Commissioner of Police v Li
[2018] NZHC 1566
•27 June 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2013-404-003228
[2018] NZHC 1566
UNDER Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
STEVEN QUAN LI
First Respondent
FAN YANG
Second RespondentPENGJU CHEN
Third RespondentJONATHAN LI
Fourth RespondentAIQING XIANG
Fifth Respondent
Appearances: M Harborow and D Wiseman for Applicant
DPH Jones QC and Y Y Wang for First and Second Respondents D Dufty and R Patel for Fourth Respondent
S Buckley for Fifth Respondent
Judgment:
27 June 2018
JUDGMENT OF WOOLFORD J
[Approving settlement]
This judgment was delivered by me on Wednesday, 27 June 2018 at 4:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Meredith Connell, Auckland Counsel: DPH Jones QC, Auckland
D J Dufty, Auckland S Buckley, Auckland
COMMISSIONER OF POLICE v LI [2018] NZHC 1566 [27 June 2018]
Introduction
[1] Assignment4U was in the business of writing tailored assignments for students. The Commissioner of Police considers that in doing so the business operators, and the students that used the services, committed various offences.
[2] No-one has been charged, but the Commissioner sought forfeiture in respect of the business’ proceeds. The investigation also uncovered alleged mortgage fraud by the business operators, and members of their family. Forfeiture was sought in respect of that too. Three days into the four-week hearing, the parties agreed to settle.
[3] The main issue is, therefore, whether the settlements should be approved under s 95 of the Criminal Proceeds (Recovery) Act 2009. I also determine applications for access to documents from the media.
Background
The assignment writing business
[4] The name, Assignment4U, gives a fair indication of the business.1 It involved selling tailored assignments to students. The Commissioner says that in doing so the first and second respondents, Mr Steven Li and Ms Fan Yang, were effectively using the business to provide “cheating services”, enabling students to fraudulently submit purchased assignments as their own work.
[5] The first and second respondents, on the other hand, say that they simply provided “model answers”. These were only to be used as study aids – not for submission. Any students that submitted the purchased assignments did so on their own volition and contrary to Assignment4U’s disclaimers.
[6]No charges have been laid. A description of the Commissioner’s case follows.
[7] Students would lodge requests with Assignment4U for assignments to be written. They would provide the assignment question, word limits, relevant textbooks
1 It is said to have been operated through several companies but it is unnecessary to consider the corporate structure in this judgment.
and even their university login details. The turnaround would be set by reference to the deadline set by the relevant tertiary institution.
[8] Generally, Assignment4U’s fee would be set by reference to the word count. But students could also request assignments of a particular standard. The price would adjust accordingly – pay more for a better grade. Students could also pay more for faster turnarounds. If the desired grade or turnaround was not achieved, the student would be provided “Assignment4U store credit”.
[9] All correspondence with students would be accompanied by a disclaimer to the effect that the product provided by Assignment4U was only to be used as a study aid and should not be submitted. Such a disclaimer was also displayed at Assignment4U’s premises. The first and second respondents say these disclaimers were intended to guide the students as to the proper use of their services, to safeguard both the business and the students. The Commissioner, on the other hand, describes the disclaimers as a “sham”.
[10] When a request was received, Assignment4U would turn to its network of independent contractors, the ghost writers, to find someone to write the assignment. Once written, the ghost writer would provide the completed assignment to Assignment4U. The business then passed it on to the student. The ghost writers were paid a portion of Assignment4U’s fee, on a staged basis. The final payment would be made after the student received their grade. Ghost writers would be penalised if desired grades were not achieved.
[11] Plagiarism would be detected by the software used by tertiary institutions. That was obviously a concern. Assignment4U attempted to obtain access to that software to develop its own. On the Commissioner’s case, this indicates the business was not simply providing model answers.
[12] Assignment4U carried on business in this manner until May 2013, when the police executed search warrants at its premises.
The alleged offending
[13] The Commissioner says that, through Assignment4U, the first and second respondents committed offences under Pt 10 of the Crimes Act 19612 and s 292E of the Education Act 1989.3
[14] The legality of its operations is untested in New Zealand. The respondents’ business is the first of its kind to come under judicial scrutiny in New Zealand. Even if the alleged actions could satisfy the elements of the offences, it would then need to be determined whether the elements were in fact met. Given the settlement, it would be inappropriate to discuss whether any offences were committed. But I make two observations.
