denominations, e.g., where a regular price is paid for a commodity the multiples of those amounts is frequently found.(c) Lists with either paid income from drug sales or tally income from drug sales, commonly known as 'tick books'.[12] Bank records reveal that the funds into Mr Brown's accounts from knownsources amounted to $72,713.86 over the period 23 February 2010 to 4 April 2013.In the same period $45,560 made its way into Mr Brown's accounts in the form of cash or unknown deposits. And in the same period Mr Brown paid for the following items (identified by Ms van der Pol, a witness for the Commissioner) with funds not sourced from his bank accounts:Triumph Rocket Motorbike $26,500.00Toyota Hilux $10,000.00Motor Vehicle Expenses – Team Auto Sound $252.00Australian Cash Purchases $1,399.60Post Shop Expenses $219.90Meridian – Electricity $9,642.16[13] A corollary of all this is that from February 2010 until the Police raid in April last year, Mr Brown enjoyed $82,273.66 that cannot be readily explained by available records.[14] Relevantly, the Triumph motorcycle was acquired in the period 17 February 2010 to 3 September 2010, the Hilux was purchased in June 2012 and the BonusBonds obtained by Ms Pedley with a bank cheque drawn from Mr Brown's accountin April 2013.[15] Mr Brown says that he saved about $100,000 in the period 2002-2005 when he was working for about $25 an hour for 40-50 hours a week but paying no expenses such as rent and electricity. He refers to a letter said to be from a former employer stating that Chris Brown worked for John Rees Building Solutions between the years 2002-2005 on an hourly rate of $25.00 per hour for 40-50 hours per week on average.[16] Based on the income information provided by Mr Brown for this period and together with available records for the period 2006-2008, Ms van der Pol estimatedthat his earnings were somewhere between $182,896.74 to $215,071.74 for the years 2002-2008. After the $100,000 saved, this would have left Mr Brown between $18,421.49 and $25,571.49 per annum to live on. This evidence was not challenged by Mr Brown. In fact he considered that this showed that he had ample to live on.[17] Mr Brown is a father to four children and one step child. The children are currently aged 23, 22, 19, and twins aged 6. He regularly cares for the twins, and the other children would stay with him from time to time. He has since 2000 also enjoyed regular overseas travel to places such as Australia, Vanuatu, Vietnam, Cambodia, Tanzania, Kenya and Indonesia. And as noted, he purchased various luxury items over the same period.Jurisdiction – asset forfeiture[18] I may make an order for the forfeiture of property if I am satisfied on the balance of probabilities that the property is tainted.2[19] More specifically, s 50 provides:50 Making assets forfeiture order(1) If, on an application for an assets forfeiture order, the High Court is satisfied on the balance of probabilities that specific property is tainted property, the Court must make an assets forfeiture order in respect of that specific property.(2) Subsection (1) is subject to section 51.(3) The Court must specify in an assets forfeiture order the property to which the order applies and that the property-(a) vests in the Crown absolutely; and(b) is in the custody and control of the Official Assignee.2 Criminal Proceeds (Recovery) Act 2009, s 50.[20] Tainted property is defined in the Act as follows:3tainted property-(a) means any property that has, wholly or in part, been-(i) acquired as a result of significant criminal activity; or(ii) directly or indirectly derived from significant criminal activity; and(b) includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity.[21] Plainly tainted property is a broad concept, and includes property 'added to in part'.4[22] Significant criminal activity means:6 Meaning of significant criminal activity(1) In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending-(a) that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or(b) from which property, proceeds, or benefits of a value of $30,000 or more have, directly or indirectly, been acquired or derived.(2) A person is undertaking an activity of the kind described in subsection (1) whether or not-(a) the person has been charged with or convicted of an offence in connection with the activity; or(b) the person has been acquitted of an offence in connection with the activity; or(c) the person's conviction for an offence in connection with the activity has been quashed or set aside.(3) Any expenses or outgoings used in connection with an activity of the kind described in subsection (1) must be disregarded for the purposes of calculating the value of any property, proceeds, or benefits under subsection (1)(b).3 Criminal Proceeds (Recovery) Act 2009, s 5.4 Doorman v Commissioner of Police [2013] NZCA 476 at [34].[23] Section 55 then deals with profit forfeiture as follows:55 Making profit forfeiture order(1) The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that-(a) the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and(b) the respondent has interests in property.(2) The order must specify-(a) the value of the benefit determined in accordance with section 53; and(b) the maximum recoverable amount determined in accordance with section 54; and(c) the property that is to be disposed of in accordance with section 83(1), being property in which the respondent has, or is treated as having, interests.