IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2014-485-009652 [2015] NZHC 1240

IN THE MATTER of an application pursuant to the Criminal Proceeds (Recovery) Act 2009

BETWEEN COMMISSIONER OF POLICE Applicant

AND PETER WILLIAM EVANS Respondent

AND CHAD WILLIAM EVANS First Interested Party

AND CATHERINE MURA POIHIPI Second Interested Party

AND ROBERTS CONSOLIDATED LIMITED Third Interested Party

AND MARTIN ALLAN PINHEY Fourth Interested Party

Hearing: 20 and 28 May 2015

Counsel: E M Light for Applicant P H Surridge and A O'Connor (28 May only) for Respondent

Judgment: 4 June 2015

JUDGMENT OF BROWN J

COMMISSIONER OF POLICE v EVANS [2015] NZHC 1240 [4 June 2015]

[1] On 29 September 2014 Collins J made restraining orders in respect of property comprising motor vehicles and several amounts of cash under the Criminal Proceeds (Recovery) Act 2009 (the Act). The motor vehicles the subject of that order are:

(a) A red 2012 Harley Davidson CVO Breakout motor cycle, registration HFFH1, including ignition keys registered to the respondent and under his effective control;

(b) A gold 1970 Pontiac GTO motor vehicle, registration 7OGTO, including ignition keys registered to the first interested party (C W Evans) and under the effective control of the respondent;

(c) A black 2002 Holden Monaro GTO motor vehicle, registration CSS945, including ignition keys registered to the second interested party (Poihipi) and under the effective control of the respondent;

(d) A silver 1994 BMW 730i motor vehicle, registration ZR7030, including ignition keys registered to the respondent and under his effective control.

[2] In the notice of application dated 28 July 2014 an order was also sought under s 35(e)(v) of the Act directing the Official Assignee to sell those vehicles in order to preserve their value.

[3] The respondent does not oppose the application in respect of the fourth vehicle.

[4] In its submissions dated 14 May 2015 the applicant advised that he no longer pursued the application in respect of the second vehicle because he accepts the evidence advanced by the respondent that that vehicle appears to be relatively rare and the respondent has owned that vehicle for some time.

[5] Consequently the present application relates only to the Harley Davidson motor cycle and the Holden Monaro GTO car.

The law

[6] Section 35(e)(v) of the Act states:

35 Types of further order

Without limiting the generality of section 34(1), a court may, on an application under section 33(1), make 1 or more of the following further orders in relation to restrained property:

…

(e) an order relating to the Official Assignee that–

…

(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property:

[7] As explained in Proceeds of Crime Law in New Zealand what are colloquially called “immediate sale orders” are typically applied for by the Commissioner in relation to motor vehicles and houses, in the case of motor vehicles because they have a clear tendency to depreciate and cost money to store, maintain and insure. 1 This reduces the ultimate quantum of property available for forfeiture.

[8] In Commissioner of Police v Chen Courtney J observed:2

The underlying purpose of the restraining order is to preserve the subject property because it represents a monetary value to the parties concerned. The legislature can be taken to have appreciated that property may be subject to a restraining order for a considerable time and that circumstances may change over the life of the order that so as put the property at risk. Some risks may be of a kind that action, including disposition of the property itself, may be needed to preserve the value that the property represents. If there were no mechanism for responding to such risks the rationale for the scheme would be significantly undermined.

1 H McKenzie Proceeds of Crime Law in New Zealand (LexisNexis Wellington 2015) at [5.17.2]. 2 Commissioner of Police v Chen [2013] NZHC 2259 at [30]–[31].

Section 35(e)(v) specifically recognises the need to preserve the value of the restrained property through the sale of it. There are many foreseeable circumstances that might justify such an order. These include a significant drop in the property market, the risk of a mortgagee sale and the reduction in value caused by lack of funds to maintain the property. For these reasons I consider that the ancillary orders can properly be made in the terms sought.

[9] Specifically in the context of an application concerning inter alia motor vehicles and motor cycles in Commissioner of Police v Cavanagh Venning J said:3

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

…

[9] Detective Latimer’s most recent evidence discloses that the Inland Revenue Department applies depreciation rates to motor cycles at 30 per cent per year, motor vehicles at 30 per cent per year and for pleasure vessels 13 per cent per year. Mr Harborow accepted that those are maximum rates of depreciation for accounting purposes but I accept his submission they give an indication of and support the instinctive view one might take that cars and boats are depreciating assets. That is particularly so where the cars, motor cycles and boats are of recent vintage and have no particular value in terms of speciality or uniqueness. The Official Assignee has obtained estimates valuations of a number of the vehicles which reflects and supports the view that they are wasting assets.

State of the evidence at hearing on 20 May 2015

[10] In the description of the vehicles in the notice of application dated 28 July 2014 a value was attributed to the motor cycle of approximately $20,000 and to the Holden car of approximately $25,000.

[11] Detective Constable Neville explained in his affidavit dated 28 July 2014 that an order for immediate sale was sought because the ongoing costs associated with the storage, insurance and general management of the vehicles would mount considerably and there was likely to be further depreciation of the vehicles which would reduce the likely return to the community for many forfeiture proceedings.