[15] First, assignment writing businesses are not a recent invention. A 1972 case from New York illustrates as much.4 In that case, the Court appointed a receiver in respect of a “ghost-writing” company on the basis that its business was fraudulent. The company used independent contractors to write the assignments. A flyer distributed by that company too contained a disclaimer, saying “this material is intended to be used for research and reference purposes only”. But the Court considered that, based on students’ evidence of the detailed instructions they provided to the company, it must have been clear to the company that the students were planning on submitting the assignments as their own work.
[16] Second, businesses of this nature appear to be common around the world and mostly operate in broad daylight. The first and second respondents referred me to a United Kingdom business, Law Teacher ( which they say has been operating lawfully for around 15 years. That business has a sophisticated website. It openly advertises “law essay writing” services, even “law dissertation writing services”. In addition to providing their assignment question, customers can select the country of study, required grade, paper length, delivery time and so on. Essentially, students can order a highly customised product with plagiarism-free
2 The Commissioner alleges the first and second respondents committed offences under ss 228, 240 and 257 as parties to students’ offending and under s 256 as principal offenders.
3 The Education Act offence is clearly targeted at offending of the type alleged here, but it only came into force on 30 August 2011.
4 New York v Saksniit 69 Misc 2d 554, NYS 2d 343 (1972).
guarantees. But the website states that what they provide should only be used as a “model answer” and a “learning aid”. The website also expressly states that students should not submit the work as their own, as that would be cheating.
The mortgage fraud
[17] The Commissioner says that during the investigation into Assignment4U, it became apparent that several members of the Li family committed mortgage fraud. In brief, the Commissioner says that Ms Yang, the second respondent, Mr Jonathan Li, the fourth respondent and Ms Aiqing Xiang, the fifth respondent committed various mortgage frauds. They materially misrepresented their financial position (in terms of assets and employment) in applications for mortgage finance. They also provided sham rental agreements to the relevant bank.
The forfeiture sought – first and second respondents
[18] The Commissioner estimates Assignment4U sold 11,549 assignments from 20 June 2006 to 20 June 2013, at an average price of $406.81 per assignment. Accordingly, he says the first and second respondents derived an unlawful benefit of approximately $4,698,000 (number of assignments multiplied by the average price).
[19] A profit forfeiture order was sought in that sum in relation to the following properties: unit 2, unit 2a, unit 4, unit 8a, unit 24, unit 32, unit 6 and unit 6a – all at 88 Cook Street, Auckland. Assets forfeiture orders in respect of these properties were also sought, on the basis that the properties had been tainted due to the proceeds of the Assignment4U business being used to fund their purchase and/or service mortgages secured against them. I note these properties are currently subject to restraining orders.
The forfeiture sought – fourth and fifth respondents
[20]The Commissioner argued that Mr Jonathan Li derived an unlawful benefit of
$1,697,000 and that Ms Xiang derived an unlawful benefit of $1,120,000, being the total amounts of the loans advanced to them respectively. In respect of Mr Jonathan Li, the order sought was in relation to unit 1a at 88 Cook Street, Auckland, and 29 Takutai Street, Auckland. In respect of Ms Xiang, the order sought
was in relation to unit 7a and unit 15 at 88 Cook Street, Auckland, and 3 Fowler Street, Auckland. Assets forfeiture orders were also sought in relation to these properties and the properties are currently subject to restraining orders.
Applications for access to documents
[21] Mr Edward Gay (Radio New Zealand) and Mr Jared Savage (NZME) have applied for access to documents in this proceeding. Both seek access to this judgment and Mr Gay also seeks access to the joint memoranda regarding settlement. The application falls to be determined under the Senior Courts (Access to Court Documents) Rules 2017. It is made on the grounds that there is public interest in this matter and that access is necessary to ensure fair and accurate reporting.
[22] As regards this judgment, Mr Gay and Mr Savage have the right to access it under r 8(1). That rule provides that every person has the right to access the formal court record relating to a civil proceeding. Rule 4 defines formal court record as including judgments. That general right of access should be exercised pursuant to r 10(1), by orally asking the Registrar of the relevant court registry that holds the file for access.
[23] The applications insofar as they relate to this judgment were premature. The judgment had not been written when they were made. Moving forward, I consider the most pragmatic approach is for the Registrar to treat the applications as requests under r 10(1) and to provide the applicants access to this judgment.
[24] The request for access to the joint memoranda regarding settlement must be considered under rr 12 and 13 of the Senior Courts (Access to Court Documents) Rules. Rule 12 sets out factors to be considered in determining requests for access. None of these factors have primacy; there is no hierarchy of considerations.5 The considerations are mandatory to the extent that they are relevant, but not all the stated matters will necessarily be relevant to an application.6 Rule 13 addresses the approach
5 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017] NZAR 1617 at [21].
