BOON HOOI CHEAH v COMMISSIONER OF POLICE [2020] NZCA 253 [24 June 2020]

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA254/2019

[2020] NZCA 253

BETWEEN

BOON HOOI CHEAH

Appellant

AND

COMMISSIONER OF POLICE

Respondent

Hearing:

25 February 2020

Court:

Miller, Dobson and Moore JJ

Counsel:

W D McKean and N J Hartwell for Appellant

DMA Wiseman for Respondent

Judgment:

24 June 2020 at 11.30 am

JUDGMENT OF THE COURT

Appeal dismissed.

____________________________________________________________________

REASONS OF THE COURT

(Given by Moore J)

Introduction

[1] Boon Hooi Cheah is serving a term of six years’ imprisonment having pleaded

guilty to charges of supplying methamphetamine.1

1 He pleaded guilty to one charge of possession of methamphetamine for supply and one

representative charge of supplying methamphetamine. On 10 February 2017 he was sentenced to

six years’ imprisonment from an eight and a half year starting point.

[2] On 31 October 2018 Grice J made civil forfeiture orders in favour of the

Commissioner of Police (“the Commissioner”) under the Criminal Proceeds

(Recovery) Act 2009 (“the Act”).2 These included a profit forfeiture order and an

assets forfeiture order. The Judge dismissed Mr Cheah’s application for an order

excluding his half share in a residential property on the basis of undue hardship.

[3] Mr Cheah appeals the profit forfeiture order on the basis that the quantum was

not correctly valued and, to the extent the first ground of appeal is unsuccessful, that

the Judge erred in finding that Mr Cheah had not established undue hardship.

Background facts

[4] Mr Cheah is a 59-year-old Malaysian man who has been living in New Zealand

for nearly 30 years. For 15 years, until 2012, he worked in sales at Duty Free Galleria,

first as an employee and later as an agent for Yves St Laurent.

[5] In 2001, with a friend, he purchased a half share in a property on Great North

Road, Avondale. This was where he was living at the time of his arrest.

[6] In June 2012 his employment was terminated as a consequence of mental

health issues connected to his methamphetamine use. According to Mr Cheah he

turned to the drug for relief from the stress of his job and to keep him awake and

energetic. He claimed that for a number of years he purchased methamphetamine for

personal use, but in or around 2014 he started to buy from a Mr Wagener. In 2015 he

said he met another supplier. The tables turned and he began to supply Mr Wagener.

He claimed this was initially in small amounts which Mr Cheah divided in half; half

for himself and the other half for Mr Wagener. Towards the second half of 2015 he

said the quantities increased and he was buying in one-gram amounts with the sales

covering the cost of the drugs he consumed. The amount traded and consumed

continued to increase into late 2015 and early 2016. He said that when he could, he

stockpiled the drug for his own future use. He claimed that the time of his arrest

coincided with the peak of his supplying.

2 Commissioner of Police v Cheah [2018] NZHC 2825 [High Court decision].

[7] The charges on which Mr Cheah was convicted relate to four separate incidents

of supplying Mr Wagener between 31 May 2016 and 31 June 2016.

[8] In mid-2016 the police commenced a covert operation using an undercover

police officer to target the activities of Mr Wagener. On four occasions Mr Wagener

sold the undercover officer a total of eight grams of methamphetamine. An analysis

of telephone records identified Mr Cheah as Mr Wagener’s supplier. As a result, on

29 July 2016, the police executed a search warrant at Mr Cheah’s Great North Road

property. They located 293.8 grams of methamphetamine (valued at $132,000),

electronic scales and numerous ziplock bags. Cash totalling $70,520 was also found.

[9] Amongst the items of interest, the police also located a diary. It recorded

Mr Cheah’s methamphetamine dealing over the 10-week period between 16 May 2016

and 28 July 2016.3 Transactions totalling $99,450 were recorded.

The applications and the hearing

[10] The Commissioner’s case before Grice J was that after Mr Cheah’s

employment ended with his dismissal in June 2012, he began to deal in

methamphetamine to fund his living expenses and to support his heavy

methamphetamine habit. Until his arrest on the day of the search four years later, he

did not declare any income.

[11] As noted, the Commissioner sought both an assets forfeiture order and a profit

forfeiture order.

Assets forfeiture order

[12] The assets forfeiture order was made in respect of the $70,520 of cash found

at his home and the contents of an ASB account containing $50,000.14. This order is

not subject to appeal.