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

[12] He deposed to enquiries made in relation to the cost of the vehicles by use of the Veda Advantage online application, an online credit agency used by the Police to research, among other things, vehicle ownership. He explained that the value of vehicles in the Veda Advantage database is listed as either the amount known to have been paid for the vehicle or a value provided from the car valuation specialist RedBook, an online database using information provided by the New Zealand Transport Agency.

[13] In the case of the motor cycle the Veda Advantage search had provided two indicative prices: the wholesale price of $33,000 and a retail price of $44,000. Inquiry of the Infolog Search facility identified the respondent as the first registered owner of the motor cycle.

[14] An Infolog inquiry established that the Holden was acquired by the respondent on 24 April 2006 and was transferred into the name of the second interested party, Catherine Poihipi, on 9 July 2013. A search on the Veda Autoplus website had provided two indicative prices for the car: a wholesale price of $21,000 and a retail price of $25,500.

[15] With reference to the Holden car Detective Constable Neville’s affidavit included the following observations:

137. The vehicle has rarely come to the notice of Police and I believe that it has been stored as an investment to hold its value.

138. By placing it into the name of the second interested party (Poihipi) the respondent is given a level of separation from the vehicle and therefore protection against law enforcement and other agency action.

139. An Infolog search for the Odometer History shows very limited use over recent years when the Odometer reading has been recorded at Warrant of Fitness Inspections:

139.1 61,115km on 21/10/2011;

139.2 63,301km on 28/05/2012;

139.3 63,554km on 21/12/2012; and

139.4 66,548km on 27/06/2013.

[16] The only evidence filed by the respondent was an affidavit of Mr S M Billington, a qualified mechanic with 35 years experience, who has operated a company trading as New Zealand Vehicle Consultants since 2004. The limited nature of his evidence was explained in para 4 of his affidavit:

4. I was asked as to whether or not I could assist in seeking information from the Land Transport Agency as a means of ascertaining how many vehicles were currently registered in New Zealand of the type that were the subject of the proceedings. I was not asked to comment or give an opinion on the results obtained and don’t intend to do so. I simply provide the results and my method in obtaining the information to assist the court.

[17] His enquiry of the Land Transport Agency revealed that as at 5 March 2015 there were current registrations for six Harley Davidson CVO Breakout motor cycles, 48 Holden Monaro HSV GTO Coupes (automatic) and 30 Holden Monaro HSV GTO Coupe (manual) vehicles.

[18] In an affidavit in response dated 20 April 2015 Detective Constable Neville provided information about the cost of storing the vehicles, ostensibly on the basis that this was in response to a memorandum of counsel for the respondent dated 29 October 2014. With reference to the motor cycle and car the subject of the opposed application, he provided the following cost information:

Asset Description Value Notional Insurance Maintenance Cost Storage (per month) costs Cost (per month) (per month) 2012 Harley – HFFH1 $18,000 $60.00 $15.00 $6.60 2002 Holden – CSS945 $25,000 $150.00 $25.00 $30.00

[19] At the hearing on 20 May 2015 Mr Surridge, who had only recently been instructed, sought an adjournment in order to have the opportunity to provide further evidence. In the circumstances where only a brief slippage of time would result because I indicated I would hear the matter the following week, Ms Light very reasonably did not oppose the adjournment. I directed that any further evidence by either party was to be filed by Monday, 25 May 2015.

Additional evidence

[20] In a further affidavit dated 25 May 2015 Detective Constable Neville addressed the issue of the change in the value of the vehicles since the date of their restraint. He explained that the valuation for the vehicles were initially obtained on 7 July 2014 following their transfer to the control and custody of the Official Assignee. The valuations obtained from Turners Auction “E-Value” indicated that the motor cycle was then valued at $18,000 and the Holden car at $25,000 to $28,000.

[21] Further valuations were obtained on 25 May 2015 from the same source which indicated that the motor cycle was valued at $14,000 and the Holden car at $18,000. Detective Constable Neville commented that those valuations indicated that both the motor cycle and the Holden car had reduced in value over the previous year. He also provided a copy of an Inland Revenue publication dated February 2015 entitled “General depreciation rates”.

[22] The respondent also filed an affidavit dated 25 May 2015 in which he made the following observations with reference to the motor cycle and the Holden car:

6. HARLEY DAVIDSON MOTOR CYCLE. It is known as a CVO Breakout motor-cycle. The CVO part stands for Custom Vehicle Order. It cost $44,000 and was purchased by me. I have had motor-cycles since I was 16 years of age – before I ever owned a motor-car. I cannot say at this time it will appreciate in value although it was only one of six that came to NZ and only one out of two that was red and completely fitted with all genuine factory blue-printed extras. I am aware that there is a considerable and un-satisfied demand for CVO bikes from Harley Davidson to be marketed here and who knows at this point whether the bike in design and style will ever be produced again by the manufactures. ? If not then this bike will have a scarcity value attaching to it like the Pontiac as time goes by. It is my vehicle of choice to use when the weather suits.

