COMMISSIONER OF POLICE v BOON HOOI CHEAH [2018] NZHC 2825 [31 October 2018]

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

CIV-2016-404-1926

[2018] NZHC 2825

UNDER

the Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

BOON HOOI CHEAH

Respondent

Hearing:

24 and 25 September 2018

Counsel:

DMA Wiseman and L Fraser for the Applicant

W M McKean and N J Hartwell for the Respondent

Judgment:

31 October 2018

JUDGMENT OF GRICE J

Contents

Introduction [1]

Assets forfeiture order [8]

Significant criminal activity [15]

The cash [16]

The term deposits [18]

Is the ASB term deposit tainted? [28]

Is the Westpac term deposit tainted? [28]

Conclusion [37]

Profit forfeiture order [38]

Significant criminal activity and unlawful benefit [45]

The Comissioner’s submissions [55]

Mr Cheah’s rebuttal [67]

Conclusion [76]

Calculation of maximum recoverable amount [87]

Undue hardship [89]

Conclusion [98]

Costs [103]

Introduction

[1] Mr Cheah is serving a term of six years’ imprisonment following his conviction

for supplying methamphetamine. The charges on which he was convicted relate to

four separate incidents occurring between 31 May and 31 June 2016 when he and an

associate, Brett Wagner, supplied an undercover police officer with the drug.

[2] When police officers searched Mr Cheah’s home at Great North Road,

Auckland on 29 July 2016 they found 293.88 grams of methamphetamine, electronic

scales, numerous zip lock bags and cash amounting to $70,520. They also found a

diary in which Mr Cheah had recorded his drug dealing activities over a period of

74 days from 16 May to 28 July 2016. It recorded the amounts he received on various

days during that period. The total sale proceeds recorded amounted to $99,450.

[3] That diary assumes some importance in this case, as the Commissioner has

extrapolated the information from the 74 days to estimate an income in excess of

$1.8 million from Mr Cheah’s drug dealing. In total, the Commissioner says

Mr Cheah has unlawfully benefited by $2,102,179 from drug dealing.

[4] The Commissioner is seeking orders that Mr Cheah forfeit not only the cash

that was found, but his half share interest in the property at Great North Road and the

contents of his Westpac and ASB accounts. These assets are at present the subject of

restraining orders.1 The deposits and cash are presently held by the Official Assignee.

[5] Applications for forfeiture orders are civil matters brought under the Criminal

Proceeds (Recovery) Act 2009 (the Act).2 The Act establishes a regime for the

forfeiture of property that:3

(a) has been derived directly or indirectly from significant criminal

activity; or

(b) represents the value of a person’s unlawfully derived income.

1 Criminal Proceeds (Recovery) Act 2009, s 25. 2 Section 10(a) to (c). Subsection (d) refers to foreign restraining orders. 3 Section 3(1).

[6] The Act sets out a scheme for the restraint and forfeiture of property without

the need for a conviction for the alleged criminal activity.4 The objective of the regime

is to:5

(a) eliminate the chance for persons to profit from undertaking or being

associated with significant criminal activity; and

(b) deter significant criminal activity; and

(c) reduce the ability of criminals and persons associated with crime, or

other significant criminal activity, to continue or expand criminal

enterprise.

[7] In this case, the Commissioner seeks orders for assets forfeiture and profit

forfeiture. These may overlap.

Assets forfeiture order

[8] For an asset forfeiture order to be made, the Commissioner must establish on

the balance of probabilities that the property is “tainted property” pursuant s 50(1) of

the Act.

[9] A key concept when considering assets forfeiture, as opposed to profit

forfeiture, orders is that of “tainted property”. It is defined in s 5 of the Act to include

property that has, wholly or in part, been acquired as a result of significant criminal

activity or directly or indirectly derived from significant criminal activity. If the Court

is satisfied on the balance of probabilities that the specified property is tainted

property, the Court must make an assets forfeiture order in respect of that property.6

[10] The definition of tainted property is very broad. Property is captured if it was

acquired or derived wholly or in part from significant criminal activity. This is in

keeping with the intent that the legislation has “[a] maximum deterrent effect”.7

4 Section 4(1)(a). 5 Section 3(2). 6 Section 50. 7 Tareha v Solicitor-General (1996) 13 CRNZ 487 (CA).

Property is also captured under the definition of tainted property if it has been

derived/acquired from more than one activity as long as one of those activities is a

significant criminal activity. The respondent need not be engaged in significant

criminal activity as long as the property was wholly or in part derived from significant

criminal activity.8

[11] “Significant criminal activity” is defined under s 6 of the Act as an activity that

if treated as a criminal offence would be punishable by a maximum term of 5 years

imprisonment or more; or $30,000 or more of profits, proceeds or benefits result.

[12] The Court may exclude certain property from an assets forfeiture order if it

considers that, having regard to all of the circumstances, undue hardship is reasonably

likely to be caused to the respondent if the property is included in the assets forfeiture

order.9

[13] Therefore, the assets forfeiture order provisions are largely focussed on the

acquisition or derivation of (usually) identifiable assets acquired as a result of

significant criminal activity. The assets may be directly or indirectly derived from the

activity.

[14] As I have noted above, the assets forfeiture regime focuses on the notion of

“tainted property”. In this case, the Commissioner says that the $70,520 in cash found

in Mr Cheah’s closet at the time he was arrested and his ASB and Westpac term

deposits (term deposits) should be made subject to assets forfeiture orders.