3 This period included the time span of the criminal charges.

Profit forfeiture order

[13] The profit forfeiture order of $2,102,179 was made up of four components.4

These were set out in a schedule produced by the Commissioner at the hearing. It is

reproduced in full below:

(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 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.

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

4 Initially the Commissioner nominated an unlawful benefit value of $2,178,103 but this was

reduced at the hearing before Grice J.

[14] Mr Cheah accepted he had received unlawful benefits, but placed the value of

those at $170,000, a figure derived from a combination of both the revenue recorded

in his diary and the value of the cash seized by the police.

[15] Furthermore, he did not accept that extrapolating the diary’s sales figures out

over the 196 weeks provided a sound basis on which to calculate his income from the

point when he lost his employment. Instead, he claimed he only started supplying

methamphetamine from 2015. After his job finished he said he lived off two sources

of income. The first was in the form of cash earnings from the sale of perfume and

cosmetic products which he had received from his employer as a performance bonus.

He claimed he accumulated these products over time. He sold them to Asian contacts

at duty free prices. The second income source was the interest earned from his

Westpac and ASB term deposits. Together these income sources allowed him to live

reasonably comfortably.

[16] As for undue hardship he pointed out that the Great North Road property was

purchased by him in 2001 well before any offending. He owns a half share. It is his

only remaining asset. It will be difficult for him to extract his share from the other

party’s interest to obtain fair value. Given his personal circumstances he is unlikely

to be re-employed and will be forced to apply for the unemployment benefit.

High Court judgment

[17] The Judge found that under s 53 of the Act the onus was on Mr Cheah to

disprove the Commissioner’s claim of benefit as specified in the application. She held

that a simple critique of the Commissioner’s calculation methods was insufficient to

discharge that onus. She determined that Mr Cheah was required to prove on the

balance of probabilities that the true benefit was less than that claimed by the

Commissioner, noting that in order to rebut the statutory presumption he must provide

evidence as to what the actual quantum of the benefit is. She found that the figures

provided by Mr Cheah were implausible. She thus determined that Mr Cheah had not

rebutted the presumption that the value of the unlawful benefit was the figure as stated

by the Commissioner.

[18] Mr Cheah applied under s 56 of the Act for an order excluding his half share

in the Great North Road Property from the profit forfeiture order on the basis of undue

hardship. On his behalf it was submitted that the house was purchased well before

Mr Cheah became involved in the supply of methamphetamine, he had no previous

convictions prior to the present offending and he had not lived extravagantly or

accumulated substantial assets. It was also noted that he is a mature man who now

has to restart his life and has a history of mental illness related to his methamphetamine

use.

[19] The Judge found that Mr Cheah had not established undue hardship.

She observed that any hardship he 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. Furthermore, he has access to funds

both in the form of a State benefit and debts of approximately $40,000 owed to him

by his father. She pointed out that Mr Cheah knowingly participated in the supply of

controlled drugs and ran a significant drug business.

[20] The Judge ordered that Mr Cheah pay the Commissioner the value of the

unlawful benefit derived using his share of the Great North Road property to meet the

order.

Discussion

[21] Mr McKean, for Mr Cheah, submitted that the Judge erred in her interpretation

of s 53. He argued that the onus imposed on Mr Cheah under that provision simply

required him to rebut the value nominated by the Commissioner and that once the

presumption is rebutted, the Court should undertake its own “rough and ready”

assessment of the evidence to determine the actual unlawful benefit. Had the Court

followed this approach it would have put Mr Cheah’s unlawful benefit at $272,450,

an amount which would be satisfied without the need to realise Mr Cheah’s half share

in the Great North Road property.

[22] Mr McKean also submitted that the Judge applied the “undue hardship” test

under s 56 too strictly. He submitted there is no requirement that the hardship be either

severe or gross and that in all the circumstances, the loss of Mr Cheah’s last remaining

asset, his home, constituted “undue hardship”.

[23] We turn to consider both of these points in more detail.

Did the Judge err in her interpretation of the requirements of s 53?

