Commissioner, New Zealand Police v Schneider
[2024] NZHC 2105
•1 August 2024
INTERIM ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THESECOND RESPONDENT AND
FORMER SECOND INTERESTED PARTY UNTIL FURTHER ORDER OF THECOURT
NOTE: ORDER PROHIBITING PUBLICATION OF NAME OR IDENTIFYING PARTICULARS OF THEFORMER FIRST INTERESTED PARTY. SEE
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-813
[2024] NZHC 2105
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER
of an application pursuant to ss 21, 24, and 25
BETWEEN
THE COMMISSIONER, THE NEW ZEALAND POLICE
Applicant
AND
FRANK ROBERT SCHNEIDER
First Respondent
S
Second RespondentBETWEEN
S
Applicant
AND
THE COMMISSIONER, THE NEW ZEALAND POLICE
Respondent
Hearing: 5 June 2024 Appearances:
E M Ferrier and J Corbett for the Commissioner No appearance for Schneider
T J Leighton and S Baker for S
Judgment:
1 August 2024
THE COMMISSIONER, THE NEW ZEALAND POLICE v SCHNEIDER [2024] NZHC 2105 [1 August 2024]
JUDGMENT OF McQUEEN J
TABLE OF CONTENTS
Para Nos
Introduction[1]
Procedural background[3]
Factual background to on-notice application for restraining order[10]
The Commissioner’s on-notice application for a restraining order[23]
Are there reasonable grounds to believe Mr Schneider and Ms S have been
involved in significant criminal activity?[28] Are there reasonable grounds to believe that the Second Property and the Funds are tainted property?[40]
Have Mr Schneider and Ms S unlawfully benefited from significant criminal
activity?[43]
Do Mr Schneider and Ms S have an interest in the Second Property and the
Funds?[47]
Grant of on-notice application for restraining order[48]
The application by Ms S for further orders [49]
Variation of restraining order[51]
Local authority rates [65]
Ms K's rent [71]
Ms S's living expenses [75]
Future applications for variation [81]
Undertaking as to damages[82]
Name suppression [94]
Result and orders[102]
Introduction
[1]The matters to be determined in this judgment are:1
(a)an on-notice application by the Commissioner of Police (the Commissioner) for a restraining order, pursuant to the Criminal
1 With the agreement of the parties, Gwyn J directed that these matters (together with two applications for access to court documents in this proceeding) be heard together: The Commissioner of Police v Schneider HC Wellington CIV-2023-485-813, 4 April 2024 [Minute (No 2) of Gwyn J]. The applications for access to court documents are dealt with in a separate judgment: The Commissioner of Police v Schneider (No 2) [2024] NZHC 2135.
Proceeds (Recovery) Act 2009 (the CPRA), in relation to a property and funds in a specified bank account held by the second respondent; and
(b)an application by the second respondent for orders varying the restraining order to discharge certain property, varying the conditions of the restraining order, requiring the Commissioner to provide an undertaking as to damages and costs, and continuing interim name suppression for the second respondent and former second interested party.
[2] As in this judgment I order that interim name suppression continue for the second respondent and the former second interested party, and permanent name suppression for the former first interested party has already been granted, I have anonymised references to these parties in this judgment.2
Procedural background
[3] On 21 December 2023, the Commissioner made a without notice application for a restraining order under the CPRA in respect of property owned by the second respondent (Ms S), the former first interested party (Ms K) and the former second interested party (the Company). Ms K is Ms S’s mother. Ms S is the sole director and shareholder of the Company. Ms K and the Company were recorded in the Commissioner’s without notice application as interested parties but, in this judgment, I refer to them as the former interested parties as they are no longer parties to the proceeding. Mr Schneider was named as first respondent, and more will be said about him later.
[4] The property subject to the without notice application was land in the Wellington region (the Second Property) and all funds over $10,000 held in four specified New Zealand bank accounts.3 On 22 December 2023, Ellis J granted the
2 Permanent name suppression for the former first interested party was granted on 4 April 2024: Minute (No 2) of Gwyn J.
3 One in the name of Ms K, one in the name of the Company and two accounts in the name of Ms S.
without notice application on the basis that the restraining order would expire unless an on-notice application was filed within seven days (the initial restraining order).4
[5] The Commissioner promptly filed an on-notice application for a restraining order. This application related to only some of the property that was subject to the initial restraining order, being the Second Property and all funds over $10,000 held in one of Ms S’s bank accounts, to the value of $462,308.92 (the Funds).5
[6] Ms S and the former interested parties applied for orders varying the initial restraining order to discharge certain property, varying the conditions of the initial restraining order, requiring the Commissioner to provide an undertaking as to damages and costs, and for name suppression. While Ms S and the former interested parties also filed a notice of opposition in relation to the Commissioner’s on-notice application for a restraining order, subject to the orders they seek, they do not oppose the Commissioner’s application. The Commissioner filed a notice of opposition in relation to the orders sought by Ms S and the former interested parties (other than for name suppression in relation to Ms K).6
[7] The former interested parties were removed as parties to the proceeding in February 2024, as they did not have interests in the property listed in the on-notice application for a restraining order.7 At the same time, orders granting permanent name suppression for Ms K and interim name suppression for Ms S and the Company were made.8
[8] On 5 March 2024, the Commissioner made a without notice application for substituted service on Mr Schneider as the Commissioner was unable to identify his whereabouts and therefore serve the documents on him. The application was granted, with directions that service must include notice of a call date for the matter not earlier
4 The Commissioner of Police v Schneider HC Wellington CIV-2023-485-813, 22 December 2023 [Minute of Ellis J].
5 The other three bank accounts were not included in the on-notice application as the balance of each of those accounts was less than $10,000.
6 Two affidavits from Ms Nicola Sherborne were filed in support of the Commissioner’s opposition to the application by Ms S and the former interested parties and in reply to the evidence filed in opposition to the Commissioner’s application for a restraining order.
