Commissioner of Police v William
[2024] NZHC 1140
•9 May 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-771
[2024] NZHC 1140
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
an application under ss 24, 25, 28, 29, 33 and
35
BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
ROBERT WILLIAM
First Respondent
HELEN ENG
Second RespondentSYNERGY INVESTMENTS LIMITED (IN LIQUIDATION)
First Interested Party
EVERGREENS GROUP LIMITED
Second Interested PartyANZ BANK NEW ZEALAND LIMITED
Third Interested PartyWESTPAC NEW ZEALAND LIMITED
Fourth Interested Party
BANK OF NEW ZEALAND LIMITED
Fifth Interested PartyGENERAL FINANCE LIMITED
Sixth Interested Party
Hearing: 4 March 2024 Appearances:
B Finn for Applicant
M Lennard for Respondents
N D Chapman for Interested PartiesJudgment:
9 May 2024
COMMISSIONER OF POLICE v WILLIAM [2024] NZHC 1140 [9 May 2024]
JUDGMENT OF GRAU J
What this decision is about
[1] A number of residential properties owned or allegedly controlled by the first and second respondents, Mr Robert William and Ms Helen Eng (the respondents), are currently restrained under the Criminal Proceeds (Recovery) Act 2009 (CPRA) after a Police investigation identified evidence of their involvement in commercial-scale dishonesty offending.
[2] In December 2022, this Court ordered restraint of 15 properties and made orders that 12 of the restrained properties may be sold to preserve their value.1 The sale order was made with the agreement of the respondents,2 but only four properties have since been sold. Two properties sold by way of mortgagee sales. Sales of other properties have been hindered by tenancies. Nine of the 15 restrained properties were owned by the first interested party, Synergy Investments Ltd (Synergy), a company said to have been operated by the respondents which has now been put into liquidation. The most valuable property owned by Synergy has been substantially damaged since the sale order was made. The sale order also coincided with a declining property market. Thus, the process of selling the restrained properties has not been straightforward.
[3] The first issue for determination is whether two of the unsold properties should continue to be the subject of restraint orders. The respondents do not oppose restraint of most of the currently restrained properties and do not oppose sale orders in relation to Synergy’s properties, but they say that two properties—8A/126 The Terrace, Wellington Central, and 357 Main Road, Tawa, Wellington (the Terrace and Main Road Properties)—should not continue to be restrained as there is insufficient
1 Commissioner of Police v William HC Wellington CIV-2022-485-771, 25 November 2022 (Minute of Cooke J: Without notice restraining orders) [WNRO Decision]; Commissioner of Police v William HC Wellington CIV-2022-485-771, 20 December 2022 (Minute of Cooke J: Ancillary orders) [Sale Order Decision].
2 Sale Order Decision, above n 1.
evidence those properties have been acquired or derived from significant criminal activity, and their restraint is disproportionate to the alleged benefit from such activity. The Commissioner seeks their continued restraint.
[4] The second issue for determination is whether any sale order the Court makes should include a condition under s 28(1) of the CPRA that would enable the proceeds from any property sold to be used to pay debts in relation to other restrained properties. The respondents’ position is that such a condition is essential to ensure other unsold properties are not dragged down into mortgagee sales. The Commissioner is opposed to the Court making such a broad general order, but is open to the concept in general, if specific debts or expenses are identified for his consideration.
[5] The third issue is whether any sale order should include a condition under s 28 of the CPRA to allow for the payment of the Synergy liquidators’ costs and expenses, including legal expenses. The liquidators seek such an order to ensure the value of Synergy’s assets is not eroded. Again, the Commissioner is comfortable with the payment of reasonable debts and expenses (excluding legal expenses) but considers these should be addressed on a case-by-case basis to allow him and the Court to assess their reasonableness. The Commissioner’s view is that payment of legal expenses is barred by s 28(2) of the CPRA.
[6] The fourth issue is whether the Commissioner should be required to give an undertaking as to damages under s 29 of the CPRA. The respondents say that in the circumstances of this case where assets are losing (and have lost) value while they have been under restraint, and the steps taken to sell assets have not been energetically pursued, an undertaking may result in the Commissioner and/or the Official Assignee (OA) dealing with the restrained properties more proactively and commercially. The Commissioner’s position is that he should not be required to give an undertaking as to damages when he has a relatively robust case for restraint and subsequent forfeiture, the respondents’ complaints about the management of the restrained assets concern the OA, not the Commissioner, and their allegations of negligence are not made out in any event.
[7] The Commissioner had also sought sale orders for two other restrained properties: 10 St Michael’s Crescent, Kelburn; and 160 Newlands Road, Newlands. The parties have since reached a resolution in respect of these properties. The Commissioner no longer seeks a sale order for St Michael’s Crescent and the respondents no longer oppose sale of the Newlands Road property. Accordingly, this Court will make a sale order by consent of the parties for the sale of the 160 Newlands Road property.
Why are the respondents’ properties restrained?
[8] A Police investigation called “Operation Trump Card” began in February 2022. The investigation identified evidence that the respondents were involved in commercial scale dishonesty offending and money laundering. Synergy and the second interested party (Evergreens Group Ltd) are companies alleged to have been under the ownership or management of the respondents at the relevant time that were used to facilitate their alleged offending.
