Commissioner of Police v Borlase

[2020] NZHC 3103

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2123

[2020] NZHC 3103

UNDER

the Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

STEPHEN JAMES BORLASE

First respondent

CATHERINE RUTH BORLASE
Second respondent

CATHERINE BORLASE and RLA
TRUSTEE SERVICES NO 51 LIMITED
Third respondent

PROJENZ HOLDINGS LIMITED

Fourth respondent

Hearing:

16 November 2020

Appearances:

H E Macdonald for the applicant

R M Mansfield and S L Cogan for the respondents R B Lange for the non-parties

Judgment:

24 November 2020

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 24 November 2020 at 3.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

…………………………

Registrar/Deputy Registrar

Counsel/Solicitors:

R M Mansfield, Barrister, Auckland S L Cogan, Barrister, Auckland Meredith Connell, Auckland Simpson Grierson, Auckland

COMMISSIONER OF POLICE v BORLASE [2020] NZHC 3103 [24 November 2020]

[1]    In this proceeding, the Commissioner of Police seeks profit and asset forfeiture orders under the Criminal Proceeds (Recovery) Act 2009, by which the respondents would forfeit identified property as acquired by or derived from significant criminal activity. The activity is that underlying charges brought against Mr Borlase and others of corrupt bribes of successive local government entities’ employees in respect of their official capacities,1 on conviction for eliciting which with the intention of influencing the recipient employees in their official capacities he was sentenced to five and a half years’ imprisonment.2

[2]    The proceeding necessarily is brought by originating application.3 On the present interlocutory application, the respondents – comprehending an enlargement of the Commissioner’s case in reply evidence, to extend to ‘actual influence’ had by the recipient employees – seek filing of more orthodox statements of claim and defence, and consequential discovery from the Commissioner and/or the entities employing the recipients.

Background

[3]    Mr Borlase was a director and shareholder of the fourth respondent (“Projenz”), which provided professional engineering services to particular and successive local government entities over time. At his direction, Projenz provided benefits to certain employees of those entities. As set out in greater detail in Fitzgerald J’s reasons and verdict judgments, and sentencing notes, the judge concluded, as benefits intentionally provided in connection with the employees’ “official capacity”, they were made in breach of s 105 of the Crimes Act 1961.

[4]Section 105 provides:

105 Corruption and bribery of official

(1)    Every official is liable to imprisonment for a term not exceeding 7 years who, whether within New Zealand or elsewhere, corruptly accepts or obtains, or agrees or offers to accept or attempts to obtain, any bribe for himself or herself or any other person in respect of any act done or

1      Crimes Act 1961, s 105.

2      R v Borlase [2016] NZHC 2970 (reasons); [2016] NZHC 2971 (verdict); [2017] NZHC 236

(sentence).

3      High Court Rules 2016, r 19.2(r).

omitted, or to be done or omitted, by him or her in his or her official capacity.

(2)    Every one is liable to imprisonment for a term not exceeding 7 years who corruptly gives or offers or agrees to give any bribe to any person with intent to influence any official in respect of any act or omission by him or her in his or her official capacity.

[5]Critically, for present purposes, the judge held:4

… I do not accept that s 105(2) requires an intent to influence an official to depart from his or her duty or act in some dishonest or immoral way. The legislature has deliberately cast the provisions in wide terms. The Supreme Court has confirmed the safeguards that protect against legislative over-reach.

Finally, there was no dispute that the Crown does not need to prove any actual influence – … an intent to influence is sufficient. Nevertheless, the absence of proof of any actual influence may be evidentially relevant to the question of whether there was an intent to influence in the first place. The absence of proof of any actual influence may also be relevant to sentencing.

[6]In sentencing, the judge observed:5

[T]here was no evidence of actual assistance provided by [the recipient employees] to Projenz during this tender process …. Nor was there any evidence that Projenz would not have been successful to a similar or the same degree in that tender process, absent the significant benefits being provided. A number of Council witnesses gave evidence that Projenz was ultimately very good at what it did.

