Commissioner of Police v Che
[2024] NZHC 3088
•23 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-2219
[2024] NZHC 3088
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
FUQIN (LILY) CHE
First Respondent
QIANG (MICHAEL) FU
Second Respondent
Hearing: On the papers Counsel:
M Harborow and C Purdon for the Applicant D Jones KC for the Respondents
Judgment:
23 October 2024
JUDGMENT OF GORDON J
This judgment was delivered by me
on 23 October 2024 at 12.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Meredith Connell, Auckland D Jones KC, Auckland
COMMISSIONER OF POLICE v CHE [2024] NZHC 3088 [23 October 2024]
[1] In this proceeding the Commissioner of Police (Commissioner) has obtained restraining orders in relation to property of the first respondent, Fuquin (Lily) Che and the second respondent, Qiang (Michael) Fu, under the Criminal Proceeds (Recovery) Act 2009 (the Act).
[2] The Commissioner and Ms Che and Mr Fu now seek the Court’s approval of a settlement under s 95 of the Act.
Background
[3] This proceeding arose out of a Department of Internal Affairs (DIA) investigation into the operation of Jiaxin Finance Ltd, a money remitting business of which Mr Fu was the director. The investigation identified that Ms Che and Mr Fu were conducting large scale money remittances for Xiaohua Gong (a Chinese national and fraudster) through Jiaxin Finance in non-compliance with the Anti-Money Laundering and Countering the Financing of Terrorism Act 2009 (AML/CFT Act).
[4] On 13 July 2016, Police executed search warrants at various addresses, including where Ms Che and Mr Fu were living, finding over $500,000 in cash. The cash was seized pursuant to the Search and Surveillance Act 2012.
[5] The Commissioner then applied for and obtained on notice restraining orders over the following property:
(a)7 Marco Polo Avenue, Lynfield, Auckland, record of title NA74C/680, excluding the interests of Westpac New Zealand Ltd as mortgagee (7 Marco Polo Avenue);
(b)2 Penbury Place, New Windsor, Auckland, record of title NA102D/534, excluding the interests of ANZ Bank Ltd as mortgagee (2 Penbury Place);
(c)$472,420.12 cash located in Ms Che’s living area at 7 Marco Polo Avenue on 13 July 2016 (Che Cash);
(d)$27,964.19 located in Mr Fu’s bedroom at 7 Marco Polo Avenue on
13 July 2016 (Fu Cash);
(e)2015 Maserati GHIBLI, registration JLG78 (Maserati);
(f) 2011 Mercedes Benz ML 350 CDI, registration GEB636 (Mercedes); (collectively, the Restrained Property).
[6] The restraining orders have been extended from time to time. The most recent extension provides that they will expire on 19 September 2025.
[7] Criminal proceedings were commenced by the DIA in April 2018 with charging documents being filed in the Auckland District Court. The prosecution related to the remittance of approximately $53 million into this country by Ms Che and Mr Fu for Mr Gong in non-compliance with the AML/CFT Act. The proceeding was then transferred to the High Court for a Judge-alone trial before Walker J in September and October 2019.
[8] In her judgment Walker J found Ms Che and Mr Fu (and Jiaxin Finance) guilty of all charges.1
[9] Ms Che and Mr Fu were sentenced to fines of $202,000 and $180,000 respectively, while Jiaxin Finance was sentenced to a fine of $2.55 million.2
[10] Ms Che and Mr Fu (and Jiaxin Finance) unsuccessfully appealed their convictions to the Court of Appeal.3 They also unsuccessfully sought leave to appeal to the Supreme Court.4
1 R v WF, FC and JFL [2019] NZHC 3058 at [1].
2 R v Jiaxin Finance Ltd [2020] NZHC 366 at [90]–[92].
3 Jiaxin Finance Ltd v R [2022] NZCA 287
4 Jiaxin Finance Ltd v R [2022] NZSC 127.
[11] On 6 May 2022, the Commissioner filed an application for civil forfeiture orders (Forfeiture Application) seeking:
(a)type 1 assets forfeiture orders under s 50 of the Act over all of the Restrained Property;
(b)a joint and several profit forfeiture order under s 55 of the Act against Ms Che and Mr Fu, to the sum of $4,925,667.86;
(c)a profit forfeiture order under s 55 of the Act against Ms Che, to the sum of $612,525.80; and
(d)a profit forfeiture order under s 55 of the Act against Mr Fu, to the sum of $480,510.52.
[12] The Forfeiture Application was scheduled to be heard in this Court over eight days commencing 5 August 2024. The hearing was vacated on 1 August 2024 at the request of the parties following their agreement to settle.