[24] The principles relevant to the making of a profit forfeiture order are found in

ss 53 to 58 of the Act. We begin by observing that the term “profit forfeiture order” is

something of a misnomer, because what is forfeited under s 55 of the Act is the value

of an unlawful “benefit”. The Act defines benefit as including “proceeds and

property” and specifies that any “expenses or outgoings used in connection with”

qualifying significant criminal activity must be disregarded when calculating the value

of any qualifying property, proceeds or benefits.5 In R v Pedersen this Court observed

that the predecessor Act, the Proceeds of Crime Act 1991 (“the 1991 Act”), was “not

an income tax statute, nor is it one concerned with lawful commercial operations”.6

In other words, “benefit” means gross receipts rather than profits.7

[25] Unlike the 1991 Act, the new legislation does not prescribe how the amount of

any unlawful benefit is to be assessed by the Court.8 Instead, the criteria under the

1991 Act have been replaced by a statutory presumption. This is found in s 53 which

provides:

53 Value of benefit presumed to be value in application

(1) 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 value of that benefit is presumed to be the value

stated in—

(a) the application under section 52(c); or

(b) if the case requires, the amended application.

(2) The presumption stated in subsection (1) may be rebutted by

the respondent on the balance of probabilities.

5 Criminal Proceeds (Recovery) Act 2009, ss 5(1) and 6(3). 6 R v Pedersen [1995] 2 NZLR 386 (CA) at 390. 7 At 391. 8 See Proceeds of Crime Act 1991, ss 27 and 28.

[26] Thus, under s 53(1) the Commissioner carries the initial burden of proving on

the balance of probabilities that Mr Cheah unlawfully benefitted from significant

criminal activity.9 It is then for Mr Cheah to rebut the statutory presumption that he

benefitted to the value claimed by the Commissioner, that is $2,102,179.

[27] One of the questions raised on this appeal is: what is required of him to rebut

the presumption? Is it sufficient for him to critique the Commissioner’s method of

calculation, or is something more required, such as adducing evidence that the true

value is less than that nominated or, as the Judge determined, proving the value of the

actual benefit received? To answer that question, it is necessary to review the

legislative background.

[28] The purpose of the reverse onus was discussed in the Explanatory Note to the

Criminal Proceeds (Recovery) Bill 2007 in the following way:10

The Crown will not be required to establish the value of the profit derived

from significant criminal activity, as this would be too onerous a test. Rather,

the onus will be on the respondent to an order to establish, on the balance of

probabilities, that the value specified in the application is too great.

The justification for this reverse onus is the difficulty of obtaining evidence

showing the unlawful origins of property, as against the expectation that if

property is derived from lawful activity the owner should be able to establish

that.

[29] The legislative intentions behind the new Act were helpfully discussed by

Katz J in Commissioner of Police v Tang.11 She said:

[21] The Explanatory Note to the Criminal Proceeds Recovery Bill noted

that civil forfeiture regimes in overseas jurisdictions were proving

considerably more effective than previous laws “in terms of the value of the

criminal proceeds (confiscated)”. The Note recorded that “this Bill will

introduce a similar approach in New Zealand”. The new legislation was

clearly intended to make proceeds of crime recovery more effective, rather

than less so …

[22] I note the observations of Cooke P in Pedersen that [the Proceeds of

Crime Act] 1991 was intended to deter serious crime by demonstrating

emphatically that it does not pay. “It should therefore be judicially

administered in that spirit”. The general tenor of the Explanatory Note and

the Parliamentary debates which preceded the passage of the [Criminal

9 Criminal Proceeds (Recovery) Act, s 53(1). 10 Criminal Proceeds (Recovery) Bill 2007 (81-1) (explanatory note) at 3. 11 Commissioner of Police v Tang [2013] NZHC 1750 (footnotes omitted).

Proceeds (Recovery) Act] suggest that Cooke P’s observations apply equally

to the interpretation of the [Criminal Proceeds (Recovery) Act], arguably even

more so.

[30] Some interpretative assistance may also be found in s 3 which sets out the Act’s

purpose. Stated as primary under s 3(1)(b), is the establishment of a regime to forfeit

property which represents the value of a person’s unlawfully derived income.

Mr Wiseman, for the Commissioner, also drew our attention to s 3(2)(a) which

provides that the proceeds and forfeiture regime established under the Act proposes to

“eliminate the chance” for persons to profit from undertaking significant criminal

activity and that s 53 should be interpreted in that light; language which the Supreme

Court recently described as “aspirational’, giving a “clear and emphatic signal as to

the legislative purpose”.12

[31] However, the Act is all but silent on what, in practice, is required of a

respondent to rebut the presumption. The High Court has considered this issue in two

cases. There is no appellate authority directly on point.

[32] In Tang, Katz J, in discussing the Commissioner’s presumed value of unlawful

benefit, approached the question in the following way:

[33] The Commissioner is not required to prove the extent to which

Mr Tang has benefited from significant criminal activity. It is for Mr Tang to

rebut the statutory presumption that the amount of benefit he received was

$360,000, by providing evidence as to what he says the actual amount of

benefit he received was.

