Commissioner of Police v Coles
[2024] NZHC 1776
•2 July 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-496
[2024] NZHC 1776
BETWEEN COMMISSIONER OF POLICE
Applicant
AND
ANTONY THOMAS COLES
Respondent
AND
ANZ BANK OF NEW ZEALAND LIMITED
Interested Party
Hearing: 17 June 2024 Counsel:
K South and C White for the Applicant
J Morriss for the Respondent (via VMR)
Judgment:
2 July 2024
JUDGMENT OF HARLAND J
(As to settlement under s 95 of the Criminal Proceeds (Recovery) Act 2009)
Introduction
[1] The Commissioner of Police has applied for an asset forfeiture order or, in the alternative, a profit forfeiture order under the Criminal Proceeds (Recovery) Act 2009 (the Act) in relation to property owned by the respondent. The application is opposed by the respondent and has been timetabled for a three to five day hearing1 to occur on a date yet to be allocated in the future. The respondent alone has filed 17 affidavits in support of his notice of opposition.
1 As directed in Churchman J’s Minute dated 28 August 2023, confirmed by Dunningham J in a Minute of 25 September 2023.
COMMISSIONER OF POLICE v COLES [2024] NZHC 1776 [2 July 2024]
[2] On 13 June 2024, counsel for the applicant and respondent filed a joint memorandum seeking the Court’s approval of a settlement reached between them, pursuant to s 95 of the Act.
[3] The matter came before me as Duty Judge. I declined to deal with the matter on the papers and arranged for it to be called before me in the Civil List on 17 June 2024. Since then, counsel for the applicant has filed a further memorandum dated 18 June 2024 setting out in more detail the settlement that is proposed.
[4] I am satisfied, having read the application and affidavits filed in support of it, having considered the oral submissions made to me on 17 June 2024 and having read the memorandum of 18 June 2024, that it is appropriate for me to approve the settlement under s 95 of the Act. This judgment sets out my reasons for reaching that conclusion.
Background
[5] On 9 October 2020, the Commissioner applied without notice for a restraining order in respect of three residential properties owned by the respondent in Christchurch, being the properties at 25 and 27 Kellys Road, and 31 Bronwyn Street, Mairehau. The application also sought to restrain three luxury motor vehicles and the contents of a bank account belonging to the respondent.
[6] The application was brought on the basis that there were reasonable grounds to believe that the respondent had unlawfully benefited from significant criminal activity, being the cultivation and sale of cannabis in breach of ss 6 and 9 of the Misuse of Drugs Act 1975, and that the property covered by the restraining order was, in the Commissioner’s view, tainted property.
[7] On 13 October 2020, Nation J made restraining orders on a without notice basis as sought.
[8] An on notice application for restraining orders was then filed by the Commissioner on 19 October 2020. By this point, it was known that one of the residential properties owned by the respondent and subject to the without notice
restraining order (the property at 25 Kellys Road, Mairehau) was also subject to a claim by the respondent (as plaintiff) against the Earthquake Commission (EQC) and Southern Response Earthquake Services Ltd (as defendants). There are proceedings in the High Court concerning this property.2
[9] Various on notice restraining orders were made by Nation J in the Court on 13 December 2021.
[10] The restraining orders have since been extended on several occasions. The most recent restraining order expires on 3 November 2024.3
[11] In the meantime, on 30 June 2023, the Commissioner applied for an assets forfeiture order and/or a profit forfeiture order in respect of the property that has been restrained. The respondent filed a notice of opposition to this application.
[12] Over time, various affidavits have been filed to support both the Commissioner’s applications and the respondent’s notice of opposition.
The proposed settlement
[13] The Commissioner and the respondent have reached an agreement which, if approved, would result in an assets forfeiture order being made by consent in respect of the following property:
Real estate
(a) 31 Bronwyn Street, Mairehau, Christchurch, the registered owner of which is the respondent;
Vehicles
(b) a 2001 red Ferrari 360 Spider, registration LEW487, registered to the respondent;
2 CIV-2017-409-824.
3 Order of Preston J dated 1 November 2023.
(c) a 2015 black Lamborghini Huracan, registration MJL859, registered to the respondent;
(d) a 2013 yellow Lamborghini, registration LP5604, registered to the respondent;
Bank funds
(e) all funds currently in the custody and control of the Official Assignee (including interest) relating to:
i.cash seized on 14 October 2020 at 27 Kellys Road, namely
$35,970.00;
ii.$5,443.07 from ANZ bank account […];
iii.a hearing fee refund from the Registry of the High Court totalling
$250,800.00;
(f) $8,962.79 current held in Dempsey Ferguson Law solicitor’s trust account and to be transferred to the Official Assignee upon the making of an order for forfeiture.4
[14] In consideration for an assets forfeiture order being made over the property listed above, the Commissioner agrees to abandon the remainder of his application, effectively foregoing any interest in 25 and 27 Kellys Road, Mairehau which, based on a schedule I was provided with at the hearing on 17 June 2024, appeared to be mortgage-free and have a total estimated value of $1.25 million. The value of these properties is now assessed to be $990,000. I will address the value of these properties, in particular how the parties have arrived at them, later in this judgment.
