Commissioner of Police v McLean
[2024] NZHC 1813
•8 July 2024
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-412-19
[2024] NZHC 1813
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF NEW ZEALAND POLICE
Applicant
AND
DONALD JOHN MCLEAN
First Respondent
AND
LISA MELANIE MCLEAN
Second Respondent
AND
TRUSTEES OF THE
MCLEAN-MCGOWAN FAMILY TRUST
Third Respondent
Hearing: 20 June 2024 Appearances:
R D Smith for Applicant
N T C Batts for First and Second Respondents (via VMR)
Judgment:
8 July 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 8 July 2024 at 10.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
COMMISSIONER OF NEW ZEALAND POLICE v MCLEAN [2024] NZHC 1813 [8 July 2024]
[1] The respondents, Donald McLean and Lisa McLean (the McLeans), have applied for orders as follows:
(a)directing the Official Assignee to release the respondents’ property located at 400 Taieri Road, Halfway Bush, Dunedin (the Taieri Road property) from his custody and control; or
(b)striking out the applicant’s application for restraining orders in respect of the Taieri Road property.
They also seek costs associated with this application.
[2]The grounds on which the orders are sought are as follows:
(a)the Official Assignee’s custody and control of the Taieri Road property under the Criminal Proceeds (Recovery) Act 2009 (the Act) is ultra vires because;
(i)there was no jurisdiction under the Act to extend the without notice restraining order made on 13 April 2021 when Doogue J purported to do so in her judgment dated 20 October 2022;1 or
(ii)if in Doogue J’s judgment dated 20 October 2022, an on notice restraining order was made, such statutorily expired on 21 October 2023;
(b)the Commissioner has failed to prosecute his application for restraining orders in respect of the Taieri Road property with all due diligence as required under s 39(3) of the Act.
[3]The Commissioner opposes the application saying:
1 Commissioner of New Zealand Police v McLean [2022] NZHC 2726.
(a)the on notice application for the restraining order has not been finally determined and consequently, the without notice restraining order in respect of the Taieri Road property remains in force; and
(b)for the purposes of s 39(3) the Commissioner has prosecuted the application with due diligence.
Procedural background
[4] To place the application in context it is necessary to set out the relevant procedural background. Helpfully, the parties have been able to agree on a chronology of events which summarises the background to these proceedings and the interactions between the Commissioner and the McLeans to date.
[5] On 13 April 2021, Mander J granted the Commissioner’s application for a without notice restraining order which applied to houses and other assets belonging to six respondents in these proceedings. The application was made on the basis that there were reasonable grounds to believe that the respondents had unlawfully benefited from significant criminal activity including the cultivation and sale of cannabis, tax evasion, dishonestly using documents and money laundering.
[6] The Commissioner then made an on notice application for a restraining order (the on notice application) in respect of the property which was restrained under the without notice restraining order and in respect of additional property discovered upon execution of multiple search warrants by police.
[7] The on notice application was made within the seven day period identified in s 39 of the Act, meaning that the without notice restraining order remained in force until the on notice application was finally determined.
[8] The on notice application was repeatedly adjourned while then counsel for the McLeans obtained instructions and sought wide-ranging discovery. The on notice application was, however, resolved between the Commissioner and the other respondents, in one form or another, with those parties either consenting to the order or the proceeding against one respondent being withdrawn.
[9] At a call-over before Associate Judge Paulsen on 26 May 2022, counsel for the McLeans sought to adjourn the on notice application to explore resolution and suggested that resolution of the Commissioner’s application was likely.
[10] The Associate Judge timetabled the application by another party, Ms Jones, to exclude her severable interest, to hearing, and a hearing date of 19 October 2022 was subsequently allocated by the Registrar. No hearing date was set for the on notice application in respect of the McLeans and no directions were made to progress it to hearing, given the position taken by then counsel for the McLeans.
[11] On 26 May 2022, counsel for the Commissioner confirmed, in writing, his earlier proposal to counsel for the respondents that the Commissioner would agree to releasing from restraint, all but one house property, ultimately the Taieri Road property. The reason for doing so was that the Commissioner’s investigation had confirmed that there was sufficient equity in the property to meet any forfeiture application that might be made.
[12] That proposal was not addressed by counsel for the McLeans until it was raised again by counsel for the Commissioner shortly prior to the 19 October 2022 hearing of Ms Jones’ application to exclude her severable interest.
