Commissioner of Police v MA

[2017] NZHC 2754

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-1313 [2017] NZHC 2754

BETWEEN

THE COMMISSIONER OF POLICE

Applicant

AND

ZIYANG MA First Respondent

YUANHUA ZHANG Second Respondent

YUANHONG ZHANG Third Respondent

Hearing:	On the papers
Counsel:	M Harborow and M Hammer for Applicant P Dacre QC for Second and Third Respondents
Judgment:	10 November 2017

JUDGMENT OF WHATA J

This judgment was delivered by me on 10 November 2017 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Meredith Connell, Auckland

THE COMMISSIONER OF POLICE v MA [2017] NZHC 2754 [10 November 2017]

[1]      I have before me a joint memorandum of counsel proposing settlement of these proceedings.  The proposed settlement involves forfeiture of specified property and release of other property currently subject to restraining orders.

Background

[2]      The background is helpfully set out in the joint memorandum.  I adopt it for present purposes.

Operations ‘Ghost’ and ‘Gem’

[3]      In 2012, the Organised and Financial Crime Agency of New Zealand began investigating the large-scale importation and distribution of the class B controlled drug,  pseudoephedrine,  and  dealing  of  the  class  A  controlled  drug, methamphetamine.   This investigation was called Operation ‘Ghost’.   Mr Ma, the first  respondent,  was  identified  as  being  heavily  involved  in  the  wholesale distribution and delivery of pseudoephedrine.

[4]     In 2013, police commenced a separate investigation into the supply of pseudoephedrine, called Operation ‘Gem’.  As a result of this investigation, Mr Ma was identified as being involved in the wholesale distribution and delivery of pseudoephedrine from a different stockpile, maintained by persons unrelated to those under investigation in Operation ‘Ghost’.

[5]      On 4 December 2013, police terminated Operation ‘Ghost’.   A number of search warrants were executed across Auckland, including at 8 Askerne Drive, Flat Bush, Auckland, where Mr Ma and Mrs Zhang, the second respondent, were living at the time, and 19A Kimpton Road, Papatoetoe, Auckland where Ms Zhang, the third respondent, was living at the time.

[6]      Ms Zhang is the registered proprietor of both 8 Askerne Drive and 19A Kimpton Road.

[7]      Police seized a total of $39,626.47 cash from 8 Askerne Drive and vehicles located at that property.  In a bedroom at 19A Kimpton Road, police located a sports

bag containing 11.8 kilograms of ContacNT1  with a street value of approximately

$459,190.

[8]      Subsequent  investigations  into  the  financial  affairs  of  the  respondents identified:

(a)      a significant proportion of funds used to purchase of 8 Askerne Drive and 19A Kimpton Road were of an unexplained or unverified origin;

(b)      a number of unverified cash deposits in Ms Zhang’s bank accounts, in

excess of that declared to Inland Revenue;

(c)      Mr Ma declared minimal income to Inland Revenue and he met his living expenses via undeclared sources of income; and

(d)Mrs Zhang received Work and Income benefits while not declaring the purchase of the property and subsequent profit from the sale of that property.  She declared a modest income to Inland Revenue and her bank accounts received cash deposits from unknown sources.

[9]      The Commissioner of Police’s (the Commissioner) case is that the direct or indirect proceeds generated by Mr Ma’s (and associate’s) offending has been laundered through various persons, including Ms Zhang and Mrs Zhang, and collated together to purchase 8 Askerne Drive and 19A Kimpton Road.   In addition, the Commissioner’s case is that Ms Zhang and Mrs Zhang have unlawfully benefitted to a very substantial degree from Mr Ma’s criminal activity.

Criminal proceedings

[10]     Mr Ma pleaded guilty to 43 charges of supplying pseudoephedrine.  He was sentenced to a term of imprisonment of nine years and four months, with a minimum

period of imprisonment of four years and six months.

1      ContacNT is a cold and flue medication manufactured in China.  Each capsule contains 90 mgs of pseudoephedrine.

[11]     Mrs  Zhang  was  not  charged  with  any offences  as  a  result  of  Operation

‘Ghost’ or Operation ‘Gem’.

[12]     Ms Zhang was initially charged with possession of a class B controlled drug and permitting premises to be used for drug offending.   These charges were subsequently withdrawn.

Restraint and forfeiture proceedings

[13]     On 17 June 2015, the Commissioner applied for restraining orders over 19A Kimpton Road, 8 Askerne Drive and the cash totalling $39,626.47 seized from 8

Askerne Drive.

[14]     By notice of opposition dated 6 August 2015, the restraining orders were opposed by Mrs Zhang and Ms Zhang, on the basis that:

(a)      there were not reasonable grounds to believe that the property was tainted property; and

(b)there  were  not  reasonable  grounds  to  believe  Mrs  Zhang  and Ms Zhang had interests in, or effective control of, the property, nor that they had unlawfully benefitted from significant criminal activity.

[15]     That opposition was ultimately withdrawn.   The application for restraining orders was accordingly granted on 22 February 2016 by Heath J.  The restraining orders were extended by Edwards J on 20 February 2017.

[16]     The  Commissioner  is  in  the  process  of  preparing  his  civil  forfeiture application, but has not yet applied for forfeiture orders.

Settlement

[17]     Counsel for the Commissioner, Mrs Zhang and Ms Zhang have now engaged in discussions regarding the possible settlement of these proceedings.  The parties have agreed to settle the matter of forfeiture of assets as between themselves, subject

to the Court’s approval under s 95 of the Criminal Proceeds (Recovery) Act 2009

(the Act).