Legal principles
[15]Section 95 of the Act provides:
4 Relates to funds which were erroneously released to the respondent on 4 December 2023.
95 High 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]The purpose of the Act is set out in s 3 as follows:
3 Purpose
(1) The primary purpose of this Act is to establish a regime for the forfeiture of property—
(a)that has been derived directly or indirectly from significant criminal activity; or
(b)that represents the value of a person’s unlawfully derived income.
(2) The criminal proceeds and instruments forfeiture regime established under this Act proposes to—
(a)eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity; and
(b)deter significant criminal activity; and
(c)reduce the ability of criminals and persons associated with crime or significant criminal activity to continue or expand criminal enterprise; and
(d)deal with matters associated with foreign restraining orders and foreign forfeiture orders that arise in New Zealand.
[17] In Commissioner of Police v Li, Woolford J considered what might amount to “the overall interests of justice” as outlined in s 95(3)(b) of the Act.5 At para [32], he said:
[32] A broad inquiry is required. Section 95(3) indicates that much, referring to the “overall interests of justice”. But in making the s 95(3) determination, the following factors may be relevant:
5 Commissioner of Police v Li [2018] NZHC 1566.
(a) Whether the settlement amount adequately reflects the property allegedly derived from criminal activity or income unlawfully derived.
(b) The strength of the Commissioner’s case, the respondent’s case, and accordingly, the likelihood of forfeiture if the case was not settled. Litigation risk should be considered. It may be appropriate to settle for less if the Commissioner’s case has significant shortcomings
(c) If there is a shortfall between the settlement amount and the property allegedly derived from criminal activity or income unlawfully derived, the Court should consider the extent to which there are assets available to meet that shortfall.
(d) The time, cost and resource savings that would flow from settlement.
(e) Any other relevant matters, keeping in mind that decisions to settle proceedings can be made on economic and pragmatic grounds. Does the settlement reflect a common-sense compromise between the parties?
[18] More recently, in Commissioner of Police v Cherrington, Toogood J, when deciding whether or not to approve a settlement agreed between the parties, said:6
[20]I have taken into account the following considerations:
(a) civil litigation incurs substantial costs for the parties, a significant portion of which would not usually be recoverable under the rules of Court relating to payments of costs;
(b) it is in the public interest to avoid the burden on the Court of complex and lengthy civil litigation;
(c) there is also strong public interest in litigation of this nature being brought to a prompt conclusion, so long as the settlement reflects the likely costs and risks inherent in the determination of a contested application;
(d) approval of any settlement by the Court acting in its supervisory jurisdiction requires consideration of the legislative intent and the overall interests of justice and is not a rubber-stamping exercise; and
(e) a broad inquiry is required, recognising that the decision to settle proceedings under the Act may be made on economic and pragmatic grounds and often reflects a "common sense compromise" between the parties.
6 Police v Cherrington [2022] NZHC 1396.
[19] Although counsel for the Commissioner submitted that the parties themselves will generally be well placed to assess whether a settlement is in the interests of justice because they have the greatest knowledge of the evidence and the strengths and weaknesses of their respective cases, the Act specifically requires the Court to oversee the settlement process and this requires, in my view, it to be justified in terms of the purpose of the Act. The Court cannot rubber-stamp an agreed settlement because of the provisions of s 95. This means that more information than would normally be required in civil proceedings may be required to justify an agreed settlement because of the public interest factors involved in the proceeds of crime generally. I remind myself that the purpose of the Act in s 3(2), and particularly in the context of this case subss (a) and (b), justify the Court taking a cautious approach where it appears that a settlement could cut across the very purpose of the Act.
[20] In making these observations, I am not suggesting that the Commissioner in this case has not considered his responsibilities under the Act, rather, the purpose of articulating these matters is to encourage counsel to file appropriate documentation setting out the basis for any settlement, especially where the settlement reached appears, at least on the face of it, to involve a significant financial benefit to a respondent who has had that same property restrained for some time without opposition.
The value of the proposed settlement
[21] I now refer to the schedule provided to me on 17 June 2024 that appeared to indicate that, of the property restrained, the respondent would receive property to a total value of $1.25 million and the assets forfeiture order proposed would cover property totalling $941,892.59, a compromise of some $83,000.
[22]Subsequently, counsel for the Commissioner has explained that:
(a) the schedule provided to the Court was only a tool that had been used to assist with the negotiations and was largely based on the parties’ own views of the value of the property; and
(b) there is a high degree of uncertainty associated with the estimates in value.
[23] I accept that the schedule is ultimately only a tool that has been used to assist with negotiations and I accept that, given the matters now explained to me in counsel for the Commissioner’s memorandum, the value of the two properties is difficult to assess.