6 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017] NZAR 1617 at [21].
to balancing those matters at different stages, reinforcing the distinction in the approaches to be taken to applications made at the pre-hearing, hearing and post-hearing stages.7
[25]I decline access to the settlement memoranda because of two reasons.
[26] First, I consider the principle of open justice is satisfied by the information in this judgment. It contains sufficient information to ensure fair and accurate reporting, and can be properly understood without access to the memoranda. The only information contained in the memoranda that is not in this judgment concern the mechanics of settlement, such as the amounts to be paid by each party and the timeline for payment and release of restraining orders. Those details are of minimal public interest given the description below at [33]–[36]. As Mallon J said in Chapman v P:8
The material evidence is set out in some detail in the judgment and the judgment can be understood without reference to the file. There is no particular public interest in the further detail of the private matters that are included on the Court file. The principles of open justice and the freedom to seek receive and impart information are given effect to by Fairfax being able to report on the proceeding without reference to the further detail on the Court file which was not material to my decision. In these circumstances I consider that the parties’ privacy interests outweigh the factors relied on by Fairfax on its application for access to the Court file.
[27] Second, the privacy and confidentiality interests of the parties weigh against access to the memoranda. As discussed below, it is a term of at least one of the settlement agreements that its terms will not be relayed to the other respondents. Access to the memoranda, which contain the settlement terms, might compromise that settlement.
[28] I note, for completeness, that the respondents oppose access to any other documents filed by the parties. However, access has not been requested in respect of such documents. I make some observations, on a preliminary basis, in respect of any further requests. Given the settlement, the reliability and accuracy of the evidence has not been tested. The confidentiality and privacy interests of the parties will, therefore,
7 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017] NZAR 1617 at [22].
8 Chapman v P (2009) 20 PRNZ 330 (HC) at [32].
be particularly important in any further requests. And as mentioned, I consider this judgment contains sufficient information to ensure fair and accurate reporting in relation to this proceeding.
The law: threshold for approval
[29] Section 95 of the Criminal Proceeds (Recovery) Act allows for the Commissioner to enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown. But such a settlement does not bind the parties unless the High Court approves it. The 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.
[30] The High Court must approve a settlement, under s 95(3), if it is satisfied that the settlement is consistent with the purposes of the Criminal Proceeds (Recovery) Act and that it is consistent with the overall interests of justice. In making that assessment, the High Court exercises its supervisory jurisdiction. It is not a cursory rubber-stamping exercise.9
[31] The primary purpose of the Act is set out in s 3(1). It is to establish a regime for the forfeiture of property that has been derived (directly or indirectly) from significant criminal activity or property that represents the value of a person’s unlawfully derived income. The Supreme Court described s 3(1) as “aspirational” and giving a “clear and emphatic signal as to the legislative purpose”.10 Ancillary
9 Commissioner of Police v Leone [2018] NZHC 590 at [5].
10 Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [12].
purposes, in s 3(2), include eliminating the chance for persons to profit from significant criminal activity and deterring significant criminal activity.
[32] A broad inquiry is required. Section 95(3) indicates that much, referring to the “overall interests of justice”. But in making the s 95(3) determination, the following factors may be relevant:
(a)Whether the settlement amount adequately reflects the property allegedly derived from criminal activity or income unlawfully derived.11
(b)The strength of the Commissioner’s case, the respondent’s case, and accordingly, the likelihood of forfeiture if the case was not settled.12 Litigation risk should be considered.13 It may be appropriate to settle for less if the Commissioner’s case has significant shortcomings.
(c)If there is a shortfall between the settlement amount and the property allegedly derived from criminal activity or income unlawfully derived, the Court should consider the extent to which there are assets available to meet that shortfall.14
(d)The time, cost and resource savings that would flow from settlement.15
(e)Any other relevant matters, keeping in mind that decisions to settle proceedings can be made on economic and pragmatic grounds.16 Does the settlement reflect a common-sense compromise between the parties?
11 Commissioner of Police v Owen [2018] NZHC 626 at [13]
12 Commissioner of Police v Antolik [2017] NZHC 2436 at [15].
13 Commissioner of Police v Kree [2013] NZHC 2972 at [11].
14 Commissioner of Police v Venn [2014] NZHC 361 at [5]
15 Commissioner of Police v Investments Ltd [2017] NZHC 284 at [17].
16 Commissioner of Police v Taylor [2017] NZHC 1144 at [27].
The proposed settlements
[33] The proposed settlements are in full and final settlement of all claims made by the Commissioner under the Criminal Proceeds (Recovery) Act in, or related to, the present proceeding. It is on the basis that none of the respondents admit any liability or wrongdoing.