Proposed settlement
[13]The proposed settlement is on the following terms:
(a)type 1 assets forfeiture orders under s 50 of the Act be made by consent over the following property:
(i)2 Penbury Place;
(ii)Che Cash;
(iii)Fu Cash;
(iv)Maserati;
(v)Mercedes; and
(vi)a further sum of $400,000 to be paid by the respondents (Settlement Sum);
(b)the restraining order over 7 Marco Polo Avenue will be varied until the close of business on Friday, 14 February 2025, to permit further borrowing against that property for the exclusive purpose of enabling Ms Che and Mr Fu to raise the Settlement Sum;
(c)upon the Official Assignee providing written confirmation that the Settlement Sum has been paid, the restraining order over 7 Marco Polo Avenue is lifted and is to be removed from the record of title;
(d)in the event the Settlement Sum is not paid by the close of business on Friday, 14 February 2025, the Official Assignee will sell 7 Marco Polo Avenue to obtain it;
(e)if, after the date due for payment of the Settlement Sum but prior to the Official Assignee entering into an agreement for the sale of 7 Marco Polo Avenue, the respondents pay both the Settlement Sum and all costs incurred by the Official Assignee in marketing the property for sale (Marketing Costs), then upon the Official Assignee providing written confirmation that both the Settlement Sum and the Marketing Costs have been paid, the restraining order over 7 Marco Polo Avenue is lifted and is to be removed from the record of title;
(f)Ms Che and Mr Fu are to abandon all claims they may have, under the Act or otherwise, to any of the property to be forfeited or to any of the other Restrained Property;
(g)the settlement is in full and final settlement of the Forfeiture Application, and the Commissioner will not pursue his application for profit forfeiture orders against Ms Che and Mr Fu;
(h)the settlement does not entail any admission of liability or wrongdoing by Ms Che and Mr Fu; and
(i)costs will lie where they fall.
[14] The approximate value of the property being forfeited is $2.2 million. The approximate value of the property currently subject to restraining orders, but which will not be forfeited, is approximately $366,000 after the Settlement Sum is paid.
Statutory provision – approval of settlement
[15]Section 95 of the Act which governs settlements, provides:
95High Court must approve settlement between Commissioner and other party
(1)The Commissioner may enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown.
(2)A settlement does not bind the parties unless the High Court approves it.
(3)The High Court must approve the settlement if it is satisfied that it is consistent with—
(a)the purposes of this Act; and
(b)the overall interests of justice.
[16] First, as to the purposes of the Act: the primary purpose in s 3(1) is to establish a regime for the forfeiture of property that has been derived directly or indirectly from significant criminal activity or that represents the value of a person’s unlawfully derived income. The ancillary purposes in s 3(2) include to eliminate the chance of persons to profit from undertaking or being associated with significant criminal activity and to deter significant criminal activity.
[17] The words “overall interests of justice” in s 95(3) require a broad inquiry.5 Relevant factors include the saving of time and cost and the litigation risk of a hearing
5 Commissioner of Police v Li [2018] NZHC 1566 at [32].
to the Commissioner and a respondent.6 The Courts have recognised that a decision to settle proceedings under the Act will often reflect a “pragmatic” arrangement or solution, a “common sense compromise” or a “sensible resolution” that will meet the purposes of the Act and the overall interests of justice.7
The present case
[18] For the reasons advanced by the parties, I am satisfied that the settlement proposed is consistent with the purposes of the Act and the overall interests of justice. In particular:
(a)There will be a saving of time and cost for the parties if the matter can be resolved by consent without the need for the Commissioner to pursue an eight-day hearing.
(b)It follows that settlement will also obviate the need for expenditure of the Court’s time and resources in determining an application for civil forfeiture orders.
(c)The vast majority of the value of the Restrained Property will be realised for the benefit of the Crown, with $2.2 million out of
$2.56 million being forfeited.
(d)The Commissioner considers he has a good case to show that the Restrained Property is tainted property (so as to support an assets forfeiture order) and also that Ms Che and Mr Fu have unlawfully benefited from significant criminal activity (so as to support profit forfeiture orders):
(i)The Commissioner’s financial evidence shows that Ms Che and
Mr Fu were responsible for the remittance of approximately
$77 million into New Zealand from China on behalf of
6 Commissioner of Police v Kree [2013] NZHC 2972 at [11]; Commissioner of Police v Zhang
[2016] NZHC 930 at [8].
Commissioner of Police v Marsh [2022] NZHC 1032 at [5], Commissioner of Police v Douglas
[2015] NZHC 1293 at [6], and Commissioner of Police v Cherrington [2022] NZHC 1396 at [20].
Mr Gong. The source of those funds was Mr Gong’s various fraudulent schemes, the most recent of which he pleaded guilty to through his company, Edward Enterprise International Group Inc. The allegation in respect of that fraud was that Mr Gong was the sole directing mind of the company which defrauded investors in a pyramid scheme of hundreds of millions of dollars.
(ii)WeChat messages extracted from their phones confirm Ms Che and Mr Fu were charging Mr Gong a commission rate of approximately 2.9 per cent, resulting in an unlawful benefit of approximately $2.3 million on that conduct.
