Commissioner of Police v Pham
[2024] NZHC 2283
•14 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1144
[2024] NZHC 2283
UNDER Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
KY VAN PHAM
First Respondent
THU HUONG LE
Second RespondentKY VAN PHAM and THU HUONG LE as
trustees of the TOMKAT FAMILY TRUST Third Respondent
Hearing: 17 July 2024. Further submissions 22 and 23 July 2024. Appearances:
A Mackenzie and L Lai for the applicant Self-represented first respondent
K Hogan for the second respondent
Judgment:
14 August 2024
JUDGMENT OF GORDON J
This judgment was delivered by me on 14 August 2024 at 3 pm pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Meredith Connell, Auckland K Hogan, Barrister, Auckland
COMMISSIONER OF POLICE v PHAM [2024] NZHC 2283 [14 August 2024]
[1] By application dated 18 December 2023 the Commissioner of Police (Commissioner) seeks orders:1
(a)directing the Official Assignee (OA) to sell restrained property at 1 Garcia Place, West Harbour, Auckland, owned by the first respondent, Ky Van Pham,2 and the second respondent, Thu Huong Le as trustees of their family trust, the Tomkat Family Trust (Trust);
(b)directing the OA to pay the net proceeds from the sale the amount of
$600,000 plus interest to the interested party Nam Phan;3 and
(c)any surplus proceeds of sale following the payment to Nam Phan to be held by the OA as restrained property in an interest-bearing account pending further order of the Court;
(together, the application).
[2] The Commissioner seeks to sell 1 Garcia Place because the respondents owe a debt to the interested party, Nam Phan, that they are unable to repay. Nam Phan loaned the respondents $600,000 (Garcia loan) which they used to purchase 1 Garcia Place. The Garcia loan is accruing penalty interest. It is secured by way of a caveat over 1 Garcia Place.
[3] Nam Phan consents to the application. In a joint memorandum of counsel for the Commissioner and counsel for Nam Phan, the Commissioner records his satisfaction that the Garcia loan was a genuine loan sourced from legitimate funds and that Nam Phan should be repaid.
[4] Ky Pham and Ms Le were formerly partners but have since separated. In principle, they do not oppose the sale of 1 Garcia Place, nor the repayment of Nam Phan (they accept the Garcia loan plus the interest that is accruing needs to be
1 Pursuant to the Criminal Proceeds (Recovery) Act 2009, ss 33, 34 and 35.
2 Rather than referring to the first respondent as Mr Pham, because of the similarity in the family name with the interested party, I will refer to the first respondent as Ky Pham.
3 For the same reason as in n 2 above, I will refer to the interested party as Nam Phan rather than Mr Phan.
repaid). However, in her notice of opposition dated 26 April 2024 Ms Le opposes the OA conducting the sale process. She further says she and Mr Pham should oversee the sale arrangements, following which the OA could confirm the sale is bona fide and for fair market value. Ky Pham, representing himself, agreed that Ms Le should conduct the sale process.
[5] Towards the end of the hearing Ms Hogan, counsel for Ms Le, proposed that the sale process be conducted jointly between Ms Le and the OA. Submissions on that issue were filed, with leave, after the hearing.
[6] In those supplementary submissions both respondents confirm that while they would consent to the joint sale process proposed by Ms Le, they maintain their opposition to the sale occurring without the following payments being made from the proceeds of sale: a further $20,000 the Trust owes to Nam Phan and amounts the Trust allegedly owes to Nam Phan’s and Ky Pham’s companies for renovation work on 1 Garcia Place.
[7] The Commissioner opposes both Ms Le conducting the sale instead of the OA and the joint process proposed by Ms Le. The Commissioner also opposes the additional payments being made out of restrained funds.
Background
[8] The application arises from a Police investigation in December 2021 into the commercial cultivation and sale of cannabis in various commercial, residential and rural properties in the Auckland area. The Police say that several properties owned by Ky Pham and Ms Le were for cannabis cultivation.
[9] Ky Pham has been charged with offences under the Misuse of Drugs Act 1975 and the Crimes Act 1961, including the cultivation and sale of cannabis, and money laundering.
[10] Ms Le has been charged with three representative charges of money laundering. On 10 May 2024 her application for the dismissal of all the money laundering charges was dismissed by the District Court.4
Procedural history
[11] The Commissioner has restrained the following property attributed in part to Ms Le, in part to Ky Pham or his company HandymanKiwi Ltd (HandymanKiwi) and in part to the Trust:
(a)12 Birkenhead Avenue (tenanted) and rental income from 12 Birkenhead Avenue;
(b)594 Te Atatu Road;
(c)1 Garcia Place (allegedly used for cannabis cultivation);
(d)1190B Wharehine Road (allegedly used for cannabis cultivation);
(e)130 Te Pua School Road (allegedly used for cannabis cultivation);
(f)2016 Toyota Highlander;
(g)Toyota Hiace;
(h)Bank funds of approximately $64,000;
(i)approximately $20,000 cash found in the Toyota Hiace;
(j)$6,820.70 cash found at 594 Te Atatu Road;
(k)Rental income from 12 Birkenhead Avenue.
