Commissioner of the New Zealand Police v Harrison
[2020] NZHC 1380
•18 June 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV 2016-485-000543
[2020] NZHC 1380
UNDER the Criminal Proceeds (Recovery) Act 2009 IN THE MATTER OF
an application under sections 22 and 25
BETWEEN
THE COMMISSIONER OF THE NEW ZEALAND POLICE
Applicant
AND
JOANNE HARRISON
First Respondent
AND
PATRICK FREDERICK SHARP
Second Respondent
AND
THE OFFICIAL ASSIGNEE
Interested Party
Hearing: 13 May 2020 Appearances:
A W M Britton for the Applicant N Bourke for the Applicant
E J Watt counsel assisting the Court
Judgment:
18 June 2020
JUDGMENT OF GWYN J
This judgment was delivered by me on 18 June 2020 at 12 noon Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
A W M Britton, Barrister, Wellington Crown Solicitor, Wellington
Nathan Bourke, Barrister, New Plymouth
THE COMMISSIONER OF THE NEW ZEALAND POLICE v HARRISON [2020] NZHC 1380 [18 June 2020]
Introduction
[1] The Commissioner of Police has applied for an on notice restraining order under the Criminal Proceeds (Recovery) Act 2009 (the Act). The application seeks to restrain $23,000 realised from Ms Harrison’s KiwiSaver account. Counsel represents both the Commissioner and the Official Assignee as an interested party (together referred to as the Commissioner). If the order sought is not legally possible the Commissioner seeks to convert this application to one for a freezing order under the High Court Rules 2016. Ms Harrison opposes. There are also helpful submissions from Ms Watt as counsel assisting the Court.
[2]The substantive issues requiring resolution are:
(a)whether a restraining order under s 25 of the Act is available where final asset and profit forfeiture orders were already determined by the High Court on 18 April 2019 and sealed on 8 May 2019 (alternatively, whether the order sought constitutes an abuse of process or is otherwise procedurally inappropriate in this case);
(b)whether the Official Assignee has the power to enforce a profit forfeiture order against property acquired by the respondent that has not been specified in the profit forfeiture order such that grounds exist for the Commissioner’s alternative application for a freezing order under the High Court Rules; and
(c)whether s 127 of the KiwiSaver Act 2006 acts as a bar to the order sought being made.
[3] I will address these issues in turn, setting out the substance of the submissions followed by my analysis. On all three issues I find against the Commissioner.
Background
[4] There is no dispute that Ms Harrison has unlawfully benefitted from significant criminal activity. The present proceeding is the latest stage in a series of proceedings
growing out of Ms Harrison misappropriating money from her employer, the Ministry of Transport.1 On 21 February 2017 she was sentenced to three years and seven months’ imprisonment. She was deported from New Zealand to the United Kingdom on 21 January 2019, having served approximately two and a half years of her sentence.
[5] In her judgment of 14 December 2017 Ellis J declined a civil forfeiture application under the Act seeking to recover the unrealised funds in Ms Harrison’s KiwiSaver account.2
[6] Pursuant to a determination on 18 April 2019, the High Court sealed assets and profit forfeiture orders on 8 May 2019. The Court determined that the value of the unlawful benefit recoverable via the profit forfeiture order was $784,172.16, minus the value of the property subject to the assets forfeiture order.
[7] In May 2019 Ms Harrison applied to her fund manager for early access to the funds in her KiwiSaver account on the grounds of financial hardship. The fund manager referred the application to Public Trust (the sector supervisor), who approved the application on 16 May 2019. On 21 May 2019 $23,000 arising from the sale of assets in the KiwiSaver scheme (the $23,000) was credited to the Public Trust bank account pending transfer to Ms Harrison, which was due on 30 May 2019.
[8] The Commissioner’s without notice application for a restraining order in respect of the $23,000 was filed on 23 May 2019. The Commissioner considered the money should be restrained because:
(a)[Ms Harrison] had unlawfully benefited from significant criminal activity;
(b)There was a risk of the cash amount being destroyed, disposed of, altered, or concealed if notice were given, in view of the imminent date of electronic transfer to the first respondent on 30 May 2019;
(c)Restraint was sought with a view to the cash amount contributing towards satisfaction of the maximum recoverable amount in the profit forfeiture order; and
1 The detail of that offending is set out in the judgment of Ellis J in The Commissioner v Harrison
[2017] NZHC 3140, at [2]-[5].
2 The Commissioner v Harrison, above n 1. Ms Harrison’s KiwiSaver account is with Kiwi Wealth Ltd, number KWKS102501, with a balance (at the date of application) of approximately
$109,211.98.
(d)Restraint would enable the Commissioner to secure the cash amount while it prepares to file and service an on-notice application for a restraining order and an amended on-notice application for civil forfeiture.
[9] Justice Ellis initially issued a minute expressing concern that the application might constitute an abuse of process in light of her judgment of 14 December 2017.
On 29 May 2019 she held:3
[5] As a result of those submissions and that hearing my provisional view of the matter now is that the $23,000 that has been released from Ms Harrison’s account is (as the Commissioner says) no longer protected by the provisions of the KSA. But whether the funds can be the subject of restraint strictly so called seems conceptually problematic, given that final orders under the 2009 Act have been made. That said, however, in light of the indisputable debt owed to the Crown by Ms Harrison it seems to me that the funds could equally be made the subject of a (without notice) freezing order under Part 32 of the High Court Rules. Such orders operate in a materially similar way to restraining orders under the 2009 Act. I am satisfied that the grounds for such an order would exist, at least at this without notice stage.
[6] Given the present form of the application, however, I grant the without notice restraining order sought. I would suggest that thought should be given to converting the proceeding to one brought under Part 32, but for now I leave that to the Commissioner and his counsel.
[10] On 30 May 2019 the Commissioner executed a production order on Ms Harrison’s KiwiSaver fund manager. The material produced suggested that, as at 3 May 2019, Ms Harrison’s balance of investments in that fund had a value of
$115,973.4 The material also indicated that Ms Harrison was applying for a cashing- up of investments to the value of $350,000. The reasons given for that application related to her accommodation status, expenses, lack of savings and income and inability to obtain government assistance in the United Kingdom.
[11] On 4 June 2019 the Commissioner filed the on-notice application for a restraining order. On 7 June 2019 Ms Harrison filed a notice of opposition to the application as well as applying for a variation of the restraining order to provide for her reasonable living costs. No admissible evidence was filed in support of that application and the Commissioner filed a notice of opposition on 27 June 2019. Ms Harrison later abandoned her application to vary the restraining order.
3 The Commissioner v Harrison [2019] NZHC 1199 (footnotes omitted).
4 This is based on Ms Harrison’s “Significant Financial Hardship Withdrawal Form” completed on 26 April 2016.
[12] At present the Official Assignee has not completed its discharge of the estate following the sealing of the profit forfeiture order. As at 13 March 2020 there remained $237,704.50 outstanding, excluding both the $23,000 and the proceeds of an auction for items of jewellery which was due to occur on 15 March 2020.
The application
[13] The present application seeks an order under s 25 of the Act that the $23,000 realised from Ms Harrison’s KiwiSaver account is not to be disposed of, or dealt with, other than as is provided for in the restraining order; and is to be in the Official Assignee’s custody and control.
[14]The grounds on which the order is sought are that:
(a)Ms Harrison has unlawfully benefitted from significant criminal activity.