But she also rejected the suggestion there was no scope for the recipient employees to influence matters to Projenz’s advantage.6

Statutory context

[7]    To repeat what I said in Commissioner of Police v Gong,7 under the 2009 Act, the Commissioner may pursue on notice assets forfeiture orders for tainted property to vest absolutely in the Crown. Orders are made if the Court “is satisfied on the balance of probabilities that specific property is tainted property”.8 Typically, such will be in relation to property already restrained, for which the Court only required to be

4      Reasons judgment, above n 2, at [124]–[125].

5      Sentence notes, above n 2, at [19].

6      Reasons judgment, above n 2, at [384]; sentence notes, above n 2, at [32].

7      Commissioner of Police v Gong [2019] NZHC 2735 at [4] and [18]–[23].

8      Criminal Proceeds (Recovery) Act 2009, s 50(1).

“satisfied it has reasonable grounds to believe that any property is tainted property”:9 that is, property acquired by or derived from significant criminal activity.10 The Commissioner also may pursue profit forfeiture orders, to recover the net value of unlawful benefit from significant criminal activity from the respondent as a debt due to the Crown. Orders are made if the Court is satisfied on the balance of probabilities of such benefit, and the respondent’s interest in property to realise it.11

[8]A claim for forfeiture orders must be formulated in accordance with HCR

7.19.12 The originating application must “state the relief sought and the grounds justifying that relief”, with reference to “any particular enactments or principles of law or judicial decisions on which the applicant relies”.13

[9]    On application for an assets forfeiture order, then, the relief sought is the property vests in the Crown absolutely and is in the custody and control of the Official Assignee.14 The ground justifying that relief is the property is “tainted property”:15

(a)    … any property that has, wholly or in part, been—

(i)acquired as a result of significant criminal activity; or

(ii)directly or indirectly derived from significant criminal activity; and

(b)    includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity.

In other words, formulation of the claim will require a sufficiently-pleaded assertion of the property’s acquisition as a result of or derivation from significant criminal activity. By ‘significant criminal activity’ is meant “activity engaged in by a person that if proceeded against as a criminal offence would amount to [specified] offending”, whether or not the person is charged, acquitted, or convicted of an offence.16

9      Section 24.

10     Section 5(1).

11     Section 55.

12     High Court Rules 2016, r 19.10(a).

13     Rule 7.19(1)(a) and (b).

14     Criminal Proceeds (Recovery) Act 2009, s 50.

15     Section 5(1) (definition of ‘tainted property’).

16     Section 6.

[10]   On application for a profit forfeiture order, the relief sought is the Court’s specification of each the value of the respondent’s unlawful benefit from relevant significant criminal activity, the maximum recoverable amount (after deduction of the value of forfeited assets from the value of the benefit), and the property for disposal.17 The grounds justifying that relief are the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity, and has interests in property. Again, formulation of the claim will require a sufficiently- pleaded assertion of the value of the benefit and its derivation from significant criminal activity, as well as the respondent’s interests in property.

[11]   But formulation of a claim in proceedings commenced by originating application goes further than mere specification of the relief and its grounds. Despite the oral evidence alternative provided by HCR 19.13, “[a]ny affidavit in support of the application must be filed at the same time as the application”.18 As with the HCRs’ requirement for particularised claims,19 the accompanying affidavit is to ensure the opposing party is not taken by surprise.20 In context, the expectation on originating applications is the whole of relief and grounds on which it is sought, and evidence in its support, is filed contemporaneously – all that being the formulation of the claim.

Discussion

—filing a statement of claim

[12]   The Commissioner’s grounds for the orders sought here are, on the balance of probabilities, the respondents benefited to the value of $20.340 million in revenues obtained in provision of engineering services to the local government entities during the period from 2006 to 2013, and any of their remaining specified property is ‘tainted’ as acquired or derived, from the significant criminal activity addressed by s 105. The

17 Section 55.

18 High Court Rules 2016, rr 19.10(1)(b) and 7.20.

19 Rule 5.26: in addition to showing the general nature of the plaintiff’s claim to the relief sought, giving “sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief is sought of the plaintiff’s cause of action”.

20 Premier Events Group Ltd v Beattie [2012] NZHC 1025 at [30].

Commissioner formulates his claim by reference to the judge’s findings, in particular, there was “scope” for the officials to influence matters in Projenz’s favour.21

[13]   Philip James Taylor’s affidavit sworn 13 December 2018 in support of the Commissioner’s application asserts:

[T]here was significant scope for influence and a direct financial return to Projenz. Had the relationships (and bribery) been disclosed, Projenz’[s] contracts with [the entities] would have been terminated.

