Commissioner of Police v Do
[2024] NZHC 3293
•7 November 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2301 [2024] NZHC 3293
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
CUONG VAN DO
First Respondent
THAO XUAN PHAM
Second Respondent
Hearing: On the papers Counsel:
E Rangamuwa and C F Hodgson for Applicants K E Hogan and T Hu for Respondents
Judgment:
7 November 2024
JUDGMENT OF O’GORMAN J
[Application for civil forfeiture orders]
This judgment was delivered by me on 7 November 2024 at 11 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
Meredith Connell, Auckland Katie Hogan, Barrister, Auckland
COMMISSIONER OF POLICE v DO [2024] NZHC 3293 [7 November 2024]
[1] This is an application for approval under s 95 of the Criminal Proceeds (Recovery) Act 2009 (the Act) of a settlement between:
(a)the Commissioner of Police (Commissioner);
(b)Cuong Van Do and Thao Xuan Pham as respondents; and
(c)Thin Thi Dinh as an interested party.
[2] The settlement provides for profit forfeiture orders to be made by consent in respect of assets over which restraining orders were made.
[3] The profit forfeiture orders relate to two properties (the Properties), of which Ms Pham is the registered owner:
(a)One is in Darnell Crescent, Clover Park, Auckland (Darnell Crescent).
(b)The other is in Chapel Road, Flat Bush, Auckland (Chapel Road).
[4] Under s 95, the High Court must approve the settlement if it is satisfied that it is consistent with the purposes of the Act and the overall interests of justice. The primary purpose of the Act is contained in s 3(1), to establish a regime for 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. Among other things, the Act seeks to “eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity”.1 In terms of the “overall interests of justice”, there is a strong public interest in litigation of this nature being brought to a prompt conclusion, provided that the settlement reflects the likely costs and risks inherent in the determination of a contested application.2
1 Criminal Proceeds (Recovery) Act 2009, s 3(2)(a).
2 Commissioner of Police v Cotton [2017] NZHC 21 at [7]; and Commissioner of Police v Pitman
[2024] NZHC 594 at [4].
[5] In this case, for the reasons explained below, I am satisfied that the settlement is consistent with the purposes of the Act and the overall interests of justice. The more difficult question is about the mechanics of implementing the settlement.
Procedural background
[6] On 12 December 2022, the Commissioner obtained without notice restraining and other orders over the Properties.
[7] On 17 May 2024, the Commissioner filed an application for civil forfeiture orders seeking type 1 asset forfeiture orders under s 50 of the Act over the Properties. That application was initially opposed and a hearing was scheduled to commence on 29 October 2024. The opposed hearing did not ultimately proceed because the parties reached a settlement for which they now jointly seek approval.
Facts and allegations
[8] Mr Do and Ms Pham commenced a relationship on or around April 2018 and married on 2 July 2018. Ms Dinh is Ms Pham’s mother. Ms Dinh claims to have provided funds to Ms Pham for the deposit on the purchase of the Darnell Crescent property. She currently lives there.
[9] This proceeding arose from the Commissioner’s investigation into Mr Do and Ms Pham’s assets, following Mr Do’s convictions for cannabis offending in June 2021. Mr Do was convicted for two separate instances of cannabis offending:
(a)cultivating cannabis on or before 6 April 2018; and
(b)possession of 432 grams of cannabis for supply on 19 May 2019.
[10] The 6 April 2018 offending related to the police’s identification of a cannabis cultivation at an address in Lake Panorama Drive, Henderson. Mr Do was convicted for this offending following a jury trial. However, the Court of Appeal quashed this conviction.3
[11] The 19 May 2019 offending related to Mr Do’s possession of cannabis at his home address in Darnell Crescent (where he resided with Ms Pham at the time). Mr Do appealed this conviction, but the Court of Appeal dismissed his appeal.
[12]Mr Do and Ms Pham currently reside at the Chapel Road property.
[13] The Commissioner relies on Mr Do’s criminal offending (reflected in part by the related criminal proceedings and second conviction as noted above) as the underlying significant criminal activity. Ms Pham knew he used cannabis but denies any other knowledge of his offending.
[14] To establish the fact of significant criminal activity at the Properties, the Commissioner relies on (among other things) the large amount of cannabis found at the Darnell Crescent property in 2019, receipt of cash and funds from unexplained sources, discovery by police of a cannabis cultivation at another property owned at that time by Ms Pham (no charges were brought against Ms Pham for that discovery) and the wording of a tenancy agreement for the Darnell Crescent property. The Commissioner considers that the combination of that and other evidence establishes knowledge by Ms Pham of Mr Do’s significant criminal activity and receipt of funds from that offending, which was then used to service loans secured by mortgages over the Properties.
