Official Assignee v Keen aka Chen
[2025] NZHC 539
•17 March 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2013-404-1779
[2025] NZHC 539
IN THE MATTER OF an application for a sale order pursuant to the Criminal Proceeds (Recovery) Act 2009 BETWEEN
OFFICIAL ASSIGNEE
Applicant
AND
CHEN KEEN also known as JACK CHEN First Defendant
MAY HAO also known as MAY WANG Second Respondent
YE FANG
Third Respondent
continued overleaf
Hearing: 11 February 2025 Appearances:
M R Harborow and C F Hodgson for Applicant J D Turner and D W Wang for First Respondent
E J James for Natural Dairy (NZ) Holdings Limited
Judgment:
17 March 2025
JUDGMENT OF O’GORMAN J
This judgment was delivered by me on 17 March 2025 at 4 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
Meredith Connell, Auckland McVeagh Fleming, Auckland Chapman Tripp, Auckland
OFFICIAL ASSIGNEE v KEEN [2025] NZHC 539 [17 March 2025]
(…cont’d)
AND WU RONG
ANFATEX GLOBAL FINANCIAL INVESTMENT HOLDINGS LIMITED
KING’S HOUSE NZ LIMITED
CHINESE BUSINESS ROUNDTABLE COUNCIL INVESTMENTS LIMITED
SUN RENTALS LIMITED
DAIRY ASSETS HOLDINGS LIMITED DYNASTY CORPORATE TRUSTEE
LIMITED (in liquidation) UBNZ TRUSTEE LIMITED
UBNZ ASSETS HOLDINGS LIMITED
NATURAL DAIRY (NZ) HOLDINGS LIMITED
NZ DAIRY TRUSTEE LIMITED ASB BANK LIMITED KIWIBANK LIMITED
BANK OF NEW ZEALAND
THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED
THE OFFICIAL ASSIGNEE
Interested Parties
Introduction
[1] The Official Assignee (OA) applies for a sale order under the Criminal Proceeds (Recovery) Act 2009 (Act) to sell a property in Lammermoor Drive, St Heliers, Auckland (Property).1 The Property is currently restrained pursuant to foreign restraining orders, first registered in New Zealand in 2013, and since extended. In accordance with those orders, the Property has been and remains in the OA’s custody and control.
[2] Anfatex Global Financial Investment Holdings Ltd (Anfatex) took title to the Property in February 2010 and has owned it ever since. The first respondent, Mr Chen, is that company’s sole director and shareholder.
[3] By order of the Court, the OA is responsible for meeting the rates for the Property from the restrained estate. In addition, the OA has incurred costs of $379,916 on maintenance, including security and other costs of the Property while it is under the OA’s custody and control. Those costs escalated after the Property was left permanently abandoned in January 2017. Since then, the Property has been broken into multiple times, and the state of the building has deteriorated, thereby detrimentally impacting overall value.
[4] The OA applies for the sale orders on the grounds that selling the Property will best preserve its value in the form of proceeds of sale, and this will enable the OA to stop incurring ongoing expenses on the Property. Such a sale would also mitigate the risk that those future expenses will not be reimbursed.
[5] The ultimate issue for the Court is whether a sale of the Property is “appropriate” in terms of s 34(1) of the Act.
1 The Official Assignee also applied for additional directions under the Evidence Act 2006. That application fell away during the hearing.
Hong Kong proceedings
Hong Kong criminal proceedings
[6] The criminal allegations against the respondents were that they conspired to defraud China Jin Hui Mining Corporation Limited/Natural Dairy (NZ) Holdings Limited (China/Natural Dairy) and, consequently, the Hong Kong stock exchange, by dishonestly inducing China/Natural Dairy to acquire 22 New Zealand dairy farms then owned by the CraFarms Group at an inflated price and without disclosing their interest. The accounts allegedly overstated the profit of the farms by approximately
$50 million. Some of the funds were allegedly paid from Ms Hao, the second respondent, to Mr Chen in cash and used to purchase residential properties in Auckland.2 It was asserted that Mr Chen obtained $23.5 million from these activities.3
[7] On 29 April 2016, Mr Chen was first convicted of conspiring to defraud the Hong Kong stock exchange, amongst other charges. He was sentenced to seven years and nine months’ imprisonment.
[8] Mr Chen’s wife, Mrs Ye Fang, was acquitted on 1 February 2017. The Hong Kong proceedings no longer apply to her at all. Anfatex, the owner of the Property, is not facing charges or any possibility of conviction.
[9] On 30 August 2019, the Hong Kong Court of Final Appeal quashed Mr Chen’s convictions and ordered a retrial.