[9] Between 5 and 6 October 2022, Police executed multiple search warrants at addresses linked to the respondents and recovered almost three thousand items of allegedly stolen property, with an estimated total value of between $1–$2 million.
[10] A preliminary analysis of the respondents’ and their companies’ bank accounts identified an estimated $1,530,849.20 in COVID-19 wage subsidy payments to them from the Ministry of Social Development (MSD). The respondents also received payments from MSD as private accommodation suppliers. It is alleged that these payments were obtained by deception and represent an unlawful benefit to the respondents. As at 23 November 2022, the total unlawful benefit figure was assessed at $2,526,252.59.
[11]As a result, the first respondent, Mr William, has been charged with:
(a)one charge of participating in an organised criminal group;3
3 Crimes Act 1961, s 98A(1) (maximum penalty of 10 years’ imprisonment).
(b)21 charges of receiving stolen property valued at over $1,000;4
(c)two charges of attempting to receive stolen property valued at over
$1,000;5 and
(d)one charge of failing to assist with a computer search.6
[12]The second respondent, Ms Eng, has been charged with:
(a)one charge of participating in an organised criminal group;7 and
(b)20 charges of receiving stolen property valued at over $1,000.8
[13] Mr William and Ms Eng are to face trial on these charges in this Court on 7 October 2024. At this stage, the MSD investigation into the alleged wage subsidy fraud is ongoing and charges are yet to be filed.
[14] Prior to these proceedings, in October 2022, the respondents had a property portfolio of 15 properties worth about $18 million. Development plans were in place for four of these properties, they lived in one of the properties, and most of the rest were rented out.
[15] Soon after the Police executed the search warrants and formally interviewed the respondents, Mr William and Ms Eng were involved in putting 12 properties on the market and changing the registration of vehicles they owned or controlled.
[16] The Commissioner applied for without notice restraining orders over 15 properties owned by the respondents and interested parties. Justice Cooke granted the without notice restraining orders on 25 November 2022 (the WNRO).9 The
4 Crimes Act, ss 246, 247(1) and 66 (maximum penalty of seven years’ imprisonment); 20 of these charges are representative, divided by the location of where the property was stored.
5 Crimes Act, ss 72, 66, 246 and 247 (maximum penalty of seven years’ imprisonment).
6 Search and Surveillance Act 2012, s 178 (maximum penalty of three months’ imprisonment).
7 Crimes Act, s 98A(1) (maximum penalty of 10 years’ imprisonment).
8 Crimes Act, ss 246, 247(1) and 66 (maximum penalty of seven years’ imprisonment); all of these charges are representative, divided by the location of where the property was stored.
9 WNRO Decision, above n 1.
application was subsequently amended to include ancillary sale orders, and was granted by Cooke J on 20 December 2022.10 The parties had agreed to the further orders providing the ability to sell the 12 properties the respondents had put on the market before the WNRO application. The parties also agreed that the proceeds of any sale would be dealt with either by applying it to debt facilities from any of the 15 restrained properties or by being held by the OA until the determination of any forfeiture application.
The current application
[17] On 1 December 2022, the Commissioner filed the current on-notice applications under ss 24 and 25 of CPRA (the Restraint Application). Final sealing of an on-notice restraint and sale order was adjourned a number of times to attempt to reach agreement. This has not happened. The Commissioner now seeks to preserve his position in respect of the already restrained properties until such time as a civil forfeiture application can be made.
Issue 1: Should restraint continue over the Terrace and Main Road Properties?
General principles
[18] The CPRA establishes a regime for the forfeiture of property that has been acquired or derived directly or indirectly from significant criminal activity, or that represents the value of the person’s unlawfully derived income. The purpose of the regime is to eliminate the chance to profit from crime.11
[19] Restraining orders prohibit the disposing of, or dealing with, the specified property other than as provided for in the order. They are interim orders of limited duration that may be made without notice. They are often used to preserve property pending an application for forfeiture, which requires a further process.12 Forfeiture orders may be made in respect of instruments of crime, assets, or profits.13
10 Sale Order Decision, above n 1.
11 Criminal Proceeds (Recovery) Act 2009 (CPRA), s 3.
12 Vincent v Commissioner of Police [2013] NZCA 412 at [45(a)].
13 CPRA, ss 50, 50C, 55 and 70.
[20] Applications for restraining orders are brought under ss 24 and 25 of the CPRA. Under s 24, the Court may make an order if it has “reasonable grounds to believe” that property is "tainted”:14 that is, it has, wholly or in part, been acquired as a result of, or directly or indirectly derived from, “significant criminal activity”.15 A finding on the balance of probabilities that property is tainted is not required; the question is whether the Commissioner has put forward sufficient evidence to enable the Court to determine that there are reasonable grounds to believe the property is tainted property. That is a lower threshold (it has been described as “relatively low”) consistent with the role of restraining orders as a “holding” measure.16
[21] A property may be tainted even though it has only partially been acquired from significant criminal activity. For example, an entire property will be tainted where funds derived from significant criminal activity are used to service a mortgage over a property,17 or comprise some of the funding for home improvements, even if such payments are only a small proportion of the value of the property.18
[22] Under s 25 of the CPRA, the Court may order restraint of a respondent’s property where it has “reasonable grounds to believe” that the respondent “unlawfully benefitted from significant criminal activity”.19
[23] The key difference between ss 24 and 25 is that s 25 requires a respondent to be named but does not require the property to be tainted (and vice versa). Parliament intended for the Commissioner to be able to gather further evidence between the restraint and forfeiture stages, thus it was considered beneficial that a respondent need not always be named and/or that tainting not always be shown in a restraining order application. As noted above, restraining orders were characterised as an order “to be
