Commissioner of Police v McRae

[2017] NZHC 1811

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2014-463-0110 [2017] NZHC 1811

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

ANDREW DONALD MCRAE AND OTHERS

Respondents

Hearing:	1 August 2017 (by telephone)
Counsel:	C H Macklin for Applicant D Hayes for Third to Sixth Respondents No appearance by, or on behalf of First and Second Respondents
Judgment:	1 August 2017

JUDGMENT OF HEATH J

This judgment was delivered by me on 1 August at 4.30pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Crown Solicitor, Rotorua
Counsel:

D Hayes, Hamilton

COMMISSIONER OF POLICE v MCRAE AND OTHERS [2017] NZHC 1811 [1 August 2017]

Introduction

[1]      The Commissioner of Police (the Commissioner) seeks forfeiture orders in relation to three properties, situated at 37, 39 and 43/49 Prospect Avenue, Tirau (the properties).   The application is made under the Criminal Proceeds (Recovery) Act

2009 (the Act).  The substantive proceeding is set down for hearing over two weeks, from 4 September 2017.

[2]      A restraining order in respect of each of the three properties was made by Keane J, on 7 July 2014.  Those orders were subsequently renewed, and remain in force.1   The Commissioner and the parties who are named as registered proprietors of the properties have reached a settlement.  The Commissioner asks this Court to approve that arrangement, under s 95 of the Act.2

[3]      The  Commissioner  alleges  that  the  proceeds  of  a  commercial  cannabis operation  undertaken  by  Mr  Andrew  McRae  were  used  to  acquire  the  three properties.  It is alleged that the properties were acquired to launder money derived from  the  proceeds  of  crime.    As  such,  the  Commissioner  contends,  the  three properties ought to be forfeited.

[4]      At present, Mr Henson and Ms Sawers hold the three properties as trustees for the Henson Family Trust (the Trust).  Mr and Mrs Henson are the fourth and sixth respondents respectively.  Ms Sawers is the fifth respondent.  As at 1 July 2015, the combined registered value of the properties was $641,000.

[5]      Mr McRae and Ms Nicola Kenney, the first and second respondents, have taken no steps to defend the application.   If the proposed settlement between the Commissioner  and  the  registered  proprietors  were  approved  by  this  Court,  the

Commissioner does not wish to proceed against Mr McRae and Ms Kenney.

1      See para [12] below.

2      Section 95 of the Criminal Proceeds (Recovery) Act 2009 is set out at para [6] below.

The settlement approval application

[6]      Section 95 of the Act provides this Court’s jurisdiction to approve settlement

arrangements into which the Commissioner wishes to enter.  It 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.

[7]      Questions of settlement must be considered against the background purposes of the Act.  Section 3 provides:3

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.

3      See also Hayward v Commissioner of Police [2014] NZCA 625, at para [29] and Marwood v

Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260, at para [12].

[8]      There is a strong public interest in litigation of this type being brought to a prompt conclusion.   As long as the settlement reflects the likely costs and risks inherent in determination of a contested application, it will generally be approved.

Analysis

[9]      Under  the  proposed  settlement,  the Trust  has  agreed  to  pay  the  sum  of

$150,000 to the Commissioner, in full and final settlement of the claims against them.

[10]   The Commissioner contends that Mr McRae made a direct monetary contribution to the purchase of the properties in a sum close to $52,500.  He asserts that that contribution taints the properties, in the sense that but for that contribution they would not have been acquired.  The Commissioner relies on the definition of both “property” and “tainted property” in s 5 of the Act.  The Trust does not accept that is so.  It defends the application on that basis; with an alternative defence based on  the  “undue  hardship”  it  says  the  Trust  would  suffer  if  the  properties  were forfeited.

[11]     The agreed settlement figure of $150,000 recognises the risks inherent in the litigation.   In order to facilitate settlement, a variation to the terms of restraint is required, to enable the Trust to sell two of the properties on the open market, or to refinance in a manner which will enable funds to be released.   The underlying agreement is that the sum of $150,000 will be paid by the Trust to the Official Assignee in cleared funds, no later than midday on Friday 27 October 2017.

