Commissioner of Police v Keen aka Chen

[2020] NZHC 2369

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV2013-404-001779

[2020] NZHC 2369

IN THE MATTER OF

an application pursuant to the Mutual Assistance in Criminal Matters Act 1992 and the Criminal Proceeds (Recovery Act) 2009

BETWEEN

THE COMMISSIONER OF POLICE

Applicant

AND

CHEN KEEN (AKA JACK CHEN)

First Respondent

AND

MAY HAO (AKA MAY WANG)

Second Respondent

AND

YE FANG

Third Respondent

Hearing:

Further Submissions:

20 August 2020

27 August and 3 September 2020

Appearances:

B Chamley for the Applicant

J D Turner for the First and Third Respondents No appearance for the Second Respondent

K C Grant for Natural Dairy (NZ) Ltd (Interested Party)

Judgment:

11 September 2020

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 11 September 2020 at 11.30am Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/counsel:

Crown Law, Wellington

McVeagh Fleming Lawyers, Albany Chapman Tripp, Auckland

THE COMMISSIONER OF POLICE v KEEN (AKA CHEN) [2020] NZHC 2369 [11 September 2020]

Introduction

[1]    On 24 July 2020 the applicant (the Commissioner) applied for a one-year extension of the registration of a foreign restraining order. The restraining order was made in the High Court of the Hong Kong Special Administrative Region of the People’s Republic of China. It was first registered in New Zealand on 2 September 2013. Registration was under the Mutual Assistance in Criminal Matters Act 1992 (MACMA) and the Criminal Proceeds (Recovery) Act 2009 (CPRA).

[2]    This Court has, since the initial registration in September 2013, extended the registration of the restraining order several times, under s 137 of the CPRA. It had last been extended on 21 August 2019. That extension was to expire on 2 September 2020. The Commissioner sought a further extension under s 137 of the CPRA to 2 September 2021.

[3]    The respondents and interested parties were served. None opposed the extension as such. The first and third respondents filed a notice of opposition, but in substance it was an application for the restraining order to be varied. There was no opposition by the Commissioner, nor by any interested party, to the variation proposed by the first and third respondents.

[4]    Accordingly, after hearing briefly from the parties at the first call of the application on 20 August 2020, by minute dated 21 August 2020 I extended registration of the restraining to 2 September 2021, subject to the variation sought by the first and third respondents.

Dispute over notice order

[5]    There was a related matter on which the parties were not in agreement. When this Court extended the restraining order in August 2019, the Court made an additional order. The order was that if the Commissioner or any other party applied to vary or cancel the restraining order, it should give Natural Dairy (NZ) Holdings Ltd (one of the interested parties) fifteen working days’ notice, so that Natural Dairy could file any application necessary to protect its position. I will refer to this as the “notice order.”

[6]    The background to the notice order is that Natural Dairy says it is the victim of the fraud that is the basis of the restraining order. It is pursuing civil proceedings in Hong Kong against the respondents. Ms Grant, who appeared for Natural Dairy, confirmed (at the first call on 20 August 2020) that when the order was sought in 2019 Natural Dairy told the Court that it was intending to seek orders preventing forfeiture of the New Zealand-based assets that are the subject of the restraining order, and that it was preparing to apply for civil freezing orders over those New Zealand assets. She told me that Natural Dairy had not, in the year since, pursued either of those matters, and that this was largely because Natural Dairy had obtained the protection of the notice order.

[7]    In advance of the first call of the application on 20 August 2020, the Commissioner filed a memorandum raising some practical issues with the notice order. The first and third respondents shared the Commissioner’s concern about those issues. By contrast, Natural Dairy filed a memorandum dated 18 August 2020 in which it supported the notice order. In that memorandum Natural Dairy sought either confirmation that the notice order continued to have effect, or an ancillary order giving Natural Dairy either 24-hour notice or same-day notice of any variation or cancellation of the restraining order.

[8]    At the first call on 20 August 2020 I raised with counsel my concern about whether there was any jurisdictional basis to make (or continue) the notice order, or even to make either of the alternative orders that Natural Dairy sought (which are just variations on the notice order). My concern, which I expressed in provisional terms, was that there was no provision in the CPRA that explicitly allows such an order to be made (whether for a domestic restraining order or for a foreign restraining order). A notice order seemed to be outside the purpose of the CPRA. The purpose of a restraining order under the CPRA (whether a domestic or foreign order) seemed to be to freeze the position so that the state was able to recover the proceeds of crime. Such an order was not intended to act as a proxy freezing order for civil claimants.