14 CPRA, s 24(1).
15 CPRA, ss 5 for the definition of “tainted property” and 6 for the definition of significant criminal activity.
16 Commissioner of Police v Li [2014] NZHC 479 at 8.
17 Commissioner of Police v Debreceny [2016] NZHC 3152 at [33].
18 McFarland v Commissioner of Police [2024] NZCA 16; see also Drake v Commissioner of Police [2020] NZCA 494 and Hunt v Commissioner of Police [2021] NZCA 644, [2023] 2 NZLR 1 [Hunt]. I note that the position is different when a respondent’s property is sought to be forfeited pursuant to a profit forfeiture order, as opposed to an asset forfeiture order (Hunt at [59]).
19 CPRA, s 25(1).
made to preserve property while the Crown is gathering evidence to support an application for forfeiture”.20
[24] Once an on-notice restraining order is made, it remains in force for one year. In the event any forfeiture proceedings are not resolved in one year, the Commissioner can apply to extend the duration of the restraining order. An extension is for 12 months only, but more than one extension may be granted.21
Positions of the parties
[25] The Commissioner seeks continued restraint over the Terrace and Main Road Properties to preserve the Commissioner’s position in respect of all the restrained assets, pending full financial analysis and investigation, and before the filing of a civil forfeiture application. The Commissioner maintains there are reasonable grounds to believe the Terrace and Main Road Properties are tainted, in that they were in part funded through the respondents obtaining COVID-19 wage subsidies and accommodation supplements from MSD by deception or fraud, and through the receipt and sale of stolen property. The Commissioner submits that some money used to finance the mortgage repayments (and some maintenance work) on both properties can be traced back to the alleged offending.
[26] The Commissioner also contends there are reasonable grounds to believe the respondents have unlawfully benefitted from their alleged significant criminal activities. The Commissioner highlights that the receiving charges involve
$1–2 million worth of property, there is evidence of fraud against MSD, as well as evidence of multiple unexplained cash deposits in the years preceding the restraint consistent with the proceeds of sale of stolen goods and/or fraud. Nor does the respondents’ declared income to the Inland Revenue Department (IRD) match the extent of money passing through their hands.
20 Criminal Proceeds (Recovery) Bill 2006 (81-1) (Explanatory note) at 2; see also Heather McKenzie Proceeds of Crime Law in New Zealand (2015, LexisNexis, Wellington) at [5.2].
21 CPRA, ss 37 and 41.
[27] For the respondents, Mr Lennard says the standard of proof may be relatively low, but it is not a “formality”. He points out that it is the Court, not the Commissioner, who must have reasonable grounds to believe that the Terrace and Main Road Properties are tainted, and there is insufficient evidence adduced by the Commissioner for the Court to be satisfied they are.
[28] The respondents accept that payment of mortgage debts on a property means the property has been indirectly derived from the source of the payment. They also accept that, as money is fungible, it is not possible to say a payment into a bank account goes out as any particular amount. But the respondents say there must be a limit, that is at least a substantial and actual—not de minimis or theoretical—connection between alleged significant criminal offending and the derivation of the property said to be tainted. Here, they submit there is no such substantial and actual connection.
[29] Mr Lennard’s other main argument on this issue—which can apply equally to the Commissioner’s arguments in respect of both ss 24 and 25—is that the value of the currently restrained properties is disproportionate to the alleged benefit from the offending such that return of the Terrace and Main Road Properties is needed to remedy this disproportionality. The maximum potential benefit the respondents could have received as a result of their alleged offending is around $103,848; nothing close to the $2.5 million asserted by the Commissioner. Mr Lennard notes the decision of the Court of Appeal in Hunt v Commissioner of Police (Hunt).22 There, three restrained properties were worth about $874,000, but the unlawful benefit alleged was around $59,000. The Court of Appeal disagreed with the decision of the Court below that proportionality was only ever relevant at the forfeiture stage and found that continued restraint of a particular property was disproportionate to the Commissioner’s legitimate interest in a subsequent profit order (which would be around $59,000).23
[30] The Commissioner says that continued restraint of the Terrace and Main Road Properties (and indeed the restrained properties in general) is not disproportionate. This is because fluctuations in the Wellington property market render the sale price of
22 Hunt, above n 18.
23 At [63]–[64].
the restrained properties uncertain, and the heavily mortgaged nature of the respondents’ property portfolio and its ongoing management costs reduces the potential equity available to meet any future forfeiture orders.
