Commissioner of Police v Debreceny
[2016] NZHC 3152
•20 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000920 [2016] NZHC 3152
BETWEEN COMMISSIONER OF POLICE
Applicant
AND
MICHAEL EDWIN DEBRECENY Respondent
AND
ALAN DEBRECENY AND TRUSTEES AIMS BROOKLYN LTD AS TRUSTEES FOR THE M E DEBRECENY FAMILY TRUST
Interested Party
Hearing: 30 August 2016 Appearances:
Hannah Clark for the Applicant
No appearance for the Respondent
John Dean for the Interested PartyJudgment:
20 December 2016
JUDGMENT OF MOORE J
This judgment was delivered by me on 20 December 2016 at 10:30 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
COMMISSIONER OF POLICE v DEBRECENY & ANOR [2016] NZHC 3152 [20 December 2016]
Contents
Paragraph
Number
Introduction ..............................................................................................................[1] Background...............................................................................................................[4] Applications ............................................................................................................[13]
Application to discharge the restraining orders/application for stay or set aside the conditional sale order ......................................................................................[17]
(a) Are there reasonable grounds to believe the property is “tainted” (s 24)?
The Trust’s submissions .............................................................................[20] Legal principles (s 24: tainted) ................................................................[23] Analysis (s 24: tainted) ..............................................................................[29]
(b) Are there reasonable grounds to believe the property was Mr Debreceny’s
and he had benefited from significant criminal activity?
Trust’s submissions ....................................................................................[36] Legal principles (s 25)...............................................................................[39] Analysis .....................................................................................................[42]
Immediate sale orders
Trust’s submissions ...............................................................................................[48] Legal principles....................................................................................................[52] Analysis ................................................................................................................[56] Application for change of venue ...........................................................................[61] Result .......................................................................................................................[71] Costs ........................................................................................................................[75] Timetabling orders .................................................................................................[76]
Introduction
[1] In May last year this Court made orders restraining a Wellington residential property under the Criminal Proceeds (Recovery) Act 2009 (“the Act”) pending the hearing of an application for associated civil forfeiture orders. The Court also authorised the Official Assignee to sell the property in the event the mortgage fell into arrears of more than two months.
[2] The interested party is the family trust which owns the property. It has applied to discharge the restraining order and set aside the conditional sale order. It does so on the basis of recently filed evidence which was not before the Judge who made the orders. The interested party also applies to transfer the substantive civil forfeiture proceedings to the Wellington High Court.
[3] The applicant, the Commissioner of Police (“the Commissioner”), applies for an immediate sale order to authorise the Official Assignee to sell the property in order to preserve its value.
Background
[4] On 1 July 2016, the respondent, Michael Debreceny, was convicted following a trial by jury at the Wellington High Court on one charge of importing the class A controlled drug methamphetamine. The sentencing Judge determined the amount imported was not less than one kilogram. He was sentenced to nine and half years’ imprisonment. Mr Debreceny unsuccessfully appealed to the Court of Appeal against his conviction and sentence.
[5] The conviction arose out of a Police operation codenamed “Rubber” which
revealed that on three occasions between July 2013 and 14 February 2014
Mr Debreceny arranged for packages containing methamphetamine to be delivered to his address at 4 Pearce Street, Vogeltown, Wellington. Two of those packages were delivered by courier to 4 Pearce Street and Mr Debreceny signed for them. The third was collected from the Courier Post depot by a criminal associate of Mr Debreceny’s.
[6] Mr Debreceny was also the subject of another Police investigation, “Operation Casino”. In July 2014, in the Auckland Sky City Casino carpark, Mr Debreceny and an associate were found in possession of 22 grams of methamphetamine, various pre-cursor substances and cash to the value of over
$115,000. It appears both men were originally charged with conspiracy to supply methamphetamine. However, the Crown abandoned the charge in respect of Mr Debreceny.
