Commissioner of Police v Rae
[2024] NZHC 1384
•29 May 2024
ORDER PROHIBITING PUBLICATION OF NAMES, ADDRESSES OR IDENTIFYING PARTICULARS OF CONNECTED PERSONS (REDACTED) IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-043
[2024] NZHC 1384
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
an application under r 8.21 of the High Court Rules 2016
BETWEEN
COMMISSIONER, THE NEW ZEALAND POLICE
Applicant
AND
DAVID CHARLES RAE
Respondent
AND
SARAH LOUISE RAE
First Interested Party
S LIMITED
Second Interested Party
R LIMITED
Third Interested Party
A.V.A CONSULTING LIMITED Fourth Interested Party
Hearing: 24 April 2024 Appearances:
S B McCusker for Applicant D C Rae in person
M G Robinson for the United States Government
Judgment:
29 May 2024
JUDGMENT OF GRICE J
COMMISSIONER OF POLICE v RAE [2024] NZHC 1384 [29 May 2024]
Table of Contents
Introduction [1]
Background
Factual background [6]
The forfeiture orders [10]
Procedural history [16]
The orders sought [21]
Relevant law
Section 47 of the Evidence Act 2006 [23]
Non-party discovery [27]
Submissions
For the respondent [34]
For the applicant [44]
Analysis[48]
The sting operation [59]
Cargill [65]
Documents relating to various prosecutorial decisions/relitigation of admitted criminal offending [78]
Bad faith [85]
Conclusion [92]
Other matters [94]
Costs [96]
Introduction
[1] This decision concerns an application for non-party (also referred to as third-party) discovery brought by Mr David Rae (the respondent) against the United States Government.
[2] The discovery application is in anticipation of a hearing regarding an application for civil forfeiture orders brought by the Commissioner of Police
(the Commissioner) against the respondent under the Criminal Proceeds (Recovery) Act 2009 (the CPRA).
[3] The forfeiture application concerns New Zealand bank accounts said to be related to Mr Rae’s alleged money laundering activities in connection with two Medicare fraud schemes in the United States. The respective schemes are referred to as the “durable medical equipment” or “orthotics” scheme, and the “cancer screening” or “CGX/genetics” scheme. The forfeiture application is set down to be heard from 5 May 2025 to 13 May 2025.
[4] The respondent seeks orders for discovery of documents in 16 classes of documents, which he contends are held by the United States authorities who prosecuted him and are relevant to his defence of the civil forfeiture claim brought against him in New Zealand. The United States authority to which the application is directed is the United States Government.
[5] The Commissioner opposes Mr Rae’s discovery application. He submits that the documents sought are not relevant (in terms of the third-party discovery requirements in civil claims) to the forfeiture application proceeding. The Commissioner also says that the documents would not be obtainable because the authorities are likely to refuse to hand them over. Therefore, there is an issue of jurisdiction as to whether this Court could require the documents to be provided and/or whether they might be subject to privilege. This hearing does not deal with the issue of this Court’s jurisdiction to require the United States Government to discover the documents. That is an issue for determination at a future hearing if necessary. The purpose of this decision is only to determine whether or not the material sought by Mr Rae should properly be the subject of a third-party discovery order.1
1 The Judge managing the proceedings directed the matter of jurisdiction not be considered in this hearing. See Commissioner of Police v Rae HC Wellington CIV-2020-485-43, 15 March 2024, Minute of Gwyn J (Respondent’s application for non-party discovery)) at [38].
Background
Factual background
[6] Gwyn J summarised the background to this application in a minute dated 15 March 2024. A without notice restraining order was granted by Cooke J on 13 February 2020. On 26 November 2020, Cooke J held that he was satisfied that the grounds for an on-notice restraining order were made out.2 Subsequently, on 10 May 2021, Campbell J confirmed the making of the order.3
[7] The restraining order and forfeiture orders sought relate to the following property.
(a)the contents of an ANZ bank account numbered [redacted], personalised in the name of the second interested party, S Ltd with an approximate balance of $4,321.02;
(b)the contents of an ANZ foreign currency bank account numbered [redacted] – USD01, personalised in the name of S Ltd with an approximate balance of NZD $9,814,757.70;
(c)the contents of a BNZ foreign currency bank account numbered [redacted], personalised in the name of the third interested party, R Ltd with an approximate balance of NZD $1,855.66; and
(d)the contents of a BNZ foreign currency bank account numbered [redacted], personalised in the name of R Ltd with an approximate balance of NZD $253,111.19.
2 Commissioner of Police v Rae [2020] NZHC 3132 [the High Court restraint decision]. Upheld on appeal in Rae v Commissioner of Police [2023] NZCA 4, [2023] NZAR 17. The restraining order was extended for a further 12 months in Commissioner of Police v Rae HC Wellington CIV-2020- 485-43, 8 April 2024 (Minute of Gwyn J).
3 The Commissioner, New Zealand Police v Rae HC Wellington CIV-2020-485-43, 10 May 2021 (Minute of Campbell J).
[8] The factual background is set out in Cooke J’s restraint decision in relation to the Commissioner’s application for an on-notice restraining order:4
[9] There are two related fraudulent schemes which the Commissioner alleges were in existence. The first is a durable medical equipment scheme, and the second is a cancer screening scheme. Both seek to take advantage of the Medicare system of medical insurance operating in the United States.
[10] The alleged fraud in relation to durable medical equipment is alleged to have taken advantage of the Medicare insurance benefits for disabled individuals aged 65 and over. Those benefits include cover for medical equipment such as arm, leg, back and neck braces. It is alleged that telemarketers persuaded beneficiaries of this insurance to obtain such equipment irrespective of medical need. The telemarketers would then refer those patients to a doctor, who would write prescriptions for the patients for a flat fee, and without any meaningful patient interaction. Companies would then supply the equipment to the patients, and then submit what the Commissioner says were fraudulently and unlawfully obtained claims to Medicare for payment. The companies that supplied the equipment then paid commissions, referred to as “kickbacks” to the telemarketers. It is alleged that this fraudulent system was set up by the beneficial owners of at least 22 equipment supply companies.
[11] The cancer screening scheme allegedly followed a similar general pattern. Medicare covers genetic cancer screening by clinical laboratories. Again it is alleged that telemarketers, a telemedicine company, and a clinical laboratory that undertakes genetic cancer screening persuaded patients to undertake genetic cancer screening irrespective of need, with claims then being filed with Medicare (or private insurers), and kickbacks then earned.
[12] Part of the allegations in relation to both of these schemes include a contention that both involve a violation of a Federal “anti-kickback statute”. I understand this statute to prohibit commissions being earned for such referrals, and that the allegations effectively involve offending in the nature of earning secret commissions. But the allegations go further, certainly in respect of the medical equipment scheme, on the basis that there was no genuine need for the medical service. In other words these were dishonest claims for those medical services.