Significant criminal activity

[15] There is no contest that Mr Cheah’s drug dealing was significant criminal

activity. He was convicted of four charges of supplying methamphetamine and has

admitted other drug dealing.

8 Doorman v Commissioner of Police [2013] NZCA 476. 9 Criminal Proceeds (Recovery) Act 2009, s 51.

The cash

[16] The Commissioner says the cash was acquired or derived, in whole or in part,

from Mr Cheah’s drug dealing. It was found in the same wardrobe in which the

methamphetamine was discovered. Mr Cheah accepts most of it was acquired through

methamphetamine dealing.

[17] The cash is plainly tainted, as at least part of it was acquired through drug

dealing.

The term deposits

[18] Turning to Mr Cheah’s term deposits. The Westpac term deposit contains

$298,078.08 and is restrained. When opened in 2009 it contained $257,480.64. It

increased by $40,957.44 during the relevant period. The ASB account presently holds

$50,000.14. The Commissioner argues that Mr Cheah would have needed to draw on

his term deposits to pay for his living expenses and methamphetamine habit, had he

not been using the profits from his sale of drugs. The Commissioner’s submission is

that the funds in both accounts have been indirectly (as opposed to directly) derived

from significant criminal activity.

[19] Mr Cheah argues that there is an insufficient connection between his drug

dealing and the term deposits to establish even an “indirect” acquisition or derivation

of the funds in those accounts from the drug dealing.

[20] Mr Cheah says, in any event, his expenses were few as he was frugal and he

did not need to use any more money than he did legitimately draw out of the accounts

for his living expenses. In addition, he argues he was selling various cosmetic and

perfume products to earn money on the side. This contributed to his living expenses,

and also his methamphetamine habit, during the time he was unemployed.

[21] The Commissioner submits Mr Cheah put deposits into those bank accounts

which cannot be explained and therefore the inference is that the deposits were from

the profits of drug dealing.

[22] No deposits were made into the Westpac term deposit during the relevant

period.

[23] Turning to the ASB term deposit, the Commissioner points to two deposits

totalling $13,000 from Mr Cheah’s ASB wage account into the term deposit. These

deposits were specifically noted as being made following a total of $31,918.43 in

unexplained funds being deposited into Mr Cheah’s ASB wage account. This amount

can be split into two subcategories:

(a) six unexplained deposits totalling $10,458.43. A combined total of

$106.63 was deposited on 24 June 2011 and 7 August 2012. These are

narrated by the bank teller as cheques. Given the small amounts of

those I put them to one side as not relevant to the present assessment.

An additional four deposits are of amounts each in the vicinity of

$2,500. These are narrated “Treasury MPA transfer credit”. In his

evidence, Mr Cheah said that these four payments were returns on

money he had remitted to his father in Malaysia. The amount he

remitted was about $40,000. He said it was for his father to invest in

Malaysia. Mr Cheah says he had not seen the detailed statements which

showed the returns before he gave his evidence at this hearing. The

relevant payments were made in December 2013, June 2014 and June

2015. They were shown to Mr Cheah in the course of his cross-

examination.

(b) two unexplained deposits totalling $21,515. This is made up of four

deposits. A total of $25 was deposited on 5 February 2013 and $30 on

11 July 2013. These are narrated by the bank teller as teller assisted

deposits. Two other deposits were made in cash and coins. The first

was on 15 August 2011 and totalled $10,290. The second was a cash

deposit on 7 November 2011 into a separate ASB bank account

belonging to Mr Cheah, and transferred to his wage account on

4 January 2012. It totalled $11,170. Mr Cheah was unable to explain

these deposits.

Is the ASB term deposit tainted?

[24] Mr Cheah accepts there were unexplained cash deposits made into the ASB

wage account totalling $21,515. Most of this money was received in August and

November 2011. Mr Cheah now says it was not from selling perfume or other

products. His wages were paid electronically. There is explanation for those funds

except as being the proceeds of drug dealing.

[25] I find the sum of $21,515 is drug money deposited into the ASB wage account.

Accordingly, in my view that amount has tainted the ASB wage account.

[26] The sum of $13,000 from this now tainted money was deposited into the ASB

term deposit. The evidence is that the Westpac account contains in the vicinity of

$50,000. Therefore, the deposit makes up a good portion of the funds in this account.

This, in my view, is enough to taint the term deposit and cannot be dismissed as

insignificant. Even modest contributions to an asset is sufficient to taint the asset.

Courtney J found that modest contributions to mortgage repayments were sufficient to

taint funds used to acquire a property.10

[27] Accordingly, I find that the ASB term deposit account is tainted and should be

the subject of an asset forfeiture order. Now I turn to the Westpac term deposit.

Is the Westpac term deposit tainted?

[28] A different issue arises with the Westpac term deposit.

[29] The Commissioner argues that the Westpac term deposit was indirectly derived

from the relevant significant criminal activity and indirect tainting has occurred.

Essentially, by using the illegitimately obtained funds for day to day living expenses

and buying methamphetamine, Mr Cheah’s legitimately funded Westpac term deposit

was “indirectly derived from significant criminal activity”. The tainting of the account

has occurred by virtue of what was not spent rather than by direct deposits into the

account.

