SOLICITOR-GENERAL V HUANG (AKA WONG) HC AK CIV 2005-404-1538

SOLICITOR-GENERAL V HUANG (AKA WONG) HC AK CIV 2005-404-1538 18 December 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-1538UNDER The Proceeds of Crime Act 1991 BETWEEN THE SOLICITOR-GENERAL OF NEW ZEALAND Applicant AND GANG HUANG (AKA ALEX KWONG WONG) Respondent AND YAN YAN SUI First Third Party AND DE SHAN HUANG Second Third Party Hearing: 16 July, 19 October, 1 November 2007 Appearances: A R Longdill for Applicant P E Dacre as Amicus E Orlov for First Third Party F Deliu for Second Third Party Judgment: 18 December 2007 at 4.00 pmRESERVED JUDGMENT OF RANDERSON JThis judgment was delivered by me on 18 December 2007 at 4 pm, pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Solicitors: Meredith Connell, PO Box 2213, Auckland Dennis J Gates, PO Box 222, Orewa Equity Law, PO Box 8333, Symonds Street, Auckland Counsel: P E Dacre, PO Box 47963, Ponsonby, Auckland Copy to: G Huang, C/- Paremoremo Prison, AucklandIntroduction[1] The respondent (Mr Huang Jnr) was convicted on a series of drug dealing charges and one count of money laundering on 16 June 2006 following a trial before Winkelmann J and a jury. He was sentenced on 8 September 2006 to 17 years imprisonment with a minimum period of imprisonment of eight years. His appeal against conviction was dismissed by the Court of Appeal on 12 June 2007 but he has since been granted leave to appeal to the Supreme Court on a single issue, namely whether there were exceptional circumstances justifying the decision that the trial should proceed with only 10 jurors. [2] The matter now for decision is whether the Solicitor-General is entitled to a pecuniary penalty order against Mr Huang Jnr under the Proceeds of Crime Act 1991 and whether two motor vehicles in the names of the third parties are available to meet that pecuniary order. I directed that the application by the Solicitor-General should proceed notwithstanding the leave granted to the respondent to appeal to the Supreme Court given that a decision from the Supreme Court is not expected until sometime during the first quarter next year. The Solicitor-General has undertaken that if a pecuniary penalty order is made, it would not be enforced pending the outcome of the appeal to the Supreme Court. [3] The vehicles in question are a Porsche Boxster registered in the name of the first third party (Ms Sui) on 10 June 2004 and a Mercedes-Benz registered in the name of the second third party (Mr Huang Snr) on 2 August 2004. Ms Sui is the girlfriend of Mr Huang Jnr and Mr Huang Snr is his father. [4] The essential issues are: a) Did Mr Huang Jnr derive benefits from the commission of serious offences? b) If so, what was the value of those benefits? c) What is the appropriate amount of any pecuniary penalty order? d) Should the motor vehicles be declared available to satisfy any pecuniary penalty order under s 29(3) of the Act?[5] The last issue depends on two principal sub-issues: i) Whether the motor vehicles are subject to the "effective control" of Mr Huang Jnr for the purposes of s 29 of the Act. ii) Whether the fact that the Mercedes was initially acquired by Mr Huang Jnr's sister prior to the period of the offending means there is no jurisdiction to order that the motor vehicle is available to meet any pecuniary penalty order.Procedural History[6] It is unnecessary to relate the full details of the extensive procedural history since it is fully documented on the Court file. However, I briefly summarise the key points. [7] The vehicles in question have at all times been the subject of an ex parterestraining order made by Priestley J on 24 March 2005. The Solicitor-General applied for a pecuniary penalty order in July 2006 and also sought an order under s 29(3) of the Act declaring that the motor vehicles were available to satisfy any pecuniary penalty order made. The application asserted that Mr Huang Jnr had derived benefits of not less than $184,817.20 from the offending. Reliance was placed on affidavits filed and also the evidence given in the criminal proceedings taken against Mr Huang Jnr including the preliminary hearing, the post-committal taking of evidence, and the evidence at his trial. The amount of the pecuniary penalty sought by the Solicitor-General was later reduced to $150,000. [8] There were serious delays by the respondent and third parties in filing affidavits. In consequence, orders were made by Harrison J on 27 June 2007 and by Potter J on 12 July and 18 July 2007. The ultimate outcome of these orders was that the Official Assignee was authorised immediately to take custody and control of the motor vehicles on 12 July 2007; Ms Sui and Mr Huang Jnr filed brief affidavits; but Mr Huang Jnr was debarred from taking any further steps in the proceeding.[9] In a reserved decision delivered on 6 September 2007, Courtney J rejected an application to vary or rescind the orders made by Potter J on 12 July in relation to custody of the vehicles and they have remained in the custody of the Official Assignee. [10] In relation to Mr Huang Jnr's participation in the proceedings, I took the view that while, in consequence of the orders made by Harrison J and Potter J he was not permitted to file any affidavit or give evidence, he could make submissions personally or through counsel in relation to the making of any pecuniary penalty order. To facilitate this, I appointed Mr Dacre as amicus on 1 August 2007 since Mr Huang Jnr was, by that stage, unrepresented. [11] While Mr Dacre was present at the hearings before me, he informed the Court that he did not consider it appropriate to cross-examine any of the witnesses or to advance any submissions on behalf of Mr Huang Jnr in relation to the pecuniary penalty order issue. This approach was the subject of criticism by counsel for the third parties. I rejected that criticism (which is recorded in bench notes and rulings on the file), pointing out that counsel for the third parties were entitled to make submissions, if they wished, on whether a pecuniary penalty order should be made and, if so, in what amount. Counsel for the third parties took advantage of that opportunity. [12] The hearing took place on three days. On 26 July 2007 after hearing preliminary argument, I adjourned the application because it became plain the matter was not then ready to proceed. The third parties filed an appeal against this decision but were content that the substantive application should proceed notwithstanding. Cross-examination of deponents took place on 19 October 2007 and the hearing was finally concluded on 1 November 2007 after the completion of cross-examination and the hearing of submissions. [13] Counsel for the third parties complained they were disadvantaged because they believed the Solicitor-General was relying solely on a source and disposition statement of unexplained income to evidence the value of the benefits said to have been derived by the offending. However the Solicitor-General made it clear from thetime the application was first