7 The Commissioner of Police v Schneider HC Wellington CIV-2023-485-813, 5 February 2024 [Minute (No 1) of Gwyn J].
8 Minute (No 1) of Gwyn J.
than 30 days from service and that the Commissioner was to file an affidavit of service setting out details of the service.9
[9] A hearing took place before me on 5 June 2024. At the time of the hearing, Mr Schneider had not been served in accordance with the directions of the Court. On 26 July 2024, counsel for the Commissioner filed a memorandum and affidavit of service confirming that substituted service on Mr Schneider had been completed, and that no further directions as to service were required. As Mr Schneider has now been served and has not taken any step in the proceeding, I am satisfied that all parties have been served a copy of the Commissioner’s application for a restraining order as required by s 21 of the CPRA,10 and they have been given the opportunity to appear and to adduce evidence in this proceeding.11 Therefore, I may now determine the applications before me.
Factual background to on-notice application for restraining order
[10] The factual matters underpinning the Commissioner’s on-notice application for a restraining order are set out in detail in the affidavit of Ms Sajal Twentyman dated 21 December 2023. I draw on this affidavit to briefly describe the background here, and to provide further details in later discussion as needed.
[11] OneCoin Ltd (OneCoin) was founded in 2014 by Ms Ruja Ignatova and Mr Sebastian Greenwood in Bulgaria. It is said that the company marketed and sold a fraudulent cryptocurrency through a global multi-level-marketing network that was a fraudulent pyramid scheme (the OneCoin fraud scheme). Ms Ignatova faces OneCoin- related fraud and money laundering charges in the United States and a federal warrant was issued for her arrest, however she remains at large. Mr Greenwood pleaded guilty to various OneCoin-related charges in the United States and was sentenced to 20 years’ imprisonment. An American lawyer, Mr Mark Scott, has been found guilty of laundering around $400 million of OneCoin fraud scheme proceeds through a series
9 The Commissioner of Police v Schneider HC Wellington CIV-2023-485-813, 5 March 2024 [Minute of Grice J]
10 By memorandum dated 2 February 2024, the Commissioner indicated that the proceedings have been served on the second respondent and both former interested parties through their counsel. By memorandum dated 26 July 2024, the Commissioner indicated the first respondent has been served by substituted service in accordance with the Court’s directions.
11 See Criminal Proceeds (Recovery) Act 2009, s 23.
of fake investment funds held with various offshore banks. Mr Scott transferred some funds to accounts in Dubai. Ms Ignatova’s brother, Mr Konstantin Ignatov, has also pleaded guilty to money laundering and fraud charges in the United States and is awaiting sentence. In Mr Scott’s trial, Mr Ignatov gave evidence that OneCoin had an office in Dubai.
[12] Mr Schneider is a Luxembourg national who has been a resident of the United Arab Emirates (UAE) since 2016. He was arrested in France on 29 April 2021 in relation to charges laid by the United States authorities for conspiracy to commit wire fraud and conspiracy to commit money laundering in relation to the OneCoin fraud scheme.
[13] The indictment in the United States (the US indictment) alleges that Mr Schneider’s involvement in the OneCoin fraud scheme includes, among other things, managing the scheme’s proceeds and evading law enforcement investigations into the scheme. Mr Schneider was on house arrest in France awaiting extradition to the United States but escaped in May 2023. Mr Schneider remains at large.
[14] Mr Schneider travelled to New Zealand on two occasions, in November 2018 and October 2019. On the second occasion, he advised the New Zealand Customs Service that he was visiting someone with whom he stated he was having an affair, giving Ms S’s address (the purchase of this property is discussed in [15] below). Ms Twentyman deposes her belief that this person was Ms S. Mr Schneider also sought to travel to New Zealand in May 2020, under the Covid-19 travel restriction process. In his application, he explained that he had met his partner in Europe in 2017 while she was on vacation there and they had decided to become permanent partners. Ms Twentyman deposes that the partner referred to is very likely to be Ms S. During their relationship, Mr Schneider transferred funds to New Zealand. The details of these transactions are as follows.
[15] In April 2019, Mr Schneider transferred $950,000 from UAE to New Zealand for the purchase of a property in the Wellington region. A property was purchased for
$900,000 in May 2019 (the First Property). The First Property was registered in Ms S’s name and at the time she lived there with Ms K. On 4 May 2023, the First Property
was sold for $1,002,222 and the proceeds of the sale were deposited into Ms S’s bank account (being the account holding the Funds). Ms S then transferred some of the proceeds of sale to the bank accounts of each of Ms K and the Company.
[16] In December 2019 and February 2020, Mr Schneider transferred further sums of money from UAE to New Zealand for the purchase of the Second Property, being a 152-hectare piece of land. Ms S purchased the Second Property on 7 February 2020. The Second Property is registered in Ms S’s name.
[17] Loan agreements were entered into between Mr Schneider and Ms S in relation to both the purchase of the First Property (in March 2019) and the Second Property (in January 2020), under which repayments were required from Ms S to Mr Schneider. The two loans were each recorded as being for $960,000. Ms S’s New Zealand bank accounts do not record any repayments to Mr Schneider, including following the sale of the First Property in May 2023.
[18] In June 2021, Ms S applied for a loan from ANZ bank to subdivide the Second Property. In that context, Ms S provided to the ANZ bank a three-year employment contact between her and a company owned by Mr Schneider which indicated that she was employed as a project manager with a salary of approximately
$303,000 per annum.
[19] Mr Schneider transferred further sums of money to New Zealand in relation to the purchase of at least four vehicles. Other funds were transferred to Ms S from a UAE-based bank account in her own name, which are alleged to be sourced from Mr Schneider. Ownership of the vehicles was recorded in either the name of Ms S or that of Ms K. One remains in the name of Ms K while the others have been sold with the proceeds of sale appearing to have been used for day-to-day spending by Ms S and Ms K.