10 Commissioner of Police v Winsor [2014] NZHC 161.

[30] I have found below at [79] that Mr Cheah could not have funded his living

expenses and his methamphetamine habit other than by way of profit from his drug

dealing. Therefore, he would have had to have used funds from his bank accounts to

pay his for needs. I find that Mr Cheah would have had to use the money in the bank

deposits and accounts for living and funding his purchase of drugs as he had no income

from other sources.

[31] This issue was recently considered by Dunningham J in Drake, in relation to a

house property and a bank account.11 In that case, the argument was that unlawful

benefit payments had indirectly facilitated the accumulation of savings and the

acquisition of the house. Dunningham J rejected that argument when she said.12

[110] … the word “tainted” is generally understood to mean something that

has been touched, tinged or imbued with some bad or undesirable quality.

Thus, when the definition of tainted property refers to property which is

“directly derived from significant criminal activity”, I consider there must

nevertheless be some traceable connection between the proceeds of crime and

the property so acquired or retained. …

(Footnotes omitted)

[32] Her Honour commented that while the provisions of the act are harsh she did

not consider the definition of tainted property could be read so broadly as to include

property funded entirely from legitimately sourced assets, even when the property was

not depleted because the offender’s living and other expenses were met from the

proceeds of crime.13

[33] In rebuttal, the Commissioner pointed to Winsor.14 In that decision Courtney

J was satisfied that the proceeds of drug dealing had been used to pay the interest on

the mortgage over a property. She said the mortgagee was thereby kept at bay and the

capital gain realised on the property meant it was acquired in part as a result of

significant criminal activity. The Judge found that the property was tainted as a result

of the substantial funding of interest on the mortgage from drug dealing and evasion

of tax.15

11 Commissioner of Police v Drake [2017] NZHC 2919. 12 At [110]. 13 At [110]. 14 Commissioner of Police v Winsor, above n 10. 15 At [33].

[34] The Commissioner also pointed to the Australian High Court decision in

Hart.16 That decision related to a claim by innocent third parties to assets which had

been forfeited following Mr Hart’s conviction for operating tax minimisation schemes.

The assets were various items of air craft which had been funded in part directly by

the proceeds of the unlawful activity. Those funds accounted for 29 per cent of the

purchase price.17 The burden of proof, on the balance of probabilities, was on the

innocent third parties to prove that the property was “… not derived or realised,

directly or indirectly, by any person from any unlawful activity”.18 The High Court

was concerned with whether or not the lower court had properly constructed the

provision. It considered the degree of causal connection between the relevant act and

the acquisition or continued holding by the person of the asset forfeited. In that

context, Gordon J said:19

… derivation might in another factual setting be constituted by the act or

omission resulting in the money or some other property being disposed of or

otherwise dealt with so as to make a non-trivial contribution to the payment

for the thing forfeited or a legal or equitable estate or interest in that thing,

…Those examples are not exhaustive. As with the use condition, the

derivation condition does not lend itself to detailed exposition in the abstract.

[35] Mr McKean for Mr Cheah says the regime in Australia is quite different from

here and it is impossible to meaningfully compare them. I agree. Hart does not assist

in the interpretation of the New Zealand provisions, nor is it authority for the

proposition that assets which have no traceable connection with the unlawful benefits

from the criminal activity can be the subject of an assets forfeiture order. I agree with

Dunningham J’s interpretation in Drake in that regard.20

[36] It follows that I am not satisfied that the Westpac term deposit has been

indirectly derived from significant criminal activity in this case. The application for

an asset forfeiture order in relation to that deposit fails.

16 Commissioner of the Australian Federal Police v Hart [2018] HCA 1, (2018) 92 ALJR 154. 17 At [158]. 18 At [6]. 19 At [16]. 20 Commissioner of Police v Drake, above n 11.

Conclusion

[37] The application for an asset forfeiture order in relation to the $70,520 in cash

and the ASB term deposit is successful. The application for an asset forfeiture order in

relation to the Westpac term deposit fails.

Profit forfeiture order

[38] Profit forfeiture orders relate to unlawful benefits, rather than specific property

that has been unlawfully gained. The Court will order the beneficiary of significant

criminal activity to pay the Commissioner the value of whatever unlawful benefit has

been derived, and any property owned or controlled by the beneficiary (unless

contested in a relevant way) can be used to meet this order. Profit forfeiture orders are

governed by s 55 of the Act. A profit forfeiture order must be granted if the Court is

satisfied on the balance of probabilities that the respondent:21

(a) has unlawfully benefited from significant criminal activity within the

“relevant period of criminal activity”;22 and

(b) has interests in property.

There is a four-step process in establishing whether a profit forfeiture order should be

made.23

[39] As a first step under 55(2(a) of the Act, the Commissioner must prove on the

balance of probabilities that Mr Cheah has unlawfully benefitted from significant

criminal activity during the relevant period.24 If this is established, Mr Cheah can

rebut the presumption that the value of the benefit is as stated in the Commissioner’s

application on the balance of probabilities. The Court must then determine the actual

value of the benefit.25

21 Section 55(1). 22 Section 5 definition of “relevant period of criminal activity”: Seven years of the date of the

restraining order (if any) or otherwise from application for profit forfeiture order. 23 Pulman v Commissioner of Police HC Auckland CIV-2010-404-3773, 16 February 2010 at [10]. 24 Criminal Proceeds (Recovery) Act 2009, s 53(1). 25 Section 53(2).