filed that reliance would be placed on all the evidence at trial and I drew that to the attention of counsel on 16 July when the hearing was adjourned. The third parties had ample notice and opportunity thereafter to address this issue at the subsequent hearings.The Facts of the Offending[14] Mr Huang Jnr was convicted on the following counts: a) Importing methamphetamine on or about 12 May 2004. b) Supplying methamphetamine on or about 12 May 2004. c) Importing methamphetamine on or about 7 July 2004. d) Possession for supply of methamphetamine on or about 7 July 2004. e) Money laundering in the sum of not less than $150,000 during the period 23 April to 7 July 2004. [15] He was acquitted on a further charge of importing and selling methamphetamine on 23 April 2004. [16] In brief outline, the Crown case was that five packages arrived in New Zealand from China on 8 July 2004. Each contained six lava lamps containing methamphetamine. Controlled deliveries were made to a North Shore address. Later inquiries established there had been two earlier consignments of lava lamps, using a similar method of importation, on 23 April 2004 and 8 May 2004. [17] Further inquiries led to Mr Huang Jnr as one of those involved in the importation along with three others who, in the end, were acquitted. [18] In her sentencing notes, Winkelmann J found that Mr Huang Jnr was one of those involved in the organisation of importations but was not a prime mover. She accepted it was not possible to quantify with precision the extent of the May importation because it was never intercepted. However, she accepted that the May importation involved commercial quantities. In respect of the July importation, the Judge accepted that this involved at least 8.9 kgs of methamphetamine. On that basis, she considered a starting point of 15 years imprisonment was appropriate forthat importation alone. She then increased that figure to 17 years to reflect the totality of the offending in light of the May shipment and the money laundering offences. There were no mitigating factors. [19] The Judge referred to evidence from a police officer that the value of the July shipment alone was between $2.5 million and $8.9 million. Although the Judge did not make any express finding as to the value of the methamphetamine in the July shipment, it is reasonable to infer that it would have been worth some hundreds of thousands of dollars and, more probably, was worth some millions of dollars. In all events, it is obvious that the value of the methamphetamine imported far exceeded the modest amount now claimed for a pecuniary penalty order.The facts relating to the motor vehicles[20] The police executed a search warrant on 4 August 2004 at the apartment in which Mr Huang Jnr and Ms Sui were living at the time at the Metropolis in Central Auckland. Both were present when the warrant was executed. The two motor vehicles were found in the basement carpark. One of them was in the carpark associated with the apartment in which the couple were living and the other was in another parking space nearby.The Porsche[21] It is not in dispute that the Porsche was purchased from one Moxuan Liang who had won the vehicle in a competition organised by Sky City Casino. Nor is it in dispute that the purchase price was paid in cash in a transaction which took place at a car dealer's yard in Auckland. There is no documentation of the transaction other than the registration certificate which records that the vehicle was registered in Ms Sui's name on 10 June 2004. [22] In a separate decision delivered on 9 August 2007, I ruled that Mr Liang's statement to the police given on 21 September 2004 was, with one minor exception, admissible under the Evidence Amendment Act (No 2) 1980 as Mr Liang had left thecountry and could not be located. According to his account, he was paid $90,000 for the Porsche by a man he identified as Mr Huang Jnr. This evidence was given by a police officer, Detective Brennan, who said Mr Liang identified Mr Huang Jnr from a photo board he was shown at the time he made his statement. Mr Liang also stated that a girl was present whom he described as Chinese and of thin build. He did not identify the Chinese girl as Ms Sui but Ms Sui admits she was present. [23] There was substantial cross-examination of Detective Brennan designed to cast doubt on the identification and to question the method by which the interview of Mr Liang by Detective Brennan was conducted. However, I am satisfied that the identification was properly made and that it was Mr Huang Jnr who paid Mr Liang the cash for the vehicle. [24] I make that finding notwithstanding Ms Sui's evidence, given for the first time during cross-examination, that she went to purchase the Porsche with a friend of hers, a man named Jackie Chan and that it was he who handed over the money for the vehicle through a friend of his named Summi. Ms Sui agreed that the cash was taken to purchase the car in a plastic bag. She agreed that most of the money was in $100 notes although some were in $50 notes according to her account. She also maintained that the amount paid was $95,000 (rather than $90,000 as indicated by Mr Liang). [25] Ms Sui asserted that the Porsche was hers and that she paid for it using her own cash. Some of this had come from a safe deposit box which she had maintained in Parnell and the rest (about $40,000) had been kept at her home. She said she had saved the cash over a period of years from employment, gifts made by her former husband and his mother, and the proceeds of sale of previous motor vehicles she had owned. [26] I found Ms Sui's evidence vague and unconvincing. As already indicated, the suggestion that the cash was handed over by Jackie Chan emerged for the first time in cross-examination. It was not mentioned in her affidavit filed earlier nor was there any suggestion made in cross-examination of Detective Brennan that Mr Liangmay have confused Mr Huang Jnr with Mr Chan as the man who had handed over the money. [27] Secondly, Ms Sui admitted that, at the time of the offending, she was not earning and was undertaking a hairdressing course. Thirdly, I regard it as highly unlikely that she would keep a sum as large as $90,000 in cash in a safe deposit box and lying about her home, despite suggestions that, to do so, was in accordance with Chinese custom. She maintained that she hid the money in the wardrobe, a closet, and some of it in the pockets of her jackets. In answer to questions from the Bench, she said she had $5000 in an ASB account. She volunteered that this was earning 8% per annum. She maintained she gave no thought to the fact that she would be losing a great deal of interest by having $95,000 not earning interest. Again, I did not find this evidence to be at all convincing. Indeed, I reject her account as to the source of the money. [28] Given the coincidence in time between Mr Huang Jnr's drug offending and the acquisition of this vehicle and the fact that Mr Huang Jnr handed over the cash for the vehicle, the overwhelming