THE SOLICITOR-GENERAL OF NEW ZEALAND V HUNT CA CA 418/05

THE SOLICITOR-GENERAL OF NEW ZEALAND V HUNT CA CA 418/05 15 November 2006IN THE COURT OF APPEAL OF NEW ZEALAND CA 418/05BETWEEN THE SOLICITOR-GENERAL OF NEW ZEALAND Appellant AND DION JAMES HUNT Respondent Hearing: 4 October 2006 Court: William Young P, Glazebrook and Goddard JJ Counsel: D G Johnstone for Appellant P M Keegan and C P Brosnahan for Respondent Judgment: 15 November 2006 at 11amJUDGMENT OF THE COURT A Leave to appeal is granted. B The order for forfeiture of 51.8% of the net proceeds of sale of the farm property at 79 Lincoln East Road, Inglewood is varied to become an order for forfeiture of the entire net proceeds of sale. C The order refusing forfeiture of the balance of funds in the TSB account in the name of LTD Family Trust Ltd is set aside and there will be an order for forfeiture of the entire balance, valued at $8,873.52. D By consent: 1) The pecuniary penalty order against Mr Hunt is set aside; 2) The order for forfeiture of a boat and trailer valued at $29,000.00 is set aside; and3) The order for forfeiture of a Suzuki motorcycle (79UBK) is set aside. E We direct payment of Mr Hunt's reasonable costs associated with this appeal to be made from the property which is forfeited in sum to be agreed between the parties and in default of agreement to be fixed by the Registrar. ____________________________________________________________________ REASONS OF THE COURT(Given by Goddard J)Introduction[1] This is an application for leave to appeal by the Solicitor-General from a decision of Heath J determining various applications by the Solicitor-General under the Proceeds of Crime Act 1991. A cross-appeal by the respondent, Mr Hunt, was abandoned. [2] Before Heath J, the Solicitor-General sought orders for forfeiture of a number of property items which he alleged were associated with drug offending in respect of which Mr Hunt had pleaded guilty, together with a penalty order equal to the amount of the benefits derived by Mr Hunt from his offending less the value of property to be forfeited. The proceedings before us focused primarily on two items: a) A property at 79 Lincoln East Road, Inglewood, comprised in Certificate of Title TNH1/797 and registered in the name of LTD Limited, excluding the interest of Speirs Group Limited as mortgagee, such remainder interests being valued at $129,499.11;b) An amount of $62,535.35 held in a TSB Bank Limited account numbered 15-3945-0325799-00 in the name of LTD Family Trust; [3] Following a three-day defended hearing and a further telephone conference Heath J made a variety of orders which included forfeiture of: a) 51.8% of the net proceeds of sale of the property at 79 Lincoln East Road, Inglewood, and b) $19,267.12 of the funds held in the TSB account. The primary issues in this appeal are whether the Judge was right to make only limited forfeiture orders in relation to these assets.Other aspects of the judgment[4] Some other aspects of the judgment were also the subject of submission by the Crown. Mr Johnstone said that an element of confusion seemed to have arisen, in that whilst Heath J declined to order forfeiture of a "B" class yacht "Freedom II" valued at $180,000.00 as sought by the Crown, he did order forfeiture of a boat and trailer with an ascribed value of $29,000.00 which the Solicitor-General had not sought to forfeit, as this boat and trailer had already been onsold by Mr Hunt despite being under restraint. The Solicitor-General, therefore asks that this order be set aside. A similar situation arises in relation to a forfeiture order relating to a Suzuki motorcycle (79UBK). The Solicitor-General did not seek forfeiture of this vehicle and the Official Assignee does not have custody or control of it. The Solicitor- General therefore asks that this order also be set aside. Further, some arithmetical errors were made in the calculations underlying a pecuniary penalty order made by Heath J and Mr Johnstone accepted that, subject to the Solicitor-General succeeding on the two live issues, the order should be set aside. [5] The orders which we record at [26] as having been made by consent correct these errors.