4 R v Thu Huong Le [2024] NZDC 9871.
[12] After receiving legal advice Ms Le did not oppose restraint. But she did not make any concession regarding the contents or admissibility of the evidence filed in support of the Commissioner’s various restraint applications.
[13]On 27 October 2022 a sale order was granted over the Toyota Highlander.
[14] On 25 November 2022 further orders were made by consent for the sale of 130 Te Pua School Road and for the OA to use the proceeds of sale to repay loan facilities secured over 12 Birkenhead Avenue and 594 Te Atatu Road.
[15] On 17 October 2023 further orders were made by consent for the sale of 1190B Wharehine Road and for the OA to use the proceeds of sale to repay loan facilities secured over 12 Birkenhead Avenue and 594 Te Atatu Road.
[16] On 26 February 2024 counsel for the Commissioner and counsel for Nam Phan filed a joint memorandum in relation to the application. As already noted, Nam Phan consents to the application. The joint memorandum records the following further agreement between the Commissioner and Nam Phan:
(a)Costs to lie where they fall in relation to all matters between the Commissioner and Nam Phan in this proceeding.
(b)Nam Phan records his right to recover $20,000 in relation to money loaned to the respondents (as trustees of the Trust)5 and his legal costs incurred in relation to the repayment of the Garcia loan, directly from Ky Pham and Ms Le.
(c)The agreement is in full and final settlement of any claim Nam Phan might have against the Commissioner in relation to any of the property restrained in this proceeding.
5 There were two separate loans by Nam Phan to the Trust. One, for $400,000 was repaid to Nam Phan. But the interest of $20,000 on that loan was not repaid. There is no penalty interest accruing on the $20,000.
The parties’ respective positions on the application
Commissioner
[17] The Commissioner says he simply seeks the sale of 1 Garcia Place in order to repay Nam Phan, thereby preventing further penalty interest accruing and preserving the value of the property restrained.
Ms Le
[18] In her second notice of opposition dated 26 April 2024 Ms Le says she opposes the application to the following extent:
(a)that the OA be tasked with selling 1 Garcia Place; and
(b)that 1 Garcia Place be sold absent determination of other debt-reduction issues.
[19] In the grounds for her opposition Ms Le says she is concerned that the OA will not act promptly in selling 1 Garcia Place and that the OA will not realise the best value for Garcia Place.
[20] Another ground for Ms Le’s opposition (as amended during oral submissions) is that she says there are other debt-reduction issues which should be resolved by the Court prior to or in conjunction with the sale of 1 Garcia Place and the balance of the sale proceeds should be used to make those payments. In particular she says the Court should order:6
6 One of those debt reduction issues referred to in the notice of opposition was that the sale proceeds be used to discharge the remainder of the Trust’s bank loan facility. In the course of the hearing Ms Hogan, counsel for Ms Le, accepted that the Trust’s indebtedness to the bank is fully discharged. The notice of opposition also referred to maintenance work required for 12 Birkenhead Avenue. Ms Le said either Ky Pham should carry it out or the OA should contract a provider who offers a similar rate to Ky Pham. She says the quotes obtained by the OA for the work are too high. At the hearing it became apparent that as at 7 June 2024 the OA had advised that the work was very close to being completed. This issue therefore also fell away.
(a)Repayment of the $20,000 of interest owed by the Trust to Nam Phan. She says there is no reason to make a distinction between that sum and the $600,000 plus interest also owed by the Trust to Nam Phan.
(b)The Trust’s debt to Ky Pham by his company HandymanKiwi for work for the Trust on 12 Birkenhead Avenue and 1 Garcia Place before those properties were restrained, be discharged from restrained property.
(c)All invoices for Nam Phan’s company Specialist Tiling Services Ltd (Specialist Tiling) for work he did on 1 Garcia Place.
Ky Pham
[21] Ky Pham has not filed a notice of opposition but he has filed an affidavit in opposition. Based on that affidavit it appears that Ky Pham’s position is that in addition to the repayment of the Garcia loan, the following repayments should be made:7
(a)The repayment of all invoices for his company, HandymanKiwi, for work on 12 Birkenhead Avenue and 1 Garcia Place (same position as Ms Le in [20(b)] above).
(b)All invoices for Nam Phan’s company, Specialist Tiling, for work he did on 1 Garcia Place (same position as Ms Le in [20(c)] above).
Legal framework
[22] The application is to be determined under ss 33, 34 and 35 of the Criminal Proceeds (Recovery) Act 2009 (Act). Further orders may be applied for by the applicant for the restraining order.8 The Court may make further orders in relation to the restrained property if it considers it appropriate.9 The further orders can be made either at the same time of the restraining order or at any later time before the expiry of the associated restraining orders.