inference is that the cash for the purchase came from Mr Huang Jnr's drug dealing. I so find.The Mercedes[29] The Mercedes was purchased from Coutts Cars Limited in March 2004 for $133,500. The vehicle was registered on 8 March 2004 to Mr Huang Jnr's sister Ying Huang. The purchase documents show Mr Huang Jnr as both the "contact person" and "the driver" of the vehicle. It is not in dispute that the purchase price comprised $13,500 in cash and two cheques drawn on Moneyworld for $70,000 and $50,000 respectively. The two cheques issued by Moneyworld were purchased for cash. The registration papers show that the vehicle was transferred to financiers and then to Mr Huang Snr on 2 August 2004, just two days before the police executed the search warrant at the Metropolis. [30] Mr Huang Snr has given accounts of the acquisition of the vehicle which completely contradict each other. He was interviewed by Detective Brennan on20 December 2004 when the police executed a search warrant at Mr Huang Snr's address. The interview took place with the assistance of an interpreter and was recorded on a job sheet prepared by Detective Brennan. Mr Huang Snr said that he and his wife owned the apartment at the Metropolis in which their son was living and they also owned another apartment in the same building. Their son was a part-owner of this second apartment. Mr Huang Snr said the money for the purchase of the apartments came from a takeaway business he was then operating, along with a mortgage advance which was being serviced by rental income from the second apartment. [31] Mr Huang Snr told Detective Brennan he owned the Mercedes in question and also owned another one. He said the subject Mercedes was at the Metropolis Apartments and he let his son use it. Again, the money for the purchase of that vehicle had come from his own business. He admitted that his son had handled the purchase of the subject Mercedes, including obtaining the cheques from the finance company, and that it was his son and daughter who had gone to the car dealer to buy the vehicle. He said the money had come partly from his business and partly from savings made while he had lived in China. Later in the interview, he told Detective Brennan that he let his son use the car "because he wants to show off, he is young, he is my only son and that is the way Chinese do things". [32] Mr Huang Snr added in his statement that he told his son to go and buy the car; his son and daughter went to hand the cheques over; and the car was bought "for the two of them to use. I thought I was going to die". [33] Mr Huang Snr was tried separately on one count of money laundering in February 2007. His account then was completely different. He was adamant when cross-examined that, although the car was finally registered in his name, he did not pay for it. He explained his earlier statement to Detective Brennan on the basis that he was not feeling well at the time of the interview. In re-examination at his trial, he explained that the Mercedes had initially been registered in his daughter's name but she had got into difficulties with gambling, the car had been mortgaged, she was in debt, and the car had eventually been transferred into his (Mr Huang Snr's name) to protect his daughter's position.[34] In his affidavit sworn in this proceeding, Mr Huang Snr repeated this explanation and asserted once more that the car was his. He had always insured it and maintained it. He added that, in August 2004, his daughter had sold her house and was able to pay off the debt secured over the Mercedes. It was at that point that it was decided that the ownership of the car should be transferred into Mr Huang Snr's name as protection against the risk of her losing the vehicle again through financial difficulties arising from gambling. [35] In cross-examination before me, Mr Huang Snr was asked about who drove the vehicle. He said the vehicle was shared by himself, his daughter and his son. Initially, from the time of the original purchase in March 2004, 80 percent of the driving was undertaken by his daughter. After the vehicle was transferred into the ownership of Mr Huang Snr on 2 August 2004, Mr Huang Snr drove the vehicle most of the time but he said it was also driven sometimes by his son. When asked why the Mercedes was in the carpark for his son's apartment at the Metropolis at the time of the police search two days later on 4 August 2004, he said he (Mr Huang Snr) sometimes parked the car there. He did so when he went to the gym to swim. When asked whether he was at the gym swimming on the day of the search, he replied "No definitely not on that day. On that day he [Mr Huang Jnr] used the car". He accepted that the Mercedes was Mr Huang Jnr's only means of transport. I record here that Mr Huang Jnr's cellphone was found in the Mercedes on the day of the search. [36] Mr Huang Snr became very agitated when questioned about the statement he had given to Detective Brennan on 20 December 2004. He explained that he was not feeling well and was under stress. He then made a lengthy statement criticising the police for unfairness in relation to the prosecution of himself and his son. He claimed that the police had misled the jury. He wished to make it clear that both his son and he were innocent. He persisted in his complaint about the prosecutions despite my formal advice to him that the Court was not presently concerned with the issue of his son's conviction. When further questioned about the interview with Detective Brennan, Mr Huang Snr stated he could not remember what he had said but he confirmed "that according to the Chinese culture father give the house and the car to the son to use".[37] I find that Mr Huang Snr's evidence about the source of the funds for the acquisition of the vehicle is completely unreliable. He has given two totally conflicting accounts on that point. In his interview with Detective Brennan in December 2004, he maintained firmly that he had paid for the vehicle while, at his trial, when answering a charge of money laundering, he denied any involvement with the purchase whatsoever. Accordingly, I put Mr Huang Snr's evidence on this subject to one side. [38] I accept however that there is no evidence from which it could be reliably concluded that the Mercedes was purchased using money derived from the offending. The vehicle was purchased at least two months before the first importation in May 2004 for which Mr Huang Jnr was convicted. But there is clear evidence that the Mercedes was intended for the use of Mr Huang Jnr and, possibly, his sister. That is the plain inference to be drawn from the vehicle purchase documents which showed Mr Huang Jnr as the contact person in respect of the vehicle and as the driver. It is also consistent with Mr Huang Snr's admission both to Detective Brennan and at his trial that his son used the motor vehicle. [39] Overall, I am satisfied from this evidence and from the fact that the vehicle was found in the carpark associated with Mr Huang Jnr's apartment at the Metropolis (with his cellphone in it), that he was the principal user of the Mercedes even if his father or sister may have used it from time to time.The Statutory Framework[40] The Act establishes two key mechanisms: forfeiture orders under ss 15 to 23 and pecuniary penalty orders under ss 24 to 29. Forfeiture orders are concerned with the confiscation of specific identifiable assets which have been used to commit or facilitate the commission of an offence, or assets which represent the identifiable proceeds of the offence. In contrast, pecuniary penalty orders are designed to recover any benefits derived by a person from the commission of a serious offence even though it is not possible to trace the proceeds of the offence to specific property.