[24] As to 25 Kellys Road, counsel for the Commissioner has explained that the value in the table reflects the value to the respondent, as assessed by him, which includes the value of his EQC proceeding as $600,000. The EQC claim is not restrained and has no value to the Commissioner. Accordingly, the value of 25 Kellys Road to the Commissioner on this basis would only be the estimated value less the EQC payment.
[25] Further, in relation to 25 Kellys Road, counsel referred to a desktop valuation undertaken in August 2023 (a copy of which was attached to counsels memorandum) valuing 25 Kellys Road at $490,000. But I agree that, if the property was sold, the EQC litigation would likely need to be disclosed, so it is arguable that this value would be unlikely to be realised. The Commissioner has taken this into account in assessing the value of 25 Kellys Road, which is reasonable.
[26] I also accept that fixing a value on 27 Kellys Road is problematic. A desktop valuation undertaken in August 2023 and an inspection of the property in 2020 have led to an estimated value of $500,000 for this property. However, since the inspection in 2020, the respondent has settled his insurance litigation in respect of the property for $500,000. I was advised that this money was not used to repair the property (as outlined above) so there is merit in the Commissioner’s view that this will likely have an impact on the value that would be realised from any sale of the property.
[27] But further, in relation to 27 Kellys Road, the $500,000 the respondent settled for in relation to his insurance proceeding was initially restrained by the Commissioner but, in January 2021, by agreement, $326,705.88 of these funds were used to repay the mortgages over both 25 and 27 Kellys Road properties, injecting additional equity into them. Counsel advised that the remainder of these funds remained restrained until they were released back to the respondent in December 2023.
[28] Counsel for the Commissioner outlined that the Commissioner now recognises that the insurance settlement money was not tainted and, had it not been used to pay off the mortgages, would have been returned to the respondent. It is therefore also appropriate to recognise that this money should be extracted from the pool of restrained property.
[29] If these adjustments are taken into account, then the schedule presented to me showing equity in 25 and 27 Kellys Road amounting to $1,250,000 would be reduced to $663,294.12.7
[30] To cross-check this, counsel for the Commissioner provided another alternative method of valuation which adopts the Council land values for both 25 and 27 Kellys Road sections. This approach would assign a value of $430,000 to each of the properties meaning that, with the adjustment of $326,705.88 for the return of the insurance money, the adjusted total would be $533,294.12.
[31] I am grateful to counsel for the Commissioner for providing this further information and analysis. Not only have the issues to do with the value of the proposed settlement been identified, but the information provided helps to provide a framework against which to assess the credit that it might be appropriate to allow to reflect the litigation risk involved in these proceedings.
[32] As to litigation risk, Mr White for the Commissioner outlined that the primary area of dispute at trial would likely be when the respondent began benefiting from significant criminal activity. The Commissioner contends that the benefit commenced in February 2014 with the first unexplained cash deposit, but the respondent contends that there was no unlawful benefit until June 2018.
[33] But as well, the Commissioner recognises that the respondent has made an application for relief from forfeiture on the basis that the forfeiture of all of the specified property would cause him undue hardship. I accept that it is appropriate for
7 The adjustment recognises the $326,705.88 referred to above, which the Commissioner now accepts are untainted funds.
the Commissioner to consider this aspect of the respondent’s case when considering litigation risk.
[34] Having reviewed these matters, I am satisfied that the proposed settlement strikes an appropriate balance and that, as a result, the time, cost and resource saved by the settlement are not unsubstantial.
[35] Having had the basis of the settlement more fully outlined to me, I am satisfied that it is appropriate to approve the settlement reached between the parties. I am satisfied that the settlement meets the purposes of the Act and the overall interests of justice.
Result
[36]I make the following assets forfeiture order by consent as follows:
A.the property to which this order applies:
(a)vests in the Crown absolutely; and
(b)is to be in the Official Assignee’s custody and control.
B. this order applies to the following property:
Real estate
(a)31 Bronwyn Street, Mairehau, Christchurch, registered owner is the respondent, legally described as Lot 65 Deposited Plan 16952;
Vehicles
(b)a 2001 red Ferrari 360 Spider, registration LEW487, registered to the respondent;
(c)a 2015 black Lamborghini Huracan, registration MJL859, registered to the respondent;
(d)a 2013 yellow Lamborghini, registration LP5604, registered to the respondent;
Bank funds
(e)all funds currently in the custody and control of the Official Assignee (including interest) relating to:
(i)cash seized on 14 October 2020 at 27 Kellys Road, namely
$35,970.00;
(ii)$5,443.07 from ANZ bank account […]; and
(iii)a hearing fee refund from the Registry of the High Court totalling $20,800.00;
(f)$8,962.79 currently held in Dempsey Ferguson Law solicitor’s trust account.
[37] No party suggested that final suppression orders were either necessary or appropriate. In the absence of any application to that effect, this judgment will be released for publication on 15 July 2024.
Harland J
Solicitors:
Raymond Donnelly & Co., Christchurch Dempsey Ferguson Law, Auckland.
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