Commissioner of Police v Yan
[2015] NZHC 2544
•16 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-002040 [2015] NZHC 2544
UNDER the Criminal Proceeds (Recovery) Act
2009
BETWEEN
COMMISSIONER OF POLICE Applicant/Respondent
AND
WILLIAM YAN
First Respondent/ApplicantWEI YOU
Second Respondent/Applicant
Hearing: 30 September 2015 Appearances:
M Harborow for Applicant/Respondent
D P H Jones QC for Respondent/ApplicantsJudgment:
16 October 2015
JUDGMENT OF VENNING J
This judgment was delivered by me on 16 October 2015 at 10.30 am, pursuant to Rule 11.5 of the
High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Meredith Connell, Auckland
Copy to: D P H Jones QC, Auckland
COMMISSIONER OF POLICE v YAN & ANOR [2015] NZHC 2544 [16 October 2015]
Introduction
[1] The respondents apply to the Court for directions. Specifically, they seek an order requiring the Commissioner of Police (the Commissioner) to file an application for civil forfeiture orders together with associated timetable directions to ready such application for a hearing in 2017.
[2] The respondents also sought directions in relation to the hearing of the on notice application for restraining orders. Issues in relation to that aspect of the application have been resolved. A three week fixture has been allocated for that application on 13 June 2016. The parties have agreed to a timetable to ready it for hearing.
Procedural background
[3] The Commissioner filed a without notice application for restraining orders under the Criminal Proceeds (Recovery) Act 2009 (the Act) on 18 August 2014. Lang J granted the application on 19 August.
[4] The Commissioner then filed an on notice application for restraining orders on 25 August. The application was adjourned by consent to 10 September. On 10
September the Court noted senior counsel for the respondents, Mr Wicks’ QC,
advice:
But for the jurisdiction issue in relation to the undertakings sought on behalf of the respondents and interested parties, the respondent [Mr Yan] would otherwise have been prepared to concede to the orders sought in the on notice application being made in relation to him. There are, however, also the applications filed by the interested parties. …
[5] Directions were made for the hearing of the applications for the undertakings sought from the Commissioner. That application was heard on 24 October 2014. Lang J delivered a decision on 31 October 2014 declining the application for orders requiring the Commissioner to provide undertakings. That judgment was taken on appeal. The Court of Appeal have heard argument. A decision is awaited.
[6] On 29 May 2015 the respondents filed an amended notice of opposition to the on notice application for restraining orders. As noted, that application is set down for hearing in June 2016.
[7] During the course of these proceedings the existing without notice restraining orders have been varied as to their scope and effect, often by agreement. Variations were made by consent or at least without opposition on 2 and 9 September, 13, 20 and 24 November, and 19 December.
[8] In addition, following an opposed application, provision was made for the respondents’ reasonable living expenses to be met out of restrained property and to allow them to operate an investment company on terms. These orders were made by the Court following a two day hearing on 8 and 11 December 2014.
[9] The existing restraining orders that remain in force until the application on notice is disposed of include the original without notice orders granted by Lang J on
19 August 2014 together with a number of amendments. The property affected by the orders (as amended) is:
Global restraint:
(i)all property held by or on behalf of Mr Yan and Ms You, whether directly or indirectly;
(ii)on 2 September the global restraint order was varied (on terms) to enable the release of $4 million from a bank account held in the name of Elliot Lane Developments Ltd (ELD) (of which Mr George Hunt was a sole director and shareholder) to enable payment of a deposit under an existing agreement for sale and purchase BC Corporate Administration Ltd had entered in relation to property at 113 McClymonts Road, Albany;
(iii)on 20 November further orders were made varying the arrangements in relation to ELD’s interests in the property at McClymonts Road, Albany.