[13] Between 17 and 18 October 2022, counsel for the Commissioner and then counsel for the McLeans prepared and filed a joint application seeking to vary the without notice restraining order, so as to release from restraint all of the McLeans’ property, other than the Taieri Road property. The parties also filed a joint memorandum explaining the basis for seeking to vary the without notice order. It read as follows:
1.On 19 October 2022 the Commissioner and the First, Second and Third Respondents (“The Parties”) will jointly apply for a variation of the Without Notice Restraining Order made by His Honour Justice Mander on 13 April 2021 in respect to the property owned by the First, Second and Third Respondents that is presently restrained.
2.Specifically, the parties will seek an Order varying the restrained property to which the Restraining Order relates, in particular that the Restraining Order only continue to apply in respect to:
(a)the residential property at 400 Taieri Road, Halfway Bush, Dunedin, registered proprietors Donald John McLean and Lisa Melanie McLean, understood to be owned by the McLean-McGowan Family Trust, legally described in the record of title as Lot 1, DP97000.
The joint application also went on to confirm which items of property would no longer be subject to the 13 April 2021 without notice restraining order.
[14] Mr Smith, counsel for the Commissioner, points out that the joint application to vary the without notice restraining order was made in reliance on ss 33, 34 and 35 of the Act which allows a party to a restraining order to seek further orders from the Court, including varying the property to which the restraining order relates. In other words, there was jurisdiction under the Act to seek to vary the existing restraining order.
[15] In correspondence being exchanged around the same time, counsel for the Commissioner queried whether the McLeans were agreeable to the making of a final restraining order in respect of the Taieri Road property. Relevantly, counsel for the McLeans responded saying:
… the McLeans do not concede that there was ever justification for orders in the first place.
All we need is more time to sort out any outstanding issues.
[16]In Doogue J’s 20 October 2022 decision, she dealt primarily with:
(a)the settlements reached with other respondents; and
(b)Ms Jones’ application to have her interest severed in a restrained property;
and she made the orders sought in respect of those matters.
[17] Doogue J then also made the order jointly sought by the Commissioner and the McLeans in respect of the scope of the without notice restraining order. Specifically, she recorded in her judgment dated 20 October 2022, the following:2
[36] The Court further orders that the interim restraining order made by Mander J on 13 April 2021 continues to apply to the following property, until further order of the Court:
Real estate
(a) all interests in the residential property at 400 Taieri Road, Halfway Bush, Dunedin, registered proprietors Donald John McLean and Lisa Melanie McLean, understood to be owned by the McLean-McGowan Family Trust, legally described in the record of title as Lot 1 DP9777.
[18]She then confirmed that the “interim restraining order made by Mander J on
13 April 2021” was discharged in respect of other property owned by those respondents.3
[19] Since then, the Commissioner has not sought to bring on the on notice application and the McLeans have not filed any opposition to it.
[20] Following the issue of the 20 October 2022 judgment, a number of steps were taken to progress the proceedings. On 22 October 2022 the police sought a Production Order to obtain information about the vehicles the McLeans had bought and sold, how they were paid for and who they had been purchased from or sold to. On being advised of this, and in response to a suggestion to this effect from counsel for the Commissioner, the McLeans expressed a willingness to attend a round table meeting with the Asset Recovery Unit of the Police. As was signalled to the Commissioner in November, the McLeans provided considerable accounting information to the Commissioner in December 2022.
[21] In June 2023, the Commissioner provided the McLeans with draft affidavits from Mr Andrew Hugill, a forensic accountant with the Asset Recovery Unit. In August 2023, at the invitation of the McLeans, an offer of settlement was made, but
2 Commissioner of New Zealand Police v McLean, above n 1, at [36].
3 At [37].
was formally rejected by the McLeans in early September 2023. However, discussions then ensued regarding the utility of convening a settlement conference before a Judge.
[22] On 17 October 2023, counsel for the Commissioner indicated a further settlement proposal was likely to be made on a without prejudice basis with a view to achieving settlement before the end of the year. However, in January, the McLeans advised that they were instructing new counsel. On 1 February 2024, counsel for Mr McLean noted the Commissioner of the change in representation. On 13 March 2024, the Commissioner applied for a profit forfeiture order, supported with affidavit evidence from six deponents. On the same day, the McLeans filed this application to strike out the proceedings and to discharge the restraining order.
[23]It is in the context of that history that the current application is advanced.
Submissions for the McLeans
[24] The first challenge raised by counsel for the respondents, Mr Batts, is to the lawfulness of Doogue J purporting to extend the without notice restraining order. He points out that, in her 20 October 2022 judgment, Doogue J refers to “interim restraining orders”. However, he says there is no such thing in the Act. That said, he acknowledges it is apparent that when the Court referred to “interim restraining orders” this was a reference to without notice restraining orders. He submits that there is no jurisdiction to extend the without notice restraining order once an on notice restraining order application has been heard and determined and that is, in effect what was done here.