[6] We note in passing that the Solicitor-General's applications in relation to other items of property (a Honda XR200 dirt bike, a Honda 4-wheeler farm bike, a 1996 Subaru Legacy, a 1999 Toyota Hilux and a Ford tractor) were apparently overlooked by the Judge and consequently they were not the subject of any determinations. In the circumstances, the Solicitor-General does not now pursue his application in respect of those items.The property at 79 Lincoln East Road[7] The equity in the property at 79 Lincoln Road East was paid for in the following way. On 10 September 2002 Mr Hunt paid a $30,000 deposit by way of bank cheque. Bank records show the purchaser of the cheque as John Hunt (who is Mr Hunt's brother). Mr Hunt's evidence under cross-examination was that he could not remember whether he or John Hunt had purchased the cheque but said that it was purchased with cash funds that he kept hidden in a tree on a farm. He claimed to have used that particular tree as a hiding place for money over a number of years. [8] The balance of the purchase price was paid into the trust account of Young Carrington Shera, the solicitors acting for Mr Hunt on the purchase, in varying amounts on various dates. Mr Carrington, the solicitor acting on the purchase, said in affidavit evidence that he was told by Mr Hunt and by John Hunt that Mr Hunt would be paying $70,000 towards the purchase of the property (which Mr Carrington inferred may represent Mr Hunt's share of the proceeds of an earlier farm sale in 2000) and that John Hunt would be contributing $80,000 by way of a loan sourced from a worker's compensation pay-out in Australia. The balance would be financed by mortgage. Mr Carrington said on the basis of that information he lodged a caveat on the title to protect John Hunt's interest as a contributing third party and on Mr Hunt's instructions he set up the LTD Family Trust as owner of the property for the beneficial interest of Mr Hunt and his children. [9] In the event, the balance of the purchase price was paid in four instalments. The first was on 26 September in the form of a $40,000 bank cheque purchased by Mr Hunt using $40,000 cash he deposited into his TSB account the same day. The second, also on 26 September, was in the form of a $7,800 TSB bank chequepurchased by Ms O'Carroll (who has a family connection to Mr Hunt) for cash paid into her TSB account that same day. Mr Hunt acknowledged that this cash came from his tree, and explained that he had originally organised for some other person to purchase the cheque but in the end this task had been undertaken for him by Ms O'Carroll. The third instalment was paid on 30 September in the form of a $22,200 bank cheque purchased through Mr Hunt's TSB account using a cash deposit for the same amount paid into the account that same day and which Mr Hunt said he was unsure as to the source of. Under cross-examination he conceded that it could have been a combination of his money and John Hunt's money and that some or all of it could have come from the tree. The fourth instalment was in the form of the $50,000 bank cheque purchased by John Hunt using $50,000 cash deposited into his bank account that same day. Mr Hunt did not admit providing this cash. [10] Heath J found that the that the arrangements for the acquisition of the Lincoln East Road property were "convoluted, a factor that suggests an illegitimate transaction". The Judge had little hesitation in dismissing Mr Hunt's evidence as unreliable and dishonest and found that, particularly when forced to reveal the extent of his income from drug-dealing, Mr Hunt impressed as "deliberately untruthful". However, and notwithstanding this finding, Heath J declined to forfeit the whole of the net proceeds of sale of the farm property in order to protect the third party interests of John Hunt and Ms O'Carroll. He concluded that there was evidence "to suggest that Mr John Hunt had the ability to make a payment of $70,000 from legitimate funds". He concluded that the Solicitor-General had not "established to the requisite standard" that the money paid by John Hunt and Ms O'Carroll was tainted. [11] We disagree with his conclusions. [12] John Hunt did not file any affidavit in the forfeiture proceeding and nor did he make any claim for relief against forfeiture. The only statement as to his position was the hearsay report by Mr Carrington in his affidavit, of the self-serving statement John Hunt had made to him about an intended $80,000 contribution coming from a worker's compensation pay-out in Australia. Ms O'Carroll similarly filed no affidavit in the forfeiture proceeding and nor did she make any claim forrelief against forfeiture. Indeed, Mr Hunt accepted that the money she used came from his tree. [13] The fact that the deposit and the four payments that made up the equity in the purchase price were all sourced from cash deposits paid into TSB bank accounts