Commissioner of Police v Brennan

[2014] NZHC 416

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2013-470-614 [2014] NZHC 416

IN THE MATTER             of an application for restraining orders under the Criminal Proceeds (Recovery) Act 2009

BETWEEN  COMMISSIONER OF POLICE Applicant

ANDGRANT LEIGH BRENNAN First Respondent

LORRAINE BRENNAN Second Respondent

WESTPAC BANK Interested Party

Hearing:                   10 March 2014

Appearances:           R W Jenson for Applicant

H Roose for Respondents (abides decision of Court) M Van Ryn for Westpac Bank

Judgment:                10 March 2014

(ORAL) JUDGMENT OF LANG J [on application for restraining orders]

COMMISSIONER OF POLICE v BRENNAN [2014] NZHC 416 [10 March 2014]

[1]      This  is  an  opposed  application  by  the  Commissioner  of  Police  (“the

Commissioner”) for a restraining order under the Criminal Proceeds (Recovery) Act

2009 (“the Act”) in respect of five assets owned by the first and second respondents, Mr and Mrs Brennan.

Background

[2]      The proceeding arises out of the fact that Mr Brennan was seriously injured as a result of an assault in 1999.  The costs associated with his medical treatment were  covered  by  the  provisions  of  the  accident  compensation  legislation.    In addition,  he  became  entitled  to  receive  weekly  compensation  because  he  was rendered incapable of working as a result of the injuries received in the assault.

[3]      Mr  Brennan  continued  to  receive  weekly  compensation  until  2004.      In addition, the Accident Compensation Corporation (“the Corporation”) paid various sums to Mrs Brennan for the care that she was providing to her husband.  It also met the costs charged by Mr Brennan’s advocate, as well as other invoices rendered by suppliers who provided goods or services to Mr Brennan that were related in some way to the injury he had suffered.

[4]      In  total,  the  Corporation  made  payments  to  or  on  Mr  Brennan’s  behalf totalling approximately $772,000.00.  Of this sum, Mr Brennan himself received the sum of approximately $489,000.00.

[5]      Shortly after his accident, Mr Brennan formed had a company called Brennan Racing Limited.   That company undertook a number of activities, including the manufacture and production of high specification racing motor vehicles and the sale of racing motor vehicle components.

[6]      Some  years  ago,  the  Corporation  became  concerned  about  the  level  of income that Mr Brennan received from this business. A forensic accountant engaged by the Corporation has now prepared a detailed draft report in which he considers that the income derived by Brennan Racing for the years during which Mr Brennan received payments from the Corporation have been very significantly understated.

He believes that this has occurred in several ways.  These include the receipt of cash by the company that was not included within its accounts, and the receipt of cash by Mr  Brennan  on  the  company’s  behalf  that  was  also  left  out  of  the  company’s financial statements.

[7]      As a result of the investigator’s conclusions, Mr and Mrs Brennan now face a number of charges in the District Court under the accident compensation legislation. In broad terms, these allege that Mr Brennan and his wife obtained benefits from the Corporation to which they were not entitled because of the fact that they had understated the income derived by their company.

[8]      The Commissioner now seeks a restraining order because he wishes to ensure that property owned by Mr and Mrs Brennan will remain available to meet any assets forfeiture order or profit forfeiture order that the Court might make under the Act once the criminal proceedings have concluded.

The property in respect of which the Commissioner seeks restraining orders

[9]      The items of property in respect of which the Commissioner seeks restraining orders are as follows:

(i)A 3.57 hectare property situated at 7 Freeburn Road, Pyes Pa.   This property is subject to a mortgage in favour of the Westpac Bank.

(ii)     A Volvo FH12460 articulated truck having the personalised registration

number “Brenan”.

(iii)A 1992 Roadmaster SG2A76 commercial trailer having the registration number L634A.

(iv)A   1992    Roadmaster   SG3A76B   commercial     trailer    having    the registration number L635A.

(v)     An orange racing car.

