Li v District Court at Auckland
[2015] NZHC 3015
•1 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-002382 [2015] NZHC 3015
UNDER The Judicature Amendment Act 1972
The Criminal Proceeds (Recovery) Act
2009BETWEEN
ZHIWEI LI
Applicant
AND
DISTRICT COURT AT AUCKLAND First Respondent
COMMISSIONER OF POLICE
Second Respondent
Hearing: 21 October 2015 Counsel:
R Reed for applicant
M Harborow for second respondentJudgment:
1 December 2015
REASONS FOR JUDGMENT OF KATZ J
Solicitors: Meredith Connell, Auckland
Counsel: R Reed, City Chambers, Auckland
LI v DISTRICT COURT AT AUCKLAND [2015] NZHC 3015 [1 December 2015]
Introduction
[1] On 21 October 2015 I declined an application by Zhiwei Li for interim relief under s 8 of the Judicature Amendment Act 1972 (“JAA”). Mr Li had sought to prevent the Commissioner of Police from conducting an examination of him under s 106 of the Criminal Proceeds (Recovery) Act 2009 (“CPRA”). That application was scheduled to take place the following week. I set out below the reasons for that decision.
Background
[2] In 2008 and 2009 a media company, Screentime Productions, investigated allegations that members of the public could obtain New Zealand Qualifications Authority (“NZQA”) qualifications without having to fulfil the necessary educational requirements. Screentime engaged a man who used the identity “Danny Chen” (not his real name) to respond to a newspaper advertisement offering to provide such qualifications.
[3] Danny Chen paid Mr Li $12,000.00 cash on 30 October 2008, on the understanding that Mr Li would provide him with a New Zealand Diploma in Business issued by the NZQA and arrange for a third party to complete the necessary assignments to gain the diploma.
[4] Following the screening of Screentime’s programme on 20 August 2009, the police commenced an investigation into Mr Li and others. On 15 October 2012, Mr Li was arrested and charged with obtaining by deception in relation to the transaction with Danny Chen. He was convicted on 23 April 2015, following a Judge alone trial before Judge Bergseng in the District Court at Auckland, and sentenced to four months home detention.
[5] The Commissioner then obtained restraining orders under the CPRA over property in which Mr Li and his wife, Ms Wang, have interests. The relevant property includes their home, the contents of a number of bank accounts, and a significant sum of cash. The Commissioner believes that this property may be the proceeds of significant criminal activity, and therefore subject to forfeiture under the
CPRA. Forfeiture has not yet been sought, however, while investigations under the
CPRA continue.
[6] To further his investigations the Commissioner obtained an examination order against Mr Li from a District Court Judge, pursuant to ss 106 and 107 of the CPRA. Section 106 provides that the Commissioner may apply to a Judge for an examination order if he has reason to believe that a person is able to answer questions or supply information with respect to any matter relevant to the Commissioner’s investigation or to any proceedings under this Act.
[7] Mr Li’s sentence expired on 14 November 2015 (subsequent to the hearing before me). He is presently subject to a deportation order, apparently as the result of remaining illegally in New Zealand since 10 May 2010, when his work visa expired.
[8] Mr Li filed judicial review proceedings under the JAA on 15 October 2015. Mr Li says that the terms of the examination order are unreasonable and outside the purposes of the CPRA. In particular, he alleges that the Commissioner acted in bad faith and for an improper purpose in seeking the examination order, namely to gather information for possible future criminal proceedings (rather than simply for civil recovery proceedings under the CPRA).
[9] The key issue arising in Mr Li’s interim relief application is whether granting interim relief would be futile, because the Commissioner would be entitled to continue with the proposed examination of Mr Li despite any interim relief that might be granted by this Court. Only in exceptional circumstances would a Court be willing to grant interim relief that is futile.
Would granting interim relief be futile?