(b)The profit forfeiture order against Ms Harrison is enforceable as an order made as a result of civil proceedings instituted by the Commissioner against Ms Harrison to recover a debt due to the Crown.
(c)Restraint of the $23,000 will preserve the position as between the applicant and Ms Harrison and will enable the Commissioner to prepare proceedings to recover the $23,000 as part of the debt due to the applicant.
[15]Ms Harrison’s grounds of opposition are that:
(a)the funds sought for restraint retain the essential character of KiwiSaver funds and thus s 127 of the KiwiSaver Act 2006 is effective to prevent them being transferred into the Official Assignee’s custody and control;
(b)the application is an abuse of process and constitutes an attempt to re- litigate matters already determined; and
(c)an order pursuant to s 25 of the Criminal Proceeds (Recovery) Act is discretionary and it is not in the interests of justice that an order be made.
Preliminary issue
[16] The Commissioner seeks leave pursuant to r 7.32 of the High Court Rules to rely on the affidavits of:
(a)Detective Senior Sergeant Brent Andrew Murray sworn on 29 June 2017, originally filed in support of applications for civil forfeiture orders;
(b)Detective Senior Sergeant Brent Andrew Murray sworn on 23 May 2019 and filed in support of the without notice application for restraining order;
(c)Detective Senior Sergeant Brent Andrew Murray sworn on 2 October 2019 and filed in support of the on-notice restraining order; and
(d)Ian MacKenzie sworn 28 May 2019 and filed in support of the without notice application for restraining order.
[17] The Official Assignee also seeks leave to file and adduce the affidavit of Derek Richard Shane Webb sworn on 13 March 2020.
[18] The Commissioner submits that these affidavits will assist the Court to determine the issues before it by filling out the details of the wider factual picture.
[19] There does not appear to be opposition to these affidavits being before the Court.
[20] Rule 7.32 allows the Court to grant leave for affidavits already filed in any other proceeding between the same parties to be used on the disposal of an application if prior notice of the intention to use them has been given to the opposite party. I
consider that the affidavits listed at [16] are useful in determining the proceeding. I do not consider their admission controversial. I grant leave accordingly.
[21] The affidavit of Derek Webb serves two purposes: “to inform the Court of the status of the estate in this proceeding” including the discharge of the forfeiture orders, and to outline the role of the Official Assignee in relation to already-satisfied forfeiture orders under the Act. Again, I consider the affidavit useful, and grant leave for its filing.
Issues
[22] The submissions for the Commissioner and Ms Harrison and from Ms Watt all frame the issues differently. Broadly, the issues requiring resolution are:
(a)whether a restraining order under s 25 of the Act is available where final asset and profit forfeiture orders were already determined by the High Court on 18 April 2019 and sealed on 8 May 2019 (alternatively, whether the order sought constitutes an abuse of process or is otherwise procedurally inappropriate in this case);
(b)Whether the Official Assignee has the power to enforce a profit forfeiture order against property acquired by the respondent that has not been specified in the profit forfeiture order such that grounds exist for the Commissioner’s alternative application for a freezing order under the High Court Rules; and
(c)whether s 127 of the KiwiSaver Act 2006 acts as a bar to the making of the order sought.
Statutory scheme overview
[23] It is helpful at this point to note some general features of the statutory scheme. As the Court of Appeal summarised it in Doorman v Commissioner of Police, there
are two regimes under which the forfeiture of what may be loosely termed “the proceeds of crime” can occur.5
[24] The first regime is that established under the Sentencing Act 2002.6 An instrument forfeiture order may be made where a person is convicted of a qualifying offence and property is used to commit or facilitate the commission of that offence. Such orders are made as part of the sentencing process and so are taken into account when sentencing the offender.
[25] The second regime is that established under the Act, which provides for the making of asset forfeiture and profit forfeiture orders.7 An asset forfeiture order is made in relation to tainted property – that is, property that is wholly or in part acquired or derived, directly or indirectly, from significant criminal activity. The other possibility is a profit forfeiture order, where it is not necessary for the property to be tainted property.
[26] Asset and profit forfeiture orders can be made even though the individual whose property is forfeited is not charged with a criminal offence, is acquitted of an offence, or has his or her convictions set aside.8
Whether a restraining order under s 25 of the Act is available where final asset and profit forfeiture orders were already determined by the High Court
[27] The restraining order is sought under s 21, but the determination is made under s 25, which provides:
25 Making restraining order relating to all or part of respondent’s property
(1)A court hearing an application for a restraining order relating to all or part of a respondent’s property may, if the court is satisfied it has reasonable grounds to believe that the respondent has unlawfully benefited from significant criminal activity, make an order that the property it specifies in the order (“restrained property”)—
5 Doorman v Commissioner of Police [2013] NZCA 476, [2014] 2 NZLR 173 at [11]–[14].
6 Sections 142A–142Q.
7 For present purposes, instrument forfeiture orders which are provided for in ss 70–79 of the Act are not relevant.
8 Sections 15 and 16.
(a)is not to be disposed of, or dealt with, other than is provided for in the restraining order; and
(b)is to be under the Official Assignee’s custody and control.
(2)A restraining order made under subsection (1) may relate to any of the following:
(a)all of a respondent’s property (including property acquired after the making of the order):
(b)specified parts of a respondent’s property:
(c)all of a respondent’s property (including property acquired after the making of the order) other than specifically excluded property.
[28] Mr Britton for the Commissioner acknowledges that, under the statutory scheme as written, there is no way for the Commissioner to apply to amend a profit forfeiture order that has already been made.9 The Commissioner accepts that a profit forfeiture order once determined is final.10 Instead, counsel for the Commissioner points to two provisions of the Act in tandem as making the order sought possible in procedural terms. First, s 55 provides for the making of profit forfeiture orders:
55 Making profit forfeiture order
(1)The High Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that—
(a)the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and
(b)the respondent has interests in property.
(2) The order must specify—
(a)the value of the benefit determined in accordance with section 53; and
(b)the maximum recoverable amount determined in accordance with section 54; and
9 This is particularly in light of s 47 of the Act which expressly provides for the amendment of an application for such an order before it is made, but not after.
10 Counsel assisting also explained that s 17 of the Act appears not to provide for multiple forfeiture orders of the same type in respect of the same subject matter, but instead only provides for multiple types of forfeiture order in respect of the same instance of significant criminal activity.
(c)the property that is to be disposed of in accordance with section 83(1), being property in which the respondent has, or is treated as having, interests.
(3)Subsections (1) and (2) are subject to section 56.
(4)A profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it, and the maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.
[29] Second, s 83 sets out the process for discharging a profit forfeiture order, with subs (4) being particularly material to the Commissioner’s case:
83 Discharge of profit forfeiture order by Official Assignee
(1)If the High Court makes a profit forfeiture order, the Official Assignee must, as soon as practicable after the expiry of the specified period (as described in subsection (2)), dispose of the property specified in the order and apply the money resulting from the disposal as follows:
(a)first, by paying the costs recoverable by the Official Assignee under section 87:
(b)secondly, by paying to the Legal Services Commissioner the amount (if any) payable by way of legal aid granted to the former interest holder (less any contributions paid by the former interest holder):
(c)thirdly, by paying, in the order of priority set out in section 86E of the Summary Proceedings Act 1957, any of the following amounts imposed on the former interest holder:
(i)any amount of reparation (as defined in section 79 of the Summary Proceedings Act 1957):
(ii)any offender levy (as defined in section 79 of the Summary Proceedings Act 1957):
(iii)any other type of fine (as defined in section 79 of the Summary Proceedings Act 1957):
(d)fourthly, by paying to the Crown the following amount, less the sum of the payments made under paragraphs (a) to (c),—
(i)if the sum resulting from realising the property is equal to, or more than, the maximum recoverable amount specified by the Court under section 55, the maximum recoverable amount:
(ii)if the sum resulting from realising the property is less than the maximum recoverable amount, the sum resulting from realising the property:
(e)fifthly, by paying any remaining money to the former interest holder.