[41] The following passage from the decision of the Court of Appeal in R v Brough [1995] 1 NZLR 419, 423 encapsulates the policy behind the Act:The policy of the Act, therefore, is twofold. First, a person who has engaged in criminal activity should be required to disgorge what in common parlance may be referred to as his or her ill-gotten gains. Requiring these to be paid cannot in any way be regarded as a penalty. Rather, it is simply a recognition that the law should not permit a person to retain the profits of criminal activity. Secondly, it empowers the Court to forfeit property used to facilitate the commission of the offences. That too is not for reasons of penalty or punishment, but rather in recognition of the principle that persons who use property to commit crimes should be liable to have that property forfeited.[42] In relation to pecuniary penalty orders, the starting point is s 25(1) which provides:25 Pecuniary penalty orders(1) On the hearing of an application for a pecuniary penalty order in respect of benefits derived by a person from the commission of a serious offence, the Court may, if it is satisfied that the person derived benefits from the commission of that offence,— (a) Assess, in accordance with sections 27 and 28 of this Act, the value of the benefits so derived; and (b) Order the person to pay to the Crown a pecuniary penalty not greater than the penalty amount.[43] It is common ground here that the convictions sustained by Mr Huang Jnr are in respect of serious offences as defined by s 2 of the Act. In terms of s 2(3), a benefit derived includes a benefit derived by a person either directly or indirectly or by another person at the request or direction of the first person. The term "benefits" is not defined but is to be interpreted widely: R v Pedersen [1995] 2 NZLR 386, 390-391. [44] The "penalty amount" is the value of the benefits assessed under ss 27 and 28 of the Act but reduced by amounts equal to the value of any property forfeited or pecuniary penalty imposed: s 25(2). The Act requires a robust approach. The process of assessing benefits requires a "somewhat rough and ready assessment rather than one derived from a strict application of accounting principles": Solicitor-General v Allison HC AK CIV 2000-404-2587, 3 February 2006 per Williams J at [37]. [45] Section 27 of the Act relevantly provides:27 Assessment of pecuniary penalty(1) In this section and in section 28 of this Act, the term "offence period", in relation to an application for a pecuniary penalty order in respect of 2 or more serious offences, means the period commencing when the earlier or earliest of those offences was committed and ending when the later or latest of those offences was committed. (2) For the purposes of an application for a pecuniary penalty order, the value of the benefits derived by a person (in this subsection referred to as the "defendant") from the commission of an offence or offences shall be assessed by the Court having regard to evidence before the Court concerning all or any of the following matters: (a) The money, or the value of the property other than money, that came into the possession or under the control of— (i) The defendant; or (ii) Another person at the request or direction of the defendant— by reason of the commission of the offence or any of the offences: (b) The value of any other benefit provided to— (i) The defendant; or (ii) Another person at the request or direction of the defendant— by reason of the commission of the offence or any of the offences: (c) The value of the defendant's property,— (i) Where the application relates to a single offence, before and after the commission of the offence; or (ii) Where the application relates to 2 or more offences, before, during, and after the offence period. (3) In calculating, for the purposes of a pecuniary penalty order, the value of benefits derived by a person from the commission of an offence or offences, any expenses or outgoings of that person in connection with the commission of the offence or offences shall be disregarded.[46] Of particular relevance here is 27(2)(a) which refers to the money, or the value of the property other than money, that came into the possession or under the control of the defendant by reason of the commission of the offence or offences. It isclear from this provision that money derived from the sale of methamphetamine or the value of the methamphetamine itself may be taken into account in assessing the value of the benefits derived from the offending: Solicitor-General v McDonald HC AK CIV 2005-404-7168, 31 October 2006 per Asher J at [43] – [45]. It is also well established that the term "benefits" under the Act is akin to revenue rather than profit: see s 27(3) and R v Pedersen (above). [47] In the present case, I have no doubt that Mr Huang Jnr derived substantial benefits from the offending to a level well in excess of the amount sought by way of pecuniary penalty ($150,000). His convictions for the importation and supply of methamphetamine necessarily imply that he was either a principal or a party to that offending. The Judge's finding that he was one of the organisers confirms that conclusion.What is the value of the benefits derived from the offending?[48] As counsel for the third parties submitted, the July importations were intercepted and I accept that Mr Huang Jnr did not derive benefits from those shipments. But it is reasonable to infer from the value of the July shipments, even at the lowest level of $2.5 million, that the value of the May shipment must have been substantial. The trial Judge accepted the May shipment was in commercial quantities. Adopting the most conservative assessment in Mr Huang Jnr's favour, it is reasonable to infer that the value of the May shipment was likely to have been measured in some hundreds of thousands of dollars. It was during this period that the Porsche was purchased in cash for $90,000 which, in accordance with my earlier finding, came from Mr Huang Jnr's drug offending. In addition, Mr Huang Jnr has been convicted of money laundering in the sum of not less than $150,000 during the period 23 April to 7 July 2004. At trial, evidence on this issue was called by the Crown from Ian Reid (an investigator at Sky City Casino), Adam Edgar (a financial analyst