[15] The Commissioner presents a financial analysis indicating a significant increase in cash deposits after the commencement of the relationship between Mr Do and Ms Pham, and use of such funds to service both mortgages. The proposed settlement sum is based on the fact that, between 9 April 2018 and 12 December 2022, Ms Pham’s bank accounts disclose cash deposits of $490,857 and transfers from
3 Do v R [2024] NZCA 97. The Court of Appeal ordered a retrial. The respondent’s submissions explain that the Crown has decided not to retry Mr Do.
unexplained sources of $175,928. Such deposits ceased abruptly after the restraining orders were in place.
[16] Mr Do and Ms Pham, supported by Ms Dinh, take the position that the Commissioner cannot show that Mr Do was involved in significant criminal activity that generated such receipts. Mr Do’s first conviction was overturned by the Court of Appeal, which observed that the evidence was circumstantial and the Crown case weak. Mr Do’s conviction for possession of cannabis for supply does not substantiate that he in fact supplied any cannabis, or derived cash from doing so. Nor can the Commissioner establish that Ms Pham was involved with any cannabis-related offending. They contend that the evidence relied on by the Commissioner is insufficient for the Court to conclude that the Properties are tainted.
[17] To the extent that there were significant increases in cash deposits from mid-2018 onwards, Ms Pham says this was from rental income, cash from operating a successful nail salon business, and proceeds from selling fireworks. The cessation of those types of cash income is unsurprising following the disruption to their lives caused by the criminal charges.
[18] In terms of the claims for relief, Ms Dinh asserts an interest in the Darnell Crescent property, having contributed her savings for a deposit and based on her expectation that she would be able to live in the property into her old age as her health deteriorated. Both Ms Pham and Ms Dinh say that forfeiting the Properties would leave their family with nothing and would mean Ms Pham could not continue operating her nail salon business, to the detriment of her employees.
[19] Mr Do, Ms Pham and Ms Dinh do not acknowledge that the Properties are tainted and believe they have good grounds for relief under ss 51, 56 and 61. They nevertheless agreed to the proposed settlement, given the litigation costs and risks that would have been involved in contesting the Commissioner’s application for civil forfeiture orders. This settlement provides certainty and allows the parties to put these matters behind them.
Legal principles
[20] There are three types of forfeiture orders available in respect of significant criminal activity, two of which arise directly under the Act:4
(a)assets forfeiture orders (type 1 or type 2);5
(b)profit forfeiture orders;6 and
(c)instrument forfeiture orders.7
[21] Unlike an instrument forfeiture order imposed as part of criminal sentencing, assets and profit forfeiture orders are civil in nature (a conviction is not a pre-condition).8
[22] The aim of the Act is to “make sure that crime does not pay”.9 This is reflected in the Act’s purpose:
3 Purpose
…
(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
…
4 Heather Mckenzie Proceeds of Crime Law in New Zealand (1st ed, LexisNexis, Wellington, 2015) at [2.2]; and Kiwi v Commissioner of Police [2023] NZCA 106, [2023] 2 NZLR 776 at [80].
5 Criminal Proceeds (Recovery) Act, s 50 (type 1) or s 50C (type 2), with the allied restraining orders under ss 24 and 24A.
6 Section 55, with the allied restraining order under s 25.
7 Sentencing Act 2002, s 142N in respect of criminal proceedings under ss 142A–142Q. However, see s 26 of the Criminal Proceeds (Recovery) Act for an allied restraining order, and ss 70–79 and other miscellaneous sections of that Act also apply to instrument forfeiture orders.
8 Proceeds of Crime Law in New Zealand, above n 4, at [1.1].
9 Commissioner of Police v Harrison [2021] NZCA 540, [2022] 2 NZLR 339 at [7], quoted in
McFarland v Commissioner of Police [2024] NZCA 16 at [9].
[23] Under s 50(1) (type 1 asset forfeiture), if the High Court is satisfied on the balance of probabilities that specific property is “tainted property”, the Court must make a type 1 asset forfeiture order in respect of that specific property.