(2)The specified period expires—
(a)on the date that is 6 months after the time for bringing any appeal against the profit forfeiture order expires, if no appeal has been filed; or
(b)on the date that is 6 months after all appeals in respect of the profit forfeiture order have been withdrawn or finally determined, if an appeal or any appeals have been filed.
(3)Despite subsections (1) and (2), if the period for bringing an appeal against the profit forfeiture order has expired and no appeal has been filed or all appeals have been withdrawn or finally determined, the Official Assignee—
(a)may realise any asset that makes up the property that is the subject of the profit forfeiture order; but
(b)must, if he or she does so, hold the proceeds of realising those assets until the expiry of the specified period.
(4)Subsection (1)(d)(ii) does not prevent the Official Assignee from recovering, by any lawful means, the balance of the maximum recoverable amount that remains due to the Crown, after the Crown is paid a sum less than the maximum recoverable amount under the provision.
(5) This section is subject to section 84 and any regulations made under section 173(d).
(emphasis added)
[30] Mr Britton reads s 83 as providing for a profit forfeiture order to be “discharged” by the Official Assignee, save for an ability to recover the balance of the maximum recoverable amount through s 83(4). Within that reading, counsel submits that, while it is for the Official Assignee to recover the $23,000 through the High Court Rules (rather than the Commissioner through the Act), this does not render the application for a restraining order over the $23,000 an abuse of process. That is for reasons to do with the differing functions of the Commissioner and the Official Assignee under the Act and in practice.
[31] However, before those differences arise, Ms Watt in her submissions assisting the Court raises a preliminary issue with the Commissioner’s interpretation of the Act. On Ms Watt’s reading the Act’s scheme indicates, or appears to presume, that
restraining orders are to precede, not follow, the determination of a profit forfeiture order – and that the present restraining order, coming after a final profit forfeiture order, is beyond the jurisdiction of this Court to make.
[32] She submits that, although s 25 sets no temporal limitation on the making of a restraining order, the surrounding provisions suggest such an order can only predate forfeiture orders. In particular, the natural operation of the statute is that a restraining order expires on the date that the application for a profit forfeiture order is determined:
37 Duration of restraining orders and further orders
(1)A restraining order expires on the earlier of the following:
(a)the date that is the end of the period that is 1 year after the date on which the restraining order is made:
(b)the date of the making or declining of a forfeiture order associated with the same property.
[33] Ms Watt submits that this indicates that restraining orders are only intended, in the Act’s schema, to precede the determination of forfeiture orders.11 Supporting this inference, s 11 states that property “may, but need not, be restrained property or foreign restrained property before it becomes forfeited property”.12
[34] Ms Watt sets out the Act’s formal requirements for a forfeiture order, which are that it must:13
(a)specify the value of the benefit the respondent has gained from the significant criminal activity, which under s 53 is presumed to be the value stated in the Commissioner’s application;
(b)state the maximum recoverable amount, which under s 54 is determined by deducting the value of any assets forfeited to the Crown pursuant to an asset forfeiture order from the value of the benefit determined under s 53.
[35] Ms Watt takes the view that allowing for multiple profit forfeiture orders in respect of the same period of criminal activity would potentially result in double
11 She makes an analogy to interim injunctions, preserving the parties’ positions pending a full hearing on the substantive merits.
12 Emphasis added.
13 Criminal Proceeds (Recovery) Act 2009, s 55(2).
counting and the forfeiture of property of greater value than the net benefit determined under s 53. In sum, then, she submits that there does not appear to be scope for a restraining order under the Act to be made after a forfeiture order has been determined in respect of the relevant period of criminal activity, nor scope for the making of a second profit forfeiture order. Finally, she suggests that an application for a further profit forfeiture order would likely be barred by res judicata.
[36] The submissions on behalf of Ms Harrison did not directly address this technical question, but echoed Ms Watt’s concerns regarding the principle of finality and the lack of any statutory provision for reopening the question of the “value of benefit” that a profit forfeiture order may address.
Discussion
[37] The issue here is a narrow one – whether, under the scheme of the Act, restraining orders are available in respect of a period of criminal activity after forfeiture orders have been determined in respect of that same period of criminal activity. The Court of Appeal in Vincent v Commissioner of Police relevantly characterised the general nature of restraining orders as follows:14
Restraining orders are effectively interim orders of limited duration and may be made without notice.15 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”.16 They may subsequently lead to forfeiture orders, but that requires the completion of a further process.17
[38] While the Court in Commissioner of Police v Browne noted that nothing in the Act imposes a particular time limit by which a restraining order must be sought, that case involved an unusual circumstance where funds had been seized under s 150(1) of the Search and Surveillance Act 2012 almost three years prior to the application for a restraining order over the same funds but no forfeiture order had been determined in respect of the money.18
14 Vincent v Commissioner of Police [2013] NZCA 412 at [45(a)].
15 Sections 37–42 of the Criminal Proceeds (Recovery) Act deal with the duration of restraining orders and further orders.
16 Criminal Proceeds (Recovery) Bill 2007 (81–1) (explanatory note) at 2.
17 Sub-pt 3 of the Act deals with civil forfeiture orders.
18 Commissioner of Police v Browne [2020] NZHC 484 at [29].
[39] I note that the commentary in Adams on Criminal Law tends to support Ms Watt’s proposed position, beginning its discussion of s 25 by stating that “A ‘restraining order’ under this section may be made in respect of any ‘property’ that may be the subject of a ‘profit forfeiture order.’ ”19 Counsel has not provided, nor have I been able to find, an example of a restraining order being made by this Court in respect of a period of criminal activity after forfeiture orders were made in respect of the same criminal activity. Nor have I identified a situation where two separate forfeiture orders of the same type were made in respect of the same period of criminal activity, and counsel for the Commissioner agrees in his submissions that a determination regarding such an order is final.
[40] I agree with Ms Watt’s reading of the Act. While the statute does not explicitly prohibit the making of a restraining order subsequent to the determination of forfeiture orders, it does not clearly provide for such an order. Lacking a clear provision on the issue the surrounding sections – particularly the s 37 mandate that a restraining order expire after one year or the determination of a forfeiture order associated with the property – take on greater relevance. Together the phrasing of ss 11 and 37 and the overall language of the scheme weigh against the Act providing for a restraining order related to a period of criminal activity that has already been the subject of a forfeiture order.
[41] I consider that a restraining order is not available under s 25 in this case. I turn to whether a freezing order might be.
