Between Commissioner of Police Applicant And Thomas Cheng and Others 1st Respondent And Mortgage International LLP 7th Respondent And William Cheng 18th Respondent And Nyioh Chew Hong 19th Respondent
[2024] NZHC 2569
•9 September 2024
IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY
I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE
CIV-2016-416-12, 46, 04
[2024] NZHC 2569
UNDER The Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
THOMAS CHENG and OTHERS
1st Respondent
AND
MORTGAGE INTERNATIONAL LLP
7th Respondent
AND
WILLIAM CHENG
18th Respondent
AND
NYIOH CHEW HONG
19th Respondent
Hearing: 25 July 2024 Appearances:
S Earl for Applicant
M Pascariu for Mortgage International LLP
Judgment:
9 September 2024
JUDGMENT OF CULL J
[1] The Commissioner applies for a disclosure of source order under s 109A of the Criminal Proceeds (Recovery) Act 2009 (the Act) seeking information from the respondents on the source of funding and other details relating to the property and bank funds which are currently subject to a restraining order.
[2] The respondents oppose the application on the grounds that it is an abuse of process because the restraining order on which the Commissioner relies for this
COMMISSIONER OF POLICE v CHENG and OTHERS [2024] NZHC 2569 [9 September 2024]
application has expired, the profit forfeiture application has been determined, and issue estoppel applies as the matters have already been determined.
[3] This application follows a series of restraining orders and a forfeiture hearing. The restraining orders were made under ss 24 and 25 of the Act on 4 April 2016 (2016 order), 1 May 2017 (2017 order) and 16 November 2020 (2020 order) over properties and bank accounts.
[4] The restraining order relied on for this application is the 2017 order applying to Mr William Cheng and Ms Nyioh Hong, restraining $10.7 million1 in bank accounts and nine properties owned by them through other entities.
[5] In 2020, the Commissioner sought profit forfeiture orders against Mr William Cheng and Ms Nyioh Hong and the entities with which they are associated. The profit forfeiture application was heard over a two-week trial in March 2023 before Cooke J, who made forfeiture orders against the first respondent Mr Thomas Cheng for the sum of $512,852 but otherwise dismissed the Commissioner’s forfeiture application against Mr William Cheng and Ms Nyioh Hong.2 The Commissioner appealed the High Court judgment and the appeal was heard on 4 July 2024.
[6] For the Court to exercise its discretion under s 109A(3) of the Act, there must be an extant s 24 restraining order. The focus during the hearing was on the viability of the 2017 restraining order. It was accepted by the parties that the 2017 restraining order, which underlies the Commissioner’s appeal against Cooke J’s judgment and underpins this application for source disclosure, will expire on the determination of that appeal which now awaits the Court’s determination.
1 This is the sum calculated from Schedule 2 of the amended application for disclosure of source orders dated 29 May 2024.
2 Commissioner, New Zealand Police v Cheng [2023] NZHC 606 [2023 High Court judgment].
Background
[7] The background facts are not in dispute and are drawn principally from Cooke J’s judgment and the summary provided by both counsel.
[8] The Commissioner sought restraining orders in April 2016 over six properties in Gisborne and all the funds contained in the bank accounts of Thomas and William Cheng.3 The property and funds are restrained by the 2016 restraining order under ss 24 and 25 of the Act respectively.
[9] After further inquiries were undertaken into entities connected with the two primary respondents in this application, Mr William Cheng and Ms Nyioh Hong, a restraining order was made on 1 May 2017, restraining nine commercial properties and nine further bank accounts. A third restraining order was made on 16 November 2020 for a second set of restraining orders over bank funds to capture deposits into them from 1 May 2017 to 16 November 2020. Extensions of the periods of restraint were sought and ultimately granted, the last extension being granted until 2 June 2023 by Cooke J.
[10] The relationship of the respondents and their connection with the restraining orders is concisely set out in Cooke J’s judgment, which summarises the background as follows:4
[2] The primary respondents to the application are Mr Thomas Cheng, who is presently serving a lengthy sentence for drug dealing, his father Mr William Cheng and Mr William Cheng’s spouse Ms Nyioh Chew Hong. All three are citizens of Singapore. They are not citizens or residents of New Zealand. All other respondents are persons and entities associated with these three persons. Following the completion of his sentence Mr Thomas Cheng will likely be deported back to Singapore.
[3] Mr William Cheng and Ms Nyioh Hong live in Singapore. They have extensive commercial property holdings in New Zealand involving 13 buildings which have generated leasehold income. They also have substantial funds in bank accounts that are associated with these activities. At one point they made an application to become New Zealand residents but this was declined.
3 The properties restrained were 46 Gladstone Road, Gisborne, 67 Lowe Street, Gisborne, 26 Lowe Street, Gisborne, 110 Peel Street, Gisborne (including 105 Lowe Street, Gisborne) and 119 Grey Street, Gisborne. The total amount of the funds restrained was $91,253.74.
4 2023 High Court judgment, above n 2 (emphasis added).