(3) Subsections (1) and (2) are subject to section 56.(4) A profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it, and the maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.[24] The value of any benefit is then presumed to be the value in the application under s 53(1), which states:53 Value of benefit presumed to be value in application(1) If the Commissioner proves, on the balance of probabilities, that the respondent has, in the relevant period of criminal activity, unlawfully benefited from significant criminal activity, the value of that benefit ispresumed to be the value stated [25] This presumption may be rebutted on the balance of probabilities.5[26] For completeness benefit is broadly defined as including proceeds and property.6 But the profit forfeiture order must attach to specific realisable property.75 s 53(2).6 s 5.The threshold tests are not in dispute. I simply observe that in combination, these sections require in this case that I must be satisfied on the balance of probabilities that:(a) Mr Brown sold cannabis (a criminal activity); and if so,(b) This activity is punishable by a maximum sentence of five years or more, or is activity from which property, proceeds or benefits of a value more than $30,000 accrued; and(c) The targeted assets were acquired as a result of the offending or directly or indirectly derived from it; or(d) Mr Brown has benefited from the cannabis sale in the relevant period of that sale.The Commissioner's case[27] The case for the Police essentially relies on the following propositions:(a) Mr Brown was found with a cannabis crop, at various stages of growth, capable of producing a commercial profit in the order of $111,000 over a three year period;(b) A forensic review of available financial records revealed an unexplained cash surplus of about $82,000 for the period 23 February 2010 to 4 April 2013;(c) The average monthly consumption of electricity in the period 24 September 2011 to 20 March 2013 was 1,624 units, but this dropped to 658 units in the period 19 April 2013 to 14 October 2013 (that is after the crop was discovered);7 s 55(2)(c) and see Doorman v Commissioner of Police [2013] NZCA 476 at [64].(d) The Triumph motorcycle, Toyota Hilux and the Bond Bonds were not obtained with verifiable sources of income; and(e) In these circumstances, it can be concluded that the motorcycle, Hilux and Bonus Bonds were directly or indirectly derived from cannabis sales;(f) Alternatively, Mr Brown benefited from the cannabis sales to the extent of the unverifiable cash surplus.Mr Brown's response[28] Mr Brown responds to the police case in a variety of ways. He says:(a) The cash surplus identified by Ms Van der Pol is explained by his savings accrued over a lengthy period when he did not have significant living expenses;(b) $12,000 said to have been paid toward the Triumph was sourced from the sale of his Ducati motorbike;(c) Additional cash was earned through cash bonuses;(d) There is a dearth of independent evidence showing that he was engaged in commercial sale, e.g. no sophisticated equipment, no tick lists, no drying equipment etc;(e) The reason for the three types of plants in various stages of growth is that he could only source plants of that maturity.(f) The police are merely speculating as to the basis for the power bills;(g) His position is supported by records from his employers and appended as exhibits to his affidavits showing six total sums of income for financial years from 31 March 2007 through to 31 March 2012;(h) Ms Van der Pol did not refer to his Exhibit C detailing income earned by him;(i) Ms Van der Pol has not undertaken a detailed or extended analysis of his earnings in the pre 2010 period;(j) The reason for the withdrawal of the sum for the Bonus Bonds was because they were hoping to put that sum to a deposit on a house and wanted it to accrue good interest. This was confirmed by Ms Pedley in cross-examination;(k) He had accumulated about $100,000 and stored this in tins in his wardrobe. Mr Brown counted it every six or so months;(l) He saved $500 a week in addition to his savings of $100,000 accumulated by 2007 and said this in combination contributed to his overseas travel as he had no rent, power, phone, vehicle or anything to pay for;(m) He had these savings available to him until about 2013 when the last of his savings was banked and then withdrawn in April 2013 and used by Ms Pedley to obtain $15,000 of Bonus Bonds;(n) He did not try to hide away cash by the purchase of the Bonus Bonds - the withdrawal was transparent in the name of Ms Pedley and then Ms Pedley put it into Bonus Bonds;(o) His consumption of cannabis at the time of his arrest was in the order of 1,456 grams per annum explaining his need to grow his own crop,and that large quantities of the cannabis plants were used to bake muffins.AssessmentDid Mr Brown sell cannabis?[29] Yes: I am satisfied that Mr Brown was, on the balance of probabilities, involved in the sale of cannabis over the period September 2011 to April 2013. My reasons for this are as follows:(a) Mr Brown was found with 44 plants in various stages of growth. This indicated that some care was taken to grow cannabis in cycles, a fact admitted by Mr Brown in his interview.