[10] Following a retrial, on 30 November 2023 Mr Chen was (again) convicted of conspiring to defraud the Hong Kong stock exchange, among other charges. He was sentenced to seven years and three months’ imprisonment.
[11] Mr Chen sought leave to appeal his conviction and sentence. During that process, the Hong Kong Court of Appeal recently amended Mr Chen’s bail conditions to allow him to apply for approval to travel outside of Hong Kong from the Independent Commission Against Corruption (ICAC).
2 Commissioner of Police v Chen [2013] NZHC 2259 at [11].
3 At [12].
[12] On 21–23 January 2025, his application for leave to appeal was heard before the Hong Kong Court of Appeal, concurrently with the substantive appeal. The parties understand that the pending judgment will address both:
(a)whether leave to appeal is granted; and
(b)if so, whether the appeals are allowed or dismissed.
[13] The parties estimate that the Hong Kong Court of Appeal will hand down its judgment in June 2025. The latest expected date to receive judgment on both issues is 23 July 2025, in line with a practice direction providing for the Hong Kong Court of Appeal to hand down judgment within six months of the conclusion of all oral hearings heard before a full bench.
[14] If Mr Chen is unsuccessful before the Hong Kong Court of Appeal, then he will still be able to apply for an appeal to the Hong Kong Court of Final Appeal.
[15] Mr Chen says that he has fond memories of his life and his family at the Property, prior to his departure to Hong Kong to defend the proceedings against him. Given the recent change in bail conditions, he says he plans to return to New Zealand with his wife and family as soon as possible, latest being July 2025. Meanwhile, he wants the Property to be retained.
Hong Kong forfeiture procedures
[16] The application for confiscation has proceeded under a separate process in Hong Kong:
(a)On 26 October 2011, Poon J of the High Court of Hong Kong made an order restraining the assets of various parties under ss 15–19 of the Organised and Serious Crime Ordinance of the Laws of Hong Kong (Hong Kong Restraining Order).
(b)The above order was amended on 21 December 2012 to restrain the Property.
(c)The order has since been amended on 10 January 2013, 30 June 2022, 14 September 2022, and 10 November 2022.
[17] The Hong Kong confiscation proceedings (in which a forfeiture order might eventually be made) have since been adjourned pending determination of Mr Chen’s application for leave to appeal.
New Zealand orders in support
[18] The orders in New Zealand have been made in support of the Hong Kong Restraining Order:
(a)On 11 April 2013, Andrews J made an interim order which, among other things, restrained the Property and placed it under the custody and control of the OA.
(b)On 2 September 2013, Courtney J made an order registering the foreign Hong Kong Restraining Order in New Zealand under s 56 of the Mutual Assistance in Criminal Matters Act 1992 and ss 132–135 of the Act (New Zealand Restraining Order).4
(c)The New Zealand Restraining Order has been extended to 2 September 2025, by nine orders dated 1 September 2015, 26 August 2016, 23 August 2017, 29 August 2018, 21 August 2019, 21 August 2020, 23 August 2021, 11 August 2022, and 18 August 2023.
[19] Following resolution of the criminal process and the confiscation proceedings in Hong Kong, the Property will not be forfeited automatically. The Hong Kong authorities will need to request New Zealand’s assistance to register any foreign forfeiture orders ultimately made. The request, response, preparation and filing of relevant Court documents will take time. A hearing to determine whether to register the foreign forfeiture order will need to take place.5 The Court may need to determine
4 Commissioner of Police v Chen, above n 2.
5 Criminal Proceeds (Recovery) Act 2009, ss 140–144.
whether any person is entitled to relief from forfeiture,6 and there may be further time until any judgment is issued.
Value of Lammermoor Drive
[20] Three valuations have been prepared for the OA by Darroch Ltd, a firm of registered valuers:
(a)On 1 May 2013, Mr Godkin of Darroch valued the Property at the sum of $6,970,000 (land and buildings), plus $30,000 for chattels. At the time, there was no apportionment between land and other value. However, in May 2024, Mr King of Darroch has retrospectively apportioned the 2013 value as being:
(i)$5,300,000 for the land; and
(ii)$1,700,000 for the value of improvements and chattels.
(b)On 17 June 2021, Mr King inspected the interior of the dwellinghouse and reported a market value of around $10,000,000, being:
(i)$9,810,000 for the land; and
(ii)$200,000 for improvements.
(c)On 18 March 2024, Mr King valued the Property at $8,500,000, made up of:
(i)$8,300,000 for the land value; and
(ii)$200,000 for improvements.
6 Section 148.
[21] In making the above value assessments, Mr King says the Property remains potentially attractive for the following markets:
(a)the development market, for multiple residential dwellings;
(b)the high net wealth market, for persons who are interested in purchasing a luxury estate, and are prepared to make the substantial further investment that would be required to bring it up to the standard a high net wealth purchaser would expect; and
(c)a potential hybrid of the two, namely to acquire a substantial home and then sell off other parts of the land.