[7] In April 2015 the Crown applied for restraining and civil forfeiture orders in respect of 4 Pearce Street (“the property”), a black Lexus car registered to Mr Debreceny and the cash seized at Sky City.
[8] On 27 May 2015 Thomas J made some of the orders sought. She observed that the property was held in the name of Mr Debreceny and his father, Alan Debreceny as trustees of the M E Debreceny Family Trust (“the Trust”). At that time Mr Debreceny senior had not been served.1 Her Honour made a restraining order under ss 24 and/or 25 of the Act and, in particular, directed that the property was not to be disposed of or dealt with other than as provided for in the order and
was to be under the Official Assignee’s custody and control. The property was the subject of a mortgage in favour of the Napier Building Society (“NBS”). Her Honour directed that in the event the mortgage fell into more than two months’ arrears the Official Assignee was empowered to sell it at fair market value and hold the proceeds of that sale as restrained funds pending determination of the substantive forfeiture application.
[9] The registered proprietors of the property are Mr Debreceny and his father as trustees of the Trust.
[10] NBS’ $120,000 mortgage has been in arrears for some time. It is interest only. As of 30 June 2016 the balance owing to NBS was over $135,000.
[11] NBS considers that the entire mortgage is, in fact, in arrears because it expired in April 2014 and the bank had been unable to contact either Mr Debreceny
1 Mr Debreceny senior resides in Queensland, Australia.
or his father. As such it is entitled to proceed to a forced sale to recover its debt. The service history of the mortgage reveals that some sporadic, irregular payments, mostly in cash, were made between April 2015 and April 2016 but no payments were sufficient to cover the interest charges on the loan. No principal has been repaid. Mr Debreceny senior has attempted unsuccessfully to refinance the mortgage with NBS.
[12] A further complication in respect of the property is that in May 2016 the
Wellington City Council issued a cleansing order over it under s 41 of the Health Act
1956. This step was taken after testing revealed traces of methamphetamine in excess of the Ministry of Health’s guidelines for habitation. As a consequence no person is permitted to reside in the property until it has been decontaminated. The relevance of this complication is that in the event a sale order is made the Official Assignee has agreed to undertake the decontamination, the cost of which2 would be deducted from any sale proceeds. While the source of the contamination is unknown, for present purposes that is irrelevant.3
Applications
[13] There are four applications4 brought by the Trust as an interested party. These are:
(a) an immediate stay of Thomas J’s conditional sale order;
(b) an order setting aside Thomas J’s conditional sale order;
(c) a partial discharge of Thomas J’s restraining order as so far as it
relates to the property; and
(d)an application to transfer the substantive civil forfeiture proceedings to the Wellington High Court.
2 Expected to be in the order of several tens of thousands of dollars.
3 The Trust has filed evidence that Mr Debreceny’s auto business generated volatile vapours. It is suggested this might account for the contamination although how this could explain the presence of methamphetamine traces is unexplained.
4 The Trust’s applications (a) to (c) were filed on 24 June 2016. The Trust’s application to transfer
the proceedings was filed on 4 June 2016.
[14] The Commissioner applies for immediate sale orders in relation to the property.5
[15] Mr Debreceny has indicated he does not wish to participate in the present applications. He was neither present nor represented by counsel at the hearing.
[16] For the purposes of this judgment it is convenient to consolidate the interested party’s applications by considering (a), (b) and (c) together. The issues in respect of these three applications are inextricably connected and it is logical to address these applications altogether. I shall then deal with the Commissioner’s application for an immediate sale order and the interested party’s application for change of venue separately.
Application to discharge the restraining orders/application for stay or set aside the conditional sale order
[17] Mr Dean, for the interested party, applies for the property to be released from the restraint. The application is made solely in relation to the property. No application is made in respect of the Lexus car or the cash. In opposition the Commissioner’s position is that the property should not be released from the restraint until the determination of the substantive hearing (a date for which is yet to be fixed) and, in any event, the property should be sold.
