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Doorman v Commissioner of New Zealand Police [2013] NZCA 476; [2014] 2 NZLR 173; (2013) 26 CRNZ 810 (16 October 2013)

Last Updated: 29 January 2018

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IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 First Appellant CATALINA GUINTO DE LEON Second Appellant
AND
 Respondent
Hearing:
25 July 2013
Court:
Ellen France, Ronald Young and Cooper JJ
Counsel:
R A Harrison for First Appellant R Ord for Second Appellant J M Webber for Respondent
Judgment:


JUDGMENT OF THE COURT

  1. The application by the second appellant for leave to adduce new evidence is dismissed.
  2. The appeal by both appellants against the profit forfeiture order to the value of $249,482.63 is allowed. The profit forfeiture order is quashed.

  1. The appeals are otherwise dismissed. The appellants’ interest in the property at 121 Clover Road East remains forfeit.

  1. No order as to costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Ellen France J)

Table of Contents

Para No
Introduction [1]
Background [3]
The statutory scheme [11]
The judgment below [15]
Issues on appeal [17]
Was 121 Clover Road East tainted property? [19]
“Significant criminal activity”? [20]
“Tainted property”? [25]
Was Miller J correct to conclude that Ms de Leon’s unexplained
income was $366,607.20? [37]
Should the new evidence be admitted? [39]
Was the unlawful benefit overstated? [45]
Was there power to make a profit forfeiture order? [49]
The relevant provisions [51]
Discussion [61]
Should either appellant have been granted relief from forfeiture? [67]
Mr Doorman’s case [68]
Ms de Leon’s position [71]
The children’s interests [77]
Result [81]

Introduction

[1] Mr Doorman and Ms de Leon’s family home at 121 Clover Road East was forfeited to the Crown as tainted property by an order of the High Court under the Criminal Proceeds (Recovery) Act 2009 (the Act).[1] Miller J also made an order forfeiting profits up to a maximum of $249,482.63.
[2] The appellants appeal against these orders. The appeals raise various issues about the application and interpretation of the Act. In particular, both appeals raise an issue as to whether a profit forfeiture order could be made in this case given the only property identified was the house at 121 Clover Road East which was the subject of the asset forfeiture order.

Background

[3] The background is set out in the judgment of Miller J and we adopt that description.[2]
[4] The appellants met in 2005. Mr Doorman was discharged from bankruptcy on 7 January 2006, having been bankrupted three years earlier.
[5] The Clover Road property was purchased on 5 December 2006 by Ms de Leon. She paid $540,000 for the property of which $390,000 was advanced by the Bank of New Zealand and secured by a first mortgage. Accordingly, the original equity of $150,000 was all contributed by Ms de Leon. Clover Road became the family home when the property purchase was finalised in February 2007.
[6] The family moved to another property at Redwood Valley Road in 2009. They had executed an agreement to purchase that property and paid a deposit of $99,000 with the balance due on 31 October 2009. However, that purchase never proceeded and, at the time of the High Court hearing, the couple were living at Clover Road again with their two children then aged nine and four.
[7] On 10 September 2009, the police searched both the Clover Road and Redwood Valley Road properties. At Redwood Valley Road, where Mr Doorman and Ms de Leon had by then been living for a few months, they found what the Judge described as a “sophisticated shed purpose-built for growing cannabis”.[3] Inside the shed were 193 plants. Mr Doorman admitted he had erected the shed and grown the plants but claimed that he only sold the cannabis in one ounce lots to people with medical needs, charging $50 an ounce rather than the usual $280 an ounce. He said he had sold only $1,500 worth of cannabis.
[8] At Clover Road the police found a shed which showed signs of having been used to grow cannabis and another that it appeared had been used to hang the cannabis for drying. The average monthly power bill for the property for the preceding 12 months had been $1,368 which the Judge described as “a suspiciously high figure for normal domestic use”.[4]
[9] Mr Doorman ultimately admitted to growing cannabis at Clover Road over a two-year period from 1 September 2007 to 1 June 2009. In addition he pleaded guilty to five other charges including two of cultivation, one at Redwood Valley Road between June and September 2009, two charges of sale, and one of possession for sale. The other cultivation charge related to a third address in Richmond where Mr Doorman admitted growing cannabis between July 2005 and May 2009. Mr Doorman was convicted and sentenced on 29 June 2010 to 12 months home detention and 150 hours community work.[5] Ms de Leon has never been charged. Forfeiture was not pursued at the time Mr Doorman was sentenced although an application for forfeiture had been made prior to sentencing.
[10] As the respondent explains in the written submissions, after the property was made subject to a restraining order by the High Court, the appellants ceased servicing the mortgage. Mortgage arrears mounted and, eventually, the bank took action to sell 121 Clover Road East. It was sold in October 2012 for $459,000. This was more than the value before the High Court ($445,000). But by then the amount due under the mortgage was nearly $350,000. Added to this sum and deducted by the bank from sale proceeds were credit card debts and an overdraft totalling nearly $16,000. After deduction of the mortgage, the other debts, solicitors’ fees and rates, the amount received by the Official Assignee was $70,682.86.