[4] The property that is currently restrained, and which is the target of the profit forfeiture applications, falls into three main categories. The first is money in Mr Thomas Cheng’s bank accounts and the cash he had at the time of restraint which involves just over $40,000. The second is money in Mr William Cheng’s bank accounts, amounting to approximately $10.4 million at the time of restraint. The final category is the properties that Mr William Cheng and Ms Nyioh Hong own through other entities said to be worth approximately $10.2 million at the time of restraint.
[5] As will be explained Mr Thomas Cheng has engaged in significant drug dealing in New Zealand. It is not alleged that Mr William Cheng or Ms Nyioh Hong were involved with that. The case against them, and the application for the forfeiture of their assets, is based on allegations of unrelated tax evasion and money laundering.
Background
[6] Mr William Cheng purchased his first commercial building in New Zealand in 1997. This was the Tangata Rite building in Gisborne. Of the properties owned by his entities in New Zealand this is the most valuable. It has had a number of government related tenants including Oranga Tamariki and the New Zealand Police. At the time of this first purchase Mr Thomas Cheng would have been only about 14 years old.
[7] Mr Thomas Cheng had a very troubled childhood. His mother and father are separated. Ms Nyioh Hong is Mr William Cheng’s second spouse.
[8] In August 2013 Ms Nyioh Hong applied on behalf of herself, Mr William Cheng and their three young children for New Zealand residency. That was declined in March 2014, and their appeal to the Immigration and Protection Tribunal was dismissed in May 2015. Over the same period of time Mr William Cheng and Ms Nyioh Hong acquired further properties in New Zealand. This began in September 2012 through to January 2016 leading to a total portfolio of 13 properties. These properties can be thought of as largely lower grade commercial properties, with some of the buildings having deferred maintenance requirements. One such acquisition was the Masonic Hotel in Gisborne which was once a significant hotel, and a building which still holds heritage value. As will be explained in greater detail below each of the properties acquired was owned by a special purpose holding company associated with Mr William Cheng and Ms Nyioh Hong.
[9] Mr Thomas Cheng came to New Zealand in 2015 at the suggestion of his father. It was arranged that he would manage the Masonic Hotel. It operated as a place for short term tenancies more than a hotel. The arrangement was that Thomas would be entitled to half the rent from any new tenants that he could find. He arrived in New Zealand in September 2015, but was arrested on 1 April 2016 for methamphetamine dealing in New Zealand. He pleaded guilty to representative charges of importing and supplying methamphetamine and was sentenced in the Gisborne District Court to 10 years nine months’ imprisonment on 22 February 2018. His evidence at the hearing before me was by way of AVL from Tongariro Prison.
[10] The applications under the Act followed promptly after Thomas’ arrest on 1 April 2016. The without notice restraining orders were made by Wylie J on 4 April 2016. From the outset the allegations have not only encompassed
the alleged methamphetamine dealing by Mr Thomas Cheng but also alleged tax evasion and associated offending by his father and stepmother. By judgment dated 28 September 2016 Simon France J dismissed an application for restrained funds belonging to his father to be released.5 Simon France J noted the allegations of tax evasion, and the basis for that contention.6 He recorded that Ms Nyioh Hong had attempted to provide some explanation for the business arrangements in evidence given by AVL from overseas, but that he did not find her to be a satisfactory witness.7
[11] Simon France J also effectively upheld the restraining orders on notice in his judgment. The Commissioner made a further application without notice in December 2016 to cover nine further properties and nine further bank accounts. They were granted on notice by Williams J on 1 May 2017. Extensions of the period of restraint were then granted in 2017 and 2018. On 30 April 2019 the Commissioner made applications to extend both orders which were opposed by Mr Thomas Cheng and also by Mr William Cheng and Ms Nyioh Hong. This opposition was dismissed by Grice J by judgment dated 6 November 2019.
[11] On 16 October 2020, the Commissioner elected to seek profit forfeiture orders under s 55 of the Act to be enforced against all the restrained property under the 2016 and 2017 restraining orders, involving all of the respondents. The profit forfeiture orders were sought on the basis of unlawful benefit to the value of $20 million from significant criminal activity, not on the basis of tainted property. As Cooke J recorded, there was no allegation that Mr William Cheng and Ms Nyioh Hong were involved in Mr Thomas Cheng’s drug dealing. The case against them for the forfeiture of their assets was based upon allegations of tax evasion and money laundering.8
[12] As a result of the Commissioner’s investigations, he found that none of the registered proprietors of the nine commercial properties in which Mr William Cheng and his partner exercised control as directors and/or shareholders had New Zealand bank accounts. All transactions in relation to the funding of the acquisition of those properties were processed through Mr William Cheng’s personal bank accounts in New Zealand, the Commissioner alleges. The Commissioner’s claim is that Mr William Cheng’s accounts were used as intermediaries to transfer New Zealand based funds, derived from undeclared rental income, overseas and in the same manner, transfer overseas-based funds into New Zealand. The quantum of funds transferred into New Zealand far exceeds the quantum transferred out of New Zealand.
5 Commissioner of Police v Cheng [2016] NZHC 2304.
6 At [5].
7 At [9].
8 2023 High Court judgment, above n 2, at [5].
[13] The Commissioner says that neither Mr William Cheng or Ms Nyioh Hong have co-operated with the Commissioner’s investigations and despite production of examination orders being served on them through their Counsel and on the New Zealand-based persons named as directors of the entities, no response was received.
