Commissioner of Police v Drummond [2018] NZHC 1730 (13 July 2018)

Last Updated: 3 August 2018

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY I TE KŌTI MATUA O AOTEAROA TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2018-463-28 [2018] NZHC 1730

UNDER	The Criminal Proceeds (Recovery) Act 2009
BETWEEN	THE COMMISSIONER OF POLICE Applicant
AND	CHARLES ALBERT WILLIAM DRUMMOND Respondent

Hearing:	13 July 2018
Appearances:	R W Jenson for Applicant W T Nabney for Respondent
Judgment:	13 July 2018

JUDGMENT OF LANG J

[on application for order for sale of restrained assets]

This judgment was delivered by me on 13 July 2018 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date...............

COMMISSIONER OF POLICE v DRUMMOND [2018] NZHC 1730 [13 July 2018]

[1] The Commissioner of Police has obtained restraining orders over assets owned by the respondent, Mr Drummond. These include a 2007 Toyota Hilux 3.0TD Utility registration number DTK34, a 2005 Toyota Hilux 3.0TD Utility registration number EEW957 and a White Pointer Pro Sportsman 840 Boat named “Windy Lee” and an associated trailer. Those items are currently being stored and maintained by the Official Assignee.

[2] The Commissioner now seeks orders permitting the Official Assignee to sell the assets. He does so because the present proceeding will not be determined until criminal proceedings against Mr Drummond have been resolved. That is unlikely to occur until late 2019 at the earliest. The Commissioner is concerned that the costs of storing the assets and the likely depreciation in their value whilst being stored will be considerable. This will significantly reduce the value the Commissioner will receive if the assets are ultimately the subject of forfeiture orders in the Commissioner’s favour.

[3] Mr Drummond does not oppose the sale of the vehicle having the registration number EEW957. I therefore made an order directing the sale of that item on 3 July 2018. Mr Drummond opposes the sale of the boat and the other vehicle.

The boat “Windy Lee”

[4] Mr Drummond opposes the boat and trailer being sold because his son-in-law contributed a significant part of the purchase price of both the trailer and the boat, and therefore has an interest in both assets. He says his son also contributed to the purchase of the boat.

[5] The evidence before the Court suggests the boat and trailer have a current value of around $170,000. The Commissioner will be required to spend $17.80 per day ($6,497 per annum) on storage costs. In addition, the Commissioner believes the boat will depreciate in value. A depreciation schedule published by the Department of Inland Revenue suggests that pleasure boats have a diminishing value percentage of 13 per cent per annum and a straight line depreciation rate of 8.5 per cent per annum.
[6] I give the latter little weight in the present context because it applies to boats that are in use. This boat will be stored and maintained in conditions designed to minimise any depreciation in value. I accept that the storage costs are likely to be reasonably significant. Even so, however, the value of the boat is high. The costs of storing it are unlikely to be so significant as to justify an order for sale being made on that ground alone.

[7] Given the value of the boat and the prospect that other persons may have an interest in it, I do not consider it appropriate for the boat to be sold at this stage. The Commissioner has leave to renew the application if the criminal proceedings show no sign of being resolved by the latter part of 2019.

The vehicle

[8] The vehicle is said to have a value of approximately $18,000. It will cost
$13.50 per day ($4,927 per annum) to store it.

[9] Mr Drummond opposes the sale of the vehicle because it formerly belonged to his wife, who is now deceased. He says the vehicle has sentimental value to him for that reason.

[10] The Commissioner again relies on the depreciation schedules published by the Department of Inland Revenue, this time in relation to motor vehicles. The schedules set the diminishing value percentage for motor vehicles at 30 per cent, whilst straight line depreciation sits at 21 per cent per annum. Again, however, the Commissioner’s schedules are likely to reflect the depreciation of motor vehicles that are in daily, or at least regular, use. Even so, I accept the vehicle is likely to depreciate in value to some extent whilst it remains in storage.

[11] The issue of whether restrained vehicles should be sold has been before the courts on several occasions. In Commissioner of Police v Cavanagh, Venning J observed:¹

¹ Commissioner of Police v Cavanagh [2014] NZHC 2978.

[7] A sale order may be made at any time. Typically sale orders are pursued by the Commissioner where the restrained assets in relation to which the sale orders are sought have high depreciation rates combined with additional costs of storage and insurance which ultimately decrease the potential return to the Commissioner and/or [the] parties who claim an interest in the assets. There is a further additional benefit in the sale in that, once the assets are sold, the Official Assignee is able to hold the funds in an interest bearing account.

[12] Subsequently, in Commissioner of Police v Evans, Brown J did not consider the risk of depreciation and the incurring of storage costs necessarily justified an order being made for the sale of a vehicle that was unlikely to depreciate in value:²

[33] I am not persuaded that an order for immediate sale is warranted in the case of the Holden car. Whilst I recognise that there will be costs associated with storage, and insurance, such costs are the inevitable by- product of asset seizures. I do not consider that it is appropriate to take such expenditure into account in addressing the question posed by s 35(e)(v). Were it otherwise, then in order to defeat an application for sale an owner would need to demonstrate that the vehicle was likely to appreciate in value at a rate at least equal to the annual cost of storage, maintenance and insurance. I do not consider that the section imposes that obligation.

[13] In Commissioner of Police v Blance, Dobson J indicated he was not prepared to fully endorse these remarks. After citing the passage set out above from Evans,
Dobson J observed:³

[52] With respect, I would not go so far as to disregard the relevance of holding costs in all cases. However, in the case of vehicles that are appropriately treated as investments, or at least where the rate of depreciation has bottomed out, nor can the reduction in the eventual return caused by the holding costs be sufficient of itself to warrant an order for sale.

[14] Dobson J noted that the respondents in Blance attributed sentimental or other forms of non-monetary value to two vehicles.⁴ Associated criminal proceedings were also likely to be resolved within the near future. As a result, the length of time until the substantive forfeiture applications could realistically be assessed was not extensive relative to the period during which holding costs had already been incurred. For those reasons Dobson J was not prepared to order that the vehicles be sold.

² Commissioner of Police v Evans [2015] NZHC 1240.

³ The Commissioner, the New Zealand Police v Blance [2018] NZHC 108.

⁴ At [54].

[15] The point to be taken from these cases is that the Commissioner should not assume that sale orders will automatically be made in relation to restrained assets such as motor vehicles. Factors that will need to be taken into account include the nature and value of the asset, the length of time before the substantive proceeding will be determined, the extent to which the asset may depreciate during that period and the wishes of the owner of the assets and/or those who may have an interest in it.

[16] In the present case, the vehicle has only recently been restrained and associated criminal proceedings will take well over a year to resolve. This means the present proceeding will not be determined for some considerable time. Furthermore, there is no reason to believe a 2007 Toyota Hilux utility will hold its value over that period. It is likely to depreciate in value as the Commissioner fears.

[17] I readily accept Mr Drummond has a sentimental attachment to the vehicle but I do not consider this justifies the vehicle remaining in storage for such a long period before the substantive proceeding can be heard.

[18] I therefore grant the order sought by the Commissioner in relation to the second vehicle.




Lang J

Solicitors:

Pollett Legal, Crown Solicitor, Tauranga W T Nabney, Tauranga