The statutory scheme

[11] We come later to the detail of particular provisions when we address the relevant submissions. At this stage, however, it is helpful to explain some general features of the statutory scheme. The first point to note is that there are now two regimes under which the forfeiture of what for these purposes may be loosely called “the proceeds of crime” can occur.
[12] The first regime is that established under the Sentencing Act 2002.[6] Where a person is convicted of a qualifying offence and property is used to commit or facilitate the commission of that offence, an instrument forfeiture order may be made. These orders are made as part of the sentencing process and so are taken into account when sentencing the offender.
[13] The second regime is that established under the Act. There are two relevant possibilities for present purposes. The first possibility is the making of an asset forfeiture order in relation to tainted property. Tainted property is that wholly or in part acquired or derived, directly or indirectly, from significant criminal activity. The other possibility is that a profit forfeiture order may be made. For those orders, it is not necessary for the property to be tainted.
[14] It is also helpful to note at this point that asset and profit forfeiture orders can be made even though the individual whose property is forfeited is not charged with a criminal offence, is acquitted of an offence, or has his or her convictions set aside.[7] This represents a change from the regime for forfeiture under the predecessor legislation, the Proceeds of Crime Act 1991.

The judgment below

[15] Miller J concluded that the Commissioner had proved on the balance of probabilities that Mr Doorman and Ms de Leon benefited unlawfully from cannabis growing in the seven years preceding the application for the forfeiture order. In reaching that conclusion, Miller J rejected the explanations given by both Mr Doorman and Ms de Leon. The Judge also concluded that 121 Clover Road East was tainted property in that it was acquired or derived in part from cannabis cultivation.
[16] Miller J concluded that the unlawful benefit, being unexplained income, was $366,607.20. The Judge said that Mr Doorman and Ms de Leon had not shown the $366,607.20 figure was wrong. That sum was a benefit accruing to both Mr Doorman and Ms de Leon jointly since it was the source of their income and not only paid the mortgage but also paid for assets that they enjoyed. When the value of the Clover Road property, which was the subject of an assets forfeiture order, was taken into account, the maximum recoverable amount for the purposes of the profit forfeiture order was $249,482.63.[8] The Judge declined to grant relief against forfeiture. He granted the applications for an asset forfeiture order and for a profit forfeiture order. The asset forfeiture order was confined to the appellants’ interest in Clover Road after repayment of the mortgage.

Issues on appeal

[17] The issues on the appeals can be dealt with by discussing the following questions:
[18] We deal with each question in turn.

Was 121 Clover Road East tainted property?

[19] This is an issue raised by Ms de Leon’s appeal. She says the property was not derived or acquired from “significant criminal activity”. There are two limbs to this submission. First, it is said that Mr Doorman’s offence did not comprise significant criminal activity and, secondly, that her interest in the property was not derived from such activity.

“Significant criminal activity”?