The Act’s statutory framework
[14] The Act provides for the restraint and forfeiture of property derived as a result of significant criminal activity, without the need for a conviction.9 Importantly, a restraining order is an interim order of limited duration to preserve property while the Commissioner gathers evidence to support an application for forfeiture.10
[15] There are two types of restraining order. If the Court is satisfied it has reasonable grounds to believe that any property is tainted by significant criminal activity,11 a restraining order may be made under s 24 of the Act. Alternatively, the Court may make a restraining order under s 25 of the Act if the Court is satisfied that it has reasonable grounds to believe the respondent has unlawfully benefitted from significant criminal activity.12 Although the 2017 restraining order was made under both sections 24 and 25, in this hearing, it was accepted by the parties that it was obtained on the basis of “tainted” property under s 24.
[16] Of relevance to this application is the duration of the 2017 restraining order. This is governed by s 37. That a restraining order is a limited and interim measure is reinforced by s 37(1) of the Act. It specifies that a restraining order expires one year after it was made, unless a forfeiture order is made. If a forfeiture order is made or declined, the restraining order expires. However, the Court may extend the duration of a restraining order for a period of up to one year13 and repeat extensions are expressly permitted.14
9 Criminal Proceeds (Recovery) Act 2009, s 4(1)(a).
10 Vincent v Commissioner of Police [2013] NZCA 412 at [45(a)].
11 Criminal Proceeds (Recovery) Act, s 24 and s 5 definition of “tainted property”.
12 Section 25(1).
13 Sections 37(2)(d) and 41.
14 Section 41(3).
[17] These provisions reinforce that a restraining order is made for the purpose of preserving property in contemplation of an application for its forfeiture. That is the end goal of a restraining order and its expiry. However, of particular relevance to this application are the discrete provisions governing the duration of the 2017 restraining order on an appeal from an unsuccessful civil forfeiture application.
[18] Where a Court has declined to make a forfeiture order and the applicant appeals that decision, a restraining order continues until the determination of that appeal. Section 37(2)(a) provides:
if a court declines to make a forfeiture order, but the applicant indicates that the applicant will appeal that decision, a restraining order expires on the date specified in s 38.
[19] The expiry date, which has application here, is specified in s 38(b) as the date of the determination of the appeal:
Section 38
A restraining order that is in force at the time that a court declines to make a forfeiture order that is associated with the same property does not expire, if section 37(2)(a) applies, until–
(a)the date that is the end of a period of 7 working days from the date of that decision, if an appeal has not been lodged in the court by that date; or
(b)if an appeal has been lodged in the court by that date, on the date of the withdrawal or determination of that appeal, or, if a further appeal is lodged, on the date of the withdrawal or determination of that further appeal.
[20] Those provisions, which were in force before the enactment of s 109A, are relevant to this application for disclosure of source orders.
[21] Significant legislative change was made by the amendments to the Act on 27 July 2023.15 Section 109A provided a new statutory tool for recovery enforcement and that is the disclosure of source order, which requires the provision of source
15 Section 33 of the Criminal Proceeds (Recovery) Amendment Act 2023 inserted s 109A of the Act and further amendments were enacted by ss 19, 21 and 22 prescribing the matters to be specified in type 1 assets forfeiture orders and in type 2 assets forfeiture orders. Contemporaneously, on 27 July 2023, regulation 11 of the Criminal Proceeds (Recovery) Amendment Regulations 2023 amended the form of application for type 1 and type 2 assets forfeiture orders.
information. Source information is defined as including the name of persons whom the respondent knows holds, or believes may hold an interest in the property, the circumstances in which the respondent acquired the property, and any other information of a kind specified in the disclosure of source order.16
[22] The fundamental requirement for a disclosure of source order is that it can apply only to a respondent to whom a s 24 restraining order relates.17 The Commissioner, however, is prevented from applying for a disclosure of source order, if “type 1 assets forfeiture order” application has been made relating to the same property to which the restraining order applies.18
[23] As part of the significant amendments to the Act on 27 July 2023, ss 49–52 now defines the assets forfeiture orders into type 1 (tainted property) and type 2 (a profit forfeiture order), together with a detailed prescription of the contents now required in an application for each of type 1 or type 2 forfeiture orders.
[24] For the Court to exercise its discretion under s 109A(3) of the Act, three preliminary requirements must be satisfied. They are:
(a)Is there an extant restraining order?
(b)Does the restraining order relate to the respondents?
(c)Are the respondents residing out of New Zealand?
Preliminary issues
[25] In support of the source disclosure application, the Commissioner filed two affidavits. They are the affidavits of the investigator, Mr Jonson and a forensic accountant, Mr Vevers, both of whom finalised their affidavits on 22 March 2024. They both had filed “lengthy affidavits” for the hearing before Cooke J also.19 These affidavits are lengthy with Mr Jonson’s affidavit being 440 pages in length and Mr Vevers is 1291 pages in total. The affidavits contain substantial exhibits and both
16 Criminal Proceeds (Recovery) Act, s 109A(4).
17 Section 109A(1).
18 Section 109A(2).
19 2023 High Court judgment, above n 2, at [29].
deponents rely on numbers of affidavits filed in support of the earlier restraint and profit forfeiture applications. Neither qualified themselves as experts.