(b) The grow boxes were obviously purpose built to facilitate cultivation over a lengthy period, including HID lighting and air ducts. This is illustrated, for example, by the photos of the grow boxes, which show a reasonable degree of care in the management of the plants. And Mr Brown admitted that the boxes had been used since February 2010 to February 2013 for cultivation of (he says) vegetables.(c) Electricity consumption over the period September 2011 to March 2013 is consistent with the presence of a hydroponic or grow boxoperation at Mr Brown's home during this period.(d) Mr Brown enjoyed a cash surplus over independently verifiable sources of income of about $82,000 since February 2010. Further there is evidence suggesting that this surplus accumulated by reference to frequent though irregular cash earnings. For example, the Bonus Bonds were purchased by a bank cheque and the bank cheque was funded by 14 cash deposits totalling $16,500.(e) Mr Brown's explanation that he had savings of $100,000 stored intins lacks plausibility. To achieve this he would have needed to save50% of his otherwise modest income over an extended period. That in my view is highly unlikely, especially given his lifestyle, including regular overseas travel in the period of alleged frugality, and Mr Brown's commitments, including the part time care of his twins and other children.(f) In any event, the evidence that Mr Brown earned enough money to save $100,000 over the period 2002 to 2008 is sparse. The letter purporting to record that Mr Brown was employed at $25 per hour from 2002-2005 was not capable of verification and was not verified in evidence by the author. It provided only a weak hearsay basis for Mr Brown's claims that he saved $100,000 in that period. There isreference to having his accommodation paid for while on site, but there is nothing to corroborate the claim or the quantity of its true value to Mr Brown.(g) Mr Brown's explanation for the electricity consumption that he grewvegetables in his grow boxes is too convenient and I do not accept it. There was mention of capsicum seeds having been found on site, but nothing of substance to suggest that Mr Brown was actively engaged in a sustainable horticultural production, other than the 44 healthy cannabis plants found at the property. Mr Brown said that he sold vegetables to friends, yet there is no evidence from them or anyone else about the quantity sold or the quality of his fresh produce.(h) While the absence of items normally associated with commercial production and sale is a reason for some doubt, the combination of plants found, the electricity consumption over a sustained period, together with a large amount of cash from unverifiable sources strongly suggest that Mr Brown was actively engaged in the commercial sale of cannabis from September 2011 to April 2013.(i) I also reject Mr Brown's evidence about his level of personalconsumption. When asked about his evidence of high level ofpersonal use he appeared diffident and unsure. It is also implausible to suggest that on his limited income, he could afford to purchase such large quantities of cannabis.[30] Mr Glover stressed in closing that Mr Brown presented as a plausible witnesswho did not capitulate under cross examination and that the Commissioner's case islargely speculative. Mr Glover noted the concession made by Detective Hill about the absence of evidence suggesting production for sale. He also emphasised that my questioning of Mr Brown revealed evidence about surplus income and supported MrBrown's wider evidence that he was able to save at least enough to explain theotherwise unaccounted for funds.[31] But the case for Mr Brown belies the existence of a clearly staged cannabis production line, yielding $19,800 if sold. It also belies the incontrovertible evidence of electricity consumption for 18 months prior to the discovery of the cannabis crop,and its sudden decline afterwards. The Commissioner's case is therefore notspeculative, but a logical corollary of the available proven facts. In short, the amount of electricity consumption linked to hydroponic activity, the value of the cannabis found, and the staged method of production, plausibly explains the flow of otherwise unexplained cash into his bank accounts or toward the purchase of assets and other luxuries. The absence of other indicators of sale might raise some doubt relevant to the criminal standard for culpability (and may explain the approach taken to sentencing). But the available evidence cogently supports the existence of a cannabisoperation for commercial sale. By contrast, Mr Brown's explanations for large sumsof cash and large electricity consumption simply could not be verified by probative corroborative evidence and are implausible.Does this amount to significant criminal activity?[32] Yes: The sustained period of cannabis cultivation for the purposes of sale, albeit in relatively moderate amounts, qualifies as significant criminal activity. The maximum possible sentence for such activity exceeds five years and I am satisfied this activity would have netted more than $30,000 since September 2011. Indeed, the picture presented by Ms van der Pol of Mr Brown's financial position, which wasnot seriously challenged, is that he was in receipt of frequent if irregular cash payments, and that this cash enabled Mr Brown to achieve large unaccounted for cash surplus. In this regard I attach Ms van der Pol's exhibit A. It details all known sources of funds and unknown sources outside of Mr Brown's bank accounts. It speaks for itself. I have rejected Mr Brown's evidence that this surplus is explainedby savings. I therefore consider that it is highly plausible that the unexplained cash surplus is directly attributable to his cannabis operation.