Evaluation
[31] I am unable to accept Mr Lennard’s submission that a de minimis threshold applies to property obtained or derived from significant criminal activity in order to establish tainting. A de minimis connection would cut across the CPRA which, in s 5, defines “tainted property” as any property that has “wholly or in part” been acquired (or directly or indirectly derived) from significant criminal activity. Although the CPRA does not qualify the words “wholly or in part”, the authorities make it clear that tainting can occur through very modest means. 24 Put simply, a property is either tainted or it is not.
[32] I have considered the affidavits of Ms Yumantha Alwis, a forensic accountant employed by the Police, filed in support of the on-notice application for restraint. Ms Alwis’ evidence was not challenged by way of cross-examination, although Mr Lennard’s written submissions do challenge its conclusions. Mr Lennard accepts that there may be a causal connection between some cash deposits and some mortgage payments. But he says there is nothing put forward to establish reasonable grounds to believe those deposits were the product of significant criminal activity. As to the remainder of the deposits, Mr Lennard contends there is no precision or correlation between other payments said to have derived from money laundering, MSD fraud, and/or COVID-19 subsidy fraud and the mortgage payments on the properties that are at issue.
[33] However, I accept the submissions for the Commissioner that there appears to be what was described as a “money-go-round”, with several examples of money coming in, being funnelled around accounts, and ultimately going out as payments in relation to property. When that is considered alongside unexplained cash deposits and
24 For example, interest-only mortgage or maintenance payments have been held as introducing funds derived from significant criminal activity and tainting an entire loan account, with no question of proportionality arising: see Commissioner of Police v Winsor [2014] NZHC 161 at [33]–[34].
a limited amount of taxable income being reported to the IRD, the combination satisfies me to that relatively low required standard of reasonable grounds to believe these properties are tainted in the way the Commissioner alleges.
[34] Nor do I accept Mr Lennard’s submission that the value of the restrained property is grossly disproportionate to the alleged benefit. Self-evidently the benefit figure is not settled. The criminal trial has not yet taken place. The Commissioner’s investigation is ongoing. The benefit may or may not increase or decrease. The Court of Appeal in Hunt made it clear that no question of proportionality arises at the restraint or forfeiture phases in relation to asset forfeiture orders.
[35] The position is different when property is forfeited pursuant to a profit forfeiture order.25 In this case, it does appear the Crown will seek a profit forfeiture order, but even then, as Hunt explained, no estimate of the unlawful benefit is required at the restraint stage and nor would it often be practicable.26 I acknowledge the Court in Hunt also said that a complaint of disproportionality could well be made where the significant criminal activity and/or the estimated unlawful benefit alleged was towards the lower end of seriousness and scale.27 But the alleged offending by Mr William and Ms Eng can in no way be characterised in such terms.
[36] In the Hunt case, the disproportion was stark, where the estimated criminal benefit was approximately $59,000 as against the estimate of the total value of the restrained assets of approximately $874,000. In the present case it is not, where the receiving charges relate to a high quantity and value of stolen property passing through the hands of the respondents. There is ongoing financial analysis which indicates fraud, and there is a prospect of further charges. The restrained property portfolio is of significant value but in a fluctuating market. I accept the Commissioner’s submission that the sale prices of the restrained properties are rendered uncertain by that market, and I add, by the other difficulties in achieving sales caused by factors including existing tenancies and damage. On this basis, I conclude that restraint of the Terrace and Main Road Properties should continue.
25 Hunt above n 18, at [58]–[61].
26 At [63].
27 At [63].
Issue 2: Should a condition be imposed to allow sale proceeds to be allocated to other properties’ debts?
[37] Section 28 of the CPRA enables the Court to place conditions on restraining orders:
28 Conditions on restraining order
(1)A court may make a restraining order subject to any conditions the court thinks fit including, without limitation, conditions that provide for the following to be met out of a respondent’s restrained property:
(a)the reasonable living costs of the respondent and any of his or her dependants:
(b)the reasonable business expenses of the respondent:
(c)the payment of any specified debt incurred by the respondent in good faith:
(d)any other expenses allowed by the court.
(2)Despite subsection (1)(d), a court may not allow any legal expenses to be met out of a respondent’s restrained property.
(3)In determining whether or not to make a restraining order subject to a condition, the court must have regard to the ability of a respondent to meet the reasonable living costs, expenses, or debt concerned out of property that is not restrained property.
[38] The respondents seek an order that would permit the OA to pay unsold restrained properties’ debts from the proceeds of sale of other restrained properties. Although they accept that the cross-collateralised nature of the debts would achieve this result in any event (at least to some extent), they note that had the OA previously taken that course, the mortgagee sales and/or liquidation of Synergy might have been averted.
[39] Although I consider the respondents’ position is a reasonable one, I agree with the Commissioner’s submission that identifying specific debts or expenses for consideration of payment is preferable to a broadly worded order, when debts to which sale proceeds could be allocated are readily identifiable, and the opportunities to apply sale proceeds to other properties’ debts is already necessarily limited. For example, there are a number of properties with BNZ mortgages. The mortgages are cross- collateralised; each secures lending on all other properties with BNZ mortgages. Thus,
any remaining sale proceeds from one property would necessarily have to be applied to remaining debt on other BNZ properties.