[9]    Because this jurisdictional issue had not been addressed by counsel in the memoranda filed before the first call, I offered the parties the opportunity to make written submissions on that issue. They accepted. I made timetable directions for

submissions in my minute, indicating that I would then determine the issue on the papers.

[10]   Natural Dairy filed submissions on 27 August 2020, the Commissioner on     3 September 2020. The first and third respondents chose not to make submissions.

Is there a jurisdictional basis for the notice order?

[11]   Natural Dairy submitted that there were two jurisdictional bases for a Court ordering that notice be given to an interested party prior to the variation or cancellation of a foreign restraining order. The first was through provisions in the CPRA that allow further orders to be made in respect of restrained property: ss 28 and 33–35. The second was through the inherent jurisdiction of the Court to regulate its own procedure.

Jurisdiction under the CPRA

[12]   I start by observing that, subject to one specific point raised by the Commissioner, whether there is jurisdiction to make a notice order cannot depend on whether the restraining order (to which the notice order would be ancillary) is a foreign order or a domestic order. If Natural Dairy is correct that there is such jurisdiction, the jurisdiction is equally available in respect of a domestic restraining order. This is reflected in Natural Dairy’s submissions, which focused on provisions that apply to both domestic and foreign restraining orders.

[13]   Natural Dairy submitted that ss 28 and 33–35 of the CPRA are expressed in broad terms, and provide jurisdiction for an order requiring notice to be given prior to the variation or cancellation of a restraining order.1 I accept that the provisions are in broad terms. Section 28 allows a court to “make a restraining order subject to any conditions the court thinks fit”. Section 33 allows a person to apply for a “further order” associated with a restraining order. On such an application the Court may, under s 34(1), “if it considers it appropriate, make further orders in relation to the

1      By s 134(1)(h) of the CPRA, ss 28 and 33–35 apply to foreign restraining orders as well as to domestic restraining orders.

restrained property”. Section 35 provides for a range of orders that may be made under s 34, but expressly does not limit the generality of s 34(1).

[14]   But the discretionary jurisdiction conferred on the Court under these provisions must, as with any statutory discretion, be exercised in accordance with the purpose of (here) the CPRA.2 Section 3 sets out the purpose of the CPRA:

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.

[15]   A restraining order is not an end in itself. Its purpose is to preserve property pending the bringing of a forfeiture application.3 Forfeiture is the primary purpose.

[16]   In a domestic context, any forfeiture is to the Crown, not to victims of the underlying criminal activity.4 In the foreign context, the CPRA presumes the same to apply. While the CPRA does not stipulate that forfeiture is to a state entity (that being

2      Fleetwing Farms Ltd v Marlborough District Council [1997] 3 NZLR 257 (CA) at 267 per Richardson P for the Court; and R v Knight [1998] 1 NZLR 583 (CA) at 587 per Richardson P for the Court.

3      Commissioner of Police v Yan [2015] NZHC 2544 at [27]. This case concerned a domestic restraining order, but the same point applies to a foreign restraining order. For example, a foreign restraining order lapses when a foreign forfeiture order is registered in New Zealand in respect of the same property: s 136(1)(c) CPRA.

4      Criminal Proceeds (Recovery) Act 2009, s 50(3).

a matter that will be governed by the law of the foreign country), foreign restraining and forfeiture orders can be registered only at the request of a foreign country.5

[17]   The notice order does not fit this purpose. The avowed purpose of the notice order is to give Natural Dairy notice of variation or cancellation of the restraining order, so that Natural Dairy can take steps to protect its position (such as by seeking a civil freezing order) before the restraining order is varied or cancelled.6 But the purposes of the CPRA do not include protection of civil claimants from the risk of a defendant (even an allegedly criminal defendant) putting assets beyond their reach (by removal from the jurisdiction, dissipation, and so on).