[12]     The restraining order, most recently renewed by Fitzgerald J on 26 April

2017,  puts  the  three  properties  under  the  custody  and  control  of  the  Official Assignee, and restrains disposition or other dealings in a manner contrary to the order.  The parties seek a variation which will enable 39 and 43/49 Prospect Avenue to be sold or refinanced, and 37 Prospect Avenue refinanced only. A variation to that limited extent is sought.

[13]     I consider that the proposed settlement reflects the underlying purposes of the Act.4     In my view, the costs to be saved to the Commissioner as a result of the vacation of a trial scheduled for two weeks, coupled with an assessment of the relative risks involved in proceeding with the application, justify an order approving the settlement.

[14]     In order to give effect to the settlement, it will be necessary to vary the orders to enable the properties involved to be sold or refinanced, and moneys paid to the Official Assignee.  If the Official Assignee does not receive $150,000 by midday on

27 October 2017 (or any later date that might be ordered by the Court), the Commissioner’s position will be protected by an assets forfeiture order that can lie in Court until that date.

[15]     I consider that is an appropriate way of addressing contingencies to enable vacation of the fixture now, and to provide a firm foundation on which settlement can be implemented.  It is agreed that costs will lie where they fall.

[16]     Given the Commissioner’s position in relation to Mr McRae and Ms Kenney, the claims against them will be dismissed, with no order as to costs.

Result

[17]     For those reasons, I make the following orders:

(a)      Variation of the restraining order

(i)The restraining order most recently extended by Fitzgerald J on  26 April  2017,  is  varied  so  as  to  permit  the registered proprietors of the properties at 37, 39 and 43/49 Prospect Avenue,  Tirau  (more  particularly  described  in  titles SA809/198, SA42C/333 and SA42C/331 respectively) to sell or refinance the properties at 39 and 43/49 Prospect Terrace, Tirau, and to refinance the property at 37 Prospect Avenue,

Tirau.

4      See s 3 of the Criminal Proceeds (Recovery) Act 2009, set out at para [7] above.

(ii)The proceeds of any sale or refinancing shall be restrained from disposition other than in accordance with this order.

(iii)On the day on which funds are received by the solicitors for the Trust (whether from sale or refinancing), the proceeds shall be distributed by them as follows:

1.  First, to discharge the mortgage to Westpac Bank.

2.  Second, to pay any reasonable conveyancing costs.

3.  Third, to pay remaining funds to the Official Assignee.

(iv)     On  receipt  of  funds,   the  Official  Assignee   shall  retain

$150,000 as settlement for the Commissioner, with any surplus being returned to the Trust.

(v)Unless time is extended by further order of this Court, if settlement of the sale or refinancing of any of the properties at Prospect Avenue, Tirau have not been effected by midday on

27 October 2017, the order varying the restraint order shall lapse.   The original form of the restraining order will then continue in force pending implementation of the assets forfeiture order.

(b)      Assets forfeiture order

(i)An assets forfeiture order is made in respect of the properties at 37, 39 and 43/49 Prospect Avenue, Tirau which shall lie in Court until midday on 27 October 2017, or any later fixed by further order of this Court.

(ii)      The assets forfeiture order shall come into force if the sum of

$150,000 has not been paid to the Official Assignee by midday on 27 October 2017, or such later date as this Court may order.

(iii)In  the  event  that  the  assets  forfeiture  order  is  sealed,  the Registrar shall arrange a telephone conference before a Judge as soon as practicable thereafter for further directions to be made to give effect to the settlement agreed.

(c)       No order as to costs

[18]     The application against Mr McRae and Ms Kenney is dismissed, with no order as to costs.

[19]     Leave is reserved to apply if any difficulties arise in sealing the orders I have made.

[20]     The fixture set down to commence on 4 September 2017 is vacated, and appearances are excused.

[21]     I thank counsel for their assistance.

P R Heath J

Delivered at 4.30pm on 1 August 2017