FM Custodians Ltd v R - [2019] NZHC 1128

IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE

CRI-2017-418-000009

[2019] NZHC 1128

BETWEEN
FM CUSTODIANS LIMITED

Appellant

AND

THE QUEEN

First Respondent

AND

LINDSAY BECKETT SMITH

Second Respondent

Hearing: 17 May 2018

Appearances:

D Goddard QC and I Tokmadzic for the Appellant K Grau for the First Respondent

No appearance for the Second Respondent

Judgment:

22 May 2019

JUDGMENT OF NATION J

Introduction

[1] FM Custodians Ltd (FM Custodians) claimed an interest by way of mortgages over land owned by Ballarat Terrace Ltd (BTL) and a residential property owned by the Prospect Family Trust (Prospect Trust), and the proceeds of sale from those properties.

[2] An accountant, the second respondent (Mr Smith) was a trustee of the Prospect Trust and a director of BTL. In arranging loans to the Prospect Trust and BTL from FM Custodians and in making BTL a guarantor of the mortgage obligations of the Prospect Trust, Mr Smith forged the signature of a co-director of BTL, Mr Ross. Mr Ross and his wife had, through a trust, invested some $620,000 in BTL.

FM CUSTODIANS LTD v R & SMITH [2019] NZHC 1128 [22 May 2019]

[3] On 19 June 2015, Mr Smith pleaded guilty in the District Court to using forged documents, knowing them to be forged, to obtain a pecuniary advantage or other consideration. The charge was laid on a representative basis. The particulars as to documents forged were stated to be:

1. Deed of Guarantee and Indemnity;

2. Private Corporate Client Authority and Instruction for Electronic Transaction;

3. NZ Mortgage Income Trust Borrower’s Acceptance of Loan Application;

4. Loan Agreement with NZ Mortgage Income Trust resulting in the drawdown [of] a $264,000 loan from FM Custodians;

5. Deed of Guarantee and Indemnity to FM Custodians Ltd as lender;

6. Loan Agreement with FM Custodians Ltd resulting in the drawdown of a $520,000.00 loan; and

7. Waiver of independent legal advice.

[4] The documents were used in May 2013 to draw down loans from FM Custodians to BTL for $264,000 and to the Prospect Trust for $520,000.

[5] The prosecutor notified the Court under s 142B of the Sentencing Act 2002 that, in the prosecutor’s opinion, the Court should consider whether to make an instrument forfeiture order in relation to the three properties.

[6] FM Custodians applied for relief from an instrument forfeiture order under s 142L ultimately on the basis that it had an interest in the properties and was not involved in the qualifying offence.

[7] FM Custodians’ mortgage interests were held in trust for people who had invested in the New Zealand Mortgage Income Trust (No. 2 Fund) (the No. 2 Fund).

[8] On 5 September 2017, Judge Neave in the District Court refused FM Custodians’ application for relief from forfeiture to the Crown.1

1 R v Smith [2017] NZDC 19891.

[9] The decision the Judge made in the District Court on the issues before him and which I have to now consider…

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.

Continue reading FM Custodians Ltd v R

Details

AGLC: FM Custodians Ltd v R [2019] NZHC 1128
Case: [2019] NZHC 1128
Decision Date: 22 May 2019

CaseChat Overview and Summary

The case of FM Custodians Ltd v R involved an appeal against a decision of the District Court to make an instrument forfeiture order in relation to three properties. FM Custodians claimed an interest by way of mortgages over two properties and the proceeds of sale from those properties. The issue was whether the Court should have granted FM Custodians relief from the instrument forfeiture order. The High Court found that FM Custodians did not have a valid interest in the properties as its mortgages were created by fraud. The Court held that the District Court was correct in finding that FM Custodians had been involved in the instrument forfeiture offence through the actions of its agent, Mr Smith, who had forged the signature of Mr Ross on relevant documents. The appeal was dismissed, and the High Court found that there was no error in the District Court’s decision to make the instrument forfeiture order sought by the Crown and to refuse FM Custodians’ application for relief.

Orders