[13] It is alleged that the architects, or at least proponents, of these schemes were Mr Aaron Williamsky and Ms Nadia Levit. The majority of the funds in the New Zealand bank accounts are in the name of the second interested party, [S Ltd]. The Commissioner alleges that Mr Williamsky is the true owner of these funds, and that Mr Rae is only the nominal beneficiary of the accounts in his capacity as a money launderer, albeit he is entitled to some of the proceeds.
[14] It is alleged that Mr Rae is in the business of offering international business structures through vehicles incorporated in various jurisdictions which are then used to assist persons like Mr Williamsky to dissipate funds from their fraudulent activities in order to avoid detection. It is alleged that
4 The High Court restraint decision, above n 2 (footnotes omitted).
Mr Rae does this for a fee, representing part of the return from the illegitimate activities.
[15] In particular, in relation to the medical equipment scheme it is alleged that proceeds were moved from a bank account in New Jersey to a bank account in Hong Kong in the name of Cargill Consulting Ltd. It is then alleged that funds from the Cargill account were moved into the New Zealand accounts in the names of the second and third interested parties, [S Ltd] and [R Ltd]. Similarly funds in relation to the cancer screening scheme in the name of a company called Clinical Lab Solutions LLC were also transferred into the [S Ltd] account.
[16] On 9 April 2019 Mr Rae was arrested and indicted in the state of New Jersey on two counts of money laundering. He was also indicted in the state of South Carolina for money laundering. On 19 December 2019 Mr Rae and the United States Department of Justice entered a formal plea agreement by way of counter-signed letter. Under the terms of that plea agreement:
(a)Mr Rae agreed to plead guilty to two counts of money laundering in the New Jersey indictment, and the one count of money laundering in the South Carolina indictment.
(b)In terms of forfeiture Mr Rae agreed to pay US$1,775,000 in relation to the indictments, and to forfeit all of his right, title, or interest in property referred to in a schedule. This included the proceeds in the ANZ [S Ltd] account.
(c)Mr Rae agreed that he would not file any claim in any forfeiture proceedings in respect of the property in the schedule.
(d)The Department of Justice for New Jersey agreed not to initiate any further criminal charges against Mr Rae for his role in international money laundering.
[17] The plea agreement did not address the [R Ltd] accounts. The evidence discloses that there was a proposal that the agreement would cover the [R Ltd] accounts, but it was agreed that it would not do so.
[18] It is also common ground that Mr Rae cooperated with the United States authorities, including by providing information at interviews, and that the plea agreement recognised the cooperation he had given. These factors are also reflected in the sentence imposed after Mr Rae entered guilty pleas, which effectively involved his release on time served.
[9] Mr Rae applied for a variation of the restraining order and release of funds under s 28 of the CPRA, which was dismissed by Churchman J on 15 October 2021.5
5 Commissioner of Police v Rae [2021] NZHC 2766 [the release decision].
The forfeiture orders
[10] An assets forfeiture order operates to forfeit tainted property. “Tainted property” is defined under s 5 of the CPRA as “property that has, wholly or in part, been acquired … or directly or indirectly derived from significant criminal activity”. “Significant criminal activity” is defined as:6
(1)… an activity engaged in by a person that if proceeded against as a criminal offence would amount to offending–
(a)that consists of, or includes, 1 or more offences punishable by a maximum term of imprisonment of 5 years or more; or
(b)from which property, proceeds, or benefits of a value of the threshold amount or more have, directly or indirectly, been acquired or derived.
…
[11] A profit forfeiture order forfeits the “benefit” derived from “significant criminal activity” in the “relevant period of criminal activity”.7
[12] In this case, the “significant criminal activity” relied upon by the Commissioner is money laundering. The Commissioner says he does not rely on the United States convictions per se. Certificates of those convictions are not conclusive proof of conviction in this country.8 However the Commissioner will seek to rely on transcripts of the court hearing, in which Mr Rae was questioned by the Judge prior to the entry of the pleas following a plea bargain agreement. The written plea agreement handed up to the United States Court sets out the basis of the guilty plea, and a defendant is questioned by the Judge on that agreement. This process is referred to as the “allocution” process.
[13] Cooke J noted in the restraint decision that the plea and forfeiture agreement and related orders of a United States District Court do not prevent criminal or civil proceedings in New Zealand in relation to the same matters.9 His Honour further noted
6 Criminal Proceeds (Recovery) Act 2009, s 6.
7 Section 55.
8 As outlined in more detail below, US certificates of convictions are not recognised in New Zealand under s 47 of the Evidence Act 2006.
9 The High Court restraint decision, above n 2, at [71].
that the United States plea and forfeiture agreement expressly recorded that it “…was reached without regard to any civil or administrative matters that may be pending or commenced in the future against RAE…”.10
[14]Cooke J also noted in the restraint decision that: 11
... the Commissioner may need to establish that the schemes were fraudulent as part of establishing the offending under s 243 of the Crimes Act, albeit only to the required civil standard.
[15] At trial, Mr Rae will argue that he was unaware of any underlying criminality in relation to the orthotics scheme, and he did not launder criminal proceeds. In addition, he will say that any funds that R Ltd had in its accounts were paid by Cargill Consulting Ltd (Cargill), a company that was not owned or controlled by Mr Rae. In relation to the cancer screening scheme, Mr Rae will maintain that there was no underlying criminality. The Commissioner will be required to establish on the balance of probabilities the alleged money laundering by Mr Rae and related unlawful benefit.
Procedural history
[16] On 21 May 2021 the Commissioner filed its application for civil forfeiture orders against Mr Rae. Mr Rae filed opposition and supporting affidavits in July 2021, and confirmed that the application was ready to be set down for hearing. At that stage Mr Rae was legally represented. Following several delays, on 2 February 2024, at a list call to set down a new fixture for the forfeiture application, the respondent filed the application for discovery orders which is the subject of the present hearing.
[17] In her minute dated 15 March 2024, Gwyn J accepted that if the Court were to make an order requiring non-party disclosure there may be an issue as to whether the United States Government would comply with such an order and, if not, whether it could be enforced by the New Zealand courts.12 In the same minute, Her Honour noted that the United States Government at the case management conference through its
10 At [71].
11 At [73].
12 Commissioner of Police v Rae (Minute of Gwyn J (Respondent’s application for non-party discovery)), above n 1, at [38].
counsel Mr Robinson had advised that certain United States Government employee witnesses — who were made available on behalf of the Commissioner and had sworn affidavits earlier in this proceeding — were not authorised to provide disclosure beyond the scope of their authorised testimony. Her Honour noted Mr Robinson offered his view that the non-party discovery sought by Mr Rae is not an appropriate or effective channel for him to seek information from the United States Government. He had suggested that the most readily available and appropriate channel for Mr Rae to do so was to seek materially relevant information by letter rogatory. Mr Robinson referred to r 1.22 of the High Court Rules 2016 (Rules) which, he said, appeared to address implementation of the letter rogatory process.