[26] The respondents raise two objections to the production of these affidavits. The first is whether the evidence is fresh, having not been adduced before Cooke J in the profit forfeiture trial. The second objection is to their admissibility, containing as they do hearsay, submission and argument.
[27] Ms Earl for the Commissioner describes these affidavits as containing “recently reviewed evidence which was not before the Court in the Civil Forfeiture Application” being evidence that Singaporean bank accounts under the control of Mr William Cheng and Ms Nyioh Hong “received cash deposits totalling over SGD 24.5 million in a similar timeframe to when the property restrained in this proceeding was acquired.”
[28] It was accepted at the hearing that the relevant documentation, consisting mainly of bank statements, was received by the Commissioner from Singapore on 7 March 2019. Mr Vevers deposes that due to an oversight, this information was not analysed and therefore not placed before Cooke J at the hearing of the forfeiture application in March 2023. It is plain that this evidence, in the hands of the Commissioner since 2019, could have been produced at the trial in 2023.20 It appears that it had not been analysed or adequately considered.
[29] The Commissioner relies on this evidence in support of this application as “evidence of money laundering not previously relied upon by the Commissioner”. As Cooke J recorded, the Commissioner’s forfeiture application against Mr William Cheng and Ms Nyioh Hong was based on allegations of tax evasion and money laundering, unrelated to Mr Thomas Cheng’s drug dealing.21 However, in my view, the determination of this source disclosure application does not turn on the admissibility of these affidavits, for reasons addressed below, and I make no ruling accordingly.
20 Rae v International Insurance Brokers (Nelson Marlborough Ltd) [1998] 3 NZLR 190 (CA) at 192.
21 2023 High Court judgment, above n 2, at [5].
[30] Similarly, I record that the respondents have raised objections about the hearsay nature of the evidence and the content of argument or submission. For the same reason, I make no definitive ruling on whether there are parts of this evidence which are inadmissible or otherwise. I observe however, that the Evidence Act 2006 applies to evidence in civil and criminal matters. I am not persuaded by the Commissioner’s arguments that this application is of a criminal nature and that compliance with the Evidence Act or the High Court Rules does not apply to this investigative application. The submission is at odds with the High Court Rules 2016 (HCR) and the Act. Originating applications to the High Court under the Act are governed by r 19.2 which provides specifically that applications to the Court under the Act must be made by originating application.22 Rule 9.76, which applies to the filing of affidavit evidence under the HCR, describes the form and contents of an affidavit as “matters that would be admissible if given in evidence at trial by the deponent.”
[31] Further, s 10 of the Act defines the nature of proceedings under the Act and specifically provides that proceedings relating to a restraining order, an assets forfeiture order and a profit forfeiture order, among others, are “civil proceedings”. I note that a disclosure of source order under s 109A is not defined as either a civil or criminal proceeding. Ten proceedings are defined under s 10 as civil and only one (together with an appeal) is defined as criminal under the Sentencing Act 2002.23 However, consistent with s 10 of the Act, it is a proceeding relating to both a restraining order and an assets forfeiture order. While the Commissioner may term it an “investigative tool”, I am not persuaded that this application should be regarded in the nature of a criminal proceeding. To this extent, I respectfully depart from the High Court’s decision in Commissioner of Police v Shakib.24
[32] Although these issues were raised in argument by the parties, I have made these observations and record that they are not determinative, either of the application or the admissibility of evidence at this hearing. For reasons which I address below, this hearing is concerned with whether I am satisfied that a source disclosure order can be made, given the steps that have have been taken in this proceeding to date, and the
22 High Court Rules 2016, r 19.2(r).
23 Section 10(2) defines proceedings relating to instrument forfeiture orders as proceedings under the Sentencing Act 2002 and a related appeal as governed by the Criminal Procedure Act 2011.
24 Commissioner of Police v Shakib [2024] NZHC 1667 at [62]–[64].
retroactive nature of this application, given the changes in the legislation subsequent to the forfeiture determination.
The issues
[33] It is common ground that there are three prerequisites for the Court’s exercise of its discretion to grant a disclosure of source order. There must be an extant restraining order, relating to the respondents, who must be residing outside New Zealand. The first issue requiring determination is whether there is an extant s 24 restraining order.
[34] The second issue is whether the determination by Cooke J, currently under appeal, is determinative of the Commissioner’s case against the respondents.
[35] The third issue is whether the Court should exercise its discretion to make a source disclosure order.
Is the 2017 restraining order extant?
[36] Before a disclosure of source order can be made against a respondent, there must be a s 24 restraining order (tainted assets) in force.25 Further, the Commissioner cannot apply for a disclosure of source order after he has applied for “a type 1 assets forfeiture order relating to the same property to which the restraining order applies.”26 The question then is whether the 2017 restraining order is a s 24 tainted property order and is still extant.
[37] It is common ground that the 2017 order was granted under s 24 of the Act, on the basis that the property named in the order, being commercial properties and bank accounts, was tainted. What is in dispute is whether the 2017 restraining order is still extant.