[20] The analysis undertaken by Ms Twentyman in relation to Ms S’s financial affairs suggests that Ms S has benefited from a minimum of NZD $2,447,210.72 as a result of these transfers of funds and purchase of land and vehicles, together with other incidental transfers of funds to her from Mr Schneider and payments by Mr Schneider
to various New Zealand businesses. Ms Twentyman deposes that Ms S spent and transferred $282,398.26 in the approximately six-month period following the sale of the First Property. Ms Twentyman provides details from the social media accounts of Ms S and deposes her belief that they portray a lavish lifestyle of international first- class travel and ownership of luxury brands.
[21] Ms S left New Zealand on 3 May 2023 and remains living overseas. It seems she is in the United Kingdom. Neither Mr Schneider nor Ms S presently face criminal charges in New Zealand.
[22] Ms Twentyman explains in her affidavit that the information provided about the OneCoin fraud scheme, and the US indictment, is based on publicly available information. She says that the US authorities have advised that they are unable to assist with the New Zealand investigation until the conclusion of proceedings against Mr Schneider in the United States.
The Commissioner’s on-notice application for a restraining order
[23] The Commissioner seeks a restraining order pursuant to ss 24 and 25 of the CPRA in relation to the Second Property and the Funds. I reiterate that Ms S does not oppose the making of the orders other than for the matters raised in her application to vary the orders and their conditions.12 It is nonetheless necessary for the Commissioner to satisfy the Court that the statutory requirements are met.
[24]Section 25 of the CPRA states:
25 Making restraining order relating to all or part of respondent’s property
(1)A court hearing an application for a restraining order relating to all or part of a respondent’s property may, if the court is satisfied it has reasonable grounds to believe that the respondent has unlawfully benefited from significant criminal activity, make an order that the property it specifies in the order (restrained property)—
(a)is not to be disposed of, or dealt with, other than is provided for in the restraining order; and
12 Given that the former interested parties have been removed from the proceeding, I am treating the application to vary the restraining order and its conditions as being now advanced by Ms S only.
(b)is to be under the Official Assignee’s custody and control.
(2)A restraining order made under subsection (1) may relate to any of the following:
(a)all of a respondent’s property (including property acquired after the making of the order):
(b)specified parts of a respondent’s property:
(c)all of a respondent’s property (including property acquired after the making of the order) other than specifically excluded property.
[25] Significant criminal activity includes activity that, if proceeded against as a criminal offence, would amount to offending punishable by a maximum term of five years imprisonment or more.13 A person has “unlawfully benefited from significant criminal activity” (unless the context otherwise requires) if the person has knowingly, directly or indirectly, derived a benefit from significant criminal activity, whether or not that person undertook or was involved in the significant criminal activity.14
[26] Section 24 of the CPRA requires that the Court is satisfied it has reasonable grounds to believe that the property sought to be restrained is “tainted” property. Tainted property is defined as any property that has, wholly or in part, been acquired as a result of significant criminal activity, or directly or indirectly derived from significant criminal activity.15
[27] The relevant requirements for making orders under s 25 were summarised by this Court in Commissioner of Police v Smith:16
[10] The threshold for making an order under s 25 has been described as “relatively low”.17 That is because the court is not required to make a finding that the respondent has unlawfully benefited from significant criminal activity. As the Court of Appeal explained in Vincent v Commissioner of Police restraining orders are often sought in situations of urgency.18 Restraining orders are temporary orders to give the police time to gather further evidence leading to possible forfeiture of property. Restraining orders are made where
13 Criminal Proceeds (Recovery) Act 2009, s 6.
14 Criminal Proceeds (Recovery) Act 2009, s 7.
15 Criminal Proceeds (Recovery) Act 2009, s 5.
16 Commissioner of Police v Smith [2017] NZHC 10.
17 See for example the cases cited at [Simon France] (ed) Adams on Criminal Law (looseleaf ed, [Thomson Reuters]) at [CP25.02].
18 Vincent v Commissioner of Police [2013] NZCA 412 at [47].
the court has reasonable grounds for the requisite statutory belief.19 The onus on the Commissioner is not one of proof but to adduce a sufficient evidential basis to enable the court to be satisfied it has reasonable grounds for the requisite belief. Thus, an application for a restraining order may proceed justifiably on an evidentiary basis that in other contexts would be regarded as non-compliant with requirements of the Evidence Act 2006 as to admissibility.20
Are there reasonable grounds to believe Mr Schneider and Ms S have been involved in significant criminal activity?
[28] The Commissioner asserts there are reasonable grounds to believe that both Mr Schneider and Ms S have been involved in significant criminal activity, namely money laundering. Money laundering is an offence under s 243 of the Crimes Act 1961, which provides:
243 Money laundering
(1)For the purposes of this section and sections 243A, 244 and 245,—
act includes an omission
conceal, in relation to property, means to conceal or disguise the property; and includes, without limitation,—
(a)to convert the property from one form to another:
(b)to conceal or disguise the nature, source, location, disposition, or ownership of the property or of any interest in the property
deal with, in relation to property, means to deal with the property in any manner and by any means; and includes, without limitation,—
(a)to dispose of the property, whether by way of sale, purchase, gift, or otherwise:
(b)to transfer possession of the property:
(c)to bring the property into New Zealand:
(d)to remove the property from New Zealand
interest, in relation to property, means—
(a)a legal or equitable estate or interest in the property; or
(b)a right, power, or privilege in connection with the property
19 That is, in the case of applications under s 24 that the property is “tainted” property and in the case of applications under s 25 that the respondent had unlawfully benefitted from significant criminal activity.
20 Vincent v Commissioner of Police, above n 18, at [45]–[48].
offence means an offence (or any offence described as a crime) that is punishable under New Zealand law, including any act, wherever committed, that would be an offence in New Zealand if committed in New Zealand
proceeds, in relation to an offence, means any property that is derived or realised, directly or indirectly, by any person from the commission of the offence
property means real or personal property of any description, whether situated in New Zealand or elsewhere and whether tangible or intangible; and includes an interest in any such real or personal property.
