Commissioner of Police v Skiffington
[2017] NZHC 1687
•20 July 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-282 [2017] NZHC 1687
IN THE MATTER of an application pursuant to the Criminal
Proceeds (Recovery) Act 2009
BETWEEN
THE COMMISSIONER OF POLICE Applicant
AND
LORRAINE JOYCE SKIFFINGTON First Respondent
AND
SIR RALPH HERBERLY NGATATA LOVE
Second Respondent
AND
WESTPAC NEW ZEALAND LIMITED First Interested Party
AND
ARAHI TRUSTEE SERVICES LIMITED Second Interested Party
AND
WELLINGTON TENTHS TRUST Third Interested Party
AND
PORT NICHOLSON BLOCK SETTLEMENT TRUST Fourth Interested Party
Hearing: 30 June 2017 Appearances:
E M Light for Applicant
J P Temm for First Respondent
C F J Reid for First and Third Interested PartiesJudgment:
20 July 2017
JUDGMENT OF CLARK J
Pursuant to r 11.5 of the High Court Rules I direct that the delivery time of this judgment is 3:30 pm on
20 July 2017
THE COMMISSIONER, POLICE v SKIFFINGTON [2017] NZHC 1687 [20 July 2017]
Introduction
[1] This judgment determines an application by the Commissioner of Police for further orders associated with a restraining order over residential property. In particular, the Commissioner seeks an order directing the sale of the property.
Preliminary matters
[2] Before the hearing commenced Mr Temm asked to see me in chambers in the absence of the media. I agreed. Mr Temm said there were three matters he wished to bring to my attention.
Resolution of issues
[3] The first was that discussions between the parties and efforts to resolve issues and litigation is ongoing. Mr Temm described the conversations as progressive and fruitful. There was nothing further he wished to add.
Ms Skiffington’s health
[4] The second point concerned Ms Skiffington’s wellbeing. I do not need to record the detail of Mr Temm’s submissions. Suffice to say that Mr Temm described Ms Skiffington as being exceedingly unwell. That much is clear from an affidavit which Ms Skiffington filed on 29 June 2017 for the purpose of this hearing.
[5] In response to the affidavit counsel for the Commissioner made the point that no updated medical evidence is before the Court. The only medical evidence before the Court is that which Collins J relied upon in his judgment of 7 August 2015 declaring Ms Skiffington unable to defend the charges against her and staying the
charges.1
[6] Mr Temm wished me to be aware that he had spoken to the medical specialists himself and recorded that fact in a memorandum filed in a related
1 R v R L [2015] NZHC 1862.
proceeding in May 2017.2 Mr Temm’s short point was that while there was no updating evidence from the health professionals there was an updating memorandum from Mr Temm.
[7] Mr Temm’s concern was that the first respondent has an inability to accurately recall aspects of what was a series of transactions some years ago. I touch on these matters further at [39] of this judgment.
Application for recusal
[8] The third matter was an application that I recuse myself on the basis of a past acquaintance with Ms Skiffington.
[9] In her extensive affidavit filed in opposition to the application for a sale order
Ms Skiffington sets out her past professional practice. From 1999 to 2002
Ms Skiffington was the senior ministerial legal advisor to several ministers including the then Attorney-General. Through Mr Temm, Ms Skiffington reminded me that in my role as a Crown Counsel with the Crown Law Office I had dealings with Ms Skiffington in her capacity as senior advisor to the Attorney-General. It was also suggested that Ms Skiffington and I engaged with one another during 2005-2006 when she played a lead role in the drafting of the Foreshore and Seabed Act 2004 and, as chief crown negotiator, led the negotiation and settlement of a foreshore and seabed claim. It was further suggested that Ms Skiffington and I had social contact although when I queried this, Mr Temm qualified the circumstances. Ms Skiffington’s instructions were that there had been social contact in the context of professional gatherings.
[10] I indicated during the hearing that I had a clear recollection of dealing with, and attending meetings with, Ms Skiffington including when I became Deputy Solicitor-General in 2002. I have no recollection of dealings with Ms Skiffington over aspects of the foreshore and seabed policy development or the drafting of the
Act. That is not to say I did not but as I indicated to Mr Temm I would be surprised
2 The related proceeding is an application by the Wellington Tenths Trust for summary judgment (CIV-2017-485-180). As well the Wellington Tenths Trust applied for freezing orders. I delivered a judgment on that application on 18 July 2017: Wellington Tenths Trust v Skiffington [2017] NZHC 1646.
to learn we had such dealings because those issues were not within my area of responsibility.
[11] Following a brief adjournment I declined the application because I
considered the test for recusal was not met.