[25] If, in effect, Doogue J made an on notice restraining order, then s 39 of the Act has no application. As a consequence, pursuant to s 37(1) of the Act, the Commissioner would have been required to apply for an extension to the order pursuant to s 41, and to have had such application determined on or before 20 October 2023. The consequence of not doing so is that the extant restraining order is ultra vires and there is no legal basis for the property to continue to be held by the Official Assignee.
[26] Mr Batts also expressed concern that the order made by Doogue J was expressed to endure “until further order of the Court” which, in practical terms, circumvented the one year time limit in s 41(2). In Mr Batts’ submission, the effect of this indefinite extension of the interim restraining order is “a de facto forfeiture” without requiring the Commissioner to periodically justify the position, saying this is a “very substantial interference with the respondents’ private property rights”.
[27] Finally, (and the point he pressed most strongly), was that even if the Court consider there was a legal basis for extending a without notice restraining order in circumstances when an on notice order had been applied for, the Commissioner then failed to prosecute that application with all due diligence. Mr Batts notes it is almost 17 months since Doogue J extended the restraining order. In that time the Commissioner has not advanced either the on notice restraint of the property or a substantive forfeiture application. More significantly, it is now around three years since the Commissioner first restrained the property without notice. As a result, s 39(3) now comes into play and the proceedings should be struck out.
[28] In Mr Batts’ submission, the 12 month duration of an on notice restraining order is a clear indicator of how long a without notice order should remain on foot before a hearing is brought on to determine whether it should be made on notice. The Commissioner has allowed the without notice order to remain in place for much longer than that.
[29] Mr Batts also says the delay in advancing the on notice application cannot be excused by the negotiations which the Commissioner was conducting with the McLeans during this period. Section 39(3) places the obligation on the applicant to proceed with all due diligence regardless of the position of the respondents.
[30] Finally, while acknowledging there was no special prejudice to the McLeans by the maintenance of the without notice restraining order, such as, for example, losing the opportunity for a sale, he submits there is inherent prejudice in the McLeans having their property subject to a restraining order and this should be taken into account in determining whether to release the restraining order and to strike out the proceedings.
Submissions for the Commissioner
[31] Counsel for the Commissioner submits that none of the McLeans’ arguments can be sustained in light of the procedural history as outlined above. First, Mr Smith submits that it is clear that the McLeans did not consent to an on notice restraining order application being granted at the time Doogue J made the relevant order. The only application that was before the Court was to vary the without notice restraining order, pursuant to s 35 of the Act, to exclude certain property. Furthermore, it was a joint application to which both parties consented.
[32] The fact it was not a fresh application for a restraining order, as suggested by counsel for the respondents, is confirmed by the wording of the judgment which said that the original without notice restraining order made by Mander J “continues to apply” in respect of the Taieri Road property until further order of the Court. Mr Smith points out that this is a correct statement of the legal position under the Act, specifically at s 39(2) of the Act, which states:
(2)However, if, before restraining order A expires, an application is made with notice for a restraining order on notice (restraining order B) in relation to the same property to which restraining order A relates (whether or not the application also relates to any other property), restraining order A continues in force until the application for restraining order B is finally disposed of.
[33] The Commissioner’s position is that the without notice restraining order remains in force by operation of s 39(2) of the Act and the on notice restraining order, which has not been consented to by the respondents, nor heard, remains undetermined.
[34] Mr Smith also notes that while counsel for the respondents is critical of the reference to an “interim” restraining order, saying that is not a term used in the Act,4 it is common place for without notice restraining orders to be referred to as interim restraining orders given that they are temporary in nature. Mr Smith cites several cases where a without notice restraining order is referred to as an “interim order”, or an order
4 Save for interim foreign restraining orders which have no application in the present case.
providing “interim relief”.5 In particular, Mr Smith refers to Commissioner of Police v Jiang, where Mander J stated:6
Restraining orders are temporary measures. They are “interim orders of limited duration”, intended “to preserve property while the Crown is gathering evidence to support an application for forfeiture”.
(footnotes omitted)
[35] Here, counsel for the Commissioner submits that nothing turns on the use of the word “interim” in describing the order in the present case, particularly when the Judge confirmed that the original without notice restraining order “continues to apply”.
[36] In any event, counsel for the Commissioner submits that if the order made by Doogue J was a nullity and must be set aside, then the property reverts to being restrained under the without notice restraining order originally made by Mander J.