7 Ky Pham also referred to the quotes for work at 12 Birkenhead Avenue as referred to in n 6 above.
8 Criminal Proceeds (Recovery) Act, s 33(1).
9 Section 34.
[23] Section 35 of the Act sets out the types of further orders that the Court may make. One of those orders is for restrained property in the custody and control of the OA to be sold in order to preserve its value.10 The OA has a statutory duty to preserve the value of the restrained property.11
[24] In Commissioner of Police v Skiffington when granting the Commissioner’s application for further sale orders over restrained real estate this Court stated:12
The question for my determination is whether, in the face of mounting mortgage arrears, a sale order is necessary to preserve the equity in the house. I have been persuaded that it is necessary. Since the verdict and findings of the High Court, not impeached on appeal, the Plimmerton property is correctly viewed as tainted by the proceeds of crime. The Commissioner has a proper interest in preservation of its value. The value is being eroded by the steadily increasing arrears. A sale order is the means by which to preserve value.
Issues
[25]There are three issues for determination:
(a)whether 1 Garcia Place should be sold;
(b)if so, who should oversee the sale process; and
(c)whether the Court should impose further conditions on the sale orders in relation to the surplus proceeds of sale in the manner sought by the respondents.
[26] The Commissioner’s position is that if the application is granted as sought, the OA will oversee the sale of 1 Garcia Place. Following the repayment of the Garcia loan the OA will hold the derived funds, which are restrained,13 in an interest-bearing account until the forfeiture proceedings are finally determined.
10 Section 35(e)(v).
11 Section 80.
12 Commissioner of Police v Skiffington [2017] NZHC 1687 at [40].
13 Criminal Proceeds (Recovery) Act, s 36(4).
Issue 1: should 1 Garcia Place be sold?
[27] This issue is not contested (but with the respondents saying their agreement is subject to other payments being made in order to discharge certain liabilities). In the circumstances with penalty interest accruing on the Garcia loan which is secured against 1 Garcia Place and the value of the property eroding, I consider it is appropriate for 1 Garcia Place to be sold (and the Garcia loan repaid) to preserve its value as restrained property.
Issue 2: who should oversee the sale of 1 Garcia Place?
[28] I will first address whether the OA or Ms Le should oversee the sale process and then whether the joint process proposed by Ms Le should be ordered.
The OA or Ms Le?
[29] The OA’s statutory obligation to preserve the value of restrained property in his custody and control permits him to do “anything reasonably necessary to preserve the value” including selling restrained property.14 As Mr Mackenzie, counsel appearing for the Commissioner notes, the OA regularly deals with restrained property, including the sale of restrained property when further orders are made such as those sought here under ss 33, 34 and 35 of the Act or disposing of property in accordance with civil forfeiture orders made under the Act.15
[30] Anthony Pullan, an OA and Regional Manager Hamilton of the Insolvency and Trustee Service, filed an affidavit in response to Ms Le’s criticisms of the OA in relation to the sale of other restrained properties owned by Ky Pham and Ms Le.
[31] Mr Pullan says in Auckland the OA has a procurement arrangement with real estate firms. That pre-existing relationship means it is a simple process to initiate the sale of a property. He explains the sale process, which includes: initiation of the
14 Section 80(1).
15 Sections 82 and 83.
marketing campaign, seeking of advice on it, and obtaining a registered valuation for each property the OA is directed to restrain.16
[32] Mr Pullan explains that it has become more common recently for the OA to struggle to get a price at or near the registered valuation as market conditions have changed.
[33] Once offers are received Mr Pullan says it is either he or Bryce Rayner, acting Criminal Proceeds Management Team Leader, who makes the ultimate assessment as to whether that price should be accepted. In making the assessments they consider a variety of matters including (but not limited to):
(a)the registered valuation;
(b)the real estate agent’s appraised marketing range and professional opinion;
(c)buyer price feedback;
(d)if rubbish and belongings are left at the property, the likely costs of a general clean of the property;
(e)time on the market;
(f)previous offers; and
(g)any issues that may have come to light with the property during the sales process which may not have been known or considered by the valuer such as unconsented works or unknown defects.
[34] Mr Pullan emphasises the OA’s independence in selling restrained properties and says this is important in the context of proceedings under the Act. First he says because the OA is not emotionally invested in any of the properties, it means the OA
16 The registered valuation includes not only a fair market value for the property but also the indemnity value necessary for the property to be insured.
is likely to respond more quickly and impartially to market conditions and be reasonable but realistic about price and does not speculate. Second, he says the OA’s independence enables the OA to be more commercially realistic about the process in the context of proceedings under the Act.