[20] Initially Ms de Leon argued that there was no jurisdiction to make an asset forfeiture order in this case because Mr Doorman had been dealt with summarily. As a result it was said that he was not subject to a maximum term of imprisonment of five years or more and so his offending did not satisfy the definition of “significant criminal activity”. “[S]ignificant criminal activity” is defined in s 6(1) of the Act as activity engaged in by a person that, if proceeded against as a criminal offence, would amount to offending:
[21] This point was however conceded as it was accepted that Mr Doorman was committed for trial and pleaded guilty on indictment.[9] He was therefore exposed to the maximum penalties for cultivating and selling cannabis. Accordingly, his offending came within the definition of significant criminal activity.
[22] Ms de Leon pursued the other limb of her argument on this aspect, namely, that it was relevant that she had never been charged. That argument cannot stand in the face of s 6(2) which states that a person is undertaking significant criminal activity whether or not:
[23] There is no requirement that Ms de Leon be engaged in significant criminal activity herself. Rather, the property is tainted if it was, wholly or in part, acquired or derived from significant criminal activity. There is nothing in this part of the challenge to the decision.
[24] The more substantive point raised under this head is the extent to which the repayment of the mortgage from the proceeds of drug offending means Ms de Leon’s interests in the property were tainted. We now address that issue.

“Tainted property”?

[25] Mr Ord for Ms de Leon makes three principal submissions. First, he emphasises that Ms de Leon made a substantive contribution to the property and that contribution was not tainted. Rather, it was derived from legitimate savings and not from significant criminal activity. Secondly, it is said that Miller J was wrong to find that Clover Road was relationship property and that Mr Doorman had an interest in it. Finally, even if the property was relationship property it is by no means certain Mr Doorman would have an interest in it.
[26] The starting point for our analysis is s 50 of the Act. Section 50(1) states that if, on an application for an assets forfeiture order, the Court is satisfied on the balance of probabilities that the property in issue is tainted, the Court must make an assets forfeiture order in relation to that property.
[27] The definition of “tainted property” is set out in s 5(1). That section states that tainted property:
[28] “Property” has a wide definition and the definition provides that it means:[10]
[29] “Interest” in relation to “property” means:[11]
[30] The respondent’s case was that while Ms de Leon’s untainted property was the source of the appellants’ initial equity in the house, the property became tainted because Mr Doorman’s money from his drug offending paid the interest and principal on the mortgage. Payments of principal and interest to the bank over the period from October 2007 to October 2009 totalled over $112,000. The amount in cash paid to Ms de Leon’s mortgage account over that period was over $85,000. The Judge said the evidence showed that “most” of the total payments to the bank over this period were from Mr Doorman’s cash deposits.[12] Miller J’s finding was as follows:

[33] ... I am satisfied that the mortgage was routinely paid by Mr Doorman, using cash that he paid into Ms de Leon’s account. That cash was substantially if not entirely derived from cannabis cultivation.

[31] The Judge noted that for the purposes of forfeiture it was sufficient if the property was derived in part from cannabis cultivation. He concluded that because it was derived in part in this way it was tainted and must be forfeited subject to the application for relief.
[32] On the factual findings, which are uncontested, Ms de Leon’s interest in the property has been in part directly or indirectly derived from significant criminal activity. It is not possible in this factual situation for Ms de Leon to separate out her initial contribution from the later contributions that have increased her equity in the property.
[33] An alternative argument, although not run expressly for Ms de Leon, is that the words “acquired” and “derived” in the definition of tainted property are effectively synonyms, or at least do not encompass a reduction of the principal and/or interest under a mortgage.
[34] In a separate judgment[13] we have upheld the decision of Andrews J in Commissioner of Police v Duncan[14] and rejected a similar argument. It fails because of the width of the relevant definitions, in particular, that “property” is defined to include an interest and that “tainted property” includes property added to in part.
[35] Mr Ord submits that Duncan is distinguishable on the facts. It involved more serious offending (methamphetamine) and both Mr and Mrs Duncan had some involvement. Neither of those factors alter the impact of the definitions. In addition, the Judge said he did not believe Ms de Leon when she denied knowledge of Mr Doorman’s activities. He made the point the drug growing operations were “substantial” and were carried on “for a considerable time” at properties where she lived.[15] Given her own financial circumstances, the Judge said “she cannot have been indifferent to the money which supported the family and paid the mortgage at Clover Rd”.[16] The unchallenged finding is that Ms de Leon “benefited knowingly” from the cannabis cultivation.[17]
[36] We should add that we agree with Miller J that as the house was the family home, Mr Doorman had an interest in it. That arose because of his interest under the Property (Relationships) Act 1976. As Mr Webber notes, there was no evidence of contracting out of that Act. In Duncan, we have accepted that such an interest can comprise an interest in property under the Criminal Proceeds (Recovery) Act. While a 50/50 split in the family home is not guaranteed, Mr Doorman can be said to have had an equitable interest in the property which is sufficient to meet the statutory definition. On this analysis, the property is tainted because Mr Doorman’s interest in it is derived at least in part from the benefits of his drug offending.

