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Hayward v Commissioner of Police [2014] NZCA 624 (18 December 2014)

Last Updated: 13 January 2015

     
IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellant
AND
 Respondent
Hearing:
20 November 2014
Court:
Randerson, White and Courtney JJ
Counsel:
C F L Godinet for Appellant M R Harborow and R K Thomson for Respondent
Judgment:


JUDGMENT OF THE COURT

The appeal is dismissed.
____________________________________________________________________

REASONS OF THE COURT

(Given by Courtney J)

[1] Jene Hayward pleaded guilty in 2011 to charges of being in possession of cocaine for supply on 18, 21 and 24 December 2009 and was sentenced to four years nine months’ imprisonment.[1] The Commissioner of Police applied for asset and profit forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (CPRA). Venning J found that, in addition to the admitted December 2009 drug dealing, Mr Hayward had been involved in drug dealing at other times between 1 January 2008 and March 2011 from which he had derived a benefit of approximately $397,540.[2] In making this finding the Judge rejected Mr Hayward’s explanations as to the source of money remitted to him from Romania and Australia and the circumstances in which he acquired a Rolex watch.
[2] Venning J made asset forfeiture orders in respect of a Ducati motorcycle, commemorative coins and $3,606.50 cash and a profit forfeiture order to a maximum recoverable of $382,259, directing that Mr Hayward’s property be realised to meet that sum. Mr Hayward appeals Venning J’s decision on the grounds that:
[3] The Judge also determined an application by Mrs Hayward for relief from forfeiture. Her appeal against that decision has been allowed in part for the reasons given in our separate judgment.[3] Mr Gay, who appeared for Mrs Hayward, substantially carried the argument for both appeals. Mr Godinet, for Mr Hayward, supported those submissions in his written submissions and in brief oral argument.

First ground of appeal: the Commissioner’s application was limited to significant criminal activity in December 2009

[4] Under s 52 CPRA an application for a profit forfeiture order must “describe the significant criminal activity within the relevant period of criminal activity from which the respondent is alleged to have unlawfully benefited”. Venning J recorded the Commissioner’s position as being that Mr Hayward had been involved in drug dealing before December 2009 and continued until he was arrested in March 2011. The decision specifically identified as an issue for determination whether Mr Hayward had been engaged in significant criminal activity in addition to the December 2009 offending of which he was convicted.
[5] Mr Gay submitted that the Commissioner’s application had been made only in respect of Mr Hayward’s drug dealing in December 2009, so that Venning J was not entitled to make findings of significant criminal activity at other times.
[6] The Commissioner’s application of 21 April 2011 noted that:

Mr Hayward is currently subject to the criminal proceedings relating to the operation named Dreadnought, evidence forthcoming from that trial will be introduced as further evidence in the course of the proceedings;