(2)Subject to sections 244 and 245, every one is liable to imprisonment for a term not exceeding 7 years who, in respect of any property that is the proceeds of an offence, engages in a money laundering transaction, knowing or believing that all or part of the property is the proceeds of an offence, or being reckless as to whether or not the property is the proceeds of an offence.
(3)Subject to sections 244 and 245, every one is liable to imprisonment for a term not exceeding 5 years who obtains or has in his or her possession any property (being property that is the proceeds of an offence committed by another person)—
(a)with intent to engage in a money laundering transaction in respect of that property; and
(b)knowing or believing that all or part of the property is the proceeds of an offence, or being reckless as to whether or not the property is the proceeds of an offence.
(4)For the purposes of this section, a person engages in a money laundering transaction if, in concealing any property or by enabling any person to conceal any property, that person—
(a)deals with that property; or
(b)assists any other person, whether directly or indirectly, to deal with that property.
(4A)Despite anything in subsection (4), the prosecution is not required to prove that the defendant had an intent to—
(a) conceal any property; or
(b) enable any person to conceal any property.
(5)In any prosecution for an offence against subsection (2) or subsection (3),—
(a)it is not necessary for the prosecution to prove that the defendant knew or believed that the property was the proceeds of a particular offence or a particular class of offence:
(b)it is no defence that the defendant believed any property to be the proceeds of a particular offence when in fact the property was the proceeds of another offence.
(6)Nothing in this section or in sections 244 or 245 limits or restricts the operation of any other provision of this Act or any other enactment.
(7)To avoid doubt, for the purposes of the definition of offence in subsection (1), New Zealand law includes, but is not limited to, the Misuse of Drugs Act 1975.
[29] Section 243A of the Crimes Act provides that a person may be charged with engaging in a money laundering transaction, or with obtaining or possessing property intending to engage in a money laundering transaction in respect of that property while knowing or being reckless to the property being the proceeds of an offence, even if the person who committed the offence has not been charged with or convicted of that offence.
[30] As the offence of money laundering is punishable by a maximum term of five years imprisonment or more, it meets the definition of “significant criminal activity” under s 6 of the CPRA.
[31] To support the Commissioner’s position that Mr Schneider has been involved in significant criminal activity through money laundering, the Commissioner says that Mr Schneider has been involved in the OneCoin fraud scheme, in relation to which he has been charged in the United States with conspiracy to commit wire fraud and conspiracy to commit money laundering. The Commissioner refers to the US indictment, which alleges that Mr Schneider:
(a)violated Title 18, United States Code, Section 1343;
(b)devised a scheme to defraud and obtain money and property through false and fraudulent pretences, representations and promises; and
(c)committed money laundering and transported, transmitted, and transferred funds in relation to the proceeds of a wire-fraud scheme in order to conceal and disguise the nature, location, source, ownership and control of those proceeds.
[32] Thus, the Commissioner submits that Mr Schneider committed money laundering in New Zealand by moving the proceeds of the OneCoin fraud scheme into the UAE and then into New Zealand through various transactions, in an attempt to conceal their origins. The Commissioner submits that these transactions include loan agreements between Mr Schneider and Ms S for the purchase of the First Property and the Second Property which totalled $960,000 each. The Commissioner says that there are no records of any repayments to Mr Schneider, even following the sale of the First Property in May 2023. Therefore, the Commissioner says that this shows there are reasonable grounds to believe Mr Schneider has been involved in significant criminal activity in New Zealand through money laundering.
[33]I am satisfied that there are reasonable grounds to believe that:
(a)Mr Schneider’s conduct constitutes money laundering under s 243 of the Crimes Act;
(b)All or part of the Second Property and the Funds are proceeds of Mr Schneider’s offending and he knew, believed or was reckless as to whether that is the case; and
(c)Mr Schneider dealt or assisted in dealing with that property by concealing, or enabling a person to conceal it, as defined in s 243 of the Crimes Act.
[34] To support the Commissioner’s position that Ms S has been involved in significant criminal activity, the Commissioner submits that she committed the offence of money laundering by concealing the proceeds of the OneCoin fraud scheme in New Zealand, converting those proceeds into other forms of property and/or concealing or disguising the source of the property.
[35] The Commissioner highlights the evidence that Ms S has a lavish lifestyle, as detailed on her social media accounts and established through travel records, which is contrary to the information obtained about her declared income as set out in Ms Twentyman’s affidavit. The Commissioner notes in this regard that Ms S’s
declared income between 2017 and 2022 was $137,849.30, and that the two companies of which she is sole director and shareholder declared a net loss and/or nil income between 2019 and 2022.
[36] The Commissioner also relies on the employment contract between Ms S and Mr Schneider’s company, under which she was employed as a project manager and received a salary that exceeds the average salaries for similar positions, despite Ms S having no relevant qualifications or prior experience. Ms Twentyman’s affidavit indicates there are no regular incoming payments into what appears to be Ms S’s day- to-day spending bank account from an external source akin to a salary. The Commissioner submits that this evidence invites the inference that the employment contract is an attempt to conceal the proceeds of the OneCoin fraud scheme.
[37] The Commissioner also refers to Ms S having received funds from Mr Schneider’s UAE bank accounts and used those funds to purchase the First Property and the Second Property.
[38]I am satisfied that there are reasonable grounds to believe:
(a)Ms S has committed the offence of money laundering under s 243 of the Crimes Act;
(b)All or part of the Second Property and the Funds are proceeds of Ms S’s offending and she knew, believed or was reckless as to whether that is the case; and
(c)Ms S dealt or assisted Mr Schneider in dealing with that property by concealing, or enabling a person to conceal it, as defined in s 243 of the Crimes Act.
[39] I am satisfied that both Mr Schneider and Ms S have been involved in significant criminal activity as defined under the CPRA.
Are there reasonable grounds to believe that the Second Property and the Funds are tainted property?