[12] The operative principles were settled by the Supreme Court in its leading decision in Saxmere Company Ltd v Wool Board Disestablishment Company Ltd.3 A judge is disqualified if a fair-minded and properly informed lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question which the judge is to decide.4 Simply identifying a relationship, however, is not enough. In addition to identification of the disqualifying interest the party alleging apparent bias must also articulate a logical connection between the matter complained of and the feared deviation from impartiality.5 The question is “one of possibility (real and not remote), rather than probability”.6
[13] Although Mr Temm identified as the disqualifying interest the historical professional engagements Ms Skiffington and I had he did not articulate why it is said that those official interactions, over a decade ago, might give rise to an apprehension of impartiality. This failure to articulate any connection, much less a logical connection, between the matters complained of and the feared deviation from impartiality means it is not possible to assess the reasonableness of the asserted apprehension of bias.
[14] I appreciate an appearance of bias may be as damning as actual bias7 and that my personal sense of impartiality is irrelevant. But ultimately I was satisfied that, by
a wide margin, the test for disqualification was not met.
3 Saxmere Company Ltd v Wool Board Disestablishment Company Ltd [2009] NZSC 72, [2010]
1 NZLR 35 [Saxmere (No 1)]. The judgment was subsequently recalled due to further disclosure after the hearing: Saxmere Company Ltd v Wool Board Disestablishment Company Ltd [2009] NZSC 122, [2010] 1 NZLR 76 [Saxmere (No 2)].
4 At [3], [37], [89] and [127].
5 At [20] and [86].
6 At [4] and [81].
7 To borrow from Philip A Joseph Constitutional and Administrative Law in New Zealand (4th ed, Thomson Reuters, Wellington, 2014) at [25.5.4(3)].
The application for sale orders
[15] On 4 February 2014 Mallon J made a restraining order in respect of a residential property at 12 Moana Road, Plimmerton. The property is registered in the names of the first and second respondents and the second interested party. The restraining order remains in force.
[16] In a notice of application dated 18 October 2016, the Commissioner of Police applied under ss 33 and 35 of the Criminal Proceeds (Recovery) Act 2009 (the Act) for further orders including an order directing the Official Assignee to sell the Plimmerton property in order to preserve its value. The mortgage over the property is substantially in arrears.
[17] The application seeks further orders in the following terms:
The proceeds of the sale are to be applied as follows:
(i) Costs of and associated with the sale of the property by the Official
Assignee, or persons nominated by the Official Assignee;
(ii) Settlement of mortgage(s) held by Westpac New Zealand Limited
(the first interested party);
(iii) The net proceeds of the sale of the property are to be held in the custody and control of the Official Assignee in an interest bearing deposit account under the restraining order of 4 February 2014 until further order of the Court; and
…
[18] The first respondent opposes the application on grounds set out in a notice of opposition eventually filed on 10 February 2017.8 In summary the grounds of opposition are:
(a) The state of the first respondent’s health means she is unable to adequately instruct counsel or participate in the hearing.
(b) The Commissioner’s position is secured by the restraining order and
any type of presumptive sale will not result in a fair return on the trust
8 Ellis J directed on 2 February 2017 that a notice of opposition was to be filed within five days failing which the application for sale would be determined on the papers.
asset.
(c) The mortgage arrears are recent and have arisen as a result of a dispute with Westpac New Zealand Ltd, the first interested party, because Westpac is charging premium interest and this has led to a break down in the relationship.
(d)The net equity in the Plimmerton property has increased since the restraining order in February 2014 even taking account of the arrears.
The law
[19] Section 35(e)(v) of the Act states:
35 Types of further order
Without limiting the generality of section 34(1), a court may, on an application under section 33(1), make 1 or more of the following further orders in relation to restrained property:
…
(e) an order relating to the Official Assignee that—
…
(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property:
…
[20] Sale orders are typically applied for by the Commissioner in respect of restrained property to ensure the property does not erode in value. A sale order may be made at any time including when it is the subject of a forfeiture order.9
[21] Courtney J, in a frequently cited observation, recognised the legislative purpose and utility of s 35(3)(v):10
[30] The underlying purpose of the restraining order is to preserve the subject property because it represents a monetary value to the parties
9 Commissioner of Police v Cavanagh [2014] NZHC 2978 at [7].
10 Commissioner of Police v Keen (aka Chen) [2013] NZHC 2259 at [30]-[31].
concerned. The legislature can be taken to have appreciated that property may be subject to a restraining order for a considerable time and that circumstances may change over the life of the order so as to put the property at risk. Some risks may be of a kind that action, including disposition of the property itself, may be needed to preserve the value that the property represents. If there were no mechanism for responding to such risks the rationale for the scheme would be significantly undermined.