[18] Mr Robinson also submitted that the New Zealand High Court did not have authority to make orders in respect of the United States (including any orders to provide discovery of the records or information of the United States Government) under the non-party discovery mechanisms in the Rules. Her Honour directed that the first matter to be ascertained was whether the disclosure sought may be relevant to Mr Rae’s defence against the Commissioner’s forfeiture application. The Judge explicitly noted that the hearing would not canvas the question of jurisdiction in relation to the United States Government.
[19] In a minute dated 8 April 2024, Gwyn J noted the Commissioner sought to file an affidavit setting out the extent to which categories of documents are disclosable under United States law and/or obtainable through other procedures.13 Mr Rae opposed this on the basis that the Commissioner would effectively be raising jurisdictional matters when these had explicitly been excluded from the scope of the hearing by Gwyn J’s previous minute. The Judge was satisfied that the further affidavit proposed by the Commissioner was not necessary at this stage.
[20] Gwyn J directed that submissions for this hearing should address the question of relevance, not the question of the Court’s jurisdiction to ultimately enforce any orders, nor the practical availability of the documents.
13 Commissioner of Police v Rae (Minute of Gwyn J), above n 2.
The orders sought
[21] The respondent seeks discovery orders in relation to 16 classes of documents. He provided a chart of the documents requested, together with explanations as to why they were sought by him, and with some cross- referenced to paragraphs in the affidavit of Mr Touger, who was Mr Rae’s United States attorney. I have summarised the document types and (in italics) Mr Rae’s reasons for seeking the documents:
1.Testimony, documents and evidence provided to grand jury14 for the South Carolina indictment. To support Mr Rae’s contention that the grand jury had been misled and that “clearly exculpatory evidence had been withheld”. Referred to in an email dated 30 May 2022.
2.Testimony, documents and evidence provided to grand jury for the New Jersey indictment. For the reasons set out in 1.
3.Instructions given to Herb Kimble by the FBI/US Government “as to the type of SUA (specified unlawful activity) and property that he was to represent that Mr Rae had become a party.” Required for the grand jury to indict Mr Rae on the sting payments and to support Mr Rae’s contention that Mr Kimble was cooperating with the FBI/US Government and acting as a participating informant.
4.Audio/transcript of the conversation between Herb Kimble and David Rae on 22 December 2018 at the meeting in London. Mr Kimble was an informant and likely to be wearing a covert recording device; Mr Rae says he explained that Cargill was not owned or controlled by him.
5.Notes of evidence/information provided by Herb Kimble to FBI agents/prosecutors regarding the 22 December 2018 meeting.
14 A grand jury in the United States decides only on preliminary court matters relating to whether there is “probable cause” to believe that an individual committed a crime and should be put on trial. Proceedings conducted before a grand jury are private. If the grand jury determines that there is enough evidence to justify putting the individual on trial, this will result in an indictment being issued.
Whether Mr Kimble recorded the meeting or not, Mr Kimble must have reported on the meeting to the agents/prosecutors for the indictments to be preferred.
6.Evidence/information provided by Herb Kimble to the United States Government about Cargill. To support Mr Rae’s contention that the ownership and control of Cargill is relevant to indictment and the Commissioner’s case on forfeiture.
7.Evidence and documents secured by the United States Government in relation to Cargill. Mr Rae states this relates to the ownership structure, bank details, bank accounts, and bank transactions of Cargill. The Cargill account had been frozen and is now closed.
8.Investigations undertaken into HBSC (Hong Kong) holding the Cargill bank accounts and the United States Government’s steps taken to freeze those accounts. For the reasons set out in 7.
9.Results of the FBI/US Government’s investigation into Mr Rae’s predisposition to criminal conduct. Mr Rae submits this was a requirement under the “sting” offence provisions. The results are sought to support Mr Rae’s contention that he had no criminal convictions and it was not clear what was presented to the grand jury.
10.All “302 minutes” from the proffer sessions conducted with Mr Rae.15 Mr Rae submits that the notes of those proffer meetings will show what he said.
11.PowerPoint presentation shown to Mr Rae during a proffer session. To support Mr Rae’s contention that the United States Government made a “fully informed” decision in relation to not charging Mr Rae with the CGX/genetics model.
15 A proffer session is a meeting between an individual who is a defendant or a suspect (and their attorney), and United States investigators/prosecutors. The individual at the session presents information as to their involvement or insight into the involvement of others.
12.Copy of the “5K1 letter” provided by the United States Government to HHJ McNulty prior to Mr Rae’s sentencing.16 To support Mr Rae’s contention that he had been truthful about his interaction with United States government officials.
13.Documentation regarding United States Government’s decision not to prosecute Mr Rae in relation to the CGX/genetics model. To support Mr Rae’s defence to criminality and forfeiture.
14.Documentation to evidence how the United States Government calculated the United States forfeiture of $1.775 million and why the CGX/genetics monies were not included in the forfeiture calculation. To support Mr Rae’s contention that the United States Government made no contention that CGX/genetics was criminal in the US.
15.Documents relating to the identification and any investigation into Professor Gordon Walker. Mr Rae contends this is relevant to the “continued presentation” that Professor Walker owns and controls Cargill.
16.Documents relating to the decision made by the United States Government not to pursue any forfeiture in relation to R Ltd and Fu Lei Yan. Mr Rae contends this is relevant to the issue of ownership of R Ltd, and the alleged criminality of both orthotics and genetics and the position of Sarah Rae and [redacted].
[22] Mr Rae contends that the United States Government is exclusively in possession of a number of the items listed above.
16 A “5K1 letter” is a letter provided by the United States Attorney’s office to the court to seek leniency on behalf of an individual in sentencing for providing substantial assistance in the investigation or apprehension of others for criminal conduct,
Relevant law
Section 47 of the Evidence Act 2006
[23] The burden rests on the Commissioner to establish the alleged significant criminal activity and the respondent’s knowledge and/or involvement by presenting or eliciting relevant evidence.
[24] As noted in Gwyn J’s minute, a certificate of the respondent’s conviction in the United States cannot be used as conclusive proof that he committed those offences in a New Zealand civil proceeding under s 47 of the Evidence Act. The relevant definition of “conviction” does not include United States convictions.
[25]Section 4 of the Evidence Act provides:
conviction means,—
(a)in sections 47 to 49, a subsisting conviction entered before or after the commencement of this Act by—
(i)a New Zealand court or a court-martial conducted under New Zealand law in New Zealand or elsewhere; or
(ii)a court established by, or a court-martial conducted under, the law of Australia, United Kingdom, Canada, or any other foreign country in respect of which an Order in Council has been made under section 140(5); and
…
[26] No Order in Council was made under s 140(5), therefore a United States conviction is not covered by s 47.
Non-party discovery
[27] Discovery is not mentioned in the CPRA. However, r 19.2 of the Rules says that applications under the CPRA must be made by originating application, therefore the discovery rules which apply to originating applications also apply to CPRA applications.