[35] Mr Pullan also addressed issues that can arise if respondents are entrusted with the sale process. He says a primary issue is that the OA is not legally permitted to have another person or entity sign it up to liabilities. He says if the OA were to sign the listing agreement but with the respondents organising the sale, then the respondents would have some influence over whether the OA incurs a loss. He says this separation would mean that the OA takes all the risk.
[36] In the alternative he says if the respondents were to sign the listing agreement themselves, other issues arise. For example, he says should the sale fall through and costs be incurred, his understanding is that the respondents would not be able to use the restrained property to meet those costs in the absence of a court order.
[37] Next, he says if the respondents agreed to take the risk of those costs with unrestrained funds, allowing them to take over the process, that may give rise to the risk that they are dishonest in how they deal with the sale. He says, by way of example, they may enter into transactions outside the sale and purchase agreement with the purchaser including kickbacks. In other words, and by way of example, they could document a lower sale price in the agreement if the purchaser agreed to pay them cash separate from the agreement.
[38] Mr Pullan notes his awareness that in the present case Ky Pham transferred the restrained proceeds of the sale of 1190B Wharehine Road to another bank account so that those funds could not be used in accordance with the court order.17 He says that is a perfect example of why it is important that restrained assets are placed into the custody and control of, and sold by, the OA.
[39] I consider all of the above strongly supports the OA and not the respondents having control of the sale process of 1 Garcia Place.
17 Ky Pham gave evidence at the hearing but exercised his right not to answer questions on this issue.
[40] However, it is nevertheless necessary to address Ms Le’s original case as to why she should oversee the sale arrangements including her criticisms of the OA’s handling of the sale of 130 Te Pua School Road and 1190B Wharehine Road. There are essentially three complaints that she makes: the OA did not act promptly to sell 130 Te Pua School Road after the restraining order was made for that property; the sale prices for both properties were too low; and the OA did not consult during the sale process.
[41] Ms Le also says that in resisting the proposal that she sell the properties, the Commissioner has focused on the actions of Ky Pham, who is now her former partner. She says the Commissioner has not offered a reason as to why she cannot undertake the role of the sale of the property owned by her Trust.
[42] The Commissioner responds to Ms Le’s criticisms not only through Mr Pullan’s affidavit but also by way of an affidavit from Isabella Wilson, who is a member of the Criminal Proceeds Management Unit for the OA. Her role is the Criminal Proceeds coordinator. Ms Wilson has been the file holder at the OA for these proceedings since 25 October 2022. In that capacity she has overseen various sales of the restrained property and has also had dealings with Ky Pham.
[43] First, in relation to the allegation that the OA did not act promptly, Ms Wilson responds in detail setting out the steps that were taken to sell 130 Te Pua School Road. I briefly summarise her evidence. She says that on 28 November 2022 she received a copy of the sealed further orders dated 25 November 2022 directing the OA to sell the 130 Te Pua School Road property. Between 28 November 2022 and 9 January 2023 the OA completed an appeal check process with the Court of Appeal. The Court of Appeal confirmed no appeals had been filed.
[44] On 12 January 2023 Ms Wilson completed a legal referral for the sale of 130 Te Pua School Road and sent it to her team leader for approval. On 2 March 2023 the legal referral was signed off. Ms Wilson notes the legal approval process was delayed due to widespread illness within the OA’s office.
[45] On 15 March 2023, counsel for the OA confirmed contact had been made with a real estate agent (agent) at Barfoot and Thompson for the sale of 130 Te Pua School Road. The OA made arrangements with Ky Pham for access to be granted to 130 Te Pua School Road on 24 March 2023 for an inspection and appraisal. Ky Pham did not attend as agreed and it was not possible to gain access. A new date for access of 5 April 2023 was arranged for Ky Pham for appraisal purposes. He did not grant access on that day.
[46] On 26 April 2023 the appraisal of 130 Te Pua School Road was completed. Once again Ky Pham did not attend. However, he had left the property unsecured, which allowed the OA and the agent to complete the appraisal.
[47] On 8 May 2023 Ms Wilson asked Ky Pham to clean up the property. He asked to be paid to do so. Ms Wilson says the state of the property was such that it was not able to be professionally photographed and marketed for sale until it was cleaned. On 26 May 2023 Ms Wilson again asked Ky Pham if he had cleaned the property recently. He once again asked to be paid.
[48] On 9 August 2023 Ms Wilson was provided with an update on the sale process. Only one offer of $850,000 was received at tender. Given the registered valuation was
$1,475,000 excluding chattels, a sale was not completed.
[49] On 1 September 2023 counsel for the OA advised counsel for the Commissioner and Ky Pham that offers for 130 Te Pua School Road were increasingly closer to a realistic sale price.
[50] On 19 September 2023 a conditional offer was agreed for $1,200,000. Settlement was to be 30 October 2023 if the conditional dates were satisfied. Between 29 September 2023 and 3 November 2023 the conditional dates were extended for due diligence. The OA consented to these requests for extensions as there was no other interest in the property for that price or higher. On 9 November 2023 the sale of 130 Te Pua School Road for $1,200,000 was completed. A settlement date of 30 November 2023 was set.
