A couple have lost their battle to prevent the Crown from taking their two properties worth $1.7 million after a commercial-scale cannabis bust.

Police raided one of Michael John Heron’s North Canterbury properties in September 2020, shutting down a “commercial-scale” hydroponic cannabis-growing operation and seizing more than $153,000 in cash.

Heron pleaded guilty in the District Court to cultivating cannabis, possessing cannabis for supply, and manufacturing cannabis oil. He was sentenced to 12 months of home detention.

Police then moved to confiscate their property at Fernside in the Waimakariri district, as well as another at Waikuku, which Heron and his partner, Hayley Lewis, own as an investment, and the cash. Together, the two properties have council ratings valuations totalling $1.7m.

It was argued both pieces of real estate were “tainted” by Heron’s illegal activities, which a forensic accountant estimated had netted him $1.28m between 2013 and 2020, and the cash was derived in the same way.

Heron acknowledged that the $153,000 was derived from illegal activity but denied that any of his real estate was “tainted” in terms of the Criminal Proceeds (Recovery) Act.

Last year, the High Court made an order under the act to transfer the properties and the cash to the Crown.

The couple took their case to the Court of Appeal, which dismissed their challenge.

However, the court order allowed Lewis to keep $147,000, which Lewis, who has no criminal charges and no criminal history, had contributed to the mortgage and upkeep of the properties from her legitimate full-time employment. The sum was to be paid to her after the properties had been sold.

Heron and Lewis have since taken their case to the Court of Appeal, attempting to have the High Court’s decision overturned.

The couple’s challenge

Today, the Court of Appeal released its judgment which detailed Heron argued it was only necessary for the judge to make orders that deprived him of assets to the value of the cash profit he had made illegally from the cannabis operation, which amounted to about $380,000.

He submitted that the sale of the Waikuku property alone would recover more than that amount, making forfeiture of the Fernside property unnecessary.

It was also argued that forfeiting the Fernside property would cause undue hardship, as Heron had established a new business on that property.

Lewis argued that the relief granted to her was inadequate and that the judge failed to fully consider her contributions to the Waikuku property from 2016 to 2020.

It was also submitted that Lewis should retain the increase in the capital value of the Fernside property between the date of Heron’s arrest and the hearing in the High Court.

“The undue hardship that the forfeiture of both properties will cause for her can only be mitigated by recognising the legitimate financial and non-financial contributions that she made both to her family and to the two properties,” her counsel argued.

But the Court of Appeal ruled the judge was correct not to grant Heron relief against forfeiture concerning the Fernside property.

The decision stated the Fernside property was bought using a deposit from Heron’s tainted investment account, the house was then used as a residence for the family, and the garage was converted into a “sophisticated cannabis growing facility” using cash derived from criminal activity.

“The garage was then used exclusively to conduct a sophisticated cannabis growing operation that derived further cash profits.”

The Court of Appeal also ruled it would not be appropriate to increase the relief Lewis has already received.

“On any view of the evidence, she had some appreciation of what was occurring at both properties. She also plainly knew of the significant quantities of cash her husband’s activities were generating over a period spanning several years. She was also prepared to share in the benefits those activities produced.”

The senior court dismissed the couple’s appeals and did not make an order for costs as their appeal was legally aided.

Raid found 331 cannabis plants

Heron was convicted on the cannabis charges in 2021 and then turned his skills to start a legitimate business, building up a “micro-greens” growing facility providing edible vegetable sprouts using similar methods to his former cannabis operation.

When he was raided in 2020, officers found 331 cannabis plants in four different stages of cultivation in four grow rooms or tents.

The bust came about a month before the 2020 nationwide referendum on whether to legalise recreational cannabis. The referendum was narrowly defeated and a draft Cannabis Legalisation and Control Bill did not proceed.

When he was first arrested, Heron claimed he had only undertaken one successful grow to supply cannabis oil “for medicinal purposes” in anticipation of a legislative change to permit this.

On the day of the search, Lewis told police that she “knew something was going on, but not the extent”, court documents say.

Police said, however, that Heron had been using four times the daily average electricity use for years to power his grow rooms.

Since June 2016, he had consumed more than 100kWh (units) per day. Over four months in the spring and summer of 2015, his power bill came to $3483.

Police said Heron had fitted out a five-bay garage next to his house to accommodate the commercial-scale hydroponic cannabis-growing operation.

Equipment found included heat pumps and air conditioners, water and nutrient supply systems and a carbon dioxide pump.

“Cash and electronic funds derived from Mr Heron’s criminal activity were regularly paid into the couple’s joint bank account, and used to pay the mortgages,” according to the High Court order.

In the walk-in wardrobe of the couple’s bedroom, police found $153,860 – in total, 3238 banknotes neatly bundled up into $10,000 packages – in two lock boxes on a shelf.