[28]Rule 8.7 of the Rules relates to standard discovery, and provides:
Standard discovery requires each party to disclose the documents that are or have been in that party’s control and that are—
(a)documents on which the party relies; or
(b)documents that adversely affect that party’s own case; or
(c)documents that adversely affect another party’s case; or
(d)documents that support another party’s case.
[29] Rule 8.21(1) provides for orders against a non-party after a proceeding has been commenced:
Order for particular discovery against non-party after proceeding commenced
(1)This rule applies if it appears to a Judge that a person who is not a party to a proceeding may be or may have been in the control of 1 or more documents or a group of documents that the person would have had to discover if the person were a party to the proceeding.
(2)The Judge may, on application, order the person –
(a)to file an affidavit stating –
(i)whether the documents are or have been in the person’s control; and
…
(b)to serve the affidavit on a party or parties specified in the order; and
(c)if the documents are in the control of the person, to make those documents available for inspection…
…
[30] The starting point for assessing whether there should be particular discovery is that documents must be relevant to the matters at issue in the proceeding. In Commissioner of Police v Yan, Thomas J noted with respect to proceedings in the CPRA that:17
Whether discovery should be ordered is discretionary and depends upon whether the documents sought are relevant to the issues before the court and is subject to considerations of proportionality.
17 Commissioner of Police v Yan [2015] NZHC 3315 at [41].
[31] The principles relating to discovery in respect of proceedings by way of originating application are set out in Commissioner of Inland Revenue v Elementary Solutions Ltd: 18
(a)The Court has a discretion to order discovery.
(b)The documents sought must be capable of supporting the applicant’s case or adversely affecting the opponent’s case.
(c)Any orders for discovery should be subject to the proportionality and practicality requirements identified in r 8.2 of the Rules and should accord with the objective of ‘just, speedy, and inexpensive determination’ under r 1.2 of the Rules.
(d)The approach to discovery in originating applications should be conservative.
(e)Discovery will be appropriate in marginal cases where the party makes out an outline case, but the Court encounters genuine difficulty in determining, without documentary evidence which is likely to assist, whether the threshold test is satisfied.
[32] In Vector Gas Contracts Ltd v Contact Energy Ltd, this Court noted that the power to make an order under r 8.21 is discretionary.19 Kós J also observed:20
[29] Secondly, in determining an application for non-party discovery order, the Court should have regard to the test under r 8.7 for standard discovery –
i.e. the adverse documents regime. But, as Judge Osborne observed in Westpac New Zealand Ltd v Adams, the former Peruvian Guano approach may still inform a non-party discovery order in some instances. To that extent the “train of inquiry” approach, broader than the adverse documents regime, remains relevant. However excursions on the train of inquiry are not to be encouraged in the case of non-party discovery. The Australian cases I am about to discuss make that clear.
[30] Thirdly, a non-party discovery order must still be necessary. This point flows to an extent from the first two, but particularly the first. Previous decisions of this Court have observed that the former requirement in r 8.26, that an order for particular discovery be “necessary”, no longer exists under r 8.21. Technically, that is correct. But it is I think a distinction without a difference, in practice. It is simply a consequence of the 2011 changes to the discovery provisions in the High Court Rules, which made party discovery presumptive. That is not the case with non-party discovery, as the opening words of r 8.21(2) make clear. Such discovery remains discretionary. As Mr Cooper (who carried the burden of the argument for the applicants) candidly accepted, no Court will make a non-party discovery order that is
18 Commissioner of Inland Revenue v Elementary Solutions Limited [2017] NZHC 2411 at [37]. See also Commissioner of Police v Marwood [2019] NZHC 837 at [18]; and Gibson v Official Assignee [2018] NZHC 1077 at [7].
19 Vector Gas Contracts Ltd v Contact Energy Ltd [2014] NZHC 3171, [2015] 2 NZLR 670 at [28].
20 Vector Gas Contracts Ltd, above n 19 (footnotes omitted).
unnecessary. In my view it remains implicit in r 8.21 that the non-party discovery order be necessary, so that the discretion should be exercised. That is to say, without limitation, other sources of evidence are unlikely to be sufficient because they are materially incomplete or unreliable. And that the documents sought may make a real difference, and are not merely marginal.
[33] Non-party discovery cannot be used to obtain documents which would normally be privileged.21 This is not an issue that I need to consider at this stage.
Submissions
For the respondent
[34]The respondent’s position is as follows:
(a)He does not admit to the allegations underlying his United States convictions.
(b)He advances a positive case that he was not guilty of any of the alleged predicate offending in the United States and New Zealand for both the Medicare schemes involved.
(c)He contends that the indictments in South Carolina and in New Jersey were underpinned by bad faith and thereafter continued in bad faith.
(d)He contends that the Commissioner’s case in the present application for forfeiture is also underpinned by bad faith. For example, the Commissioner is continuing to adopt the position advanced by the United States vis-à-vis Cargill and is not securing the documents from the United States Government which it knows to exist and which would assist the respondent. Furthermore, the Commissioner has secured documents via its Application for a Production Order which it has not disclosed and which undermine the factual contentions it seeks to make about Cargill.
21 B v T [1999] NZFLR 364 (HC).
[35] In his submissions, Mr Rae pointed to his responses to the Commissioner’s allegations as he framed them in the conclusion of Mr Rae’s affidavit of 26 July 2021. These were as follows:
173.I understand that the starting point of the Commissioner's case is that Cargill, [R Ltd] and [S Ltd] are all sham structures and set up to facilitate money laundering transactions. The true position is that Cargill is owned by Professor Walker. It existed and conducted business Before he met me, let alone Williamsky. Mr [redacted] produced documentation within the production order confirms that and DS MacDonald have made a conscious decision to exhibit none of it. The position is the same for [R Ltd] and [S Ltd]. Both were set up pre-my involvement with Williamsky. [R Ltd] conducted numerous projects. [S Ltd] was set up with a view to embarking on Genetics and oncology projects before the one we embarked on in the United States with Clinical Lab Solutions.
174.I understand that the commissioner will also argue even if those structures are not a sham, they were controlled and/or used by me in the laundering of criminal proceeds. That would involve having to prove the underlying criminality that is alleged to have taken place in the United States within these proceedings, and my knowledge of the alleged criminality.
175.As far as I was concerned, my role was to develop tax structures and investment portfolios outside the US with the money he was he had already generated and was going to generate, from whatever source that came from. At the start of the Cargill and D2D relationship, neither Professor Walker nor I had any knowledge of the Orthotics model. Cargill entered into that business relationship to facilitate the advice that Williamsky was seeking and to commence the process of building the structure is relevant to his tax position and a diverse investment portfolio outside of the US, principally the UK and the Far East.
