REECE V SOLICITOR-GENERAL OF NEW ZEALAND HC CHCH CIV 2005 409 174

REECE V SOLICITOR-GENERAL OF NEW ZEALAND HC CHCH CIV 2005 409 174 2 December 2005IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV 2005 409 174IN THE MATTER OF an application pursuant to the Proceeds of Crime Act 1991 BETWEEN MAUREEN PATRICIA REECE Applicant AND SOLICITOR-GENERAL OF NEW ZEALAND Respondent Hearing: 1 December 2005 Appearances: L L Heah for Applicant C M Ruane for Respondent Judgment: 2 December 2005ORAL JUDGMENT OF CHISHOLM J[1] It is alleged by the Crown that eight people, including the applicant, conspired to grow and sell cannabis on a large scale. On 26 October 2005 Hansen J granted a restraining order which covered several properties including the properties at 9 Kingfisher Lane and 46A Rockinghorse Road, both of which are registered in the name of Maureen Reece. She has applied for a release of those properties from the restraining order pursuant to s48(d) of the Proceeds of Crimes Act 1991. [2] Three affidavits have been filed in support of the application, two affidavits by Ms Reece and one by her solicitor. An affidavit has also been sworn by Detective Bell.Background[3] With the co-operation of the Solicitor-General a sale of 48A Rockinghorse Road is to be settled today. After repayment of mortgages, agent's commission and conveyancing fees it is anticipated that the surplus will be in the region of $100- 120,000. Ms Reece wants those funds to be released to her. Her application is opposed by the Solicitor-General. [4] The other property at Kingfisher Lane was purchased by Ms Reece in April 2004 for $500,000. It is subject to a mortgage of approximately $300,000. Recently Ms Reece declined an offer to purchase the property for $700,000. Confirmation of those matters has been provided by the affidavit sworn by her solicitor. It follows that the equity in Kingfisher Lane is in the region of $200-400,000. My estimate is that it is closer to $400,000. [5] Apart from those two properties Ms Reece owns three others. Two properties in Queensland are both tenanted. A property at 195B Rockinghorse Road has been sold with settlement to be effected in the near future. It was indicated from the Bar by Ms Heah in response to my inquiry that it is likely to produce an surplus of somewhere in the vicinity of $180,000. It is accepted by the police that in New Zealand alone Ms Reece's debts exceed $1 million and that her monthly payments under mortgages are in the vicinity of $8,700. [6] Ms Reece describes herself as a property investor. She has deposed that the restraining order has given rise to "enormous stress and pressure" on her. The property at Kingfisher Lane was rented by one of her co-accused. Since he vacated it has not been possible for Ms Reece to rent the property because it is in need of considerable repairs. It seems that mortgage instalments are in arrears. Ms Reece describes her financial position as desperate and she has deposed that her current arrears on mortgages amount to around $45,000. She also claims that the restraining order will have the effect of preventing her from taking up market opportunities that she would normally pursue in her capacity as a property investor.[7] Indications are that the trial is still a relatively long way off. Ms Reece fears that her position will get worse. She is also concerned about the impact on her three children, who are aged between 13 and 18 years.Determination[8] Section 48(d)of the Act provides:"48 Application for exclusion of interest from restraining orderWhere a person having an interest in property that is subject to a restraining order applies to the Court under section 47 of this Act for variation of the order to exclude the person's interest from the order, the Court shall grant the application if,— (d) In any case, the Court is satisfied that it is in the public interest to do so, having regard to all the circumstances, including,— (i) Any hardship that is reasonably likely to be caused to any person if the interest remains subject to the restraining order: (ii) The gravity of the offence: (iii) The likelihood that the interest will be subject to a forfeiture order or be required to satisfy a pecuniary penalty order."Before I can be satisfied that it is in the public interest to exclude either Kingfisher Lane and/or the net proceeds of sale of 46A Rockinghorse Road from the restraining order it is necessary for me to balance the various matters that I think are relevant, including the matters specified in (i) to (iii) of paragraph (d). [9] It is beyond argument that both properties are tainted. However, both properties are tenanted and, at least on the surface of the information currently available, the leasing arrangements were made by Ms Reece's former husband. Nevertheless having considered the affidavit evidence, including the record of intercepted conversations, I am of the view that there is enough evidence against Ms Reece to sustain the restraining order unless other factors justify her application.[10] Now I turn to the issue of hardship in terms of s48(d)(i). Given the use of the expression "undue hardship" in s15(2)(b), I accept Ms Heah's point that the threshold contemplated in s48 is lower than "severe hardship". Nevertheless some form of severe privation or suffering must be required. If the restraining order is retained over Kingfisher Lane and the whole of the net proceeds of 46A Rockinghorse Road, a case for hardship could be made out on the strength of Ms Reece's precarious position notwithstanding the sale of 126BRockinghorse Road. [11] Subparagraph (ii) relates to the gravity of the offence. The allegations against the accused and others involve a major cannabis operation encompassing four properties and eight people. As far as I can gather from the Detective Bell's affidavit the street value of the cannabis located might be somewhere between $1-2 million and the value of the cannabis located on the two properties under consideration might exceed $500,000. On the other hand, the Solicitor-General accepts that Ms Reece played a lesser role (she denies that she played any role at all). If the allegations against Ms Reece are proved her offending would certainly be serious but it would not be towards the higher end of the spectrum. [12] Finally, I consider the likelihood that the interests of Ms Reece in the properties will be subject to a forfeiture order or be required to satisfy a pecuniary penalty order. In many ways this is the crux of the matter. Numerous photographs suggest that the Kingfisher Lane property was a major component of the operation. It seems that three rooms were utilised and that a relatively high degree of sophistication was involved. I have little doubt that if Ms Reece is convicted this property will be extremely vulnerable to a forfeiture order. [13] 46A Rockinghorse Road is in a different category. On that property the alleged operation was confined to a shed. It has been verified that Ms Reece settled the purchase of the property on 8 July 2005, exactly two months before the police executed a search warrant. By comparison with the other properties only a relatively small number of plants were located. And, as I have already indicated, it was also leased. Those factors lead me to believe that even if the property was not being sold it is relatively unlikely that it would have been subject to a forfeiture order in the event that Ms Reece is convicted.[14] On the other hand, if Ms Reece is convicted there must be a reasonable prospect that the Court would seriously consider a pecuniary penalty order in relation to the net proceeds of sale pursuant to s25 of the Act. That would require an assessment of the value of the benefits derived by Ms Reece pursuant to s27. On the information currently available it is, of course, difficult for me to arrive at any accurate assessment. My best estimate is that it is unlikely that if a pecuniary order was made it would be for an amount exceeding $15,000.Outcome[15] The application for the discharge of the property at 9 Kingfisher Lane is refused but the application is granted in relation to the property at 46A Rockinghorse Road subject, however, to $15,000 from the net sale proceeds being retained in terms of the restraining order. This means that the solicitors acting on the sale of 46A Rockinghorse Road must pay the sum of $15,000 to the Official Assignee as soon as the sale is settled and that sum will be held in terms of the restraining order made by Hansen J on 26 October 2005.Solicitors: Steel & Co, Christchurch for Applicant (Counsel: L L Heah) Crown Solicitor, Christchurch