[40] To have unlawfully benefitted, the person must have knowingly directly or

indirectly derived a benefit from significant criminal activity. This is whether or not

that person undertook, or was involved in, that activity.26 The value of the benefit is

presumed to be the value stated in the application if the Commissioner proves, on the

balance of probabilities, that the respondent has, in the relevant period of criminal

activity, unlawfully benefited from significant criminal activity. The respondent can

rebut that presumption on the balance of probabilities.27

[41] As a second step under s 55(2)(b), the Court must determine the maximum

amount recoverable by taking the value of the benefit from step 1 and deducting it

from the value of any property already forfeited in relation to the same criminal

activity.28

[42] The maximum recoverable amount is the value of the benefit, less the value of

any property forfeited to the Crown as a result of an assets forfeiture order made in

relation to the same significant criminal activity.29 This deals with double counting if

both assets orders and profit orders are made.

[43] As a third step, pursuant to s 55(3), the Court must determine whether any

property should be excluded due to hardship likely to be caused to Mr Cheah.30 As

with assets forfeiture orders, the Court must determine whether any property should

be excluded from the order due to hardship likely to be caused to the respondent.31

The Court will need to consider factors including what the property was used for,32 the

nature and extent of the respondent’s interest in the property,33 and the circumstances

of the relevant significant criminal activity.34

[44] As a fourth and final step, the Commissioner must satisfy the Court on the

balance of probabilities that the requirements of s 53 have been met, and that the

26 Criminal Proceeds (Recovery) Act 2009, s 7. 27 Section 53(2). 28 Section 54(1). 29 Section 54. 30 Section 56(1). 31 Section 56(1). 32 Section 56(2)(a). 33 Section 56(2)(b). 34 Section 56(2)(c).

respondent has an interest in the property.35 If this is done, a profit forfeiture order

must be made that specifies the value of the benefit,36 the maximum recoverable

amount,37 and the property to be disposed of.38

Significant criminal activity and unlawful benefit

[45] In support of the application for profit forfeiture orders the Commissioner

relies for his unlawful benefit calculation on the same significant criminal activity as

for the asset forfeiture orders.

[46] As I have noted it is common ground that Mr Cheah has benefited from

significant criminal activity. Apart from pleading guilty to the four charges of

supplying of methamphetamine, he has admitted he was involved in supplying more

methamphetamine than is reflected by the criminal charges. I am entitled to take that

into account.

[47] “Unlawfully benefit” is defined under s 7 of the Act. Under this definition it

is not necessary for the property to have been derived from the significant criminal

activity, or even that the beneficiary was involved in the significant criminal activity.39

All that is required is that the beneficiary knew, which includes wilful blindness, that

they were deriving a benefit from significant criminal activity.40

[48] In Hayward, Venning J noted the range of evidence upon which the

Commissioner can rely to prove unlawful benefit.41 Venning J noted that the

Commissioner did not have to rely on the actual proceeds received from the offending

the respondent was convicted of.42 The Court can infer (on the balance of

probabilities) that Mr Cheah was involved in other significant criminal activities for

which there was no criminal charge.43 This could be done by way of pointing to a

disparity between legitimate income, assets and liquid assets where there is no

35 Section 55(2)(c). 36 Section 53. 37 Section 54. 38 Section 55(2)(c). 39 Section 7. 40 Section 7; Vincent v Commissioner of Police [2013] NZCA 412. 41 Commissioner of Police v Hayward [2014] NZCA 625. 42 At [22]. 43 At [22].

legitimate credible explanation for this disparity.44 The Court of Appeal in Dryland

adopted the standard of whether the only likely explanation for the unexplained

income was unlawful activity.45

[49] It is also possible for the Court to infer that the criminal activity occurred over

a longer period than what is proven beyond a reasonable doubt in a criminal case – an

example of this was Haywood in which criminal offending occurring on only three

days in December 2009 but through the use of unexplained money entering and exiting

Mr Haywood’s accounts, the Court inferred offending was occurring both before and

after that time.46

[50] Further, it is possible for unlawful benefit to be proved using circumstantial

evidence the sum of which on the balance of probabilities is sufficient but the items of

evidence separately are insufficient.47 The Commissioner need not prove separately

that each individual strand of evidence meets the balance of probabilities test – only

that the sum of the items does.48

[51] If the Commissioner establishes on the balance of probabilities that Mr Cheah

benefitted from significant criminal activity then Mr Cheah bears the onus of

disproving the Commissioner’s claim of the level of the benefit as stated in the

application.49 In Tang, Katz J confirmed the Commissioner does not have to prove the

extent to which the respondent has benefited from the significant criminal activity – it

is up to the respondent to rebut the presumption by providing evidence of what they

claim the actual amount of benefit received was.50 This must be done on the balance

of probabilities.

[52] The relevant period of criminal activity according to the Commissioner is 24

August 2009 to 26 July 2016 (relevant period) and the amount claimed is $2,102,179.