employed by the police) and Clement Chack (the Huang family accountant). [49] Mr Edgar produced as an exhibit a Source and Disposition Statement showing unexplained income of some $184,817.20. He was cross-examined before me in connection with this statement. He accepted that the statement showed cashflows from bank accounts involving not only Mr Huang Jnr but also both his parents. He also accepted it was difficult to differentiate the position as between the financial affairs of all three since the funds and accounts were intermingled. [50] However, I accept the submission made by Ms Longdill on behalf of the Solicitor-General that the jury's verdict necessarily implies that the jury accepted the Crown case at trial which was that Mr Huang Jnr was the source of the unexplained funds through his drug offending. The defence case at trial (and the evidence of Mr Huang Snr) was that the funds were his, saved from his business and kept at home. Plainly, the jury rejected Mr Huang Snr's evidence on that point. This issue was dealt with by the Court of Appeal at [36] to [38] in dismissing Mr Huang Jnr's appeal against conviction (R v Wong [2007] NZCA 280). [51] I conclude there is ample evidence to support a finding that the value of the benefits derived by Mr Huang Jnr from the offending substantially exceeded the amount now sought by the Solicitor-General by way of penalty.What is the appropriate amount of any pecuniary penalty order?[52] Given that background, I am satisfied that it is appropriate to make a pecuniary penalty order against the respondent Mr Huang Jnr in the sum of $150,000 as sought. There is no basis for reducing the amount of the order or denying an order. In this case, the full penalty amount is the value of the benefits derived, there being no other financial sanction imposed in respect of the offence. [53] I reject the submission made on behalf of the third parties that there is some element of double punishment or unfairness in imposing a sentence of imprisonment and also a pecuniary penalty. Mr Orlov and Mr Deliu presented an elaborate argument based on the New Zealand Bill of Rights Act 1990 and certain international instruments in support of this submission. But the short point is that the Proceeds of Crime Act makes specific provision for the recovery of pecuniary penalty orders in addition to any sanctions imposed under the criminal law. The statutory policy in this respect is clearly stated in R v Brough at 423-424. The Court will be slow to award less than the maximum penalty amount: R v Pedersen (above)at 390. No evidence has been placed before the Court to suggest that Mr Huang Jnr would be unable to meet the penalty order or that it is otherwise harsh or unfair to make such an order. The amount sought by the Crown in this case is only a fraction of the probable benefits received by Mr Huang Jnr. [54] Accordingly, I make an order that the respondent pay to the Solicitor-General the sum of $150,000 as a pecuniary penalty order.Are the motor vehicles available to satisfy the pecuniary penalty order?[55] Under s 29 of the Act, the Court is empowered to override the usual rules regarding ownership of property for the purpose of assessing the value of the benefits derived from serious offending, and for the purpose of making that property available to satisfy pecuniary penalty orders. In essence, the Court may treat property of persons other than a defendant as that of the defendant, where the property is subject to the defendant's "effective control". [56] Section 29 provides:29 Court may lift corporate veil, etc.(1) In assessing the value of benefits derived by a person from the commission of an offence or offences, the Court may treat as property of that person any property that the Court is satisfied is subject to the effective control of the person whether or not the person has— (a) Any legal or equitable estate or interest in the property; or (b) Any right, power, or privilege in connection with the property. (2) Without limiting the generality of subsection (1) of this section, the Court may have regard to— (a) Shareholdings in, debentures over, or directorships of, any company that has an interest (whether direct or indirect) in the property; and (b) Any trust that has a relationship to the property; and (c) Family, domestic, and business relationships between persons having an interest in the property, or in companies of the kind referred to in paragraph (a) of this subsection or trusts of the kind referred to in paragraph (b) of this subsection, and any other persons.(3) Where a Court, for the purposes of making a pecuniary penalty order against a person, treats particular property as that person's property under subsection (1) of this section, the Court may, on application by the Solicitor- General, make an order declaring that the property is available to satisfy the order. (4) Where a Court declares that property is available to satisfy a pecuniary penalty order,— (a) The pecuniary penalty order may be enforced against the property as if the property were the property of the person against whom the order is made; and (b) A restraining order may be made in respect of the property as if the property were property of the person against whom the order is made. (5) Where the Solicitor-General applies for an order under subsection (3) of this section that property is available to satisfy a pecuniary penalty order against a person,— (a) The Solicitor-General shall serve notice of the application on that person and on any person whom the Solicitor-General has reason to believe may have an interest in the property; and (b) That person and any person who claims an interest in the property may appear and adduce evidence at the hearing of the application.[57] At the first reading of the Proceeds of Crime Bill, the then Minister of Justice Hon W P Jeffries said of clause 27 (later to become s 29):In assessing the monetary value of the benefits derived by the offender the court is entitled to look behind the legal ownership of property to determine whether particular property is under the effective control of the criminal. That is to counter the use of devices such as family trusts and nominee shareholdings to disguise the extent of the offender's illicit income. (4 September 1990) 510 NZPD 4304[58] The explanatory note to clause 27 stated: that a Court, in assessing the benefits derived by a person from the commission of an offence, may treat as property of the person any property that is subject to the effective control of that person. For that purpose, the Court may look at such things as shareholdings in companies that own the property, trusts that have a relationship to the property, and family and other relationships between the defendant and the persons who have interests in the property.