[18] The Commissioner’s application before Thomas J sought restraining orders relying on both ss 24 and 25 of the Act. It follows that Thomas J’s restraining orders arose from her being satisfied that:
(a) there were reasonable grounds to believe the property was tainted;6
and
5 The Commissioner’s application for sale orders was filed on 19 May 2016.
6 In reliance on s 24 of the Criminal Proceeds (Recovery) Act 2009.
(b)there were reasonable grounds to believe the property was the property of Mr Debreceny and he had benefited from significant criminal activity.7
[19] Mr Dean accepts that Mr Debreceny was involved in significant criminal activity as defined by s 6 of the Act. However, he submits that for the Commissioner to “sustain” the restraining order continuing he must prove that there are reasonable grounds to believe the property was/is “tainted” or, alternatively, that Mr Debreceny has effective control and has unlawfully benefited. As a preliminary point I do not accept there is any obligation on the Commissioner to sustain the restraining orders. The restraining orders are already in force as ordered by Thomas J. The issue is whether on the evidence now before the Court they should be set aside. I shall examine each of these grounds separately in the context of the interested party’s applications.
(a) Are there reasonable grounds to believe the property is “tainted” (s 24)? The Trust’s submissions
[20] Mr Dean advises that up to 30 June 2016 payments totalling $42,607.41 had been made by Mr Debreceny in servicing the mortgage. Of those payments, $35,925 was deposited in cash the source for which is contested.
[21] He submits that while the Commissioner claims the cash payments were derived from significant criminal activity, they can be explained by Mr Debreceny’s vehicle repair, panel beating and paint business which largely operated on cash. Any cash payments were made from this source and were thus legitimate. In support of this submission evidence has been filed from Mr Debreceny himself, his accountant and a number of customers for whom he undertook panel beating and automotive repair work. The cumulative effect of this evidence is that Mr Debreceny ran a cash business undertaking car repairs at very reasonable rates, buying and selling cars and undertaking other related and miscellaneous tasks for which he was routinely paid in
cash.
7 In reliance of s 25 of the Criminal Proceeds (Recovery) Act 2009.
[22] Mr Dean thus submits that any cash payments made to NBS by Mr Debreceny should not be viewed as sinister. Alternatively, he submits that even if the Commissioner is correct and the cash sums were derived from significant criminal activity, the maximum amount capable of being attributed to that source could only be the cash component which is equivalent to just six per cent of the current market value of the property. This reasoning led Mr Dean to submit that if it is found the property was or is tainted, any returns on its sale will be grossly disproportionate to the value of the criminal activity.
Legal principles (s 24: tainted)
[23] Given the restraining orders are already in force the proper question for the Court is whether, by reference to the evidence filed by Mr Debreceny in support of his applications, the release of the property from restraint is justified. This would require the Court to be satisfied that there are no longer reasonable grounds to believe the property is tainted or that the property belongs to Mr Debreceny who has benefited from significant criminal activity.
[24] Section 24 of the Act provides that the Court may make a restraining order if it is satisfied it has reasonable grounds to believe the property is “tainted property”. That phrase is defined in s 5 of the Act. Section 5 provides:
“5 Interpretation
(1) In this Act, unless the context otherwise requires,—
tainted property—
(a) means 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”
[25] “Significant criminal activity” is defined in s 6(1) of the Act as meaning an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending. Section 6(1) provides:
“(1) In this Act, unless the context otherwise requires, significant criminal activity means an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending—
(a) that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or
(b) from which property, proceeds, or benefits of a value of
$30,000 or more have, directly or indirectly, been acquired or derived.”
[26] It follows it is not a pre-requisite to the making of restraint orders that a person be charged with or convicted of a criminal offence connected with the “significant criminal activity”. It is sufficient if they meet the s 6(1) criteria.
[27] For the purposes of the present applications Mr Dean accepts Mr Debreceny was engaged in significant criminal activity at the relevant time albeit, as I understood his concession, it was limited to his dealing in methamphetamine only. For reasons which will become apparent later in this judgment this distinction assumes some relevance.