[10] Although global restraint orders were obtained, the following specific property was also identified as the orders:
Real estate:
(i) all interest in the property at apartment 3505 Metropolis, 1
Courthouse Lane, Auckland registered to Khai Wain Ng;
(ii) Marmande Property Investment Ltd’s interest in the properties
at 2 and 2A Tizard Road Birkenhead, Auckland;
(iii) the property at 12/1 Marine Terrace, Bayswater, Auckland; (iv) the property at 12/2 Marine Terrace, Bayswater, Auckland; (v) the property at 22/b Owens Road, Epsom, Auckland;
(vi)the property at 1143 Arapuni Road, Arapuni and all associated rights and consents;
Vehicle
(vii)2007 Bentley Continental Flying Spur, registration number DQJ516 registered to Hai Guang Gao. The Bentley was sold by consent on 10 September 2015 with the proceeds held by the Official Assignee;
Bank funds
(viii) all funds in the bank accounts of Zhihong Xu, ANZ 06-0594-
0099879-00; and ASB 12-3233-0684574-50;
(ix) all bank accounts formerly held in the bank accounts of Lijing
Zeng, Westpac 03-0166-0828019-028, and 118296-AUD-
374001;
(x) on 13 November an ASB account in the name of Wei You, 12-
3029-0357226-00 was released from restraint. The respondents were free to use that bank account. Further, the Official Assignee was directed to immediately release to that bank account $5,000 for living expenses and a further $5,000 to allow Mr Yan and Ms You to clear the overdraft on the account;
(xi) on 24 November further orders were made by consent in relation to restrained sums as trustee of the GEP No. 1 Trust bank account. Again the orders were varied on terms;
(xii) on 19 December Mr Yan and Ms You’s restrained assets overseas, Ms You’s HSBC account, Mr Yan’s British Virgin Island account, and/or the Australian bank accounts were released from restraint to the extent of $4,720.00 per month in total for reasonable living expenses;
(xiii) on 19 December 2014 the funds in the bank account of LY Investment are released from restraint provided that bank statements for the bank account of LY Investment are to be provided to the Commissioner on a monthly basis and Mr Yan provides full and complete disclosure of the source of any funds received by LY Investment (No 1) Ltd that the Commissioner requests information about;
(xiv) all funds held in ANZ Bank New Zealand Ltd bank account number 06-0103-0226221-00 and its associated term deposits;
(xv) Gallinas Holdings Ltd’s bank accounts including Westpac accounts 03-0252-0496073-000 and 03-0252-0496073-025 and ANZ account 06-0103-0296812-00.
Shareholdings
(xvi) 73,564,333 shares held in the name of SY Huang Family Trust) and 280,000,000 shares held in the name of Zihong Xu in FM International Limited;
(xvii) 100 per cent of TEY Trustee Limited’s shareholding in Mega
Limited;
(xviii) 100 per cent of New Vision Trustee Limited’s shareholding in Mega; 80,000,000 shares in FM International Ltd held by Nominee Gallinas Holding Ltd;
(xix) these orders were varied by consent on 19 June 2015 to allow the companies who held shares in Mega Ltd to enter a shareholders’ agreement and a termination agreement.
(xx) these orders were varied by consent again on 10 August 2015 to allow the Mega shareholders to participate in a non- renounceable rights issue;
The respondents’ case
[11] The application requiring the Commissioner to file any application for civil forfeiture orders was filed on 29 May 2015. It is made on the basis that the restraining orders currently in place will not dispose of the substantive issues between the parties. Mr Jones QC submitted:
(a) Restraining orders are akin to an interim injunction1 or freezing order and should not be allowed to subsist without substantive orders being sought.
(b)The hearing of any substantive application for civil forfeiture orders will occupy a considerable period of Court time (the respondents estimate five months). Any application will not be heard until 2017, even if the application is filed shortly. Further delays will lead to a hearing of any application for forfeiture not being heard until 2018 or later.
(c) Permitting the Commissioner to sustain the restraining orders without being required to make an application for a civil assets forfeiture order amounts to an abuse of process.
(d)The orders sought are necessary and desirable for the prompt disposal of the proceeding and to achieve fairness and meet the interests of justice.
The Commissioner’s case
[12] The Commissioner says there is no jurisdiction for the Court under the Act or otherwise to require him to file an application for forfeiture orders.
[13] Alternatively, if there is jurisdiction, it should not be exercised as the Commissioner has not unduly delayed in progressing the hearing of the restraining orders.
[14] The Commissioner submits the appropriate remedy for the respondent lies in the resolution of the on notice application for restraining orders in June 2016. If the
orders are not made that will end the matter. If the orders are made then the Court
1 Commissioner of Police v C [2012] NZHC 435, at [8]; see also High Court Rules, r 32.2 and the discussion in Watt v Sharma HC Auckland CIV-2006-404-2975, 15 December 2008, at [17]– [18].
can exercise its supervisory jurisdiction on any application for extension of the orders (which may be made for a period of less than a year).
