Commissioner of Police v Hughes
[2024] NZHC 22
•25 January 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-419-126
[2024] NZHC 22
UNDER Criminal Proceeds (Recovery) Act 2009 BETWEEN
THE COMMISSIONER OF POLICE
Applicant
AND
MARK FREDERICK HUGHES
First Respondent
AND
JAMARK PLUMBING LIMITED
Second Respondent
AND
JAMARK INVESTMENT COMPANY LIMITED
Third Respondent
Cont:/
Hearing: On the papers Counsel:
J N Hamilton for applicant N Stanley for respondents
P Cornegé for Leah Cranston
Judgment:
25 January 2024
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 25 January 2024 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Crown Solicitor, Hamilton
THE COMMISSIONER OF POLICE v Cont:/ [2024] NZHC 22 [25 January 2024]
AND Cont:/
LEAH JANE CRANSTON
Interested PartyAND
KIWIBANK LIMITED
Interested Party
AND
WESTPAC BANK CORPORATION AUSTRALIA
Interested Party
AND
CITIBANK (AUSTRALIA)
Interested Party
[1] In May 2021, Walker J made orders restraining residential properties at Tamahere and at Horsham Downs in New Zealand, and in Queensland, Australia, pending an application for forfeiture likely to be made by the Commissioner of Police in respect of the conduct of Mark Frederick Hughes. An application for the forfeiture of each of those properties was filed on 18 August 2021. This Court has since extended Walker J’s restraining orders from time to time, while the forfeiture application has been progressing towards a hearing.
[2] The Commissioner and Mr Hughes have now agreed between themselves to settle the proceeding. They jointly invite the Court to approve their settlement under s 95 of the Criminal Proceeds (Recovery) Act 2009 (Act), and to make consequential orders.
[3] Further, Walker J’s restraining orders will expire if not further extended by 31 January 2024. With Mr Hughes’ consent, the Commissioner seeks orders immediately varying the orders in a manner designed to facilitate the settlement, and then extending the varied restraining orders pending the settlement’s implementation.
Background
[4] The proceeding arises from a Police investigation into the financial affairs of Mr Hughes, and of Jamark Plumbing Limited and Jamark Investment Company Limited, companies of which Mr Hughes has since their incorporation been sole director and either majority or sole shareholder. From 2010 to 2019, Jamark Plumbing was subcontracted to undertake plumbing and gas-related repairs and maintenance on Kainga Ora properties in the Waikato/King Country and Bay of Plenty. The investigation indicated that when charging for Jamark Plumbing’s work, Mr Hughes added charges for work that was never completed, charged at a higher rate than agreed, and failed to install products that met Kainga Ora specifications. The amount of over-charging indicated by the investigation was $527,960.02.
[5] The investigation further indicated that Mr Hughes was intentionally avoiding both his own tax liabilities and those of Jamark Plumbing. He took cash for plumbing work but either failed to generate invoices or deleted them. Further, Mr Hughes would have Jamark Plumbing engage in untaxed bartering arrangements, exchanging its
plumbing services for work completed at his privately owned properties. This aspect of the investigation indicated large-scale tax evasion. The joint submissions of counsel refer to a value of $2,250,000, albeit they do not make it clear whether that value represents undeclared income or unpaid tax.
[6] Following the investigation, Mr Hughes made voluntary disclosures of additional income to the Commissioner of Inland Revenue, in October 2020 and in March 2021. In combination, Mr Hughes’ voluntary disclosures stated previously undeclared income of $1,402,545.00 and unpaid GST of $62,371.00. The Commissioner of Inland Revenue issued tax assessments requiring payment of core tax, interest and penalties, which have since been paid.
Settlement for approval
[7] The settlement, which will bind the parties in the event this Court approves it,1 is that:
(a)The parties consent to the Court making a profit forfeiture order requiring the payment of $2,200,000, to be paid in the following instalments:
(i) $500,000 by 29 February 2024;
(ii) $700,000 by 28 June 2024; and
(iii) $1,000,000 by 27 September 2024.
(b)To facilitate Mr Hughes making the above payments, he will be permitted to sell the property at Tamahere on terms approved by the Commissioner and the Official Assignee.
(c)In default of the above payments being made when required, the restrained property is to be sold in a nominated sequence, and to the
1 Criminal Proceeds (Recovery) Act, s 95(2).
extent necessary to satisfy the profit forfeiture order. The joint submission of counsel refers to sale by the Commissioner. Since s 83 of the Act provides for the Official Assignee to undertake the sale of property for the purpose of profit forfeiture, I assume their reference here to the Commissioner be mistaken, and intended as a reference to the Official Assignee.
Approval of settlements under the Act
[8]Section 95 of the Act provides as follows:
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.
