Commissioner of Police v Investments Ltd

[2017] NZHC 284

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002877 [2017] NZHC 284

UNDER

the Criminal Proceeds (Recovery) Act

2009

BETWEEN

THE COMMISSIONER OF POLICE Applicant

AND

INVESTMENTS LIMITED First Respondent

JKK HOLDINGS LIMITED Second Respondent

Respondents continued over

Hearing:	[On the Papers]
Counsel:	M R Harborow and T R Bellingham for the Applicant S N B Wimsett for the First to Third and Fifth to Ninth Respondents V Naidu for the Fourth Respondent D J Ryken for the Tenth Respondent
Judgment:	28 February 2017

JUDGMENT OF EDWARDS J

This judgment was delivered by Justice Edwards on 28 February 2017 at 4.30 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel:     S N B Wimsett, Auckland

Solicitors:    Meredith Connell, Auckland

Newton Law, Auckland

Ryken and Associates, Auckland

COMMISSIONER OF POLICE v INVESTMENTS LTD [2017] NZHC 284 [28 February 2017]

JKK TRUSTEES LIMITED Third Respondent

BLUEMOON GROUP LIMITED Fourth Respondent

AKL SUNRISE COMPANY LIMITED Fifth Respondent

DC EMPIRES LIMITED Sixth Respondent

CHK INVESTMENTS LIMITED Seventh Respondent

SRKK GROUP OF TRUSTEES LIMITED Eighth Respondent

SUPINDER SINGH Ninth Respondent

JOTI JAIN

Tenth Respondent

[1]      The parties to this proceeding have reached a settlement in relation to the civil forfeiture of assets.  By joint memorandum of counsel dated 9 February 2017 (joint  memorandum),  they  seek  approval  of  that  settlement  under  s  95  of  the Criminal Proceeds (Recovery) Act 2009 (Act).

Factual background

[2]      In 2012, Inland Revenue, Immigration New Zealand and the Department of Labour commenced investigations into companies and individuals involved with the Masala chain of restaurants.

[3]      Those investigations identified widespread and systemic tax evasion and immigration related offending by those involved with the Masala group.

[4]      By judgment dated 3 December 2015, I granted the Commissioner of Police’s (Commissioner) without notice application for restraining orders.  Those orders restrained 34 residential properties in Auckland, Waikato and Bay of Plenty.   The first to eight respondent companies (property holding companies) owned 33 of the

34 properties.  The other property was registered in the name of the wife of one of three key individuals with controlling positions in the Masala group.  The properties were used as premises for Masala restaurants or to accommodate staff of the Masala related companies.

[5]      The grounds of restraint (as summarised in the joint memorandum) were as follows:

(a)       the property holding companies have benefited from the significant criminal activity of the Masala related companies;

(b)      the property holding companies are in the effective control of the

Masala related companies, by virtue of common human actors and;

(c)       due to the channelling of funds from one group to the other, the

properties are tainted property …

[6]      An on notice application was filed on 9 December 2015.   It was initially opposed by the respondents, but a consent position was subsequently reached.  Since then, the parties have reached a settlement in relation to the forfeiture of assets.

Terms of settlement

[7]      The  substance  of  the  settlement  is  set  out  in  the  joint  memorandum  as follows:

(a)       The settlement would be a full and final settlement of all claims the Commissioner has brought to date under the proceedings against the respondents.

(b)       The  Commissioner  and  the  respondents  jointly  ask  the  Court  to make an assets forfeiture order for the sum of $8 million.  That sum will be met by the sale of restrained real property.  The order of sale of the restrained properties to meet the settlement sum (as reflected in Annexures A to C) has been agreed between the parties.

(c)       The respondents, and specified third parties, would agree not to take any further  action  arising from,  or in relation to, the  restraining orders.

(d)      Costs would lie where they fall in relation to all matters. (footnote omitted)

[8]      It has also been agreed as a condition of the proposed settlement that upon the assets forfeiture order being discharged by the Official Assignee, Inland Revenue will  refrain  from  taking  any  steps  to  recover  the  outstanding  tax,  any  related penalties, and use of money interest.   Neither this undertaking nor the settlement affects the ability of the Inland Revenue to bring criminal charges for the conduct underlying the proceeding against the respondents for example, in relation to tax evasion. As that particular condition does not concern the forfeiture of assets, it falls outside the terms of the settlement to be approved by the Court pursuant to s 95 of the Act.

[9]      The respondents have also executed separate deeds of agreement as between themselves which relate to certain of the properties.  Those agreements do not form part of the settlement for which approval is sought by the Court.

[10]     The Court’s jurisdiction to supervise and approve settlement arrangements is

provided for in s 95 of the Act. That section provides:

95High 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.

[11]     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.

[12]     The parties put forward a number of grounds as to why the settlement should be approved.  I agree with those grounds for the reasons set out below.

[13]     The settlement sum of $8 million represents almost all of the unlawful benefit said to have been derived from the tax evasion offending.   The settlement sum is expected to be met in full through the sale of restrained properties.  Forfeiture in that amount meets the deterrence purposes of the forfeiture regime as set out in s 3 of the Act.   It also reduces the ability of those associated with the criminal activity to continue with that criminal enterprise.

[14]     Whilst the Commissioner considers he has a good case, a contested hearing inherently carries risk.   In particular, the Commissioner acknowledges that the restrained properties have been subject to numerous changes in registered ownership since they were first acquired by individuals or companies alleged to have been involved with the Masala related companies.

[15]     Similarly, from the respondents’ point of view, any contested hearing of a civil forfeiture application carries risk and the fact that there is a statutory presumption in favour of the Commissioner’s nominated profit forfeiture figure exacerbates the litigation risk inherent in any court proceeding.

[16]     The settlement eliminates the litigation risk faced by both parties.  It provides finality on whether forfeiture will occur, and if so, which assets will be forfeited. Achieving certainty on those issues without the need for a trial is in the public interest in my view.

[17]     There will also be a very considerable saving of time, resource and cost if the settlement is approved.  That includes a saving in Court time and resources due to a substantive fixture not being necessary to determine the application.  Those savings in time and cost are in the public interest, and are consonant with the overall interests of justice.

[18]     Furthermore,  approval  of this  settlement  will  encourage others to  pursue settlements  under  the Act.    The  joint  memorandum  records  that  the  settlement discussions have been complicated by the number of properties involved, the cross- security lending arrangement in place in respect of a majority of them, and the existence of a number of third parties with potential interests in the restrained properties.   In my view, settlements in cases of this size and complexity should generally be encouraged by the Court.   The approval of the terms of settlement furthers that purpose.

[19]     Overall,  I  consider  the  settlement  proposal  represents  a  sensible  and pragmatic outcome which is consistent with the purposes of the Act and the interests of justice.  It should be approved accordingly.

Result

[20]     By consent, I make the following orders:

(a)      The terms of settlement set out in the signed settlement agreement annexed to the joint memorandum are approved pursuant to s 95 of the Criminal Proceeds (Recovery) Act 2009;

(b)      Orders in accordance with paragraph 6.1 of the joint memorandum;

(c)      Leave is reserved to apply for any further orders that might become necessary so as to give full effect to the orders of the Court in the

settlement reached between the parties.

Edwards J