[40] The Commissioner submits that there are reasonable grounds to believe that the Second Property and the Funds are tainted property pursuant to s 5 of CPRA, in that they have, wholly or in part, been acquired or derived from significant criminal activity.
[41] The Commissioner alleges that Mr Schneider financed the purchase of the First Property and the Second Property out of his UAE based accounts using proceeds from the OneCoin fraud scheme. The Commissioner submits that there are reasonable grounds to believe the funds in Ms S’s bank account are the proceeds from the sale of the First Property and therefore are from significant criminal activity. Similar transfers of funds occurred to enable the purchase of the Second Property.
[42] I am satisfied that there are reasonable grounds to believe that the funds used to purchase the First Property and the Second Property are proceeds of the OneCoin fraud scheme and that the transfer of these funds to New Zealand, as well as registering the properties into the names of Ms S, constitutes money laundering. I am therefore also satisfied that there are reasonable grounds to believe the Second Property and the Funds (which are likely to be the proceeds of sale from the First Property) were acquired as a result of, or were derived from, significant criminal activity and thus are tainted property in terms of the CPRA.
Have Mr Schneider and Ms S unlawfully benefited from significant criminal activity?
[43] The Commissioner submits that there are reasonable grounds to believe that Mr Schneider and Ms S have each unlawfully benefited from significant criminal activity as defined in s 7 of the CPRA.
[44] The Commissioner submits that it is established that Mr Schneider has unlawfully benefited from significant criminal activity because he financed the purchase of the First Property and Second Property from his UAE bank accounts, and as already discussed, there are reasonable grounds to believe that those funds are proceeds of the OneCoin fraud scheme.
[45] The Commissioner further says that Ms S has benefited from significant criminal activity through:
(a)receiving funds which the Commissioner alleges are the proceeds of the OneCoin fraud scheme and which were used to buy the First Property and the Second Property; and
(b)receiving additional payments from Mr Schneider’s UAE bank accounts to finance the purchase of vehicles for herself and Ms K.
[46] I am satisfied that there are reasonable grounds to believe that Mr Schneider and Ms S have unlawfully benefited from significant criminal activity.
Do Mr Schneider and Ms S have an interest in the Second Property and the Funds?
[47] I am satisfied that Mr Schneider and Ms S each have an interest in the Second Property and the Funds in light of the matters already discussed.
Grant of on-notice application for restraining order
[48] Accordingly, I am satisfied that it is appropriate to grant the Commissioner’s on-notice application for a restraining order, and I record that order at the conclusion of this judgment.
The application by Ms S for further orders
[49] I now turn to consider the application by Ms S for further orders relating to the restraining order.21 Ms S has provided affidavits in support of her application from herself, Ms K and a friend of Ms S.
[50]The application seeks the following orders:
21 The application dated 25 January 2024 sought to discharge the restraining orders over two bank accounts in the name of Ms K and the Company respectively, which were the subject of the order made on the Commissioner’s without notice application for restraining orders. The restraining orders over those bank accounts were discharged by Gwyn J: Minute (No 1) of Gwyn J on 5 February 2024. Accordingly, I do not discuss this aspect of the application further.
(a)An order to vary the conditions of the initial restraining order to allow payment of:
(i)rates at the Second Property in the sum of $9,151.66;
(ii)Ms K’s rent of $384.01 a week; and
(iii)Ms S’s living expenses of $1,500 a week.
(b)that the Commissioner provides an undertaking as to damages to compensate Ms S for any damage and costs sustained because of the interim restraining orders.22
(c)An order suppressing the names of Ms S and the Company.
Variation of restraining order
[51] Mr Leighton, counsel for Ms S, indicated at the hearing that he wishes to pursue the application to vary conditions in relation to both the initial restraining order currently in effect and any order made in relation to the Commissioner’s on-notice application for a restraining order. Given that I have concluded it is appropriate to grant the Commissioner’s on-notice application for a restraining order, for convenience in the discussion that follows, I refer where necessary to the restraining order rather than the initial restraining order.
[52] Section 28 of the CPRA provides the Court with a discretion to allow specified expenses or debts to be met out of a respondent’s restrained property. It provides:
28 Conditions on restraining order
(1)A court may make a restraining order subject to any conditions the court thinks fit including, without limitation, conditions that provide for the following to be met out of a respondent’s restrained property:
22 The application dated 25 January 2024 originally sought an undertaking as to damages to compensate Ms S, Ms K and the Company for any damage and costs sustained because of the interim restraining orders. However, as Ms K and the Company have been removed from the proceedings, Ms S is now the sole applicant.
(a)the reasonable living costs of the respondent and any of his or her dependants:
(b)the reasonable business expenses of the respondent:
(c)the payment of any specified debt incurred by the respondent in good faith:
(d)any other expenses allowed by the court.
(2)Despite subsection (1)(d), a court may not allow any legal expenses to be met
out of a respondent’s restrained property.
(3)In determining whether or not to make a restraining order subject to a condition, the court must have regard to the ability of a respondent to meet the reasonable living costs, expenses, or debt concerned out of property that is not restrained property.
(4)In this section a dependant is a person who is dependent on the respondent and who is either or both—
(a)a child of the respondent:
(b)a member of the household of the respondent.
[53]Two issues arise in relation to an application under s 28:23
(a)what amounts to “reasonable living costs” in the circumstances of the applicant; and
(a)whether the applicant has any unrestrained property, income, or assets that may be able to be liquidated to meet those reasonable costs.
[54] There is an evidential burden on an applicant to show on the balance of probabilities that the amounts sought are justified. In the absence of such evidence, the Court may draw an adverse inference.24
[55] As a general principle, where there are unrestrained and unencumbered assets sufficient to meet expenses, the Court will expect evidence that the applicant has explored all avenues to liquidate those assets before exercising its discretion under s 28(1).25
23 Commissioner of Police v Cole [2023] NZHC 1369 at [13].
24 At [16] citing Commissioner of Police v Rae [2021] NZHC 2766 at [44].
25 Commissioner of Police v Cole, above n 23, at [17].
[56] Mr Leighton refers to the evidence from Ms S that currently her only source of income relates to the provision of online services, in relation to which her income is irregular, and for which she presently holds approximately USD 3,900.