Section 93 of the CPRA
[10] The central issue before me is whether, correctly interpreted, s 93 of the CPRA would render the granting of interim relief futile. Section 93 provides as follows:
93 Effect of proceedings relating to Commissioner’s powers and duties
(1) This section applies if any person makes any challenge in any proceeding in any court in respect of—
(a) the exercise by the Commissioner of any power conferred by this
Act:
(b) the discharge of any duty imposed on the Commissioner by this Act. (2) If this section applies, until a final decision (as described in subsection
(4)) in relation to those proceedings is given, the power or duty may be, or may continue to be, exercised or discharged as if no such proceedings of that kind had been commenced, and no person is excused from fulfilling any obligation under this Act by reason of those proceedings.
(3) This section applies despite any other provision of any enactment or rule of law or equity.
(4) A final decision does not include a decision in proceedings for an interim order under section 8 of the Judicature Amendment Act 1972.
[11] In summary, s 93 provides that where a person issues a court challenge in respect of the exercise of a power by the Commissioner, the Commissioner may continue to exercise that power unless and until a final decision is made that the exercise of the power is unlawful.
[12] Mr Li submitted that s 93 does not apply in this case, because he is not challenging the exercise by the Commissioner of a power under the CPRA. Rather, he is challenging the making of the examination order by the District Court Judge.
[13] Sections 93 and 94 of the CPRA are modelled on ss 21 and 22 of the Serious Fraud Office Act 1990. A key difference, however, is that the Director of the Serious Fraud Office may simply issue a notice requiring a person to attend for examination. Unlike the position under the CPRA, no court order is required.
[14] Sections 21 and 22 of the SFO Act were the subject of judicial discussion by
Thomas J in Hawkins v Sturt. His Honour observed that: 1
Although not in the usual form of the family of privative clauses which the Legislature has conceived over the ages, it is a clever cousin. While not excluding the Court's jurisdiction to make an interlocutory injunction or interim order, it appears at first glance to provide that the officer concerned
1 Hawkins v Sturt (1990) 5 NZCLC 66,606.
may nevertheless continue to exercise the power or duty as if no proceedings had been commenced and as if, therefore, no interlocutory or interim order had been made. The Courts have historically been unwilling to grant injunctive relief which would have no force or effect. However, whether or not the words “power or duty” extend to a power or duty which is a nullity is a question which can be left to another day. For present purposes, what is pertinent is that the section provides a clear indication of the intention of the Legislature to avoid the situation where an investigation for serious or complex fraud is frustrated by legal proceedings. The investigation is not put beyond the bounds of the law for it may be ruled upon in a final decision. But it is clearly intended that in the interim the Serious Fraud Office is to be free to continue any investigation it has chosen to undertake notwithstanding what this Court might think, say, or do. I am prepared to recognise the clear legislative intention manifest in the section.
[15] Thomas J emphasised that the Court would not allow “supposed or alleged infringement of an individual’s rights to prompt it to thwart the clear intention of the Legislature”.2
[16] The Criminal Proceeds (Recovery) Bill, as initially drafted, envisaged that a “recovery authority” under the CPRA would have essentially the same direct examination powers as the director of the SFO. The Select Committee, however, recommended the introduction of judicial oversight to the exercise of such powers.
It said in its report:3
We recommend amending clause 114 [now s 107] and inserting new clause
113A [now s 106] so that it would be necessary to obtain judicial authorisation to require a person to appear before the Commissioner to
answer questions, supply information and produce documents for inspection. In the bill as introduced there is no requirement for judicial authorisation
and, as with production notices, submitters were concerned by the potential for abuse of power. We consider that replacing the notice power with the
power to seek an examination order with judicial oversight would provide
better safeguards.
[17] In Parliamentary debates regarding the Bill, the Hon Simon Power stated that the recommendation for greater judicial oversight originated with the Law Commission, in its report on search and surveillance powers.4
[18] As the Court of Appeal observed in Commissioner of Police v Burgess it seems likely that ss 93 and 94 were drafted at a time when the Bill provided that the
2 At 14.
3 Criminal Proceeds (Recovery) Bill (81-2) (select Committee report) at 5.
4 17 February 2009) 652 NZPD 1370.