belonging to Mr Hunt, Mr John Hunt and Ms O'Carroll, with contemporaneous purchases of bank cheques for equivalent amounts, is at least consistent with the conclusion that those payments emanated from the cash proceeds of crime amassed by Mr Hunt during the period. Such a payment structure suggests the simple laundering of large amounts of cash by conversion of those amounts into bank cheques using several different bank accounts, inferentially to deflect focus from large amounts of unexplained income in Mr Hunt's possession. [14] Mr Edgar's analysis of John Hunt's bank accounts does not support any assertion that he was in possession of funds that could have funded the $50,000 bank cheque he purchased on 1 October 2002. In the circumstances, there is, as Mr Johnstone submitted, a powerful inference that this bank cheque came from the proceeds of Mr Hunt's offending and not from any insurance pay-out in Australia. As Mr Johnstone said, had this money come from a compensation pay-out (as Mr Carrington was told) it would not have been purchased with cash. [15] Insofar as Ms O'Carroll's $7,800 contribution is concerned there is no doubt that this emanated from Mr Hunt in light of his own evidence. [16] We are satisfied that Mr Hunt was the source of all of the funds paid into Young Carrington Shera's trust account for the purchase of the property and that John Hunt and Ms O'Carroll were not bona fide contributors but a convenient means by which to mask the true source of chunks of funding.The LTD Family Trust TSB bank account[17] Mr Hunt consented to forfeiture of $19,267.00 of the $62,535.36 held in this account but contended that the balance (then amounting) to $43,268.23 was not tainted property. That sum represented a single deposit made on 12 December 2002which Mr Hunt said was "legitimate money" comprising a $30,768.23 GST refund on the farm purchase with the balance of $12,500.00 coming from Sky City winnings. [18] The challenge to the refusal to order forfeiture of the balance of the funds held in the TSB account was directed to Heath J's finding that the question of forfeiture was coloured by the need to protect the third party interests of John Hunt and Ms O'Carroll as bona fide contributors to the purchase of 79 Lincoln East Road. [19] Heath J's brief determination of this matter was as follows:[89] The Solicitor-General seeks forfeiture of the entire balance. Mr Hunt opposes forfeiture on the basis that part of the balance represented the proceeds of a GST refund in respect of the farm. [90] While I am satisfied that the GST component of the purchase price was paid by Mr Hunt out of the proceeds of crime, the question of forfeiture is coloured by the need to protect the third party interest of the two remaining contributors. [91] On discretionary grounds I decline to order forfeiture in respect of this sum.[20] Given we have found that the purported contributions by John Hunt and Ms O'Carroll were funded with the proceeds of Mr Hunt's offending, there is no reason for forfeiture of the balance of the account to be declined on the basis of any need to protect their third party interests. [21] At the date of the hearing before us, the balance in the account was only $8,873.52, following the various deductions made under an order for variation of the restraining order. Given the small balance available, we are disinclined to allow any further credit against the residue in the account.Mr Hunt's costs[22] We consider that payment of Mr Hunt's reasonable costs associated with this appeal should made from the property which is forfeited.Conclusion[23] Leave to appeal is granted. [24] The order for forfeiture of 51.8% of the net proceeds of sale of the farm property at 79 Lincoln East Road, Inglewood is varied to become an order for forfeiture of the entire net proceeds of sale. [25] The order refusing forfeiture of the balance of funds in the TSB account in the name of LTD Family Trust Ltd is set aside and there will be an order for forfeiture of the entire balance, now valued at $8,873.52; [26] By consent a) The pecuniary penalty order against Mr Hunt is set aside. b) The order for forfeiture of a boat and trailer valued at $29,000.00 is set aside. c) The order for forfeiture of a Suzuki motorcycle (79UBK) is set aside. [27] We direct payment of Mr Hunt's reasonable costs associated with this appeal to be made from the property which is forfeited in a sum to be agreed between the parties and in default of agreement to be fixed by the Registrar.Solicitors: Meredith Connell, Auckland