…

[39] How the Commissioner calculated the $360,000 figure is strictly

irrelevant. It is the figure itself that is important. It is not for the Commissioner

to prove, on the balance of probabilities or otherwise, the amount of benefit

Mr Tang received or to justify how the benefit amount he relied on was

calculated. The figure of $360,000 is presumed to be the correct benefit

amount unless and until Mr Tang proves otherwise. Mr Tang cannot do this

by simply “critiquing” aspects of the Commissioner’s methodology as,

ultimately, precisely how the Commissioner calculated his benefit figure is

irrelevant. Mr Tang must adduce his own evidence to establish, on the balance

of probabilities, that the true benefit figure was less than $360,000.

12 Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [12].

[33] Katz J determined that Mr Tang had not discharged the onus. His evidence did

not credibly establish what the total benefit received was; it was thus not possible to

determine whether it was $360,000 or a greater or lesser sum.13

[34] Mr McKean submitted that these comments are not authority for the

proposition the Commissioner contends. He accepted that a respondent must do more

than merely critique the Commissioner’s methodology. A respondent must adduce

evidence that the amount of the unlawful benefit claimed by the Commissioner is

greater than that actually received. However, he considered that proof the

Commissioner’s methodology was flawed would go some considerable way towards

rebutting the presumption.

[35] In Commissioner of Police v Filer, Gilbert J observed that the statutory

presumption means it does not matter how the Commissioner assesses the benefit.14

He said:

[13] Section 53(2) of the Act does not make clear whether the respondent

has to go further than show that the Commissioner’s assessment is wrong and

prove what the actual benefit was. However, in my view, this is the correct

interpretation. Once the Commissioner discharges the initial onus under

s 53(1), the onus of proving the correct figures rests with the respondent under

s 53(2) and does not pass back to the Commissioner. This interpretation serves

the purposes of the forfeiture regime which include eliminating the chance for

persons to profit from undertaking or being associated with significant

criminal activity and deterring such activity. These objectives could be

frustrated if the legislation is interpreted so as to require the Commissioner to

prove the benefit in all cases where a respondent can establish some error in

the Commissioner’s assessment. The respondent will know what the benefit

was and will have access to the witnesses and records that may be needed to

prove this, whereas the Commissioner does not. I conclude that if the

respondent fails to prove the benefit on the balance of probabilities, the

amounts stated in the Commissioner’s application must stand, even if the

correctness of the underlying assessment is questionable.

[36] Mr McKean submitted that this approach is simply wrong. Given the

potentially dire consequences for a respondent, the nature and extent of the onus must

be clear on the face of the section. It is not appropriate to read into the provision words

which are not there. To adopt the Judge’s interpretation can impose an insuperable

burden on a respondent. The practical difficulties for someone in Mr Cheah’s position

13 Commissioner of Police v Tang, above n 11, at [52]. 14 Commissioner of Police v Filer [2013] NZHC 3111 at [5].

are so formidable and unfair that a less stringent test must be favoured. Judicial and

parliamentary observations that respondents are best placed to prove the source of

acquired assets assume situations where a respondent has accumulated identifiable

property such as land, a house or a car. In those circumstances it is self-evident that

the respondent will be better placed than the Commissioner to explain the provenance

of the property. But in Mr Cheah’s case there is no such property. He has virtually no

assets. He operated in a cash economy, with minimal accounting records and was

often under the influence of methamphetamine. The values recorded in the diary were

used to estimate the presumed figure on what Mr McKean described was an entirely

“speculative basis”. All Mr Cheah could say in rebuttal was, “I did not make

$1.8 million in benefits from drug dealing”. He could go no further.

[37] Mr McKean also submitted that the less onerous interpretation he favours is

consistent with observations of this Court in Nicholas v Commissioner of Police and

Doorman v Commissioner of Police.15

[38] In our view neither of these decisions provides the support which Mr McKean

claims. In the passage relied on from Nicholas, this Court described the onus,

commenting that the starting point will be the value of the unlawful benefit calculated

by the Commissioner with the respondent being required to prove that the

Commissioner’s figure “is wrong”.16 Contrary to Mr McKean’s submission, that

statement is not one of interpretive principle. It goes no further than paraphrasing

s 53. The same point may be made in respect of Doorman, where this Court stated

that the onus was to prove that the value in the Commissioner’s application was “not

correct”.17 The appellant in that case had suggested a portion of the figure proposed

by the Commissioner was actually from money “recycled” through different bank

accounts. The Court held that this was not a plausible suggestion, noting that the

appellants had provided no evidence to support it.18 Clearly, this case does not support

Mr McKean’s submission either.