Whether a freezing order is available
[42] The Court may make a freezing order under r 32.2 of the High Court Rules. Much like a restraining order under the Act, a freezing order serves to restrain a respondent from removing any assets located in or outside New Zealand or from disposing of, dealing with, or diminishing the value of those assets. Freezing orders operate in personam rather than in rem, meaning that if I am to grant one then in
19 Simon France (ed) Adams on Criminal Law (online ed, Thomson Reuters) at [CP 25.01].
addition to the other necessary amendments to the application, once made it must be served on the Public Trust as the party currently in possession of the $23,000.20
[43] Justice Muir recently summarised the criteria for a freezing order in Chi v Yue:21
(a)the applicant must show that he or she has a good arguable case on their substantive claim;
(b)there must be assets of the defendant within the jurisdiction to which the orders can apply;
(c)the applicant must show there is a real risk of dissipation; and
(d)balanced against the prospect the plaintiff’s judgment may be rendered barren must be any prejudice or hardship to the defendant and to the third parties from a grant of the order.
[44] It is reasonably clear that if Ms Harrison receives the $23,000 that money will not remain in New Zealand. Whether a freezing order is appropriate in this case will prima facie turn on whether a profit forfeiture order can be enforced against property not specified in that order. Here that is the $23,000, which did not technically exist at the time of, and was not named in, the forfeiture order sealed on 8 May 2019.
[45] Under s 55(1) of the Act the Court must make a profit forfeiture order if it is satisfied on the balance of probabilities that the respondent has unlawfully benefited from significant criminal activity within the relevant period of criminal activity; and has an interest in property. The order must specify the value of the benefit, determined in accordance with s 53; the maximum recoverable amount determined in accordance with s 54; and the property that is to be disposed of in accordance with s 83(1), being property in which the respondent has, or is treated as having, interests.22
[46] Section 83(1) provides for the Official Assignee to discharge a profit forfeiture order by disposing of the specified property in accordance with a schedule set out in
20 Official Assignee v Scott [2012] NZHC 2579 at [24]. While r 32.4 permits an order to be made against a non party to the substantive proceeding, r 32.2 requires that the entity against which an order is made be a respondent to the application: Mogilin v Jo HC Auckland CIV-2011-404-1584, 26 August 2011 at [6].
21 Chi v Yue [2018] NZHC 1298 at [41]; citing Shaw v Narain [1992] 2 NZLR 544 (CA) and Gong v Zhang [2016] NZHC 705.
22 Section 55(2) (emphasis added).
the section. Mr Britton directed the Court to s 83(4), which states that “subsection (1)(d)(ii)23 does not prevent the Official Assignee from recovering, by any lawful means, the balance of the maximum recoverable amount that remains due to the Crown, after the Crown is paid a sum less than the maximum recoverable amount under the provision.” The Commissioner says this is consistent with s 55(4), which provides that “a profit forfeiture order is enforceable as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it, and the maximum recoverable amount is recoverable from the respondent by the Official Assignee on behalf of the Crown as a debt due to the Crown.”
[47] The Commissioner’s position is that ss 55(4) and 83(4) allow, in practice, for any further property acquired by the respondent to be recovered by the Official Assignee, pursuant to recovering the balance of the maximum recoverable amount, using established debt enforcement mechanisms. This is true even after a profit forfeiture order has been “discharged under s 83(1)”.
[48] The referenced mechanisms are part 17 of the High Court Rules, which provides for a court order to be enforced in the same way as a judgment.24 Counsel would seek a sale order under r 17.62 allowing for the seizure of personal property (here the $23,000) to discharge the judgment debt. Counsel submits that it would be appropriate for the Official Assignee as the party that has standing under the relevant provisions of the Act, to seek such an order.
[49] Ms Watt submits that this is not possible. She framed the Commissioner’s approach as using the existing profit forfeiture order to realise the $23,000. In other words, allowing the forfeiture order to reach beyond the property specified in it and create a capacity for a future debt. She says that this cuts against both the provisions of the Act requiring a profit forfeiture order (and the application for it) to specify the property to be disposed of pursuant to it, and the decision of the Court of Appeal in Doorman v Commissioner of Police.25
23 Which provides that the fourth stage in the Official Assignee’s application of money arising from the disposal of the property specified in the order will be paying to the Crown (less the money already paid out at the prior three stages) the sum resulting from realising the property (if it is less than the maximum recoverable amount).
24 High Court Rules 2016, r 17.2.
25 Doorman v Commissioner of Police, above n 5.
[50]The statutory provisions she points to are:
(a) section 52(d), which requires the application for a profit forfeiture order to identify the property in which the respondent holds interests and the nature of those interests;
(b)section 58, under which the Court may treat effective control over property as an interest in that property for the purpose of including it in an order;
(c) section 55(2)(c), which requires that “the order must specify” the property that is to be disposed of by the Official Assignee in accordance with s 83(1) of the Act (emphasis added); and
(d)section 56(1), which provides for the Court to “exclude certain property from being able to be realised under s 55(2)(c)” on the grounds that realising the property may cause undue hardship – suggesting that unless property is specified under s 55(2)(c), it cannot be realised by the Official Assignee.
[51] Ms Watt submits that these requirements for specification point against the notion that a profit forfeiture order may be enforced against property not specified, including property the respondent acquires in the future, up to the maximum recoverable amount – which would render the requirement that orders identify specific property otiose. She says that, viewed in light of these specification requirements, ss 55(4) and s 83(4) are better interpreted as saying that a profit forfeiture order is enforceable as a civil order by the Official Assignee to recover the debt due to the Crown by realising the property specified in the order.
[52] For support she points to the decision in Doorman v Commissioner of Police. In Doorman the house over which a forfeiture order was sought was found to be tainted property for the purposes of the Act and the amount of unlawful benefit derived was
upheld.26 Also challenged on appeal was whether the Court had the power to make a profit forfeiture order where the only property identified as property to be disposed of was the house, which had been the subject of an asset forfeiture order. The High Court had held that s 55 established a debt recoverable as a result of civil proceedings, with subs (2) designed to ensure there was no double recovery where assets were forfeited.27 The Court of Appeal rejected this view, saying:28
[62] We take a different view. We consider that the wording of the Act means that before a profit forfeiture order can be made, property must be specified in the order as the property to be disposed of. We emphasise the requirement in s 52 that the application for a profit forfeiture order identify the property, the prerequisite that there be an interest in property in s 55(1)(b) and, particularly, the reference to “the property that is to be disposed of” in s 55(2)(c). It is difficult to see what the latter requirement means if not a requirement to specify the property subject to the order.
[63] On its own, s 55(4), which treats a profit forfeiture order as a debt due to the Crown recoverable by the Official Assignee, may support the respondent’s approach. However, that section must be read alongside the other requirements in s 55 indicating that it is necessary to have interests in property and to specify the property that is the subject of the order. Our interpretation is supported by s 83 which deals with how the Official Assignee is to discharge a profit forfeiture order. That section envisages payment to the Crown of amounts related to sums resulting from realisation of the property.
[64] The sections in the Act dealing with the statutory purpose we have set out above show the Act is intended to deter criminal activity of the sort engaged in by Mr Doorman and to eliminate profit from such activities for persons such as the appellants.29 However, those purposes are linked to property that is identifiable, albeit that may be hidden in some way. In this sense, the focus is on clawing back the value of property interests, broadly defined, rather than on the value of lifestyle choices that are not reflected in property.
[65] The legislative history suggests that the intention was that profit forfeiture orders would be available where a person has profited from significant criminal activity, but concealed those assets.30 We consider that the Act does provide for that so long as the Court can be satisfied of the existence of such property. The distinction we draw is between that scenario and the present case where the profit forfeiture order is simply creating a capacity for a future debt.