[24]Section 5 defines “tainted property” as:
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] It is well-established that using money derived from significant criminal activity to make mortgage payments can “taint” the mortgaged property.10 The effect of the definition is that the whole of the property will be tainted, even if only part of a property has been acquired as a result of significant criminal activity, or indirectly derived from such activity.11
[26] Persons other than the respondent may apply for relief if they claim an interest in the property to be forfeited and they have not unlawfully benefited from the significant criminal activity.12 In addition, other relief (including to the respondent) can be granted based on the concept of “undue hardship”:13
(a)exclusion of respondent’s property from assets forfeiture order because of undue hardship;14
10 Commissioner of Police v Heron [2024] NZHC 2497 at [54]–[61]; Commissioner of Police v Wright [2024] NZHC 1531 at [17]; Commissioner of Police v Snowden [2020] NZHC 2036 at
[117]; Duncan v Commissioner of Police [2013] NZCA 477; (2013) 26 CRNZ 796 at [18]–[19]
and [32]–[33]; Doorman v Commissioner New Zealand Police [2013] NZCA 476, [2014] 2 NZLR
173 at [32]; and Commissioner of Police v Geddes [2013] NZHC 1199 at [24].
11 McFarland v Commissioner of Police, above n 9, at [13].
12 Criminal Proceeds (Recovery) Act, ss 61, 62 and 66.
13 Proceeds of Crime Law in New Zealand, above n 4, at[6.2.6].
14 Criminal Proceeds (Recovery) Act, s 51.
(b)exclusion of respondent’s property from profit forfeiture order because of undue hardship;15
(c)relief from civil forfeiture for non-respondent on grounds of undue hardship;16 and
(d)relief from an instrument forfeiture order on the basis of undue hardship.17
[27] For dealing with third party interests, those interests are excluded where possible,18 rather than the Crown paying sums of money in relation to relief:19
Generally speaking, the Act’s drafting reflects a preference that the Crown not pay sums of money in relation to relief and instead tends towards exclusion of a severable interest where possible.
[28] For example, an innocent mortgagee’s interest in property is protected under the Act,20 so a restraining or forfeiture order should be drafted or amended to exclude the mortgagee’s interest. In De Leon v Bank of New Zealand, the bank was entitled to exercise its power of sale as mortgagee “independent of any forfeiture issue”,21 and the Official Assignee ultimately received $70,682.86 after other sums were deducted.22
[29] Otherwise, if the non-respondent’s interest is not severable, the Court must direct the Crown to pay the applicant an amount equal to the value of their interest.23 For an assets forfeiture order, this occurs within the Official Assignee’s process set out in s 82 of the Act.
15 Section 56.
16 Section 67.
17 Section 77; and Sentencing Act, s 142M.
18 Criminal Proceeds (Recovery) Act, s 68.
19 Proceeds of Crime Law in New Zealand, above n 4, at [3.3].
20 Criminal Proceeds (Recovery) Act, ss 30 and 70(2).
21 De Leon v Bank of New Zealand [2012] NZHC 2984 at [5].
22 Doorman v Commissioner of New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173 at [10].
23 Criminal Proceeds (Recovery) Act, s 69.
[30] The scope to make a profit forfeiture order under s 55 arises if the High Court is satisfied, on the balance of probabilities, that the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity and the respondent has interests in property.
[31] Profit forfeiture orders and type 2 assets forfeiture orders both have express procedures for forfeiting a proportion of the property (effectively a charge on the property and its proceeds):
(a)For a profit forfeiture order, s 55(2) provides that the order must specify the value of the benefit determined under s 53, the maximum recoverable amount determined in accordance with s 54, and the property that must be disposed of in accordance with s 83(1). Under s 83(1), the forfeited property must be sold and the money applied under the specified payment cascade, with the Crown paid up to the maximum recoverable amount after the priority payments, and any balance paid to the former interest holder.
(b)For a type 2 assets forfeiture order, s 50D(2) provides that the interest that vests in the Crown is to be expressed as a proportion of the value of the subject property that remains after excluding the exempt proportion (if any) of that property. Under s 82(5), if other interests are not severable, the forfeited property must be sold and the money applied under the specified payment cascade, with the Crown paid up to the proportion referred to in s 50D(2) after the priority payments, and any balance paid to the former interest holder.
[32] In Commissioner of Police v Snowden,24 to the extent that assets forfeiture orders were not made in relation to all the property sought, the Commissioner sought a profit forfeiture order against Mr Snowden for $754,533.25 In relation to assets forfeiture sought for the Karaka property, the Court concluded it was tainted property because the mortgage repayments were funded, at least in part, from significant
24 Commissioner of Police v Snowden, above n 10.
25 At [124].
criminal activity. In terms of the orders ultimately made, in effect the extent of the taint was limited to the criminal proceeds used for mortgage repayments and that corresponding part of the capital gain.26 The Court granted relief from asset forfeiture of the entire property, but found there was no undue hardship to the beneficiaries of the trust that owned the Karaka property if it were sold and part of the proceeds forfeited to meet a profit forfeiture order.27 Accordingly, the Court ordered that the Karaka property be disposed of for the purpose of meeting a profit forfeiture order, with a maximum recoverable amount of $743,308.28
[33] In Commissioner of Police v Phan,29 the mechanics of the proposed settlement originally contemplated a type 1 assets forfeiture order in the sum of $672,000, which would be met by either:
(a)Mr Phan borrowing that sum from a “legitimate lender”, including if necessary by borrowing against the Forrest Hill property; or
(b)the Official Assignee selling the Forrest Hill Road property and meeting the asset forfeiture order from the net proceeds of sale, with any balance to be returned to Mr Phan.