[59] At the time of the second reading of the Bill the new Minister of Justice, Hon D A M Graham said:Under clause 27, a court is entitled to look behind the legal ownership of property to determine whether particular property is really under the effective control of the offender. That is to counter the use of devices such as family trusts and nominee shareholdings to disguise the extent of the offender's illicit income. Clause 26 [enacted as s 28] is also relevant to the calculation. The effect of subclauses (1) to (3) is that a measurable increase in the defendant's property over the time that the offence or offences were committed may be treated as the value of the defendant's illegal gain. (26 November 1991) 521 NZPD 5586[60] These passages make it clear that the intention of s 29 is to enable the Court, where the section applies, to go behind the normal principles of property ownership and to determine that particular property is under the effective control of the offender. While s 29(2)(a) and (b) enable the Court to have regard to company and trust structures, it is of particular relevance here to consider under s 29(2)(c) the family and domestic relationships between Mr Huang Jnr and the third parties in relation to their respective rights and interests in the motor vehicles.When is the issue of effective control to be determined?[61] There is an initial question as to the point in time in which the issue of effective control is to be determined. Is it at the time the property first comes under the effective control of the person in question, or at the time of the hearing, or at some other time? It was submitted on behalf of the Crown that the point at which the Court should determine whether property is subject to a defendant's effective control should be at a point which is "somewhat historical". It was submitted that the Act would be ineffective if an offender could give money or other benefits received from the offending to another and thereby put the property beyond the operation of the pecuniary penalty regime. [62] It was also pointed out that the disposal of the motor vehicles has been restrained since March 2005 and that the motor vehicles have been in the custody and control of the Official Assignee since July 2007. In these circumstances, at the date of hearing, it was submitted no-one had the ability to deal with the vehicles except by order of the Court.[63] To the contrary, it was submitted on behalf of the third parties that, the Court must be satisfied that the motor vehicles were under the effective control of the offender at the date of hearing. [64] I accept the submission of the third parties on this point. The principal reason for that conclusion is the use of the present tense in s 29(1): " the Court is satisfied is subject to the effective control of the person ". Similarly in s 29(2), where the present tense is also used to describe the various interests in the property. [65] This conclusion is also supported by the passages from the parliamentary debates already cited. These passages are expressed in the present tense and there is nothing to suggest that effective control was intended to mean control at some earlier time such as at the date of the offending. [66] As to the existence of the restraining order and the order placing the motor vehicles in the custody and control of the Official Assignee, I am satisfied that the correct approach is to consider the issue of effective control, as at the date of the hearing, as if the orders had not been made. Otherwise, s 29 would be rendered ineffective for all practical purposes. The Crown almost invariably applies for restraining orders in cases such as this. Such orders are usually granted soon after charges are laid and long before any trial of the offender. The alternative approach (of considering the position as at the date of the restraining order) is to disregard the words of the statute in s 29 and would not permit any account to be taken of changes in circumstances between the date of the restraining order and the date of hearing of the application for a pecuniary penalty order. [67] Obviously, where nominee company structures or trusts remain in place at the date of hearing there should not be any great difficulty with this approach. However, where reliance is placed on the family or domestic relationship between the offender and third parties, it may be more difficult to establish issues of effective control as at the date of hearing. Just as with other questions of fact to be determined under the Act, the civil standard of proof on the balance of probabilities applies: s 85.The meaning of "effective control"[68] As to the meaning of "effective control", a recent judgment of Stevens J inSolicitor-General v Bartlett HC AK CIV 2006-485-2334, 19 July 2007 is helpful. At [24], Stevens J adopted the following passage from the commentary on s 29 inAdams on Criminal Law – Sentencing (loose leaf ed) at PC29.01:This section is intended to enable the Court to go behind any corporate structure, trust, family relationship, or the like disguising the true and effective control of property by a particular person. In such situations, the Court is to determine whether particular property is to be treated as the property of offenders not by reference to their legal or equitable rights, but by reference to the degree to which they are able to treat the property as their own: DPP v Walsh [1990] WAR 25; (1990) 43 Crim R 266. In other words, as expressed in Connell v Lavender (1991) 7 WAR 9, the question is whether the defendant in fact has the power to regulate possession, use, or disposition of the property in question (that is, the de facto power to give or refuse consent to a proposed course of action in relation to it).[69] Stevens J adopted the following passage from the judgment of Seaman J inDPP v Walsh at [25]:means that degree of control which results in Walsh being able to treat these properties as his own at the date on which an order under s 28(3) might be made.[70] Stevens J also referred to the conclusion reached by Rowland J in Connell v Lavender at [26]:In my opinion, the ordinary meaning of "control" is de facto control or control in fact. The question then is: what effect does the adjective "effective" have upon the meaning? In my opinion, "effective control" in the context of the statute means de facto control. The expression contemplates control that is practically effective, in the sense that the person concerned has in fact the capacity to control the possession, use, or disposition of the property.[71] Stevens J then concluded at [27]:These cases support the proposition that, when considering the issue of tracing the proceeds of crime, the Court is entitled to consider the real, de facto position of the respondent in relation to the property. The intent is that the respondent should not profit from his crime purely because of the legal structure by which he chooses to organise his assets. In order to determine whether the respondent had effective control of the property, the Court mustask whether in fact the respondent had the capacity to control, use, dispose of or otherwise treat the property as his own.