He demonstrates that scope, and disclosure’s prospective consequence, by reference to various evidence from trial, including the recipient officials’ “influence … in the day to day … management of contracts once won”. The Commissioner nonetheless is express his case for forfeiture is only “inferential” of the required intent to influence.

[14]   In response, Mr Borlase – who opposes the Commissioner’s application on grounds including the respondents did not unlawfully benefit from, or acquire or derive the specified property from, any significant criminal activity, because any benefit was obtained from performance of the contracts won on tender – says Projenz won the tenders “on the merits”, and “not as a result of any influence arising from the payments and gifts”. In particular, he rejects the two recipient employees were in any position to be influenced in their official capacities in Projenz’s favour. In reply, the Commissioner denies the two employees were without influence, and points to a number of instances in which they are alleged to have directed work to Projenz.

[15]   For Mr Borlase, Ron Mansfield argues ‘inferential’ no longer is a sustainable characterisation of the Commissioner’s case when, in reply evidence, he alleges actual influence. On that basis, Mr Borlase seeks the Commissioner restate his case by filing an appropriately particularised statement of claim. I may order the same on my own initiative;22 such discretion “should only be exercised in cases where that is both necessary and proportionate having regard to the nature of the proceeding”.23

21     Reasons judgment, above n 2, at [365]–[384].

22     High Court Rules 2016, r 19.5A; Commissioner of Police v Marwood [2019] NZHC 760 at [11].

23     Commissioner of Police v Li [2018] NZHC 292, (2018) 24 PRNZ 268 at [9].

[16]   Mr Borlase’s argument sets up ‘influence’ as a false equivalence. The recipient employees’ “actual influence”, if any, does not necessarily correlate to s 105(2)’s “intent to influence”. The object of s 105(2)’s “intent to influence” is the recipient employees in their official capacities; the object of their “actual influence”, if any, is the contracts within their gift or sway.

[17]   The “significant criminal activity” alleged by the Commissioner is not dependent  on  the  recipient  employees’  ‘actual  influence’,  if  any;  it  rests  on  Mr Borlase’s proven intent to influence them. Neither does the Commissioner rely on the recipient employees’ ‘actual influence’, if any, for the respondents’ acquisition or derivation of property; he relies instead on the “scope” for such influence and the disqualifying nature of the benefits provided.

[18]   In short, Projenz’s tender success, even if on merit, is no answer to the Commissioner’s allegations of the respondents’ acquisition or derivation of property from or through the significant criminal activity. The Commissioner’s reply does not change the nature or specifics of his pleaded case against the respondents. For those reasons, it is neither necessary nor proportionate to require the Commissioner to replead. I will not exercise my discretion to do so.

—tailored discovery

[19]   Mr Mansfield explained the respondents’ application for tailored discovery largely sought to obtain the disclosure made to Mr Borlase in the criminal proceeding, in which the prosecutor was the Serious Fraud Office (and not the Commissioner).

[20]   At the close of the hearing, I enquired if the Commissioner may seek to obtain that disclosure for use in the present proceeding.24 The Commissioner subsequently advised, “[c]onsistent with model litigant principles”, he had obtained that disclosure and provided it to the respondents.

[21]   Noting also Mr Mansfield’s allowance discovery in arbitral proceedings between Auckland Transport and the respondents need not to be re-discovered if

24     Minute, 16 November 2020.

available for use in the present proceeding, I am unable to discern what may remain of the respondents’ applications for tailored discovery (particularly given the failure of their application for repleading). I therefore will reserve leave to the respondents to press any aspect of the present applications as may remain unanswered by the available disclosure(s).

Result

[22]   The respondents’ application for an order the Commissioner file and serve a statement of claim is dismissed.

[23]   The respondents have leave to bring on notice any aspect of the present discovery applications for determination, which otherwise are dismissed.

Costs

[24]   In my preliminary view, no-one presently can claim to be so successful on the applications such that costs should be ordered in their favour, and costs on the applications therefore should lie where they fall or fell: that is, be borne by the party incurring them.

[25]   If that is not accepted by the parties, or they cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by anyone claiming them within ten working days of the date of this judgment, with any response and reply to be filed within five working day intervals after service.

—Jagose J