(iii)Transactions for Mr Gong represented approximately one third of Ms Che and Mr Fu’s total business by volume. However, as they were earning approximately three times higher commission on remittances conducted for him than for their other customers, his business represented approximately three-fifths of their income. Therefore, the unlawful benefit derived from transactions for Mr Gong was more likely than not used to both fund Ms Che and Mr Fu’s lifestyle and to acquire their assets.
(e)While the Commissioner considers he has a good case, the agreed settlement recognises the risks inherent in such litigation to both parties and allows them to have certainty and control as to the outcome. The Commissioner acknowledges that a contested hearing carries with it risk. On their part, Ms Che and Mr Fu, while disputing the strength of the Commissioner’s case, recognise the Act empowers the Court to forfeit the entire Restrained Property on the civil standard of proof.
(f)Regarding a profit forfeiture order, the Commissioner acknowledges the practical difficulties of pursuing a civil debt under ss 55(4) and 83(4) of the Act.
(g)The absence of a profit forfeiture order against Ms Che and Mr Fu will relieve them of any significant residual debt in the future.
Result and orders
[19] Given that I am satisfied that the settlement proposed is consistent with the purposes of the Act and the overall interests of justice under s 95(3), I must approve the settlement. I make the following orders so as to give effect to the settlement:
(a)Type 1 assets forfeiture orders under s 50(1) of the Act: the following property vests in the Crown absolutely and is in the Official Assignee’s custody and control:
(i)2 Penbury Place, New Windsor, Auckland, record of title NA102D/534, registered proprietor Ms Che, excluding the interests of ANZ Bank Ltd as mortgagee;
(ii)cash in the sum of NZD$472,420.12 located in Ms Che’s living area at 7 Marco Polo Avenue, Lynfield, Auckland, record of title NA74C/680, registered proprietor Fu Family Trust Ltd (7 Marco Polo Avenue) on 13 July 2016, and belonging to her, and all interest earned thereon;
(iii)cash in the sum of NZD$27,964.19 located in Mr Fu’s bedroom at 7 Marco Polo Avenue on 13 July 2016, and belonging to him, and all interest earned thereon;
(iv)a blue 2015 Maserati GHIBLI, registration JLG78, registered to Mr Zhixin Fu;
(v)proceeds of sale of a black 2011 Mercedes Benz ML 350 CDI, registration GEB636, previously registered to Ms Che, and all interest thereon; and
(vi)a further sum of $400,000 to be paid by or on behalf of Ms Che and/or Mr Fu (Settlement Sum).
(b)Additional orders necessary and convenient for giving effect to the type 1 assets forfeiture order made in respect of the Settlement Sum under s 59 of the Act:
(i)the restraining order over 7 Marco Polo Avenue is varied to permit further borrowing against the property for the exclusive purpose of enabling Ms Che and Mr Fu to raise the Settlement Sum;
(ii)upon the Official Assignee providing written confirmation that the Settlement Sum has been paid, the restraining order over 7 Marco Polo Avenue is lifted and the Official Assignee must then arrange for the restraining order to be removed from the record of title;
(iii)in the event that the payment of the Settlement Sum in accordance with paragraph (a)(vi) is not made by 5pm on 14 February 2025, the Official Assignee shall, as soon as is reasonably practicable, sell 7 Marco Polo Avenue at its fair market value and deal with the proceeds of sale in the following way:
(A)first, deduct the Official Assignee’s actual costs in effecting the sale (including, if applicable, any decontamination costs);
(B)second, repay any borrowings secured against the property;
(C)third, apply $400,000 of the net proceeds of sale toward the type 1 assets forfeiture order at paragraph (a)(vi);
(D)finally, return the balance to the registered proprietor, Fu Family Trust Ltd;
(iv)if, after the date for the payment of the Settlement Sum but prior to the Official Assignee entering into an agreement for the sale of 7 Marco Polo Avenue, the respondents pay both the Settlement Sum and all costs incurred by the Official Assignee in marketing the property for sale (Marketing Costs), then upon the Official Assignee providing written confirmation that both Settlement Sum and the Marketing Costs have been paid, the restraining order over 7 Marco Polo Avenue is lifted and the Official Assignee must then arrange for the restraining order to be removed from the record of title.
(c)Costs: costs lie where they fall in relation to all matters between the Commissioner and Ms Che and Mr Fu.
[20] Finally, as requested by the parties, I note the further terms of the agreed settlement:
(a)Ms Che and Mr Fu abandon all claims they may have, under the Act or otherwise, to any of the property to be forfeited or any of the other restrained property;
(b)the settlement is in full and final settlement of the Forfeiture Application, and the Commissioner will not pursue his application for profit forfeiture orders against Ms Che and Mr Fu; and
(c)the settlement does not entail any admission of liability or wrongdoing by Ms Che and Mr Fu.
Gordon J
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