Commissioner of Police v Cheng
[2020] NZHC 1861
•6 July 2020
IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY
I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE
CIV-2016-416-12
CIV-2016-416-46 [2020] NZHC 1861
IN THE MATTER Of an application pursuant to sections 22, 24 and 25 of the Criminal Proceeds (Recovery) Act 2009 BETWEEN
THE COMMISSIONER OF POLICE
Applicant
AND
THOMAS CHENG
First Respondent
AND
MASONIC LIMITED
Second Respondent
AND
REDOUBT HOUSE LIMITED
Third Respondent
AND
ACTION INVESTMENTS LIMITED
Fourth Respondent
AND
ACTION INVESTMENT LLP
Fifth Respondent
AND
HARVEST PROPERTY LLP
Sixth Respondent
AND
MORTGAGE INTERNATIONAL LLP
Seventh Respondent
AND
EXPRESS FACTOR LLP
Eighth Respondent
AND
WILLIAM CHENG
First Interested Party
AND
NYIOH CHEW HONG
Second Interested Party
Hearing: 6 July 2020
THE COMMISSIONER OF POLICE v THOMAS CHENG [2020] NZHC 1861 [6 July 2020]
Appearances: F Cleary for Applicant
L Ord and E Blincoe for First Respondent
No appearance for First and Second Interested PartyJudgment:
6 July 2020
JUDGMENT OF GRICE J
(Application for extension of restraining order)
Introduction
[1] Mr Thomas Cheng, the first respondent, was convicted of serious methamphetamine offending.1 He is presently serving a term of imprisonment for that offending. Further offending occurred during the term of his imprisonment.2
[2] As a result of Mr Cheng’s offending the Commissioner sought and obtained restraining orders over some commercial properties in Gisborne as well as various bank accounts. The Commissioner’s inquiries widened as a result of investigations which had been made concerning the methamphetamine offending and the funds from that.
[3] The Commissioner reached the view that Mr Thomas Cheng as well as his father Mr William Cheng and his father’s partner Ms Nyioh (the former being the first interested party and the latter being the second interested party)3 had benefited from tax evasion and money laundering. Further restraining orders were obtained as a consequence.
[4] Since the filing of the original applications on 4 April 2016 the Commissioner has obtained extensions of the restraining orders over the restrained property on a number of occasions.
1 This decision was delivered orally on 6 July 2020. The written form has been edited and footnoted before distribution.
2 Commissioner of Police v Cheng [2019] NZHC 2888.
3 Mr William Cheng is Mr Thomas Cheng’s father and Ms Nyioh Hong is Mr William Cheng’s partner.
[5] The Commissioner has not yet filed an application for forfeiture in relation to the restrained property.
[6] A list of property and restraining orders in relation to the two sets of proceedings, the subject of this application is set out in Attachment 1.
[7] The parties who have taken steps in the proceedings to date are Mr Thomas Cheng, as well as Mr William Cheng and Ms Nyioh, the first and second interested parties. The interested parties were represented by counsel at the hearing for extension of restraining orders held in September/October 2019. Mr Thomas Cheng gave evidence at that hearing. Mr Simperingham appeared for Mr William Cheng and Ms Nyioh.
[8] Mr Simperingham advised the Crown at the time of the application by the Commissioner for the extension on 3 April 2020, that he no longer had instructions. However, Ms Nyioh has emailed the Registrar indicating that they oppose the further extension and are seeking legal assistance to progress their opposition to these matters.
[9] An application for an extension was the subject of a hearing in 2019.4 I granted an extension for 12 months. However, that 12-month extension was backdated. The result was that the extension granted extended the restraining order until 4 April 2020.
[10] On 3 April 2020 the restraining orders were further extended on an interim basis for six months or until this hearing. Doogue J granted that extension and directed that the substantive application be set down for hearing as urgently as practicable.5 Therefore, at present, the interim orders extend the restraining orders until 4 October 2020 unless discharged following this hearing.