7. HOLDEN MONARO 2002 COUPE. This vehicle is a two door coupe type vehicle with a factory fitted manual gearbox. Nearly all Monaro coupe vehicles produced around this year were factory automatic gearbox variants. This vehicle can only appreciate in value. That is also because it is in excellent condition when I had it; has travelled only some 67,000 km and has excellent paint-work and upholstery. It was a sort of Australian designed and built ‘muscle car’ made by a company that soon ceases to manufacture vehicles in Australia. I purchased this vehicle for some $42,000 in (i would

say) 2004 and purchased it by trading-in a Holden Club sport for $35,000 on its purchase price. This vehicle is rare; I am confident it will become a classic and its value will appreciate. It has high sentimental value to me and was sold by me to Catherine Poihipi (the mother of my children) who had the car for the year prior to the Police grabbing it.

[23] He further stated that he wished to have the vehicles inspected by a Harley Davidson agent in Palmerston North so that a professional opinion could be provided to the Court regarding the future values of the vehicles. However no additional affidavit was filed.

The hearing on 28 May 2015

[24] Both Detective Constable Neville and Mr Evans were called for cross-examination.

[25] With reference to the Holden car Mr O’Connor produced to Detective Constable Neville a Price Check Value Estimate obtained by Mr O’Connor on 28 May 2015 from the Turners website in respect of a 2002 Holden Monaro model CV8 V2 Coupe 5.7. The estimated sale price for such a vehicle, subject to its condition, was:

(a) Excellent: $26,967;

(b) Average: $24,522;

(c) Poor: $22,007.

[26] The document stated that two comparable sales had been used in estimating the value of the vehicle searched for, namely:

(a) a sale on 18 August 2014 of an automatic transmission vehicle with 124,897 kilometres for $17,800;

(b) a sale on 17 March 2015 of an automatic transmission vehicle with 82,409 kilometres for $26,250.

[27] In response to my question Mr Evans explained that his Holden Monaro was different from the model the subject of the Turners Estimate, it being a superior model, namely a GTO HSV 6 speed manual transmission car. In cross-examination he claimed to place a high sentimental value on the Holden car, explaining that he had owned it for a long time and that he viewed it “sort of as an investment”. He pointed out that it was a “numbered” car, that is, under the bonnet there is a tab recording the production number of that model.

[28] It was put to him in cross-examination that the fact that he had been prepared to transfer the vehicle into Ms Poihipi’s name suggested that he did not place much sentimental value on the vehicle. He rejected that and made the point that Ms Poihipi was proposing to have a garage built to house the car and that it was protected by a tarpaulin. He asserted that he had really looked after the vehicle and that it was in premium condition having travelled only 23,000 kilometres in the last eight years. He described as totally wrong the applicant’s evidence that its current valuation was only $18,000.

[29] The suggestion by counsel for the respondent that he was a fanatic about motor cycles was borne out in his evidence which disclosed that he had owned numerous motor cycles including at least eight Harley Davidson motor cycles. The respondent explained why he viewed this particular model as special, noting its engine size and the hand painted finish.

Decision

[30] The Harley Davidson motor cycle is comparatively new and the evidence indicates that, as one would expect, it is still declining in value. While I recognise that it is a somewhat exclusive model, the Harley Davidson brand is certainly not uncommon in New Zealand. The material provided by Mr Billington indicated that the Harley Davidson brand had the highest number of registrations of new motor cycles in New Zealand in 2013 (1,090), being slightly more than the largest Japanese brand, Suzuki (1,046), and substantially more than Triumph (533) and BMW (338). Indeed the respondent has owned at least eight Harley Davidson motor cycles.

[31] I am satisfied that in the course of the next few years at least, this Harley Davidson motor cycle will continue to decrease in value. Consequently I consider that an order for sale under s 35(e)(v) is necessary and appropriate in order to preserve the value of the motor cycle.

[32] I view the Holden car differently. The Turners estimate which Mr O’Connor put to Detective Constable Neville suggests that the value of this Holden car could be in excess of $26,250, given that it is a superior model to that the subject of the estimate and has a manual transmission and a comparatively low kilometre reading. Consequently the evidence suggests that the value of the car has not reduced since July 2014. That is consistent with both the respondent’s perception of the vehicle4 and with Detective Constable Neville’s opinion that the vehicle had been stored as an investment to hold its value.5

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

Disposition

[34] The Official Assignee is directed to sell:

(a) the red 2012 Harley Davidson CVO Breakout motor cycle registration HFFH1 including ignition keys;

(b) the silver BMW 730i motor vehicle registration ZR7030 including ignition keys.

4 At [27]–[28] above. 5 At [15] above.

[35] The application is declined in respect of the black 2002 Holden Monaro GTO motor vehicle registration CSS945. The application was not pursued in respect of the gold 1970 Pontiac GTO motor vehicle registration 70GTO.

[36] As honours have been shared, there is no order for costs.

______Brown J

Solicitors: Luke Cunningham & Clere, Crown Solicitors, Wellington Surridge & Co, Porirua