The Commissioner says there was unlawful benefit accruing far beyond the period

44 At [22]; Commissioner of Police v Dryland [2013] NZCA 247 at [34] to [39]. 45 Commissioner of Police v Dryland, above n 44, at [34]. 46 Commissioner of Police v Hayward, above n 41, at [42]. 47 Commissioner of Police v de Wys [2016] NZCA 634. 48 At [10]. 49 Criminal Proceeds (Recovery) Act 2009, s 53. 50 Commissioner of Police v Tang [2013] NZHC 1750 at [33].

established by the Judge in Mr Cheah’s sentencing indication.51 The Commissioner

produced a schedule setting out his calculations as to the unlawful benefit from the

drug dealing. This provides:52

1 The unlawful benefit figure of $2,102,179 stated by the Commissioner

is calculated as follows:

(a) $132,000, being the value of the 293.88 grams of

methamphetamine located at 2147 Great North Road;

(b) $94,350, being the total value of Mr Cheah’s earnings from

his drug dealing activities in a 10 week period between May

and July 2016, as recorded in the diary located at 2147 Great

North Road;

(c) $1,843,856, being an estimate of the total value of Mr Cheah’s

earnings from the sale of methamphetamine (extrapolated

from the diary), during the 196 week period that he was not

in receipt of any known income, excluding the time period at

(b) above:

(i) Mr Cheah recorded earnings of $99,450 in the diary

over a 74 day period;

(ii) $99,450 divided by 74 provides Mr Cheah’s average

daily income of $1,343.91;

(iii) Mr Cheah’s weekly average income is calculated by

multiplying the daily rate of $1,343.91 is by seven,

which equals $9,407.43

(iv) To assess Mr Cheah’s earnings from the sale of

methamphetamine, the weekly rate of $9,407.43 is

multiplied by 196, (being the time period that

Mr Cheah was not in receipt of income from his

employer, and excluding the ten week period

recorded in the diary) which equals $1,843,856.

(d) $31,973, being the value of unknown deposits received into

Mr Cheah’s bank accounts:

(i) $10,290 cash on 15 August 2011;

(ii) $11,170 cash on 4 January 2012; and

(iii) $10,458 unidentified deposits to ASB accounts and

55$ to the Westpac accounts.

2 $132,000 + $94,350 + $1,843,856 + $31,973 = $2,102,179.

51 R v Cheah DC Waitakere CRI-2016-090-004211, 19 December 2016. 52 This is the unlawful benefit calculation provided at the hearing (footnotes omitted). The

application states the maximum recoverable amount to be $2,178,103.00.

[53] The Commissioner argues that it is open to the Court to infer on the evidence

that Mr Cheah’s offending was greater than the criminal proceedings established.53

[54] The Judge noted that Mr Cheah had 293.88 g of meth at his home when

arrested, which at a total of $600 - $1000 a gram comes to a sum of $191,022 to

$293,880. There was also $70,520 in cash at his home. The Commissioner’s case is

that this was the tip of the iceberg.

The Comissioner’s submissions

[55] Mr Cheah kept records in a diary in the ten-week period in which he was

dealing drugs preceding his arrest. It recorded the totals of money Mr Cheah received

from his meth sales between 16 May 2016 and 29 July 2016. Sales are recorded almost

every day. The total value of Mr Cheah’s drug sales over the period was $99,450.

[56] Mr Cheah accepts that he purchased half gram amounts of meth in 2015 to

supply Mr Wagner. This points to his drug offending occurring over a longer period of

time than was recorded in his diary in 2016.

[57] Mr Cheah now admits using meth personally starting in 2012. When he was

arrested on 29 July 2016 he had said he started in 2010. Mr Cheah accepts he started

selling meth to cover the cost of his personal use from 2015 onward. He also admitted

buying half or quarter gram quantities for his personal use when he began. These

would cost $200 to $300. He was unemployed for a significant period of the time that

he was dependent on methamphetamine.

[58] From 2002 to mid-way through 2012, Mr Cheah had been a top performing

sales person at a duty-free outlet. He was employed by L’Oréal, a cosmetic company,

on an hourly rate which had been increased to $25, from a starting rate of $11 per hour.

In addition, he was given various incentive payments by both L’Oréal and other luxury

cosmetic and perfume suppliers. These were based on the number of sales he made of

various products. The Commissioner produced records from L’Oreal which gave

examples of incentive products that Mr Cheah may have received during his

53 R v Cheah, above n 51.

employment in order to show the items that Mr Cheah received were likely of low

value. An email exchange with L’Oreal was also tendered. This said that employees

could receive large sale incentives up to a maximum return value of $5000 per year.

Mr Cheah challenged the admissibility of this evidence on the basis that it was hearsay.

[59] The requisite 20 days’ notice was not given objecting to the evidence of

Mr Taylor which attached the L’Oréal records.54 The Commissioner says he was

prejudiced by that failure as he could have called evidence on the issue.

[60] Mr McKean pragmatically accepted that the real issue is the weight that I put

on them rather than their admissablity. I agree. The records are not complete, nor do

they purport to cover all the cosmetics and perfume items that Mr Cheah says he

received.

[61] I am of the view that they are admissible however not of great weight. The

records are of limited assistance. They are largely extracts from the company’s

business records. It is unlikely that the person supplying them, who is based in

Australia, would recollect making them. Undue delay and expense would be caused

by requiring the relevant person to be called as a witness.55

[62] Having dealt with that matter, I turn back to Mr Cheah’s employment. In 2012,

his performance at work was deteriorating due to his methamphetamine habit. L’Oréal

formally terminated his employment in June 2012.56

[63] The Inland Revenue Department records show that Mr Cheah’s declared

earnings were $53,683 in the tax year ending 2011, $29,213 in the tax year ending

2012 and $6,635 in the tax year ending 2013. This totals $89,531 for the period of the

2011 to 2017 tax years (inclusive). After PAYE deductions of $18,480, his total net

income was $71,051. He did not declare any income to the Inland Revenue Department

between August 2012 and the time of his arrest in July 2016.