[9] As can be seen, Parliament has expressly empowered the Commissioner to enter into settlements as to the forfeiture of property under the Act, and it has entrusted the High Court with a supervisory jurisdiction to approve settlements when satisfied they are consistent with the purposes of the Act and the overall interests of justice.2
[10] The primary purpose of the Act as set out in s 3 is to establish a regime for the forfeiture of property that has been derived directly or indirectly from significant criminal activity or which represents the value of a person’s unlawfully derived income.3 Further purposes include those of eliminating opportunities to profit from
2 Commissioner of Police v Know-All Group Ltd HC Auckland CIV-2010-404-403, 7 November 2011 at [11].
3 Criminal Proceeds (Recovery) Act, s 3(1).
undertaking or being associated with significant criminal activity, and deterring significant criminal activity.4
[11] The requirement expressed in s 95 that the Court have regard to the overall interests of justice reflects the strong public interest in litigation under the Act being brought to a prompt conclusion, reflecting the likely costs and risks inherent in the determination of a contested application,5 and the desirability of proceedings under the Act being made on economic and pragmatic grounds reflective of common sense compromise.6
Decision
[12] Counsel refer to the fact that Mr Hughes and Jamark Plumbing have paid tax, interest and penalties following his disclosures to the Commissioner of Inland Revenue. Counsel submit that a profit forfeiture order in the sum of $2,200,000.00 would reflect:
(a)the entire balance of funds directly derived by Mr Hughes and Jamark Plumbing from their significant criminal activity; and
(b)a proportion of the increase in value of the restrained residential properties to which those funds were applied.
[13] This submission implies the proposed profit forfeiture amount does not reflect the entire increase in value of the restrained properties, despite the funds derived from Mr Hughes and Jamark Pluming’s significant criminal activity having been applied to those properties. The settlement therefore does not absolutely “eliminate” the prospect of Mr Hughes retaining some profit from his offending.
[14] However, the Commissioner acknowledges that Mr Hughes’ former partner, Leah Cranston, has signalled an intention to apply for relief against forfeiture, relying upon her relationship property claim against the restrained properties. The merits of
4 Section 3(2).
5 Commissioner of Police v Cotton [2017] NZHC 21 at [7].
6 Commissioner of Police v Douglas [2015] NZHC 1293 at [6].
Ms Cranston’s potential relief application are unknown, but the Commissioner has not advised of any evidence indicating that Ms Cranston was aware of Mr Hughes’ offending. There must therefore be some prospect of an application by Ms Cranston undermining the Commissioner’s application for asset forfeiture of the restrained properties, or at least the prospect of recourse to those properties so as to meet a profit forfeiture order.
[15] In any event, the test for approval of settlement requires consistency with the Act’s purposes and the overall interests of justice, rather than strict elimination of all potential forms of profit by undertaking or being associated with significant criminal activity. I consider it relevant that asset forfeiture orders made in respect of the Queensland properties would inevitably involve significant cost and administrative difficulty, and as noted above that it is desirable that settlements acknowledge economic and pragmatic reasons favouring compromise.
[16] I accept the submission of counsel that the amount to be forfeited is significant and will tend to act as a deterrent to both Mr Hughes and others who may learn of the consequences of the application of the Act.
[17] Overall, I consider the settlement meets the threshold for approval. I will approve it.
Variation and extension of restraining orders
[18] On 19 December 2023, Ms Cranston’s counsel and counsel for the respondents consented to the Commissioner’s application to vary and extend the restraining orders, made expressly on the basis that settlement had been agreed in principle and the Court’s approval would be sought in the new year. Amongst other things, the variation sought was to permit sale of the Tamahere property and payment of the net proceeds to the Official Assignee to be held under ongoing restraint.
[19] Ms Cranston is not a party to the application for approval of settlement, made by joint memorandum of counsel for the Commissioner and for the respondents dated 22 December 2023, but the settlement does not necessarily require recourse to the net proceeds of the Tamahere sale. Instead, it contemplates payment of the profit
forfeiture amount by instalment, and the use of restrained properties starting with the Tamahere property only in the event those instalments are not met on the dates due.
[20] I consider it appropriate to vary and extend the restraining orders in accordance with the Commissioner’s application of 19 December 2023, subject to further variation in accordance with the settlement, which will not prejudice Ms Cranston’s position as she appears likely to understand it.
Result
[21]The parties’ settlement is approved.
[22]I make the following orders:
Profit forfeiture order under s 55(1) of the Act
(a)Mr Hughes is to pay a maximum recoverable amount of $2,200,000.00, that being the value of his benefit in the relevant period of criminal activity.
(b)Mr Hughes is to pay the profit forfeiture order by instalment as follows:
(i) $500,000.00 by 29 February 2024;
(ii) $700,000.00 by 28 June 2024; and
(iii) $1,000,000.00 by 27 September 2024.
(c)The property to be disposed of by the Official Assignee in accordance with s 83(1) of the Act, is specified as follows:
(i)If the above instalments are paid on or before the date specified, then none of the restrained property.