[72] Although Stevens J uses the past tense in this passage, he was not called upon to consider the timing issue. [73] Where a family or domestic relationship is relied upon, the Court is not concerned with the legal power of the offender to direct or control the family member or other person in a domestic relationship with the offender. Rather the Court has to consider the nature and characteristics of the family ties or relationship. The focus is on the ability of the offender in all the circumstances to influence or control the family member or other party in relation to the use or disposition of the property. As well, the Court must, in a case such as this, take into account the effect of the offender's incarceration on his ability to influence or control. [74] Applying s 29 and the relevant principles to the Porsche, I find that this vehicle has been subject to the effective control of Mr Huang Jnr from the time it was acquired and registered in the name of Ms Sui on 10 June 2004 until the date of the hearings before me. I reach that conclusion for these reasons. First, I have found that the vehicle was purchased using funds derived from Mr Huang Jnr's offending. (I note, incidentally, that this would have entitled the Solicitor-General to seek a forfeiture order in respect of the motor vehicle but that approach has not been adopted). [75] Secondly, at the time of the purchase and until the date of his arrest, Mr Huang Jnr and Ms Sui were in a domestic relationship such that he felt comfortable in having the vehicle registered in Ms Sui's name despite the source of the funds. The formal evidence was a little unclear as to the state of their relationship now but it was evident to me during the hearing that their relationship remains close. [76] Thirdly, Mr Huang Jnr was directly involved in the transaction including the handing over of the money to the vendor. It is reasonable to infer that he directed the registration of the vehicle in Ms Sui's name.[77] Fourthly, the vehicle was located in the Metropolis carpark at the time of the execution of the search warrant on 4 August 2004. It is reasonable to infer that Mr Huang Jnr had the power at that time to control the possession, use and disposition of the vehicle. [78] Fifthly, while it may be that Ms Sui was the principal user of the Porsche, she admitted that Mr Huang Jnr drove the vehicle himself at times up to the time of his arrest. There is no evidence or suggestion that Mr Huang Jnr gifted the vehicle to Ms Sui. Her evidence was she had paid for it herself. [79] Finally, given the domestic relationship and the source of the funds used to acquire it, it is also reasonable to conclude that Mr Huang Jnr continues to have the power to control the possession, use or disposition of the vehicle, but for the restraining orders and the custody order made. It is not credible that he would permit the vehicle to be disposed of without his permission given its value and the source of funds used in the purchase. [80] I reach a similar conclusion in respect of the Mercedes although for slightly different reasons. First, I rely on the conclusion already reached that the Mercedes was driven principally by Mr Huang Jnr even if it was, at times, driven by his father and his sister. Secondly, Mr Huang Jnr was directly involved in arranging the purchase as admitted by Mr Huang Snr. Thirdly, the documentary evidence shows that Mr Huang Jnr was listed as the driver and as the contact person for the purposes of the sale. Fourthly, the Mercedes was found in the Metropolis carpark at the time of the execution of the search warrant on 4 August and had Mr Huang Jnr's cellphone in it. Finally, there is Mr Huang Snr's admission that he allowed Mr Huang Jnr to use the vehicle.Does it matter that the Mercedes was acquired prior to the offending?[81] Mr Deliu is on firmer ground when submitting on Mr Huang Snr's behalf that s 29 is not applicable to the Mercedes because it was acquired prior to the period of the offending. While, as earlier indicated, it is not necessary in the case of a pecuniary penalty order to trace the proceeds of the offending to particular assets, ss24 to 29 of the Act are nevertheless concerned with the benefits derived from the offending and the assessment of the value of those benefits. That is clear from s 25(1) in terms of which the value of the benefits derived from the offending is to be assessed in accordance with ss 27 and 28 of the Act. [82] Section 27(2)(a) and (b) both refer to the value of benefits "by reason of the commission of the offence". And, while s 27(2)(c) speaks of the value of the defendant's property before and after the commission of the offence, this provision is, in my view, aimed at a calculation of the value of benefits derived by comparing the value of the property before and after the offending. For example, if a house was owned by the defendant prior to the offending and had been increased in value by improvements made during the course of the offending, the increase in value must be taken into account for the purpose of assessing the value of the benefits derived from the offending. This is further elaborated in ss 28(1) and (2). [83] The statutory intention to confine the assessment of value of the benefits to those derived from the offending is reinforced by s 28(4) which creates a presumption in relation to drug dealing offences. All the property of the defendant during the period defined by s 28(4) is presumed, unless the contrary is proved, to be property that came into the possession or under the control of the defendant by reason of the commission of the offence or offences. The property subject to the presumption is all the defendant's property at the time the application for the pecuniary penalty order is made and for a defined period prior to that time, but not earlier than the date on which the earliest offence was committed. [84] Section 29 has a dual purpose. The first (under s 29(1)) is concerned with "assessing the value of benefits derived by a person from the commission of an offence or offences ". It is for that purpose that "the Court may treat as property of that person any property that the Court is satisfied is subject to the effective control of the [defendant] ". It follows from this provision and from the structure of ss 24 to 29 as a whole, that the Court could not be assisted in assessing the value of benefits derived from the offending by taking into account property under the defendant's effective control which was acquired prior to the offending. This conclusion follows as a matter of logic, because property of that descriptionordinarily has no connection with benefits derived from the commission of the offence or offences. [85] Of course, the position would be different if it could be demonstrated that a property acquired by the defendant or under the defendant's effective control prior to the period of the offending was funded later from the proceeds of crime (for example by the repayment of a mortgage using funds derived from the subsequent offending). Similarly, if property acquired by the defendant or under the