Commissioner could himself issue examination notices, and that the last minute amendment to this aspect of subpart 7 of the CPRA occurred without completely thinking through the consequential changes required, “particularly to s 10 and ss 93 and 94”, with the effect that “legislative clarification is needed”.5 Unfortunately there has not yet been any such clarification.
[19] The interpretation difficulty arises because s 93 is expressed to apply to court challenges to the “exercise by the Commissioner of any power conferred by this Act”. If the Commissioner had direct examination powers, as originally envisaged, then any challenge to the exercise of those powers would clearly fall within the scope of s 93. Such cases would essentially be on all fours with Hawkins v Sturt. What role, however, does s 93 have to play in relation to examination orders in a statutory context that requires that such orders be made by a District Court Judge, on the application of the Commissioner? In such circumstances is any challenge properly construed as a challenge to the exercise of the Commissioner’s powers under the CPRA, or simply a challenge to the Court’s decision to make the relevant order?
Previous authorities on the correct interpretation of s 93
[20] This issue has been considered in two recent cases in which applicants have endeavoured to prevent examinations from taking place under the CPRA. In both cases the applicant sought judicial review of an examination order made by a District Court Judge and also sought urgent interim orders that would prevent the Commissioner from proceeding with the examinations pending determination of the substantive proceedings. Each applicant was declined interim relief, but for different reasons.
[21] The first case was Yan v Hamilton District Court.6 In that case the Commissioner sought an examination order in respect of Mr Yan, who is currently under investigation for fraud and money laundering. An order was made in the Hamilton District Court requiring Mr Yan to answer questions relating to his
overseas assets. Mr Yan filed an application in the High Court seeking to judicially
5 Commissioner of Police v Burgess [2012] NZCA 436 at [33] and [35].
6 Yan v Commissioner of Police [2015] NZHC 141.
review the making of the examination order. As in this case, he also sought an interim order to prevent the examination from taking place.
[22] Ellis J identified the central issue in the case as being whether s 93 of the Act would render the ordering of such interim relief futile.7 Her Honour concluded that s 93 does allow the Commissioner to continue to exercise any of his powers under the Act (including the power to examine a person) despite any interim order made by the Court. She observed that:8
There is nothing in the legislative history to suggest that, in determining that examination orders should be authorised by a judge, Parliament also intended to permit the conduct of any examination so authorised to be stymied by orders for interim relief. Such an interpretation would involve a complete reversal of the position under the Bill as originally drafted and might accordingly be expected to have been the subject of comment either by the Select Committee or the House.
[23] Ellis J held that, under s 93(2) of the CPRA, there can only be a remedy for an examinee once a final decision is made by the Court (that is, once the application for judicial review has been determined). Under s 93(4) of the Act, a final decision does not include an interim order preventing examination. The Commissioner would therefore be entitled to continue with the examination, even if an interim order was made. In such circumstances the granting of interim relief would be futile.
[24] Her Honour’s decision to decline the application for interim relief was further supported by her reservations about the merits of the underlying claim for review. She noted the low threshold for obtaining an examination order under s 107, that is, the Commissioner had to simply demonstrate to the Court “reasonable grounds to apply for the order”. The principles set out in the Court of Appeal’s decision in Commissioner of Police v Burgess (supporting an adjournment of proceedings under the Act until after a criminal trial) were seen as having no application, as the
examinee was not facing a criminal trial.9
7 Yan v Commissioner of Police, above n 6, at [22].
8 Yan v Commissioner of Police, above n 6, at [31].
9 See Commissioner of Police v Burgess, above n 5. See also Lee v New South Wales Crime Commission [2013] HCA 39, (2013) 251 CLR 196 for a discussion of this issue in an Australian context.
[25] Duffy J took a different approach in Li v District Court,10 which arose in almost identical circumstances to Yan. Ms Li applied to judicially review an examination order and also filed an accompanying application for interim relief. Duffy J considered the analysis in Yan, but concluded that:11
With the greatest respect to Ellis J, I am not persuaded that the approach taken in Yan was correct. First, I consider that s 93 of the Act is not engaged as the decision to make an examination order is made by a Judge. Whilst the springboard for them making of the order is the Commissioner’s decision to seek one that cannot turn the order itself into something that can be attributed to the Commissioner.