[57] Ms S attaches to her affidavit a screenshot of her New Zealand ANZ Bank account which indicates that, at least at the time of making her affidavit in February 2024, she had approximately $12,000 available to her.
[58] Ms S deposes that she does not wish to go back to full-time work in her previous occupation. She says that if she has to, she will, but notes that for health reasons she will be unable to do that for some time. Ms S says she is pursuing opportunities in the music industry, but nothing has yet resulted from that.
[59] Ms S estimates her weekly living expenses to be around $1500 per week. She explains those as:
(a)a monthly phone bill of around $300;
(b)rent of $300 per week;
(c)food of $500–$700 per week;
(d)Ubers and transport/petrol of $300 per week;
(e)therapy at $500 per month;
(f)vocal coach at $100 per week; and
(g)other online costs such as subscriptions at $100 per month.
[60]Ms S describes these expenses as her “living at a minimum”.
[61] Ms S also disputes some of the conclusions drawn by counsel for the Commissioner in relation to flights and travel she has undertaken as well as her presentation on social media, which includes photos of her with expensive high-end
products. Ms S says that social media is a curated platform where she says things or posts to embellish a story or create a narrative, with the goal of drawing in more subscribers.
[62] Ms S also says that she will sell some of the expensive items she owns (handbags and jewellery) to pay for her living expenses. Mr Leighton filed an invoice that shows Ms S received approximately GBP 2,500 for bags she has sold. At the hearing, Mr Leighton also handed up a summary of items said to have been sold by Ms S, with the sums that she has obtained for each item.
[63] Overall, the Commissioner submits that if Ms S is able to meet expenses out of restrained property, there is a risk that she and Mr Schneider will retain some of the profits of criminal activity, while reducing the pool of resources available to meet any assets or profit forfeiture order which may be granted in the future. The Commissioner says that such an outcome is plainly contrary to the CPRA.26
[64]I now discuss each payment sought as a condition of the restraining order.
Local authority rates
[65] Mr Leighton says that local authority rates in relation to the Second Property are presently due in the sum of $9,151.66. He accepts that Ms S has not arranged for the payment of rates for some time but says the evidence from Ms S shows that this is a matter of oversight only and the rates remain a good faith debt that needs to be paid.
[66] The Commissioner has provided evidence in the affidavit of Ms Sherborne that the last rates payment made on the Second Property was in October 2021. Since then, despite having the means to pay the rates and those rates being overdue, Ms S has not paid them. The Commissioner says that there is no evidence of the Hutt City Council seeking to take steps to recover the rates as a debt.
26 Yan v Commissioner of Police [2015] NZCA 576, [2016] 2 NZLR 593 at [39].
[67] The Commissioner therefore submits that there is insufficient evidence for the Court to find that the rates payment is payable as a debt by Ms S so as to necessitate this amount being made available out of restrained funds.
[68] The Commissioner also submits that as at December 2023, the bank account of the Company contains sufficient funds to pay the overdue rates. The Commissioner notes that the stated purpose of the Company is to subdivide and develop land such as the Second Property (as stated in the Companies Office record).
[69] In these circumstances, I am not satisfied that the overdue rates constitute a debt incurred by Ms S in good faith. The length of non-payment of rates and the availability of funds held by the Company to pay them weigh against the conclusion that the overdue rates should be paid out of restrained funds.
[70] I decline to vary the restraining order to make it subject to a condition to pay the outstanding rates in relation to the Second Property.
Ms K’s rent
[71] Mr Leighton submits that Ms K should be understood as a dependent in terms of the definition under the CPRA, as Ms K was part of Ms S’s household until Ms S went overseas in 2023. He says that if Ms S returns to New Zealand, she is likely to live with Ms K again. Mr Leighton submits that Ms K’s rent is therefore appropriately paid for out of restrained property.
[72] Like the Commissioner, I do not accept that the evidence establishes that Ms K is a dependant of Ms S. Ms S has been living overseas for more than a year now. While Ms S may return to New Zealand at some point, that is speculative, and while she is overseas, Ms K cannot be said to be part of Ms S’s household.
[73] Nor do I accept that payment of the rent under the alternative ground of s 28(1)(d) of the CPRA should be permitted given the insufficiency of the evidence offered that Ms S has been paying Ms K’s rent. The screenshots provided by Ms S in her affidavit are unusual (being in the sum of $384.01, and not identifying any payee
or payer) and do not satisfy me that they relate to rent payments for Ms K. No other documentary evidence has been provided to support this assertion. In any event, I note that Ms K is receiving Work and Income New Zealand benefits of $472.29 per week.
[74] I decline to vary the restraining order to make it subject to a condition to permit payment of Ms K’s rent.
Ms S’s living expenses
[75] Ms S also seeks an allowance of $1,500 per week for living expenses. I have already set out the detail of those expenses and the evidence relating to Ms S’s financial position.
[76] I am not satisfied on the evidence that these are reasonable living expenses when no independent evidence of the components claimed has been provided.
[77] While Ms S says she will be forced to return to her previous work if her living expenses are not met out of the restrained funds, she has not addressed in evidence why she is unable to obtain any other form of work. She has mentioned some opportunities in the music industry that have not yet come to pass. There is also evidence that Ms S was appointed as a project manager for a company owned by Mr Schneider, being paid a very high salary, and the Commissioner submits that she has offered no explanation as to why she cannot now obtain a similar role. Nor has Ms S addressed in her evidence any assets held overseas. Given the evidence establishes that she has at least one bank account in the UAE, this is a significant omission.