[38] Following Cooke J’s judgment declining the Civil Forfeiture Application in relation to these respondents,27 the Commissioner lodged an appeal prior to the expiry
25 Criminal Proceeds (Recovery) Act, s 109A(1).
26 Section 109A(2).
27 2023 High Court judgment, above n 2.
of the seven-day period as prescribed in s 38(a) of the Act. As a result, the restraining orders remain in force pending the determination of the appeal or the determination of a further appeal.28
[39] The respondents contend that the 2017 order has expired. They point to the wording of s 109A of the Act, which requires that a source disclosure application may only be brought against a respondent to whom a “s 24 restraining order relates”. They say the present tense used in the section indicates that the s 24 restraining order must be extant.
[40] They say that the 2017 order does not survive the High Court determination because it is not subject to the Court’s appeal. The relevant restraining orders in force at the time of the High Court judgment were the 2016 and 2017 orders. The Commissioner has since amended his source disclosure application and abandoned the source disclosure orders sought in respect of the 2016 order, because only the 2017 order, which was made under s 24, provides the jurisdictional basis for the source disclosure order sought. Although the Commissioner has appealed within the prescribed seven working day period, the respondents say the Commissioner has confined it to two issues only. They were whether the Judge’s assessment of the benefit of tax evasion was an error and whether the Judge erred by declining to make a profit forfeiture order in favour of possible enforcement action by the Commissioner of Inland Revenue.
[41] The respondent’s argument is that the scope of the Commissioner’s appeal is confined to property which is restrained on the basis of profit or benefit obtained from tax evasion. Only the 2016 order was granted on the basis of a s 25 (profit) order, that the property was obtained as the benefit of criminal activity. It is accepted that the 2017 order however, was granted on the basis that the property was tainted under s 24. The respondents say therefore that the 2017 order is not subject to the appeal. As a consequence, the respondents say the 2017 restraining order has expired on the High Court’s determination of the profit forfeiture application.
28 Criminal Proceeds (Recovery) Act, ss 37(2)(a) and 38(a).
[42] Although the respondents are correct in submitting that s 38 is silent on what happens when a forfeiture application involves multiple restraining orders, I cannot accept the submission that the 2017 restraining order was not “extended” by operation of law on the lodging of an appeal against the profit forfeiture determination. There are two reasons for this. The first is the legislative provision on seeking forfeiture orders.
[43] Section 14 of the Act provides that a forfeiture order may be sought on grounds that differ from those on which the restraining order was made. To that extent, the scope of an appeal against a decision concerning a forfeiture order cannot be bifurcated depending on whether the restraining orders were obtained under ss 24 or 25. Once the suspect property has been restrained, either under ss 24 or 25 of the Act, the Commissioner must then decide which asset forfeiture order he wishes to pursue.
[44] Prior to 27 July 2023, the Commissioner’s election was either to pursue an assets forfeiture order or a profit forfeiture order. Following the amendments to the Act and to the Criminal Proceeds (Recovery) Regulations 2009 on 27 July 2023, the Commissioner may now apply for a type 1 assets forfeiture order against tainted property or a type 2 assets forfeiture order. The latter is described amorphously under s 50C(c) as the respondent’s acquisition of specific property, which has a market value beyond the respondent’s convertible legitimate property.
[45] Here, prior to the 27 July amendments, the Commissioner sought a profit forfeiture order against these respondents for tax evasion and money laundering and has appealed the refusal of that application to the Court of Appeal within the prescribed time. He was entitled to make that election and the profit forfeiture application encompassed both the 2016 and 2017 restraining orders.
[46] Secondly, the Commissioner’s appeal concerns the property of the 2017 restraining order. I accept the Commissioner’s submission that the 2017 restraining order has not expired. The trial concerned the two restraining orders and the Commissioner is challenging the High Court determination declining the profit forfeiture order and the finding that the proceeds from tax evasion should be pursued by the Commissioner of Inland Revenue, not by way of a forfeiture order. That puts
in issue the forfeiture determination over property which is the subject of the 2017 order and by operation of law, under s 38, the order has not expired. The fact that the 2017 order was granted on the basis of a s 24 order of tainted property does not restrict the Commissioner in pursuing a forfeiture order on a ground that differs from those on which the restraining order was made.
[47] Accordingly, the 2017 order is currently extant but only until the determination of the appeal. It was accepted by all parties that the order will expire on the appeal outcome, regardless of the result, by virtue of s 38(b) of the Act. As noted, the hearing before the Court of Appeal took place on 4 July 2024 and a decision currently awaits.
[48] Ms Earl for the Commissioner acknowledged that when the Court of Appeal judgment is delivered, the 2017 restraining order will expire but the Commissioner wishes to undertake the process of obtaining the source information in the interim, while the 2017 order is still alive. It is anticipated that the Commissioner will seek to extend the restraining order on the delivery of the Court of Appeal judgment, if such a jurisdiction is available. I note however, that s 37(3) provides that on the expiry of a restraining order, any further order associated with that restraining order also expires.