54 High Court Rules 2016, r 9.11. 55 Evidence Act 2006, s 19(1). 56 There is some evidence suggesting the termination was completed in early 2013. However, the

date is immaterial.

[64] The only other legitimate income Mr Cheah had was the interest on his bank

accounts. This was in the vicinity of $10,000 in 2011. He also received $2,500 he

says was returns on investment from Malaysia in each December 2013, June 2014,

December 2014 and June 2015.

[65] The Commissioner pointed to New Zealand Statistics 2013 household

economic survey which found the average weekly expenditure of a one-person

household was $564 weekly, and would have totalled $205,296 over the relevant

period. Mr Cheah withdrew a total of $155,641 from his bank accounts over that same

period which would be insufficient to meet the estimate of Mr Cheah’s living costs.

This estimate does not take into account Mr Cheah’s meth addiction nor his yearly

trips to Malaysia. Mr Cheah claims he funded all of these expenses with withdrawals

from his bank accounts and sale of products.

[66] In addition an analysis carried out by the Commissioner on the ASB bank

accounts for the period 2 August 2009 to 26 July 2016, indicates that Mr Cheah made

no payments through that account for power and repairs and maintenance. The

Commissioner says Mr Cheah must have been living a cash based life.

Mr Cheah’s rebuttal

[67] If it is accepted on the balance of probabilities that Mr Cheah benefited from

significant criminal activity, then the figure of $2,102,179 is presumed to be correct

unless he is able to rebut that presumption. A simple critique of the Commissioner’s

calculation methods is insufficient; Mr Cheah must give his own evidence to establish

on the balance of probabilities that the true benefit was less than $2,102,179.57

[68] Mr Cheah’s rebuttal amounts to the following. Mr Cheah said in his affidavit

that the total income from his drug dealing was $100,000 (the value of the

methamphetamine found) together with the cash. Therefore the total is $170,000. He

said that is what he received from drug dealing over a one year period. He claims the

figure produced by the Commissioner of $1,843,856 as an estimated value of Mr

Cheah’s profit from the sale of methamphetamine is far too high. This number was

57 Commissioner of Police v Tang, above n 50.

calculated using the monetary amounts recorded in Mr Cheah’s diary from a 74-day

period extrapolated out over the 196 weeks Mr Cheah was not receiving income. Mr

Cheah argues the diary was kept at the height of his methamphetamine dealing and to

extrapolate this over a long period is inaccurate.

[69] Mr Cheah says his methamphetamine sales did not begin until 2015, and that

there is no evidence to show otherwise. He had admitted using methamphetamine

before that, and was able to sustain both his own supply of methamphetamine and

living expenses largely out of his bank accounts and the sales of the luxury perfume

and cosmetic products he had stock piled from his previous employment. Mr Cheah

claims that as was typical he progressed to dealing over time.

[70] Mr Cheah was also the owner of a half share and the occupier of the property

at Great North Road. He agreed he paid some expenses in cash. He also confirmed

he ran a car. He claims he was able to live on $10,000 per annum, and funded his

lifestyle with the $155,641 that he withdrew from his bank accounts for the period

after his employment had ended. He travelled to Malaysia, but said these trips to see

his parents were few and he travelled using on a cheap airline.

[71] I am of the view that the withdrawals from his bank accounts would have been

used for living expenses even if he had been living frugally. The funds for his

purchases of methamphetamine must have come from other sources. He claims he

paid for the methamphetamine with cash that was largely derived from the sale of

products he had received either as large sale incentives or allocations from L’Oréal

and other cosmetic and perfume companies. He also said he made money from time

to time by doing some hairdressing. None of this income was disclosed to the Inland

Revenue Department.

[72] Mr Cheah said he knew that the incentive items were gifts and something to

give to friends rather than for sale but nevertheless he did sell them. He said that he

had sold 70 per cent or more of his stockpile when arrested. His market was Asian

customers, other staff at the duty-free store and customers on the internet. He

produced nothing to support these contentions.

[73] Mr McKean submitted that Mr Cheah should be believed as he had candidly

admitted, under cross-examination, a number of matters which were put to him which

were not in his interest. This included the fact that the unexplained deposits into his

ASB wage account were not from sales of perfume and luxury goods. He had earlier

said that they were from product sales.

[74] In my view Mr Cheah was not slow to lie about matters when they did not suit

his interests. He lied about his involvement in the drug dealing when he was initially

arrested. He said he did that because he was so shocked at being arrested. At that

stage, he blamed all the dealing on his associate. He now accepted he was guilty of

supplying, albeit he said he was only supplying his associate Mr Wagner. He

maintained he had weaned himself off methamphetamine after he became unemployed

but had been lured back by Mr Wagner sometime in 2014 and started selling in 2015.

I find it is unlikely he stopped using methamphetamine when he left his employment.

He was clearly in a bad state in the period leading to his dismissal and it is unlikely he

changed his behaviour. He failed to mention that he stopped using methamphetamine

to the probation officer but instead had gone into some detail about his reliance on

methamphetamine and the mental health issues that flowed from that. Further Mr

Cheah also initially said that only part of the $70,520 cash found in his wardrobe was

from his drug supplying activities. He said some was from product sales. However,

he agreed at the hearing the cash was from drug sales.