[7] The value of the benefit for the purposes of profit forfeiture orders was described as being “at this stage (pending further inquiries) $404,293”.
[8] The application was supported by an affidavit from Detective Wayne Gray. It canvassed the evidence supporting the allegations of significant criminal activity in respect of which the criminal charges had been laid. These were specifically directed to December 2009. However, the detective also expressed a belief that Mr Hayward had continued to be involved in dealing cocaine between December 2009 and February 2010. He referred to the fact that although Mr and Mrs Hayward were in receipt of welfare benefits Mr Hayward owned valuable assets, including the property, motorcycles and some cash. The property had been purchased in 2007 for $375,000. At the time of the application Mr Hayward owed just $9,340.01 under a mortgage loan on it.
[9] Mr Hayward opposed the application and filed an affidavit, sworn 15 July 2011, in opposition giving a detailed account of his financial dealings going back to 2003. We return to this affidavit later. It is sufficient to note at this stage that Mr Hayward described the establishment, operation and sale of three businesses during the relevant period; a bungee jumping business in Greece, a firewood business in Auckland (Auckland City Firewood) and a café in Auckland (the Tiki Boy Café). He asserted that he received both income and capital sums from these businesses, as well as a Rolex watch as part payment for the firewood business. Mrs Hayward also filed an affidavit addressing aspects of these businesses.
[10] As a result of those affidavits the Commissioner obtained examination orders and examined Mr and Mrs Hayward. Early in his interview Mr Hayward was asked to tell Detective Gray about “your income including cash and benefits from 2008 - 2011 when arrested”. When Mrs Hayward was interviewed she was asked about “what income you have had since January 2008”.
[11] Detective Gray filed a further affidavit in support of the Commissioner’s application sworn 1 November 2011. He described investigations into Mr Hayward’s financial affairs. He referred to income tax returns filed between 2005 and 2010 and noted that Mr Hayward had not declared any overseas income for that period and had only declared New Zealand income from the Tiki Boy Café. Detective Gray also observed that in the Inland Revenue Department documentation there was no reference to Auckland City Firewood.
[12] Mr Hayward filed a further affidavit dated 30 March 2012 responding to some of these matters. Detective Gray provided a third affidavit dated 8 May 2012 directed specifically to the Ducati motorcycle.
[13] Mr Gay acknowledged that he knew from Detective Gray’s second affidavit that the Commissioner was targeting assets acquired before December 2009 and accepted that an affidavit filed in support of an application is properly viewed as part of the application itself. However, he argued that because the Commissioner’s application only referred to the first affidavit it was limited to the scope of that affidavit.
[14] We do not accept that the Commissioner’s application was limited in this way. The original application signalled that additional material was likely to be provided in support of it and by the time the application was heard Mr and Mrs Hayward and their counsel were well aware that the Commissioner was focusing on the period between January 2008 and March 2011. In particular, Detective Gray’s second affidavit made it absolutely clear that the Commissioner was alleging significant criminal activity in the period prior to December 2009. Although a specific allegation of drug dealing was not made, it was obvious that the Commissioner was inviting this inference from the substantial unexplained cash deposits coming into Mr Hayward’s bank accounts in the period leading up to and after the time at which he was, on his own admission, dealing in cocaine.
[15] Further, a year before the hearing of the application Venning J determined an application by Mr Hayward for orders for the issue of subpoenas of witnesses whose statements to the police had formed part of Detective Gray’s first affidavit.[4] In the course of that decision Venning J referred specifically to the fact that the Commissioner’s application was not limited to unlawful benefit derived from the offences to which Mr Hayward had pleaded guilty. For example, the Judge said:

[11] ... The basis for the application is the figure nominated by the Commissioner of $404,293 as the value of the respondent’s benefit from his significant criminal activity.

...

[20] Drug dealing, which the Commissioner’s application is premised on, satisfies the requirement under s 6(1) [of the CPRA]. Section 6(2) makes it clear that it is unnecessary that the respondent to an application even be charged or convicted of an offence in connection with that activity. In Mr Hayward’s case he has been charged and convicted of drug dealing offences. However, the amount the Commissioner may recover under the s 53 application, is not restricted to the unlawful benefit the respondent may have received from the offences he was convicted on. The issue under s 55 is whether the respondent has benefited from significant criminal activity, not the value of the transactions he was convicted of.

...

[24] On the Crown’s analysis, during the period January 2007 to the date of his arrest, Mr Hayward purchased motorcycles and other assets including collectable coins and cash on hand to a value of approximately $56,837. In September 2010 he received telegraphic transfers from Romania totalling in excess of $119,000. Further, he received other substantial cash deposits totalling $247,371. Even without taking account of the money Mr Hayward paid to purchase the drugs in relation to the offending which he was convicted on, the Crown estimates over $420,000 has either been received or applied by Mr Hayward at a time when his declaration of income was minimal.

[16] Not only is it clear that the Commissioner’s application was made in relation to the period 2008–2011, but Mr Gay’s opposition was advanced on the same basis. Although Mr Gay said that he had approached the hearing in the belief that the Commissioner’s case was fundamentally flawed because the application did not mention significant criminal activity other than in December 2009 and referred only to the first affidavit, he did not object to Detective Gray’s second affidavit. Instead, his submissions in the High Court were squarely on the basis that the assets acquired before December 2009 had not been acquired through criminal activity rather than on the basis that the Commissioner was not entitled to rely on evidence about that period.
[17] Nor was there any prejudice to Mr Hayward in the Commissioner relying on a wider period of significant criminal activity than that identified in the original application and affidavit. Mr Gay submitted that, had an amended application been filed, Mrs Hayward would have been permitted to advance more evidence relating to the acquisition of the assets but there was no application for leave to adduce further evidence for the purposes of the appeal and no suggestion that any other evidence existed.

Second and third grounds of appeal: the Judge wrongly rejected Mr Hayward’s explanations for the cash from Romania and the Rolex

[18] The Commissioner’s case was essentially that in light of Mr Hayward’s minimal declared income between 2005 and 2010, there was no credible explanation for various cash deposits into Mr Hayward’s bank accounts or for the Rolex.
[19] Mr Hayward claimed that the cash deposits were the profits and proceeds of sale of the bungee business, the firewood business and the Tiki Boy Café. Although Venning J accepted that these businesses had existed, he rejected them as the sources of the cash and the Rolex, inferring from the lack of credible explanations coupled with Mr Hayward’s involvement in serious drug offending in 2009 that they were the proceeds of drug dealing.