15 Nicholas v Commissioner of Police [2017] NZCA 473, [2017] NZAR 172; and

Doorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173. 16 At [24]. 17 At [48]. 18 At [46].

[39] Mr McKean submitted that once a respondent has proved the Commissioner’s

assessment of presumed value is wrong, the Court would be required to make its own

“rough and ready assessment on the basis of all the evidence of what the benefit from

criminal offending was”. He said that such an approach is fair given the practical

impossibility of proof.

[40] There are, however, a number of difficulties with that submission. First, it

invites a return to the law as it was under the 1991 Act. That was a conviction-based

regime which required the Court to assess the value of benefits derived from the

commission of a serious offence.19 Unlike its predecessor, the present Act is silent on

the matters the Court is to have regard to in assessing the amount of any benefit

received. Instead, the previous criteria under the 1991 Act have been replaced with

the presumption in s 53.20 The obvious perils of the Court embarking on an accounting

audit of criminal activity, even a rough and ready one, were commented on by this

Court while the 1991 Act was still in force.21

[41] Secondly, no justification for that course is to be found anywhere in the Act.

Mr McKean’s submission would require us to read into the Act a reasonably complex

procedural mechanism.

[42] Thirdly, Mr McKean’s submission implies a distinction should be made

between those cases which involve identifiable and real assets and those such as

Mr Cheah’s, which do not. Nowhere in the Act is there any justification for such a

distinction.

[43] Another factor Mr McKean submitted operates in favour of his interpretation

is that otherwise there is no fetter or control over what figure the Commissioner might

nominate in his s 52 assessment. With an onus on the respondent which is effectively

impossible to answer, the Commissioner will be “encouraged” to nominate inflated

figures in the knowledge of how difficult it is for a respondent to rebut them.

19 Proceeds of Crime Act, s 25(1)(a). 20 Commissioner of Police v Tang, above n Error! Bookmark not defined., at [9]. 21 R v Pedersen, above n 6, at 392.

[44] While we accept there is a potential for harshness, there are two aspects of the

legislation which provide some comfort against an unfair or oppressive result.

The first is s 53(1) which deals with the value of the benefit being presumed in the

Commissioner’s application. Before that figure may be presumed the Commissioner

is required to prove, on the balance of probabilities, that the respondent has unlawfully

benefitted from significant criminal activity during the relevant period. This is a not

insignificant evidential hurdle. It requires the Commissioner to specifically turn his

mind to quantifying the level of value of the unlawful benefit.

[45] The second is s 47(1) which permits the High Court to amend an application

for a civil forfeiture order either on its own initiative or on the application of the

Commissioner. Section 47(2) prohibits any amendment to include additional property,

proceeds or benefits unless the Court is satisfied the additional assets were not

reasonably identifiable when the application was made or the evidence to support the

application in relation to the additional assets only became available after the order

was made. This suggests that s 47(1) contemplates a situation where the Court elects

to reduce the value of the benefit claimed in the application. A similarly worded

provision was contained in the 1991 Act.22 It would seem that neither s 47 nor its

predecessor has yet been used to amend an application to reduce the Commissioner’s

claim to proceeds, property or benefits. Presumably the power to do so would be

exercised in accordance with the Act’s purpose of permitting forfeiture of the direct or

indirect proceeds of significant criminal activity.

[46] We accept that for respondents such as Mr Cheah, who have accumulated few,

if any, identifiable assets, the task of displacing the statutory presumption in s 53 may

prove challenging. Mr McKean referred to it as proving the counterfactual; namely

that Mr Cheah was not involved in drug dealing to the extent claimed. But we do not

accept it is as onerous or impossible a task as Mr McKean submitted. The respondent

will always be best placed to explain not only in what respects the Commissioner’s

assessment is wrong, but also what the correct figure should be. If believed, this will

usually result in a successful rebutting of the onus. In this case Mr Cheah filed

affidavit evidence. He gave oral testimony at the hearing. He disclosed the existence

22 Proceeds of Crime Act, s 12.

of offshore funds which had not, until that point, been known to the Commissioner.

As is discussed in more detail below he gave explanations for his sources of legitimate

income and what his expenses were. This body of evidence went well beyond a bald

denial that he received $1.8 million in benefits from his drug dealing.