[78] The evidence also establishes that other unrestrained bank accounts and funds in Ms S’s name or under her control were available (at a combined balance of
$28,401.66) as at December 2023. Her income from her online work has varied between $67.98 and $652.92 per month. While Ms S has also provided an affidavit from a friend to say that the friend provided Ms S with financial support while Ms S stayed with her in Australia, I find this of little assistance given Ms S is now in the United Kingdom and there is no evidence that the friend is providing any ongoing
support. Mr Leighton suggests Ms S is living off the charity of her friends, but this is not established on the evidence. I also acknowledge the apparent sale by Ms S of various high value luxury items but consider the information provided is insufficient to satisfy me that this has taken place.
[79] I am not satisfied that the living expenses claimed by Ms S are reasonable in the circumstances.27 There is simply insufficient evidence before me to reach such a conclusion. In addition, I consider that the evidence supports the inference that Ms S has continuing access to sufficient funds to permit her to continue to meet her living expenses.
[80] Accordingly, I decline to vary the restraining order to make it subject to a condition to permit payment of $1500 per week to Ms S as her reasonable living expenses.
Future applications for variation
[81] While I have declined all the variations to the restraining order sought by Ms S, I record that ss 33–35 of the CPRA permits further applications for variation. An application for further orders can be made at any time before the expiry of the associated restraining order.28
Undertaking as to damages
[82] Ms S seeks an undertaking from the Commissioner that he will comply with any order for the payment of damages and costs to compensate her for any damage and costs sustained as a consequence of the interim restraining orders.
[83] Section 29 of the CPRA contemplates an applicant for a restraining order may be required to give satisfactory undertakings with respect to the payment of damages or costs, or both, in relation to the making, operation or extension of the duration of
27 Commissioner of Police v Dotcom [2015] NZHC 820 at [12].
28 Criminal Proceeds (Recovery) Act 2009, s 34(2)(b).
the restraining order. In Commissioner of Police v Salter, Palmer J discussed the need for requiring undertakings as a balancing test, observing:29
… there are no presumptions either way. There is a public interest in ensuring the proceeds of crime regime operates effectively and a public interest in protecting those subject to it from potential injustice. Those considerations need to be balanced, in the context of the facts of the case.
[84] The Court of Appeal in Yan v Commissioner of Police noted the role of the Commissioner in fulfilling an important public function under the CPRA. The Court stated that:30
… The Commissioner is not an ordinary civil litigant. He or she is acting in the public good with a law enforcement purpose designed to combat significant criminal activity, in particular organised crime. In the digital age and in a global economy, those imperatives are arguably more pressing than ever.
[85] Against this background the Court of Appeal set out a non-exhaustive list of factors relevant to determining whether the Court should exercise its broad discretion to require an undertaking as to costs or damages, including:31
(a)the personal circumstances of the respondent;
(b)delay;
(c)the nature of the asset;
(d)the likelihood of loss being suffered as a result of the restraint;
(e)the extent of any likely loss;
(f)the conduct of the Commissioner;
(g)the strength of the Commissioner’s case;
(h)the existence of a meaningful alternative avenue of redress; and
(i)whether the applicant for an undertaking is an innocent non-party.
29 Commissioner of Police v Salter [2021] NZHC 1531 at [49].
30 Yan v Commissioner of Police, above n 26, at [33].
31 At [41]–[45].
[86] There is no presumption for or against an order, rather the inquiry is fact- dependant and the weight to be afforded to any particular factor will necessarily vary from case to case.32
[87]I consider each of the factors referred to by Mr Leighton in turn.
[88] I am not satisfied that Ms S has limited income. The evidence filed in support of her position is simply insufficient to establish this. Nor am I satisfied that Ms S’s only source of income is from providing online services or reverting to her previous work. I am not satisfied on the evidence that she has sufficiently explored other work options.
[89] Mr Leighton made something of the potential for delay in this proceeding, noting that the Commissioner’s application for civil forfeiture is likely to be dependent on progress in relation to the criminal charges laid against Mr Schneider in the United States. The Commissioner says that its investigation is ongoing, and that any suggestion of delay is speculative. The Commissioner submits that:
(a)there are reasonable grounds to believe that Mr Schneider and Ms S have been engaged in significant criminal activity, namely money laundering (as I have discussed earlier in the judgment);
(b)in relation to establishing that the Second Property and the Funds are tainted, the Commissioner does not need to prove that Ms S knew the Second Property or the Funds was acquired or derived from significant criminal activity in any event; and
(c)the Commissioner notes that Ms S does not oppose the Commissioner’s on-notice application for a restraining order other than to the extent that she seeks certain expenses be met from the restrained property.
[90] As to the likelihood of loss being suffered as a result of the restraint, Mr Leighton submits that the value of the Second Property and the state of its upkeep
32 Yan v Commissioner of Police, above n 26, at [40].
could be affected should it be restrained for a significant period. He says that the loss could include a decrease in value and inflation loss, although he acknowledges that these factors are speculative.
[91] I accept the Commissioner’s submission that Ms S has not filed any evidence of matters tending to prove that the Second Property is at risk of a reduction in value if it is restrained (especially given it is a large bare piece of land). I also agree that loss from inflation or rates collection by the local authority is not consequential on a restraining order. The remainder of the restrained property is the Funds, and Mr Leighton does not submit that there is any likely loss from them being restrained.33
[92] While I agree with Mr Leighton that the Court should be alert to any potential injustice to Ms S (and Mr Schneider) given they have not been subject to any criminal charges in New Zealand, I do not accept that the strength of the Commissioner’s case is fragile. Mr Leighton says it is reasonable to think that Ms S genuinely believed Mr Schneider’s business ventures to be legitimate, given that it would have appeared to Ms S that her doting partner wanted to support her lavish lifestyle and assist her in supporting her mother. But as I have already discussed, there are reasonable grounds to believe that Mr Schneider and Ms S have been engaged in significant criminal activity, namely money laundering, and that they unlawfully benefited from that activity. There are also reasonable grounds to believe that the Second Property and the Funds are tainted property. Therefore, the Commissioner’s investigations to date show that, at least on a prima facie basis, he has a well-founded case. The investigation is ongoing and given its nature, it will necessarily take some time.