[26] On that analysis, the granting of interim relief would not be futile, and would operate to prevent the examination continuing pending the determination of the judicial review proceedings. Her Honour saw s 93 as a privative clause and applied the usual principles of interpretation which require that such clauses be interpreted
narrowly, because they operate to preclude access to the Courts.12
[27] Ultimately, however, Duffy J was not persuaded to grant the interim relief sought. Not because it would be futile, but because such relief was simply not warranted on the facts before her. This was essentially due to the low prospects of success in the substantive judicial review proceedings. Her Honour considered that examination orders were similar to search warrants, investigative powers and prosecutorial discretion. Such powers are only reviewable in “exceptional circumstances”, including where there is evidence of bad faith, improper purpose or malice by the Judge making the order. As a result the threshold for judicially reviewing an examination order was a very high one. Indeed the circumstances would have to be “so exceptional that if the grounds for review were established I
think that would be because the order was a nullity”.13
[28] There are accordingly competing High Court authorities as to whether s 93 applies in the context of an application to prevent an examination by the Commissioner from taking place. On the Yan approach the granting of interim relief
would be futile, because the effect of s 93 is that the Commissioner could proceed
10 Li v District Court [2015] NZHC 1605, [2015] NZAR 1280.
11 Li v District Court, above n 10, at [76].
12 At [78].
13 Li v District Court, above n 10, at [82].
with the examination in any event. On the Li approach s 93 does not render the granting of interim relief futile. Nevertheless, it would be rare for interim relief to be granted in such cases unless exceptional circumstances (such as bad faith or improper purposes) were seen as justifying such a course.
Discussion – the correct interpretation of s 93
[29] Not surprisingly, the Commissioner argued in favour of Ellis J’s interpretation and Mr Li supported Duffy J’s interpretation. Ultimately I concluded that s 93 did apply and that the granting of the interim sought by Mr Li would therefore be futile. My reasons for this conclusion are essentially those set out by Ellis J in Yan, as well as the further reasons that I set out below.
[30] First, I agree with Ellis J’s observations in Yan that there is nothing in the legislative history to suggest that, in determining that examination orders should be authorised by a judge, Parliament also intended to permit the conduct of any examination so authorised to be stymied by orders for interim relief. As her Honour observed, such an intention would involve a complete reversal of the position under the Bill as originally drafted and might therefore be expected to have been the
subject of comment either by the Select Committee or the House.14 This view is
supported by a careful analysis of ss 93 and 94, viewed in the context of the Act as a whole.
[31] Section 93 applies where “any person makes any challenge in any proceeding in any court in respect of the exercise by the Commissioner of any power conferred by this Act [or] the discharge of any duty imposed on the Commissioner by this Act”. A key issue, therefore, is whether the present proceedings challenge the exercise by the Commissioner of any power conferred by the Act.
[32] The powers and duties of the Commissioner are set out in Subpart 7 of the
CPRA, under the heading “Investigative powers”. Subpart 7 also covers “Police powers” (s 101) and “Official Assignee’s powers” (ss 110 to 113). Sections 102 to
14 Yan v Commissioner of Police, above n 6, at [31].
108, however, all relate to various aspects of the Commissioner’s powers and duties
under the Act, including in relation to: (a) search warrants (s 102);
(b) the transfer of property to the Official Assignee (s 103); (c) production orders (ss 104 and 105);
(d) examination orders (ss 106 and 107).
[33] Section 105 is the key section relating to production orders and s 107 is the comparable section for examination orders. It relevantly provides:
107 Power to require attendance before Commissioner, production of documents, etc
(1) If an application is made under section 106, the Judge may, if satisfied that the Commissioner has reasonable grounds to apply for the examination order, make an order that the person do 1 or more of the things specified in subsection (3) at the time and place specified in the order.