The remittance of cash from Romania used to reduce the mortgage

[20] The property was central to the Commissioner’s case. The 2007 purchase price was $375,000. Mr Hayward contributed $70,000 and borrowed $305,000. By March 2011 the loan of $305,000 had been reduced to approximately $9,000. It was not suggested that the property was itself tainted. Rather, the Commissioner asserted that the money Mr Hayward used as a deposit ($70,000) and the money he used to reduce the mortgage loan (approximately $296,000) was obtained from drug dealing because there was no other credible explanation.
[21] Venning J accepted that the $70,000 deposit came from the sale of Mr Hayward’s “General Lee” car (a 1969 Dodge Charger used in the television series “Dukes of Hazard”) to a Mr Michaels in late 2007 for $75,000. However, there was no satisfactory explanation for the money used to reduce the mortgage. The loan account for the mortgage was one of Mr Hayward’s Westpac accounts (the Westpac 91 account). The bank statements for the Westpac 91 account then showed a reduction of the loan by $140,000 on 24 November 2010, leaving $98,104.65 owing. In March 2011 $86,951.09 was credited against the mortgage loan, reducing it to approximately $9,340. Venning J was satisfied that $86,951.09 came from the sale of Tiki Boy Café. This left the $140,000 unexplained.
[22] The $140,000 came from Mr Hayward’s Westpac account (the Westpac 00 account). It was made up of deposits of $57,616 and $62,085 on 27 September 2010 and a further $27,000 on 29 October 2010. The first two sums had, in turn, come into the Westpac 00 account from the Bank of Transylvania in Romania where they were held as approximately USD 42,799 and EUR 34,000. Mr Hayward provided copies of his Bank of Transylvania bank statements. These showed the funds coming into the Bank of Transylvania account in July 2008 in two deposits, each of USD 20,000.
[23] There was, however, no documentary evidence as to the source of the two USD 20,000 deposits. In his examination Mr Hayward identified the source as income from the bungee business that he and a friend, Mr Sullivan, established in Greece in 2003. In the off season Mr Hayward would return to New Zealand, leaving Mr Sullivan in Greece. When he arrived back for the 2005 season he found that Mr Sullivan had been dishonest in relation to Mr Hayward’s share of the profits and it was agreed that the business would be sold, which it was, with Mr Hayward receiving half of the proceeds.
[24] Apart from photographs of Mr Hayward wearing a bungee operator’s t-shirt there was no documentary evidence of any kind to support the establishment, operation and sale of the business. Nevertheless, Venning J accepted that Mr Hayward had a financial interest in the bungee jumping business. But he did not accept that the business was the source of the $57,616.91 deposit (USD 40,000 converted to New Zealand currency) remitted from Romania in 2010:

[61] On Mr Hayward’s evidence he brought €24,000 in total back to New Zealand during 2004 and 2005. On the exchange rates at the time, that would have been between NZD$40,000 and NZD$50,000. That may explain the $56,750 (approximately) in Mr Hayward’s National Bank account in March 2006, but it does not explain the remittances from Romania in September 2010. Mr Hayward says they were from the business, but on his evidence only €20,000 was banked when he sold the business in 2005.

[62] The €20,000 initially deposited with the Bank of Tiriac together with some of the other euro Mr Hayward says he took back to Europe may explain the transfer and remittance of €34,377 in 2010, but it cannot explain the remittance of the additional USD$40,000 from Romania in 2010. From the accounts produced to the Court there were two US accounts, each opened in July 2008 with US$20,000. There is no explanation for the source of those deposits. For the above reasons the sale of the bungy business does not explain them.