[33] For completeness, I accept that there is a lack of direct evidence (for example tick lists) overtly linking the sale of cannabis to the unaccounted for cash. But I consider it is available for me to infer from coincidence of various proven facts that Mr Brown sold cannabis and that this explained the unaccounted for cash surplus. In short, the nature and scale of the cannabis operation uncovered by Police, the period and scale of the electricity consumption (which was linked by admission to the use of the grow boxes) and the presence of unaccounted for cash surplus combine to show significant criminal activity.Are the Hilux, Triumph and Bonus Bonds tainted property?[34] In part, yes: I am satisfied on the balance of probabilities that the sale of cannabis directly contributed to the acquisition of the Hilux and the Bonus Bonds. The Hilux was acquired by way of unaccounted for payments, and the Bonus Bonds are directly traceable to otherwise unaccounted for cash deposits made in the period September 2011 to April 2013. I have already resolved that these cash payments and deposits are plausibly explained by the earnings from the sale of cannabis.[35] Even if I am wrong on this, I consider that an indirect link between the proceeds of the cannabis sale has been established to the purchase of the Hilux andBonus Bonds. Ms Van Der Pol's evidence reveals that in the period 1 April 2012 and31 March 2013, Mr Brown's enjoyed access to more than $28,543.24 of cash fromunverified sources over the period of the acquisition of these assets. The strength and accuracy of the analysis was not seriously challenged. Plainly in my view this tainted cash contributed to their purchase and no reasonable or plausible explanation was given to explain the capacity to purchase the Hilux or the Bonus Bonds.[36] I am not, however, satisfied on the balance of probabilities that the Triumph motorcycle was purchased via the proceeds of cannabis sale. The critical point of difference between the Triumph motorcycle and the other assets is that the former was purchased outside the period of proven high electricity consumption, namely between September 2011 and March 2013. It is this electricity consumption, in combination with other evidence, which enables the strong inference to be drawn that the grow boxes were being used for the purpose of commercial level cannabis production. But without this evidence, I am unable to conclude, on the balance of probabilities, that commercial level cannabis production was undertaken in the period of purchase. I acknowledge that Mr Brown said he grew vegetables from 2010. While that supports the proposition that he was engaged in hydroponic activity in this period, it is not enough by itself to show, on the balance of probabilities, that he was engaged in commercial level cannabis production prior to September 2011.Did Mr Brown benefit from the cannabis sales (in the relevant period)?[37] Turning to the application for profit forfeiture, for the foregoing reasons, I am not prepared to make such an order for the sum of $82,273.66. This sum relates to income for three years commencing February 2010. The evidence, as I have said, only justifies profit forfeiture orders in the period September 2011 to the date of the seizure (that is, within the period of proven commercial level cannabis production). The effect of this is that the presumption at s 53 is not triggered.[38] Ms van der Pol's evidence does not identify exactly the quantum earned in this period, but rather identifies yearly income of $35,697.07 for the 2011/2012 year and $28,543.24 for the 2012/2013 year. I am not prepared to speculate on the sum earned from September 2011 to April 2012 or undertake my own forensic analysis without affording the parties to submit to me on the question of quantum. I therefore make no order for profit forfeiture at this stage, but grant leave for the parties to submit on the issue of profit forfeiture should the Commissioner wish to continue to pursue this relief.Outcome[39] Accordingly, I am satisfied that in terms of the Act, there is a sufficient basis for finding, on the balance of probabilities, that money earned from the sale of cannabis contributed to the purchase of the Hilux and the Bonus Bonds. Depending on the approach that the Commissioner may wish to take in terms of the alternative relief, there shall be a forfeiture order in respect of those assets.[40] I reserve leave to the parties to submit on the issue of profit forfeiture, including the issue of quantum, in the event that the Commissioner wishes to pursue the alternative relief. The Commissioner shall file submissions within 14 days. If necessary, Mr Brown and Ms Pedley will have 14 days to file submissions in response.Costs[41] I will reserve costs pending receipt of submissions from the parties on relief. My tentative view is that the Crown has been largely but not entirely successful. I also consider that any costs order would need to take into account the withdrawn allegation of tax evasion. There must be a further discount for that fact. Submissions may be filed if costs cannot be agreed, though it would be sensible to resolve the position on the profit forfeiture before doing so.Solicitors:Raymond Donnelly & Co, ChristchurchR G Glover, Christchurch