176.The Genetics model did not actually require Williamsky at all. I already had both interest and knowledge of the Genetics model via the keyholder project. [S Ltd] had the tax structure, corporate structure, and contacts to be able to take that project forward. Williamsky did not have that structure. That did not mean that as a provider of services he or any entity would not be paid for those services. This in no way put him in control of it. He was never asked to provide any ID to Mr [redacted]. This was because this was a [S Ltd] project.
177.Even if there was an underlying fraud in Orthotics, I had no knowledge of that and was party to conversations and meetings where compliance with those regulations was discussed and legal advice taken and considered.
178.I do not accept that there is any underlying criminality in the Genetics model, or that I had knowledge of any such criminality. I was at pains to ensure that there was not and adopted and adopted the advice given
the O'Toole Scrivo and what I had learned was the advice from K&L Gates.
[36] Mr Rae submits that all the documents he seeks meet the requirements under r 8.7 of the Rules. He says they are documents that the Commissioner ought to have secured from the United States Government which are relevant to the issues to be determined in the forfeiture application hearing.
[37] Mr Rae further submits that he is entitled to obtain discovery against the United States Government in order to use his exculpatory statements and material that the United States prosecution agencies gathered in the course of their investigations. He says he tried to help the United States authorities in the investigation which took place there and he wants to obtain that material. Mr Rae says this will include material which would support his present stance that he had no knowledge of the wrongdoing which formed the basis of the convictions. Mr Rae says the material he seeks on discovery will go to the “fundamental proposition of whether he was guilty at all”. He says the fact of the plea bargains and the convictions in the United States does not prevent him from arguing his innocence in respect of that offending, in this proceeding.
[38] In addition, Mr Rae says he needs the whole of the prosecution files from the United States Government, as it cannot be looked at on a piecemeal basis. He says that what he said and did in the course of that investigation has a bearing on the New Zealand forfeiture application hearing. Mr Rae notes the fact that he was not charged with some matters which were investigated in the United States.
[39] The respondent emphasises that the Commissioner is exercising the full power of the State against him. He submits that as an instrument of the Crown, the New Zealand Police must conduct litigation to a higher standard than ordinary civil litigants. In particular, the Crown guidelines require it to:22
5.1Take and defend litigation in accordance with the rule of law, ensuring the Government is able to pursue its objectives and responsibilities lawfully and effectively.
22 Crown Law “Attorney-General’s Values for Crown Civil Litigation” (31 July 2013).
5.2Deal with litigation promptly and efficiently and without causing unnecessary delays or expense, and seek to have cases resolved as early as is appropriate and on such terms as are appropriate.
5.3Apply a fair and objective approach in the handling of litigation, promoting the just and fair application of the law to all.
…
[40] On this basis, the respondent contends that the documents he seeks should have formed part of the Commissioner’s standard discovery, and are clearly relevant. He says discovery would give him “equality of arms” to deal with the Commissioner’s allegations.
[41] The respondent’s primary position is that under the test for standard discovery, each of the documents and classes of documents which he seeks exist, are relevant, and are disclosable. He contends that the documents sought will show whether his concerns as to bad faith involved are well-founded. He notes that the affidavit of Mr Touger, who acted as his attorney in the United States criminal prosecutions, supports Mr Rae’ position that the documents are relevant. Mr Rae says this has not been countered by any witness for the Commissioner or United States Government. He argues that the United States Government is withholding disclosure and presenting the Court with a one-sided and skewed picture of the true factual matrix, which is conflicting with the respondent’s ability to have a fair trial, particularly in circumstances where the Commissioner could and should have secured those documents.
[42] In addition, Mr Rae indicates that his exculpatory statements made to prosecutors and others would support his defence to the forfeiture applications and his credibility.
[43] Mr Rae says in relation to the disclosure he seeks of material concerning Herb Kimble (the United States informant in the “sting operation”) that this will show that Mr Kimble entrapped Mr Rae.
For the applicant
[44] The Commissioner opposes the respondent’s application on the basis that the documents sought, to the extent that they exist, are not materially relevant and/or will not make a real difference to the forfeiture application proceeding. The Commissioner further contends that the orders are unnecessary, pointing to Mr Rae’s undue delay in bringing the application and lack of evidence of Mr Rae taking steps to obtain the information from elsewhere. In view of the limited scope of this part of the application, the Commissioner makes his submissions assuming the documents sought actually exist, they are in fact disclosable, and are not subject to legal restrictions on their disclosure or otherwise privileged.
[45] The Commissioner sought to be heard on his other grounds of opposition (including jurisdiction), should the Court still be contemplating making orders following the hearing.
[46] In his submissions dated 22 April 2024, the Commissioner summarised his case against the respondent at a high level as follows:
33.1The Forfeiture Application concerns Mr Rae’s alleged money laundering activities based on two Medicare fraud schemes in the United States, which involved prescribing medically unnecessary Durable Medical Equipment (the DME Scheme or Orthotics) and cancer screening tests (the Cancer Screening Scheme or CGX) to patients.
33.2On 9 April 2019, Mr Rae was arrested and indicted in New Jersey on one count of conspiracy to commit international money laundering in connection with the DME Scheme, and one count of a money laundering “sting” offence (the New Jersey indictment). He was separately indicted in South Carolina on a separate count of violating the money laundering “sting” provision (the South Carolina indictment).
33.3On 19 December 2019, Mr Rae signed a Plea Agreement and Forfeiture Order (the Plea Agreement) and pleaded guilty in the United States District Court for the District of New Jersey (USDC NJ). The Plea Agreement was in connection with the charges contained in the New Jersey and South Carolina indictments only. It also provided (among other things) that he would forfeit USD
$1,775,000 (the Money Judgment) and whatever interests he had in a New Zealand bank account in the name of [S Ltd]. Mr Rae was not charged or convicted in connection with the Cancer Screening Scheme. He was sentenced to time served by the USDC NJ on 7 February 2020.
..
[47] The Commissioner says that the documents sought by Mr Rae are duplicative and overlapping and can generally be grouped under three main headings:
(a)first, the “Sting Operation” involving the United States informant Mr Herb Kimble;
(b)secondly, the matters relating to Cargill; and
(c)thirdly, those related to the United States prosecutorial decision making process.
Analysis
[48] It goes without saying that whether or not a document is relevant for the purposes of third-party discovery depends on the claims and the defence. A matter may be relevant in the sense that it is capable of supporting the applicant’s case or adversely affecting the opponent’s case. But, to qualify for discovery here, the documents must also be material and necessary.
[49] I must determine whether the material would be discoverable by the non-party if they were a party to the proceeding. As Kós J put it:23
Under r 8.21 [the Court’s] role is to determine whether the material would be discoverable by the non-party if they were in fact a party to the proceeding. The test is simply the relevant discovery test applicable to a party, based primarily on the adverse documents regime. That is, they really may assist parties … to advance or defend their cases. Excursions on trains of inquiry should be rare where non-parties are being compelled to embark.