26 At [36] and [46].
27 Commissioner of Police v Doorman HC Nelson CIV-2010-442-169, 15 December 2011 at [46],
28 Doorman v Police, above n 5, at [62].
29 See Brazendale v R [2011] NZCA 494, (2011) 25 CRNZ 580 at [13] and [38]; Elliot v R [2011] NZCA 386, [2011] 3 NZLR 811 at [34]–[35].
30 Criminal Proceeds (Recovery) Bill 2007 (81-1) (explanatory note) at 3.
[53] Mr Britton for the Commissioner submits that Doorman was distinguishable on its facts and does not apply in the present case. It was a decision not to impose a profit forfeiture order, as distinct from the present case, in which a profit forfeiture order already exists, and the question is whether an outstanding debt under it can be used as a basis for restraining or freezing the money Ms Harrison stands to receive from her KiwiSaver provider.
[54]I turn to s 83(4), which I set out again for convenience:
(4) Subsection (1)(d)(ii) does not prevent the Official Assignee from recovering, by any lawful means, the balance of the maximum recoverable amount that remains due to the Crown, after the Crown is paid a sum less than the maximum recoverable amount under the provision.
[55] Ms Watt submits that it is the final clause of the section (emphasis added) that is instructive. She notes that the section does not provide for enforcement of the debt to the Crown against property not specified in the order, and emphasises s 83(1) stating that the Official Assignee is to “dispose of the property specified in the order and apply the money resulting from disposal” in the order set out. In her written submissions she put it this way:
Section 83(4) appears to be intended to ensure that payment by the Official Assignee of a sum to the Crown under s 83(1)(d)(ii) does not prevent the OA lawfully recovering further specified property to satisfy the amount due to the Crown under the profit forfeiture order. For example where, as here, the specified property is realised over the course of time, there may be several payments made to the Crown towards the maximum recoverable amount. Section 83(4) makes clear that the fact of one payment under s 83(1)(d)(ii) does not prevent further payments may be made.
[56] Ms Watt says that if I consider there is a good arguable case that the forfeiture order may be enforced in respect of property not specified and acquired after the order was made, a freezing order may be available. Otherwise it will not.
[57] Finally, Mr Bourke for Ms Harrison submitted that the Commissioner’s proposed approach is contrary to the spirit or principle of finality and would create an unpalatable position in which the Commissioner can stand ready to restrain Ms Harrison’s Kiwisaver funds into the far future.
Discussion
[58] This issue turns on the true interpretation of ss 55(4) and 83(4). Framed narrowly, I must decide whether, because the assets seized will likely lead to a shortfall between the Crown’s recovery and the maximum recoverable amount under the existing profit forfeiture order, there is a reasonable possibility that the Crown will be able to recover the $23,000 as though it were any other money required to satisfy a regular cash debt. If that is the case, it will be appropriate to grant the request to turn this application into one for a freezing order over the $23,000.
[59] This possibility was acknowledged by Ellis J, who recorded in her earlier judgment that “after realisation of those assets there remains a considerable portion of the maximum recoverable amount which remains unpaid. That amount remains recoverable by the Official Assignee as a debt due to the Crown by virtue of s 55(4) of the 2009 Act” and that “in light of the indisputable debt owed to the Crown by Ms Harrison it seems to me that the funds could equally be made the subject of a (without notice) freezing order”. 31
[60] Justice Ellis appears to have accepted, on a provisional basis, the reading proposed by the Commissioner, that ss 55(4) and 83(4) provide for, where the property realised under the profit forfeiture order is insufficient to discharge the maximum recoverable amount, the remainder to be recovered as an ordinary debt, without any restriction of recovery to property named in the order.
[61] Support for this reading is widespread, albeit not deep – in that it is generally treated as a matter of assumption, with writers pointing purely to the statutory text itself for support. In Commissioner of Police v Malcolm the Commissioner applied for a forfeiture order under s 55 for $62,400, being the profit from harvesting and sale of cannabis.32 The total assets available for forfeiture were $58,676.98 in cash. Justice Ronald Young simply stated that “if an order is made the difference, $3,713.02, would be a civil debt owed by Mr Malcolm to the Commissioner.33 He considered that sum could be “recovered as a civil debt pursuant to s 55(4) of the [Criminal
31 Commissioner of Police v Harrison, above n 3, at [2] and [5] (emphasis added).
32 Commissioner of Police v Malcolm [2013] NZHC 2986.
33 At [2].
Proceeds] Act”.34 The Court did not elaborate on what the recovery of that debt might look like.35
[62] Various other sources take it as read that ss 55(4) and 83(4) allow a profit forfeiture order to be enforced as an order made as a result of civil proceedings instituted by the Crown against the person to recover a debt due to it, and that the maximum recoverable amount is recoverable by the Official Assignee on the Crown’s behalf as a debt due to the Crown, by any lawful means.36
[63] The logical conclusion of such an approach (putting aside the issue of the KiwiSaver Act, which I come to later) would seem to be that, with the $23,000 having been realised and its payment to Ms Harrison pending, a freezing order to ensure the money goes towards the debt rather than being transferred out of the country might be possible.
[64] Against this Ms Watt and Mr Bourke argue that ss 55(4) and 83(4) are qualified by the sections around them, which require an application for a profit forfeiture order to specify particular property which the Official Assignee is to dispose of in order to discharge the order. They also point to the Court of Appeal in Doorman holding that a profit forfeiture order must be in respect of particular property, rather than simply creating a capacity for future debt.37 At the hearing counsel pointed to the application of this principle in Commissioner of Police v Zhang, where Brewer J declined to make a profit forfeiture order because it would be redundant, given there was no property named in the application that was not already the subject of an assets forfeiture order.38
34 At [13].
35 I note that the decision followed that in Doorman by almost two months, but did not cite Doorman.
36 Heather McKenzie Proceeds of Crime Law in New Zealand (1st ed, LexisNexis, Wellington, 2015) at 179 and 201; Simon France (ed) Adams on Criminal Law, above n 19, at [CP55.09]; and Commissioner of Police v Fennell [2018] NZHC 2249 at [18], in which the Court said “the quantum of a profit forfeiture order may exceed the property to be realised. The remaining balance can be recovered by the Official Assignee on behalf of the Crown as a civil debt due to the Crown under s 55(4) of the Act.” I also note Commissioner of Police v Dollman [2017] NZHC 3094, in which the Court approved settlement agreements in accordance with s 95 of the Act, which made reference to the sums being realised being “in full and final satisfaction of the maximum amount recoverable against [the respondent] and accordingly there will be no balance outstanding that would be recoverable as a civil debt pursuant to s 55(4) or 84(4) of the Act or any other applicable section”.
37 Doorman v Commissioner of Police, above n 5.
38 Commissioner of Police v Zhang [2017] NZHC 3211 at [46].
[65] In my view, the potentially significant distinction is that Doorman and Zhang both dealt with whether a profit forfeiture order should be made, whereas the present case arises in the aftermath of one having been validly made. In this case there was specified property, almost all of which has, at this point, been realised, but where it appears there may well still be a shortfall relative to the maximum recoverable amount.
[66] There is a second potentially significant distinction. It is clear that a profit forfeiture order is not intended to create a capacity for future debt. The $23,000 did not technically exist at the time the profit forfeiture order was made. However, it was realised from Ms Harrison’s interest in a KiwiSaver account that largely did exist (at least in an equivalent form) at the time the orders were made (though orders could not be made in relation to it). This might arguably address the concern expressed in Doorman around simply creating a capacity for future debt. On such a reading this would be a situation in which an asset that would have been available for recovery by the Crown, but for the application of the KiwiSaver Act, has potentially become recoverable.