Issues
[15] The application raises three broad issues:
(a) whether the Court has jurisdiction to make orders requiring the Commissioner to file an application for civil procedure within a particular time frame; and
(b) if so, whether the jurisdiction should be exercised in this case; and
(c) if it is to be exercised, the terms upon which it is to be exercised.
Jurisdiction
[16] Proceedings under the Act for restraining orders and civil forfeiture orders are civil proceedings.2 They are commenced by originating application under Part 19 of the High Court Rules.3
[17] Mr Jones submits that restraining orders are ancillary to the primary purpose of the Act which is to establish a regime for the forfeiture of property.4 Restraining orders are not stand alone orders. Rather they are “ancillary orders” intended to preserve property pending the issue of forfeiture being determined. It would be an abuse of process if restraining orders were obtained and maintained with no intention to preserve property pending the bringing and determination of the forfeiture application, but rather to apply financial pressure on a respondent to enter a compromise settlement with the Commissioner. A lengthy delay in bringing a
forfeiture application, such as is the situation in the present case, has the same effect
and can amount to an abuse of process.
2 Criminal Proceeds (Recovery) Act 2009, s 10(1).
3 High Court Rules, r 19.2(r).
4 Criminal Proceeds (Recovery) Act 2009, s 3(1).
[18] Mr Jones submitted the Court had jurisdiction to make the directions sought on a number of bases:
(a) High Court Rule 7.43A; or
(b) High Court Rule 1.6(1) or High Court Rule 1.6(2); or
(c) The Court’s inherent power to control its own proceedings.
[19] Mr Jones submitted that as there is a proceeding before the Court r 7.43A applies with all necessary modifications5 and enables directions to be made. Specifically he noted that r 7.43A provides:
7.43A Directions as to conduct of proceedings
(1) A Judge may, by interlocutory order,—
(a) fix the time by which a step in a proceeding must be taken:
(b) fix the time by which all interlocutory steps must be completed:
(c) direct the steps that must be taken to prepare a proceeding for a substantive hearing:
(d) direct how the hearing is to be conducted:
(e) make any other direction or order that the court may make under these rules.
(2) A party or intended party may apply without notice to a
Judge for directions if in doubt about—
(a) whether it is correct or appropriate to join a person as a party; or
(b) the proper court in which to commence or take a step in a proceeding; or
(c) the correct method of proceeding under these rules.
[20] The position is confirmed by r 7.1AA, which provides:
…
(3) A proceeding commenced by originating application is subject to limited case management through the ability of the parties to seek directions (see rules 19.11 and 7.43A).
[21] Mr Harborow agreed that rr 19.11 and 7.43A provide jurisdiction for the Court to make orders and case management directions, but submitted the jurisdiction was only in relation to the application before the Court, which is the application for the restraining orders. Case management orders and directions have been made for that proceeding and it has been timetabled for a fixture in June 2016.
[22] Mr Harborow submitted there is no jurisdiction for the Court to make an order requiring the Commissioner to file an application for forfeiture. The application for forfeiture is a quite separate and discrete application from the current application for restraining orders. The two applications are different in nature and are dealt with in different parts of the Act.
[23] Mr Harborow also noted that a further indication the applications are discrete is found in s 11 of the Act which confirms that property need not be restrained before it becomes forfeited. Equally, property may initially be restrained but ultimately may not be the subject of a forfeiture application.
[24] Further, as a matter of principle he submitted the police investigation should not be cut short by this Court compelling the Commissioner to prematurely file a forfeiture application. Mr Harborow contrasted the position under the Act with that under the former Proceeds of Crime Act 1991 which imposed time limits for filing a forfeiture application following conviction.6 There is no equivalent in the current Act.
[25] Mr Harborow is correct that the application for forfeiture orders and the application for restraining orders are different and distinct applications. As there is no application for forfeiture before the Court, the Court obviously cannot make directions within such an application requiring the filing of such an application.
[26] I also accept that the Court cannot direct the Commissioner how the police should conduct their investigation of Mr Yan.7
[27] However, it does not follow that the Court has no jurisdiction to make orders within these existing proceedings, which may include an order relating to the discharge of the restraining orders if certain steps, including the filing of an application for forfeiture orders within a certain period of time, are not taken (hereafter referred to as an “unless direction”). When the Act is considered as a whole, it is clear in my judgment that the restraining orders are not an end in themselves. They are only there to preserve property pending the bringing of a forfeiture application. If no application is filed they must be discharged.