[50] The next step is to consider what is necessary, which in this context means “reasonably necessary”.24 That requires the Court:25
…to have a reasonably strong sense that non-party discovery of this kind and extent is necessary. That is, in most cases, that existing sources available to
23 Vector Gas Contracts Ltd, above n 19, at [58] (footnotes omitted).
24 Miller v Flora Properties Ltd HC Christchurch CIV-2010-409-799, 11 June 2010 at [31].
25 Vector Gas Contracts Ltd, above n 19, at [59].
the parties are likely to be materially incomplete or unreliable. And that the documents sought may make a real difference, and are not merely marginal.
[51] Discovery will not be ordered in relation to documents which provide no more than background, or relate to matters that are no longer in issue or which have been conceded. Fishing expeditions are discouraged.
[52] The analysis requires consideration of the issues arising from the case advanced by the Commissioner and the defences raised by Mr Rae. In this case there are no pleadings but the claims and defences are apparent from the material before the Court, including the submissions made in this hearing.
[53] The Commissioner puts his case in terms of the statutory provisions upon which the application is based. I have set those out above. The Commissioner seeks forfeiture orders on the basis that the subject property (bank accounts) represent tainted property or unlawful benefit from significant criminal activity by Mr Rae. He relies on money laundering under s 243(2) of the Crimes Act 1961, which provides:
(2)Subject to sections 244 and 245, every one is liable to imprisonment for a term not exceeding 7 years who, in respect of any property that is the proceeds of an offence, engages in a money laundering transaction, knowing or believing that all or part of the property is the proceeds of an offence, or being reckless as to whether or not the property is the proceeds of an offence.
[54] The Commissioner notes that in the context of international money laundering, this is supplemented by the requirement for double criminality under s 245(1) of the Crimes Act.26
[55] The Commissioner alleges Mr Rae laundered the proceeds of offences committed under United States federal law, namely healthcare fraud, wire fraud, and violations of the Anti-Kickback Statute. He alleges that such offending would also be an offence under New Zealand law, namely obtaining by deception under s 240 of the Crimes Act. The Commissioner further alleges that that Mr Rae knew (or was reckless) to this fact, and that he dealt with that property as defined.
26 The High Court restraint decision, above n 2, at [28].
[56] The principal issue at trial is likely to be whether the Commissioner can prove on the balance of probabilities that the subject property (bank accounts) represent tainted property or unlawful benefit from significant criminal activity by Mr Rae. The Commissioner does not rely on the United States convictions per se to establish the relevant “significant criminal activity”. He will however likely rely on the Mr Rae’s court testimony in the US.
[57] Mr Rae says his defence is that he was not guilty of the United States offences to which he entered the guilty plea. Further, he says he did not know of the underlying criminality of the schemes and his only role was to develop tax and investment portfolios for money, whatever its source. He said this was a business relationship only.
[58] Mr Rae also alleges bad faith against the United States government and the Commissioner. He says the items he seeks in discovery will support that allegation.
The sting operation
[59] Under the first heading (the “Sting Operation”) in Mr Rae’s chart of documents are documents in classes 1 to 9. These generally relate to Mr Rae’s involvement in a sting operation involving the provision of funds by an undercover agent. The Commissioner says that Mr Rae admitted this offending in the US. However, there are no equivalent offences under New Zealand law. Some of those items also relate to Cargill, which is dealt with below.
[60] The Commissioner does not rely on United States evidence in relation to the sting operation. Mr McCusker, for the applicant, says that the overseas offending which the Commissioner relies on for establishing money laundering under s 243 of the Crimes Act are corresponding but separate offences under United States federal law of healthcare fraud, wire fraud, and violations of the Anti-Kickback Statute.
[61] For convenience, I reproduce the summary of the chart as relevant to items 1– 9:
1.Testimony, documents and evidence provided to grand jury for the South Carolina indictment. To support Mr Rae’s contention that the grand jury had been misled and that “clearly exculpatory evidence had been withheld”. Referred to in an email dated 30 May 2022.
2.Testimony, documents and evidence provided to grand jury for the New Jersey indictment. For the reasons set out in 1.
3.Instructions given to Herb Kimble by the FBI/US Government “as to the type of SUA (specified unlawful activity) and property that he was to represent that Mr Rae had become a party.” Required for the grand jury to indict Mr Rae on the sting payments and to support Mr Rae’s contention that Mr Kimble was cooperating with the FBI/US Government and acting as a participating informant.
4.Audio/transcript of the conversation between Herb Kimble and David Rae on 22 December 2018 at the meeting in London. Mr Kimble was an informant and likely to be wearing a covert recording device; Mr Rae says he explained that Cargill was not owned or controlled by him.
5.Notes of evidence/information provided by Herb Kimble to FBI agents/prosecutors regarding the 22 December 2018 meeting. Whether Mr Kimble recorded the meeting or not, Mr Kimble must have reported on the meeting to the agents/prosecutors for the indictments to be preferred.
6.Evidence/information provided by Herb Kimble to the United States Government about Cargill. To support Mr Rae’s contention that the ownership and control of Cargill is relevant to indictment and the Commissioner’s case on forfeiture.
7.Evidence and documents secured by the United States Government in relation to Cargill. Mr Rae states this relates to the ownership structure,
bank details, bank accounts, and bank transactions of Cargill. The Cargill account had been frozen and is now closed.
8.Investigations undertaken into HBSC (Hong Kong) holding the Cargill bank accounts and the United States government’s steps taken to freeze those accounts. For the reasons set out in 7.
9.Results of the FBI/US Government’s investigation into Mr Rae’s predisposition to criminal conduct. Mr Rae submits this was a requirement under the “sting” offence provisions. The results are sought to support Mr Rae’s contention that he had no criminal convictions and it was not clear what was presented to the grand jury.
[62] In relation to items 1 and 2, Mr Rae cross-referenced the requirement for those documents to Mr Touger’s affidavit of 21 July 2021 at [13]–[17]. The relevant paragraphs refer to the sting operation and suggest that Mr Rae could have advanced the argument that he was entrapped by Mr Kimble. Mr Touger also suggests that there was exculpatory evidence that was not produced to the grand jury, in particular relating to the ownership of Cargill, as it was highly probably that Mr Kimble (given his involvements with other defendants in the United States offending) would have known that Professor Walker owned Cargill. The material referred to in items 1 and 2 is not materially relevant to these proceedings as it relates to the sting operation (which is not relied on by the Commissioner) or to Cargill. The ownership or control of Cargill is not an issue in the substantive application for reasons set out in more detail below.
[63] Items 7 and 8 also relate to Cargill and its structure and ownership. The Cargill material is not necessary in this proceeding. because the issue of its structure and control is not contested by the Commissioner.
[64] Items 3, 4, 5, and 6 refer to interactions with Mr Herb Kimble. Mr Kimble was the United States informant involved in the sting operation. The material at item 9 relates to Mr Rae’s predisposition, or the claim that he had no criminal convictions at the time of the sting operation. The Commissioner’s case does not rely on the sting operation. Mr Rae also said the material would show that he was cooperating with the
United States authorities and would support his credibility in various respects. Those objectives do not make the material relevant to the present proceedings or the defence.