Was Miller J correct to conclude that Ms de Leon’s unexplained income was $366,607.20?

[37] Both appellants rely on this ground of appeal.
[38] The first point we need to deal with in this context is Ms de Leon’s application to adduce as new evidence an affidavit from her and an affidavit from her accountant. This evidence relates to her income from Sealord up to her redundancy in September 2007 and the payment to her of over $100,000 by way of redundancy at the end of September 2007.

Should the new evidence be admitted?

[39] The threshold for the admission of new evidence is well established.[18] We agree with the Crown that the proposed new evidence does not meet the freshness requirement. There were numerous references in the evidence at trial to this money and some reference to the period of financial review relating to Ms de Leon. In any event, it was very much a matter within Ms de Leon’s knowledge. This aspect was plainly in issue and no explanation was given by her as to why further evidence of this type was not filed at the time in a situation where candour on these matters is expected.[19] Accordingly, we decline to admit this evidence.
[40] We are satisfied that, in any event, the point sought to be advanced by reference to this new evidence is without merit.
[41] Ms de Leon’s submission relates to the source and disposition statement prepared by Melanie van der Pol, a financial analyst for the New Zealand Police, which was before the High Court. Ms van der Pol explained in her evidence that her source and disposition statement covered a period of 20 July 2005 to 10 September 2009 for Mr Doorman and from 26 September 2007 to 30 October 2009 for Ms de Leon. Ms de Leon says that the approach taken in the source and disposition statement was wrong because it ignored over $200,000 of legitimate income she earned because the financial review period for her commenced some time after she was made redundant and received various payments.
[42] We agree with the submissions for the respondent that this criticism is misconceived. The purpose of the source and disposition statement, as Ms van der Pol explained, was to determine if the appellants had access to income from an unidentified source. The statement analyses where money came from and where it went. All known expenditure is compared with all known sources of income for a given period. A net deficit of funds indicates there is an additional unexplained source of income during the period under review.
[43] Ms de Leon’s approach is to deduct from the unlawful benefit of over $366,000 identified by Ms van der Pol her legitimate income received in an earlier period. As Mr Webber for the respondent submits, that ignores the fact most of these legitimate funds had been spent by the time the financial review period for her had commenced. That is apparent from her bank records. The only funds remaining in her bank account (some $10,000) were taken into account in the source and disposition statement. Further, of the over $366,000 in cash deposits and cash expenditure, all but $7,000 was deposited or spent from 2008 onwards after Ms de Leon was no longer working.
[44] There was no suggestion in Ms de Leon’s evidence in the High Court that the cash deposits and expenditure forming the basis of the calculation on unlawful benefit came from her legitimate income. As we have indicated, the Judge roundly rejected the alternative explanations of the sources of this money from the appellants.[20] That is not surprising given the nature of those explanations. For example, Mr Doorman said he had buried a bucket of cash prior to his bankruptcy in January 2003 but did not tell the Official Assignee about it instead declaring he had no assets. As Miller J noted, “[t]he buried bucket was said to contain the entire proceeds of a house sale”.[21] Ms de Leon was similarly unable to explain the source of the money used to support the family. The Judge said that the most she could say was that she did not know where Mr Doorman got the money from.

Was the unlawful benefit overstated?