[31] Section 35(e)(v) specifically recognises the need to preserve the value of the restrained property through the sale of it. There are many foreseeable circumstances that might justify such an order. These include a significant drop in the property market, the risk of a mortgagee sale and the reduction in value caused by lack of funds to maintain the property.
[22] An additional benefit arises from sale of assets in that once sold the funds may be held by the Official Assignee in an interest bearing account.11
The evidence
[23] The property is valued at $1.75 million. The mortgage over the property is approximately $1 million.
[24] The parties do not dispute there are mortgage arrears owing on the property although where Ms Skiffington contends the amounts have been manufactured by the bank. Wespac’s evidence is that there is no genuine dispute as to the amounts owing.
[25] Demands issued by Westpac expired without payment on 31 January 2017. As at 1 February 2017 the amounts secured by Westpac’s mortgage over the property were in arrears in the sum of $27,944.99. A Property Law Act 2006 notice in respect of arrears was served on Ms Skiffington on 2 March 2017.
[26] Westpac confirmed in affidavit evidence that, as at 19 June 2017, arrears totalled $92,685.80. Additionally there is accrued interest and costs including legal costs. A letter dated 22 June from Westpac’s solicitors to Ms Skiffington advised the
arrears as at 22 June 2017 totalling $96,532.83 comprised:
11 Commissioner of Police v Cavanagh, above n 9, at [7].
Account No Balance (OD) Limit Arrears Account - 00 $6,064.70 $5,000 $1,064.70 Accrued debit interest $1.02 Account - 91 $676,315.17 $600,635 $75,680.17 Accrued debit interest $828.73 Account - 93 $343,340.97 $324,555 $18,785.97 Accrued debit interest $172.24 Total $96,532.83
[27] In his affidavit evidence on behalf of the Commissioner sworn on 14 October
2016 Detective Senior Sergeant Murray deposed that the Commissioner intended to file an application for forfeiture once the criminal proceedings involving the second respondent were at the end. At that stage Dr Love had indicated his intention to file an appeal in the criminal proceedings in which he had been convicted and sentenced
on a charge of obtaining property by deception.12 Dr Love’s appeal has now been
determined. Neither his conviction, nor his sentence, were disturbed.13
[28] The Commissioner’s application was filed in order to preserve the equity in the Plimmerton property. The proceeds of a sale, which would be managed by the Official Assignee, would be held in the Official Assignee’s interest bearing deposit trust account. The Commissioner considered a sale order would more effectively preserve the equity. The restraining order had not prevented the mortgage falling into arrears.
[29] In her affidavit filed on 29 June 2017, the day before the hearing, Ms Skiffington deposed to having paid all of the interest payments due up to March 2017. Ms Skiffington sourced the escalating arrears — from $38,000.00 in March 2017 to in excess of $96,000.00 as at June 2017 — to failures on the part of
Westpac. In essence it is said that the bank was deducting significantly larger sums
12 R v Love [2016] NZHC 2046 (verdict) and R v Love [2016] NZHC 2394, 2016 4 NZTR 26-020 (sentence).
13 Love v R [2017] NZCA 265.
than were going in because Westpac had unilaterally moved to a larger mortgage repayment arrangements. Ms Skiffington said she had asked Westpac to mediate the issue and it had refused. Ms Skiffington believed the arrears could be managed by her giving an undertaking to pay the interest as it falls due on an interest only basis. A rental stream from the tenancy of the property would meet more than 80 per cent of the interest only payments and an application for forfeiture should be filed and heard so that this issue could be resolved. In this way the equity in the restrained property would not be further eroded. Westpac should be asked to appear before the Court to explain the arrears and finally undertakings and sureties could be provided by the bank that it would meet damages to the trustee proprietors in the event that the Crown’s application ultimately fails and the asset has been lost because of the bank’s conduct.
[30] Mr Reid objected to the late filing of Ms Skiffington’s affidavit. Westpac was unaware when it filed updating submissions on 22 June 2017 that there was to be a further affidavit. There had been no indication that it would be filed. To the contrary it had been understood, particularly from memoranda filed by Mr Temm, that Ms Skiffington was not well enough to do so. Westpac had not had an opportunity to review the substantial material exhibited to Ms Skiffington’s affidavit and Mr Reid submitted that if the Court intended to rely on the affidavit, Westpac should be given the opportunity to respond if it wished to do so. Further, contentions by Ms Skiffington about corrupt practice within Westpac were vehemently denied. Mr Reid objected also to the assertion that Westpac had “manufactured mortgage arrears”.
[31] Because Mr Temm undertook that only paragraphs [43]–[57] of Ms Skiffington’s affidavit are relevant to this application it was ultimately not necessary to provide further time to Westpac to consider and respond to Ms Skiffington’s affidavit.