[28] Both counsel referred to the following passage from the decision of the Court of Appeal in Vincent v Commissioner of Police as to the purpose of restraining orders:8
Restraining orders are effectively interim orders of limited duration and may be made without notice.9 The explanatory note to the Criminal Proceeds (Recovery) Bill identified the purpose of restraining orders as being “to preserve property while the Crown is gathering evidence to support an application for forfeiture”.10 They may subsequently lead to forfeiture orders, but that requires the completion of a further process.11 So, for example, before an assets forfeiture order may be made, the Commissioner must file and serve a further application and the court cannot make the order unless it is satisfied, on the balance of probabilities, that the relevant property is tainted property.12
[29] The passage is, with respect, clearly correct. An application for forfeiture need not be filed at the same time as an application for restraining orders. The test in each case is different. Before issuing a restraining order the Court must be satisfied there are reasonable grounds to believe either that the property sought to be restrained is tainted property, or that the respondents have unlawfully benefited from
significant criminal activity, whereas before making an assets forfeiture order, the
7 Fox v Attorney-General [2002] 3 NZLR 62 (CA).
8 Vincent v Commissioner of Police [2013] NZCA 412, at [45](a).
9 Sections 37—42 of the Criminal Proceeds (Recovery) Act 2009 deal with the duration of restraining orders and further orders.
10 Section 5(1): definition of ‘property’. The explanatory note to the Criminal Proceeds (Recovery)
Bill 2007 states that one of the Bill's purposes was to facilitate cooperation with other jurisdictions in respect of the recovery of criminal proceeds: Criminal Proceeds (Recovery) Bill
2007 (81-1) (explanatory note) at 2.
11 Sub-pt 3 of the Act deals with civil forfeiture orders.
12 Section 50.
Court must be satisfied on the balance of probabilities of those considerations. In the restraint proceedings in this case the Commissioner alleges both that there are reasonable grounds to believe that the items of property subject to restraint are tainted property by virtue of being derived from money laundering,13 and that the respondents have unlawfully benefited from significant criminal activity14 including money laundering, domestic fraud and breach of restraining orders.
[30] However, while the application for restraining orders preserves the position and enables the police to carry out further investigations, that does not address the issue in the present case. Mr Jones is correct in that the restraining orders are ancillary to the ultimate application for forfeiture. The police investigation is directed towards a decision whether to apply for forfeiture orders (and if so, in what terms) or not. If the decision is made not to apply for forfeiture orders then the restraining orders should be discharged.
[31] The relationship between the restraining orders and the forfeiture application is further recognised in s 37(1) of the Act.
[32] Parliament has also recognised the need for the Commissioner to progress the application for restraining orders by directing an applicant for such an order to prosecute the application with all due diligence and, if the applicant does not do so, the Court may strike out the proceedings. The Court is also directed, so far as is practicable and consistent with the interests of justice, to ensure the application is dealt with speedily.15 As the purpose of the restraint is to preserve the position until a forfeiture application is made and determined, the forfeiture application should be
brought within a reasonable time after the property is restrained.16
13 Section 24(1).
14 Section 25(1).
15 Criminal Proceeds (Recovery) Act 2009, s 39(3) and (4).
16 Criminal Proceeds (Recovery) Bill 2007 (81-1) (explanatory note) at 2 states that a restraining order is an order “to be made to preserve property while the Crown in gathering evidence to support an application for forfeiture.” See further Commissioner of Police v Singh [2012] NZHC
344 at [17] where Priestley J stated that “restraining orders are kept under judicial scrutiny.”
[33] Parliament has also recognised the effect restraint may have on a respondent’s interests by providing the Court may require the Commissioner to provide an undertaking with respect to damages.17
[34] There are a number of other provisions of the Act relating to restraining orders which support the argument the Court may make an unless direction in these proceedings. Section 28 of the Act provides for the Court to impose conditions on restraining order:
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.
(4) In this section a dependant is a person who is dependent on the respondent and who is either or both—
(a) a child of the respondent:
(b) a member of the household of the respondent.