[49] It is accepted by all parties that there must be a valid s 24 restraining order in place for the duration of the source disclosure process. While the timeframe for the delivery of the Court of Appeal judgment is unknown, the period to be specified in the order for the respondents’ compliance of disclosing source information must not exceed the period of two months after the order is made, unless special circumstances apply.29 I note the Commissioner’s disclosure application seeks to require the respondents to produce the source information within two months from the date of the order. The respondents must then provide the information specified in s 109A(4)(a)–
(d) and all relevant documents substantiating that information, in respect of each item of property specified in the restraining order. The term of the order may be extended on the application of the respondent, or the Court’s own motion, or on an application to vary it by the Commissioner.30
29 Section 109A(5).
30 Section 109A(6).
[50] Where a respondent fails to comply with the order or the respondent makes a statement that was false or misleading in a material particular, the specific property that is the subject of a restraining order is subject to a statutory presumption that it is tainted property under s 50(2A). This presumption applies whether or not the respondent is convicted of an offence under s 152 of the Act, for failing to comply with an order or knowingly making a false statement. Otherwise, the presumption may be rebutted by a respondent, who establishes on the balance of probabilities that the specific property is not tainted property, or there was a reasonable excuse for failing to comply with the order or for making any false or misleading statement.31 The presumption does not apply if the Court is satisfied that it would not be in the interests of justice for the presumption to apply.32
[51] It is important to note that there are significant consequences from the rebuttable presumption under s 50(2A). Where a respondent has failed to comply, or had made materially false or misleading statements, or the presumption is not rebutted, the Court must make an assets forfeiture order (type 1) in respect of that specific property under s 50(1) and (2A) of the Act.
[52] With such a draconian statutory presumption, the uncertainty over the viability of the 2017 restraining order in my view, weighs against granting the Commissioner’s application. At any point in the process, the delivery of the Court of Appeal judgment may require the Commissioner to abandon the source disclosure process, if the 2017 restraining order expires or a fresh restraining order is not made. I consider the likely expiry of the 2017 restraining order presents a significant impediment to the grant of the Commissioner’s application.
[53] There are, however, other hurdles which I consider weigh against the making of the order.
31 Section 50(2B).
32 Section 50(2D).
Has the Commissioner’s case against the respondents been determined?
[54] The Commissioner says he has brought this application for the following reasons:
(i)given the recent introduction of s 109A of the Act, it was not possible to bring this application before the civil forfeiture application;
(ii)the Commissioner submits he is not prevented from bringing this application because he had not applied for a type 1 assets forfeiture order relating to the same property to which the restraining order applies (s 109A(2));
(iii)he had recently reviewed evidence which was not before the Court in the civil forfeiture application that the respondents had received cash deposits into Singaporean bank accounts totalling over SGD 24.5 million at the time when they acquired the restrained property; and
(iv)he seeks to further investigate through this application the extent to which funds remitted into New Zealand may be the proceeds of money laundering and therefore taint the restrained property, for which the Commissioner will consider whether he makes an application for an asset forfeiture order.
[55] The respondents submit that the Court should exercise its discretion to prevent re-litigation of issues which have already been determined. They raise issue estoppel or the doctrine of res judicata because there has been a final decision in the civil forfeiture High Court determination by Cooke J, the decision affects the same parties as in this application, and the decision is in relation to a cause of action that is identical to the cause of action or issue arising in this proceeding.33 Mr Pascariu submits that the reason for the res judicata doctrine is a public policy one, that it is fundamental to the judicial process that there be an end to litigation.34
33 Shiels v Blakely [1986] 2 NZLR 262 (CA) at 266; Commissioner of Police v Geddes [2013] NZHC 1199 at [42].
34 Gregiruadis v Commissioner of Inland Revenue [1986] 1 NZLR 110 (CA) at 114.
[56] In response, Ms Earl rejects the respondent’s contention that the Commissioner’s application is an abuse of process, or is a collateral attack on that decision. The Act, she says, does not preclude the Commissioner from making successive applications for civil forfeiture orders and he has made no previous application for an assets forfeiture order. The Act confers a power on the Commissioner to apply for disclosure of source applications and he cannot be estopped from exercising the statutory power. The Commissioner is also not precluded from making the application, as it is made in reliance on the “new evidence” of money laundering, not previously relied upon by the Commissioner, meaning the issues are not identical with those that were raised before Cooke J.
[57] However, Ms Earl submits it is premature for the Court to analyse the evidence at this stage because the evidence is relevant only to the ongoing nature of the investigation and that as the application for a disclosure of source order is a “criminal proceeding” the purpose of disclosure is to gather information for a potential civil proceeding. The Commissioner says further even if the question of issue estoppel is capable of being raised here, the elements are not made out.
[58] I accept the Commissioner’s argument that it is premature for the Court to embark on an analysis of the evidence adduced in the civil forfeiture trial compared to the evidence adduced by way of the two new affidavits. However, the Commissioner’s intention to undertake a further investigation into money laundering, while his unsuccessful profit forfeiture application is under appeal, raises questions about the appropriateness of this application. I deal then with the submissions on the res judicata issue.
Res judicata/issue estoppel
[59] The Commissioner applied for forfeiture orders for property under the 2016 and 2017 restraining orders with the asserted value of $20 million. The grounds of the application were that the respondents had unlawfully benefitted from significant criminal activity, namely the sale and supply of the Class A controlled drug methamphetamine, money laundering, tax evasion and criminal deception.
