Cavanagh & Stevens v Solicitor-General [2008] NZCA 579 (22 December 2008)

Last Updated: 5 February 2009

IN THE COURT OF APPEAL OF NEW ZEALAND

CA57/2008CA325/2008 [2008] NZCA 579MICHAEL JOSEPH CAVANAGHSHANNON KAY STEVENS

v

SOLICITOR-GENERAL

Hearing: 24 November 2008

Court: Ellen France, Potter and MacKenzie JJ

Counsel: P H H Tomlinson for Appellants
D G Johnstone for Respondent

Judgment: 22 December 2008 at 11.30 am

JUDGMENT OF THE COURT

1. The application to admit further evidence is refused.
2. An extension of time for appealing is refused to both applicants.
   

REASONS OF THE COURT

(Given by MacKenzie J)

Background

[1] This is an appeal against a forfeiture order made by Rodney Hansen J pursuant to the Proceeds of Crime Act 1991: Solicitor-General v Cavanagh HC AK CIV 2002-404-3798 7 December 2006.
[2] Mr Cavanagh pleaded guilty to six charges and was found guilty at trial of a further six, including possession of equipment and material for methamphetamine manufacture, unlawful possession of firearms, ammunition and explosives, manufacturing methamphetamine, possession of methamphetamine for supply, and supplying methamphetamine. Ms Stevens was found guilty on a number of the same charges. The offending occurred between August 1997 and October 2004.
[3] The Solicitor-General subsequently applied for confiscation orders under the Proceeds of Crime Act for property held by the appellants which the Crown alleged was tainted property in respect of the offending. The application sought forfeiture orders under s 15(1) in respect of a range of property which had been seized including large amounts of cash, bank deposits, bonus bonds, real estate, motor vehicles, motorcycles, gold and silver bullion, jewellery, and gemstones. The property amounted to over one million dollars.
[4] The confiscation application was heard by Rodney Hansen J (the trial Judge) over two days, and a reserved judgment was delivered on 7 December 2006. Most of the property in question had been seized in two separate seizures in August 2002 and November 2003, at the house occupied by the appellants and at a storage facility. The application also sought forfeiture of a residential property at 4 Borris Close, Howick, purchased in November 2002, allegedly with the proceeds of the drug dealing offending and a motor vehicle seized in October 2004. The Judge dealt separately with the property seized in each of the seizures, and the Borris Close property. He found that, with some exceptions, all of the property involved was tainted property. The exceptions were, particularly, a number of items of jewellery. The application also sought a pecuniary penalty order under s 25. The Judge declined to impose a further pecuniary penalty.
[5] The proposed challenge to the forfeiture order is within a narrow compass. Included among the property covered by the forfeiture order were approximately 100 items of jewellery, and loose gemstones. They were itemised and valued in two separate valuations by GemLab Jewellery Valuers in December 2003 and June 2005 respectively. The proposed appeal relates to a number of those items.

The applications before the Court

[6] The right to appeal against the forfeiture order is conferred by s 82 of the Proceeds of Crime Act. Under s 83, the provisions of Part 13 of the Crimes Act 1961 are to apply, with all necessary modifications, as if the appeal were an appeal under s 383 of that Act. The time for appealing is accordingly limited by s 388. As these appeals were not filed within the 28 days specified in s 388(1), leave to extend time is sought under s 388(2).
[7] The appellants also seek to adduce, in support of the appeal, new evidence, in the form of a joint affidavit by the appellants.

The appellants’ case

[8] Mr Cavanagh is a jeweller. The essence of the defence to the forfeiture application, so far as it related to the jewellery items, was that he had acquired the gold and silver for the purposes of his work as a jeweller, and that the jewellery was legitimately obtained, much of it having come to him from his grandmother. The appellants say that they have fresh evidence supporting their contentions to present to the Court. The appellants submit an affidavit concerning specific items for which they say they have documentary evidence to show the items are not tainted. They maintain that even more of the forfeited property was untainted, and that the affidavit limits itself to items for which there is such documentary evidence. The appellants claim that they were not given full disclosure by their previous counsel, Mr Neutze (whose conduct of this and other trials was held to be incompetent in Auckland District Law Society v Neutze [2006] 2 NZLR 551 (HC)) and Mr Comesky, and, being imprisoned, they were unable to take action on their own to bring documentary evidence to the Court’s attention. Ms Stevens says by affidavit that her former counsel, Mr Comesky, has repeatedly failed to keep appointments or answer correspondence since her release, and has failed to lodge an appeal as she instructed him to do. They say they have consistently pursued the appeal given their circumstances, and that the Court should therefore accept that the evidence qualifies as fresh evidence as suggested by the approach of the Privy Council: Bain v R [2007] UKPC 33; (2007) 23 CRNZ 71 at [34] and [35] approving the approach taken in R v Bain [2004] 1 NZLR 638 at [22] and [26] (CA). Specifically, they submit that even if the Court does not accept the evidence as “new” in a strict sense, it should be treated as such because it was not disclosed to the appellants themselves by their counsel.
[9] The appellants say the Judge erred in placing the evidential onus on them. The items involved were not particularised in the Crown’s application, and the assumption appears to have been that everything was tainted unless otherwise shown. The Court of Appeal has found that the approach must be more specific than this, and the “tainted property” must be “proceeds of the offence”: Bromby v Solicitor-General [2007] NZCA 440. Here there was no attempt to demonstrate a connection between the items and the offending.