Grounds of opposition

[10]     Mr and Mrs Brennan accept that Mr Osborne’s draft report is sufficient to raise issues relating to the correctness of the financial statements of their company. They also acknowledge that these formed the basis of Mr Brennan’s applications to the Corporation for ongoing weekly compensation.  They are not yet in a position to answer Mr Osborne’s detailed assertions and, instead, have effectively denied all of them on a blanket basis.  They say that as matters progress they will be in a position to provide explanations for many of the phenomena that Mr Osborne comments on in his draft report.

[11]     For present purposes, they accept that the Court has jurisdiction to make the restraining order the Commissioner seeks.  They accept that based on Mr Osborne’s report  alone,  there are  reasonable  grounds  to  believe that  they have  unlawfully benefited from criminal activity in respect of which they received benefits of more

than $30,000  in  value.1     They say,  however,  that  the Court  should  exercise  its

discretion against the making of a restraining order.

[12]     They say, first, that the registration of such an order against the title to the property will prevent them from having resort to the equity in the Freeburn Road property so as to be able to meet their ongoing living and legal costs.  Second, they say that the existence of the restraining order will have a negative impact on the value of the property when it is ultimately sold.  Third, they say that they have no intention of selling any of the assets in respect of which the Commissioner seeks a restraining order.  For that reason they contend that the restraining order will have no utility.

Decision

[13]     I do not accept that Mr and Mrs Brennan will be completely denied the ability to gain access to the equity in the Freeburn Road property if a restraining order is made.  The Commissioner accepts that the interest of Westpac Bank under

its existing registered mortgage will be excluded from the restraining order.   This

1      Criminal Proceeds (Recovery) Act 2009, s 6(1)(b) and 25.

means that Mr and  Mrs Brennan  remain free  to negotiate with Westpac for an increase in their loan facilities to meet ongoing living and / or legal costs.  Counsel advised me that the Freeburn Road property has a current value of approximately $1 million, and that the sum of approximately $100,000 is owing to the bank.  There is obviously considerable equity in the property, and the bank should be able to take some comfort from the fact that the Commissioner accepts that its interest as mortgagee shall be excluded from the restraining order.

[14]     I consider, however, that the restraining order would serve a useful purpose in that it would place other potential lenders on notice that the property may one day be the subject of forfeiture proceedings under the Act.

[15]     I do not accept that the existence of the restraining order will have a negative impact on the value of the property.  The existence of a restraining order does not point to any defect in the property or title to the property.  If and when the property is ultimately sold, it is likely to sell for its market value at that time.

[16]     I accept that Mr and Mrs Brennan may not have any present intention of selling any of the property in respect of which restraining orders are sought.  Their position may, however, change as time goes on.  If restraining orders are not made, they will be free to dispose of the property without reference to the Commissioner. That  would  prevent  the  Commissioner  from  later  obtaining  forfeiture  orders  in respect of the property.

[17]     Counsel for Mr and Mrs Brennan also urged me to bear in mind the fact that the Freeburn Road property alone would be sufficient to meet any overpayment that the Court may ultimately find has been received by Mr and Mrs Brennan.  That may be the case, provided the current level of equity in the property is maintained.  In the event that the level of borrowing from the bank increases, however, the position may be  different.    I  therefore  accept  that  it  is  appropriate  at  this  stage  to  make  a restraining order in respect of the remaining items as well as the Freeburn Road property.  In addition, although those items may not have a significant commercial value, they may eventually be subject to the forfeiture provisions of the Act in the form of an assets forfeiture order or a profit forfeiture order.

[18]     In the event that Mr and Mrs Brennan wish to sell any of the remaining items, they can seek the Commissioner’s consent to a variation of the restraining order to enable that to be done.  If the Commissioner refuses to permit the items to be sold, they may apply to the Court to obtain its consent to the restraining order being varied in that way.

Result

[19]     I am satisfied that is appropriate to make restraining orders in respect of all of the items listed in the Commissioner’s amended application dated 6 March 2014.  I record that the interest of Westpac Bank under registered mortgage B683014.3 is excluded from the restraining orders.

Costs

[20]     The Commissioner has succeeded, and is entitled to an award of costs on a category 2B basis together with disbursements as fixed by the Registrar.  Costs are to

be calculated on the basis of those payable in respect of an interlocutory application.

Lang J

Solicitors:

Crown Solicitor, Tauranga