Asset Forfeiture: Commissioner of Police v. Drake & Stewart

Leticia Drake and Gavin Stewart had their Christchurch home and earthquake insurance payouts seized as proceeds of crime having been funded with money from benefit fraud.   

Drake, currently serving two years nine months jail for benefit fraud, left fellow staff at Countdown so annoyed with her tales of living it up on welfare whilst working that they dobbed her in. The High Court was told she received more than $250,000 over a fifteen year period in what was described as a highly premeditated and cynical benefit fraud.  Recoveries under the Criminal Proceeds (Recovery) Act can go back only seven years.  Fraudulently claimed welfare benefits and Working for Family tax credits totalled $136,500 for the seven year period.

The family home in Emmett Street, Shirley, was purchased from Housing NZ in March 2010.  It was then substantially upgraded and refurbished.  Justice Dunningham ruled any property improved by the proceeds of crime is ‘tainted’ and can be confiscated.  Benefits were paid into Drake’s bank account and this money used not only for household expenses but also for mortgage payments, payment of insurance premiums and to renovate their home.  The Emmett Street property was confiscated, together with earthquake insurance payouts totalling $23,100 and funds held in a bank account.

Mr Stewart benefitted from the fraud, Justice Dunningham said.  His own funds were freed up by having fraudulent benefit payments help fund their purchase and renovations.  Justice Dunningham dismissed as not credible Mr Stewart’s claim to be unaware of Drake’s long running benefit fraud over the time he was her de facto partner.  Mr Stewart was described as a self-employed electrician.  There was evidence of tax evasion with Mr Stewart doing cash jobs on the side and not declaring income.          

Commissioner of Police v. Drake & Stewart – High Court (27.11.17)

18.012

Family Trust: Ash v. Singh

The High Court blocked attempts by Auckland lawyer Darsan Singh to benefit personally from her late husband’s million dollar family trust and to potentially remove as beneficiaries children from his first marriage.

Shean Singh died tragically in a boating accident in May 2015.  He left his second wife Darsan and their two children, plus two children from his first marriage.  Before marrying Darsan, Shean set up the Shean Singh Family Trust.  His children, born and yet to be born, were named as beneficiaries.  The Trust made no provision for any wife or de facto partner.  Shean himself was not a trustee. In 1996, the Trust was varied to add Darsan as a beneficiary with terms resulting in her potentially taking 60 per cent of trust assets and Shean’s four children receiving ten per cent each.  After Shean’s death, Darsan was appointed as trustee.

The High Court was told Gabriel, a son from Shean’s first marriage and now living in Germany, had fallen out with the trustees who include his stepmother Darsan and Shean’s brother.  He complains they will not provide details of his late father’s trust and alleges they are scheming to cut him out.  Associate judge Bell said varying the Trust in 1996 by including a power to remove individual beneficiaries was clearly a device aimed at Gabriel.  There is no evidence Shean ever wanted to exclude his children as beneficiaries, he said.  Evidence was given that the Trust’s current net worth is about one million dollars.  It owns properties in the Auckland suburbs of Mt Eden and Redvale.

Judge Bell ruled the 1966 Trust variation was of no legal effect.  The original Trust deed has no power to add beneficiaries.  Trustees do have power to resettle trust assets.  This is a power to take assets out of the trust and create a new trust.  This does not allow a new trust to be set up for someone who was not a beneficiary of the original trust, Judge Bell said.  Application to rectify the Trust by adding trustee powers to name extra beneficiaries was refused.  Rectification enables a document to be corrected, to match what was originally intended.  Shean Singh was himself a lawyer.  It is improbable that the Trust deed as originally signed is not what he intended, Judge Ball said.  He is now dead and cannot give evidence of his original intent.  Darsan Singh was removed as a beneficiary of the Sean Singh Family Trust.  The power to potentially remove Gabriel as a beneficiary was void.
[Post-judgement note: the Court of Appeal ordered a High Court hearing to determine whether in fact Shean Singh had intended to include in his family trust a power to add further beneficiaries.]   

Ash v. Singh – High Court (24.11.17)

18.011

Finance: Export Finance v. Mellsop

Internationally renowned aquarium builder Ian Mellsop was ordered to pay $320,500 to financier Export Finance after director Greg Fitzimmons finally lost patience.  Refinancing Mellsop’s business was abused, he said, when a mere $3000 was paid down on escalating business debt at a time when Mr Mellsop spent tens of thousands repairing his boat.

The High Court was told Export Finance Ltd assisted Mr Mellsop in his construction of a new aquarium in Chennai and facilitated the sale of his shares in a Thai aquarium.  Mr Fitzsimmons took an accommodating approach to Mr Mellsop’s ongoing indebtedness.  Three successive deeds with Export Finance were signed by Mr Mellsop and his companies acknowledging debts due and agreeing to repayment schedules.  Each time repayments were not fully met.  The third and final deed was signed in 2014.  Three years later Export Finance sued to recover its money.  Mr Mellsop said there was an oral agreement to further delay payment and to cap the amount owing.  He further said 25 per cent interest charged on the debt was oppressive, in breach of the Credit Contracts and Consumer Finance Act.

Associate judge Sargisson said it was inherently implausible that a vague and imprecise alleged oral agreement existed to contradict their written contract.  A default interest rate of 25 per cent was not oppressive, she said.  They are experienced business people.              

Export Finance Ltd v. Mellsop – High Court (24.11.17)

18.010