[75] I am of the view that while he did concede a number of matters in the witness

box, he was not generally a credible witness.

Conclusion

[76] I am satisfied on the balance of probabilities that Mr Cheah has unlawfully

benefited from significant criminal activity within the relevant period. That relevant

period is the seven years prior to the date of the application, meaning between 24

August 2009 and 26 July 2016 in this case.58 I am satisfied the benefit extended

58 Commissioner of Police v Tang, above n 50, at [39]. 58 Criminal Proceeds (Recovery) Act 2009, s 5.

beyond the profits from the dealings supporting his convictions and beyond the period

recorded in Mr Cheah’s diary which was found on the premises on 29 July 2016.

[77] Mr Cheah may have been frugal, but nevertheless he had a car to run as well

as household expenses and maintenance. With his additional expenses, such as

overseas travel (which is not taken into account in the household economic survey), I

am of the view that it is more likely than not that his living expenses would have been

closer to the Commissioner’s estimate based on the household economic survey, than

Mr Cheah’s estimate of $10,000 per annum.

[78] I do not accept that Mr Cheah received substantial funding from the resale of

products. I do not consider that the sale of the items would have been sufficient to

generate the amount of money that was required for him to purchase his own drugs

and to fund his drug dealing business. There are a number of reasons for this, including

the fact that the amount of product he would need to sell would be considerable. I also

note his employment records, particularly over the last two years of his employment,

show that his earnings were decreasing. His ability to earn large sale incentives and

allocations was likely decreasing as well. I do not accept that he had a substantial cash

business in selling cosmetics and luxury goods he had stockpiled.

[79] The disparity between Mr Cheah’s legitimate income and his maintenance of

money in his bank accounts on the one hand and his living expenses (in particular the

cost of purchasing methamphetamine for his own drug habit) on the other supports my

view that the benefit Mr Cheah received from his criminal activities was significant.

He was very experienced in supplying methamphetamine by the time of his arrest.

The Judge noted in her sentencing indication decision in relating to Mr Cheah’s

charges of supply of methamphetamine and possession of methamphetamine for the

purposes of supply that the police had found over 293.88 grams of methamphetamine

(almost 11 ounces). That is a substantial amount. The judge said that considering then

current values of between $600 and $1000 per gram, the amount involved may have

been worth between $191,022 and $293,880.59

59 R v Cheah, above n 51, at [5].

[80] Mr Cheah had graduated from buying and selling small amounts of drugs, to

buying substantial amounts, repackaging it and selling it at a large profit margin. I am

not required to undertake a profit and loss calculation. I must approach my assessment

holistically. It would be impossible for a court to accurately calculate the net profit of

a drug dealing operation such as Mr Cheah’s. The Court does not need to undertake

that analysis nor calculate the gross or net benefit accruing from the criminal activity.

[81] Mr Cheah submitted the cost of the purchase of the meth found should be

deducted from the calculation as to its value. However I am not required to deduct the

costs of Mr Cheah’s drug supply business even if there is a possibility of over recovery

involved.60 As Lang J commented in Pullman,61 equating benefit with profit would

lead to significant practical difficulties and would require the Court to engage in a

complex accounting exercise in order to determine the ultimate benefit the respondent

retained from his criminal activity.

[82] The value of the benefit is determined in accordance with s 53 of the Act. The

Commissioner enjoys a presumption under s 53 that the value of the unlawful benefit

is the figure stated in the Commissioner’s application. The Commissioner has

nominated the figure of $2,107,583.62 However, the unlawful benefit calculation

which was handed up at the outset of the hearing sets out a figure of $2,102,179. The

application dated 25 July 2017 states the benefit determined in accordance with s 53

of the Act is $2,178,103. The Act requires the benefit to be the value stated in the

application or amended application.

[83] As the lowest of the various figures put forward by the Commissioner is

$2,102,179 I am of the view that Mr Cheah should be given the benefit of the lowest

figure put forward and I treat that figure as the application figure.

[84] It is for Mr Cheah to rebut the statutory presumption by providing evidence as

to what he says his actual amount of the benefit is.63 Mr Cheah deposed in his affidavit

that the total value of his drug dealing was $100,000 worth of methamphetamine

60 Solicitor General v Rhodes HC Auckland CIV-2007-404-3373, 16 February 2010 at [41]. 61 Pullman v Commissioner of Police HC Auckland CIV-2010-404-5666, 27 May 2011. 62 This is the amount set out in the submissions of the Commissioner at paragraph 6.9. 63 Commissioner of Police v Tang [2013] NZHC 1750 at [54].

together with the cash totalling $170,000. He said that is what he received from drug

dealing over a one year period. That is implausible for the reasons set out above. I

have found against Mr Cheah in relation to his explanations about how he managed

to, in particular, fund his own drug use for some years.

[85] Therefore, the presumption in favour of the Commissioner that the value of

unlawful benefit is the figure is as he has stated has not been rebutted.

[86] Accordingly, the value of the benefit from significant criminal activity is

presumed to be $2,102,179.

Calculation of maximum recoverable amount

[87] I am now required by s 54(1)(b) of the Act to deduct from the value of the

benefit derived from calculating the profit forfeiture order, the value of any property

forfeited as a result of the asset’s forfeiture orders made in relation to the same

significant criminal activity.