[67] However, this reading casts into doubt the purpose and function of the requirements in the Act that profit forfeiture orders meticulously specify property that is to be realised in accordance with s 83. If a profit forfeiture order simply allows the Official Assignee to recover money as though a debt outright, those requirements would become meaningless procedural hoops. It might be argued that, while the s 55(2) requirements are strict requirements for the Court to make a profit forfeiture order in the first place, they do not necessarily limit recovery in all situations after that order has been made. But that approach would still render the ability to modify an application for a profit forfeiture order redundant, given the ultimate effect of modifications sought could simply be achieved after the fact without the additional application.
[68] While the issues are far from straightforward, I conclude that the better interpretation of the relevant provisions is that they do not support the enforcement of a profit forfeiture order against property not specified in that order and therefore a freezing order.
[69]In any event, there remains the outstanding issue of the KiwiSaver Act.
Whether a freezing order is barred by the KiwiSaver Act
[70] Counsel for Ms Harrison says that the $23,000 retains its essential character as KiwiSaver funds, and thus cannot be transferred to the Official Assignee’s custody and control. This is because of s 127 of the KiwiSaver Act, which says:
127 Member’s interest in KiwiSaver scheme not assignable
(1)Except as expressly provided in this Act, a member’s interest or any future benefits that will or may become payable to a member under the KiwiSaver scheme must not be assigned or charged or passed to any other person whether by way of security, operation of law, or any other means.
(2)However, subsection (1) does not prevent a member’s interest or any future benefits that will or may become payable to a member under the KiwiSaver scheme from being released, assigned, or charged, or from passing to any other person if it is required by the provisions of any enactment, including a requirement by order of the court under any enactment …
[71] The Act defines a “member’s interest” as, in relation to a member of a scheme, the net value of the total of “the member’s accumulation; and any unvested employer contributions”.39 A “member’s accumulation” is defined as the net value of the total of:
(a)the member’s contributions; and
(b)any vested employer contributions in respect of the member; and
(c)any fee subsidies paid in respect of the member under regulations made under section 228(1) (n) or (o) before the revocation of those regulations; and
(d)the Crown contribution paid in respect of the member
“Net value” is defined as:
(a)in relation to contributions, the values of the contributions once appropriate debits and credits have been made for positive and negative returns; and
39 KiwiSaver Act 2006, s 4(1).
(b)in relation to a member’s accumulation, or a member’s interest, means the value of the member’s accumulation or member’s interest (as applicable) once any other appropriate debits and credits have been made to account for things like fees, permitted withdrawals, and positive and negative returns.
[72] Counsel’s submissions focussed on whether a restraining order, rather than a freezing order, is available in circumstances such as this. I have already concluded a restraining order is not available after a profit forfeiture order has been determined. There would also likely be a bar because of the relationship of s 127 and the criminal proceeds recovery regime, which was the subject of close analysis in The Commissioner v Harrison.40 Justice Ellis concluded that:41
the provisions of the KSA prevail over those of the CPRA; the Court has no power to make a civil forfeiture order in relation to the KiwiSaver funds of a person who has been engaged in significant criminal activity. No doubt it follows that there is no power to make a restraining order over such funds either, although I heard no argument on the point.
[73] This conclusion was based on several factors. While they address the Act’s regime, I consider their substance has some relevance in the context of a freezing order:
(a)Unlike the Insolvency Act 2006, the Act does not contain any provision stating that civil forfeiture orders might be made in relation to monies or interests held in superannuation schemes generally or KiwiSaver funds in particular.42 This is despite the Act lacking any provision (like that in the Insolvency Act) acknowledging that other statutes might override it.43
(b)The Act’s forfeiture provisions are primarily concerned with deterring profiting from criminal behaviour, and the Act does not purport to vindicate individual rights or provide specific redress to victims of criminal activity.44 This distinguishes it further from the Insolvency Act, which also does not override s 127 of the KiwiSaver Act despite
40 The Commissioner v Harrison & Sharp, above n 1.
41 At [69].
42 At [56].
43 At [57].
44 At [58]–[59].
serving “relatively more important” interests.45 The Court also noted a technical anomaly that if a person’s KiwiSaver funds vested in the Official Assignee as a consequence of an order under the Act and that person became bankrupt, those funds would then become available to satisfy creditors under the Insolvency Act.46
(c)The general anti-avoidance provision at s 167 of the Act was sufficient to defeat any attempt by people involved in criminal activity to avoid forfeiture by depositing any surplus funds into a KiwiSaver fund.47
(d)In the absence of specific statutory provisions detailing the interaction between the statutes, there were practical issues around how the Court might make workable orders under the Act in relation to KiwiSaver accounts and how the Official Assignee might act on them.48 In particular Trustees Executors Ltd v Official Assignee makes clear that the Official Assignee would be unable to realise funds until either the respondent’s 65th birthday or some other event triggered early release of funds – which sat awkwardly with the language of the Act, which otherwise contemplates forfeiture as “more or less immediate action by the OA to realise any assets that are identified in a profit forfeiture order.”49
[74] The present issue is whether the $23,000 realised from Ms Harrison’s KiwiSaver qualifies as “a member’s interest” and is therefore protected by s 127 of the KiwiSaver Act.
45 At [59]–[60].
46 At [62]. The Court noted this would cut directly against the decision in Trustees Executors Ltd v Official Assignee [2015] NZCA 118, [2015] 3 NZLR 224, which had held that a person’s interest in KiwiSaver funds could not be divested pursuant to another statute unless that statute expressly provided for the vesting in a third party of a person’s interest in those funds.
47 At [63].
48 At [64].
49 At [66].
[75] The submission for the Commissioner and the Official Assignee is that it does not. Mr Britton submits that the $23,000 has been withdrawn from investment, realised and is now a payable cash amount like any other cash amount.50
[76] Counsel points to certain events following Ellis J’s judgment in December 2017 as transformative – particularly Ms Harrison’s application for early access to her KiwiSaver funds on the ground of significant financial hardship, the approval of that request, Public Trust’s partial withdrawal of funds on 16 May 2019, Kiwi Wealth Ltd’s realisation or divestment of certain investments to the value of $23,000 and that amount being withdrawn and held in a trust account for payment to Ms Harrison on 30 May 2019. Mr Britton submits this is a sufficient transformation to render the
$23,000 equivalent to any other cash amount, and able to be subject to a restraining or freezing order without violating Ellis J’s judgment.
[77] Counsel points to rr 7, 10 and 11 of the KiwiSaver Act Rules,51 which govern the release of funds and provide for withdrawal in the case of significant financial hardship. He submits that the wording of those sections, particularly the use of the words “withdrawal” and “release,” indicate that, once withdrawal and release of funds has been permitted by the fund manager, the cash amount realised and payable moves outside of the KiwiSaver Act regime and is no longer subject to s 127. Accordingly, withdrawal or divestment of the amount from a KiwiSaver account means it no longer comprises a “member’s interest”.