[37] In addressing the submission that s 39(3) now applies, given the Commissioner’s failure to progress the on notice restraining order application, Mr Smith points out that it was the respondents who repeatedly sought to adjourn the application with a view to resolving the matter to agreement.
[38] Mr Smith then submitted that in deciding whether to strike out the proceedings, the general principles which apply to striking out a proceeding for want of prosecution should apply. Those principles are set out in Lovie v Medical Assurance Society New Zealand Ltd as follows:7
[T]he applicant must show that the plaintiff has been guilty of inordinate delay, that such delay is inexcusable, and that it has seriously prejudiced the defendant. Although these considerations are not necessarily exclusive, and at the end one must always stand back and have regard to the interests of justice, in this country, ever since NZ Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58 it has been accepted that if the application is to be successful, the applicant must commence by proving the three factors listed.
5 Commissioner of Police v Carson [2015] NZHC 2442 at [2]; and Commissioner of Police v Bicycle Brothers Ltd [2023] NZHC 3013 at [3].
6 Commissioner of Police v Jiang [2016] NZHC 2782 at [17].
7 Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 at 248, (1991) 4 PRNZ 662 at 666 (HC).
[39] Here, even if there was inordinate delay (which the Commissioner denies), Mr Smith submits the delay was excusable because the McLeans themselves were seeking further time and this is apparent from the email exchange between counsel at the time the varied orders were being negotiated. Furthermore, the delay was excused by the Commissioner’s efforts to gather evidence following the 19 October 2022 hearing. The evidence that was gathered was relevant to both the on notice application for restraining orders and the application for civil forfeiture orders.
[40] By proceeding in this way, the parties were trying to avoid costly litigation and, in Mr Smith’s submission, the Commissioner could have been criticised for trying to bring the on notice restraining order application on while the parties were trying to resolve all matters. Although the McLeans had made it clear they were not consenting to the on notice restraining order application, they were not required to file a notice of opposition or supporting affidavits in order to minimise costs to them if the substantive application could be resolved.
[41] Mr Smith also explained that this was not a case of the Commissioner avoiding costs. He was incurring costs by preparing and exchanging the draft affidavits proposed to be filed in support of the application for civil forfeiture orders in order to advance negotiations with the McLeans.
[42] Finally, while Mr Smith accepts that there is inevitably a degree of prejudice to the McLeans from the fact of the restraining order being in place, here there is no particular or special prejudice such as to meet the threshold of serious prejudice to the respondents. Indeed, the delay in progressing the on notice restraining order was, for the reasons already explained, an attempt to avoid prejudice to the respondents.
[43] For all these reasons, the Commissioner says the applications should be dismissed.
Discussion
[44]The parties’ submissions raise two key questions:
(a)first, what was the nature of the orders applied for and made in respect of the Taieri Road property on 19 October 2022?; and
(b)second, whether, if the order made was a continuation of the without notice restraining order, the point has now been reached where the proceedings should be struck out for a failure to prosecute the on notice application with all due diligence?
What was the nature of the order made by Doogue J on 20 October 2022?
[45] The starting point for considering what was determined in the 20 October 2022 judgment is to look at the language of the judgment. In it, Doogue J ordered:
…that the interim restraining order made by Mander J on 13 April 2021 continues to apply to the following property, until further order of the Court:
The property then described is the Taieri Road property.
[46] In my view, it is clear that this is a variation of the without notice restraining order for the following reasons. First, the Judge describes the order as an “interim” restraining order. For the reasons articulated in the Commissioner’s submissions, I am satisfied that only a without notice restraining order can properly be described as an “interim” order. It endures pending the resolution of an application for an on notice restraining order. An on notice restraining order is made, after hearing argument, between the parties or by an agreement, and endures for a set period of time pursuant to s 41 of the Act. It does not endure pending the making of another form of restraining order.
[47] Second, the Judge specifies that it is the order made by Mander J on 13 April 2021 which she is varying. Were it otherwise, there would be no need to refer to it as a continuation of Mander J’s order.
[48] Third, the reference until “further order of the Court” envisages that there is another decision to be determined. Were the Judge making an on notice restraining order it would have specified a termination date of up to one year in the future as required under s 41 of the Act. It does not do that.
[49] I also note that, while not strictly determinative, the wording of the order is consistent with the expressed intention of the parties at the time they applied for the variation of the order. The McLeans had made clear that, at the time, they reserved their rights to contest the application for an on notice order because they did not concede a restraining order was justified. That explains why the parties jointly agreed to a variation of the without notice restraining order. It left open the option to contest the making of an on notice restraining order being made.