[51] There were other issues that the OA and agent were required to deal with during the sale process including neglected and malnourished livestock on the property. Engaging with Ky Pham on this issue was an extended process. Finally, on 29 November 2023 the agent arranged for the livestock to be sold to a third party. Ky Pham agreed and collected the payment.
[52] The above is merely a summary of Ms Wilson’s evidence as regards the sale process. There is further detail in her affidavit. It is not necessary to mention that further detail in this judgment. With one exception, I am satisfied that the steps taken by the OA to sell 130 Te Pua School Road were appropriate and timely. There was an unnecessary delay on the part of the OA between 28 November 2022 and 9 January 2023. As the restraining order had been made by consent there was no need to wait until the expiry of the appeal period. However, I do not consider that the one error by the OA detracts from the overall timeliness of steps taken. The delay due to illness in the OA’s office was unfortunate but I do not attribute any blame to the OA for that.
[53] Next, I address the issue of the sale price for 130 Te Pua School Road and 1190B Wharehine Road. Ms Le alleges that the OA did not achieve full market value for the sale of 130 Te Pua School Road and that the costs incurred were very high and not necessary. I will start with that property and then turn to the sale price for 1190B Wharehine Road. Ms Wilson says that there were significant issues with the property which were ongoing and were caused at least in part by Ky Pham and the property was sold to the highest offer received following a comprehensive sales process.
[54] The following is again simply a summary of Ms Wilson’s evidence regarding the sale price and costs associated with the sale. She says a total of 13 open homes were held and the property was on the market for a total of 162 days. There were 20 viewings at the open homes, three private viewings and 24 phone enquiries. The total views for the property comprised 11,316 listing views, search views, email and phone enquiries, engagements and other media interactions. Online marketing generated 22,393 searches.
[55] The registered valuation was $1,475,000 excluding chattels. The agent’s Comparable Market Appraisal gave the property a sales range of
$1,200,000–$1,400,000. During the marketing campaign buyer price feedback was between $800,000–$1,250,000.
[56] The property went to tender on 27 July 2023 with one offer received at tender of $750,000, which was increased to $850,000 following a counteroffer from the OA. That offer was not accepted by the OA.
[57]Subsequent to tender, various offers were received, the highest being
$1,200,000. As already noted 130 Te Pua School Road eventually settled at a purchase price of $1,200,000.
[58] There were various costs that needed to be incurred having regard to issues with the property. A methamphetamine report dated 24 April 2023 confirmed the property and all dwellings on the property were contaminated. The written appraisal report for the property dated 5 May 2023 set out a number of issues with the property including that it was in a state of disrepair with unconsented works.
[59] As already noted, Ms Wilson asked Ky Pham to clean up the property and deal with rubbish and personal belongings. Ms Wilson told him the OA would not be paying him to clean the property as it was his and Ms Le’s house. He did not respond further.
[60] Given Ky Pham’s position, on 21 June 2023 Ms Wilson obtained a quote which totalled $5,520 for a professional company to clean the interior and tidy the exterior of the property. That quote was provided to Ms Hogan. On 26 June 2023 Ms Wilson was advised by counsel for the Commissioner that Ms Le had approved the quote and the OA could proceed with engaging professional services to clean up 130 Te Pua School Road. The clean-up was completed on 28 June 2023.
[61] Ms Wilson also reports that one day prior to settlement and during the purchasers’ pre-settlement inspection, piles of trees and rubbish were observed having been dumped on the property. The purchasers asked that the rubbish be removed and
that the funds would be withheld until that occurred. However, the purchasers eventually did settle. Ms Wilson’s understanding is that Ky Pham had been dumping and burning rubbish on the property throughout the marketing period.18
[62] Having regard to Ms Wilson’s evidence I do not consider that Ms Le’s criticism of the purchase price for 130 Te Pua School Road has any substance. There were issues with the property that appear to have been significant and ongoing, and were in part caused by Ky Pham. Ms Wilson’s evidence discloses a comprehensive sales process and the property was sold to the highest offer received following that process.
[63] In relation to 1190B Wharehine Road, both Ky Pham and Ms Le say that the sale price of $550,000 was too low.
[64] Ms Wilson says that on 18 October 2023 she received a copy of the sealed further orders dated 17 October 2023 requiring the OA to sell the property at 1190B Wharehine Road. The property was appraised on 24 November 2023. The OA received advice that due to the impending Christmas and New Year period, there would be little utility in listing the property on the market before the New Year. Further, if that were done, that could open up potential issues with the rural property being vacant.
[65] She says on 11 January 2024 1190B Wharehine Road was put on the open market. On 7 February 2024 the property went to auction with one bidder participating. It did not sell.