[18]     Further, Mr Ma has confirmed he has no financial or personal interests in the property subject to restraint, and does not want any further involvement in this matter. To date, he has taken no steps in the proceeding.

Proposed settlement

[19]     The proposed settlement is as follows:

(a)      Mrs Zhang and Ms Zhang will raise funds sufficient to discharge the mortgage to ANZ Bank New Zealand Ltd over 19A Kimpton Road. Upon the raising of those funds, they will be applied to clear the mortgage on that property, rendering 19A Kimpton Road unencumbered;

(b)assets forfeiture orders are to be made under s 50(1) of the Act, by consent, over the following property:

(i)       the unencumbered property at 19A Kimpton Road; and

(ii)      the cash;

(c)      8 Askerne Drive will not be forfeited and the Official Assignee will, upon  being  satisfied  that  19A  Kimpton  Road  is  unencumbered, arrange for the restraining orders to be lifted from the title of the property;

(d)the Commissioner will not pursue an application for profit forfeiture orders against any of Mr Ma, Mrs Zhang or Ms Zhang; and

(e)       costs will lie where they fall in relation to all matters.

[20]     The approximate value of the property being forfeited is $719,626 (including cash seized), and the value of the property returned to Mrs Zhang and Ms Zhang is approximately $605,000 (taking into account current and likely borrowing).

Assessment

[21]     Section 95 of the Act provides that the High Court must approve a settlement if it is satisfied that it is consistent with:

(a)       the purposes of the Act; and

(b)      the overall interests of justice.

[22]     The Court’s jurisdiction pursuant to s 95 is supervisory, ensuring settlements are  consistent  with  Parliament’s  intent  in  enacting  the  statute.2   This  means  the Court’s role is not to merely rubber stamp agreements.

[23]     The  primary  purpose  of  the  Act  is  contained  in  s  3(1),  namely,  the establishment of 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.  Furthermore, as submitted by counsel, the reference to “overall interests of justice” indicates a broad enquiry is required.

[24]     In terms of the present case, there is a debate between the parties as to the strength of the Commissioner’s case.   The consensus reached represents a compromise, having regard to the merits.  There is nothing before me to suggest the compromise is not a sensible one.   Pragmatic compromises serve the overarching

purpose of the Act and the overall interests of justice.3   In this regard, I consider the

saving of time and cost, and the avoidance of a litigation risk for both sides, is desirable.4    Additionally, the certainty and finality achieved by settlement is in the

public  interest.5   I  am  therefore  satisfied  that  the  expeditious  resolution  of  the

2      Commissioner of Police v Know-All Group Ltd HC Auckland CIV-2010-404-403, 7 November

2011, at [11].

3      Commissioner of Police v Douglas [2015] NZHC 1293 at [6].

4      Commissioner of Police v Kree [2013] NZHC 2972 at [11].

5      Commissioner of Police v Moutray [2012] NZHC 2940 at [5].

proceedings by forfeiture of the identified properties and release of the remaining property subject to restraining orders, serves the purpose of the Act and the overall interests of justice.

[25]     Accordingly, there shall be orders as sought, namely:

(a)      Within 15 working days of these orders being made, Mrs Zhang and Ms Zhang must ensure 19A Kimpton Road, Papatoetoe, Auckland becomes unencumbered by:

(i)raising sufficient funds to discharge, fully, the mortgage (9160097.3) registered in favour of ANZ Bank New Zealand Ltd on 19A Kimpton Road, Papatoetoe, Auckland;

(ii)      paying those funds to ANZ Bank New Zealand Ltd; and

(iii)taking all other steps necessary to discharge the mortgage (9160097.3) registered in favour of ANZ Bank New Zealand Ltd on 19A Kimpton Road, Papapatoetoe, Auckland.

(b)For the purpose of raising sufficient funds to discharge, fully, the mortgage  (9160097.3)  registered  in  favour  of  ANZ  Bank  New Zealand Ltd on 19A Kimpton Road, Papatoetoe, Auckland in accordance with paragraph (a)(i) above, the restraining order against 8

Askerne Drive, Flat Bush, Auckland is varied so that all or part of those funds may be borrowed against 8 Askerne Drive, Flat Bush, Auckland.

(c)      Twenty  working  days  after  these  orders  are  made,  the  following property will become the subject of assets forfeiture orders under s

50(1) of the Criminal Proceeds (Recovery) Act 2009 so that it vests in the  Crown  absolutely  and  is  to  be  under  the  Official  Assignee’s custody and control:

(i)the unencumbered property at 19A Kimpton Road, Papatoetoe, Auckland; and

(ii)$39,626.47  cash  seized  from  8  Askerne  Drive,  Flat  Bush, Auckland (and all interest earned on that sum).

(d)Provided that Mrs Zhang and Ms Zhang comply with their obligations under  paragraph  (a)  above,  and  upon  the  Official Assignee  being satisfied that 19A Kimpton Road, Papatoetoe, Auckland is unencumbered, the property at 8 Askerne Drive, Flat Bush, Auckland will  be  released  from  restraint,  and  the  Official Assignee  is  then directed to lift the restraining orders from the title of that property.

(e)      The Commissioner will not pursue an application for profit forfeiture orders against any of the respondents.

(f)       Costs will lie where they fall in relation to all matters.

(g)Leave is reserved to all parties to apply to the Court in the event unforeseen circumstances arise.