Commissioner of Police v Zheng
[2024] NZHC 3362
•12 November 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001070
[2024] NZHC 3362
UNDER the Criminal Proceeds (Recovery) Act 2009 BETWEEN
COMMISSIONER OF POLICE
Applicant
AND
TIANLING ZHENG
Respondent
Hearing: On the papers Appearances:
M Harborow and G Young for the Commissioner
Judgment:
12 November 2024
JUDGMENT OF WALKER J
This judgment was delivered by me on 12 November 2024 at 4 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitor:
Meredith Connell, Crown Solicitor Auckland
COMMISSIONER OF POLICE v ZHENG [2024] NZHC 3362 [12 November 2024]
[1] The Commissioner of Police (Commissioner) applies without notice for a disclosure of source order against Tianling Zheng under s 109A of the Criminal Proceeds (Recovery) Act 2009 (the Act).
[2] The Commissioner seeks information from Mr Zheng on the source of funding and other details relating to the proceeds of the sale of property and bank funds (collectively, the Property) which are currently subject to a restraining order.1 That order restrains:
(a)The proceeds of sale of the following properties (the Broadway Properties):
(i)C408/176 Broadway, Newmarket, Auckland record of title unique identifier 340278 (Broadway Property) excluding the interests of Kiwibank Limited (Kiwibank) as mortgagee as at the date of the orders;
(ii)5B89/118 Broadway, Newmarket, Auckland record of title unique identifier NA125A/287 (Broadway Carpark) excluding the interests of Kiwibank as mortgagee as at the date of the orders;
(b)All credit funds held in a bank account held at Kiwibank in the name of Mr Zheng [REDACTED] along with accrued interest in that account (the Bank Funds).
[3] The disclosure of source order which the Commissioner seeks would require Mr Zheng to produce the information described in the application within a period of two months after the date on which the order is made.2
1 Pursuant to s 24 of the Criminal Proceeds (Recovery) Act 2009, if this Court is satisfied it has reasonable grounds to believe that property has been acquired or derived from significant criminal activity, it may order that the property is not to be disposed or dealt with other than is provided for in the order; and is to be under the Official Assignee’s custody and control.
2 Criminal Proceeds (Recovery) Act 2009, s 109A(5).
Background
[4] The police allege that several parties, including Mr Zheng, were involved in a criminal syndicate responsible for the laundering of funds, and that some members of the syndicate were involved in the importation and supply of controlled drugs.
[5] On 18 June 2021, the Commissioner applied without notice for restraining orders over property attributed to the respondents, including Mr Zheng.
On 23 June 2021, Nation J made the orders sought.3
[6] On 29 June 2021, the Commissioner applied for on notice restraining and further orders. That application was originally opposed by Mr Zheng who filed a notice of opposition and two affidavits in support of his opposition.4
[7] The Commissioner filed evidence in response to Mr Zheng’s opposition. Mr Zheng then withdrew his opposition prior to the hearing and consented to the making of restraining orders. On 9 May 2022, Moore J made the restraining orders sought by the Commissioner by consent. They have been extended twice and will expire on 9 May 2025 unless further extended.
[8] On 11 July 2022, Venning J issued a costs judgment awarding costs to the Commissioner in respect of the steps taken by him in respect of the restraining order matters, after Mr Zheng’s opposition.5 When determining the question of costs, Venning J observed:
[18] I accept an uplift is appropriate on the basis that Mr Zheng’s opposition plainly lacked merit. The lack of merit was obvious and, on the face of the evidence before the Court, incontrovertible.
[9] Parallel criminal proceedings arising out of the police investigation into the alleged criminal syndicate are ongoing.
3 Commissioner of Police v Zheng [2021] NZHC 1512.
4 Affidavit of Mr Zheng affirmed 17 September 2021, and affidavit of Ms Liqing Huang affirmed 8 September 2021.
5 Commissioner of Police v Zheng [2022] NZHC 1633.
[10] The Commissioner’s position is that the Broadway Properties (and consequently their sale proceeds) are tainted property. Mr Zheng purchased the Broadway Properties on 4 July 2013 for $399,000. A loan secured by mortgage was registered in favour of ANZ Bank New Zealand Limited on 15 August 2013. That mortgage was discharged and a mortgage to Kiwibank registered on 19 August 2015. The Kiwibank mortgage remained registered at the time the Broadway Properties were sold. The balance owing on the loan secured by mortgage was repaid to Kiwibank on sale and the net proceeds of sale held by the Official Assignee in accordance with the restraining orders.