[45] We should at this point deal with the submission from both appellants that the unlawful benefit is overstated by $60,000. To understand this submission it is necessary to refer to some of the detail in the source and disposition statement prepared by Ms van der Pol. For the period from 20 July 2005 to 30 October 2009 the source and disposition statement has a heading “Unknown Source of Funds Cash report”. The statement goes on to list under this topic a further heading “Funds Used By The Respondent”. Some cash purchases and then a number of cash deposits banked to the credit card and to various bank accounts are listed. These items when added up total a sum of $366,607.20. Ms van der Pol then has a further heading “Funds Available To The Respondent”. What follows then is a list of ATM drawings, cash drawings, cheque expenses and unidentified withdrawals. Those items when added up total $63,527.70. Underneath this the source and disposition statement records that the funds from unknown sources are $303,079.50.
[46] The appellants say it follows from the way that these sums are treated in the statement that the funds available from unknown sources, that is, the unexplained unlawful benefit, is the $303,079.50 figure, not the $366,607.20 figure. However, the position is that in this respect Ms van der Pol has effectively given the appellants the benefit of the doubt. She was working on the basis that she could not show that the $63,000-odd figure had not been re-banked having been withdrawn from, for example, an ATM machine or by means of a cheque. The Commissioner however did not accept this approach and the Judge found that the appellants had not shown that the amount of the unlawful benefit identified by the respondent was wrong. We agree. It is not plausible to suggest that this amount of money was recycled through the bank accounts. Nor were we referred to any evidence from the appellants to support the proposition that this is what occurred.[22]
[47] One final point we need to deal with under this heading is the criticism by Mr Doorman of the Judge’s conclusion that the police had not failed to recognise any legitimate income. The criticism arises because Miller J said it was “very unlikely” that anything more than a small portion of the party’s income was legitimate.[23] The argument is that if a figure is to be deemed to be an unlawful benefit then it should be, in terms of s 53 of the Act,[24] the exact figure.
[48] As Mr Webber points out, the onus was on the appellants to prove on the balance of probabilities that the value in the police application was not correct.[25] In any event, when read in context, it is plain Miller J did not mean there was any doubt about the amount of the unlawful benefit. The Judge did not find that some of the cash deposits and expenditure relied upon by the respondent as unlawful benefits were in fact legitimate income.

Was there power to make a profit forfeiture order?

[49] Both appellants say that there was no power to make the profit forfeiture order where the only property identified as property to be disposed of was the Clover Road house which had been the subject of an asset forfeiture order. The appellants submit that the focus of the Act is on stripping assets rather than on effectively imposing a burden on potential assets acquired at some future time. The respondent supports the approach taken by the Judge. Mr Webber also submits that providing the applicant can refer to some property in which the respondent holds an interest, the threshold is crossed and a profit forfeiture order can be made.
[50] In order to assess the submissions we first discuss the relevant provisions relating to profit forfeiture orders and the statutory purpose.

The relevant provisions

[51] Section 3(1) of the Act states that its primary purpose is to:

establish a regime for the forfeiture of property—

(a) that has been derived directly or indirectly from significant criminal activity; or
(b) that represents the value of a person’s unlawfully derived income.
[52] Section 3(2) goes on to provide that the criminal proceeds and instruments forfeiture regime established under the Act relevantly proposes to:
[53] In addition, it is helpful to refer to the overview of the Act set out in s 4. Section 4(1) states that “[i]n general terms” the Act:
[54] The requirements for the contents of an application for a profit forfeiture order are set out in s 52. The respondents must be named, and the significant criminal activity from which the respondent is alleged to have benefited must be identified along with the value of the unlawful benefit. Importantly, s 52(d) states that an application for a profit forfeiture order must:

identify the property in which the respondent holds interests and the nature of those interests.

