Commissioner of Police v Wang aka Huang

[2019] NZHC 640

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000435

[2019] NZHC 640

UNDER

The Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

GANG WANG (aka KANG (THOMAS) HUANG)

First Respondent

AND

YAN ZHANG (aka KANG (JENNY) XU)

Second Respondent

AND

ZONGLIANG JIANG (aka CHARLY JIANG)

Third Respondent

AND

PETER SHING FENT CHEUNG

Fourth Respondent

AND

SUNSHINE CONSTRUCTION LIMITED

Interested Party

Hearing:

(On the papers)

Counsel:

M Harborrow for the Applicant P Davey for the First Respondent

A Simperingham for the Second Respondent

Judgment:

29 March 2019

JUDGMENT OF MOORE J

This judgment was delivered by me on 29 March 2019 at 2:30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

COMMISSIONER OF POLICE v WANG & ORS [2019] NZHC 640 [29 March 2019]

Introduction

[1]                 I have received a joint memorandum dated 25 March 2019 filed by counsel for the Commissioner of Police (“the Commissioner”) and counsel for the respondents, Mr Huang and Ms Xu. The memorandum requests the Court to approve a proposed settlement under s 95 of the Criminal Proceeds (Recovery) Act 2009 (“the Act”).

[2]                 Under that provision, any settlement made in relation to proceedings brought under the Act is required to be approved by this Court.

[3]I approve the settlement for reasons more fully discussed below.

Background

[4]The following summary is drawn from counsels’ memorandum.

The fraud

[5]                 The Commissioner’s case is that the respondents all profited from what is accepted to have been one of the largest case of mortgage fraud to come before any New Zealand Court.

[6]                 Mr Huang operated a property development business, LV Park Construction Trust (“LV Park”). Unable to secure first tier lending to fund his business he was compelled to resort to third tier lending which attracted much higher rates of interest.

[7]                 In order to avoid these higher rates, Mr Huang devised a scheme which caused three mainstream banks to advance funds at much lower rates. Adopting this course he obtained at least 57 bank loans with a combined value of over $55 million. The fraud was facilitated by accomplices in two of the banks as well as a property lawyer who handled the conveyancing and has since fled the jurisdiction.

[8]                 The Serious Fraud Office (“the SFO”) investigated and prosecuted the fraud. Its investigation commenced in 2015. During the course of the investigation it was disclosed that Mr Huang, assisted by Ms Xu, arranged for around 120 properties to be transferred into the names of friends, relatives and, in some cases, fictitious people.

[9]                 Mr Huang retained ownership and control of the properties via LV Park and other entities which he owned and controlled. The loan applications contained false income and employment information as well as other false details. The named purchasers (and borrowers) either did not exist or were oblivious to the fact that the loans were being made in their name.

[10]             In February 2018 Mr Huang entered pleas of guilty. He was sentenced to four years and seven months’ imprisonment.

[11]             Ms Xu maintained her plea of not guilty and elected trial by Judge-alone. On 15 June 2018, following a 12 week trial before Katz J, Ms Xu was found guilty of 22 charges of obtaining by deception. Her accomplices at the banks were convicted of various related criminal offences.

Mr Huang and Ms Xu

[12]             It is accepted that Mr Huang was the principal offender and that Ms Xu played a subservient, albeit vail and significant role.

The current proceedings

[13]             In March 2018 the Commissioner commenced these proceedings. Restraining orders were granted  on  9 April  2018  in  relation  to  the  net  proceeds  of  sale  of 1 Geranium Avenue (which was sold immediately prior to restraint) and 33 Hart Road (which had not been sold at that stage).

[14]             The essence of the Commissioner’s case is that Mr Huang and Ms Xu each derived unlawful financial benefits from the fraud and that the two properties at issue were acquired or derived (at least in part) from that criminal activity.

Proposed settlement

[15]The terms of the proposed settlement are:

(a)assets forfeiture orders under s 50(1) of the Act, by consent, in relation to the following property:

(i)the net proceeds of sale of 1 Geranium Avenue together with any accrued interest except  for  $3,000  to  be  returned  to  Mr Huang (i.e. approximately $351,826);1

(ii)the net proceeds of sale of 33 Hart Road together with any accrued interest (i.e. approximately $29,028);2

(b)a sum of $3,000 to be returned to Mr Huang from the net sale proceeds of 1 Geranium Avenue;

(c)the Commissioner will not pursue an application for profit forfeiture orders against either Mr Huang or Ms Xu in relation to the significant criminal activity subject to these proceedings (as identified in the related SFO criminal prosecution);

(d)costs lie where they fall in relation to all matters as between the Commissioner, Mr Huang and Ms Xu; and

(e)the total value of the property to be forfeited as a result of the proposed settlement is $380,854 (including interest as at 5 March 2019, and deducing the $3,000 referred to at (b) above).

Legal principles: Threshold for settlement approval

[16]             Section 95 of the Act governs Court-approved settlements and provides as follows:

“(1)The Commissioner may enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown.

(2)A settlement does not bind the parties unless the High Court approves it.

(3)The High Court must approve the settlement if it is satisfied that it is consistent with—

(a)the purposes of this Act; and

1      Including interest of $5,618.26 as at 5 March 2019.

2      Including interest of $135.67 as at 5 March 2019.

(b)the overall interests of justice.”