[11] The Commissioner seeks to analyse the source of deposits in respect of purchase of the Broadway Properties and payments towards the loan(s) secured by mortgage(s). In particular, he seeks to investigate the extent to which some of the cash deposits and transfers from unknown third parties into Mr Zheng’s bank accounts and applied towards those loans may reflect Mr Zheng’s involvement in money laundering.
[12] The Commissioner also intends to analyse Mr Zheng’s Bank Funds to ascertain whether they are tainted. The Commissioner notes that the declared net income received by Mr Zheng into his bank accounts between 21 September 2013 and 22 December 2020 was insufficient to cover his financial, household, personal, institutional, utility vehicles and other expenses over the same period. The Commissioner also notes that Mr Zheng received undeclared income into his accounts between 21 September 2013 and 9 June 2021 totalling $247,362.27, comprising cash deposits, transfers from third parties, unidentified deposits and undeclared rental income.
[13] The Commissioner relies on an affidavit of Hamish Edwards filed in support of the disclosure of source order application and the affidavits previously filed in support of the original restraining orders which set out Mr Zhang’s alleged role and modus operandi.6
6 Affidavit of Detective Sergeant Andrew Stevenson sworn 18 June 2021 and reply affidavit of Detective Sergeant Stevenson sworn 14 December 2021.
[14] Mr Zheng’s initial opposition to the on notice application for restraining orders asserted that he had no involvement with the alleged criminal activity; that his funds derived from legitimate sources of income and were not tainted property. He claimed that the cash deposits and third party transfers were attributable to a combination of currency exchange;7 debt repayments; side-business income; the sale of personal property and borrowings from and loans to other people. He maintained that he used funds from the sale of a former property towards the deposit on the Broadway Properties and rental payments to repay the secured loan.
[15] The Commissioner argues that no cogent documentary evidence supporting these explanations was provided in the affidavits Mr Zheng supplied; substantiation being limited only to screenshots detailing Chinese bank account transactions. Mr Zheng also asserted that an individual named Liqing Huang had a 50 per cent share in the Broadway Properties. This assertion was supported by a brief affidavit from that individual. I pause to note that Liqing Huang is not named as an interested party in the proceedings.
[16] The police investigation was terminated on 23 June 2021. Mr Zheng left New Zealand on 13 March 2021 for China. According to the evidence filed by the Commissioner, he had not returned to New Zealand as at the date of this application.
Statutory framework
[17] The Act provides for the restraint and forfeiture of property derived from significant criminal activity without the need for a conviction.8 A restraining order is intended to be of limited duration to preserve property while the Commissioner gathers evidence to support an application for forfeiture.9
[18] Section 109A was introduced through amendments made to the Act on 27 July 2023 to better respond to significant transnational and organised criminal
7 By this explanation it appears Mr Zheng meant receipt of his own personal savings transferred from China back to New Zealand (albeit with the funds entering his accounts from accounts in the names of third parties).
8 Criminal Proceeds (Recovery) Act 2009, s 4(1)(a).
9 Vincent v Commissioner of Police [2013] NZCA 412 at [45(a)].
offending and supplement other investigative tools which are not practically enforceable overseas.10 Disclosure of source orders under s 109A require a respondent to whom a s 24 restraining order relates to give the Commissioner “source information” in a prescribed form within a stated period.11 Source information includes the name of each person the respondent knows holds or believes to hold interests in the property, the circumstances in which the respondent acquired the property, and any other information or documents of kinds specified in the disclosure of source order.12
[19] There are three preliminary requirements to be met before the Court may exercise its discretion to make a disclosure of source order. There must be an extant restraining order made under s 24 of the Act; that restraining order must relate to the respondent; and there must be a reasonable belief that the respondent is residing outside New Zealand or is absent from New Zealand.13
[20]The consequences of the making of a disclosure of source order are material:
(a)It is an offence to fail, without reasonable excuse, to comply with a disclosure of source order.14
(b)Evidence provided in response to a disclosure of source order is admissible,15 other than self-incriminating statements which are not admissible except in proceedings expressly defined under the Act as civil proceedings or in the prosecution of any offence under s 152.16
(c)A rebuttable presumption arises that the specific property subject to the order is tainted property if it can be shown that a respondent served with a disclosure of source order has failed to comply, or in purported compliance has made a materially false or misleading statement.17
10 Criminal Proceeds (Recovery) Amendment Act 2023, s 33.
11 Criminal Proceeds (Recovery) Act 2009, s 109A(1).
12 Section 109A(4).
13 Section 109A(1) and (3).
14 Section 152.
15 Section 164.
16 Section 165A.
17 Section 50(2A).
(d)Where the presumption applies, the Court must, subject only to limited exceptions, order the specific property’s forfeiture.18
Source information sought
[21]The source information sought is:
(a)The source of funds used to pay any deposit and repay any loans secured by mortgage registered against the Broadway Properties.
