Commissioner, New Zealand Police v Cheng
[2023] NZHC 1167
•16 May 2023
IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY
I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE
CIV-2016-416-12 CIV-2016-416-46
CIV-2019-416-4 [2023] NZHC 1167
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
THE COMMISSIONER, NEW ZEALAND POLICE
Applicant
AND
THOMAS CHENG
First Respondent
MASONIC LIMITED
Second Respondent
REDOUBT HOUSE LIMITED
Third Respondent
ACTION INVESTMENTS LIMITED
Fourth Respondent
ACTION INVESTMENT LLP
Fifth Respondent
HARVEST PROPERTY LLP
Sixth Respondent
MORTGAGE INTERNATIONAL LLP
Seventh Respondent
EXPRESS FACTORING LLP
Eighth Respondent
WORLDWIDE MODELS LIMITED
Ninth Respondent
CML BUILDING LIMITED
Tenth Respondent
STARDUST BUILDING LIMITED
Eleventh Respondent
THE COMMISSIONER, NEW ZEALAND POLICE v CHENG [2023] NZHC 1167 [16 May 2023]
BAYWIDE CREDIT LIMITED
Twelfth Respondent
ANDERSONS BUILDING LIMITED
Thirteenth Respondent
UNITEC INVESTMENT LIMITED
Fourteenth Respondent
KFC LIMITED
Fifteenth Respondent
WILLIAM CHENG LIMITED
Sixteenth Respondent
QUEENS HOTEL LIMITED
Seventeenth Respondent
WILLIAM CHENG
Eighteenth Respondent
NYIOH CHEW HONG
Nineteenth Respondent
EMILY CHENG aka JOANNE MCKAY
Twentieth Respondent
WINSTON GEORGE MAURICE RAYMOND FRANKLIN
Twenty First Respondent
UNITEC INVESTMENTS LLP
Twenty Second Respondent
HARVEST FACTORING LLP
Twenty Third Respondent
AND
WARREN JAMES BORRIE
First Interested Party
Hearing: On the papers Appearances:
F E Cleary and V M Rea for the Applicant
L C Ord and E T Blincoe for the First Respondent M T Lennard counsel assisting the Court
Eighteenth and Nineteenth Respondents in person
Judgment: 16 May 2023
JUDGMENT (NO 2) OF COOKE J
(Costs)
[1] These proceedings involved an application for profit forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 (the Act). In the principal judgment I upheld the Commissioner’s claim for profit forfeiture orders against the first respondent, but declined the application in relation to the 18th and 19th respondents.1
[2] The question of costs as between the Commissioner and the first respondent has been resolved. There are two outstanding issues in relation to costs, however:
(a)a claim for costs by the 18th and 19th respondents; and
(b)the question whether the Commissioner should meet the costs of counsel assisting under s 178 of the Senior Courts Act 2016.
Costs claim by 18th and 19th respondents
[3] By memorandum dated 28 March 2023 the 18th and 19th respondents appear to make a claim for costs. They say:
On 24th March 2023, Judgment was made by the Honourable Cooke J — and we believe that the underlying principle is that costs and damages should be awarded to us after the Action is completed in our favour.
We are not seeking costs for the Court Hearing held on 13th February 2023 — as we were not represented by any lawyer at the said Hearing — but we are seeking costs and damages for the whole 7-years action taken and initiated by the Applicant.
We noted that Our costs and damages was inadvertently overlooked by the Honourable Judge Cooke J.
We wish to advise the Honourable Court that We had incurred various costs (like disbursements, professional lawyers fees, etc paid to date) and damages (resulted from the Applicant’s Restrain Orders) in defending the 7 years Action brought about by the Applicant.
1 Commissioner of Police v Cheng [2023] NZHC 606.
We therefore humbly seek for an Order that costs and damages be agreed upon between Us and the Applicant, failing which same be assessed by Court.
[4] I also note in a notice of appeal dated 18 April 2023 the 18th and 19th respondents have appealed against a decision of the High Court not to award them damages and costs.
[5] There is no basis upon which the High Court can award damages in relation to the conduct of proceedings. Any such claim would have to be in a separate proceeding, and there is no basis for that here in any event. As the 18th and 19th respondents also acknowledge, no costs could be awarded to them in relation to the profit forfeiture application as they elected not to instruct counsel and participate. The only application could be for costs for the earlier stages of the proceeding.
[6] Counsel for the Commissioner has advised that the 18th and 19th respondents were legally aided at this time, and if they were that would affect the question of costs. But in any event there is no basis upon which costs could be awarded to the 18th and 19th respondents for the earlier stages. It was the Commissioner, and not the 18th and 19th respondents who succeeded with the applications before the Court at the earlier stages. For example, in Commissioner of Police v Cheng Simon France J upheld an application to continue the restraining orders.2 This was opposed. The 19th respondent gave evidence by AVL. The Court did not accept this evidence and found that the 19th respondent was not a satisfactory witness.3 The Court awarded costs to the Commissioner on a 2B basis together with reasonable disbursements.4 This is not a situation where the 18th and 19th respondents could be entitled to costs. Rather costs have been awarded against them. Generally speaking there is no basis for the 18th and 19th respondents to be awarded costs for the earlier stages of the proceeding. That is so even if the Commissioner ultimately failed with his subsequent profit forfeiture application.