[35] Mr Harborow submitted that the type of conditions that could be made on a restraining order were informed by the particular matters referred to at s 28(1)(a)–(d) and s 28(3). He submitted the conditions were limited to dealing with the property itself and did not permit the case management of separate and distinct applications
for forfeiture. However, I see no reason to read down the words of the section
17 Criminal Proceeds (Recovery) Act 2009, s 29.
“subject to any conditions the court thinks fit including, without limitation …”,
particularly given the potentially draconian effect of the Act.18
[36] Section 33 also confirms the respondents may apply for further orders associated with the restraining orders.19 Sections 34 and 35 then provide for the making of such further orders and the types of further order that may be made:
34 Making further orders
(1) On an application under section 33(1), a court may, if it considers it appropriate, make further orders in relation to the restrained property (which may, but need not, be an order of any 1 or more of the types referred to in section 35).
(2) A further order may be made—
(a) at the time the associated restraining order is made; or
(b) at any later time before the expiry of the associated restraining order.
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:
(a) an order varying the restrained property to which a restraining order relates:
(b) an order varying any condition to which a restraining order is subject:
(c) an order for any person (including, without limitation, the respondent) to be examined by the court or the registrar of the court concerning the nature and location of any restrained property:
(d) an order relating to the carrying out of any undertaking given under section 29:
(e) an order relating to the Official Assignee that—
18 See Saffron v Director of Public Prosecutions [1989] 96 FLR 196 (NSW CA) where Kirby P discussed the scope of s 43 of the Proceeds of Crime Act 1987 (Cth) which was the basis for s 42 of the Proceeds of Crime Act 1991 in New Zealand. The President stated at 200 that: “a court will give effect to the will of Parliament. It will do so, if that will is clear, even in a penal statute and despite drastic consequences for those affected. But if there is ambiguity, a court will prefer a construction which observes and upholds time honored civil rights. Particularly it will do so where orders may be made with drastic consequences upon third parties and, as under the Act whether or not a conviction for an offence has been secured.”
19 Criminal Proceeds (Recovery) Act 2009, s 33(1)(b).
(i) regulates the manner in which the Official Assignee may exercise his or her powers or perform his or her duties under a restraining order:
(ii) determines any question relating to the restrained property (including any question relating to the liabilities of any person holding an interest in the restrained property), or the exercise of the powers, or the performance of the duties, of the Official Assignee:
(iii) requires the examination, before the Official Assignee, of any person holding an interest in the restrained property or any other person, concerning the nature and location of the restrained property:
(iv) directs any person holding an interest in the restrained property to furnish the Official Assignee, within the time specified in the order, with a statement on oath setting out any particulars of that interest or that property that the court thinks fit:
(v) directs the Official Assignee to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property:
(vi) directs the Official Assignee to make mortgage payments or payments in respect of any other encumbrance from the restrained property.
[37] Section 34 contemplates variations to the restraining order before the on notice application for restraining order is ultimately determined. An unless direction could be such a variation. Mr Harborow noted that s 34(1) is specifically directed at further orders “in relation to the restrained property”. He submitted that a direction as to the filing of an application for forfeiture was not an order in relation to the restrained property as such and certainly not of the type contemplated by s 35.
[38] However the unless direction is effectively in relation to the restrained property as it would potentially release the restrained property. I see no reason to read s 34 down as Mr Harborow does.
[39] The interpretation of s 34 can also be informed by the examples provided in s 35. The examples provided disclose a broad discretion. For example, s 35(c) provides for an order for examination concerning the property. Section 35(e) provides for the Official Assignee to exercise a broad range of powers in relation to the restrained property.
[40] Next, I note that orders similar to the unless directions are made in other originating applications. For example, on an originating application to sustain a caveat the test for the Court is whether there is a reasonably arguable case for the interest claimed in the caveat. If there is then the Court may make an interim order sustaining the caveat. If it makes such an order the Court will often do so on terms that substantive proceedings to determine the merits of the claim to the interest be issued within a certain period of time failing which the caveat will lapse. There is no express statutory provision in s 145 of the Land Transfer Act 1952 providing for such an order, but there is no suggestion the Court does not have jurisdiction to make such an order. Further the only application before the Court is the originating application, so on Mr Harborow’s argument r 7.43A could not provide jurisdiction for the order.
[41] For the above reasons I am satisfied that, while the Court does not have jurisdiction to make the express order sought by the respondents in this case, namely to direct the Commissioner to issue an application for civil forfeiture, it does have jurisdiction to make an order in the current application for restraint proceedings that unless the Commissioner issues an application for forfeiture order by a certain date, the existing restraining orders will be set aside. It has that jurisdiction either under the provisions of the Act or under its inherent jurisdiction.