[93] I am not satisfied that in the circumstances of this case the interests of justice and fairness require an order that the Commissioner give an undertaking as to damages or costs. Accordingly, I decline to make such an order as sought by Ms S.
33 See also Commissioner of Police v Rodriguez [2021] NZHC 425 at [52].
Name suppression
[94] As mentioned earlier, Ms K has already been granted permanent name suppression.34 The continuation of interim name suppression is sought in relation to Ms S and the Company.35
[95] Mr Leighton submits that some of the evidence both already filed and likely to be filed in this matter is of a highly private nature and poses risks to Ms S’s reputation, including in a professional context. Ms S’s evidence addresses the nature of the work she formerly undertook, and that she deposes she no longer wishes to undertake. She is concerned that if her name is published, she is at risk of being identified and harassed both online and in person, giving rise to concern for her physical safety. She says that she has been subject to pressure and to a home invasion by gang members. Ms S is also concerned about disclosure of the nature of her relationship with Mr Schneider (although I find that to be a point of little weight). Mr Leighton submits that the listing of Ms S as shareholder and director of the Company means that its name must also be suppressed. In addition, the fact that Ms K is the mother of Ms S is relevant as not suppressing Ms S’s name would place Ms K at further risk of identification.
[96] Mr Leighton submits again in this context that while the Commissioner alleges that Ms S was knowingly engaged in money laundering, she has not been charged with any criminal offence and that she is entitled to the presumption of innocence at this stage.
[97] The Court can exercise its inherent power to suppress the names and identifying particulars of parties in civil proceedings.36 The starting point in approaching Ms S’s application is the principle of open justice and the freedom of expression guaranteed by s 14 of the New Zealand Bill of Rights Act 1990.37 These two tenets create a presumption of disclosure in civil court proceedings.38
34 Minute (No 2) of Gwyn J, above n 1.
35 At the hearing, Mr Leighton accepted that Mr Schneider’s name is already in the public domain and did not pursue the argument that suppression of his name is required to support Ms S’s name suppression.
36 Taylor v Attorney-General [1975] 2 NZLR 675 (CA); Erceg v Erceg [2016] NZSC 135; Siemer vSolicitor-General [2013] NZSC 68, [2013] 3 NZLR 441.
37 Y v Attorney-General [2016] NZCA 474 at [25].
38 At [26].
[98] Therefore, the Court will need sound reasons for finding that the presumption favouring publication is displaced.39 There is no onus on Ms S to prove the presumption should be displaced, instead the question is whether the circumstances justify an exception to open justice.40 No particular threshold is required to be met. Nor are extraordinary or exceptional circumstances required to justify suppression in a civil case.41 However, the threshold remains high because any suppression order necessarily derogates from the principle of open justice and the right to freedom of expression.42
[99] The correct approach is to undertake a balancing exercise between the interests of Ms S and the considerations of open justice.43 This exercise is necessarily fact specific. For example, the Court of Appeal held that there would be a strong public interest consideration where a professional was being professionally disciplined, however in other cases of a highly personal nature the balance may well be in favour of name suppression.44 The Court of Appeal observed:45
[33] But in other cases there may be little or no legitimate public interest in knowing the name or identifying particulars of the parties, or those of a witness, or in knowing particular details of the case. That is likely to be the position in cases involving information that is intensely private or personal, or information that is confidential, or commercially sensitive. In a case of that sort, the balance between open justice considerations and the interests of the party seeking suppression may well tip in favour of suppression…
[100] Other considerations to be taken into account are how central the information sought to be suppressed is to understanding the nature of the proceeding and what it is that the Court has decided. There will be a stronger presumption favouring disclosure where such detail is required in order for the public to understand what the Court has decided and why.46
39 At [29].
40 At [29] citing ASB Bank Ltd v AB [2010] 3 NZLR 427 (HC) at [14].
41 Y v Attorney-General, above n 37, at [30] citing Jay v Jay [2014] NZCA 445, [2015] NZAR 861 at [118].
42 Y v Attorney-General, above n 37, at [30] citing McIntosh v Fisk [2015] NZCA 247, [2015] NZAR 1189 at [1].
43 Y v Attorney-General, above n 37, at [31] citing Hart v Standards Committee (No 1) of the New Zealand Law Society [2012] NZSC 4 at [3]. See also Rowley v Commissioner of Inland Revenue [2011] NZSC 76, (2011) 25 NZTC 20-052 at [6]–[7].
44 Y v Attorney-General, above n 37, at [32] citing X v Standards Committee (No 1) of the New Zealand Law Society [2011] NZCA 676 at [18].
45 Y v Attorney-General, above n 37, at [33].
46 Y v Attorney-General, above n 37, at [34].
[101] I conclude that some details in this case are highly personal in nature in relation to Ms S. I consider that the public can understand the circumstances of the alleged money laundering and what the Court determines without the need to name her. Given Ms S is not currently facing charges in relation to the alleged offending and that the proceedings are at an early stage, I am satisfied it is appropriate to continue Ms S’s interim name suppression. As Ms S is the sole director and shareholder of the Company, I am satisfied that it is also appropriate to continue its interim name suppression to avoid identifying Ms S.47
Result and orders
[102] I grant the Commissioner’s application for a restraining order on the terms as set out in para 1, in relation to all property listed in para 2, of the Commissioner’s on- notice application dated 22 December 2023.
[103]I decline the application by Ms S to vary the conditions of the restraining order.
[104] I decline the application by Ms S for an order requiring the Commissioner to give an undertaking as to damages and costs.
[105] I grant the application by Ms S for interim name suppression for Ms S and the Company, pending further order of the Court.
McQueen J
Solicitors:
Luke Cunningham Clere, Wellington for Applicant Frontline Law, Wellington for Second Respondent
47 See A Ltd v C Ltd [2018] NZHC 3433.
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