[50] Accordingly, I am satisfied that Doogue J’s decision dated 20 October 2023 did no more than vary the without notice restraining order so that it only applied to the Taieri Road property, as was agreed by the parties.
Should the proceedings now be struck out for failure to prosecute the on notice application with all due diligence?
[51]Section 39(3) of the Act provides:
(3)An applicant for restraining order B must prosecute the application with all due diligence, and if the applicant does not do so, the court may, on the application of any party to the proceedings, order that the proceedings be struck out.
[52] The main focus of the submissions for the McLeans was that, regardless of whether the Commissioner understood the McLeans were agreeable to deferring the on notice application, s 39(3) puts a positive obligation on the Commissioner to progress the application with all due diligence. He did not do so in this case and the point had been reached where the proceedings should be struck out.
[53] The only case law on the threshold for striking out such proceedings for failing to discharge a duty to prosecute an application for restraining order with all due diligence appears to be Solicitor-General v Cleven, which was decided under a similar provision to s 39(3) of the Act, being s 41(4) of the Proceeds of Crime Act 1991.8
8 Solicitor-General v Cleven HC Auckland 5-IM/2000, 15 March 2001.
[54] Under s 41(4), a duty was imposed on the applicant “to prosecute the application with all due diligence”. As under s 39(3), a failure to do so gave rise to the Court’s ability, in its discretion, to order the proceedings to be struck out.
[55] In Solicitor-General v Cleven, unlike here, counsel were agreed that the phrase “with all due diligence” simply meant that the applicant had to pursue the application “with the vigour appropriate to the circumstances.”9 If there was a finding that the applicant had not pursued the application with all due diligence then, as under s 39(3), the Court still had a discretion as to whether or not to strike out the proceedings, and which is signalled by the use of the word “may”.
[56]In exercising that discretion, Morris J held that the Court must consider:
…the nature of the lack of action complained of, whether it was deliberate, excusable or understandable, the real effect of any such failure to act and overall, have regard to what is proper and just having regard to the position of [the respondent] in the circumstances established and the nature of the evidence and allegations made against him.
I note these considerations reflect those articulated in Lovie, with the ultimate question being what outcome best serves the interests of justice.
[57] In Solicitor-General v Cleven, the application to strike out was declined having regard to the following factors:
(a)the non-activity complained of was “minor in nature”;
(b)the non-action complained of was not deliberate but was in the nature of an oversight;
(c)during the period complained of, variation orders had been made, on the respondent’s application, which ensured any loss he suffered was minimised;
(d)counsel had been in regular contact with each other;
9 Solicitor-General v Cleven, above n 8, at [10].
(e)even if the matter had been brought on earlier, it was unlikely the order would have been discharged;
(f)the evidence before the Judge suggested there had been a significant sum earned from drug dealing; and
(g)it was expected that the application would now proceed with due expedition.
[58] I now turn to consider whether, in the circumstances of this case, there has been a failure to pursue the application with all due diligence and, even if that is established, whether I should, in the exercise of my discretion, strike out the proceeding.
[59] Despite the respondents’ submission, I do not consider the timeframe of one year to be determinative of whether there has been inordinate delay. In a simple case, that might be a useful measure, but in other cases, a longer timeframe may well be reasonable in all the circumstances.
[60] However, the more significant issue is whether that delay was excusable. Here, I am satisfied that it was. The Commissioner has sought to accommodate the McLeans, first, by relinquishing the restraining order over all property that was not considered necessary to meet the terms of a civil forfeiture order if one was made and second, by assisting the McLeans assess their overall litigation risk by providing them with the evidence the Commissioner would be relying on (albeit in draft), before pursuing the on notice restraining order. This was done with the agreement of then counsel for the McLeans who sought to dispose of the proceedings efficiently and without incurring unnecessary cost. It is difficult to understand how the Commissioner could be criticised for not insisting on progressing an on notice application when this was done to suit the respondents.
[61] I also do not consider there has been any special prejudice to the respondents. They point to no circumstances which suggest the existing restraining order has caused particular prejudice to them, other than by its mere existence and the knowledge that
should they want to deal with the Taieri Road property in any way, they would be prevented from doing so unless the Court authorised a variation to the order.
[62] It follows that I do not consider the interests of justice are served by striking the proceedings out and I decline to exercise my discretion to make the orders sought.
Conclusion
[63] The application to discharge the without notice restraining order and to strike out the proceedings are both dismissed.
[64] Costs are reserved. My tentative view is that the Commissioner is entitled to costs on a 2B basis. If costs can not be agreed, any application for costs must be brought within 20 working days of this decision.
Solicitors:
Crown Solicitor, Dunedin Molloy Hucker, Auckland
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