[42] The real issue is whether, in the exercise of the Court’s discretion, bearing in mind the public policy issues that Mr Harborow argued strongly for, the Court should exercise that discretion and if so, on what terms.
[43] For those reasons it is unnecessary to consider Mr Jones’ alternative submissions as to the application of r 1.6(1). Nor do I consider there is any need to resort to r 1.6(2).
The exercise of the jurisdiction
[44] Mr Harborow submitted that the Commissioner’s investigation is ongoing. It is complex and it involves tracing money from China to New Zealand, sometimes via several other jurisdictions. In some instances the moneys brought to New Zealand have left New Zealand and later, returned again. Mr Yan has also concealed
the true ownership of the property by employing trust companies and unrelated third party nominees. Quite apart from the limited issue of jurisdiction, he submitted that the Court should be very reluctant to unduly interfere with an ongoing and active police investigation and effectively truncate the Commissioner’s investigation by placing a time limit on it in this case.
[45] Mr Harborow submitted that the Court could exercise its supervisory jurisdiction at the time the Commissioner sought any further extension of the restraining order. I note that in making that submission Mr Harborow acknowledged the Court could exercise a supervisory jurisdiction over the existence and continuation of the restraining orders (at least to that extent).
[46] Both counsel agree that as the Commissioner applied for a restraining order on notice prior to the expiry of the without notice restraining order, the effect of s 39 of the Act is that the without notice restraining order (as varied) continues in force until the application for the restraining order is determined (currently scheduled for June 2016).20 Counsel also agree that the section relating to the extension of a restraining order, s 41, which Mr Harborow argues is the basis for the Court’s supervisory jurisdiction, will not apply before that hearing. If, following the hearing, the restraining order is confirmed, an application for extension would only be necessary prior to the expiry of whatever period (not exceeding one year) the Court
directed the restraining order would expire. On that basis, it is possible that the supervisory jurisdiction of the Court Mr Harborow referred to would not arise until up to 12 months after delivery of the decision on the application for on notice restraining orders. That would be well into 2017.
[47] The Court’s ability to control the impact of the restraining order by, as Mr Harborow suggested, invoking the Court’s supervisory jurisdiction under s 41 of the Act in relation to whether an extension should be granted or not, is therefore limited,
particularly in relation to the time at which it might be imposed.
20 Criminal Proceeds (Recovery) Act 2009, s 39.
[48] I do not consider the Court’s supervision of the invasive effect of a restraining order should be restricted in that way, particularly given the breadth and scope of the restraining orders sought and granted in this case.
[49] An argument could be made for the Commissioner based on s 39(3) of the Act. Section 39(3) provides that if the Commissioner is not prosecuting the application for restraining order with due diligence the respondent can apply to have the proceedings struck out. It might be argued that implicitly the respondent must accept that the restraining order proceedings are being advanced with sufficient diligence as the respondent has consented to a timetable leading to a fixture on that
application in June 2016.21
[50] However, the point has been made that the applications for the restraining order and the application for forfeiture order are different and distinct applications. Given the complicated nature of the matters in issue preparation for the restraining order hearing might support a fixture on that matter in June 2016, but that says little about whether the Commissioner should pursue an application for forfeiture in relation to some or all of the restrained assets. Mr Jones acknowledged that a fixture on any forfeiture application would not be before 2017 in any event, and possibly even a year after the hearing of the on notice application for the restraining order.
[51] Nor do I accept the suggestion that the respondents will have the opportunity to respond at the hearing of the on notice application for restraint. As noted the test to be considered by the Court at that hearing is a different one to that applying to the application for forfeiture.22
[52] Mr Harborow then submitted that no order should be made as there had been no undue delay on the part of the Commissioner and that good progress was being
made with the investigation so far as it related to property and transactions in New
21 The Court identified this route in Commissioner of Police v Cutfield [2012] NZHC 2593 at [13].
22 As noted by McKenzie, Heather in Proceeds of Crime Law in New Zealand (LexisNexis,
Wellington, 2015) at 121 “in some circumstances opposing restraint can have the practical effect of prejudicing opposition to forfeiture. This is because in opposing restraint, the respondent will typically need to reveal his or her position and case, which in turn might give the Commissioner new avenues for the further enquires and investigation contemplated by the Act between restraint and forfeiture. Restrain and its opposition, therefore, are an important step strategically for both Commissioner and respondent alike.”
Zealand. The investigation, however, required mutual assistance with authorities overseas such as in Hong Kong and China.