[40] Indeed, as Mr Lennard responsibly accepted, it may be that such a condition is never needed. He pointed to one situation (the sale of a property in Kanpur Road, Broadmeadows) where such a condition could have been useful––but there was no surplus after that sale.
[41] In my view, given the relatively limited circumstances in which the need for such a condition could arise, it is better dealt with on a case-by-case basis by agreement between the parties and/or approval of the Court. The Commissioner has said he is open to any application for payment of specific debts or expenses. He should be expected to respond in a reasonable manner, so that recourse to the Court should be unlikely.
Issue 3: Should a condition be imposed to allow for payment of the liquidators’ costs and expenses?
[42] Synergy’s position is that any orders made by the Court should reflect its liquidation. Accordingly:
(a)any sale orders should include a requirement that the OA will only consult with the liquidators about the properties owned by Synergy, and not with the respondents;
(b)any orders should make it clear that proceeds from the sale of Synergy’s properties cannot be used to pay the respondents’ personal debts, or used to pay debts that relate to properties they own personally, except to the extent of secured creditor cross-collateralisation; and
(c)the proceeds of the properties owned by Synergy should—after paying real estate agent fees, other costs related to sale, and debt facilities required by mortgagees and/or secured creditor cross- collateralisation—be applied to the liquidators’ reasonable costs and
expenses, giving effect to s 278 of the Companies Act 1993, which provides that “the expenses and remuneration of the liquidator are payable out of the assets of the company”.
[43] Synergy submits these conditions are necessary to ensure the value of its assets is not eroded by paying the respondents’ debts. It also submits that the position should be formalised, rather than being addressed on a case-by-case basis as the Commissioner proposes.
[44] I accept the Commissioner’s submission that the CPRA took no account of the Companies Act regime when s 28 of the CPRA was crafted. Nor do I consider orders are necessary in respect of using sale proceeds to pay down other mortgages. There is a relatively limited and identifiable pool of properties subject to mortgages by two banks. The liquidators can, and should, specify debts or other expenses for the Commissioner to consider. He is open to applications of sale proceeds to specific reasonable debts or expenses, and he can and should be expected to respond in a reasonable manner.
[45] Synergy also notes that the liquidators have and will incur legal costs in accordance with their duties under the Companies Act. It submits s 28(2) is not intended to (and should not) limit a liquidator’s ability to use a liquidated company’s restrained property to pay for legal expenses incurred for the benefit of is creditors.
[46] Synergy points out that it is not a respondent to the proceedings. Although it accepts Synergy’s sole director and shareholder is the second respondent, Ms Eng, it makes the point that, since it was placed into liquidation on 27 June 2023 on the application of its creditors, it is the liquidators, not the second respondent, who have been in control of its assets and actions.
[47] Section 28(2) plainly prohibits legal costs being met out a respondent’s restrained property where those expenses were incurred after the restraining order is made. The Proceeds of Crime Act 1991 previously permitted such a condition, but it was not carried forward into the CPRA. In contrast, legal expenses incurred before
the restraining order is made can be met out of restrained property as a “specified debt” in subs (1)(c).28
[48] The Commissioner relies on the plain wording of s 28(2) and the observations made at [47] above. The Commissioner says he takes no issue with the bona fides of the Synergy liquidators or the appropriateness of their decision to retain counsel, but no account was taken of the renumeration regime in the Companies Act when the CPRA was passed, and so the prima facie position in subs (2) applies.
[49] I do not accept the liquidators’ submission that, because Synergy, not the respondents, owns the restrained property, and the liquidators now control Synergy’s assets and actions, the restriction in s 28(2) does not therefore apply to limit the payment of Synergy’s legal expenses from the restrained property.
[50] Nor do I accept the submission that Synergy’s properties are not to be treated as (at least one of) the respondents’ restrained properties for the purposes of this application, when the scheme of the CPRA enables the Court to go beyond any corporate structure to consider the real de facto position of the respondents in relation to that property.29
[51] The second respondent, Ms Eng, was the sole director and shareholder of Synergy, a company alleged to have been used as a vehicle for fraud. It was clearly within her effective control. Indeed, if it was not, then the property owned by Synergy could not have been restrained.
[52] While the liquidators are now in control of Synergy’s property to ensure that creditors’ interests are recognised, that does not change the basis on which Synergy’s properties were restrained. It would not be consistent with the CPRA regime (and would potentially undermine it) to treat Synergy’s property any differently now.
[53] The liquidator’s legal expenses are not a debt that was in existence at the time Synergy’s properties were restrained. They are legal costs Synergy seeks to have paid
28 Commissioner of Police v Venkatnaidu [2013] NZHC 3424 at [26].
29 See, for example, as provided for in s 17A of the CPRA.
property restrained because it was under the control of a respondent, Ms Eng. The legal expenses are (or will be) incurred after the restraining order was made. Section 28(2) bars payment.
Issue 4: Should the Commissioner be required to provide an undertaking as to damages?
[54] Under s 29(1) of the CRPA a court may require the applicant for a restraining order to give an undertaking to pay damages or costs in respect of the restrained property.