defendant's effective control prior to the offending was improved, subsequent to its acquisition by the proceeds of crime at a later date. In these examples, the property could also become "tainted" property and subject to forfeiture. [86] The second purpose of s 29 is to enable the Court to declare under s 29(3) that property subject to the effective control of the defendant is available to satisfy the order. But this is not an open discretion. The Court may make such a declaration only:Where a Court, for the purposes of making a pecuniary penalty order against a person, treats particular property as that person's property under subsection (1) of this section [87] I conclude that, in the circumstances of this case, there is no jurisdiction under s 29 to treat the Mercedes as the property of Mr Huang Jnr or to declare that it is available to satisfy the pecuniary penalty order. Given the fact that its acquisition preceded the offending and, in the absence of any evidence that it was acquired using funds derived from the offending, there is no basis on which the vehicle or its value is relevant to the assessment of the value of benefits derived by Mr Huang Jnr from the offending. The Solicitor-General's case on this point fails at this threshold stage. [88] Ms Longdill referred me to the decision of the Court of Appeal in R v Wallace (2001) 18 CRNZ 577 in which it was held that, for the purposes of property available to meet a pecuniary penalty order, it was irrelevant that the house and land in question had been purchased prior to the date of the offending. The Court's conclusion is, with respect, undoubtedly correct because the property in question belonged to the appellant and his wife (both of whom were the offenders) and was therefore available as their property to meet the pecuniary penalty order which, oncemade, is enforceable in civil proceedings as a debt due: s 25(3). For that purpose, the date of acquisition of the asset is irrelevant. The Court of Appeal was not required to consider the application of s 29 in relation to property not in the name of the defendant but subject to the effective control of the defendant. [89] Counsel also referred to the decision of Seaman J in the Supreme Court of Western Australia in DPP v Walsh & Ors (1989) 43 A Crim R 266. In that case, the Court was concerned with whether a pecuniary penalty order made against the first respondent Mr Walsh could be enforced against real estate owned by companies with which Mr Walsh was associated. [90] At 275 Seaman J found that, if the properties were under the effective control of Mr Walsh, then the properties were available to satisfy the pecuniary penalty order even though the properties were acquired prior to the offending and it could not be demonstrated that the benefits derived from Mr Walsh's offending could be traced to those properties. [91] However, Seaman J was considering a section of the Proceeds of Crime Act 1987 (Cth) which is not in identical terms to s 29. While s 28(1) of the Commonwealth statute is in the same or similar terms to s 29(1) of the New Zealand legislation, s 28(3) of the Commonwealth legislation is in different terms:(3) On application by the DPP, a court may, if in its opinion particular property is subject to the effective control of a person against whom the court has made a pecuniary penalty order, make an order declaring that the whole, or specified part, of that property is available to satisfy the pecuniary penalty order.[92] It is immediately apparent that the Commonwealth provision is wider in scope than our s 29(3). The Court may order that property is available to satisfy the pecuniary penalty order under the Commonwealth provision whenever "in its opinion particular property is subject to the effective control of a person against whom the Court has made a pecuniary penalty order". In contrast, the New Zealand provision gives the Court jurisdiction under s 29(3) only where the Court treats particular property as that person's property under subs (1) for the purposes ofmaking a pecuniary penalty order. In this case, that stage is not reached in respect of the Mercedes. [93] It may be that Parliament intended that the Act should operate in the way identified by Seaman J in Walsh. Given the nature of a pecuniary penalty order, it would seem logical that any property of the defendant, or property which is subject to the defendant's effective control, should be available to meet a pecuniary penalty order if required. If my interpretation of s 29(3) is correct, this is a lacuna which the legislature may see fit to correct. [94] I conclude that there is no jurisdiction in the circumstances of this case to declare that the Mercedes is available to meet the pecuniary penalty order. I now turn to consider whether it is appropriate to make such an order in respect of the Porsche. [95] No doubt, there are discretionary factors which might militate against the making of an order under s 29(3) as the Court accepted in R v Wallace. It was submitted on behalf of Ms Sui that to treat the Porsche as property of the respondent for the purposes of the Act would be to deprive her of her means of transport. However, once it is concluded that the assets in question are subject to the effective control of the respondent, some compelling reason would be required before the Court should exercise its discretion against making an order under s 29(3): see the discussion in R v Wallace at [6] and [7]. [96] Ms Sui did not provide any consideration for the acquisition of the vehicle and the public policy objectives of the Act require that neither she nor Mr Huang Jnr should benefit from his offending. [97] There being no compelling reason against exercising the discretion under s 29(3), I declare that the Porsche Boxster motor vehicle registered number CBK811 is available to meet the pecuniary penalty order made against the respondent.Result[98] A pecuniary penalty order is made against the respondent in favour of the applicant in the sum of $150,000. [99] The Porsche Boxter motor vehicle registered number CBK811 is declared to be available to meet the pecuniary penalty order. [100] The application against the second third party is dismissed. [101] The pecuniary penalty order is not to be enforced pending the further order of the Court. [102] Liberty is reserved to the applicant to apply to enforce the pecuniary penalty order and for any ancillary orders. [103] The Mercedes Benz motor vehicle BWT233 is to be released forthwith by the Official Assignee to the second third party and the restraining order made in respect of that vehicle is discharged. [104] The applicant is entitled to costs on a 2B basis against the first third party; the second third party is entitled to costs on a 2B basis against the applicant; Mr Dacre's costs are to be met out of the Consolidated Fund or such other source as determined by the Registrar. [105] Counsel are to submit memoranda as to costs by 31 January 2008. ______________________________ A P Randerson, J Chief High Court Judge