Cargill
[65] The second heading (“Cargill”) covers documents listed as 4, 5, 6, 7, 8 and 15. These relate to the Hong Kong-based entity known as Cargill Consulting Ltd. I reproduce the relevant classes from the chart as follows:
4 Audio/transcript of the conversation between Herb Kimble and David Rae on 22 December 2018 at the meeting in London. Mr Kimble was an informant and likely to be wearing a covert recording device; Mr Rae says he explained that Cargill was not owned or controlled by him.
…
6.Evidence/information provided by Herb Kimble to the United States Government about Cargill. To support Mr Rae’s contention that the ownership and control of Cargill is relevant to indictment and the Commissioner’s case on forfeiture.
7.Evidence and documents secured by the United States Government in relation to Cargill. Mr Rae states this relates to the ownership structure, bank details, bank accounts, and bank transactions of Cargill. The Cargill account had been frozen and is now closed.
8.Investigations undertaken into HBSC (Hong Kong) holding the Cargill bank accounts and the United States Government’s steps taken to freeze those accounts. For the reasons set out in 7.
…
15. Documents relating to the identification and any investigation into Professor Gordon Walker. Mr Rae contends this is relevant to the
“continued presentation” that Professor Walker owns and controls Cargill.
[66] Mr Rae says non-party discovery is necessary to challenge the “false and very important proposition the Commissioner has adopted,” that Mr Rae owned and controlled Cargill. He highlights the significance of Cargill as an intermediary entity through which other accounts (S Ltd and R Ltd) received proceeds from the orthotics scheme. Mr Rae denies having ownership or control over Cargill and argues the United States authorities knew and accepted his position on that. He contends that the documents held by the United States Government would demonstrate that the Commissioner continues to misrepresent the underlying factual position in relation to Cargill.
[67] Mr Rae refers to a 16 January 2020 email from Mr McCusker to Detective Sergeant MacDonald as demonstrating the significance of Cargill to the Commissioner’s case. In that email, Mr McCusker suggested to Detective Sergeant MacDonald that it would be useful to provide information showing wire transfers from Cargill to R Ltd and the amounts, as that information was key to the Commissioner establishing that there was “effective control, at least at the restraint stage”.
[68] The respondent submits that the timing of this email is significant. Mr Rae pleaded guilty in the United States on 19 December 2019 on the basis set out in the plea agreement, that is, that he had never been in control of Cargill. He suggests that the United States Government therefore agreed to adopt the word “utilised” instead of “controlled” when dealing with the Cargill bank account in that agreement. Mr Rae says that at the time the email was sent, while the Commissioner was working on the basis that it was agreed the respondent had sole control over the Cargill account, the United States Government had determined the contrary and the documents will prove that. Therefore, the Cargill material is relevant to the Commissioner’s case and the defence.
[69] The respondent also submits that the email demonstrates the following issues are relevant to the Commissioner’s case, and therefore also to the respondent’s:
(a)That Cargill made the payments to R Ltd.
(b)The ownership of Cargill.
(c)Who made the payments/authorised the payments from Cargill to R Ltd.
(d)The contention that Sarah Rae was the beneficial owner of Cargill.
(e)Who was in effective control of R Ltd.
[70]Mr Rae therefore submits that the Commissioner is obliged under r 8.7(b) and
(d) of the Rules to disclose any materials demonstrating that the respondent was not in effective control of Cargill.
[71] Mr Rae also disputes the Commissioner’s characterisation of Cargill as a “shell corporation”, and the implication that it was established by the respondent as a vehicle to launder criminal proceeds. He argues that investigations and documents of the United States Government wholly undermine this position, and that the Commissioner has received materials undermining the case presented which have not been disclosed.
[72] The Commissioner says he accepts that Mr Rae is not the owner of Cargill, and moreover his position since the beginning of this proceeding has been that Professor Walker is the owner. This is contrary to the respondent’s characterisation of the Commissioner’s position. Furthermore, the Commissioner does not allege that Cargill is a “shell company”.
[73] The Commissioner also notes that the email dated 16 January 2020 which the respondent relies upon refers to the “effective control” of R Ltd, not Cargill. Contrary to the respondent’s submissions, the Commissioner says he did not advance a position that Mr Rae “controlled” Cargill.
[74] The Commissioner says that the documents sought in relation to the ownership and status of Cargill are based on a misconception of the Commissioner’s case and are accordingly not relevant, as they do not go to a matter that is in issue or dispute.
[75] The Commissioner also argues that these documents, irrespective of the relevance issue, could have been obtained directly from Professor Walker or Cargill.
[76] In view of the Commissioner not relying on the fact that Mr Rae owns or controls Cargill, nor that it was a shell company, the items under this heading are not material to the proceeding nor are they necessary.
[77] The Commissioner reproduces entries from the Cargill bank in the affidavit of Detective Sergeant MacDonald dated 21 May 2021 in support of the application. The discovery chart provided by Mr Rae does not seek copies of bank statements or other bank information. However, if that has not been provided and the Commissioner intends to rely on bank statements it would seem appropriate that all relevant bank statements should be produced. That said, it would be the relevant bank that would hold that information, not the United States government. That issue was not explored in this hearing.
Documents relating to various prosecutorial decisions/relitigation of admitted criminal offending
[78] The third category suggested by the Commissioner includes documents 10, 11, 12, 13, 14 and 16. These are:
10.All “302 minutes” from the proffer sessions conducted with Mr Rae. Mr Rae submits that the notes of those proffer meetings will show what he said.
11.PowerPoint presentation shown to Mr Rae during a proffer session. To support Mr Rae’s contention that the United States Government made a “fully informed” decision in relation to not charging Mr Rae with the CGX/genetics model.
12.Copy of the “5K1 letter” provided by the United States Government to HHJ McNulty prior to Mr Rae’s sentencing. To support Mr Rae’s contention that he had been truthful about his interaction with United States government officials.
13.Documentation regarding United States Government’s decision not to prosecute Mr Rae in relation to the CGX/genetics model. To support Mr Rae’s defence to criminality and forfeiture.
14.Documentation to evidence how the United States Government calculated the United States forfeiture of $1.775 million and why the CGX/genetics monies were not included in the forfeiture calculation. To support Mr Rae’s contention that the United States Government made no contention that CGX/genetics was criminal in the US.
…
16. Documents relating to the decision made by the United States Government not to pursue any forfeiture in relation to R Ltd and Fu Lei Yan. Mr Rae contends this is relevant to the issue of ownership of R Ltd, and the alleged criminality of both orthotics and genetics and the position of Sarah Rae and [redacted].