Previous extensions
[11] In my judgment of 6 November 20196 I noted that the purpose of a restraining order was to preserve the property for a limited time while the Commissioner gathered
4 Commissioner of Police v Cheng, above n 2.
5 Commissioner of Police v Cheng CIV-2016-416-0000046 and CIV-2016-416-0000012, 3 April 2020.
6 Commissioner of Police v Thomas Cheng, above n 2.
evidence to support an application for forfeiture. I noted that there was a wide discretion to extend restraining orders and described the purpose and effect of the orders as follows:
[31] A restraining order expires one year after it was made if no forfeiture order is made before that date.7 The Court is able, however, to extend the duration of a restraining order for a period of up to one year.8 Repeat extensions are expressly permitted.9
[32] There is a wide discretion to extend restraining orders. However, that discretion must be exercised in a reasonable manner “having regard to the purpose of the Act and the nature and purpose of the restraining orders”.10
[12] I also referred to the risks and the prejudicial effect of repeatedly extending restraining orders as follows:
[34] Nevertheless, it must be borne in mind that the orders are “interim orders of limited duration”.11 A restraining order can be highly prejudicial to those affected by it which is the reason that an extension of such orders is subject to judicial oversight.12 The risk is that the Commissioner will obtain a defacto forfeiture order without following the prescribed statutory process if the restraining order is extended repeatedly.13 Against that, an application for civil forfeiture may be declined on the basis of insufficient evidence. This may be the result if the Commissioner has not had the opportunity to complete his investigation.
[35] The restraining orders may preserve the property while the Crown is gathering evidence to support an application for forfeiture, but this cannot go on forever.14
[13] I concluded at that stage that, having heard the evidence and despite the substantial delay in bringing the forfeiture application, the restraining orders should be extended.
7 Criminal Proceeds (Recovery) Act, s 37(1).
8 Section 37(2)(d).
9 Section 41(3).
10 Commissioner of Police v Reed [2013] NZHC 802 at [34].
11 Commissioner of Police v Burgess [2015] NZHC 1008 at [34].
12 At [36].
13 At [37].
14 At [39].
[14] The reasons put forward for the Commissioner at the time the orders were extended were described, in my judgment, as being due to the overseas mutual assistance requests. I referred to the process that had been undertaken in my judgment as follows:
[59] The Commissioner points out that a number of overseas mutual assistance requests have already been made. Information has been sought from Hong Kong and Singapore. The first application for a mutual assistance request to Singapore was made in December 2017 and to Hong Kong in January 2018. Mr Thomas Cheng was examined on 27 February 2018, following his conviction and sentencing on the methamphetamine dealing charges. Various production orders were also executed from May 2017. Most recently, production orders were executed in the period May to June 2019. These include production orders to telecommunication providers, banks and law firms. Examinations of Ms McKaye and others were carried out in July 2019.
[60] Disclosure was received from Hong Kong authorities pursuant to a mutual assistance request in September 2019. However, Commissioner says that disclosure has not been completed in response to the request made to Singapore. Information is being sought concerning the tax treatment of the relevant income by the Singapore tax authorities. This is to deal with the need to recognise tax paid in another jurisdiction in which has an arrangement with New Zealand.
[61] The Commissioner says that Mr William Cheng and Ms Nyioh have been uncooperative which meant that he must wait for the information through the mutual assistance request process. It could have been supplied by them. Counsel points out any assistance by Mr William Cheng and Ms Nyioh must be voluntary. The Commissioner cannot enforce production or obtain the information through legal processes against them outside New Zealand. While there has been some informal data production by authorities from outside the jurisdiction the only option open to the Commissioner, he says, is to use the cumbersome formal process which is slow and cumbersome.
[15]I found then that in the circumstances:
[62] … the Commissioner’s explanation for the delays in the circumstances is reasonable. Money laundering is usually complex, particularly where it involves multiple foreign entities and is difficult to detect and to investigate. …
[16] This case involves a complex web of commercial ownership structures for the New Zealand based assets. Those are assets owned by New Zealand companies and overseas companies. They also have indebtedness secured to companies apparently
controlled by the Chengs and Ms Nyioh. I recognised that these matters took time to unravel and reliance on a mutual assistance process had slowed things down. I also took into account that in the absence of real assistance by Mr Cheng and Ms Nyioh, who were outside the jurisdiction and remain outside the jurisdiction today, that it was necessary to undertake those cumbersome processes.