The respondent’s case

[10] The respondent submits that Mr Cavanagh should not be granted leave to appeal out of time. It says that Mr Neutze’s incompetence is irrelevant to Mr Cavanagh’s appeal because he was replaced by fresh counsel, Mr Kaye, for the sentencing, an appeal against sentence and the Proceeds of Crime Act hearing itself. It submits that the reasons given in explanation for the delay are insufficient to justify the granting of leave.
[11] The respondent accepts that Ms Stevens’ appeal should be allowed to proceed. Counsel for the Crown had also unsuccessfully sought a response from Mr Comesky, and was therefore unable to refute Ms Stevens’ assertions as to her counsel’s failure to follow her instructions to appeal.
[12] The respondent submits that the forfeiture finding and the pecuniary penalty finding were interdependent. It says that if high-value items of property had been excluded from the forfeiture order, then the appellants would have been caught by the pecuniary penalty mechanism instead. The respondent further submits that Rodney Hansen J erred in the way that he treated the real estate (a property at Borris Close). That property was forfeit, but the $331,000 used to purchase it was unexplained money that should have been added to the estimate of the appellants’ illegal income (based on a financial analyst’s report). The property therefore should have had a neutral effect on the estimated illegal income, since it was both a forfeited asset and part of the unexplained income.
[13] The respondent also says that the argument made by the appellants is not fresh because there is no explanation of Mr Cavanagh’s claim that he was denied access to police disclosure at the time of the Proceeds of Crime Act hearing. Further, Ms Stevens’ claims are also not fresh because the evidence relating to some items was before Rodney Hansen J, and there was insufficient explanation of why the evidence relating to other items was not placed before him.

The application to adduce further evidence

[14] It is convenient to address this application first. As we have noted, this appeal is governed by Part 13 of the Crimes Act. This Court in Black v R (1997) 15 CRNZ 278 held that applications for forfeiture orders, though civil in form, are criminal proceedings. Power to admit further evidence is contained in s 389 of the Crimes Act. The principles to be applied are as set out in this Court’s judgment in R v Bain at [22] and [26] (endorsed by the Privy Council in Bain v R at [34]). The appellant must demonstrate that the new evidence is sufficiently fresh and sufficiently credible.
[15] The appellants seek leave to adduce a joint affidavit in support of the appeal. In it, they list individual items of jewellery they say were owned by them prior to the offending (commencing in 1997), or were received as gifts or by inheritance. They are listed below with replacement values, a brief description of the appellants’ evidence as to the basis upon which they are claimed not to be tainted property, and the documentary evidence (if any) relied on to support that claim:

1. Gold ring with a bird skull design ($1,750). Made by Mr Cavanagh at a cost of approximately $75. Receipts for materials dated 13 August 1998 and 14 August 1998 provided;

(There is no item listed as B in the affidavit.)

100. Dress ring ($3,550) purchased for Mr Cavanagh by Deborah Henry (a co-offender) in Singapore. Purchase receipt dated 29 June 1995 provided;

4. Diamond pendant ($2,300) purchased for Mr Cavanagh by Deborah Henry in South Africa and given to him as a 21st Birthday gift (ie in 1994). No documentation;
5. Neck-chain ($4,200) purchased by Mr Cavanagh in Australia. An insurance valuation dated 8 March 1996 is provided;
6. Raymond Weil wristwatch ($1,250) left to Mr Cavanagh in his mother’s estate. No documentation;
7. Rolex Perpetual Datejust watch ($12,500) purchased by Mr Cavanagh in 1995. A receipt/guarantee dated 29 March 1995 is provided;