[25] Mr Gay said that the Judge’s analysis of the money derived from the bungee jumping business did not take account of the income earned in 2003, nor of income from 2004 that was not repatriated to New Zealand, nor income from 2005. He submitted that the funds transferred from Romania “presumably” included this income. Mr Gay relied on Mr Hayward’s evidence of the revenue generated by the business. But the evidence does not support Mr Gay’s submission. It shows only that Mr Hayward banked 2003 income into a Bank of Cyprus account, repatriated 2004 income to New Zealand and banked part of the proceeds of the sale of the business into the Bank of Tiriac in Romania in 2005.
[26] In his affidavit Mr Hayward said:
  1. [In 2003] the bungee was making good money and I banked some money in my bank account that I had with the Bank of Cyprus. The following year in 2004 I went back to Mykonos for about five weeks and business had increased substantially and at the end of this season I sent home approximately €10,000 to my National Bank. I also brought home €5,000 cash.
  2. In 2005 I again returned to Mykonos, this time with Natalia [his wife]. We went half-way through the season in about mid-July. My absence during the off season enabled my business partner Michael to take more of a hold on the business and I realised that I was marginalised and so Michael and I decided to break the partnership and I sold my share of the partnership to the bar owner on the beach. The business was sold for €70,000 and I received €35,000 of which I banked €20,000 in my account with the Bank of Tiriac in Romania. Of this I brought €9,000 home to New Zealand.

[27] In his evidence, Mr Hayward said:

... we were jumping around a hundred people a day, 80 to 100 people a day and it was 50 Euro a jump, um, and after paying the staff and everything I was getting around anywhere between 800 and 1500 euro a day.

[28] Mr Hayward gave no details of the 2003 income banked into the Bank of Cyprus account. He did give details of the 2004 income but on his evidence all of that came back to New Zealand. There is no reference to any of it being banked into the Bank of Cyprus. Nor did he refer to actually receiving income from 2005 for the half season he was there. There is simply no evidence as to income for that year, only of the capital payment for the sale of the business.
[29] Further, although Mr Hayward had bank statements dating back to 2008 for the Bank of Transylvania account, there were no bank statements produced for the Bank of Cyprus account and no explanation as to why he did not have them.
[30] In short, there was simply no evidence from which the Judge could have concluded that the USD 40,000 in the Bank of Transylvania account represented income from the bungee business. The Judge was therefore entitled to reject the business as the source of those funds.

The Rolex watch

[31] Mr Hayward sold a Rolex watch at auction in March 2009, netting $42,655. He claimed that Mr Michaels, who had bought his “General Lee” car, purchased his firewood business in 2007 for $120,000 in order to acquire Mr Hayward’s truck (worth perhaps $15,000) and gave him the Rolex as part-payment (for a credit of $8,000) of the purchase price, telling him that it was worth $20,000.
[32] At the time, Mr Michaels owned a café in Ponsonby near to Mr Hayward’s Tiki Boy Café. Mr Michaels is now known to be a fraudster but Mr Hayward said that he simply knew Mr Michaels then as another local businessman. However, he claimed that the relationship soon soured because Mr Michaels never paid the balance of the purchase price and then turned on Mr Hayward and arranged for associates to threaten him, beat him and damage his café, partly as punishment for demanding the balance.
[33] Mr Hayward also claimed that Mr Michaels pressured him to meet a debt owing to Mr Michaels by a friend of Mr Hayward. He said that in late 2009 Mr Michaels approached him to say that he had heard that the café was being sold and that if the $30,000 Mr Michaels claimed Mr Hayward owed him was not paid “something bad would happen”. He later received a telephone threat of arson. Shortly afterwards Mr Hayward directed a customer who had been pestering him to become involved in cocaine dealing to Mr Michaels but this led to Mr Michaels pressuring Mr Hayward himself to become involved in the dealing, which ultimately led to his arrest.
[34] The Judge was not convinced that Mr Michaels had purchased the firewood business. Even on Mr Hayward’s evidence Mr Michaels never actually ran the firewood business and the Judge did not accept that he was likely to have agreed to pay $120,000 and part with a valuable watch for a business he did not want. Nor did the Judge accept Mr Hayward’s account of Mr Michael’s threats and stand over behaviour:[5]

It is simply not credible that a fraudster, such as Mr Michaels, would part with a watch worth almost $50,000 for consideration of $8,000. The far more likely explanation is that a watch of that nature would be parted with as part of an illegal transaction involving drugs. I consider that the net proceeds of sale of $42,655 (approximately) from the watch to be unlawful proceeds from drug dealing.

...

The evidence leads to the conclusion that Mr Hayward simply ceased running the firewood business in 2007 when he bought the Tiki Boy Café. Mr Hayward has used his relationship with Mr Michaels in an attempt to explain deposits of money that he is otherwise unable to explain legitimately.