[34]In broad terms, the Commissioner has agreed to settle for payments totalling
$2,120,000 from the five respondents.17 That includes payment of various sums by all five respondents. The settlement sum will be paid through assets forfeiture orders.
[35] I am not outlining the respondents’ respective contributions to the total sum as one of the settlement agreements require that its terms not be relayed to the other respondents. But per the agreement, the Commissioner is allowed to make a public statement which includes reference to the total value of property forfeited in this proceeding.
[36] The proposed settlements further contemplate that the restrained properties be released. Some of the restraining orders will be lifted immediately. Others in increments. This is to allow the Official Assignee to sell some of the restrained properties to meet any shortfalls, in the event that the settlement sum is not paid in accordance with the agreed timeline.
Application of s 95 to the proposed settlements
[37] I am going to approve the proposed settlements. I consider these settlements are consistent with the purposes of the Criminal Proceeds (Recovery) Act and the overall interests of justice because of four broad reasons.
[38] First, there will be a significant saving of time, cost and other resources. Significantly, three weeks of the Court’s time is saved as the remainder of the allocated
17 This judgment addresses the settlements with the first, second, fourth and fifth respondents, and Xuanxuan Trustee Limited as an interested party. The amount also includes a settlement with the third respondent, approved earlier by Brewer J.
hearing is no longer required. And a considerable number of witnesses will not have to be cross-examined.
[39] Second, while the Commissioner considers he has a reasonable case, he recognises it is not without risk. He recognises general litigation risk, but acknowledges specifically there are difficulties with the application of the Crimes Act offences to the first and second respondents. As mentioned, these have not previously been applied to the type of offending alleged in this case.
[40] The first and second respondents also maintain that no offences were committed. They say the business provided lawful “model answers”, as well as other services including tutoring, translation services, grammar and spell checking and selling second-hand textbooks. And that in any event, they did not have any real involvement with Assignment4U after it was transferred to Atan Limited in 2007.
[41] While it is not a pre-requisite for forfeiture orders, I note that no one has been charged with any offending in relation to Assignment4U’s business.
[42] As regards the allegations of mortgage fraud, it is denied by all respondents. No steps have been taken by the relevant bank, and no criminal charges have been laid against any of the respondents in relation to mortgage fraud. The Commissioner also accepts that the fourth and fifth respondents were not primary actors in this proceeding. They are not alleged to have been actively involved in Assignment4U, the primary focus of the Commissioner’s investigation and this proceeding.
[43] Third, I consider the shortfall between the settlement sum and the orders initially sought is not as significant as it would appear at first sight. $4,698,000 was sought against the first and second respondents but that amount represents the Commissioner’s estimation of Assignment4U’s gross revenue between 20 June 2006 and 20 June 2013. Section 292E of the Education Act, the primary criminal offence relied on by the Commissioner, only came into force on 30 August 2011. As mentioned, the Commissioner acknowledges there are difficulties with the application of the Crimes Act offences. Assignment4U sold an estimated 3200 assignments after
30 August 2011. That quantum of assignments would, therefore, support a profit forfeiture order in the sum of approximately $1.3 million.
[44] I note, further, that apparently about 70 per cent of the price per assignment was paid to the ghost writers. The sum excluding that expenditure for the whole period, approximately $1,400,000, is far closer to the settlement sum. As regards the period after 30 August 2011, the amount would be around $390,000. I consider the settlement sum reasonable in that context.
[45] The shortfall in relation to the orders originally sought against the fourth and fifth respondents should be viewed in light of their secondary role in this proceeding.
[46] Fourth, I am satisfied the settlements represent common-sense compromises between the parties. A lengthy trial will be avoided, and all will have certainty as to the outcome of a proceeding that was first initiated about five years ago.
Result
[47] I approve the Commissioner’s settlements with the first and second respondents, the fourth respondent and the fifth respondent, respectively, under s 95(3) of the Criminal Proceeds (Recovery) Act 2009.
[48]By consent, I make the orders set out in:
(a)Paragraph 6.1(a) to (i) of the joint memorandum of counsel for the Commissioner and the first and second respondents regarding proposed settlement, dated 22 June 2018.
(b)Paragraph 6.1(a) to (l) of the joint memorandum of counsel for the Commissioner, the fourth respondent and interested party Xuanxuan Trustee Limited regarding proposed settlement, dated 15 June 2018.
(c)Paragraph 6.1(a) to (g) of the joint memorandum of counsel for the Commissioner and the fifth respondent regarding proposed settlement, dated 19 June 2018.
Woolford J
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