…
(3) The things referred to in subsection (1) are—
(a) to attend before the Commissioner:
(b) to answer questions with respect to any matter that the Commissioner has reason to believe may be relevant to the investigation or to any proceedings under this Act:
(c) to supply any information specified in the order with respect to any matter that the Commissioner has reason to believe may be relevant to the investigation or to any proceedings under this Act:
(d) to produce for inspection any documents that are specified in the order and that the Commissioner has reason to believe are in the person’s possession or control and may be relevant to the investigation or to any proceedings under this Act.
(4) If any document is produced under this section, the Commissioner may do any one or more of the following things:
(a) retain the original document produced for as long as is reasonably necessary for the purposes of this Act, provided that a copy of the document is taken and returned as soon as practicable after the document is produced:
(b) take copies of the document, or of extracts from the document:
(c) require the person producing the document to provide an explanation of the history, subject matter, and contents of the document and to answer any other questions that arise from that explanation and that the Commissioner has reason to believe may be relevant to the investigation:
(d) if necessary, require the person producing the document to reproduce, or to assist any person nominated by the Commissioner to reproduce, in usable form, any information recorded or stored in the document.
[34] Section 107 is consistently recognised in the CPRA as being a section that confers “powers” on the Commissioner. For example, s 97, which is headed “exercise of powers by outside investigators” provides that:
any person who is appointed by the Commissioner to investigate the affairs, or any aspect of the affairs, of any other person may be authorised by the Commissioner to exercise, in the company of a member of the police, all or any of the powers conferred by sections 105 and 107.
[Emphasis added]
Similarly, s 102(3)(c) permits the Commissioner to apply for a warrant “whether or not the Commissioner has exercised any power under section 105 or 107”.
[35] The scheme of the Act therefore expressly recognises that s 107 confers powers on the Commissioner (notwithstanding that those powers can only be exercised following the making of an appropriate court order). The relevant powers are set out in ss 107(3) and (4), and include the power to require an examinee to attend before the Commissioner to answer questions and supply information. In addition, s 106 also confers powers on the Commissioner, being the power to apply to the Court for an examination order.
[36] The question I must determine is whether, in these proceedings, Mr Li is making “any challenge… in respect of” the exercise by the Commissioner of any of his powers under ss 106 or 107. If he is, then s 93 applies and the granting of interim relief would be futile.
[37] Determining this issue requires some analysis of Mr Li’s statement of claim. First, I note that both the District Court and the Commissioner are named as defendants to the proceedings. Although the relief sought is that the examination order (made by the Court) be set aside, the key assertion underpinning the pleadings (and advanced in argument before me) is that the Commissioner has abused his powers under the CPRA by seeking an examination order “for the improper purpose of a wider criminal investigation”. Indeed the pleadings go so far as to allege that the Commissioner has acted in bad faith in exercising his powers to apply to the Court for an examination order.
[38] Essentially, Mr Li’s claim is that the process resulting in the making of an examination order by the Court was tainted due to a misuse of power by the Commissioner. The proceedings therefore squarely raise challenges relating to the exercise of the Commissioner’s powers under the Act. It is not alleged that the District Court Judge acted in bad faith or for improper purposes when he made the examination order. Rather, the Court was allegedly led into error as a result of the Commissioner acting in such a way. The core challenge in the proceedings is to the Commissioner’s conduct and motivations, which are said to have tainted the exercise (or proposed exercise) of his powers under the Act. The statement of claim accordingly challenges the exercise of the Commissioner’s powers under the CPRA. In addition, the application for interim relief also directly challenges the proposed exercise of the Commissioner’s powers under the CPRA. In particular it challenges the exercise of his powers under ss 107(3) and (4) by seeking to prevent Mr Li’s examination from proceeding at this stage.
[39] The legislative intent is, however, clear. Notwithstanding a legal challenge, the Commissioner is entitled to proceed “as if” no such challenge existed. That is so even if the Court grants interim relief under s 8 of the Judicature Amendment Act.