H, I Matching pair of Rolex watches that belonged to Mr Cavanagh’s mother (claimed to form part of her estate) and father (claimed to have been given to Mr Cavanagh as a birthday present in 1998) ($35,000 and $55,000). No documentation;

10. Bracelet ($1,350), given to Ms Stevens by her then boyfriend, Greg Clarke, during the period 1996-99. No documentation;
11. Bangle ($600) made for Ms Stevens by Mr Cavanagh during the 1990s before they became romantically involved. No documentation;

50. Aquamarine and imitation diamond ring ($1,600) bequeathed to Mr Cavanagh by his mother (clause 8D of the will). Insurance valuation dated 9 August 1996 and Mr Cavanagh’s mother’s will provided;

13. Sapphire and diamond dress ring ($1,500) bequeathed to Mr Cavanagh by his mother (clause 8C of the will). A valuation dated 21 July 2000 and Mr Cavanagh’s mother’s will provided;
14. Emerald and diamond three stone ring ($8,000) bequeathed to Mr Cavanagh by his mother (clause 8F of the will). Mr Cavanagh’s mother’s will provided;

O1, O2 Neckchain ($3,400) and bracelet ($1,550) purchased by Ms Stevens from Mr Cavanagh. Receipts dated 4 and 24 August 1998 and valuation dated 18 July 2000 provided;

16. Bracelet ($3,100) bequeathed to Mr Cavanagh by his mother. Valuation dated 21 July 2000 and Mr Cavanagh’s mother’s will provided (specifies “all gold bracelets”);
17. Tourmaline ($700) purchased by Mr Cavanagh on a trip to Zimbabwe and the United Kingdom in 1995. Valuation dated 18 July 2000 provided;
18. Emerald ($1,900) purchased by Mr Cavanagh on a trip to Zimbabwe and the United Kingdom in 1995;

S, T Loose gemstones: evidence is provided to show Mr Cavanagh’s ownership of gemstones unconnected to the offending: valuations of five gemstones purchased in Zimbabwe during 1995, dated 11 June 1997, 29 July 1997, 22 July 2000, 24 July 2000, and credit card bills showing travel to Zimbabwe.

[16] Rodney Hansen J dealt with Mr Cavanagh’s evidence at the hearing of the forfeiture applications concerning the jewellery items in this way. He said:

[17] ... He deposed that the jewellery was legitimately obtained. Without elaboration he says that much of it came from his grandmother.

[18] Speaking generally, I find Mr Cavanagh’s explanations totally implausible as, obviously, did the jury at his trial. The evidence adduced by the Crown showed he was engaged in a major way in the manufacture and supply of drugs over a period of years. His explanations for the wealth he had accumulated were far-fetched and largely unsubstantiated. They could not stand against the meticulously researched and documented evidence of Ms Nutsford, the Crown’s financial analyst.

[19] The assertions Mr Cavanagh makes in his affidavits do little to advance the case against forfeiture. Generally, he relies on sweeping and unsupported claims, much as he did at trial. Some of the claims he makes in relation to particular assets are corroborated but, more often than not, they lack any credible support.