[66] The property eventually sold. The sale of the property ultimately settled on 30 April 2024. It had been on the market for a total of 55 days.
[67] As with 130 Te Pua School Road, there were issues with this property. On 14 July 2022 the OA had arranged for a registered valuation of 1190B Wharehine Road. The valuation noted that the site may be regarded as contaminated, as there were piles of waste material lying around, and the cost to remove the existing, obsolete
18 Under cross-examination Ky Pham accepted that he was burning rubbish at the property but denied that he dumped the rubbish.
structures was high and would impact negatively on the value. The market value was assessed at $550,000 and a realistic market range was said to be between $360,000 and $600,000.
[68] Buyer property feedback during the marketing was that the property was essentially beyond repair. Most parties that inspected the property felt that the work required to be done was too much to undertake.
[69] Ms Wilson says in summary a total of nine open homes were carried out. There were 1,212 views, 64 watches and five enquiries on TradeMe, 8,981 views and 8,410 searches on Realestate.com and 965 views on OneRoof.
[70]The agent’s Comparable Market Appraisal gave the property a sales range of
$450,000–$550,000. During the marketing campaign, buyer price feedback was between $200,000–$300,000.
[71] The property went to auction on 7 February 2024 with one bidder participating. The bidding began at $300,000 and was eventually pushed by the agent to $450,000. This offer was presented to the OA for consideration. Ky Pham and Ms Le were advised and considered it to be too low. The OA presented a counteroffer at the registered valuation of $550,000, which the bidder was unable to meet.
[72] The OA received one offer of $285,000 post-auction which was not considered. On 11 March 2024 the OA received an offer of $550,000. Ky Pham and Ms Le were advised of the offer and again indicated it was too low. However, as it was in line with the registered valuation, the OA accepted the offer.
[73] I do not consider there is any substance in the respondents’ criticism of the sale price obtained for 1190B Wharehine Road having regard to the issues with the property. The price achieved was near the top of the market range in the valuation and significantly exceeded the buyer price feedback during the sale process.
[74] Finally, there is the respondents’ complaint that they were not kept informed during the sale process. Ms Wilson refers to the communications and annexes some
correspondence. I do not propose to traverse all those communications. In short Ms Wilson says:
3.24As stated above, [1190B Wharehine Road] went to auction on 7 February 2024 with one bidder participating. The bidding began at
$300,000 and was eventually pushed by the agent to $450,000. This offer was presented to the OA for consideration. Mr Pham and Ms Le were advised of the offer and considered it to be too low. The OA presented a counter offer at the registered valuation of $550,000, which the bidder was unable to meet.
[75] It is clear from the above evidence that the views of Ms Le and Ky Pham were sought during the bidding process.
[76]Ms Wilson further says:
3.28 On 11 March 2024, the OA received an offer of $550,000 for the property. Mr Pham and Ms Le were advised of the offer and again indicated it was too low. However, as it was in line with the registered valuation, the OA accepted the offer.
[77] Again, it is apparent that Ms Le and Ky Pham were consulted and expressed their views on the sale price. However, I consider it was appropriate for the OA to accept the offer as it was in line with the registered valuation.
[78] In relation to 130 Te Pua School Road, as referred above Ms Le and Ky Pham were consulted regarding costs for cleaning up the property as part of the sale process. There is also correspondence from counsel for the Commissioner updating Ms Le and Ky Pham of the sale process and inviting them to share their thoughts.
[79] I consider that the evidence establishes that Ky Pham and Ms Le were kept properly informed.
[80] In conclusion on this issue, for the reasons set out in Mr Pullan’s affidavit, the OA is the appropriate person to manage the sale of 1 Garcia Place. There is nothing in the criticisms made by Ky Pham and Ms Le of the OA’s management of the sale of 130 Te Pua School Road and 1190B Wharehine Road that suggests the respondents should be permitted to manage the sale of 1 Garcia Place.
Should the process be a joint process?
[81] As part of the joint process put forward by Ms Le, she proposes that the Court orders should provide that the sale of 1 Garcia Place must be at a price sufficient to repay the Garcia loan and that the sale should have a settlement date no later than five months after the date of the Court orders.
[82] I accept the submissions made by Mr Mackenzie that it is difficult to see how such conditions could be enforceable. As Mr Mackenzie submits, if no offers sufficient to repay the Garcia loan were received within a period of five months from the date of the orders, it is not clear what the consequence would be. While both parties have an interest in a sale occurring as soon as reasonably practicable, there are many factors beyond the control of the agent which can influence how quickly a sale can be achieved and the price achieved.
[83] A further part of Ms Le’s proposal is that the OA will instruct a particular named agent at Harcourts Cooper & Co as the agent to market the property for sale. The proposal also contains a provision that the OA may instruct another agent to also market the property for sale at the same time as the named agent.