[28] Thus Mr Dean’s submission is, in reality, directed towards his application to discharge Thomas J’s restraining order. He submits there is no or no sufficient evidence that the property is tainted. It was acquired in good faith and long before the significant criminal activity. He notes that the Trust was created on 5 May 1995. It purchased the property on 23 June 1995. The purchase was funded by the proceeds of Mr Debreceny’s deceased mother’s estate and was refinanced with NBS on 8 April 2011. He thus submits any criminal activity post-dated the creation of the Trust and the acquisition of the property.
Analysis (s 24: tainted)
[29] I am satisfied that from the time the restraining orders were made until the present there are reasonable grounds to believe the property was tainted within the meaning of s 24. My reasons follow.
[30] First, subsequent to Thomas J making the restraining orders, Mr Debreceny has been convicted of importing methamphetamine.
[31] Secondly, payments in cash are consistent with income generated by trading in methamphetamine. Mr Debreceny made the cash deposits in favour of NBS at various banks around Wellington. The inference is that this was done to avoid fewer, but larger, deposits being made which could draw unwelcome attention to the depositor. I do not overlook the evidence filed by the interested party supporting Mr Debreceny’s claim that the cash deposits were derived from his panel beating and automotive repair business. But that is not a matter which I am required to determine as a question of fact on these applications. The issue on the present applications is whether there continue to be reasonable grounds to believe the property was/is tainted. On the evidence before me I am satisfied that the grounds for reasonable belief have been made out by the drawing of proper inferences from the evidence discussed above.
[32] Mr Dean emphasised the legitimacy surrounding the setting up of the Trust, the purchase of the property and its refinancing. However, as I understood Ms Clark’s submission for the Commissioner, it has never been in dispute that the property was originally purchased and owned by the Trust. The Commissioner’s case for tainting is that Mr Debreceny maintained the mortgage over the property using funds derived from significant criminal activity and as such, the whole of the property was tainted.
[33] Furthermore, I do not accept Mr Dean’s submission on disproportion, that is any cash component applied towards servicing the mortgage is disproportionately modest when measured against the current market value of the property. The Commissioner’s case for asset taint is that Mr Debreceny maintained the mortgage through the use of funds sourced from his significant criminal activity. If that is
correct it follows that the whole of the property is tainted, a proposition which is now well founded in the case law.8
[34] However, even if I was not satisfied there were reasonable grounds to believe the property was tainted, the Commissioner has filed an application to amend the application for civil forfeiture orders to include tax evasion as an incident of significant criminal activity. This application was filed on 17 August 2016 following receipt by the Commissioner of the Trust’s affidavits tending to prove that the cash payments were sourced from Mr Debreceny’s legitimate business activities. The Commissioner now intends to rely on both the methamphetamine-related offending as well as tax evasion. Mr Debreceny has filed no returns of income nor has he declared or paid any income tax on the profits of his panel beating and automotive repair business. His last tax return was filed in 2008.
[35] I am thus satisfied there are reasonable grounds to believe, irrespective of the actual source of the cash payments, they were derived from significant criminal activity. This means that there remain reasonable grounds to believe that the property is “tainted” within the meaning of the Act.
(b) Are there reasonable grounds to believe the property was Mr Debreceny’s
and he had benefited from significant criminal activity?
Trust’s submissions
[36] This is the alternative question which must also be answered in the affirmative if the orders of Thomas J are to remain. Mr Dean claims there is no or no sufficient evidence that Mr Debreceny has an “interest” in or effective control of the property.
