Commissioner of Police v Zhang

[2016] NZHC 930

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-002516 [2016] NZHC 930

UNDER

the Criminal Proceeds (Recovery) Act

2009

BETWEEN

COMMISSIONER OF POLICE Applicant

AND

GUANGJUN ZHANG First Respondent

JINGYANG XU Second Respondent

Hearing:	9 May 2016
Appearances:	H Clark for Applicant No appearance for First Respondent M Ryan for Second Respondent
Judgment:	9 May 2016

JUDGMENT OF VENNING J

Solicitors:           Meredith Connell, Auckland

Copy to:            M Ryan, Auckland

COMMISSIONER OF POLICE v ZHANG [2016] NZHC 930 [9 May 2016]

[1]      Restraining orders have previously been made in relation to the property in issue.  The Commissioner now seeks forfeiture orders. The orders are sought against Mr Zhang and Ms Xu.

[2]      Mr Zhang has taken no steps in the proceeding and I will deal with his position shortly.  Ms Xu is represented by counsel.  Ms Xu at one time was a partner of Mr Zhang.  Although Ms Xu has apparently not formally made an application for relief against forfeiture counsel representing Ms Xu and counsel representing the Commissioner  have  had  discussions  regarding  her  position  in  light  of  the information that the Police have been able to obtain about Ms Xu’s involvement. As a result of that investigation and counsels’ discussions a resolution has been reached in relation to Ms Xu’s position.   The parties seek the Court’s approval to the resolution.

[3]      By way of background on 18 June 2014 Mr Zhang was stopped driving a car. The attending police officers considered that Mr Zhang had recently taken drugs.  A search of his vehicle revealed a large snap lock bag containing just under 500 grams of methamphetamine.  Mr Zhang was also found in possession of three cell phones and two wallets.   He was charged with possession of methamphetamine for the purpose of supply.  Subsequent inquiries established that between October 2008 and mid 2014 undeclared amounts of just under $665,000 were deposited into bank accounts linked to Mr Zhang and Ms Xu.  From his income tax returns Mr Zhang had no apparent legitimate income that would account for such deposits.  Mr Zhang became the registered owner of an apartment at 176 Broadway, Newmarket in September of 2008.  Prior to that, on 25 June 2008 Mr Zhang had made a foreign currency transfer presenting $30,000 in cash in $20 denominations for transfer to an account held in his name in Guangzhou, China.   At the time his annual declared income was only $2,000.

[4]      On  23  September  2014  the  Commissioner  sought  restraining  and  civil forfeiture orders in respect of the property at Broadway and funds from a bank account held in the name of Ms Xu.   The funds in the bank account were approximately $38,700.  Subsequently by consent the property at 176 Broadway was sold and the net proceeds of sale of just over $300,000 held by the Official Assignee

as  restrained  property.    The  forfeiture  aspect  of  the  application  was  adjourned pending the conclusion of Mr Zhang’s criminal trial, which was scheduled to take place in the Auckland District Court on 9 February 2016.  However, Mr Zhang failed to appear at Court.  The Police understand that he may have fled New Zealand on a false passport. A warrant for his arrest remains outstanding.

[5]      The Commissioner and Ms Xu have now agreed to settle the question of forfeiture assets as between themselves, subject to the Court’s approval under s 95 of the Act.

[6]      Ms  Clark  has  confirmed  that  there  is  nothing  in  the  Commissioner’s investigation that can disprove Ms Xu contributed just under $40,000 to the purchase of the property in issue.  She says that had been provided to her from her parents in China. The Commissioner is also satisfied that nothing in the investigation by the Police suggests that Ms Xu was in any way involved in the drug offending of Mr Zhang.

[7]      The  proposed  settlement  is  that  from  the  proceeds  of  the  sale  of  the Broadway property $90,000 be returned to Ms Xu.  The remainder of any interest that Ms Xu may have in the property, being up to a half share of the property, is to be forfeited to the Crown and the bank funds formerly held in Ms Xu’s bank account, approximately $38,700, should be forfeited to the Crown.  That recognises that the

$40,000 seized from that bank account in her name would otherwise be Ms Xu’s property.   In other words, the Commissioner acknowledges Ms Xu’s claim to approximately $80,000 as funds properly belonging to her.  The difference between that and the $90,000 proposed settlement reflects the litigation risk and costs.   In short in monetary terms the proposed settlement would see $90,000 returned to Ms Xu and approximately $100,000 of moneys that Ms Xu may otherwise have a claim to forfeited to the Crown.

[8]      The Court must approve the settlement if it is satisfied that it is consistent with the purposes of the Act and the overall interests of justice.  Having regard to the information before the Court, the further submissions from Ms Clark and the clarification from Mr Ryan, I am satisfied that in this case the proposed settlement is

consistent with the purposes of the Act and the overall interests of justice.   It is proper that the Court have a supervisory jurisdiction but that in exercising that jurisdiction it is equally important that the Court carry out a broad inquiry and acknowledge, where appropriate, that settlements can be in the interests of justice, bearing in mind the savings of time and cost and the litigation risk to the parties.

[9]      I am satisfied in the present circumstances and on the evidence before the Court that the settlement proposed with Ms Xu is an appropriate one.  The proposed settlement involving the forfeiture of approximately $100,000 but with the return of

$90,000 to Ms Xu represents the strength of the Commissioner’s case for forfeiture against her but also in particular recognises Ms Xu’s ability to have sought relief from forfeiture and the prospects of success, at least in part, of such an application given the state of the Police inquiry.

[10]     In relation to Ms Xu I make the following formal orders:

(a)       the Official Assignee is directed to release $90,000 from the proceeds of the sale of 176 Broadway to Ms Xu;

(b)the following property is to vest in the Crown absolutely and is to be in the custody and control of the Official Assignee:

(i)half of the sale proceeds presently restrained at 176 Broadway attributable to Ms Xu but less the sum returned to her, plus all interest earned on that sum, which is to be retained by the Official Assignee;  and

(ii)the  $38,713.59  seized  on  27  August  2014  from  Westpac account 03-0296-0378773-01 (plus all interest earned on that sum);

(c)       costs are to lie where they fall as between the Commissioner and Ms

Xu;

(d)the $90,000 to be released to Ms Xu is to be released to her within 10 working days of the sealed order being released to the parties.

[11]     In relation to Mr Zhang, he has taken no steps to defend this proceeding. Although counsel entered an appearance on his behalf initially counsel has subsequently been granted leave to withdraw.   The evidence before the Court of Detective Davenport satisfies the Court on the balance of probabilities the property is tainted property because it was wholly or at least in part acquired as a result of significant criminal activity, namely drug dealing activity and/or tax evasion.

[12]     There is also clear evidence that Mr Zhang has benefited from such criminal activity given the limited legitimate income earned over the relevant period from April 2006 to 2014.  In addition there are a number of unexplained deposits to his accounts during the relevant time period.  Mr Zhang was able to service a substantial loan without any apparent other income.   There is also the foreign currency transaction in cash in June 2008.   While it would have been open for the Commissioner  to seek  a profit  forfeiture order,  given the practical  situation  the pragmatic approach adopted by the Commissioner is appropriate, namely that the property that is in existence and readily realisable be forfeited to the Crown.

[13]     In relation to Mr Zhang there will be an order that the remaining half of the presently restrained sale proceeds of 176 Broadway attributable to Mr Zhang, including all interest earned on that, be forfeited to the Crown absolutely and that it is to be in the custody and control of the Official Assignee.

[14]     In the circumstances I make no orders for costs.

Venning J