[18]   Natural Dairy submitted that the CPRA facilitated victim recovery through its relief from forfeiture provisions, such as s 66, and that this supported jurisdiction to make a notice order. The CPRA does have provisions that give some protection to third parties who claim to have an interest in the property that is subject to restraint or to forfeiture. But those provisions are designed to protect third parties from the effects of the restraint or of the forfeiture. They are not designed to protect third parties from the risk of an allegedly criminal defendant putting assets beyond their reach. The provisions do not lend any support to the argument that making a notice order is in accordance with the purpose of the CPRA.

[19]   Finally, Natural Dairy submitted that a key purpose of the CPRA was to eliminate the chance for persons to profit from significant criminal activity: s 3(2)(a). It said that removal of the notice order would run counter to that purpose, because it would increase the likelihood that restraint orders could be varied or fall away without Natural Dairy having an opportunity to seek civil freezing orders. This, it would said, would create an opportunity for the first and third respondents to dissipate assets or remove them to another jurisdiction where recovery was more difficult.

5      Mutual Assistance in Criminal Matters Act 1992, s 54; and Criminal Proceeds (Recovery) Act 2009, s 132.

6      In a memorandum dated 18 August 2020 counsel for Natural Dairy said that a notice order would “allow Natural Dairy to take urgent steps to protect its position before the restraining orders cease to have effect”.

[20]   I do not accept that submission, for two reasons. First, s 3(2)(a) says that it is the forfeiture regime established “under this Act” that is proposed to eliminate the chance for persons to profit from significant criminal activity. The forfeiture (and restraint) regime established under the CPRA is one that is under the control of the state. There is no hint anywhere in the CPRA that it is intended that private individuals (or corporations) have a role to play under the CPRA in eliminating the chance for criminal profiteering.

[21]   Secondly, it is not correct that removal of the notice order would deprive Natural Dairy of the opportunity to seek civil freezing orders. When Natural Dairy sought the notice order in August 2019 it told this Court that it intended to seek civil freezing orders. It said that it was “currently in the process of preparing its application for this purpose”. The notice order was sought simply as an interim measure. Natural Dairy has had ample opportunity to apply for a freezing order in this Court, but has apparently taken no steps to do so.7

[22]   For the above reasons, I conclude that making a notice order is not in accordance with the purposes of the CPRA. Sections 28 and 33–35 of the CPRA therefore do not provide jurisdiction to make such an order. I am comforted in this conclusion by the fact that Natural Dairy could not point me to any case in which such an order has been made.8

The Court’s inherent jurisdiction

[23]   Natural Dairy submitted that a proceeding under the CPRA is subject not only to the provisions in the CPRA, but also (as a civil proceeding) to the High Court Rules 2016, and to the Court’s inherent jurisdiction.

[24]   I accept that a proceeding under the CPRA is subject to the Court’s inherent jurisdiction, and that this provides a basis for the Court to make ancillary procedural

7      Natural Dairy advised that it had applied for a freezing order in the Hong Kong courts.

8      I exclude the instance case, as the minute of Duffy J in which her Honour made the order does not explore the basis for it. This reflects the fact that Natural Dairy’s request (by memorandum) for the notice order was not met with any opposition.

orders.9 But, as Ms Fenton for the Commissioner submitted, the Court should exercise its inherent jurisdiction in harmony with the relevant legislative scheme.10 I have concluded above that the notice order is not in accordance with the purposes of the CPRA. That conclusion equally prevents resort to the Court’s inherent jurisdiction.

The Commissioner’s other argument

[25]   The above is sufficient to conclude that the Court has no jurisdiction to make the notice order. For completeness I also note another argument that the Commissioner put forward against the making of the notice order. This argument was, as I have foreshadowed, particular to the regime for foreign restraining orders.

[26]   The Commissioner submitted that the notice order might require it to take or defer taking steps that conflict with its statutory powers and obligations. This submission largely rested on s 136 of the CPRA, which provides for the duration of a foreign restraining order that has been registered in New Zealand:

136 Duration of foreign restraining order registered in New Zealand and associated further orders

(1)The registration of a foreign restraining order in New Zealand expires on the earliest of the following dates:

(a)the date when the foreign restraining order to which it relates expires or is revoked:

(b)the date that is the end of 2 years after the date on which the foreign restraining order is registered in New Zealand:

(c)the date when the Commissioner registers a foreign forfeiture order in New Zealand in respect of some or all of the property specified in the foreign restraining order:

(d)the date on which the registration of the foreign restraining order in New Zealand has been cancelled under section 58 of the Mutual Assistance in Criminal Matters Act 1992.

