Commissioner of Police v Stepping Stone Finance Ltd

[2013] NZHC 1537

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-4545 [2013] NZHC 1537

BETWEEN  COMMISSIONER OF POLICE Applicant

ANDSTEPPING STONE FINANCE LIMITED First Respondent

PROFIT MARK (HONG KONG) LIMITED

Second Respondent

DIAMOND TRUST NZ LIMITED Third Respondent

CIV-2012-404-4605

BETWEEN  STEPPING STONE FINANCE LIMITED Applicant

ANDPROFIT MARK (HONG KONG) LIMITED

Respondent

Hearing:                   On the papers

Counsel:                  MR Harborow for Applicant in CIV-2012-404-4545

MJ Ruffin for First Respondent in CIV-2012-404-4545 and
Applicant in CIV-2012-404-4605
TJ Rainey and J Heard for Second Respondent in CIV-2012-
404-4545 and Respondent in CIV-2012-404-4605
STA Ellis for Third Respondent in CIV-2012-404-4545

Judgment:                25 June 2013

JUDGMENT OF RODNEY HANSEN J As to costs

COMMISSIONER OF POLICE v STEPPING STONE FINANCE LTD [2013] NZHC 1537 [25 June 2013]

This judgment was delivered by me on 25 June 2013 at 11.00 a.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Meredith Connell, Auckland 1140 in CIV-2012-404-4545

Kemps Weir, Auckland in CIV-2012-404-4605

Lee Salmon Long, Auckland in CIV-2012-404-4545

Introduction

[1]      In my judgment delivered on 28 March 2013,1  I granted the application by the Commissioner of Police (the Commissioner) for restraining orders.   The Commissioner seeks costs on a 2B basis, totalling $9,353, to be apportioned between the first, second and third respondents in the proportions of 10 percent, 75 per cent and 15 per cent respectively.

[2]      The first respondent (Stepping Stone) consents to an order in the sum of

$935.30 as proposed by the Commissioner.   The second respondent (Profit Mark)

opposes the order. The third respondent (Diamond Trust) has not filed submissions.

[3]      Profit Mark submits, first, that no award of costs should be made.   It is submitted that at what is described as the interim stage of restraint, an order for costs should not be made; costs should be determined at the conclusion of the substantive forfeiture proceedings.  It is further submitted that an award of costs should not be made against Profit Mark as its assets are restrained in their entirety and it has no ability to pay costs other than from the restrained funds.  If costs are awarded, Profit Mark submits that the award should exclude the costs of filing the application and supporting affidavits and that liability should be shared equally between the respondents.

Should an order be made

[4]      For Profit Mark, it was submitted that as a restraining order is a discretionary remedy which does not finally determine substantive legal rights, costs should not be awarded at this stage.  I am unable to accept that submission.  By virtue of s 10(1)(a) of the Criminal Proceeds (Recovery) Act 2009 (the Act), a proceeding relating to a

restraining  order  is  a  civil  proceeding.    Normal  costs  principles  apply.2    As

Mr Harborow has pointed out, this means that on occasion the Commissioner must also bear the costs of a successful respondent.3

1      Commissioner of Police v Stepping Stone Finance Ltd HC Auckland CIV-2012-404-4545, 28

March 2013.

2      Commissioner of Police v Reid [2013] NZHC 1063 at [2]. See also Commissioner of Police v

Vincent [2012] NZHC 926.

3      See, for example, Commissioner of Police v Rye (No 2) HC Auckland CIV-2010-404-4897, 28

October 2010.

[5]      Contrary to the submission made on behalf of Profit Mark, the general rule is that,  unless  there  are  special  reasons  to  the  contrary,  costs  on  an  opposed interlocutory application should be fixed in accordance with the Rules when the application is determined.  In Chapman v Badon4 the Court of Appeal said:

Apart from applications for summary judgment, the general approach to costs in respect of interlocutory applications is that they are dealt with at the time the applications are determined rather than being held over until the outcome of the proceedings is known.  This reflects the fact that the merits of particular applications and the merits of the substantive proceedings are different matters.

[6]      There is nothing in the scheme of the Act to indicate that costs should not be awarded until forfeiture orders are made or declined. An application for a restraining order is a distinct step in the proceeding.   Its determination has no bearing on subsequent steps and there is no reason why costs should not be awarded at the time it is determined.

[7]      The evidence does not establish that the restraining order affects all assets of Profit Mark.  The restraint is limited to the sum of $5.8m.  Evidence put forward by the Commissioner in support of the application indicates that Profit Mark benefitted to a much greater extent from the alleged criminal activity in New Zealand.   It appears that funds held in Hong Kong were disposed of after the termination of the police operation.   I do not accept that Profit Mark would not be able to meet an award of costs.

[8]      Even if the restraining order affected all Profit Mark’s assets, it would not be an impediment to a costs order.  I understand counsel for Profit Mark to submit that no order should be made because legal expenses may not be met out of restrained property.5    That is so but it is no reason not to make an order for costs in the first place.

Quantum

[9]      For Profit Mark, it is submitted that the costs of filing the application and supporting affidavits should not be part of a costs award as those documents had to

4      Chapman v Badon [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].

5      Criminal Proceeds (Recovery) Act 2009 s 28(2).

be filed whether or not the application was opposed.  They were, however, necessary steps in the proceeding.   They were costs incurred by the Commissioner for the purpose of obtaining restraining orders.  The Commissioner is not disentitled to an order because he would have had to make the application in any event.   The Commissioner is entitled to recover costs for all steps reasonably necessary to the determination.

Apportionment of costs

[10]   The Commissioner’s suggestion that the respondents should bear costs disproportionately is an attempt to apportion costs according to the degree to which the respondents contributed to the overall costs of the application.  In my view, this provides a fair and reasonable basis on which to apportion costs and the suggested division reflects that objective.  I agree with the Commissioner that Stepping Stone adopted a realistic and pragmatic approach to the application.  Mr Ruffin confined his submissions to a single issue.  In contrast, Profit Mark opposed the application on numerous grounds, including the jurisdiction of the Court and the admissibility of evidence in a number of categories.  These arguments occupied the greater part of the hearing and required the filing of further affidavits by the Commissioner. Diamond  Trust  did  not  file  written  submissions.    Counsel  simply endorsed  the submissions of Profit Mark.

[11]     I am satisfied that the proposed order fairly apportions liability for costs between the respondents.

Result

[12]     I  make  an  order  that  the  respondents  pay  the  Commissioner’s  costs  as

follows:

(a)       The first respondent, the sum of $935.30.

(b)      The second respondent, the sum of $7,014.75. (c)       The third respondent, the sum of $1,402.95.