[55] The Court of Appeal, in Yan v Commissioner of Police, set out the general principles to be applied when considering whether the Commissioner should be required to give an undertaking under s 29.30 The Court began by confirming what it said was the “broad and untrammelled” discretion conferred by s 29 and endorsed the principle articulated by Lang J in the Court below that the discretion “should be exercised according to considerations of justice and fairness and to diminish the possibility of oppression and injustice”.31 The Court explained that, although there is a strong public interest in preventing criminals from benefitting as a result of significant criminal activity, a restraining order represents a significant infringement of property rights and “has the potential to cause considerable injustice” should it transpire the order was not justified. Section 29 provides a potential safeguard against such injustice.32
[56] The Court set out a (non-exhaustive) list of the relevant factors to be taken into account:33
(a)the personal circumstances of the respondent;
(b)delay;
30 Yan v Commissioner of Police [2015] NZCA 576, [2016] 2 NZLR 593 [Yan].
31 At [27] and [40]; referring to Commissioner of Police v Yan [2014] NZHC 2688 at [5].
32 At [39].
33 At [41]–[42]; in his minority decision, Asher J included another factor, being whether the applicant for an undertaking is a non-party.
(c)the nature of the asset;
(d)the likelihood of loss being suffered as a result of the restraint;
(e)the extent of any likely loss;
(f)the conduct of the Commissioner;
(g)the strength of the Commissioner’s case; and
(h)the existence of a meaningful alternative avenue of redress.34
[57] The inquiry under s 29 is “essentially fact dependant”, with the weight afforded to each particular factor varying from case to case.35 There is no presumptive approach in favour of giving an undertaking.36 The Court also warned against the “chilling effect” of requiring the Commissioner to give an undertaking, where it considered there was a “realistic possibility the Commissioner would become excessively cautious and be inhibited from seeking restraining orders because of the spectre of having to face a damages claim”.37
[58] In Commissioner of Police v Salter, Palmer J expanded on the Yan factors.38 His Honour also took into account the novel nature of the proceeding in that case,39 the public interest in ensuring both an effective criminal proceeds regime and in protecting those subject to it,40 the impact on business,41 and whether an undertaking would act as an additional incentive to the Commissioner to respond to reasonable requests for variations.42 I note that the Court of Appeal has recently released its decision on the Commissioner’s appeal against Palmer J’s decision to require an
34 For example, the ability to grant a restraining order subject to provision for reasonable living costs or business expenses under s 28, or the ability to vary and/or grant a further order under s 35.
35 At [40].
36 At [46].
37 At [37].
38 Commissioner of Police v Salter [2021] NZHC 1531.
39 At [48].
40 At [49].
41 At [52].
42 At [54].
undertaking.43 Although disagreeing with part of Palmer J’s reasoning in respect of the facts, the Court took no issue with Palmer J’s approach to the question of whether an undertaking should be ordered, and was satisfied that case was an appropriate one for an undertaking.
Positions of the parties
[59] Mr Lennard submits that the so-called “dynamic” assets involved in this case are losing value while they are under restraint, and that the restraint seems excessive. His argument is that:
(a)These proceedings are novel. The Commissioner has moved to restrain all the profit-generating assets of a legitimate leasing and property development businesses.
(b)Although the Commissioner may have an arguable case, no forfeiture application has been made, the respondents have not been convicted of anything, any asserted benefit appears excessive, and tainting is challengeable.
(c)The impact on the business has been “disastrous”. The respondents’ development plans have been lost, their holding company is in liquidation, mortgagee sales are looming, and their property portfolio is said to have lost $2 million in value after being restrained. The restraint has already been in place for 16 months, resolution is years away, and time only makes the loss more acute.
(d)There is a potential for sales at a discounted price. Assets so far have been sold at a loss. Synergy’s liquidation demonstrates forced sales. The OA’s marketing efforts do not inspire confidence that the remaining properties will not also be sold at a discount.
43 Commissioner of Police v Salter [2024] NZCA 6.
(e)In 2023, the respondents sought the OA’s agreement to variations of the type now sought by the s 28 orders. Had such orders been obtained on a consent basis then perhaps the mortgagee sales and/or the Synergy liquidation could have been averted. An undertaking would incentivise the Commissioner to respond to reasonable requests for variations.
(f)There will be no undue chilling effect. Requiring an undertaking here addresses what Mr Lennard considers “recklessly or even too readily” restraining peoples’ property, disproportionat[e] to any benefit or damage from alleged offending and with a foreseeable risk of serious commercial harm”. In his submission, if that is chilling, then “that might not be a bad thing”.
[60]The Commissioner’s position is that:
(a)The OA’s role and conduct are distinct from the conduct of the Commissioner. Any redress the respondents might seek, as a result of concerns about the OA’s handling of the restrained properties, would properly be directed to the OA through separate proceedings.
(b)The OA’s marketing and sale of properties was agreed to by the parties and approved by the Court, as the respondents were in financial hardship and had debt accumulating on the properties.
(c)The OA has followed a reasonable and orthodox approach to the sale process.