[53] To establish both an arguable case to support the restraining orders and to support any application for forfeiture, the Commissioner has to establish the property in issue is tainted property acquired as a result of significant criminal activity or directly or indirectly derived from significant criminal activity.23
[54] To the extent the civil forfeiture order may be for a profit forfeiture order the issue is whether the respondent can be said to have unlawfully benefited from significant criminal activity within the relevant period. For this purpose the relevant period of criminal activity is the seven year period between 18 August 2007 and 18
August 2014, being the date on which the application for the restraining order was made. The allegation of significant criminal activity in New Zealand (money laundering) is necessarily founded on the allegation of significant foreign criminal activity in China (fraud). It will be necessary for the Commissioner to establish:
(a) the fraud in China;
(b) the remission of proceeds of that fraud from China to New Zealand;
and
(c) the dealing with the proceeds of the fraud in New Zealand in a way that amounts to money laundering.
[55] The Commissioner has 38 witness statements from Chinese witnesses which I understand would be relied on to support the fraud. Mr Jones suggested the witnesses may not be willing to appear but Mr Harborow’s position is the Commissioner is confident of co-operation with the Chinese authorities.
[56] That leaves the ongoing investigations in New Zealand and the related inquiries from overseas to establish points (b) and (c). I accept those inquiries are
complex and require time to be completed. However the inquiries have been on foot
23 Criminal Proceeds (Recovery) Act 2009, s 6.
for some time, and the time for the police to complete the investigation cannot be unlimited.
[57] Mr Harborow submitted the first police investigation into Mr Yan initiated in
2007/2008 was solely for the purpose of providing technical assistance and guidance to Chinese officials in respect of the potential extradition of Mr Yan back to China. It was following this investigation that immigration charges were brought against him in mid 2009. Mr Yan was acquitted on those charges in 2012.
[58] Mr Yan came to the attention of the police again at the end of 2013 as a result of evidence found on termination of a drug related matter, Operation Ghost. The police investigation regarding Mr Yan then commenced in early 2014.
[59] Mr Harborow also noted that, without attributing blame, the delay in resolving the restraint proceedings was explained by:
(a) the respondents had initially indicated the on notice application was not opposed and had only changed their attitude recently by filing an amended notice of opposition;
(b)a privilege claim over a large amount of documents remains unresolved; and
(c) the respondents have not been willing to identify the existence, nature and location of property in respect of which they have interests and/or effective control.
[60] The fact that Mr Yan initially indicated there was no opposition to the restraining orders (subject to the issue of the undertaking) is not in my judgment relevant to the particular issue before the Court. I note that the issue of the undertaking was not resolved and, as noted, has been taken to the Court of Appeal. Importantly, in any event there is no reason for that issue to have prevented the Commissioner from pursuing whatever lines of inquiry he wished to pursue to support a forfeiture application.
[61] The privilege claim arises out of the documents seized following the execution of a search warrant on 20 August 2014. As Mr Jones submitted (and I understood it was accepted by Mr Harborow) there has been a considerable amount of correspondence between counsel on the issue since then. But it is now over 13 months since the seizure of the documents. While I accept some progress has been made towards resolution of the issue, ultimately the Court may have to rule on the issue. There are provisions under the Search and Surveillance Act 2012 which enable it to do so. The documents seized are, in any event, only part of the investigation.
[62] On the last point, as Mr Harborow acknowledged, there is no obligation on the respondents to actively assist the police investigation.
[63] In contrast, Mr Jones submitted Mr Yan has been the subject of police attention for some time. The investigation since December 2007 involved an inquiry into at least some of the respondent’s financial dealings. In 2006 the New Zealand Police Financial Intelligence Unit made inquiries with the ANZ Bank in relation to accounts held by Ms You. Detective Inspector Bruce Good confirmed that in December 2007 the New Zealand Police began an investigation in the financial activities of the respondents and their associates, which led to the execution of a search warrant in a bank account held by Ms You on 15 October 2008 and in October
2008 execution of a search warrant on a bank account held by Ms You and a bank account held by Mr Yan. At about the same time the police conducted inquiries in relation to properties owned by Mr Yan in New Zealand and in relation to Metropolis apartments owned by Mr Yan. In October 2008 the inquiries extended in relation to the purchase of a Bentley car by Mr Yan. In March 2009 the police obtained a search warrant on a bank account held by Xiang Yang Yuan, which the police considered Mr Yan had authority to operate.