[78] Given at the date of the without notice application the $23,000 was payable to Ms Harrison and held on trust pending electronic transfer to her, Mr Britton submits it was either in her possession or under her effective control in terms of s 58 of the Act (which the Court may treat as an interest in property). Save for the transfer having happened, nothing prohibited her making use of the money. Counsel further submits the present situation is no different to other situations under the KiwiSaver Act where “permitted withdrawal” is allowed, such as for purchasing a first home. Counsel says that if the $23,000 was transferred to Ms Harrison and then deposited into another
50 Counsel submits this brings it within the definition of property under s 2 of the Criminal Proceeds (Recovery) Act 2009.
51 At sch 1 of the KiwiSaver Act 2006.
account, withdrawn in cash and held or applied to the purchase of real property, there would be no question that a restraining or freezing order could legitimately be sought.
[79] Finally, Mr Britton submits that the various practical issues pointed to in Ellis J’s judgment regarding making workable orders under the Act in relation to KiwiSaver Acts do not arise in this case.52 That is fundamentally because of the Commissioner and Official Assignee’s view that the $23,000 has been realised and can be acted on immediately by the Official Assignee under s 83 of the Act – the Official Assignee can then utilise the enforcement mechanisms under the High Court Rules to seek contribution of the $23,000 towards satisfaction of the maximum recoverable amount of the profit forfeiture order.
[80] That is not the view taken for Ms Harrison or by Ms Watt in her submissions assisting the Court.
[81] Counsel for Ms Harrison says the $23,000 remains protected by s 127 of the KiwiSaver Act against the order sought. This is because it is unquestionably derived from her member contributions. Counsel says that while the approval of her withdrawal application means the funds in question can be considered as a benefit that was to become payable to her the s 127 bar is still operative.
[82] Mr Bourke says it is not seriously arguable that the funds were in Ms Harrison’s possession. They were placed in a bank account in the name of Public Trust as Trustee for Kiwi Wealth Kiwisaver Scheme, operated by Kiwi Wealth Ltd. Ms Harrison had no authority or control over that account at the time they were restrained – her KiwiSaver provider did. Counsel rejects the suggestion that Ms Harrison had “effective control” of those funds wholesale. He points to the fact that this submission comes almost a year after the without notice restraint application was first made, and in the interim there has been no application for an order that the
$23,000 be treated as though the respondent had an interest.53 In the alternative, he submits that the purpose of s 58 is to allow the Court to go behind corporate structures, trusts, family relationships and other devices used to conceal the real position of the
52 Commissioner of Police v Harrison, above n 1, at [64]–[68].
53 Section 58 provides for the making of such an application.
respondent in relation to the property in question.54 Such an analysis requires investigating whether the respondent had the capacity to use, dispose of, or otherwise treat the property in question as her own.55
[83] Counsel submits that, until the moment of payment, the funds retain their character as KiwiSaver funds. Clause 5 of the KiwiSaver Scheme Rules requires that “the manager must, at the member’s request, pay a permitted withdrawal as a lump sum.”56 Counsel says that until that lump sum is paid, the funds have not altered in character from constituting a member’s interest. Ms Watts notes that if funds were placed in a holding account pursuant to an approved early withdrawal application (such as for serious illness or the purchase of a first home) but the application was then withdrawn the funds would not be payable to the KiwiSaver member – because they would not change their essential nature as KiwiSaver funds until actually paid out.57
[84] That being so, counsel for Ms Harrison submits that allowing a restraining order in respect of the $23,000 in this case would cut against the spirit and policy of the KiwiSaver Act itself and Ellis J’s decision that the Court has no power to make forfeiture orders in relation to KiwiSaver funds.58 Counsel says s 127(2) requires an express provision allowing the seizure of KiwiSaver funds. That is what was required by the Court of Appeal in Trustees Executors Ltd v Official Assignee.59 Without such
54 Pointing to Simon France (ed), Adams on Criminal Law, above n 19, at [CP58.01]; and Solicitor- General v Bartlett [2008] 1 NZLR 87 (HC) at [24]–[27].
55 Citing Solicitor-General v Huang HC Auckland CIV-2005-404-1538, 18 December 2007 at [71], which leads to a paragraph quoting Connell v Lavender (1991) 7 WAR 9 (WASC) at [27] to similar effect.
56 Kiwisaver Act 2006, sch 1, cl 5.
57 Counsel also notes that for an early withdrawal for a first home purchase made before the sale and purchase agreement is unconditional the withdrawn money is paid to a stakeholder obliged to hold that money until the agreement becomes unconditional. Should settlement not occur, the stakeholder would be obliged to repay the money is returned to the purchaser’s funds manager.
58 Counsel also points to a specific perversity identified in Trustees Executors Ltd v Official Assignee, above n 46, at [76], wherein allowing control of KiwiSaver funds to pass to the Official Assignee would interfere with the mechanism by which an account holder applies for early withdrawal of funds in the case of serious illness – leaving a seriously ill bankrupt at the mercy of the Official Assignee to apply on her behalf. Counsel warns that the present approach would similarly compromise the position of respondents suffering serious illness or financial hardship.
59 At [52]. Interestingly counsel points to the following quote at [54]: “The objective of the KSA is to encourage a long-term savings habit and the accumulation of funds that will increase the wellbeing and financial independence of individuals, particularly in retirement. There is nothing in the KSA to suggest that a purpose of the legislation is to accumulate funds for the benefit of creditors in the event of the member’s bankruptcy. If that were the case, the important social and economic purposes of the KSA would be undermined and the burden of providing for the welfare of individuals would fall back on the state.” This case occupies a narrow exception, in that
a provision or clarification from the legislature the Commissioner’s proposed approach would constitute an overreach, particularly given the Act allows the state to deprive individuals of their possessions.
[85] Counsel for Ms Harrison also points to Ellis J’s comments that the effective hierarchy between the interests protected by the relevant statutes is first the KiwiSaver Act; then the Insolvency Act; then the Criminal Proceeds (Recovery) Act. Counsel says allowing a seizure in this case would be unworkable or at least technically convoluted in light of s 84 of the Insolvency Act, which states:
84 Bankruptcy in relation to profit forfeiture order
(1)If, after a profit forfeiture order is made, the Official Assignee is given notice in writing of the filing of a creditor’s application in respect of the person under section 13 of the Insolvency Act 2006, the Official Assignee must, until the petition has been withdrawn or been disposed of, refrain from taking, or continuing to take, any of the following actions:
(a)selling or disposing of the property specified in the order:
(b)paying the amounts specified in section 83.
(2)If a person whose property is the subject of a profit forfeiture order becomes bankrupt, the property that is the subject of the profit forfeiture order, if it has not yet been disposed of, ceases to be in the custody and control of the Official Assignee and is deemed to be vested in the Assignee of the bankrupt’s property under section 101 of the Insolvency Act 2006.
(3)A profit forfeiture order made against a person is provable in the bankruptcy of that person.
(4)To avoid doubt, subsection (3) applies despite anything in section 232(2) of the Insolvency Act 2006.
[86] Counsel says this is particularly the case given all Ms Harrison’s known assets, save her KiwiSaver funds, have been forfeited to the Commissioner, which creates a real possibility she will become bankrupt – at which point property that is the subject of the profit forfeiture order, if it has not yet been disposed of, will be deemed to be vested in the Assignee of her property under s 101 of the Insolvency Act 2006.
Ms Harrison has been deported and the New Zealand government will not be responsible for her welfare.
[87]Finally, Ms Harrison submits that allowing the Commissioner to access the
$23,000 is contra finality, in that it would open the floodgates to restraint or forfeiture of her funds withdrawn at any time she experiences illness or serious hardship in the coming years, through to her eventual retirement.