(d)The respondents’ assertion of negligence rests upon assertions and opinions of a third party, Mr Aashish Suri, who is the respondents’ property manager. Accepting these claims involves the Court second guessing the appropriateness of the OA’s decision making about property management. Despite Mr Suri’s assertions that he might have obtained a better return on the properties sold, it would be difficult for the Court to make assessments as to any “likely” loss alleged by the
respondents, given the volatility of the housing market. And Mr Suri “has not always made the [OA’s] role easy”.
(e)Justice Cooke’s orders included provision for the respondents to participate in (and in certain circumstances halt) the sales process. They have not fully exercised these rights, and this is not the OA’s fault.
(f)The Commissioner’s case for restraint and forfeiture is robust. There is clear evidence of fraud and the laundering of proceeds through the restrained properties. Ongoing investigation is not uncommon in complex cases of this kind.
The evidence about the sales process
[61] At the hearing, three witnesses were cross-examined on the affidavits they had filed in this matter:
(a)Mr Suri, the property manager who has worked for Mr William and Ms Eng and their company Synergy (until its liquidation) since 26 January 2023. Mr Suri criticised the way in which the OA has dealt with him and with the restrained properties.
(b)Ms Elizabeth Cook, a case coordinator in the Criminal Proceeds Management Unit (CPMU) of the OA, who has provided an account of the OA’s dealings with the restrained properties and with Mr Suri.
(c)Ms Monique McIntyre, a Specialist Investigator in the Central Asset Recovery Unit, who filed affidavits in support of the without notice and on-notice restraining orders.
[62] The purpose of Mr Suri’s evidence appeared to be to build a case that the OA was uncooperative with him and his management of his clients’ portfolio. His view is that at least some of the restrained properties could have been tenanted, the large property portfolio has been run down, properties had been marketed in a manner that would result in poor prices, sale proceeds were not allocated to take care of Synergy
debts—which resulted in two properties being sold at mortgagee sales—and money was lost, which he considered was avoidable.
[63] Despite that the evidence of these three witnesses occupied a good part of the hearing time, there was very little reference to their evidence in counsels’ oral submissions that followed. That is perhaps unsurprising, and I comment here that I consider Mr Suri’s evidence did not make Mr Lennard’s task easy in terms of advancing a case that the OA has acted in a negligent manner. As Mr Lennard responsibly accepted, there was probably fault on both sides in the way the restrained properties have been dealt with.
[64] In general, I found Mr Suri to be an unsatisfactory witness, and I am unable to attach any significant weight to his opinions. For example, he appeared reluctant to agree with even the most obvious propositions such as the Wellington housing market’s decreasing house prices in 2022, or that late 2022/early 2023 was not the easiest time to sell a house in Wellington.
[65] I also note Mr Suri appeared to be unfamiliar with some of the attachments to his affidavit; including matters I would have expected him to have knowledge of. And some of his answers tended to be evasive.
[66] Mr Suri’s affidavit included his opinion that there was tension between the respondents’ need to generate rental income and the OA wishing to have properties ready for sale. But he would not accept the suggestion that perhaps he and the OA were getting in each other’s way, because it would be easier for the OA to sell properties if he had not been trying to tenant them—something that in my view could be considered as self-evident.
[67] Despite that the OA told Mr Suri they preferred periodic tenancies (to assist with the sales process), he nevertheless put a tenant into a property on a fixed-term basis which caused the OA difficulties in attempting to selling it. Mr Suri discussed a photograph he took of that property––noting there was no advertising outside––in support of his opinion that the OA was not being energetic in the process of selling the
restrained properties. He would not accept, however, that the lack of a sign outside might be consistent with a fixed-term tenant being at the property.
[68] He also disputed a letter from the OA’s solicitors which included that the tenant at that same property (who was a diplomat) would not allow open homes for security reasons. He said the agent never sent him any information about an open home. In my view, however, it is readily inferable that a diplomat would not wish for open homes.
[69] I prefer the evidence of Ms Cook as to the OA’s dealings with the restrained properties. The OA immediately placed the properties with the same real estate agent the respondents had recently engaged before the properties were restrained, so that the properties could remain on the market. Ms Cook also provided examples of Mr Suri’s conduct in dealing with the OA that tended to suggest he was less cooperative than might have been expected, which also bears on my assessment of his evidence.
[70] In terms of criticisms of advertising signs being taken down outside a property, Ms Cook said she wished the CPMU had been told as they would have acted immediately. Nor did she accept the propositions put to her that the OA was advertising property sales as distress sales akin to a mortgagee sale.
[71] I comment here that I do not consider a property being sold “as is” necessarily demonstrates a distress sale. As Ms Cook said, there could be tenants living there. Stating that there was to be no entry onto the property also suggests protection of a tenant’s privacy.
[72] In relation to a criticism about insurance claims on the Hatton Street address (a property that had been significantly damaged), Ms Cook outlined the OA’s process of asking the respondents if they had made a claim, and for OA review if that claim was not accepted––which she recalled emailing Mr Suri about but received no response.
[73] Ms Cook acknowledged that she thought the appointment of Mr Suri was a good idea and would make everyone’s jobs easier. That did not transpire. She frankly opined that there was room for improvement from both parties.