[17] That is not a criticism. Of course, the parties are not required to cooperate. However, they could have speeded up the process by supplying the information. That is not irrelevant in the context of a hearing about the unfairness of how long an investigation was taking. Nevertheless, I noted the right of persons not to be deprived of their property without proper process was an important right. That must be taken into account and put in the balance.15
[18] It had been three and a half years since restraining order 1 and two years and nine months since order 2 had been made. By then the methamphetamine dealing which had triggered the original investigations leading to the restraining orders had become largely irrelevant. The Commissioner was by then focussed on tax fraud and allegations of money laundering.
[19] I considered that in all the circumstances the extension of the orders was justified but I warned that the Commissioner must bring the application for forfeiture as soon as possible.16 I granted the extension for 12 months rather than a lesser time in order to enable the investigations to be progressed properly.17 Had the order remained in place for 12 months from 6 November 2019 it would not have expired until 6 November 2020.
[20] Mr Thomas Cheng opposes the application today. In addition, as I have mentioned, Ms Nyioh and Mr William Cheng continue their opposition although they did not appear today.
[21] Ms Cleary, for the Commissioner, points out that progress had been made since the hearing in September/October 2019. She says the time has been used to carry out
15 Commissioner of Police v Cheng, above n 4, at [64].
16 At [66].
17 At [67].
the investigations which were necessary before a forfeiture application could be properly supported and filed.
Present reasons for application for extension
[22] Detective Johnson gave evidence for the Commissioner as to what had occurred in the time since the hearing in September/October. He referred to a chronology from October 2019. It listed a number of occurrences which included:
(a)In October 2019: dealing with a likely witness who had mental health issues, possibly suicidal, flowing from the Cheng investigation, dealing with an IPCA complaint initiated by Mr Thomas Cheng to identify correspondence with an accountant who helped Mr William Cheng and associated companies in the 1990s through to the 2000s.
(b)In December 2019: correspondence with a Singapore-based lawyer who had assisted Mr William Cheng historically.
(c)In February 2020: the Commissioner asked support staff to extract data from Inland Revenue files and prepare schedules for each of the respondent entities or individuals known to the Inland Revenue who were respondents in the proceedings. The Commissioner prepared and liaised to obtain a sworn affidavit from Mr Brian Shields who was the real estate agent who had been involved in the purchase of a number of the restrained properties. He is presently involved in the sale of the Masonic Hotel, one of the restrained properties.
(d)From February to July 2020 the Commissioner corresponded with Mr Winston Franklin who is an accountant who has been assisting Mr William Cheng and Ms Nyioh to sort out their affairs and accounting matters. This included liaising with the Inland Revenue department. The Detective mentioned that Mr Franklin was creating difficulties and he was tardy responding.
(e)On 26 February and 23 March there were visits to Mr Thomas Cheng apparently returning his property following a subsequent investigation into offending while he was in jail.
(f)On 2 March is a reference to correspondence with ministerial services around those complaints.
[23] The relevant chronology entries also indicate there have been ongoing reviews of this file, analysis and collation, of material. In the midst of this, the COVID alert level 4 lock down occurred. Despite that through April to May 2020 the chronology records the receipt of the disclosure material from Singapore pursuant to the mutual assistance request and to the analysis of this material. From April to May 2020 the support staff prepared timelines and extracted data, scheduled chronologies and charts. From April to June 2020 reference is made to the drafting of an affidavit for forfeiture for Mr Hunt, a solicitor from Gisborne. He apparently has relevant information but was uncooperative.
[24] From April to May 2020 there was also further liaison with Mr Neil Weatherhead who was a tenant of some of the listed properties that are restrained. He has also been assisting the Chengs in legal matters more recently. Mr Weatherhead did not cooperate with the Commissioner.
[25] From April to July 2020 there is mention of liaison with Mr Samuel Tay. He is based in Christchurch. He had provided the address for the registered office in New Zealand for the Cheng companies. Mr Tay is apparently a Mandarin speaker. There were complications in relation to speaking to him and translating his affidavits.
[26] There have also been examinations of prospective witnesses and production orders issued throughout the period. Mr Franklin was examined and his transcript has been reviewed. In addition, there have been visits to other witnesses including Mr Piripi Springhall and Ms Marissa Springhall in Te Kuiti who may assist in relation to various charges involving Mr Thomas Cheng. Mr Springhall was in jail at the same time as Mr Cheng.