(b)Details of all income received by Mr Zheng between 21 September 2013 to 23 June 2021 from salary and wages, benefits, bonuses, business related sales and the sale of personal chattels and an explanation of the reasons any of this income was not declared to Inland Revenue (if it was not).
(c)Details of the sales by Mr Zheng’s New Zealand based business(es), including sales of assets associated with the business, between 21 September 2013 to 23 June 2021 where funds connected with or derived from those sales were applied to the Broadway Properties and/or the Bank Funds.
(d)Details of Mr Zheng’s movement of funds to New Zealand from China, including through the use of currency exchange providers, between 21 September 2013 and to 23 June 2021, and the source of those funds in China, where funds were applied to the Broadway Properties and/or the Bank Funds.
(e)Details of Mr Zheng’s provision of cash to currency exchange providers between 21 September 2013 and to 23 June 2021 where that information is not captured above and the funds were applied to the Broadway Properties and/or the Bank Funds.
18 Section 50(1).
(f)Details of any loan agreements or loan arrangements through which Mr Zheng either borrowed or loaned funds, during the period 21 September 2013 to 23 June 2021, and the details of the provision and repayment of funds pursuant to the loan agreements or arrangements where the funds were applied to the Broadway Properties and/or the Bank Funds.
(g)Details of Mr Zheng’s sale of personal property in New Zealand during the period 21 September 2013 to 13 March 2021 where the funds were then applied to the Broadway Properties and/or the Bank Funds.
(h)Authenticated records substantiating the above.
[22] The stated purpose of the disclosure of source order is thus to progress the Commissioner’s investigation, in part by testing the claims made by Mr Zheng in his original opposition to the restraining orders. The Commissioner argues that there are reasonable grounds to believe that the Property is tainted and the source information is critical to understand the nature and source of funds contributing to that restrained property.
[23]He also asserts:
(a)that he has exhausted all other available channels of investigation under the Act;
(b)the source information is likely held only by Mr Zheng or that it would be prohibitively cumbersome to obtain it through third parties; and
(c)there is a logical and reasonable nexus between the property, the issues that need to be proved to demonstrate the property is liable to a civil forfeiture order, and the source information.
Analysis
[24] The first issue is whether the application is appropriately made without notice. In Commissioner of Police v Shakib Johnstone J determined that disclosure of source order applications under s 109A of the Act are, by their nature, criminal proceedings to which the High Court Rules 2016 do not apply.19 They should generally be brought without notice although the Court retains a discretion to require that they be heard on notice to the respondent.20
[25]His reasons supporting that conclusion were:
(a)The purpose of disclosure of source orders is closely related to that of production and examination orders made under ss 104 to 109 of the Act, applications for which are criminal proceedings made without notice.21
(b)The form, effect and location of the disclosure of source order provisions within “Subpart 7 – Investigative powers” – indicates alignment with production and examination orders.22
(c)Section 109A(7) provides that the orders must inform respondents of the rebuttable presumption under s 50(2A) to (2D), and of the consequences of failing to apply, the absence of privilege against self-incrimination, and the limited admissibility of self-incriminating statements in response.23 That notice requirement would serve little purpose if respondents were to be served with, and entitled to appear in opposition to the application.
(d)The Act provides specifically for particular types of applications to be made on notice to affected persons but does not do so for applications under s 109A, indicating that the legislature did not intend for
19 Commissioner of Police v Shakib [2024] NZHC 1667 at [62].
20 At [63].
21 At [32].
22 At [42].
23 At [43].
production, examination and disclosure of source orders to carry notice and appearance rights.24
(e)The Criminal Proceeds (Recovery) Regulations 2009 (the Regulations) prescribe forms for various types of applications including on notice and without notice modes of applications for restraining orders under ss 21 and 22 of the Act. However, the Regulations prescribe only one type of form for each of the other applications addressed by the Regulations, including in respect of applications for disclosure of source orders.25 That prescribed form (added pursuant to the Criminal Proceeds (Recovery) Amendment Regulations 202326) omits reference to any “respondent” in contrast to the on notice forms.