[37] He submits that the relevant time at which the Court must assess effective control is at the date of the forfeiture hearing. He submits that a review of the evidence reveals that Mr Debreceny does not have an interest in or effective control of the property. In support of that submission he observes that Mr Debreceny was
removed as a trustee and beneficiary of the Trust from 24 May 2016 following his
8 Dorrman & Anor v Commissioner of Police [2013] NZCA 476 at [32]-[36]; Commissioner of
Police v Duncan [2013] NZCA 447 at [18]-[27].
conviction and failed appeals. And even before then he was only able to act in concert with the other trustee or trustees. Furthermore, he was a mere tenant in the property whose authority to reside there was dependent on him paying the mortgage and outgoings in lieu of rent.
[38] Thus, if the effective date for assessing an interest or effective control is at the date of the hearing, Mr Dean submits Mr Debreceny is no longer occupying the address and following his removal as a trustee and beneficiary, he has no legal or equitable interest in the assets of the Trust including the property. He thus has no interest in or effective control of the property.
Legal principles (s 25)
[39] Section 25 of the Act provides that a Court may make a restraining order if it has reasonable grounds to believe that the respondent has unlawfully benefited from significant criminal activity. The phrase “unlawfully benefited from significant criminal activity” is defined in s 7 of the Act as meaning that a person has knowingly, directly or indirectly derived a benefit from significant criminal activity.
[40] However, if a Court makes an order under s 25 it must also be satisfied that the property is the respondent’s property or that the respondent has an interest in or effective control over the property. A respondent may be deemed to be in effective control of the property irrespective of whether they have an actual legal or equitable interest in the property.9
[41] The relevant time at which to assess whether the respondent has an interest or effective control is at the time of the offending. This principle was discussed in a similar context to the present in Crown Solicitor of Auckland v Crawford-Flett & Ors.10 There the respondent had been removed as a trustee and final beneficiary of a trust. Allan J explained the rationale for this principle:
“I accept Ms Johnston’s [the Crown’s] submission that the task of identifying relevant interests must be undertaken as at the time of the offending. To hold otherwise would be to enable the owners of property potentially the subject
9 Criminal Proceeds (Recovery) Act 2009, s 58(2).
10 Crown Solicitor of Auckland v Crawford-Flett & Ors [2012] NZHC 963 at [27].
of an instrument forfeiture order to deal with the property in order to avoid
the operation of the statutory regime.”
Analysis
[42] I am satisfied Mr Debreceny had an interest in or effective control of the property at the relevant time. I do not accept Mr Dean’s submission the relevant time to determine the existence of that interest or control is at the date of the hearing.
[43] I agree with Allan J’s analysis that the time at which to assess whether a respondent has an interest in or effective control of the property is at the time of the offending. It is the application of the proceeds of significant criminal offending which is central to the assessment. That is best measured either at the time of the offending or at a time when the proceeds of significant criminal activity are applied to the asset. As Allan J commented, to hold otherwise would provide a vehicle to circumvent the plain purposes of the Act. It would mean that those holding interests in assets, such as trust beneficiaries or shareholders, could avoid the operation of the Act simply by being removed or insulated from the connection they previously had with the asset. This would have the wholly unsatisfactory effect of removing those persons from the operation of the Act. That cannot be correct.
[44] The inquiry must focus on Mr Debreceny’s interest in or effective control of
the property at or about the time of the significant criminal activity.
[45] An examination of the evidence plainly reveals he was. At the time of the offending he and his father were the registered proprietors of the property as trustees of the Trust. They remain so today despite Mr Debreceny being removed as a trustee. This is discussed more fully later in this judgment. Furthermore, at the time of the offending Mr Debreceny and his father were trustees. Mr Debreceny was the primary beneficiary under the Trust. He has no children. The Trust holds the mortgage in favour of NBS. Mr Debreceny made cash deposits between April 2015 and April 2016 into the mortgage account.
[46] Five days after the Commissioner applied for sale orders over the property
Mr Debreceny was removed as a trustee and beneficiary. I agree with Ms Clark for
the Commissioner that on its face, this conduct appears to be a deliberate attempt to distance Mr Debreceny from the property. Despite this, I am satisfied it has no bearing on an assessment of his effective control at the relevant time for the reasons already given. Furthermore, he remains a registered proprietor of the property. Ms Clark has put the parties on notice that the act of his removal will now be an issue at the hearing of the substantive application because this conduct may well amount to dealing in restrained property, conduct which may result in voiding the removal under s 167 of the Act and/or rendering the parties liable to criminal sanction under s 150 of the Act.