[88] Ms Watt’s submissions assisting the Court reach the same conclusion as Ms Harrison on this issue, although framed in somewhat different terms. By reference to the statutory definitions, Ms Watt reads s 127 as protecting:
(a)the combined value of Ms Harrison’s contributions, her employer’s contributions (whether vested or unvested), any fee subsidies paid in respect of Ms Harrison, the Crown contribution, and any appropriate credits for things like positive returns; less
(b)appropriate debits made for things like fees, negative returns, and permitted withdrawals.
[89] Ms Watt points to the operation of the particular KiwiSaver scheme, as set out in the Kiwi Wealth KiwiSaver Trust Deed (the Deed). The Deed explains that Public Trust is the trustee and supervisor of the scheme, and Kiwi Wealth Ltd is the scheme’s manager. The scheme’s overall trust fund consists of assets vested in Public Trust, Member’s contributions paid to Kiwi Wealth KiwiSaver and money transferred over from other schemes. Public Trust holds the trust fund as a trustee for the beneficiaries, being the members of the scheme and others entitled to benefits under it. Benefits are defined by the Deed as payments made to or in respect of a member in accordance with the Deed. Kiwi Wealth Ltd, as manager, operates various investment funds, the assets of which are held by Public Trust (or a custodian on its behalf) for the exclusive benefit of members who hold an interest and members are entitled to direct the Manager as to the proportion of their account invested in each fund.
[90] Clause 19 of the Deed provides for the opening of a member account for each member in the scheme, and Kiwi Wealth’s management and recording of those accounts and their contents. In particular cl 19.3 states that money comes to a member’s account and is increased by (among other things): “contributions paid by
the Member or in respect of the Member by a Contributing Employer or another Person that have not been used by way of acquisition of Assets in a Fund”; “money received following the realisation of Assets in a Fund”; and income and cash returns from Assets in a Fund. Clause 19.4 provides that money leaves a member account and it is reduced by “payments made to or at the direction of a Beneficiary”. Counsel for Ms Harrison makes a similar submission, emphasising that cl 19.4 lists a number of scenarios whereby money leaves a member account. Other than the transfer to another KiwiSaver Scheme or Superannuation Scheme at the request of a member and fees, the other situations outlined by the clause require actual payment as the triggering event at which the member’s account is decreased.
[91] Ms Watt submits (as does Ms Harrison) that it is clear that a member’s interest will always comprise a “cash” component, including contributions by both the member and their employer (or employers) prior to investment, and cash from dividends, interests and the realisation of assets. This is normal for an investment fund, and therefore the fact that Ms Harrison’s interest in the $23,000 takes the form of cash rather than investments is not material to the s 127 bar.
[92] Ms Watt explains the legal effect of the Trust Deed is that Public Trust held a range of choses in action as trustee on behalf of Ms Harrison, amongst the other beneficiaries under the Deed. At the date the without notice restraining order was sought, certain assets it held had been sold in anticipation of Mrs Harrison’s permitted withdrawal, and the funds were transferred to another bank account held by Public Trust.
[93] Regarding whether the $23,000 remains a chose in action, counsel notes that Lord Millett in Foskett v McKeown held that a cash balance in a bank account is not money but a chose in action, representing the debt owed by the bank to the account holder.60 As such, all that changed when the $23,000 was realised from investments was the form in which Public Trust held choses in action for Ms Harrison. Ms Harrison continued to possess simply an interest in KiwiSaver assets. Ms Watt argues that the
60 Foskett v McKeown [2001] 1 AC 102 (HL) at 127–128.
wording of s 127 of the KiwiSaver Act is clear in its effect – a restraining or other order over the $23,000 is not legally tenable.
Discussion
[94] On this issue I accept the submissions of Ms Watt. While the Commissioner’s attempt to recover the money in this case is consistent with the underlying principles of both the criminal proceeds recovery regime and the High Court Rules’ debt collection tools, neither provide an explicit route past the roadblock posed by s 127. Until the $23,000 enters Ms Harrison’s possession it seems undeniable that her interest in it (or in the chose in action of being able to claim it) remains an interest or future benefit that will become payable to her under the KiwiSaver scheme, and so is protected by s 127 against being assigned, charged or passed to another person. Accordingly, a freezing order over the money in its present state seems unsustainable. A finding otherwise would, in my view, subvert the earlier finding of Ellis J.
[95] I note that freezing orders operate in personam rather than in rem. The Court could theoretically restrain Public Trust from dealing with the $23,000 without that constituting a charge over the property itself. However, it is not clear what, if anything, could legally be done by the Commissioner to recover the money while it remains in its present state protected by s 127. The freezing order would not therefore serve a useful purpose – while it is held in its present state no successful claim for its recovery is tenable.
Interests of justice
[96] Mr Bourke advanced an alternative ground on which, in his submission, the making of a restraining order was not in the interests of justice. In essence, his submission was that Ms Harrison’s offending represented a loss to the Ministry of Transport of $726,836.07. Of that total, it was accepted by the Serious Fraud Officer as prosecutor that $576,175.20 was paid to Ms Harrison and the remaining
$150,660.87 to a colleague, Ms C.61
61 There is a suppression order in place prohibiting publication of Ms C’s name and identifying details.
[97]In the proceedings against Ms Harrison the Commissioner sought to recover
$784,172.16 as the value of the benefit obtained, comprising the loss caused by Ms Harrison’s offending, plus the salary paid to the second respondent, Patrick Sharp.
[98] Mr Bourke says that following the decision of Ellis J and the expiry of relevant appeal periods Ms Harrison made the decision not to contest or take further part in the proceedings. However counsel has since become aware that the Commissioner has recovered $75,000 from Ms C. Had he known that at an earlier stage the value of the benefit obtained by Ms Harrison would have been disputed. The practical effect, he says, is that the Commissioner now seeks to recover far more than the actual loss caused by Ms Harrison. Such a situation would, in his submission, be an abuse of the Commissioner’s powers.
[99] Mr Bourke also notes his concern that the Commissioner did not disclose this information to counsel despite repeated requests some time ago. That lack of candour, when considered together with the significant amount already recovered by the Commissioner, means that it is not in the interests of justice that the restraint order now sought be granted.
[100] In response, the Commissioner says that the Official Assignee’s recovery from Ms C does not affect the value of the benefit personally received by Ms Harrison from her significant criminal activity, particularised in the profit forfeiture order as
$784,172.16.
[101] Mr Bourke strongly rejects the allegation that the Commissioner has misled counsel and the Court or is seeking to abuse the Court’s process.
[102] Because of my decision on the earlier questions, I do not need to resolve this issue.
Conclusion
[103]For the reasons given, I decline the application for a restraining order over the
$23,000. I also do not consider there is a sufficient statutory basis to convert the application to one for a freezing order.
Costs
[104] My preliminary view is that Ms Harrison is entitled to costs on a 2B basis. If the parties cannot agree as to costs, counsel for the Commissioner and the Official Assignee may file a memorandum of no more than five pages within five working days of receiving this judgment. Counsel for Ms Harrison will then have five working days to file a memorandum in response.
[105] Ms Watt is entitled to costs paid out of public funds under s 178(2)(b) of the Senior Courts Act 2016. If necessary, she should file a memorandum as to her costs within five working days of receiving this judgment.
Gwyn J
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