[17] He further said that he had considered the evidence relating to ownership of the jewellery and was satisfied that, with a number of exceptions, the jewellery was the property of Mr Cavanagh. He also reached the conclusion that all of the jewellery which belonged to Mr Cavanagh was tainted property and he accordingly ordered forfeiture of it.
[18] The appellants submit that the items were essentially “all lumped together and the view taken that all items were tainted”. That submission does not fairly reflect the careful and detailed analysis undertaken by the Judge. He examined each item, and made findings in respect of each, to the effect that the items were derived from the unexplained wealth which had been accumulated. The conclusions that the property was tainted followed from that factual finding.
[19] The items referred to in the affidavit can be dealt with broadly in three categories. The first comprises those items where there is simply an assertion by Mr Cavanagh or Ms Stevens that the items were acquired by them from legitimate sources, with no further documentary evidence to support the claim. The second category comprises those items where receipts and valuations are relied on. The third category comprises the items it is alleged were inherited by Mr Cavanagh from his mother, who died in 1998.
[20] So far as the items which are not supported other than by the assertions of Mr Cavanagh and Ms Stevens, we do not consider that it is appropriate to grant leave to admit further evidence. The evidence is not fresh, in that it is simply a statement of evidence which was available at the time of the hearing. As to its credibility, clear adverse findings as to credibility in respect of Mr Cavanagh were made by Rodney Hansen J. As the trial Judge, he was better placed than this Court to make that assessment.
[21] The additional documentary material does not cause us to reach a different view for those items in the second category, where there are receipts and valuations available. Some of that material is dated within the period of the offending. It is therefore of little assistance in determining whether the money used to purchase these items was derived from the offending. For the receipts and valuations which predate the offending, the documentary evidence cannot be conclusively related to the items to which it is alleged to relate, except by reliance on Mr Cavanagh’s and Ms Stevens’ affidavit. That material is largely inconclusive as to the circumstances of acquisition. Given the very detailed nature of the Crown’s evidence on the application, it might have been expected that the items would have been individually addressed by the appellants in the High Court. The freshness and credibility of the evidence is therefore marginal. The items for which there is evidence which, if accepted, might establish ownership of the property by Mr Cavanagh at a period before the offending to which the forfeiture proceedings related are essentially de minimis in the context of the total property involved, and are not sufficient to lead to the granting of leave to admit the further evidence.
[22] The third category comprises the items referred to in the will. Under clause 8 of the will, six specified items of jewellery were bequeathed to Mr Cavanagh. Mr Cavanagh claims in the affidavit, summarised at [15] above, that six items (items F, H, L, M, N and P) were inherited by him. Only three of those are identified in the affidavit by a paragraph number in clause 8 of the will (items L, M and N). Item P is such that it might be one of the articles mentioned in clause 8B, but the affidavit does not refer to it by that reference. The remaining two items (F and H) are watches. There are no watches in clause 8 of the will. The items in clause 8 were the only items of jewellery bequeathed to Mr Cavanagh in the will (remaining jewellery items were to be sold). Rodney Hansen J had accepted that three items of property were part of the estate. There are many quite similar items, and the descriptions in the will are not sufficiently detailed to permit a precise cross-reference to the descriptions in the GemLab reports. One of the items accepted by Rodney Hansen J as falling under the will, item 2/56, could fall only within the description in paragraph 8C of the will. That paragraph is now relied upon for item L. Clearly, only one of these items can come within paragraph 8C. Items 13/56 and 51/56, also excluded by the Judge, are not readily referable to the descriptions in the will (the terms of which were not before the Judge). That means that, to examine in detail what jewellery items were inherited, it would be necessary to reopen that whole question. We do not consider that the interests of justice require that course.
[23] A further relevant consideration in determining whether further evidence should be admitted, is whether it is appropriate to review only some of the items in the order. In refusing to make a pecuniary penalty order, the Judge calculated that only some $14,000 of the unexplained income would not be forfeited. He treated that as de minimis. Counsel for the respondents submits that any adjustment to the forfeited items would require the conclusion that the balance was de minimis to be revisited. Counsel also submits that that calculation was in error as to the way in which the Borris Close property was dealt with, in that the funds used in its purchase were not included in the calculation of the unexplained income. There is no cross-appeal on this point, and we do not need to address it. Both of these points are, however, relevant to the issue of whether the discretion to admit the further evidence should be exercised. They weigh against it.
[24] For these reasons, we consider that the appropriate course is to refuse leave to adduce the new evidence now relied on. Leave is accordingly refused.

The application for leave to appeal out of time

[25] The principles applying to the exercise of the discretion to grant leave, stated in R v Knight [1998] 1 NZLR 583 (CA) and confirmed in R v Lee [2006] 3 NZLR 42 (CA), require the balancing of a number of considerations, including, of particular relevance in this case, the reasons for the delay and the strength of the proposed appeal. We deal first with delay. We gave counsel for Mr Cavanagh an opportunity to file a further affidavit for Mr Cavanagh and also allowed both counsel the opportunity for further written submissions. There is, in the further material, no sufficient explanation of when instructions to appeal were given to counsel. The appeal was not filed until February 2008, over a year late. The notice was dated in September 2007, but even that is well out of time. So far as Ms Stevens is concerned, we have noted the Crown’s concession that her explanation of the delay cannot be refuted. We regard the explanations given for the delay as weighing in favour of the granting of leave to Ms Stevens, but against the granting of leave to Mr Cavanagh.
[26] The second aspect, the strength of the proposed appeal, needs to be considered having regard to our decision on the application to adduce further evidence. Without further evidence to challenge the factual findings, the appeal would be in essence a challenge to findings of fact based on an assessment of credibility and would therefore have little prospect of success. That means that the merits of the appeal are insufficient to meet the test for the granting of leave to appeal. Leave to appeal is accordingly also refused.

Solicitors:
Crown Solicitor, Auckland for Respondent