[47] For these reasons I am satisfied there are reasonable grounds to believe the property was Mr Debreceny’s property and he has benefited from significant criminal activity. The conditional sale orders made by Thomas J should not be interfered with and the application to discharge the restraining orders over the property should be dismissed.
Immediate sale orders
Trust’s submissions
[48] The Commissioner brings this application out of what Ms Clark describes as an abundance of caution. She submits this Court, through the conditional sale orders made by Thomas J, has already given authority to the Official Assignee to sell the property in the event the mortgage falls into more than two months’ arrears. That has occurred and the Official Assignee is now at liberty to sell the property. In that event the Official Assignee may sell the property at fair market value and hold the proceeds of sale as restrained funds in an interest-bearing account.
[49] Notwithstanding Thomas J’s order, the Commissioner seeks an immediate sale order on several grounds. These are:
(a) the mortgage is in arrears and is accruing interest and other costs. No principal has been repaid;
(b) the rates are not being paid and continue to accrue;
(c) the property is the subject of a cleansing order and if the Commissioner is successful in obtaining sale orders the property will be decontaminated by the Official Assignee prior to sale; and
(d) the interested party is not prejudiced.
[50] In summary, the essence of the Commissioner’s submission is that the property is uninhabitable, is deteriorating, continues to accrue rental arrears and rates and, in order to preserve its value, an immediate order for its sale should be made before the final determination of the Commissioner’s substantive application.
[51] Mr Dean submits that while the arrears may be accruing, they are accruing very slowly.
Legal principles
[52] The mechanism for restrained property to be sold in order to preserve its value is to be found in s 35(e)(v) of the Act. This provides:
“35 Types of further order
…
(e) an order relating to the Official Assignee that—
…
(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property;
…”
[53] Such an order may be made at any time.11 It is not uncommon for sale orders to be made before the final disposition of the forfeiture application. Typically immediate sale orders are sought by the Commissioner in relation to assets under restraint which have a high depreciation rate, and where the ongoing storage costs,
insurance and maintenance costs are such that the property’s value is deteriorating
11 R v Sharp HC Rotorua CRI-2010-063-4641, 22 July 2011.
and to preserve its value it should be sold before final determination. A sale order allows the Official Assignee to optimise and preserve the value of the restrained property in accordance with her statutory duty under s 80(1) of the Act.
[54] In practice, the Official Assignee oversees the sale of the asset and holds any of the funds obtained from sale in an interest bearing account until the forfeiture proceedings are determined. The sale proceeds are restrained property even though they were not the subject of the initial restraining orders.12
[55] It is well settled that a central purpose of restraining orders is to preserve the value of the assets. As observed by Courtney J in Commissioner of Police v Chen & Ors:13
“[30] The underlying purpose of the restraining order is to preserve the subject property because it represents a monetary value to the parties concerned. The legislature can be taken to have appreciated that property may be subject to a restraining order for a considerable time and that circumstances may change over the life of the order so as to put the property at risk. Some risks may be of a kind that action, including disposition of the property itself, may be needed to preserve the value that the property represents. If there were no mechanism for responding as such risks the rationale for the scheme would be significantly undermined.
[31] Section 35(e)(iv) specifically recognises the need to preserve the value of the restrained property through the sale of it. There are many foreseeable circumstances that might justify such an order. These include a significant drop in the property market, the risk of a mortgagee sale and the reduction in value caused by lack of funds to maintain the property. For these reasons I consider that the ancillary orders can properly be made in terms sought.”
Analysis
[56] I am satisfied that it is proper to make the orders sought. My reasons follow.