[47] Under s 53 there are only two possible outcomes. The first is that the

Commissioner enjoys the benefit of the presumption and the respondent fails to rebut

the presumption. In that case the presumed value stands. The second is where the

respondent succeeds in rebutting the presumption. As for the latter, by necessary

construction, it follows that the respondent must prove a different value. Under s 53

the Court’s role is limited to deciding on the balance of probabilities whether the

Commissioner has proved that the respondent unlawfully benefitted, during the

relevant period of criminal activity, from significant criminal activity, and whether the

respondent has rebutted the presumption that the value of that benefit is correctly

stated in the application. That may be contrasted with s 54, where the High Court is

specifically tasked with determining the maximum recoverable amount by taking the

value determined under s 53 and deducting from it the value of any property forfeited

to the Crown as a result of the assets forfeiture order. In other words, the Act draws a

distinction between values which are for the Court to assess and others which are for

others to prove.

[48] We are satisfied that the Judge was correct to determine that it was for

Mr Cheah to rebut the statutory presumption by adducing evidence as to what the

actual amount of his benefit was.23 As discussed, this approach reflects the legislative

purpose and is consistent with the statutory scheme and the wording of s 53.

[49] We acknowledge that the result in this case is severe. The Commissioner’s

projection of profits fails to make a reasonable concession for the fact that Mr Cheah

was probably not supplying on the same scale over the 196 weeks. The vast majority

of dealing cases which come before the Court involve dealing which increases

incrementally over time. Nevertheless, this is what is required by the statutory onus

23 High Court decision, above n 2, at [84].

on a defendant in such proceedings. Section 53 would not result in such a tough

outcome if the figures put forward by the Commissioner had been credibly challenged.

[50] This finding leads to the next question and that is whether the Judge was correct

in determining that Mr Cheah had not rebutted the presumption. It is to that issue we

next turn.

Was the Judge correct to find that Mr Cheah had not rebutted the presumption?

[51] As earlier noted, the Commissioner’s assessment was made up of four

component parts; first, $132,000 being the value of the methamphetamine found at

Mr Cheah’s address, secondly, $94,350 being the total receipts recorded in the diary,

thirdly, $31,973 being the total of unexplained cash deposits into his bank accounts

and $1,843,856 being the estimated total receipts earned from drug dealing after he

was dismissed from his job. For the purposes of this appeal it is only the last amount

which is challenged.

[52] The Judge summarised Mr Cheah’s rebuttal evidence in relation to the value

of his unlawful benefit in the following way:24

[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, his 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 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.

24 At [68] and [69].

[53] In finding that Mr Cheah had failed to rebut the presumption in favour of the

Commissioner’s figure, the Judge made adverse credibility findings against him. She

dismissed Mr Cheah’s account of his income and expenditure as implausible. Her

findings on that conclusion are reproduced, in part, below:

[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 Wagener. He maintained he had weaned himself

off methamphetamine after he became unemployed but had been lured back

by Mr Wagener 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.

[54] The evidence of unlawful benefit came from Mr Cheah’s claim he was

Mr Wagener’s drug supplier for modest amounts for just two months before his arrest,

the methamphetamine (valued at $132,000), $70,520 in cash found on his arrest and

the diary showing sales of $99,450 of methamphetamine sales over the 10-week period

prior to his arrest. He admitted to the author of the pre-sentence report that he had

been a heavy user of methamphetamine. He had not been employed since June 2012

and had spent $155,000 through his bank for living expenses. Statistically, an average

New Zealander would have needed $205,000 to $296,000 in living expenses over the

period. Thus, Mr McKean submitted that Mr Cheah, compared to the average

New Zealander, spent just $50,000 less on living expenses over the relevant period.25

Furthermore, Mr McKean submitted there was no evidence of drug dealing beyond

the 10-week period or that he was selling to anyone other than Mr Wagener.

Significantly, he acquired no assets over the period in question.

25 The evidence was that the average New Zealander spends $564 per week on living expenses. An

analysis of his bank account revealed that Mr Cheah spent $427 per week on living expenses.

[55] Mr McKean also placed considerable emphasis on the Commissioner’s

proposition that in the four-year period after Mr Cheah left his employment he earned

$1.8 million and spent that sum on purchasing methamphetamine to feed his habit.