(2)Despite subsection (1), if the registration of a foreign restraining order in New Zealand is extended as a result of an application to the High Court, it expires on the date specified by the High Court under section 137.

9      Natural Dairy relied, correctly, on Commissioner of Police v Yan [2015] NZHC 2544 for this proposition.

10     R v Moke and Lawrence [1996] 1 NZLR 263 (CA) at 268–269.

(3)On the expiry of the registration of a foreign restraining order in New Zealand, any further order made in relation to the foreign restraining order also expires.

[27]   The Commissioner’s concern was that the registration of a foreign restraining order might expire under s 136(1)(a) as a result of the underlying foreign restraining order ceasing to have effect (by itself expiring or being revoked). The Commissioner said that it was implicit in the CPRA that if the foreign country informed New Zealand that the foreign restraining order had expired or been revoked, the Commissioner was obliged to take steps, reasonably promptly, to bring that to the Court’s attention and to take relevant steps in connection with the assets. The Commissioner submitted that that obligation was inconsistent with a notice order that required it to first give 15 days’ notice if it applied to vary or cancel the registration of the restraining order, or if it sought to obtain custody of the assets from the Official Assignee.

[28]   Natural Dairy took a different view of s 136. It relied on s 136(2), which provides that “despite” s 136(1), where the restraining order has been extended as a result of an application to the High Court (as in this case), the order expires on the date specified by the High Court under s 137. Natural Dairy said that the “despite” made it clear that, where the restraining order has been extended by the High Court, expiry is governed by s 136(2), which overrides s 136(1). On this view, there was now no prospect of this restraining order expiring under s 136(1)(a), and no prospect of the conflict that is of concern to the Commissioner.

[29]   Usually the word “despite” would mean that  expiry would be  governed  by  s 136(2) (where it applies) in place of s 136(1). But I do not think that, read in context, that is the meaning of s 136. Such a meaning would produce absurd consequences. The restraining order would continue to be registered when it had expired in its home country (s 136(1)(a)), when the Commissioner had registered a foreign forfeiture order in respect of the same assets (s 136(1)(c)), and even when registration had been cancelled under s 58 of the MACMA (s 136(1)(d)). I do not think that these absurd consequences could have been intended. Section 136(2) applies where the duration of registration has been “extended”. This presupposes a fixed time limit on the duration of registration. The only fixed time limit in s 136(1) is that in s 136(1)(b). Interpreted in context, s 136(2) therefore overrides only s 136(1)(b).

[30]   It is therefore possible that, as the Commissioner argued, the notice order would conflict with steps that the Commissioner would be obliged to take if the registration of the foreign restraining order expired under s 136(1)(a). But that is not a matter that I have to decide, given my conclusion above that there is no jurisdiction to make the notice order.

Should the notice order continue, or should it be revoked?

[31]   This Court made the notice order on 21 August 2019. The order is not limited in time (in particular, it is not limited to the period of the one-year extension to        2 September 2020). It presently continues to have effect as an order of this Court.

[32]   I therefore asked the parties whether, on the assumption that I concluded that there was no jurisdictional basis for the notice order, there was any basis on which the order should continue, or any basis on which it should instead be rescinded. Neither party made submissions on that point.

[33]   I am of the view that the order should be rescinded. The order was made without any argument on, or consideration of, the jurisdictional point. The order appears to have been an interlocutory order, and so may be rescinded under rule 7.49. Alternatively, if it was not an interlocutory order, it must have been a “further order” purportedly made under s 34 of the CPRA. In that event, s 34(2)(b) empowers the Court to continue to make further orders at “any later time” prior to expiry of the restraining order. Such a further order can, under the broad terms of s 35, include rescinding the earlier order.

Result

[34]I rescind the notice order made by this Court on 21 August 2019.

[35]I decline Natural Dairy’s request for a notice order in different (or any) terms.

[36]If there is any issue of costs between the Commissioner and Natural Dairy,

brief memoranda (of no more than two pages each) may be filed.

Campbell J