[57] The property is untenanted and given it is subject to a cleansing order it is untenantable and will remain that way until it has been decontaminated. The costs of its maintenance will continue to accrue. As of 26 August 2016 the $120,000 interest only mortgage account had a balance of $136,763.69. This balance includes the
initial loan plus unpaid interest, penalties and professional fees.
12 Criminal Proceeds (Recovery) Act 2009, s 36(4).
13 Commissioner of Police v Chen & Ors [2016] NZHC 322.
[58] Ms Clark advises me that in the event a sale order is made the Official Assignee will meet the costs of decontaminating the property before sale. The property would then be presented to the market. The alternative is that NBS may exercise its own rights of sale under the mortgage. The first option, in my view, is to be preferred to NBS embarking on a mortgagee sale process which it is entitled to initiate at any time. Given the value of the property, NBS’ interest under the mortgage is relatively modest. Even under forced sale conditions the mortgagee will easily recover its interest in the property. However, unlike the Official Assignee, NBS has little incentive to maximise the sale price by undertaking remedial and decontamination work prior to sale. It is more likely to sell the property in its present condition. I agree with Ms Clark that the property would be a much more marketable and valuable proposition if it was decontaminated before sale.
[59] An immediate sale order would ensure the Official Assignee undertook the sale with the likelihood a significantly better sale price would be achieved. The resulting funds would be invested pending the final disposition of the Commissioner’s application.
[60] For these reasons I am satisfied that in order to preserve and maximise the value of the property an immediate sale order should be made.
Application for change of venue
[61] Mr Dean applies to transfer these proceedings to the Wellington Registry.
[62] In doing so he relies upon r 5.1 of the High Court Rules which provides:
“5.1 Identification of proper registry
(1) The proper registry of the court, for the purposes of rules
5.25 and 19.7, is,—
(a) when a sole defendant is resident or has a principal place of business in New Zealand, the registry of the court nearest to the residence or principal place of business of the defendant, but when there are 2 or more defendants, the proper registry is determined by reference to the first-named defendant who is resident or has a principal place of business in New Zealand;
(b) when no defendant is resident or has a principal place of business in New Zealand, the registry the plaintiff selects;
…
(2) Despite subclause (1)(a), if the place where the cause of action sued on, or some material part of it, arose is nearer to the place where the plaintiff or the plaintiff first-named in the statement of claim resides than to the place where the defendant resides, the proper registry of the court for the purposes of subclause (1) is, at the option of the plaintiff or the plaintiff first-named, as the case may be, the registry nearest to the residence of the plaintiff or the plaintiff first- named, as the case may be.
…
(4) If it appears to a Judge, on application made, that the statement of claim has been filed in the wrong registry of the court, he or she may direct that the statement of claim or all documents filed in the proceeding be transferred to the proper registry.
(5) If it appears to a Judge, on application made, that a different registry of the court would be more convenient to the parties, he or she may direct that the statement of claim or all documents be transferred to that registry and that registry becomes the proper registry.”
[63] What emerges from this rule is that the proper registry will be the one nearest the respondent’s residence (in the case of an individual) or principal place of business. “Nearest” means nearest by the most practicable route.14 Mr Dean submits that the proper registry is Wellington because:
(a) Mr Debreceny resides and did reside in the Wellington registry area at the time the Commissioner commenced these proceedings;
(b) the property is situated in Wellington;
(c) the Commissioner’s published address for service and principal place
of business is the Police National Headquarters in Wellington;
14 High Court Rules, r 1.3.
(d)seven out of the eight witnesses for the Trust who have sworn affidavits in this proceeding reside in Wellington. The Commissioner’s only witness resides in Auckland;
(e) two of the three counsel on the record practice in Wellington;
(f) the Commissioner has served notices requiring the cross-examination of each of the deponents who have sworn affidavits in support of the Trust. The majority of these witnesses are based in Wellington.