Decision
[32] I am persuaded the application should be granted.
[33] The evidence shows the mortgage is more than $96,000.00 in arrears which are increasing. The first respondent does not dispute that the mortgage is in arrears although she strongly disputes her liability for the debt because, she says, the mortgage arrears were created by the bank when it changed the basis of the mortgage repayment arrangements without notice or agreement.
[34] Ms Light queried the legitimacy of the dispute on the basis that if the first respondent had a genuine concern about the way in which the arrears had arisen, she might have been expected to flag the issue to Westpac prior to February 2017. The fact the arrears were disputed first emerged in the first respondent’s notice of opposition to the application for a sale order which the Commissioner filed in October 2016. Ms Light submitted also that if the dispute was genuine then the interest only payments, which the first respondent maintains are the only payments due, could have been made.
[35] I observe that Westpac’s position, as advised to Ms Skiffington’s counsel in a letter of 14 March 2017, is that the trustees should have been aware that loans continued to be on floating interest rates and principal and interest terms as these were the agreed terms in relation to which Westpac regularly sent correspondence. In addition, details of the applicable interest rates were available at all times by internet banking and stated on the relevant bank statements.
[36] I regard the dispute as a matter which it is for Westpac and the first respondent to settle. The first respondent may have her reasons for not paying the arrears but those reasons are not relevant to the application before me and cannot be raised as a bar to the application for a sale order. The following established facts are relevant to the question whether a sale order is necessary for the purpose of preserving the value of the restrained property:
(a) There are arrears of almost $100,000.00.
(b) No mortgage payments have been made since 3 March 2017.
(c) The arrears are impacting on the value of the equity in the property.
(d) There is an ongoing reduction in value caused by the first
respondent’s failure to pay the arrears.
(e) A notice has been issued under the Property Law Act.
[37] As to the Property Law Act notice I accept Ms Light’s submission that non- compliance with the notice seems likely given the strength of the first respondent’s opposition to Westpac’s claim and her contention that the arrears have been manufactured by the bank. In the event of non-compliance the property will be sold by way of a mortgagee sale.
[38] The first respondent says the applicant’s position is protected by the restraining order. I do not see it that way. The effect of the restraining order preserves the property itself not its value. There is no evidence that a presumptive sale will have an adverse effect on the value of the property and no reason is advanced as to why, when the property is sold, it will be unlikely to sell for its market value at that time. Nor is there evidence of an increase in the net equity in the property since the restraining order in February 2014. On the other side of the ledger there is evidence that the mortgage arrears are substantial.
[39] I turn now to a matter which Mr Temm raised at the outset, namely, the first respondent’s health. In his memorandum filed on 27 February 2017 Mr Temm successfully sought an adjournment of the hearing set down for 6 March 2017 on the grounds of Ms Skiffington’s deteriorating health. Mr Temm stated that he had been unable to obtain full instructions. I accept, of course, Mr Temm’s assessment of the position at that stage. With regard to the hearing before me it did not appear that Ms Skiffington’s interests in opposing the application have been compromised by her personal circumstances. Ms Skiffington filed extensive affidavit evidence the day before the hearing. Up to the minute correspondence was included. Although succinct in his delivery Mr Temm made wide-ranging arguments in opposition to the application. Even accepting that the affidavit apparently took many months to complete it was apparent to me that Ms Skiffington’s interests were comprehensively and ably advanced by her counsel.
[40] 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.
Disposition
[41] I make the following orders:
(a) The Official Assignee is directed to sell the residential property located at 12 Moana Road, Plimmerton details of which are at paragraph 1(a) of the notice of application dated 18 October 2016.
(b)Guy Sayers of Napier, office of the Official Assignee, is appointed to execute any deed or instrument in the name of Lorraine Joyce Skiffington (the first respondent), Ralph Heberley Ngatata Love (the second respondent) and Arahi Trustee Services Limited (the second interested party), being the registered proprietors of the property, for the purpose of effecting the sale of the said property if required;
(c) The proceeds of the sale of the property are to be applied as follows:
(i)payment of the costs of and associated with the sale of the property by the Official Assignee, or persons nominated by the Official Assignee;
(ii) settlement of mortgage(s) held by Westpac New Zealand
Limited;
(iii)the net proceeds of the sale of the property are to be held in the custody and control of the Official Assignee in an interest bearing deposit account under the restraining order of
4 February 2014 until further order of the Court; and
(iv) nothing in this order affects the rights, title and interest of
Westpac New Zealand Limited under the registered mortgage number 7149389.3.
Karen Clark J
Solicitors:
Crown Solicitor, Wellington for Applicant
Jonathan Temm, Rotorua for First Respondent
Gibson Sheat, Wellington for First and Third Interested Parties
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