That assumption rests on the contents of the diary which indicated Mr Cheah was

receiving approximately $9,400 per week from drug dealing and he was using those

funds to purchase his drugs. In the absence of acquiring any other property,

the Commissioner assumed the funds were spent on drugs. Mr McKean was

particularly critical that no allowance was made for any variation in Mr Cheah’s rate

of earning, noting that the progression of addiction to methamphetamine and thence

to dealing typically starts off in small amounts before growing incrementally. Mr

McKean illustrated this point by observing that if Mr Cheah was earning about $9,400

per week from drug dealing and was using that money to spend on drugs for both

personal use and sale it meant he was consuming approximately four grams of

methamphetamine a day for four years. That amount, by any measure, would be a

phenomenal quantity of drugs.26 There was no evidence to contradict Mr Cheah’s

evidence that he stopped taking drugs in 2012 and only recommenced once he met Mr

Wagener online.

[56] However, as Mr Wiseman pointed out, the unlawful benefit figure must also

include the expenses of Mr Cheah’s drug dealing operation which included purchasing

the product he was on-selling. It also funded his living expenses. Viewed that way,

Mr Cheah’s personal methamphetamine consumption would have been considerably

less than Mr McKean’s figure, which we agree suggested extremely high volumes.

[57] Mr McKean was also critical that insufficient weight was given to the evidence

Mr Cheah received considerable income from the private sale of cosmetic products he

had acquired during the course of his employment. We do not agree. The Judge

reasoned that these sales would not have been sufficient to generate the funds

necessary for Mr Cheah to purchase drugs not only for his own use and also for

dealing, noting that his tax records revealed substantially declining earnings in the

years preceding his employment termination.27

26 This was on the basis that $9,400 is approximately what would be paid for an ounce of

methamphetamine, that is, 28 grams which equates to four grams of methamphetamine a day. 27 This was explored in Mr Cheah’s cross-examination which revealed he declared $53,683 for the

year ending 31 March 2011, $29,000 in 2012 and $6,635 for 2013 (which covered three months

[58] Nor is it correct to say that the Commissioner’s assessment was entirely

arbitrary and unfair. An example is the criticism that the Commissioner assumed that

Mr Cheah’s drug dealing activity was constant throughout the four years when, in fact,

the figures relied on related to the final phases of his offending over the last 10 weeks.

The criticism is that no allowance was made for the likely scenario that the level of

his trading increased incrementally from a relatively low base. There is, however,

force in Mr Wiseman’s contrary submission that it is plain Mr Cheah was addicted and

was dealing to support his habit for some time, from at least 2011, before his

behavioural issues led his employers to terminate his employment. Mr Cheah was

unable to explain the origin of two substantial cash deposits paid into his accounts in

August and November 2011 before his termination. These suggest that he was a

substantial dealer for some time before he left his work, a period which the

Commissioner has not included in the retrospective extrapolation.

[59] Mr McKean was also critical of the Judge’s rejection of Mr Cheah’s claim that

he stopped taking drugs in 2012 and only recommenced once he met Mr Wagener

online. In our view this was a factual finding which was open to the Judge and for

which she gave reasons. These included Mr Cheah’s evidence relating to his

methamphetamine use and addiction which led him to lose his job. It also included

his omission to mention to the probation officer that his methamphetamine

consumption had abated until 2014 or 2015. Given the Judge’s strong credibility

findings against Mr Cheah, her rejection of his account is understandable.

[60] For these reasons we are unable to conclude the Judge erred in finding

Mr Cheah had not rebutted the Commissioner’s presumption.

Was the Judge wrong not to make a finding of undue hardship?

[61] Because we have decided that the Judge was correct in her interpretation and

application of s 53 it is necessary to consider the second ground of appeal, namely

whether the Judge applied the undue hardship test under s 56 too strictly and failed to

take into account Mr Cheah’s personal circumstances in the event he was to lose his

part interest in the Great North Road property.

of his employment from April to June 2013).

[62] Mr McKean’s criticism is that the Judge elevated the relevant test to one

requiring severe or gross hardship, rather than applying the statutory wording.

[63] Under s 56 the Court may exclude certain property from a profit forfeiture

order if it considers that, having regard to all the circumstances, undue hardship is

reasonably likely to be caused to the respondent if property was realised. Section 56

provides:

56 Exclusion of respondent’s property from profit forfeiture order

because of undue hardship

(1) The High Court may, on an application made by the

respondent before a profit forfeiture order is made, exclude

certain property from being able to be realised under section

55(2)(c) 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 were realised.