[7] Finally I note that the 18th and 19th respondents have complained that the amounts initially restrained by this Court have not been released to them
2 Commissioner of Police v Cheng [2016] NZHC 2304.
3 At [9].
4 At [20].
notwithstanding the Court’s findings. The fact that the profit forfeiture application in relation to the 18th and 19th respondents property has been dismissed could have had the result of the relevant property being released from restraint.5 However under s 38 of the Act a restraining order that is in force at the time the Court declines to make a profit forfeiture order does not expire if an appeal is lodged within the time specified. That is what has happened in the present case. So the fact that the funds have not been released is not a consequence of any decision by the Court. It simply arises from the operation of s 38.
Costs of counsel assisting
[8] As I explained in the principal judgment at [24]–[27] I appointed counsel to assist the Court under r 10.22 of the High Court Rules 2016. The reason for this was the existence of issues of principle in relation to making profit forfeiture orders in connection with suggested tax offending in circumstances where the Commissioner of Inland Revenue had power to recover the taxes, and property is available to meet any such liability. These circumstances gave rise to complex interpretation questions involving the inter-relationship between the Act and the revenue statutes.
[9] I found counsel assisting of assistance on these questions. Ultimately I declined the Commissioner’s application for profit forfeiture orders in circumstances where the Tax Administration Act 1994 gave the Commissioner of Inland Revenue an ability to recover the tax due (together with interest and penalties). I concluded that there was accordingly no benefit from any tax evasion to be recovered under the Act.
[10] By memorandum dated 11 April 2023 counsel assisting formally raised the question whether the costs of counsel assisting, which had been effectively met by the Ministry of Justice, should be met by the Commissioner of Police. That course was opposed by the Commissioner, and written submissions have been filed following my earlier direction.
[11]Section 178 of the Senior Courts Act 2016 provides:
5 Albeit then likely subject to recovery action by the Inland Revenue Department.
178 Costs where intervener or counsel assisting court appears
(1)This section applies to proceedings in any senior court or other court.
(2)If the Attorney-General or the Solicitor-General or any other person appears as an intervener or counsel to assist the court in any civil proceedings or in any proceedings on any appeal and argues any question of law or of fact arising in the proceedings, the court may, subject to the provisions of any other Act, make any order it thinks just—
(a)as to the payment by any party to the proceedings of the costs incurred by the Attorney-General or the Solicitor-General in so doing; or
(b)as to the payment by any party to the proceedings or out of public funds of the costs incurred by any other person in so doing; or
(c)as to the payment by the Attorney-General or the Solicitor- General or that other person of any costs incurred by any of those parties by reason of his or her so doing.
(3)If the court makes an order under subsection (2)(b), the Registrar of the court must forward a copy of the order to the chief executive of the Ministry of Justice who must make the payment out of money appropriated by Parliament for the purpose.
[12] In Earthquake Commission v Insurance Council of New Zealand Inc a full Court addressed the legislative predecessor to s 178 which was in the same terms. The Court said the section:6
…confers a broad discretion on the Court in relation to such costs. The discretion must be exercised on a principled basis but it is not possible to define the circumstances in which an award will be appropriate. The enquiry will always depend on the particular circumstances of the given case.
[13] The Court then set out four principles that would be relevant to whether an order was appropriate. The principles so listed were relevant to the kind of case the Court was there considering — an application by a private party who had engaged in the proceedings under s 178(2)(b). The present case involves an application under s 178(2)(a) where the costs of counsel assisting have or will be met by the Ministry of Justice from public funds. In terms of principles relevant to s 178(2)(a), and adapting the factors listed in Earthquake Commission, I would suggest the following factors are likely to be relevant:
6 Earthquake Commission v Insurance Council of New Zealand Inc [2015] NZHC 457 at [5].
(a)Whether counsel assisting provided material assistance to the Court.
(b)Whether the involvement of counsel assisting became appropriate or necessary as a consequence of the conduct of the party against whom the order is sought, including whether the principles concerning the award of costs under Part 14 of the High Court Rules may be applicable by analogy.
(c)Whether the matters addressed by counsel assisting involved broader questions, or matters of public importance.
[14] Applying that approach in the present case I accept the arguments for the Commissioner of Police that an order under s 178 is not appropriate in the present case.
[15] The issue leading to the appointment of counsel assisting was whether property should be forfeit under the Act when that property was also available to the Commissioner of Inland Revenue under the Inland Revenue Department’s enforcement powers. There was an associated risk of double recovery by the Crown. That issue had been recognised as one of importance in at least two New Zealand decisions.7 It is also an issue that has been addressed by overseas cases.8 It was accordingly an issue of wider public importance.
[16] The second point is that, whilst there are expectations relating to the manner in which the Commissioner undertakes litigation, it was to expect too much for the Commissioner to have advanced all of the matters that counsel assisting advanced. Those included matters that were contrary to the Commissioner’s interests, and to his arguments. Moreover the absence of a contradictor on these points arose because the 18th and 19th respondents elected not to participate in the proceedings. That is not a situation for which the Commissioner bears responsibility.
7 Commissioner of Police v Nabawi [2021] NZHC 2413; Li v Commissioner of Police [2022] NZHC 514.
8 R v Waya [2012] UKSC 51, [2013] 1 AC 294.
[17] Finally, this is not a situation where the Commissioner has conducted litigation in a way that was unreasonable leading to a need to appoint counsel assisting, or where any other costs rules in the High Court Rules were engaged, or engaged by way of analogy. The Commissioner was making an appropriate application and advancing appropriate arguments. The need for counsel assisting arose because of the interpretation difficulties, and associated wider interests in the matters so arising, in circumstances where there was no contradictor to address those matters.
[18] For all of these reasons I accept that the Commissioner of Police should not be required to meet the costs of counsel assisting under s 178 of the Senior Courts Act.
Cooke J
Solicitors:
Luke Cunningham Clere, Wellington for the Applicant Ord Legal, Wellington for the First Respondent
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