[40] The fact that s 93 was intended to apply to the exercise of the Commissioner’s powers relating to search warrants, examination orders and production orders (despite the fact that a prerequisite to the exercise of the Commissioner’s powers in relation to each of those is the obtaining of a court order) is further apparent from s 94. That section specifies what should occur if the Court
ultimately determines that the exercise by the Commissioner of a power conferred by the Act was unlawful. In that event, and to the extent which the exercise of those powers is declared unlawful, the Commissioner must ensure that immediately after the proceedings are finally determined:
(a) any information obtained as a consequence of the exercise of powers declared to be unlawful, and any record of that information, is destroyed;
(b)any documents or other material that has been removed is to be returned to their owner or controller, with any copies being destroyed;
(c) any information derived from or based on such information, documents, extracts, or things must be destroyed.
[41] This clearly indicates that the “powers” that s 93 is directed to must be the Commissioner’s powers to gather information, documents or other material under sections 102 (search warrants), 105 (production orders) and 107 (examination orders) notwithstanding that the obtaining of a Court order is a prerequisite to the exercise of such powers.
[42] The legislative scheme therefore clearly envisages that the Commissioner will be able to exercise his or her powers to execute or pursue search warrants, production orders or examination orders unless and until a final decision of the Court is made determining that the exercise of such powers is unlawful. In that event, the Commissioner will not be able to use any information obtained as a result of the unlawful exercise of his or her powers (subject to a residual discretion conferred on the Court to order otherwise). Section 94 further provides that no material or information obtained as a consequence of any unlawful exercise of powers is admissible as evidence in any proceedings, unless “the court hearing the proceedings in which the evidence is sought to be adduced is satisfied that there was no unfairness in obtaining the evidence”.
[43] If s 93 does not apply to the Commissioner’s powers in relation to search warrants, production orders, and examination orders, then the section is virtually meaningless, as is s 94. The only other “power” that s 93 could apply to is the Commissioner’s power to transfer property to the Official Assignee (s 103). It is clear from s 94, however, that the primary focus of the Legislature in enacting s 93 was not the Commissioner’s power to transfer property to the Official Assignee, but rather his powers to compel the provision of information.
[44] It follows that, pursuant to s 93, the Commissioner would be entitled to continue with his examination of Mr Li even if the Court were to make the interim orders sought. As a result the granting of interim relief would be futile. For the reasons outlined by Thomas J in Hawkins v Sturt, it is not appropriate to grant
interim relief that would be futile.15
[45] Given the view I have reached on the futility of interim relief, it is not necessary to traverse the underlying merits of the judicial review proceedings in any detail. I do note, however, that this is not a case where Mr Li is currently facing any further criminal charges. Accordingly there is no direct issue of prejudice to a forthcoming trial, raising difficult issues under the New Zealand Bill of Rights Act.16
In the event that there was to be such a trial in the future (which seems unlikely if Mr
Li is deported), I note the protections afforded to those who become subject to an examination order, including the limitation in s 165 on the use to which any incriminating statements can be put.
[46] Mr Li’s proceedings appear to be predicated, to some extent, on a belief that the Commissioner is not entitled to examine him in respect of possible offending that extends beyond the one specific incident he has been convicted of. It is well established, however, that the CPRA does not require that any investigation or proceedings be limited to offending in respect of which a respondent has been charged or convicted. The Commissioner “can invite the Court to infer, on the balance of probabilities that a respondent was involved in other significant criminal
activities that he was not charged with”.17 In doing so the Commissioner may rely on a range of evidence, including evidence of any disparity between money passing through a respondent’s bank accounts or used to purchase assets, versus legitimate declared income.18
Conclusion
[47] For all of the above reasons, I dismissed Mr Li’s application for interim
orders.
[48] My preliminary view is that the Commissioner should be entitled to 2B costs in the usual way. Memoranda may be submitted if the parties cannot agree. Any memorandum from the Commissioner is to be filed and served by 11 December
2015, with any response from Mr Li to be filed and served by 18 December 2015. A
decision will then be made on the papers.
Katz J
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