[84] Mr Mackenzie says the Commissioner is not opposed in principle, to the parties agreeing on a real estate agency to be appointed.19 However, Mr Mackenzie notes that the Commissioner has some concerns about the respondents selecting a particular agent on the basis of Mr Pullan’s evidence that this might create the possibility for dishonesty on the part of the respondents potentially entering into transactions outside the sale and purchase agreement as referred to in [37] above.
[85] In relation to the proposition that both parties appoint an agent or agency, the Commissioner says this will simply double the cost.
19 On 19 July 2024 the Commissioner rejected the proposal by Ms Le and counter-proposed a condition that the OA is to appoint a real estate agency as agreed between the OA and Ms Le. The condition also included that in the event that agreement cannot be achieved the OA was to determine the appropriate real estate agency. The proposal was not accepted.
[86] I consider there is substance in the Commissioner’s submissions in opposition to the joint process and agree that the above terms proposed by Ms Le should not be included in orders made by the Court.
[87] Ms Le also proposes a condition that the sale will be conducted by a means other than an auction. I accept Mr Mackenzie’s submission that there is not a reasonable basis for a condition limiting the methods by which 1 Garcia Place might be sold. I accept the submission that whichever agency is appointed, they will be best placed to determine, based on their expertise, which method of sale is best.
[88] In conclusion, the appropriate orders providing for the sale of 1 Garcia Place are those as sought in the application and not in the joint process proposed by Ms Le.
Issue 3: what conditions (if any) should be imposed on the surplus proceeds of sale?
[89] The Commissioner’s position is that the balance of the proceeds of the sale of 1 Garcia Place after the repayment of the Garcia loan including interest are to be held by the OA in an interest-bearing account until the forfeiture proceedings are finally determined.
[90] I will address in turn each of the three payments the respondents submit should be paid out of the balance of the restrained funds.
Interest of $20,000 owed by the Trust to Nam Phan
[91]In his affidavit of 30 October 2023 Nam Phan says:
4.Pursuant to a loan agreement dated 18 November 2020, I loaned a sum of NZD 400,000 to [Ky Pham and Ms Le], as trustees of the Tomkat Family Trust (the First Loan). The agreement provided for interest of 5% per annum commencing 26 November 2020.
5.On 21 December 2021, [Ky Pham and Ms Le] repaid the principal sum of the First Loan through their solicitor. [Ky Pham and Ms Le] and I orally agreed that they could delay payment of interest (NZD 20,000) and that further interest would not accrue on the unpaid interest. Interest has yet to be paid as at the date of this affidavit.
[92] Nam Phan then refers to the second loan of $600,000 made pursuant to a loan agreement on 24 March 2022.
[93] Section 28 of the Act permits the Court to authorise payments from restrained property to meet specified expenses. Section 28 relevantly provides as follows:
28 Conditions on restraining order
(1)A court may make a restraining order subject to any conditions the court thinks fit including, without limitation, conditions that provide for the following to be met out of a respondent’s restrained property:
(a)the reasonable living costs of the respondent and any of his or her dependants:
(b)the reasonable business expenses of the respondent:
(c)the payment of any specified debt incurred by the respondent in good faith:
(d)any other expenses allowed by the court.
…
(3) In determining whether or not to make a restraining order subject to a condition, the court must have regard to the ability of a respondent to meet the reasonable living costs, expenses, or debt concerned out of property that is not restrained property.
…
[94] The phrase “incurred by the respondent in good faith” makes it clear that the issue of good faith must be determined from the perspective of the respondent.20 A debt will be incurred in good faith for the purposes of s 28 where the debtor obtains it for a purpose that is not contrary to the purposes of the Act.21
[95] In this case Ky Pham and Ms Le purchased 1190B Wharehine Road on 16 November 2020 for $852,250. The evidence of Detective Pretorius in his affidavit sworn 8 July 2022 was that the purchase of 1190B Wharehine Road was not funded by a mortgage. Detective Pretorius notes that part of the proceeds from the sale of 730 Te Atatu Road were used to purchase 1190B Wharehine Road. The detective says
20 Commissioner of Police v Taylor [2013] NZHC 3226 at [19].
21 Commissioner of Police v Taylor, above n 20, at [20].
that the remainder of the purchase price for 1190B Wharehine Road included unexplained cash and/or cheque deposits.
[96] Given the timing of the $400,000 loan by Nam Phan by way of an agreement dated 18 November 2020 it is reasonable to infer that the loan was for the purchase of 1190B Wharehine Road. Mr Mackenzie’s submission was that the $400,000 loan was used for that purpose.
[97] The property at Wharehine Road was then allegedly converted into a cannabis cultivation operation. For that reason I do not consider the $20,000 interest on that loan was incurred in good faith for the purposes of the section as the debt was incurred for a purpose, namely the obtaining of a property for the purpose of a cannabis operation, that was contrary to the purposes of the Act.