(ii)If the above instalments are not paid on or before the date specified, then (only to the extent the instalments remain unpaid) the following restrained property, in the order stated:
(1)All that parcel of land known as 21C Riverfields Lane, Tamahere, Hamilton as being all that land comprised and described in the record of title unique identifier 399028 South Auckland Land Registration District being 5,030 square metres more or less, Lot 10 Deposited Plan South Auckland 400098 and includes a one quarter share in 638 square metres more or less described as Lot 15 Deposited Plan South Auckland 385543, excluding the interest of the mortgagee, (Tamahere), or the net proceeds of sale of Tamahere;
(2)All that parcel of land known as 2 Tokerau Drive, Horsham Downs, Hamilton, as being all that land comprised and described in the record of title unique identifier 867376 South Auckland Land Registration District being a 644 square meter residential section more or less, Lot 41 Deposited Plan 530313, excluding the interest of the mortgagee, (Horsham Downs);
(3)All that parcel of land known as 18 Coomera Court, Helensvale, Queensland, Australia being all that land comprised and described in the record of title unique identifier 50532677 Gold Coast, Queensland, Australia being a residential property, Lot 123 Survey Plan 175359 Gold Coast, excluding the interest of the mortgagee, (Coomera Court);
(4)All that parcel of land known as 4 Midpark Court, Helensvale, Queensland, Australia being all that land comprised and described in the record of title unique identifier 50030305 Gold Coast, Queensland, Australia being a residential property, Lot 409 Registered Plan 869218 Gold Coast, excluding the interest of the mortgagee, (Midpark Court);
(5)All that parcel of land known as 15 Fairbairn Court, Oxenford, Gold Coast, Australia being all that land comprised and described in
the record of title unique identifier 50394524 Gold Coast, Queensland, Australia being a residential property, Lot 89 Survey Plan 145051 Gold Coast, excluding the interest of the mortgagee, (15 Fairbairn Court); and
(6)All that parcel of land known as 22 Fairbairn Court, Oxenford, Gold Coast, Australia being all that land comprised and described in the record of title unique identifier 50394521 Gold Coast Queensland, Australia being a residential property, Lot 86 Survey Plan 145051 Gold Coast, excluding the interest of the mortgagee, (22 Fairbairn Court).
Varying Walker J’s restraining orders
(d)A residential dwelling may be built upon the Horsham Downs property.
(e)The Tamahere property may be sold, subject to the following conditions:
(i)A sole agency agreement with Bayleys will be entered into on terms agreed after consultation with the Official Assignee.
(ii)Mr Hughes will proactively provide any information in relation to the sale of the property to the Official Assignee, including but not limited to instructing any real estate agent engaged to sell the property to provide the Official Assignee and the Commissioner of Police with copies of the marketing and the agent’s vendor reports (such reports to include “buyer price feedback” and highlight any issues relating to the property arising out of any purchaser’s due diligence).
(iii)No contract for sale will be entered into without the approval of the Commissioner of Police and the Official Assignee as to sale price and conditions. If sold by auction the Commissioner of Police and the Official Assignee must approve the reserve price.
In the event of any difference of opinion, the Official Assignee will have the final decision on the sale price, and the reserve price (if applicable).
(iv)Mr Hughes will include as a term of any sale and purchase agreement that the deposit and settlement sum is to be paid to the trust account of Gurnell Harrison Stanley Law.
(v)Prior to entering into any sale and purchase agreement, Mr Hughes will procure a director of Gurnell Harrison Stanley Law to undertake to the Official Assignee to apply the proceeds of sale strictly as follows:
(1)first, deduct the reasonable costs and disbursements associated with the sale (including but not limited to real estate agent costs, legal costs, land and water rates) as approved by the Official Assignee;
(2)second, repay any secured loan(s) to Kiwibank Limited as approved by the Official Assignee; and
(3)third, pay the Official Assignee the net proceeds of sale to hold as restrained funds.
(vi)Upon the Official Assignee receiving the net proceeds of sale in accordance with the above, the Official Assignee will withdraw registration of the restraining order on the title of the property to enable Gurnell Harrison Stanley Law to provide clear title on the settlement date.
(vii)In the event Mr Hughes instructs a conveyancing solicitor other than Gurnell Harrison Stanley Law, he will procure replacement undertakings from that conveyancing solicitor to the same extent and meaning as is required to discharge the obligations set out above.
(f)For the purposes of effecting the sale of any property, the Official Assignee has the power to execute any deed or instrument in Mr Hughes’ name, and to do anything necessary to give validity and operation to the deed and instrument.
Extending Walker J’s restraining orders as varied
(g)Justice Walker’s restraining orders dated 21 May 2021, as subsequently varied and extended by this Court, are further extended until satisfaction of the above profit forfeiture order, or 18 December 2024, whichever events occurs first.
[23] I reserve to the parties leave to apply further in the event variation of the extended restraining orders is required.
[24]Costs are to lie where they fall.
Johnstone J
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