[55] If the Commissioner proves, on the balance of probabilities, that the respondent has in a relevant period of criminal activity unlawfully benefited from significant criminal activity then the value of that benefit is presumed to be the value stated in the relevant application.[26] That presumption may be rebutted by the respondent on the balance of probabilities.[27]
[56] Before the High Court makes a profit forfeiture order, the Court must determine the maximum recoverable amount. That is done in this way, namely, by:[28]
[57] The key section for these purposes is s 55(1). That provides that the High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that the respondent has unlawfully benefited from significant criminal activity within the relevant period and that “the respondent has interests in property”.
[58] Section 55(2) states that the profit forfeiture order must specify the value of the benefit calculated in accordance with s 53, the maximum recoverable amount determined in accordance with s 54 and the property that is to be disposed of in accordance with the procedure set out in s 83(1) “being property in which the respondent has, or is treated as having, interests”.
[59] Section 55(3) provides these subsections are subject to s 56 which deals with the exclusion of the respondent’s property from a profit forfeiture order because of undue hardship.
[60] Section 55(4) provides that a profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it. The maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.

Discussion

[61] The issue of interpretation raised by this part of the appeal is not without difficulty. Miller J acknowledged that the requirements in ss 52 and 55 meant that the approach contended for by the appellants was open. But the Judge considered that the “better reading” of the Act consistent with the purpose of “confiscating unlawful benefits of any sort and reducing the rewards of crime” was that a profit forfeiture order can be made although no property is realised under that order.[29] Miller J continued:

[46] ... The Act permits multiple forfeiture orders, and s 55 primarily establishes a debt recoverable as a result of civil proceedings. Subsection (2) is designed to ensure that there is no double counting, in that the maximum recoverable amount, which is the amount subject to profit forfeiture, must exclude the value of any assets forfeited. The section also contemplates that any property realised under s 83 might not suffice to meet the profit forfeiture order.

[47] The Court has no discretion to adjust the amount recoverable under the profit forfeiture order. The statute provides that the maximum recoverable amount is the sum recoverable as a debt to the Crown under the order.

[62] We take a different view. We consider that the wording of the Act means that before a profit forfeiture order can be made, property must be specified in the order as the property to be disposed of. We emphasise the requirement in s 52 that the application for a profit forfeiture order identify the property, the prerequisite that there be an interest in property in s 55(1)(b) and, particularly, the reference to “the property that is to be disposed of” in s 55(2)(c). It is difficult to see what the latter requirement means if not a requirement to specify the property subject to the order.
[63] On its own, s 55(4), which treats a profit forfeiture order as a debt due to the Crown recoverable by the Official Assignee, may support the respondent’s approach. However, that section must be read alongside the other requirements in s 55 indicating that it is necessary to have interests in property and to specify the property that is the subject of the order. Our interpretation is supported by s 83 which deals with how the Official Assignee is to discharge a profit forfeiture order. That section envisages payment to the Crown of amounts related to sums resulting from realisation of the property.
[64] The sections in the Act dealing with the statutory purpose we have set out above show the Act is intended to deter criminal activity of the sort engaged in by Mr Doorman and to eliminate profit from such activities for persons such as the appellants.[30] However, those purposes are linked to property that is identifiable, albeit that may be hidden in some way. In this sense, the focus is on clawing back the value of property interests, broadly defined, rather than on the value of lifestyle choices that are not reflected in property.
[65] The legislative history suggests that the intention was that profit forfeiture orders would be available where a person has profited from significant criminal activity, but concealed those assets.[31] We consider that the Act does provide for that so long as the Court can be satisfied of the existence of such property. The distinction we draw is between that scenario and the present case where the profit forfeiture order is simply creating a capacity for a future debt.
[66] For these reasons, we consider there was no power to make a profit forfeiture order in this case. The appellants’ appeals accordingly succeed in this respect.

Should either appellant have been granted relief from forfeiture?

[67] Three issues arise under this heading. First, Mr Doorman says that he should have had relief from forfeiture on hardship grounds. Secondly, Ms de Leon submits that partial forfeiture was available and should have been ordered on the basis of hardship. Finally, Ms de Leon submits that the interests of the children are sufficient to warrant relief and their interests should have been canvassed at the hearing. We deal with each issue in turn.

