Commissioner of Police v Zhang

[2022] NZHC 1593

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1700

[2022] NZHC 1593

UNDER

Criminal Proceeds (Recovery) Act 2009

BETWEEN

COMMISSIONER OF POLICE

Applicant

AND

YINGHUI ZHANG

First Respondent

YAN MA
Second Respondent

… contd over

On papers

Counsel:

M R Harborow and R M Gibbs for applicant D J Dufty for sixth respondent

Seventh respondent (self-represented)

Judgment:

6 July 2022

JUDGMENT OF TOOGOOD J

[Approval of settlement with sixth and seventh respondents]

This judgment was delivered by me on 6 July 2022 at 12pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:

Crown Solicitor, Auckland for applicant Dale Dufty, Auckland for sixth respondent

Copy to:

Seventh respondent

COMMISSIONER OF POLICE v ZHANG [2022] NZHC 1593 [6 July 2022]

JH LOGISTICS LIMITED

Third Respondent

GUANGXIN QU
Fourth Respondent

XUEDONG ZHANG
Fifth Respondent

SHAOBIN ZHANG
Sixth Respondent

ZHI CHEN

Seventh Respondent

AMAN RESORTS LIMITED
Eighth Respondent

HANG FONG (HOLDINGS) LIMITED
Ninth Respondent

Introduction

[1]    The Commissioner of Police commenced proceedings against the sixth and seventh respondents, and others, under the Criminal Proceeds (Recovery) Act 2009 (the Act). Restraining and other orders were made under the Act on 26 August 2019 by Fitzgerald J. An application for civil forfeiture orders under the Act was also made. The restrained property was the subject of further orders under the Act made by judges of the Court from time to time. The result is that the only property relevant to the claims against Mr Shaobin Zhang and Ms Zhi Chen that remains subject to restraint is the credit funds held in Bank of China accounts 10000023000027684 and 1000002300055883 (in the name of Ms Chen) totalling $42,625.06 (plus any interest accrued).

Background

[2]    The origin of the funds still restrained is that they are considered to be the proceeds of money laundering by Shaobin Zhang of cash received from customers which he thought could be the proceeds of drug-dealing. Shaobin Zhang pleaded guilty to two charges of money laundering on 21 October 2021 and on 28 January 2022 he was sentenced in the District Court at Auckland to six months’ community detention. The summary of facts accepted for sentence reveals that, on about 5 June 2019, Shaobin Zhang delivered $300,000 in cash, the proceeds of crime, to the first respondent, Yinghui Zhang, to be transferred to China, and that on about 15 July 2019 Shaobin Zhang delivered a further $280,000 in cash to Yinghui Zhang for the same purpose.

[3]    It is accepted that the Commissioner’s case in this civil proceeding would be more extensive than that evidenced by Shaobin Zhang’s criminal convictions. It is said, for example, that the evidence indicates that he was involved in further money laundering transactions and that he relied on these funds to fund his and his family’s lifestyle. Ms Chen is Shaobin Zhang’s partner and the Commissioner’s case is that she benefited from his offending. Shaobin Zhang and Ms Chen declared, in total, a gross income of only $2,500 to Inland Revenue between 2012 and 2020.

[4]    Although no criminal charges were laid against Ms Chen, the Police investigation revealed an instance of mortgage fraud and/or tax evasion by her. When making a loan application to support the purchase of a property at 94A Arney Road, Remuera, Auckland, Ms Chen purported to be a vice general manager for Pu Tian City Fang Yang Food Trading Limited with an annual income of $390,000. But between 2012 and 5 August 2019, she did not declare any income to Inland Revenue, despite being a New Zealand tax resident.

[5]    The underlying significant criminal activity relied on by the Commissioner in this proceeding in relation to both Shaobin Zhang and Ms Chen is:

(a)money laundering and receiving under ss 243 and 246 of the Crimes Act 1961; and

(b)dishonestly using documents and obtaining by deception under ss 228 and 240 of the Crimes Act.

Proposed settlement

[6]    The Commissioner, Shaobin Zhang and Ms Chen have now agreed to settle between themselves the question of forfeiture of assets, on the terms set out in a joint memorandum of counsel dated 21 June 2022. The settlement is subject to the Court’s approval under s 95 of the Act.