[17]             Section 95 had no predecessor under the former legislation (Proceeds of Crime Act 1991). In enacting s 95, Parliament expressly empowered the Commissioner to enter into settlement discussions with respondents and interested parties regarding the forfeiture of assets. In doing so, Parliament is likely to have had in mind the significant cost associated with civil litigation and the benefits to all parties if proceedings can be settled and resolved by consent.

[18]             As has been previously observed, Parliament has entrusted the High Court with a supervisory jurisdiction to ensure that settlements are consistent with the parliamentary intention.3

[19]             The primary purpose of the Act is contained in s 3(1); the establishment of a regime for the forfeiture of property which has been derived directly or indirectly from significant criminal activity or that represents the value of a person’s unlawfully derived income. Ancillary statutory purposes are to “eliminate the chance” for persons to profit from  undertaking or being  associated  with  significant  criminal  activity  (s 3(2)(a)) and to “deter” significant criminal activity (s 3(2)(b)). The Court of Appeal in Hayward v Commissioner of Police recently affirmed the Act has a “strongly expressed statutory purpose”.4

[20]             The statutory language, that is “overall interest of justice”, indicates a broad inquiry is required. In considering whether a settlement is in the interests of justice, relevant factors will include the savings of time and cost and the litigation risk of a hearing to both the Commissioner and the respondent.5 The Court has recognised the decision to settle proceedings under the Act may be made on economic and pragmatic grounds and reflect a “common sense compromise” between the parties.6

3      Commissioner  of  Police  v  Know-All  Group  Limited   HC  Auckland,  CRI-2010-404-403,     7 November 2011 per Brewer J at [11].

4      Hayward v Commissioner of Police [2014] NZCA 625 at [29].

5      Commissioner of Police v Kree [2013] NZHC 2972 at [11].

6      Commissioner of Police v Douglas [2015] NZHC 1293 at [6]; Commissioner of Police v Venn

[2014] NZHC 361.

The case: Threshold for settlement approval met

[21]             Reflecting the principles in s 95(3) of the Act the parties submit the settlement is consistent with the purposes of the Act and is in the overall interest of justice. I agree for the following reasons:

(a)time and cost will be saved if the matter is resolved by consent without the need for further litigation;

(b)it is appropriate that all of the property be forfeited to the Crown in recognition of the fact that it has likely been derived from significant criminal activity;

(c)the Commissioner considers he has a strong case for forfeiture but is willing to resolve the matter in a pragmatic way. It is beyond doubt that Mr Huang and Ms Xu both unlawfully benefited from the mortgage fraud. The benefit may take various forms, including the total funds advanced, the capital gains on the properties or the savings Mr Huang was able to make when he switched from third tier lenders to mainstream banking. I am also satisfied that the properties were derived (at least in part) from the proceeds of the fraud;

(d)the Commissioner is prepared to adopt a pragmatic approach to early resolution reflected in his agreement not to pursue the substantial profit forfeiture order against Mr Huang and Ms Xu. The quantum of any such profit forfeiture order would significantly exceed the value of the restrained property attributed to the respondents. The Commissioner is unaware of any other assets which could be realised to satisfy such a profit forfeiture order;

(e)both Mr Huang and Ms Xu acknowledge the strength of the Commissioner’s case, particularly following their convictions. The standard of proof is lower in the present proceedings and there are presumptions which operate in favour of the Commissioner such as the

presumption regarding the accuracy of the unlawful benefit for profit forfeiture orders;7 and

(f)all parties wish to have certainty and control as to the outcome.

[22]             Accordingly, I am satisfied that the proposed settlement is consistent with the purposes of the Act and is in the overall interests of justice. In these circumstances the Court is mandated to approve settlement.

Orders

[23]Accordingly, I make orders in terms of [15] hereof.

Further orders

[24]             In the event the Court approves the proposed settlement all parties jointly seek and I so order the following orders to give effect to the settlement. These are set out below:

(a)variation of the restraining order under s 34 of the Act: The sum of

$3,000 is to be released from restraint from the residual proceeds of sale of 1 Geranium Avenue, Flatbush, Auckland and the Official Assignee is directed to deposit that sum to a bank account nominated by Mr Huang;

(b)assets forfeiture orders under s 50(1) of the Act: The following property vests in the Crown absolutely and is to be in the Official Assignee’s custody and control:

(i)all of the remaining net proceeds of sale of 1 Geranium Avenue together with any accrued interest, except for the $3,000 referred to at (a) above (approximately $351,826 as at 5 March 2019); and

7      Criminal Proceeds (Recovery) Act 2009, s 53.

(ii)all of the net proceeds of sale of 33 Hart Road, Tamahere, Hamilton, together with any accrued interest (approximately

$29,028 as at 5 March 2019);

(c)costs lie where they fall in relation to all matters as between the Commissioner, Mr Huang and Ms Xu;

(d)the settlement is full and final in respect of any interests Mr Huang and Ms Xu (or any associated persons and companies) might claim to have in  any  of  the  property  restrained  in  this  proceeding,  including    1 Geranium Avenue and 33 Hart Road, and they agree not to take any steps in the future to oppose the civil forfeiture of property; and

(e)the Commissioner will not proceed with any application for profit forfeiture orders against Mr Huang and/or Ms Xu (or any associated persons and companies) in relation to the significant criminal activity subject to these proceedings (as identified in the related SFO criminal prosecution).

Moore J

Solicitors:

Meredith Connell, Auckland Mr Davey, Auckland

Mr Simperingham, Gisborne