Mr Doorman’s case

[68] In support of his argument for relief from forfeiture, Mr Doorman makes two key points. First, he says that the hardship criterion is met because his sentence did not take account of the forfeiture order. If there had been a forfeiture order made as part of the sentencing process as was possible, he would have had a reduction in sentence as has occurred in other cases.[32] Secondly, Mr Doorman refers to the fact that he supports two children and Ms de Leon. They have no other assets apart from a video rental business which is not doing very well. The additional civil debt imposed by means of the profit forfeiture order in circumstances where he has no capacity to meet it is just creating a debilitating hardship beyond deterrence.
[69] On the first point, the forfeiture application had been made by the time Mr Doorman was sentenced and a restraining order made. Mr Doorman asked for and obtained a sentencing indication and pleaded guilty on the basis of that indication. In those circumstances, no issue of hardship arises. We accept the position may have been different if the forfeiture order had not been signalled prior to sentencing although it seems likely that the usual remedy in such a case would be an appeal against sentence.[33]
[70] As to the financial hardship aspect, we accept that the outlook for Mr Doorman is a tough one. However, Mr Doorman cannot point to anything that makes the hardship undue particularly where, as Miller J said:

[49] ... I have assumed that he [had] an interest in Clover Rd as relationship property, but his interest in the property and in the profits subject to forfeiture is entirely attributable to drug dealings. I accept that the couple’s income from legitimate sources is modest, at about $400 net per week, and their video rental business is not doing well. He will suffer hardship, along with Ms de Leon and the children, from losing the family home, and he points to a bad back and his age, which he describes as midforties. He appeals for relief that will preserve the family home, saying he is devoted to the family and needs something to live for. But where a home is tainted property its forfeiture and resulting dependence on a benefit and state rental housing does not ordinarly work undue hardship on someone who knowingly participated in the relevant criminal activity.

(Footnote omitted.)

Ms de Leon’s position

[71] In terms of hardship for Ms de Leon, it is submitted that making the asset forfeiture order was reasonably likely to cause Ms de Leon undue hardship. Ms de Leon also says partial forfeiture is possible especially where, as here, the Clover Road property has been sold so the “property” at issue is the money held by the respondent.
[72] We doubt that partial forfeiture is available. Section 51(1) deals with the ability to exclude “certain property” from an assets forfeiture order if “undue hardship is reasonably likely to be caused to the respondent if the property is included in the assets forfeiture order”. This wording may be contrasted with that in s 142N of the Sentencing Act which provides that the court may order that the instrument of crime “or any part of it” be forfeited to the Crown.
[73] In Elliot v R[34] this Court said that if this wording had been present in the former Proceeds of Crime Act, the Court in R v Dunsmuir[35] (a case decided under that Act) would have considered there was jurisdiction to order forfeiture of part of the property despite the fact the property was held in one title. The addition of the words “any part”, absent in s 51, was accordingly significant. The nature of the property does not alter the position.
[74] In any event, we do not consider the Judge was wrong to conclude that Ms de Leon was reasonably likely to suffer undue hardship. We accept, as did Miller J, that hers was a more difficult case. Ultimately, however, we agree with his assessment.
[75] Miller J put it in this way:

[50] ... She was convicted of no crime, and her untainted assets were the source of the original equity of $150,000 in Clover Rd. Her legitimate income, including redundancy payments, contributed to payments of principal and interest under the mortgage. The property is tainted but the taint can be quantified only to the extent that $85,557.20 was paid in cash into her mortgage account during the review period and used to meet payments of interest and principal. It is the family home and she would be left without assets if the property is forfeited. For reasons explained below, it is not possible to grant her relief from the profit forfeiture order so she will be left owing a substantial debt to the Crown in any event.

[51] Against that, Ms de Leon benefited very substantially from Mr Doorman’s activities, which I have found she knew about. The amount of the unlawful benefit that she and Mr Doorman jointly gained was $366,607.20 over the review period. That far exceeds the couple’s present equity in Clover Rd. The loss of her general equity in the property is also attributable to causes other than forfeiture; apart from her decision to make it relationship property, I have mentioned its building defects and the recent decline in property values. Assuming she is entitled to a half share of relationship property, she would lose only $58,362 under an asset forfeiture order. That is far less from the amount of cash income that was paid into her bank accounts and far less than a half share of the unlawful benefit. The property must be sold in any event to realise Mr Doorman’s interest in it. Standing back, I am unable to accept that she would suffer undue hardship from the asset forfeiture orders in the circumstances. I note too that the Crown might elect to bankrupt her if she were left with any equity in Clover Rd, because she cannot be granted relief from the profit forfeiture order.