[7]The terms of the proposed settlement are:

(a)$5,000 (total) is to be released from restraint and returned to a bank account nominated by Shaobin Zhang and Ms Chen;

(b)asset forfeiture orders under s 50 of the Act be made by consent over all of the remaining restrained property, but less the $5,000 released;

(c)Shaobin Zhang and Ms Chen are to abandon all claims they may have, under the Act or otherwise, to any of the property to be forfeited or to any of the other property restrained in this proceeding;

(d)the Commissioner agrees not to bring a profit forfeiture application against Shaobin Zhang and Ms Chen on the basis of the significant criminal activity evidenced in the affidavits filed in these proceedings to date;

(e)the settlement is in full and final settlement of the current proceeding under the Act as between the  Commissioner,  Shaobin  Zhang  and Ms Chen; and

(f)costs lie where they fall as between the Commissioner and Shaobin Zhang and Ms Chen.

[8]All of the property currently subject to restraining orders, excluding a total of

$5,000 which will be first released from restraint, will be forfeited: a total value of

$37,625.06 (plus any interest accrued).

The principles

[9]    Section 95 of the Act provides that the Commissioner may enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown, but that a settlement does not bind the parties unless it is approved by the High Court. The High Court must approve the settlement if it is satisfied that it is consistent with:

(a)the purposes of the Act; and

(b)the overall interests of justice.

[10]I have taken into account the following considerations:

(a)civil litigation incurs substantial costs for the parties, a significant portion of which would not usually be recoverable under the rules of Court relating to payments of costs;

(b)it is in the public interest to avoid the burden on the Court of complex and lengthy civil litigation;

(c)there is also strong public interest in litigation of this nature being brought to a prompt conclusion, so long as the settlement reflects the likely costs and risks inherent in the determination of a contested application;1

(d)approval of any settlement by the Court acting in its supervisory jurisdiction requires consideration of the legislative intent and the overall interests of justice and is not a rubber-stamping exercise;2 and

(e)a broad inquiry is required, recognising that the decision to settle proceedings under the Act may be made on economic and pragmatic grounds and often reflects a “common sense compromise” between the parties.3

[11]   Applying those principles, I accept the submissions of counsel that the proposal for the forfeiture of the restrained funds (less $5,000) is appropriate.

[12]   The proposed settlement is “consistent with the purposes of [the] Act and the overall interests of justice” for the following reasons:

(a)There will be a saving of time and cost if the matter can be resolved by consent without the need for a civil forfeiture hearing.

(b)An agreed settlement will allow the parties to have certainty and control as to the outcome.

(c)The entirety of the value of the restrained assets, excluding a total of

$5,000 representing a little under 12 per cent of those assets, will be

1      Commissioner of Police v Cotton [2017] NZHC 21 at [7].

2      Commissioner of Police v Bradley HC Rotorua CIV-2011-463-675, 5 July 2012 at [9];

Commissioner of Police v Veevers [2017] NZHC 80 at [10].

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

[2014] NZHC 361.

realised for the benefit of the Crown. That is appropriate in this case in recognition of the seriousness of the underlying criminal offending including the significant sum ($580,000) that Shaobin Zhang was convicted of laundering across only two occasions, and the need to deter the highly profitable endeavour of money laundering. Further, the majority of the forfeited assets will be applied to the satisfaction of Shaobin Zhang’s debt to Legal Aid, being a debt of $29,621.25 (as at 5 April 2022).4

(d)Regarding a profit forfeiture order, the Commissioner acknowledges the practical difficulties of pursuing a civil debt under ss 55(4) and 83(4) of the Act, namely, that Shaobin Zhang and Ms Chen are unlikely to have sufficient assets, bank accounts or income in New Zealand to satisfy any residual debt they would owe to the Crown.

Orders

[13]Accordingly, I make the following orders by consent:

(a)$5,000 (total) is to be released from restraint and returned to a bank account nominated by Shaobin Zhang and Zhi Chen being their joint account number 02-1257-0041478-00.

(b)The following property (less the $5,000 released in (a) above) vests in the Crown absolutely and is in the Official Assignee’s custody and control:

(i)the funds from Bank of China account number 1000002300027684 in the name of Zhi Chen, plus any interest accrued; and

4      In accordance with the Criminal Proceeds (Recovery) Act 2009, s 82.

(ii)the funds from Bank of China account number 1000002300055883 in the name of Zhi Chen, plus any interest accrued.

Costs

[14]   Costs shall lie where they fall in relation to all matters as between the Commissioner, Shaobin Zhang and Zhi Chen.

Further terms noted

[15]I note the following:

(a)Shaobin Zhang and Zhi Chen abandon all claims they may have, under the Act or otherwise, to any of the property to be forfeited under this settlement or to any of the other property restrained in this proceeding; and

(b)for the avoidance of doubt, nothing in the joint memorandum of counsel dated 21 June 2022 or the settlement between the Commissioner, Shaobin Zhang and Zhi Chen impacts the Commissioner’s claims in these proceedings in respect of the first to fifth respondents, none of whom are party to the joint memorandum or to the settlement.

Toogood J