[64] I do not consider the points Mr Harborow raised to be sufficient to support his argument that the Court should not, at this stage, make an unless direction. To the extent the points he makes have merit, they are relevant to the terms of the order (particularly the time frames).
[65] It is also relevant, both when considering whether to exercise the jurisdiction to impose an unless direction, and the effect such an order may have on the ability of the police to complete inquiries, that s 47 of the Act provides the Commissioner may apply to amend the application for civil forfeiture order. I accept there are restraints on such an amendment. The Court must not amend the application unless it is satisfied that either additional property proceeds or benefits were not reasonably able to be identified when the application was made, or that the evidence necessary to support the application in relation to the additional property, proceeds or benefits, only became available after the application was made. However in the present case, with the inquiry ongoing and given the complexities Mr Harborow has referred to, s 47 would enable the Commissioner to seek leave to amend the application for forfeiture even after it is made. An application for civil forfeiture order in relation to certain property will not necessarily prevent the amendment of such application if, following the filing of the application, and before the ultimate hearing of it (which on any view of it is likely to be at least 12 months later) the ongoing investigation disclosed additional relevant evidence and/or property.
[66] It is also relevant that, at some point prior to August 2014 the Commissioner resolved there was sufficient information available to him to apply for the restraining orders on the broad basis sought and that he was able to establish reasonable grounds for believing certain property was tainted and/or the respondents had unlawfully benefited from significant criminal activity.
[67] For the above reasons I am satisfied on balance it is appropriate in this case to
exercise the Court’s discretion.
Terms of the order
[68] In exercising the discretion, however, I take account of the matters that Mr Harborow has raised in relation to the extent of the investigation and the difficulties associated with it. Balanced against those considerations is the need to bring some finality to the forfeiture issue.
[69] In framing the order I note that Mr Jones in closing submissions accepted the point made by Mr Harborow that there is little point in requiring the filing of an
application for the order (which may be in a relatively pro forma form) in advance of filing the affidavits in support as the substance of the matter will be addressed by the evidence.24
[70] The following orders are made:
(a) Unless the Commissioner files and serves an application for civil forfeiture orders, together with affidavits in support of the application no later than 29 April 2016 the existing restraining orders will be discharged and set aside and the existing scheduled fixture vacated.
(b)In the event the Commissioner files the application for forfeiture then any affidavits in opposition are to be filed and served by 30
September 2016.
(c) Any affidavits in reply to be filed and served by 16 December 2016. (d) Submissions by the Commissioner to be filed and served by 8
February 2017.
(e) Submissions by the respondents to be filed and served by 31 March
2017.
(f) A five month hearing is to be allocated on the first available date after
26 April 2017.
(g) Leave is reserved to all parties to seek to vary the timetable.
Costs
[71] The applicants have largely succeeded although the order is in a slightly different format. The applicants are to have costs on a 2B basis together with
disbursements as fixed by the Registrar.
Venning J
24 The application of r 7.20 by r 19.10 requires the affidavits to be filed with the application.
Addendum
[72] After the hearing counsel for the Commissioner filed a supplementary memorandum dated 9 October 2015. Counsel seeks leave to file the memorandum and submits that, if contrary to the Commissioner’s argument, the Court concludes it has jurisdiction the Court should take account of difficulties the Commissioner has experienced in the investigation when determining whether the orders should be made. Counsel refers to the failure by a law firm that has undertaken legal work on behalf of Mr Yan to comply with production orders issued under ss 104 and 105 of the Act.
[73] Mr Jones has filed a memorandum in reply. If leave is granted to the Commissioner to file the memorandum he notes that the Commissioner has applied to the District Court to enforce the production orders and that if the orders sought by the Commissioner are forthcoming compliance will be required before the end of the month. He also notes the production orders were obtained after the respondent’s application for directions in this case but appear to relate to matters that would have been in issue well prior to that.
[74] I grant leave to both parties to file their respective memoranda. I have considered the memoranda. While I note the matters raised by Mr Harborow, they do not affect my decision that it is appropriate for the above orders to be made nor, on the basis of the material and information currently before the Court, do they affect the terms of the above orders.
[75] As noted, leave is reserved for both parties to apply further. In the event of continued non compliance or difficulties such as identified by Mr Harborow in the memorandum it may be open for the Commissioner to seek leave to vary the terms
of the existing orders. However I consider that to be premature at this stage.
Venning J
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