[27] From June 2020 onwards the chronology refers to the preparation of affidavits and liaising with the Crown solicitor as well as liaising with Mr Shields who is the real estate agent who has been dealing with the sale of the Chengs’ Masonic Hotel property. At present the sale of that property is with the Official Assignee who is holding and dealing with the property. That process needs to be completed if the property is to be sold.
Further steps necessary
[28] Detective Johnson also outlined the further steps that need to be taken which are now underway. These include attending to evidence as the Inland Revenue has belatedly declined to file an affidavit in this proceeding in respect of the tax assessment. The tax assessment has been carried out. It appears there has been liability assessed against the Chengs and Ms Nyioh of some $5 million.
[29] The Inland Revenue Department has provided the investigation files to Detective Johnson for his review. That material now needs to be analysed and incorporated into the relevant affidavits. There are over 2,500 pages of Inland Revenue documentation. This will be reviewed by the Commissioner’s forensic accountant, Mr Vevers, who will put the material in order and supply context. It will then be produced in an affidavit in support of the application for forfeiture.
[30] At the time that the chronology was prepared an examination order was to be obtained in respect of Mr Weatherhead, the lawyer and a tenant of the Chengs from Gisborne. It appears that the examinations may now have taken place. Further analysis is needed including completing the examination process and arranging for a transcription of the material for incorporation into the relevant documents.
[31] Mr Tay’s affidavit is also in the course of completion. It requires translation from Mandarin to English. In addition, there needs to be finalisation and swearing of other draft affidavits from witnesses that I have mentioned.
[32] Detective Johnson said the information required collating, updating and validating of the data. A review of all the New Zealand registered companies and the
Singaporean limited liability partnerships which own the Cheng group properties and mortgages need to be collated.
[33] Detective Johnson also indicated that administrative work was required such as preparation of timelines which were essential to portray the evidence in its proper context.
[34] Ms Cleary noted that once the application for forfeiture was filed there would be further delays. Time was needed for the respondents and interested parties to review the information and prepare their cases in opposition. Ms Cleary indicated that the forfeiture hearing may take two weeks. This was based on an estimate of the Commissioner’s case of one week and allowing a week for the defence case. Ms Cleary noted it would then take time to go through the court process and the allocation of two weeks at a time convenient to the parties for the hearing.
[35] Ms Ord, for Mr Thomas Cheng, cross-examined Detective Johnson in relation to the delays and whether or not particular matters could have been progressed more quickly. She focussed on a number of the witnesses who had been reluctant to cooperate. They either would not cooperate or had done so in a less than timely manner.
[36] Ms Ord pointed out and Detective Johnson agreed, that in many instances the material had been obtained under production orders so it could have been annexed to an affidavit by Detective Johnson, rather than waiting for the cooperation of the various witnesses to file these affidavits. However, Detective Johnson indicated that in some instances the mere production of the material without context might not be helpful. For instance, Mr Franklin, who appeared to have substantial knowledge of the business affairs of Mr William Cheng and Ms Nyioh, needed to provide the context surrounding various emails and material between him and his clients.
[37] Detective Johnson said that the various commercial arrangements were intertwined. He viewed the properties as being controlled or part of a group which included Ms Nyioh and Mr William and Mr Thomas Cheng. Therefore, subsequent
matters involving Mr Thomas Cheng which were only investigated in an operation known as Operation Dory were also relevant to any forfeiture application.
[38] The detective indicated that he was coming to the end of his inquiries and that the application for forfeiture and supporting affidavits would be sufficiently advanced to enable them to be filed on 4 October 2020.
[39] Detective Johnson noted he had been diverted to other duties during the COVID alert level periods. It appeared some of those related to following people who had been in isolation following the COVID alerts. He said he and his team had had to work from home during the lockdown period and this had also created difficulties for them in advancing this matter. For instance, he said, during the lockdown period he could not travel to Gisborne to complete his investigations.
[40] In the circumstances I am of the view that these are good reasons why the extension should be granted.
[41] I refer to Ms Blincoe’s submissions that there has been ongoing prejudice to Mr Thomas Cheng and the interested parties caused by the fact their properties have been under restraint. Ms Blincoe pointed out the time elapsed since the original restraining orders were made in 2016/17 approached three and four years respectively. She noted the ongoing prejudice by having the properties restrained meant that the Chengs could not deal with the properties easily. She also referred to the property rights preserved under the New Zealand Bill of Rights Act 1990.18
[42] Ms Blincoe pointed out that the cases which had been referred to by counsel at the time of the November 2019 hearings had involved delays of lesser periods than here. She pointed out that in one case where an extension of a restraining order was sought, where the order had been in force for two and a half years. The Judge in that case said it was to be a final order. Although the extension was granted the Judge refused to grant the full time for which the extension had been sought.