[74] Having heard from these two witnesses, I am of the view that Mr Suri’s opinions or concerns were overstated. This finding is relevant to whether there should be an undertaking as to damages or costs in relation to the restraining order in this case.
Evaluation
[75] First, I do not accept that these proceedings are novel where the allegations in this case involve the laundering of the proceeds of crime into property. That is not an unusual context for the making of restraining orders. Despite that there may have also been legitimate use of the properties at the same time, the legitimate leasing of a properties would not bear on whether a property has met the definition of being tainted in the CPRA. It is a very different situation to the case of Salter where the significant criminal activity the Commissioner relied on for the purpose of restraining orders was unusual. It was the first case where the proceeds of crime regime had been applied to an ordinary commercial business that has committed health and safety offences (as opposed to Crimes Act or Misuse of Drugs Act offences) where issues about what the proceeds of crime might be is still at large.
[76] That said, I accept that a significant period of time has already passed since the properties were restrained. A forfeiture hearing may still be a long way off. This is a factor supporting an undertaking. However, this is also a case where the complexity of the underlying alleged offending is significant and investigation is ongoing, which I accept is not necessarily uncommon.
[77] The extent of any likely loss is difficult to determine. But after hearing from Mr Suri and Ms Cook, I have not found any basis for concerns to the extent that they would support the making of an order requiring an undertaking. It is a fact that the Wellington property market has had its difficulties, and those difficulties were already underway when the respondents themselves attempted to put the properties on the shortly before the properties were restrained. That the property market may have got
worse and/or the trends of the property market itself, cannot be laid at the door of the OA or the Commissioner.
[78] The OA has had to do its best in respect of a portfolio of properties with difficult tenants, damage caused to property rendering its sale much more difficult (and any sale proceeds detrimentally affected), and a property manager whose interests did not align with the OA’s (for example, by tenanting properties and hampering the ability to effect a sale). I also take into account that the respondents agreed with the orders Cooke J made, which included provision for them to participate in and in certain circumstances halt the sales process.
[79] I do not consider an undertaking as to damages is required to incentivise the Commissioner to respond to requests for variations or to ensure improvement in future dealings with the restrained properties by the COP and/or OA. Mr Lennard’s example of a variation that was sought (and declined) to enable a surplus from the sale of one property to forestall a mortgagee sale, does not assist his argument when there was no surplus in that case.
[80] The fact that some assets have been sold at a loss is, at least in part, a reflection of market factors. It is not possible to calculate the extent of any likely loss, particularly in a property market that is still in a state of fluctuation.
[81] In terms of the strength of the Commissioner’s case, that is also difficult to assess. However, there is evidence of a high level of fraud and dishonesty, and criminal offending involving stolen property, with proceeds finding their way through to the restrained properties.
[82] I do not consider an undertaking would result in a “chilling effect” on the role of the Commissioner in pursing and administering the restraining orders in this case. The Commissioner says he has a “relatively” robust case, any losses are difficult to assess, and in any case would more appropriately be the subject of redress directed to the OA under separate proceedings. I comment here that I do not find that last argument particularly attractive. It would have the potential to lead to an unsatisfactory outcome, whereby the Commissioner would be able to wash his hands
of any liability, despite the fact it is the Commissioner who has brought the CPRA proceedings and is working with the OA. But in any case, the risk that the Commissioner might be chilled must be balanced as part of the broader assessment of the needs of justice and fairness.
[83] Taking all of these matters into account, I consider the most pressing matter is the likelihood and extent of loss being suffered. However, at present, when I do not accept the OA/Commissioner’s conduct has reached a sufficient level of concern in terms of causation/likelihood, and it is very difficult to assess potential loss, that is too nebulous a matter to found an undertaking as to damages.
Result
[84] By consent, a sale order is made in respect of the property at 160 Newlands Road, Newlands, Wellington, registered in the name of Robert William and described under record of the title Unique Identifier WN553/262, legal description Lot 7 Deposited Plan 14492.
[85] On-notice restraining orders are to continue in respect of all interests in the property at:
(a)10 St Michael’s Crescent, Kelburn, Wellington, registered in the name of Helen Eng and described under record of the title Unique Identifier WN26A/252, legal description Part Lot 52 to 53, Deposited Plan 1632 and Lot 1 Deposited Plan 43260; and
(b)all interests in 357 Main Road, Tawa, Wellington, registered in the name of Helen Eng and described under record of the title Unique Identifier WN700/37, legal description Lot 1 Deposited Plan 18238.
[86]All other orders previously made by this Court remain in force.
[87] The applications by Synergy and the respondents pursuant to s 28(1)(d) are declined. Should Synergy or the respondents wish to apply sale proceeds of a property to a particular debt, they should endeavour to reach agreement with the Commissioner.
In the event the parties cannot agree, Synergy or the respondents may make a specified application to the Court at the time the order is sought.
[88]The application for payment of Synergy’s liquidators’ legal costs is declined.
Grau J
Solicitors:
Crown Solicitor, Wellington for Applicant Izard Weston, Wellington for Respondents
Simpson Grierson, Wellington for Interested Parties
Commissioner of Police v William [2024] NZHC 1140
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