[98] I consider the $20,000 interest is in a different category from the $600,000 loan and interest thereon which is eroding the value of 1 Garcia Place as the interest continues to accrue.
[99]The test in s 28(1)(c) is accordingly not met.
Payment of Ky Pham’s invoices
[100] Both Ky Pham and Ms Le seek the payment of all invoices for renovation work allegedly undertaken by Ky Pham at 1 Garcia Place. Ky Pham provided five invoices from his company HandymanKiwi which purport to relate to work at 1 Garcia Place.
[101] The evidence of Detective Pretorius was that 1 Garcia Place had been extensively converted to facilitate a cannabis cultivation operation. Detective Pretorius states that when the Police executed a search warrant on 14 July 2022 as part of the termination of the operation, the officer in charge of the search warrant found the property was being renovated.
[102] The invoices provided by Ky Pham are dated between 23 and 25 June 2022. Accordingly, Ky Pham is seeking to be reimbursed for the cost of removing a cannabis cultivation operation at his own property. The Commissioner’s case is that Ky Pham
is responsible for the cannabis operation. In other words, Ky Pham is seeking payment to the Trust for his attempts to conceal his own alleged offending. In those circumstances the Court would not order payment of the invoices out of restrained funds.
Invoices for Specialist Tiling
[103] Finally, Ms Le and Ky Pham seek payment of an invoice from Specialist Tiling, Nam Phan’s company, for work allegedly undertaken in two bathrooms and the kitchen at 1 Garcia Place. The only evidence of that work was oral evidence given by Ky Pham under cross-examination at the hearing. He asserted that Specialist Tiling did work on two bathrooms and the kitchen but acknowledged there were no invoices before the Court.
[104] In the concluding paragraph of her supplementary memorandum regarding the sale process filed after the hearing Ms Hogan states that Ky Pham had asked her to provide the Court with Nam Phan’s company’s invoices. There were four pages of invoices attached. They are dated 29 June 2022 and purport to relate to tiling and renovation work at 1 Garcia Place.
[105] Ky Pham was not given leave to provide these documents to the Court after the hearing. There is no sworn evidence in relation to their contents. Accordingly, the Court will not admit this evidence. It follows that the Court will not make an order that payment of these invoices be met out of the restrained funds.
Summary of result
[106] The application is granted. The Court will make an order for the sale of the property at 1 Garcia Place, West Harbour, Auckland, in terms as set out below and for the repayment of the amount of $600,000 plus interest to Nam Phan as further set out below.
[107] The Court refuses to make orders as sought by the respondents for the payment of $20,000 interest and invoices for Ky Pham’s company, HandymanKiwi, and Nam Phan’s company, Specialist Tiling.
Orders
[108] I make the following orders under ss 33, 34 and 35 of the Criminal Proceeds (Recovery) Act 2009:
(a)The Official Assignee must sell the property at 1 Garcia Place, West Harbour, Auckland, record of title unique identifier NA82B/373, registered owners Ky Van Pham and Thu Huong Le, as soon as reasonably practicable, at its fair market value.
(b)Following the payment of the Official Assignee’s reasonable costs in effecting the sale, the Official Assignee must use the net proceeds from the sale to repay the amount of $600,000, plus interest, to a bank account nominated by Nam Phan. The total interest to be paid is to be calculated as follows:
(i)between 25 March 2022 and 25 September 2022, interest at a rate of 3 per cent per annum;
(ii)between 26 September 2022 and 30 November 2023, interest at a rate of 10 per cent per annum; and
(iii)between 1 December 2023 to the date of the sale of 1 Garcia Place, interest at a rate of 8.64 per cent per annum.
(c)Any surplus proceeds of sale following repayment of the loan in clause (b) above shall be held by the Official Assignee as restrained property in an interest-bearing account pending further order of the Court.
(d)For the purpose of effecting a sale under these orders, the Official Assignee (including a person delegated his functions and powers under the Act) has the power to execute any deed or instrument in the name of Ky Van Pham and Thu Huong Le, and to do anything necessary to give validity and operation to the deed or instrument.
Costs
[109] As already noted, the Commissioner and Nam Phan have agreed that costs will lie where they fall in relation to all matters between the Commissioner and Nam Phan in this proceeding.
[110] In his submissions Mr Mackenzie records the Commissioner’s understanding that Ms Le is in receipt of legal aid in relation to this matter. However, the Commissioner expressly reserves his right to seek costs against Ky Pham (unrepresented) and Ms Le.
[111] The Commissioner, as the successful party, is prima facie entitled to costs. I did not hear submissions on costs and accordingly costs are reserved. If the Commissioner intends to seek costs, a memorandum is to be filed and served within 10 working days of the date of this judgment.
[112] Ms Le and Ky Pham are to file and serve a memorandum in reply within 10 working days of the date of service of the Commissioner’s memorandum.
[113] Costs submissions should not exceed four pages excluding attachments. I will determine costs on the papers.
Gordon J
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