[64] In response, Ms Clark submits that r 5.1(2) displaces the normal rule that a matter must be filed at the registry closest to the defendant’s residence. It requires a consideration of where the underlying “cause of action sued on” or “some material part” if that arose.
[65] She advises that the Commissioner identified the Auckland High Court registry as the appropriate registry for filing because:
(a) a substantial portion of the significant criminal activity underlying the application occurred in the Auckland region (giving rise to “Operation Casino”);
(b)two of the three items of property at the centre of the application were located in Auckland as a result of the alleged offending that occurred in the Auckland region;
(c) the respondent’s criminal charge arising from Operation Casino was
laid in the Auckland District Court.
[66] In addition, Detective Trushell, the Commissioner’s principal deponent,
resides and works in Auckland as do counsel for the Commissioner.
[67] Ms Clark also points out that Mr Debreceny senior resides in Australia. Accordingly, he should have no preference for where in New Zealand this litigation
proceeds. Additionally, Mr Debreceny is incarcerated and any cross-examination of him is likely to be via AVL.
[68] In my view the competing interests are finely balanced. Inquiries with both the Auckland and Wellington registries indicate it is unlikely a three day fixture for the hearing of the substantive issues on the Commissioner’s forfeiture application will be before May to July 2017. Given the comparable ranges of fixture availability there is no appreciable advantage in conducting these proceedings in either Registry.
[69] However, a substantial majority of witnesses are Wellington domiciled or based. Wellington counsel are engaged for the interested party. The solicitors for the Commissioner have a Wellington office.
[70] For reasons of convenience and cost I am satisfied the proper Registry is
Wellington and I direct these proceedings be transferred to that Registry.
Result
[71] The Trust’s applications for an immediate sale stay of Thomas J’s sale order and the application for an order setting aside Thomas J’s sale order are dismissed.
[72] The Trust’s application for a partial discharge of Thomas J’s restraining order
is dismissed.
[73] The Commissioner’s application for an immediate sale order is granted in the
following terms:
(a) Order ancillary to restraint under s 34 of the Act, in particular
In accordance with the orders made by Thomas J on 27 May 2015 under ss 33 and 35(v) of the Act, the Official Assignee shall sell the property more particularly described below at a fair market value and hold the proceeds of that sale, after paying all associated costs, in accordance with the restraining orders made by Thomas J on 27 May
2015 (particulars of the property are 4 Pearce Street, Vogeltown,
Wellington (certificate of title 17832), registered proprietors, Michael
Edwin Debreceny and Alan Debreceny).
(b) Order ancillary to the restraint of the property under ss 33 and
35(e)(v) of the Act, in particular
For the purpose of giving effect to any sale of 4 Pearce Street, Guy Francis Sayers of Napier, Official Assignee, is appointed to execute any agreement, deed or instrument in the name of Michael Edwin Debreceny or Alan Debreceny, being the registered proprietors of
4 Pearce Street, for the purpose of effecting the sale of 4 Pearce Street and to do anything necessary to give validity and operation to such agreement, deed or instrument.
[74] The Trust’s application for a transfer of proceedings is granted.
Costs
[75] Costs on these applications are awarded in favour of the Commissioner on a
2B basis. If counsel are unable to agree, memoranda are to be filed and served no later than 25 working days after the date of this judgment.
Timetabling orders
[76] The substantive proceedings were set down for hearing on 30 August 2016. However, due to the late filing of the Trust’s evidence on the present applications that hearing was vacated and, instead, the present applications proceeded in lieu. Those matters having now been determined by this judgment steps should be taken to expedite the forfeiture hearing. Accordingly I direct the parties to file a joint memorandum setting out an agreed timetable for the filing of any further evidence, submissions and a paginated and indexed case book. The joint memorandum is to be filed no later than 25 working days after the date of this judgment.
[77] Leave is reserved to either party to seek such further or other orders or
directions as may be necessary to give effect to the decision of the Court.
Moore J
Solicitors:
Meredith Connell, Auckland
Mr Dean, Wellington
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