[79] The Commissioner says that all of the items under this heading relate to prosecutorial decisions made in the course of Mr Rae’s United States criminal proceeding. He submits that this information is not relevant as the forfeiture proceeding is independent from the United States prosecutions. The Commissioner says that Mr Rae is able to advance his explanations as to the legitimacy of the funds restrained or his lack of knowledge as to their illegitimacy to this Court in New Zealand, having regard to the relevant sections of the Crimes Act and the CPRA.
[80] The Commissioner accepts that s 47 of the Evidence Act does not apply, and he cannot rely on certificates of convictions from a United States court as conclusive proof of the conviction here. However, he contends that while Mr Rae is not estopped from offering evidence that he was not guilty of the United States offending, the fact that he has pleaded guilty (to relevant offences) in an overseas jurisdiction and provided detailed admissions under oath about the particulars of the offending should carry significant weight. The Commissioner notes that as previously observed by this
Court, Mr Rae is inviting the Court to find that he committed perjury in the US.
Churchman J said that he was not prepared to do so.27
[81] The Commissioner submits the respondent’s allegations that discovery of the US prosecution documents will support Mr Rae’s allegation that the US indictments should have been dismissed are based on speculation which cannot found a non-party discovery order. Furthermore, Mr Rae has admitted under oath to the offending upon which the indictment was based.
[82] The Commissioner argues that the documents sought in relation to prosecutorial decisions, in particular not to charge Mr Rae in respect of the cancer screening scheme and to remove the R Ltd account from his plea agreement, relate to issues which have already been litigated before the High Court and the Court of Appeal at the restraint stage. As noted by the High Court, the Commissioner is entitled to make his allegations in respect of suspected money laundering regardless of United States prosecutorial decisions. It is therefore contended that such information is unlikely to be material or make a real difference to this proceeding.
[83] It is for the Commissioner to prove his claims and he does not seek to rely on the United States convictions to do so. I accept the arguments of the Commissioner under this head. The documents sought to be discovered from the United States investigation are sought by Mr Rae in an attempt to establish that he was not guilty of offences for which he was convicted in the United States. This is contrary to his sworn testimony in the allocution hearings. Therefore it is not a tenable defence to the Commissioner’s claim that the convictions were wrongly entered or the guilty pleas were only entered for pragmatic reasons by Mr Rae. The main point is that the Commissioner does not rely on the convictions in his forfeiture application.
[84] Mr Rae can deny his guilt of the US offences if he wishes to do so by giving evidence and explaining the situation. The evidence concerning the investigations is not reasonably necessary in relation to the issues arising in this proceeding.
27 The release decision, above at n 5, at [166].
Bad faith
[85] Permeating Mr Rae’s defence is a claim that the Commissioner is acting and has acted in bad faith.
[86]The specific allegations of bad faith were articulated by Mr Rae as follows:
(a)That the Commissioner persisted in alleging that Mr Rae owned or controlled Cargill and that the company was a “shell company” when the United States government were aware he did not.
(b)That the Commissioner should have provided discovery earlier. In particular, in his submissions Mr Rae said that:
Given the chronology, the respondent is concerned about potential underlying bad faith in the disclosure process. He contends that the requested documents are clearly relevant and have been identified as relevant and important as long as almost four years ago.
[87] In relation to the Cargill issue, Mr Rae says that the Commissioner alleges it was a “criminal vehicle”. The United States prosecution documents will show he did not control it and in fact Professor Walker owned that company. Mr Rae says in addition the allegation had been that Cargill was a shell company and it is not. The prosecution documents will disclose this. He says if the money which is alleged to have been laundered was clean when it went through Cargill it must have been clean when it reached R Ltd.
[88] I have dealt with the issue of Cargill above. The Commissioner does not contend that Mr Rae controlled nor that it was a shell company. The allegation of bad faith in relation to that allegation has no demonstrated basis.
[89] Earlier allegations of bad faith were made by Mr Rae against the Commissioner concerning the restraining order application. This Court, later confirmed by the Court of Appeal, accepted that the Commissioner was not acting in bad faith in relying on information from the United States Government in obtaining the restraining orders when, unbeknownst to the Commissioner, there had been a formal agreement entered
into with Mr Rae in the US.28 Nor was there any bad faith indicated by the United States government in relation to the information it provided to the Commissioner.29
[90] The second basis given by Mr Rae in arguing that the Commissioner has acted in bad faith is his allegation that the Commissioner in breach of his discovery obligations. The Commissioner disputes that allegation, noting that discovery is unavailable as of right in the context of applications under the CPRA. Mr McCusker noted there had been earlier references in affidavits to third-party discovery but these had not been pursued. In particular, the respondent failed to communicate any outstanding applications for discovery at the time the forfeiture application was initially set down in September 2021. Mr McCusker noted that Mr Rae was legally represented at that stage.
[91] I accept the Commissioners submissions. There is nothing to indicate bad faith on the part of the Commissioner in relation to discovery. Generally, it appears that Mr Rae is seeking to discover material which may aid him in a claim of bad faith. In doing so, Mr Rae seeks to embark on a fishing expedition. The discovery sought on the basis of allegations of bad faith by the Commissioner is not material nor is it necessary.
Conclusion
[92] I do not consider the documents sought by Mr Rae in discovery are material to the Commissioners forfeiture application or defence. I dismiss the application for non party discovery.
[93] If I am wrong about materiality and/or the necessity of the items listed by Mr Rae, I would nevertheless exercise my discretion to dismiss the application for discovery in relation to all items sought. In this case, even without considering the jurisdictional issues, the discovery of materials surrounding the United States investigation and prosecutions would require the Court to embark on a relitigation of
28 The High Court restraint decision, above n 2, at [59]. See also Rae v Commissioner of Police
[2023] NZCA 4 at [12].
29 Rae v Commissioner of Police, above n 28, at [13].
the United States proceedings and the decisions made by authorities in the context of criminal proceedings. That would require a wide-ranging investigation by this Court of United States procedures and evidence. Such an investigation would not be consistent with the objective of the Rules to secure the “just, speedy, and inexpensive determination” of the proceeding. It also requires this Court to consider whether Mr Rae committed perjury in a United States court. From a public policy viewpoint that would weigh against exercising my discretion in favour of the application.
Other matters
[94] The Commissioner has indicated that he intends to rely on the evidence given by Mr Rae at the allocution hearings. In that case the full transcript of the evidence of that hearing should be made available to Mr Rae if he has not already been provided with this. It was not one of the items sought in his discovery chart.
[95] This matter is referred back to a further case management conference to consider any outstanding issues to be dealt with before the trial.
Costs
[96] Costs are reserved. It is appropriate that costs on any interlocutory matter should be dealt with following the hearing in an application such as this. I note to assist the parties, that the band and categorisation of 2B for costs seems appropriate. Parties should file any application and submissions for costs within five days of the judgment delivery date, and file any response within a further five days.
Grice J
Solicitors:
Luke Cunningham & Clere, Wellington Robinson Legal, Wellington
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