[60] At the trial of the forfeiture application in March 2023, Cooke J recorded that the Commissioner did not allege that Mr William Cheng or Ms Nyioh Hong engaged in significant drug dealing, as it was Mr Thomas Cheng who had engaged in that activity. As noted, the Commissioner’s case against them and the application for the forfeiture of their assets, is based on allegations of unrelated tax evasion and money laundering.35
[61] The Commissioner’s forfeiture application against Mr Thomas Cheng succeeded,36 although the Commissioner is appealing the determination of the value of the benefit he received. More relevantly, Cooke J declined the Commissioner’s application for forfeiture against the respondents but found that the allegations of tax evasion over the rental income, at the centre of the Commissioner’s allegations, was proved and that significant criminal activity arose by the respondents’ failure to declare income tax and goods and services tax.37 Noting that the Commissioner’s allegations of money laundering were more complex, the Judge concluded that the only relevant offending that the Commissioner established for the purpose of the alleged money laundering offence was tax evasion in New Zealand.38 It was on that basis that the Judge discerned the difficulty or mismatch between the Commissioner’s application for a profit forfeiture order based on tax evasion and the Commissioner of Inland Revenue’s processes for recovering tax not due.39 The Judge declined the application by the Commissioner of Police for profit forfeiture because IRD were in a position to recover all the unpaid tax, as well as significant penalties and interest, in a way that eliminated any benefit from this offending.40
[62] Section 109A of the Act was enacted four months after the delivery of the High Court judgment. The Commissioner relies on this subsequent legislative change to make this application, in reliance on evidence of money laundering “not previously relied upon by the Commissioner” but which was available prior to the 2023 trial. I have some difficulty with accepting the Commissioner’s submission that because
35 2023 High Court judgment, above n 2, at [5].
36 At [65].
37 At [81]–[87].
38 At [92]–[110].
39 At [114]–[117].
40 At [133]–[146].
evidence, which was already in his possession, was not analysed or presented, that there is now additional evidence which “may well have been found to establish significant criminal activity” if it had been adduced before Cooke J. There are two concerns which arise from the Commissioner’s approach.
[63] The first is that the Commissioner has restrained these respondents’ properties and bank accounts since 2017 for approximately seven years. The Commissioner elected to pursue a profit forfeiture order against the restrained properties on the basis of these respondents’ tax evasion and money laundering. Having been unsuccessful, the Commissioner is now applying under new legislation, enacted four months after the profit forfeiture trial, to re-litigate further allegations of money laundering against the respondents. I consider it is in effect an arrangement of a retroactive penalty regime, being sought against the same respondents over the same property, and for the same money laundering allegations, on additional evidence.
[64] Second, the evidence upon which the Commissioner now relies is evidence that was available to the Commissioner since 2019. The subsequent analysis and opinions formed by the investigator and the forensic accountant could have been undertaken and made available at the 2023 trial.
[65] I consider that the question of issue estoppel or double jeopardy has application here. I reject the argument that because the Act does not preclude the Commissioner from making successive applications for civil forfeiture orders, he can make yet another application for a forfeiture order, this time a type 1 forfeiture order. The fact that the legislative amendments have changed the description of the two types of forfeiture orders reinforces the retrospective nature of this application being brought after the event.
[66] The purpose of the res judicata doctrine is to ensure that parties are not subject to re-litigation of issues already raised and determined. The respondents have provided a table of evidence considered by Cooke J and compared it with Mr Jonson’s 2020 and 2024 affidavits. The allegations cover money laundering, misleading authorities, wrongdoing by Mr William Cheng in Singapore, inwards remission of
funds into New Zealand by Mr William Cheng and failure to provide an explanation or information to explain alleged suspicious dealings.
[67] The parties did not canvass the detail of the evidence between the trial and the newly filed affidavits and I am not in a position to determine whether the nature of the evidence has already been raised and determined. My concern is at a more fundamental level that after seven years of restraining the respondents’ property and electing to pursue an assets forfeiture order against these respondents on the basis of tax evasion and money laundering, the Commissioner’s application appears to seek to re-litigate these issues, albeit with further evidence that was in the Commissioner’s possession but was not adduced at trial.
[68] For completeness, I do not perceive, as the respondents submit, that the Commissioner is saying res judicata or issue estoppel has no application here, because the application is a criminal proceeding. As noted, I consider this application is a civil proceeding but if I am wrong in my perception about the Commissioner’s submission and that this application is a criminal proceeding, the retroactive penalties and double jeopardy considerations under s 26 of the New Zealand Bill of Rights Act 1990 raise the same sanctions on duplication of criminal proceedings and the imposition of retroactive penalties, albeit for prior convictions of criminal offences.
[69] I consider this application has come too late, after the forfeiture and appeal hearings have taken place. Indeed, the inability to apply for a source disclosure order until after the conclusion of the High Court proceedings reinforces the retroactive nature of this application. I consider that it is not in the interests of justice or appropriate to grant the Commissioner’s application.