[34] The Court determined that it did not have jurisdiction to make a type 1 assets forfeiture order over a sum of $672,000 that did not yet exist.30 The parties then proposed a $672,000 profit forfeiture order, but that the property to be disposed of should be described as either that amount (once borrowed by Mr Phan), or that amount once realised by the Official Assignee from the sale of the Forrest Hill property.31 The Court considered this second proposal suffered from the same deficiency.32 The third proposal was for the current restraining order to be varied to allow Mr Phan to raise the sum of $672,000 against the restrained property and pay it to the Official Assignee and, if that sum were not paid by a specified date, to require the
26 At [153].
27 At [161].
28 At [162]–[167].
29 Commissioner of Police v Phan [2024] NZHC 2952.
30 At [12]–[13].
31 At [14].
32 At [15].
Official Assignee to sell the property and hold $672,000 from the proceeds. Once the sum was in existence from one or other of these two methods, the parties suggested they could then seek formal approval of forfeiture over those proceeds.33 Johnstone J did not consider that such deferral was necessary.34 He approved the settlement and made orders to enable the restrained property to be sold if the proposed settlement sum was not paid by the due date.35
Analysis
[35] I agree with the parties’ submissions that the proposed orders are consistent with the approach taken in Snowden and Phan, reflecting that the profit forfeiture order is akin to a charge on the Properties.
[36] Section 95(1) refers to the parties entering into settlement of any sum of property “to be forfeited”, which I accept can apply to a sum of money that will, in the future, be forfeited to the Crown. Making the relevant forfeiture orders at the same time as approving settlement enables an efficient use of judicial resources and provides desirable certainty to the parties about the outcome. The mechanics of the approved settlement provide for forfeiture to be taken against one or both Properties (through their proceeds of sale), but to allow time for refinancing so that only one of the Properties needs to be sold.
[37]I am satisfied that the proposed settlement meets the requirements set out in
[4] above. This agreed resolution has saved the cost, delay and uncertainty involved in determining a disputed application for civil forfeiture orders. The sum to be forfeited logically correlates to evidence supporting the allegation that this amount came from significant criminal activity tainting the Properties because it was applied to mortgage obligations. I accept that this settlement is a rational choice for Mr Do, Ms Pham and Ms Dinh, given the costs and risks inherent in determination of a contested application, including their claims for relief. From the Commissioner’s perspective, this settlement serves the purpose of demonstrating the steps that will be taken to ensure that people do not profit from undertaking or being associated with
33 At [16].
34 At [17].
35 At [23].
significant criminal activity. I am satisfied that the settlement is consistent with the purposes of the Act and the overall interests of justice.
Orders
[38]For the above reasons, I approve the settlement pursuant to s 95(3) of the Act.
[39]By consent, I make the following orders to give effect to the settlement:
Further orders, varying the restraining and further orders, under ss 33–35 of the Act:
(a)The restraining orders over Darnell Crescent, Clover Park, Auckland (Darnell Crescent) and Chapel Road, Flat Bush, Auckland (Chapel Road) are varied to allow Mr Do and Ms Pham to refinance existing loans secured over each property for the exclusive purposes of:
(i)removing the cross-securitisation of those loans so that each loan is secured by one property only; and
(ii)enabling Mr Do and Ms Pham to ensure there is sufficient equity in Darnell Crescent to meet a settlement sum, as set out below.
(b)The combined total outstanding principal balance of the loans secured against Darnell Crescent and Chapel Road, as at the date of this order, must not be increased by any person, including Ms Pham. The effect of the refinancing must be that there is sufficient equity in Darnell Crescent to meet the settlement sum, to the satisfaction of the Official Assignee.
(c)Mr Do and Ms Pham have a period of eight weeks from the date on which these orders are made, to refinance the loans for the exclusive purposes set out above.
(d)Mr Do and Ms Pham must advise the Official Assignee of any refinancing of the loans, within the eight-week period noted at [39](c) above, and within 24 hours of the refinancing being approved.