[76] We do not need to consider the application for relief in relation to the profit forfeiture order.

The children’s interests

[77] Finally, Ms de Leon submits that the interests of the children should have been given attention. In particular, she says that the children were entitled to be heard and that they had an interest in the Clover Road property in respect of which relief was available under s 66 of the Act.
[78] No application was ever made under s 62 for relief from the assets forfeiture order. The time for making such an application has now expired and no extension of time granted by the High Court. No evidence has been provided as to the nature of the children’s interest in the property other than that it was the family home. Nor is there any evidence as to any particular consequences of forfeiture on the children or any indication their interests are advanced separately from those of the appellants.
[79] The high point of the case in this regard is that the two children, who we understand are now aged about six and 11, will suffer from the loss of the family home.
[80] In these circumstances, we see no basis for allowing an application under s 62 to be made out of time. Nor is there any basis for taking a different view on the applications for relief because of the effect on the children.

Result

[81] For these reasons, the application by the second appellant for leave to adduce new evidence is dismissed. The appeal by both appellants against the profit forfeiture order to the value of $249,482.63 is allowed. The profit forfeiture order is quashed. The appeals are otherwise dismissed. The appellants’ interest in the property at 121 Clover Road East remains forfeit. In the circumstances, we make no order as to costs.







Solicitors:
Crown Solicitor, Nelson for Respondent

[1] The Commissioner, New Zealand Police v Doorman HC Nelson CIV-2010-442-169, 15 December 2011.

[2] At [4]–[10].

[3] At [7].

[4] At [8].

[5] R v Doorman DC Nelson CRI-2009-042-3617, 29 June 2010 [sentencing remarks].

[6] Sections 142A–142Q. There are references back to the Criminal Proceeds (Recovery) Act 2009.

[7] Sections 15 and 16.

[8] Although this was the figure recorded by Miller J, we make out the correct figure to be $249,882.63. This is arrived at by subtracting the appellants’ equity in the Clover Road property of $116,724.57 from the unlawful benefit of $366,607.20.

[9] Sentencing remarks, above n 5, at [1].

[10] Section 5(1).

[11] Section 5(1).

[12] At [33].

[13] Duncan v Commissioner of Police [2013] NZCA 477.

[14] Commissioner of Police v Duncan HC Tauranga CIV-2010-470-933, 11 October 2011.

[15] At [29].

[16] At [29].

[17] At [29].

[18] Paper Reclaim Ltd v Aotearoa International Ltd (No 1) [2006] NZSC 59, [2007] 2 NZLR 1; Airwork (NZ) Ltd v Vertical Flight Management Ltd [1999] 1 NZLR 641 (CA).

[19] See Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 194.

[20] Of Mr Doorman, Miller J observed that he had never “heard a witness lie less convincingly”: at [27].

[21] At [27].

[22] There was some cross-examination of Detective Bell about the possibility of money being banked into one account and then withdrawn and put into another bank account but the Detective thought that documents showing that would have been discovered and they had not been.

[23] At [39].

[24] See below at [55].

[25] Section 53.

[26] Section 53(1).

[27] Section 53(2).

[28] Section 54(1).

[29] At [46].

[30] See Brazendale v R [2011] NZCA 494, (2011) 25 CRNZ 580 at [13] and [38]; Elliot v R [2011] NZCA 386, [2011] 3 NZLR 811 at [34]–[35].

[31] Criminal Proceeds (Recovery) Bill 2007 (81-1) (explanatory note) at 3.

[32] For example Brazendale, above n 30, at [39].

[33] In this case, Mr Doorman has served his sentence.

[34] Elliot, above n 30, at [41].

[35] R v Dunsmuir [1996] 2 NZLR 1 (CA).

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