[70] There is one further additional matter, which I consider arguably raises a bar to the Commissioner’s current application.
The previous profit forfeiture application.
[71] Section 109A(2) prevents the Commissioner from applying for a disclosure of source order after applying for a type 1 assets forfeiture order relating to the same
property to which the restraining order applies. This provision refers to a type 1 assets forfeiture order, which now describes the former assets forfeiture order.
[72] Although the Commissioner sought a profit forfeiture order, now redefined and named a type 2 assets forfeiture order, this disclosure application seeks source information relating to all the assets in the 2017 restraining order. This is the same property which has been restrained since 2017.
[73] There is a conflict in the Commissioner’s position. On the one hand, the Commissioner submits that he has not sought an assets forfeiture order at any time. However, the disclosure of source order is available only where a s 24 restraining order, in relation to tainted property, is in place. It is relevant that in this application, the Commissioner relies on the 2017 restraining order having been granted on the grounds that the respondents’ property was tainted.
[74] While it is correct that the Commissioner did not seek an assets forfeiture order on the basis of tainted property, he pursued a profit forfeiture order seeking the realisation of the same property as in the restraining order. The significant benefit from alleged criminal activity, namely tax evasion, money laundering, criminal deception and drug dealing were the grounds on which the Commissioner sought all the respondents’ assets to be forfeited, as Cooke J described.41 The value of the benefit claimed was assessed on the total value of all properties and bank accounts, in a global sum of $20 million, with no differentiation between what was legitimately acquired by the respondents and what was profit or in excess of market value, as is now required under a type 2 forfeiture order. Even under the former profit forfeiture procedure, the benefit was assessed by unexplained funds or profits obtained from criminal activity. The grounds for the forfeiture order were simply that all the property was acquired from criminal activity. This appears to be synonymous with the allegation that the property was tainted, as the restraining order claimed in 2017.
[75] I consider there is support for the proposition that the profit forfeiture application was synonymous with an assets forfeiture application in the description by Cooke J of the factual basis for the Commissioner’s claims, where the Judge traces the
41 2023 High Court judgment, above n 2, at [5].
acquisition by Mr William Cheng of commercial properties from 1997 to 2016. Cooke J described it as follows:42
[79] The factual basis for the Commissioner’s claims in this respect arise from the fact that entities associated with Mr William Cheng first acquired a commercial property in New Zealand in 1997. A further 12 commercial properties were acquired over the years, with the last property so acquired in January 2016. Money was remitted from Singapore into New Zealand bank accounts for the purpose of the property acquisitions. Leasehold income was earned from the properties and banked into Mr William Cheng’s bank accounts in New Zealand. Money was then remitted offshore, and remitted into New Zealand from and to that account in the period between 2012 and 2016. A total of $13,249,330.08 was sent inwards, and a total of $2,447,165 was remitted outwards. A total of $9,838,000 was used to purchase the 13 properties. The balance in Mr William Cheng’s bank account at the time of restraint was just over $10 million. These essential facts are the starting point for the Commissioner’s contentions that an amount of $20 million is forfeit to the Crown as a benefit derived from its substantial criminal offending.
[76] It is arguable, in my view, that the Commissioner’s profit forfeiture application was, in effect, an assets forfeiture application in all but name. I discern little difference between the Commissioner’s forfeiture application to realise all of the respondents’ property to that of a type 1 assets forfeiture order, save for its name. The fact that s 109A(2) precludes the Commissioner from applying for a disclosure of source order, when he has already applied for an assets forfeiture order relating to the same property as the restraining order, reinforces the issue estoppel principle that duplication of proceedings is not permitted by the statute. It also reinforces my view that duplication of the same or similar allegations for forfeiture should not be permitted here.
[77] I consider that this further investigative tool of source disclosure, which the Commissioner now seeks, serves to duplicate and/or re-litigate the matters already undertaken by the Commissioner.
The exercise of the Court’s discretion
[78] Ultimately, it is for the Court to exercise its discretion as to whether a disclosure of source order is made. I have accepted that the 2017 restraining order is extant till the delivery of the Court of Appeal’s judgment. I also accept that the
42 Emphasis added.
respondents are residing outside New Zealand. However, I am not satisfied that the Commissioner’s application should be granted.
[79]My reasons can be summarised as follows:
(i)Although the 2017 restraining order is extant, it is premature for a disclosure of source information order to be made before the determination of the Commissioner’s appeal.
(ii)The profit forfeiture application has already been determined and the 2017 restraining order will expire under s 38(b) on final determination of the appeal.
(iii)Whilst the application is an investigative tool, this application heralds a further forfeiture proceeding against the respondents, when the same property restrained under the 2017 order will be the subject of a fresh forfeiture application on evidence that was available to the Commissioner at the time his profit forfeiture application was tried and determined.
(iv)The Commissioner’s application is based on a change in the law subsequent to the determination of the profit forfeiture application and has all the hallmarks of a retroactive penalty, which is contrary to justice.
(v)The respondents’ property has been restrained for seven years and there must be an end to litigation.
Result
[80]The application for a disclosure of source order is declined.
Cull J
Solicitors:
Crown Law Office for Applicant
Hamilton Locke, Auckland, for 7th Respondent
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