[88] This means the maximum recoverable amount under a profit forfeiture order is

calculated in the following way:

1 Sum specified by the Commissioner pursuant to s 52 of the Act: $2,102,179.00

2 Value specified for assets covered by assets forfeiture orders being:

Cash: $70,520.00

ASB term deposit: $50,000.14

Maximum recoverable profit under profit forfeiture order: $1,981,658.86

Undue hardship

[89] Pursuant to s 55(3), the Court must determine whether any property should be

excluded from the profit forfeiture orderdue to hardship likely to be caused to Mr

Cheah.64 The Court will need to consider factors including:

(a) What the property was used for;65

64 Criminal Proceeds (Recovery) Act 2009, s 56(1). 65 Section 56(2)(a).

(b) The nature and extent of Mr Cheah’s interest in the property;66

(c) The circumstances of the relevant significant criminal activity.67

[90] Mr McKean for Mr Cheah submitted that an assessment as to whether there is

undue hardship present is fact specific. Every case is different. He submitted that

Mr Cheah’s house should be excluded from the forfeiture as otherwise this would

mean the loss of his home, purchased well before he became involved in the supply of

drugs. Mr McKean pointed to Mr Cheah’s previous clean criminal record and that he

had not lived the high life nor had he amassed substantial assets.

[91] Mr McKean noted that when Mr Cheah gets out of jail he will be a mature man

and will need to start again. While it was conceded that when he was released he

might be eligible for a benefit, Mr McKean submitted that was a harsh submission in

the circumstances. Mr Cheah is suffering from mental illness apparently brought on

by the methamphetamine use.

[92] Mr McKean further submits that there is no burden of proof that Mr Cheah

must meet in this regard.68 Rather he needs simply to place before the Court the

evidence of hardship on which the Court can reach a judicial view.

[93] The threshold for relief for a person in Mr Cheah’s position is high. He must

show not merely inconvenience or difficulty but that any hardship he will suffer will

be disproportionate to the gravity of his offending.69

[94] In Lyall v Solicitor-General the Court of Appeal held that undue hardship

should be assessed in light of the legislative policy that wrong doers should be stripped

of proceeds of crime. Therefore, any disproportion between a respondent’s offending

and the value of the property sought to be forfeited must be gross or severe before

relief can be justified.70

66 Section 56(2)(b). 67 Section 56(2)(c). 68 Commissioner of Police v Nelson HC Auckland CIV-2010-404-989, 30 July 2010 at [20]. 69 At [73] - [75]; Commissioner of Police v Duncan HC Tauranga CIV-2010-470-933, 11 October

2011 at [144]. 70 Lyall v Solicitor-General [1997] 2 NZLR 641 (CA).

[95] Collins J in Ranga took the approach of assessing whether any proposed

forfeiture, when weighed with the punishment that has been imposed, is sufficiently

connected and proportionate bearing in mind the aims of the Act of ensuring offenders

do not benefit from unlawful activity and deterring others from engaging in such

activities.71

[96] In my assessment, the hardship Mr Cheah will suffer is not disproportionate to

the extent and seriousness of his offending. While he might lose ownership of his

house, he is not disabled to the extent of being unable to work. He may be eligible for

a state benefit and he has funds which he has lent to his father from advances made in

the vicinity of $40,000 which are outside this jurisdiction. It is unclear what the returns

are on this money but there is at least part remains outstanding. Mr Cheah knowingly

participated in the supply of controlled drugs. He had a significant drug business

operating at the time he was arrested. While the home was derived from legitimate

sources that in itself does not constitute undue hardship.

[97] Accordingly, I conclude that Mr Cheah has not established undue hardship.

Conclusion

[98] In light of these findings, I now turn to the orders that should be made.

[99] The Commissioner’s application for asset forfeiture orders is successful in

respect of the following property:

(a) $70,520 in cash seized by the police on arrest from the Great North

Road property on 29 July 2016 and all interest earned thereon, and

(b) The former contents of ASB Bank Limited term deposit account 12-

3045-0477842-075 held in the name of Mr Cheah, containing

$50,000.14 currently in the custody of the Official Assignee and all

interest earned thereon.

71 R v Ranga [2013] NZHC 745 at [43].

[100] Turning to the Commissioner’s application for a profit forfeiture order, I am

satisfied that the value of the benefit was $2,102,179.00, and in light of the asset

forfeiture orders made above, the maximum recoverable amount is $1,981,658.86.

The property to be made subject to the profit forfeiture order is:

(a) Mr Cheah’s half share interest in the property at 2147 Great North

Road, Avondale, Auckland, owned by Mr Cheah and William Pierce

Somerville (as tenants in common), described in certificate of title

NA125B/646; and

(b) the former contents of Westpac New Zealand Ltd term deposit account

03-0109-0133085-081 held in the name of Mr Cheah, containing

$298,078.08 currently in the custody of the Official Assignee and all

interest earned thereon.

[101] I make an order accordingly.

[102] Leave is given to the parties to file memoranda in relation to any issues that

arise as a result of my judgment.

Costs

[103] It appears to me that there is no reason why the Commissioner is not be entitled

to costs as the successful party. However, if costs cannot be agreed, leave is given to

the parties to file submissions in relation to this issue. Memorandum should be filed

on or before 20 working days from the date of this judgment.

______________________________

Grice J

Solicitors: Meredith Connell, Auckland for Applicant Webb Ross McNab Kilpatrick Ltd, Whangarei for Respondent