FM Custodians Limited v The Queen - [2019] NZCA 598

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA294/2019
[2019] NZCA 598

BETWEEN	FM CUSTODIANS LIMITED Applicant
AND	THE QUEEN First Respondent LINDSAY BECKETT SMITH Second Respondent

Hearing:	19 November 2019
Court:	Collins, Brewer and Gendall JJ
Counsel:	G P Blanchard QC and E B Moran for Applicant C Ure for First Respondent No appearance for Second Respondent
Judgment:	28 November 2019 at 4.00 pm

JUDGMENT OF THE COURT

AThe application for an extension of time to apply for leave to appeal is granted.
BThe application for leave to appeal is granted to the extent explained at [14].

____________________________________________________________________

REASONS OF THE COURT

(Given by Collins J)

Introduction

FM Custodians Ltd (FM Custodians) seeks leave to appeal a decision of the High Court in which Nation J upheld a District Court judgment granting an application by the Crown for an instrument forfeiture order in respect of two properties owned by Ballarat Terrace Ltd (Ballarat) and one property owned by the Prospect Family Trust (the Trust).[1] Those properties have since been sold and the instrument forfeiture order varied to cover the proceeds of the sale of those properties.
[1]FM Custodians Ltd v R [2019] NZHC 1128 [High Court judgment].
Ballarat was owned by Mr and Mrs Ross, who through a family trust held 50 per cent of the shares in that company, and Mr Smith, who through the Trust held the remaining shares. FM Custodians lent $264,000 to Ballarat secured by a mortgage over properties in a subdivision being carried out by Ballarat. All but two of those properties were sold by the time the matters giving rise to this litigation were discovered, hence, the instrument forfeiture order related to only two of the Ballarat properties.
FM Custodians also lent $520,000 to the Trust. Mr and Mrs Smith were the trustees of the Trust. The Trust loan was secured over the Smiths’ family home, which is the third property we have referred to at [1]. Ballarat and the Trust each guaranteed the other’s obligations under the loans to FM Custodians.
It transpired the documents concerning the mortgage and guarantee over the Ballarat properties, and the guarantee but not the mortgage over the Trust property, were fraudulent. Mr Woulfe, the lawyer who was instructed to act for both the lender and the borrowers, provided the documents to Mr Smith, who forged Mr Ross’ signature on the Ballarat loan and mortgage documents. Mr Woulfe falsely certified he had witnessed Mr Ross’ signature on the Ballarat client authority and instruction form and that each guarantor had received independent legal advice or had been recommended to obtain such advice.
Mr Smith was convicted of using a document to obtain a pecuniary advantage.[2] Before his sentencing the Crown gave notice pursuant to s 142B of the Sentencing Act 2002 that the Court should consider making an instrument forfeiture order in relation to the two Ballarat properties and the Smiths’ property. FM Custodians applied under s 142J of the Sentencing…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZCA 598
Decision Date: 28 November 2019 at 4.00 pm

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, FM Custodians Limited sought leave to appeal against a decision of the High Court, which had upheld a District Court judgment granting the Crown an instrument forfeiture order in respect of two properties owned by Ballarat Terrace Ltd and one property owned by the Prospect Family Trust. The properties had since been sold, and the instrument forfeiture order was varied to cover the proceeds of the sale. FM Custodians had lent money to Ballarat and the Trust, secured by mortgages over the properties. It was found that the documents concerning the mortgage and guarantee over the Ballarat properties, and the guarantee over the Trust property, were fraudulent. Mr Smith was convicted of using a document to obtain a pecuniary advantage, and before his sentencing, the Crown gave notice that the Court should consider making an instrument forfeiture order in relation to the properties.

The legal issues the court had to decide were whether the High Court had erred in holding that the three properties were instruments of crime, whether FM Custodians had an interest in the three properties, and whether the District Court had jurisdiction to hear and determine a claim for the removal of FM Custodians’ mortgage over the three properties. The application for leave to appeal was filed out of time, but the delay was minimal, and the Crown did not oppose the extension of time. The court granted the application for leave to appeal to the extent that the appeal involved a matter of general or public importance and did not extend to the jurisdictional issue. The court granted the application for an extension of time to apply for leave to appeal and leave to appeal the High Court’s decision that FM Custodians was not entitled to relief from an instrument forfeiture order.

The court concluded that the decision of the High Court raised issues of general or public importance that justified the Court determining whether or not FM Custodians was entitled to relief from the instrument forfeiture order. The court granted leave to appeal the High Court’s decision that FM Custodians was not entitled to relief from an instrument forfeiture order, save for the exception of the jurisdictional issue. The appeal would determine whether the High Court had erred in its interpretation of the definition of 'instrument of crime' and whether FM Custodians had an interest in the three properties as required by the Criminal Proceeds (Recovery) Act.

Orders