(2) The circumstances the Court may have regard to under

subsection (1) include, without limitation,—

(a) the use that is ordinarily made, or was intended to be

made, of the property that is, or is proposed to be, the

subject of the profit forfeiture order; and

(b) the nature and extent of the respondent’s interest in

the property; and

(c) the circumstances of the significant criminal activity

to which the profit forfeiture order relates…

[64] The threshold for relief under s 56 is high. Hardship for offenders and third

parties is to be expected. For the Court to grant relief an applicant must show not

merely inconvenience or difficulty, but that any hardship will be so disproportionate

as to require the objectives of recovery and deterrence to be subordinated to the

particular needs of the wrongdoer.28

[65] The loss of equity in a home acquired from legitimate sources before the

criminal activity, and the consequent prospect the respondent will need to rely on State

assistance for housing, has been held not to constitute undue hardship; the risk of

28 Nicholas v Commissioner of Police, above n 15, at [57]; and Lyall v Solicitor-General [1997]

2 NZLR 641 (CA) at 646 and 647.

losing a home ought to have been contemplated at the time the respondent embarked

on the criminal activity.29

[66] On the question of undue hardship and Mr Cheah’s application, this is what the

Judge said:30

[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.

[67] Mr McKean’s criticisms are several. First, he submits the Judge read into s 56

the requirement that the hardship must be severe or gross. He also submitted the Judge

failed to take into account or give sufficient weight to Mr Cheah’s personal

circumstances; his age, his history of mental illness, that he has no family in

New Zealand and has just completed a lengthy term of imprisonment. Given his

circumstances, his chances of getting back on his feet are limited. He is likely to have

to apply for a State benefit and, if he loses his home, seek State housing assistance.

His home is his sole remaining asset and it will be difficult to extract his share from

that of his co-owner to receive fair value. Furthermore, given the absence of concrete

evidence supporting the profit forfeiture order, its severity may be taken into account

as part of the “all of the circumstances” evaluation under s 56.

[68] We cannot agree with these points. Read in context, the Judge was not saying

that Mr Cheah must suffer extreme or gross hardship before the relief under s 56 is

available. What the Judge was correctly focusing on was the disproportion between

Mr Cheah’s offending and the value of his half share in the Great North Road property.

In doing so she applied the law reflected by this Court in Lyall and Nicholas. We agree

that forfeiture in this case will not lead Mr Cheah to suffer undue hardship in the

29 Commissioner of Police v Ranga [2013] NZHC 745 at [45]. 30 High Court judgment, above n 2, at [96].

correct legal sense, having regard to both the severity of the offending and Mr Cheah’s

personal circumstances. Our reasons follow.

[69] First, the offending was extremely serious. Both charges carry life

imprisonment and the sentence imposed on Mr Cheah reflects that seriousness.

[70] Secondly, although the property was acquired well before Mr Cheah’s

offending commenced, it was used by Mr Cheah to facilitate the commission of the

crimes he was convicted of. Found at the property was a substantial quantity of

methamphetamine, items associated with drug dealing, a large quantity of cash and

the diary recording substantial sales. Furthermore, the modus operandi involved

Mr Wagener meeting his purchaser near Mr Cheah’s home, taking the order, obtaining

the drugs from Mr Cheah and then delivering them to the waiting purchaser. This is

not a case where the asset at risk has no connection to the index offending.

[71] Thirdly, the loss of Mr Cheah’s interest in the property is tempered by other

assets he will have available to him which have not been forfeited. These were referred

to by the Judge who in our view correctly summarised the relevant factors when

making the proportionality assessment.

[72] Fourthly, Mr Cheah’s mental health issues need to be viewed in context.

He lost his job due to performance issues related to his drug use, including bizarre

conduct. However, the assessment of undue hardship is to be made at the time the

application is judicially considered. It is relevant the pre-sentence report recorded

Mr Cheah is no longer addicted and no longer suffers from suicidal ideation.

[73] Finally, we do not overlook the various other personal factors advanced by

Mr McKean. There is little doubt that the loss of equity in the Great North Road

property will cause hardship to Mr Cheah. He will lose his home. While there is no

direct evidence on this point, it seems reasonable to infer he will struggle to secure

employment given his age and circumstances. He will likely be reliant on financial

support from the State. But these factors, taken singly or in combination do not

persuade us that he will suffer undue hardship for the purposes of s 56.

Result

[74] The appeal is dismissed.

Solicitors: WRMK Lawyers, Whangarei for Appellant Meredith Connell, Auckland for Respondent