[35] Mr Gay submitted that the Judge wrongly rejected Mr Hayward’s evidence of these dealings and, in particular, was wrong to reject the assertion that Mr Michaels had agreed to buy Mr Hayward’s firewood business. He pointed to the evidence of an $80,000 cheque written in August 2009 by Mr Michaels’ accountant, Mr Skinner, which subsequently bounced (the fact of the dishonoured cheque was proven) as evidence of that indebtedness. Mr Gay argued that, given the kind of man Mr Michaels is now known to be, Mr Hayward’s account was not implausible. Mr Gay suggested that, in fact, Mr Michaels was just the kind of man who might have offered to buy the firewood business to get the truck, with no intention of paying the full purchase price.
[36] This suggestion is inconsistent with Mr Michaels’ parting with a watch worth nearly $50,000. In any event, Venning J’s conclusion was not inconsistent with Mr Michaels being indebted to Mr Hayward; the Judge was simply rejecting the claim that the debt related to the firewood business. We agree with the Judge that the explanation regarding the circumstances in which Mr Hayward acquired the Rolex was implausible and consider that the Judge was entitled to reject it.

Fourth ground of appeal: was it open to the Judge to infer that the money from Romania and Australia and the Rolex came from drug dealing?

Australian telegraphic transfers

[37] Mr Hayward maintained a BNZ account in the name of J C Hayward T/A Auckland City Firewood Supply. A total of $11,667.89 came into his BNZ account by telegraphic transfers from Australia between November 2008 and May 2009. These were $3,341.59 on 24 November 2008, $2,358.04 on 24 December 2008, $4,493.26 on 14 January 2009 and $1,475 on 13 May 2009. The first three of these came from a Ms Bullen, the fourth from a Mr Macfarlane.
[38] Venning J rejected Mr Hayward’s explanation that Ms Bullen and Mr Macfarlane were former flatmates who were passing on money from Mr Hayward’s former bungee jumping partner that was owed to Mr Hayward following the sale of that business. Venning J considered this explanation to be “simply not credible”, given Mr Hayward’s falling out with Mr Sullivan and the lack of any other contact with him.[6] Mr Gay accepted that it was open to the Judge to reject the explanation. But he challenged the Judge’s conclusion that, absent any other proper explanation, they were to be regarded as proceeds of drug dealing.[7]

Was the Judge entitled to infer that the cash and Rolex came from drug dealing?

[39] Following his rejection of Mr Hayward’s explanations regarding the remittance of money from Romania, the telegraphic transfers from Australia and the Rolex, Venning J made specific findings that those assets were the proceeds of drug dealing and later summarised those findings:

[71] Given Mr Hayward’s convictions for dealing in cocaine in December 2009, the substantial amounts of money deposited to his bank account between early 2009 and during 2010, I infer that Mr Hayward was engaged in significant criminal activity, namely drug dealing during the relevant period and particularly after 1 January 2008 and up until his arrest. The number of unexplained deposits and cash purchases (even accepting there is an acceptable explanation for some deposits and purchases), lead me to further conclude that he has unlawfully benefited from that significant criminal activity. Mr Hayward retains interests in property, namely the ... property and several motorbikes.

[40] Mr Gay submitted that, even if it was open to the Judge to reject Mr Hayward’s explanations, he was not entitled to infer from the remaining evidence that the source of the money and the watch was drug dealing. We are satisfied that he was.
[41] The Judge’s conclusion that the cash and the watch came from drug dealing rested on the following events: in 2008 USD 40,000 was paid into Mr Hayward’s Bank of Transylvania account for which there was no credible explanation; between late 2008 and early 2009 funds came to Mr Hayward’s account from Australia for which there was no credible explanation; in early 2009 Mr Hayward sold a valuable watch and could not give a credible explanation as to its acquisition; in late 2009 Mr Hayward was dealing in cocaine; in 2010 the money from the Bank of Transylvania was remitted to Mr Hayward’s New Zealand account.
[42] We consider that these events and the timing of them provided an adequate basis for the inference that Mr Hayward was involved in drug dealing in December 2009 and both before and after that time, in particular, that the Rolex and the funds that came from Romania and Australia were the proceeds of that activity.

Result

[43] The appeal is dismissed.







Solicitors:
Jespersen & Associates, Auckland for Appellant
Meredith Connell, Auckland for Respondent

[1] R v Hayward HC Auckland CRI-2011-092-4639, 13 September 2011.

[2] Commissioner of Police v Hayward [2013] NZHC 1358.

[3] Hayward v Commissioner of Police [2014] NZCA 625.

[4] Commissioner of Police v Hayward [2012] NZHC 1097.

[5] Commissioner of Police v Hayward, above n 2, at [67]–[68].

[6] At [68].

[7] At [63].

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