(e)If Mr Do and Ms Pham have refinanced loans over Darnell Crescent and Chapel Road in accordance with the terms set out at [39](a)–(d) above, the Official Assignee shall sell the property at Darnell Crescent at its fair market value, within a period of six months from being advised of the refinancing by Mr Do and Ms Pham, and deal with the proceeds of sale as follows:
(i)first, deduct the Official Assignee’s actual costs in effecting the sale;
(ii)second, repay the lending secured specifically against the title of Darnell Crescent; and
(iii)third, hold the remaining proceeds of sale in accordance with the restraining orders in this proceeding (Darnell Crescent Net Sale Proceeds).
(f)For the purposes of effecting a sale of Darnell Crescent under these orders, the Official Assignee (including a person delegated his functions and powers under the Act) has the power to execute any deed or instrument in the name of the registered proprietor of the property, and to do anything necessary to give validity and operation to the deed or instrument.
Profit forfeiture order under s 55 of the Act made against Mr Do and Ms Pham, jointly and severally, by consent:
(g)The value of the benefit determined in accordance with s 53 of the Act is $666,785.
(h)The maximum recoverable amount is $666,785.
(i)The following property is to be disposed of — a settlement sum of
$666,785 (Settlement Sum) comprising of the Darnell Crescent Net Sale Proceeds.
(j)If the Settlement Sum is raised by 5 pm on the date six months after being advised of the refinancing by Mr Do and Ms Pham (Due Date), the restraining order over Chapel Road is rescinded, and the Official Assignee must remove the restraining order from its record of title.
(k)If the Settlement Sum is raised by the Due Date, any Darnell Crescent Net Sale Proceeds that may exceed the Settlement Sum must be returned to a bank account nominated by Mr Do and Ms Pham.
(l)In the event:
(i)Mr Do and Ms Pham do not obtain refinancing or advise the Official Assignee of refinancing of loans secured against Darnell Crescent and Chapel Road, in accordance with [39](a)−(d) above; or
(ii)(subject to [39](m) below) the Settlement Sum is not raised by the Due Date, in accordance with [39](j) above,
the Official Assignee shall sell both Darnell Crescent and Chapel Road at their fair market value, and deal with the proceeds of sale as follows:
(iii)first, deduct the Official Assignee’s actual costs in effecting the sales;
(iv)second, repay any borrowings secured against the Properties;
(v)third, dispose of an amount equal to the Settlement Sum in accordance with s 83(1) of the Act; and
(vi)finally, return the balance to a bank account nominated by Mr Do and Ms Pham.
(m)In the event the sale of Darnell Crescent in accordance with [39](e) above:
(i)is frustrated by an event not attributable to Mr Do and Ms Pham; or
(ii)the Darnell Crescent Net Sale Proceeds are less than $666,785,
the Official Assignee will delay selling Chapel Road in accordance with [39](k) above for a period of three weeks, to allow the Commissioner and Mr Do and Ms Pham to discuss and potentially agree meeting the Settlement Sum from alternative sources to the satisfaction of the Commissioner. The Settlement Sum must still be met by the proceeds of sale of Darnell Crescent.
Further directions, necessary and convenient for giving effect to the civil forfeiture order under s 59 of the Act:
(n)To provide that, for the purposes of effecting a sale of Darnell Crescent or Chapel Road, the Official Assignee, including any person delegated his functions and powers under the Act, shall have the power to execute any deed or instrument in the name of the registered proprietor(s), and to do anything necessary to give validity and operation to the deed or instrument.
Costs
(o)Costs as between the Commissioner, Mr Do, Pham and Ms Dinh lie where they fall.
[40] As requested by the parties, I also note the following agreed terms of the settlement:
(a)Mr Do, Ms Pham and Ms Dinh, agree to abandon all claims they may have, under the Criminal Proceeds (Recovery) Act 2009, or otherwise, to any of the property forfeited under this settlement.
(b)The Commissioner will not pursue the application for assets forfeiture orders against Darnell Crescent and Chapel Road, nor will he apply for a profit forfeiture order against Mr Do and Ms Pham, for a greater value than stated above, on the basis of the significant criminal activity evidenced in the affidavits filed in this proceeding to date.
(c)It is not the parties’ intention that Mr Do and Ms Pham are enabled to retain both Darnell Crescent and Chapel Road. Darnell Crescent is to be sold to meet the Settlement Sum.
(d)This settlement is in full and final settlement of the question of civil forfeiture of the property restrained in this proceeding (including any claim for relief), as between the Commissioner, Mr Do, Ms Pham, and Ms Dinh, and the Commissioner will close his file without taking any further action, on the basis of the significant criminal activity evidenced in the affidavits filed in this proceeding to date.
O’Gorman J
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