(f)There are various safeguards for respondents and a considerable measure of justification before orders will be granted. As such, the public interest does not require contested disclosure of source applications as a matter of standard practice.27 Those safeguards are:28
(i)Disclosure of source orders may only be made in respect of respondents to whom a s 24 restraining order relates.29
(ii)A court must be satisfied there are reasonable grounds to believe the affected property is tainted property;30
(iii)Where such restraining orders have been made without notice, they expire seven days later, unless an on notice application for restraint is made, which must be prosecuted with all due diligence.31
24 At [47].
25 At [48]–[49].
26 Promulgated by Order in Council on 26 June 2023.
27 Commissioner of Police v Shakib, above n 19, at [57].
28 At [58]–[61].
29 Criminal Proceeds (Recovery) Act 2009, s 109(A)(1).
30 Section 24(1).
31 Section 39.
(iv)It is unlikely that disclosure of source order applications will be brought or granted, prior to the predicate restraining order having been confirmed during on notice proceedings.
(v)The period for responding can be extended.32
(vi)The presumption that the subject property is tainted property if the respondent fails to comply or makes a materially false or misleading statement may be rebutted in two circumstances – where the respondent established a reasonable excuse and where the Court is satisfied that application of the presumption would not be in the interests of justice.33
(vii)The Commissioner is required to observe a duty of candour and if that duty is not discharged, a Judge may rescind orders previously made.34
(g)It is not in the public interest that those responsible for conducting preliminary investigations should be put to the time and trouble of contested applications.
[26] The reasons set out by Johnstone J are compelling. The only countervailing factor is s 10 of the Act. Section 10 defines proceedings as either civil or criminal. It reads:
10 Nature of proceedings
(1)Proceedings relating to any of the following are civil proceedings:
(a)a restraining order:
(b)an order excluding an interest from restrained property:
(c)an assets forfeiture order:
32 Section 109A(5).
33 Sections 50(2B) and 50(2D).
34 Commissioner of Police v Shakib, above n 19, at [61], citing Beckham v R [2015] NZSC 98, [2016] 1 NZLR 505 at [127] and Rae v Commissioner of Police [2023] NZCA 4, [2023] NZAR 17 at [25].
(d)a profit forfeiture order:
(e)an order for relief from a civil forfeiture order:
(f)an appeal from a civil forfeiture order:
(g)an interim foreign restraining order:
(h)registering a foreign restraining order in New Zealand:
(i)registering a foreign forfeiture order in New Zealand:
(j)an order for relief from a foreign restraining order or foreign forfeiture order registered in New Zealand.
(2)Proceedings relating to instrument forfeiture orders are proceedings under the Sentencing Act 2002 and, in relation to an appeal from an instrument forfeiture order, subpart 4 of Part 6 of the Criminal Procedure Act 2011.
[27] If construed broadly, a disclosure of source order could be said to relate to both a restraining order and an assets forfeiture order. It is predicated on the former and intended to lead to the latter, albeit that is not inevitable.
[28] In Commissioner of Police v Cheng Cull J departed from Johnstone J on the question of whether applications for source disclosure orders should be regarded as being in the nature of a criminal proceeding rather than civil proceeding.35 This was in the context of assessing whether compliance with the Evidence Act 2006 or High Court Rules 2016 was required. The Judge referred to s 10 and concluded that a disclosure order relates to both a restraining order and an assets forfeiture order so is a civil proceeding.
[29] However, I have concluded that the nesting of the disclosure of source provisions in subpart 7, the mandatory form of the order, and the practical objective of overcoming unenforceability of production and examination orders against an absent respondent, are consistent with a legislative intention for a without notice process being the default approach.
[30] The second issue of whether the Court should require the Commissioner to proceed on notice in this particular case, falls out of the first issue. I have considered
35 Commissioner of Police v Cheng [2024] NZHC 2569 at [31].
whether in circumstances like these where a respondent has engaged during the on notice restraining order stage and provided a personal email address for service, the Court should exercise its discretion to require the Commissioner to proceed on notice. In Mr Zheng’s case, those factors alone do not satisfy me that I should exercise my discretion to require an on notice application.
[31] In sum, I am satisfied that the Commissioner is entitled to proceed without notice.
[32] I am also satisfied that the prerequisites for the making of a disclosure of source order are made out in this case and that, with one exception, there is a logical and reasonable nexus between the source information sought, the restrained property, and issues that need to be proved to demonstrate that property is liable to a civil forfeiture order. The exception is that part of [5](c)(ii) which reads “an explanation of the reasons any of this income was not declared to inland revenue (if it was not).”
Result
[33] The Commissioner’s application for disclosure of source order dated 8 October 2024 is granted. The respondent is required to give the Commissioner the source information detailed at [5] of the application within two months of the date of this judgment, with the exception of “an explanation of the reasons any of this income was not declared to inland revenue (if it was not)” at [5](c)(ii).
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Walker J
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