18 New Zealand Bill of Rights Act 1990, s 21.
[43] I have dealt with those arguments in some detail in my decision of November 2019. I will not revisit them here. Ms Blincoe makes the point that the prejudice is ongoing and extensions of restraining orders should not be used as an excuse to keep the property restrained forever. The Commissioner must put a stake in the ground and file what evidence he has in support of a forfeiture application if that is what he intends to do.
[44] I note that the properties will need to be dealt with. In that regard the Masonic Hotel in Gisborne is in the process of being sold. Detective Johnson indicated the matter was now with the Official Assignee to deal with on behalf of the Commissioner. At the earlier hearing in September 2019 the Commissioner indicated he negotiated terms for the discharge of the restraining orders to enable sales to proceed. It appears that that is what is now occurring. Therefore, there is no prejudice due to the property not being sold. However, a process was required in order to obtain consent to sell.
[45] In the circumstances, I consider a further extension is appropriate. However, I recognise there is continuing prejudice. As Ms Cleary readily acknowledged pressure is needed to move this matter forward. The difficulty is that first the application must be filed. It seems clear that will not happen until October 2020. After that there will be the delays attendant in progressing the application for forfeiture if is filed. Ms Blincoe urged that a close monitoring of any extension should take place. She suggested that the order for extension should be made a final order. However, that is problematic as once, or if, the forfeiture applications are filed the restraining orders will need to be kept in place.
Further extension to 30 October 2020 and directions
[46] In the circumstances I do not consider it appropriate to make this further extension a final order. It is appropriate to put in place monitoring to ensure the application for forfeiture is progressed properly.
[47] I grant a further extension of the orders to 30 October 2020. There will be a case management conference for these proceedings the week before 30 October or some earlier date that is convenient to counsel. At that conference timetable directions should be made (if possible by agreement between the parties).
Costs
[48] There was no discussion concerning costs. My inclination is to reserve costs on this application to be dealt with in the event. I note that the application has taken a half day for the benefit of any judge who is dealing with costs at a later date. I also observe that the opposition was not without merit. The Commissioner is well aware that this matter needs dealing with quickly.
Grice J
ATTACHMENT 1
PROPERTY THE SUBJECT OF THE APPLICATION CIV-2016-416-000012
Property
Significant criminal offending
46 Gladstone Road, Gisborne
(includes 55 Lowe Street)
Money laundering and/or tax offending. 67 Lowe Street, Gisborne Money laundering and/or tax offending. 26 Lowe Street, Gisborne Money laundering and/or tax offending. 110 Peel Street, Gisborne Money laundering and/or tax offending. 105 Lowe Street, Gisborne Money laundering and/or tax offending. 119 Grey Street, Gisborne Money laundering and/or tax offending. Westpac Bank account (suffix 000) Methamphetamine dealing and/or money
laundering.
Westpac Bank account (suffix 001) Methamphetamine dealing and/or money
laundering.
Westpac Bank account (suffix 025) Methamphetamine dealing and/or money
laundering.
CIV-2016-416-000046
81 Guyton Street, Whanganui Money laundering and/or tax offending. 82 Guyton Street Whanganui Money laundering and/or tax offending. 148 Victoria Avenue, Whanganui Money laundering and/or tax offending. 49 Ridgway Street, Whanganui Money laundering and/or tax offending. 168 Ridgway Street, Whanganui Money laundering and/or tax offending. 150 Jellicoe Street, Te Puke Money laundering and/or tax offending. 120 Main Street, Pahiatua Money laundering and/or tax offending. 2 Barnard Street, Timaru Money laundering and/or tax offending. 26 Lowe Street, Gisborne Money laundering and/or tax offending.
BNZ Bank account (suffix 000) Money laundering and/or tax offending. Westpac Bank account (suffix 5-000) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 01) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 02) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 03) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 04) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 05) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 06) Money laundering and/or tax offending
and/or deception.
Westpac Bank account (suffix 028) Money laundering and/or tax offending
and/or deception.
2
2
0