[22] Mr Bates, registered valuer, gave expert evidence on behalf of the first respondent, and he was cross-examined at the hearing. In his affidavit, he deposed that the value of the Property has likely appreciated since the Darroch valuation of 18 March 2024, and it will likely continue to appreciate through 2025 and 2026:
In my view, it is likely the Property already has a higher value in October 2024 than it did in March 2024, and certainly more than it would based on the then dated market data of 2023.
…
Likewise, I expect the market value of the Property to increase over late 2024 and through 2025.
[23] Under cross-examination, his expert opinion about the future value for the Property in 2025 was a very slow increase during the first part of 2025, and higher increases at the end of the year, resulting in an expected overall increase in value for 2025 of 5–7 per cent. He said that any predictions beyond that for 2026 were more difficult, including because the next general election must take place by 19 December 2026.
[24] There is no contrary expert evidence about future values because Mr King’s evidence was that future valuations were outside his expertise.
[25] As at 1 February 2025, the rates assessments for the Property (under three separate titles) were for the following:
Land Value Improvements Capital Value $7,600,000 $4,900,000 $12,500,000 $3,200,000 $0 $3,200,000 $3,175,000 $200,000 $3,375,000 $13,975,000 $5,100,000 $19,075,000
Costs and expenses
[26] From April 2013 to 16 August 2024, the OA incurred the following costs and expenses for the Property:
(a)insurance $56,816.66;
(b)rates including penalties (from August 2020) $221,406.42;
(c)property maintenance $379,916.47 including (among other expenses):
(i)security costs $280,448.58; and
(ii)tree trimming/outdoor maintenance $52,509.33.
[27] The Property also incurred a share of the OA’s administration costs for the estate as a whole, which as at 12 August 2024 totalled $187,520.15.
[28] As at 16 August 2024, the OA has spent a total of $658,139.55 on the Property (excluding the OA’s time costs for administration).
[29] As at 31 July 2024, the restrained estate held $9,086,619.25 in liquid funds. The restrained portion attributable to Mr Chen was $527,332.26 (from which rates for the Property have been deducted). All remaining funds in the restrained estate are attributable to Ms Hao, the second respondent, who is not party to the sale application.
Deterioration and security issues
[30] Since its abandonment in January 2017, the Property has been deteriorating and is now in a serious state of disrepair.
[31] In January 2019, a thermal imaging report recorded the Property was then in a “fair” condition but requiring “some major remedial works”, including substantial work required to rectify leaks and achieve weathertightness.
[32] In 2023, the Property was subject to seven break-ins or burglaries. Three further break-ins were recorded in 2024, and three have been recorded so far in 2025. Security contractors now conduct multiple random patrols each night.
[33] In August 2023, following the report of a further break-in, agents for the OA noted the following:
(a)large amounts of water were leaking from the ceiling onto carpets in three bedrooms;
(b)there were damp and mould issues with carpets, and water damage to them;
(c)paint was peeling off the ceiling, with one ceiling “heavily bowing”;
(d)lawns and shrubbery were overgrown; and
(e)spouting on the pool house was corroded and broken.
[34] Since February 2024, all windows and doors in the guest house and main residence have been boarded up (excluding the main door).
[35] The Darroch valuation dated 18 March 2024 noted cracks in the exterior of the residence. While the fixtures and fittings were still described as of “superior” quality, the outdoor and other improvements were described as presented in “very poor condition”.
[36] Neighbours are concerned about the lack of maintenance and security problems at the Property. Their concerns have been escalated to their local MP, who made an Official Information Act 1982 request of the OA regarding Lammermoor Drive.
Legal principles
[37] Foreign restraining orders, for which registration is enabled by the Mutual Assistance in Criminal Matters Act, are one method through which New Zealand gives effect to the United Nations Model Treaty on Mutual Assistance in Criminal Matters.7 An important policy purpose is to ensure that New Zealand does not become a safe harbour for assets or financial benefits derived from criminal activity.8
[38] The legislative provisions governing the Court’s jurisdiction to deal with applications for further orders associated with foreign restraining and forfeiture orders are set out in ss 128–149 of the Act. Section 134 sets out that ss 33–35 of the Act (regarding domestic restraining orders) apply with all necessary modifications to foreign restraining orders.
[39]Section 34 of the Act provide as follows:
34 Making further orders
(1)On an application under section 33(1), a court may, if it considers it appropriate, make further orders in relation to the restrained property (which may, but need not, be an order of any 1 or more of the types referred to in section 35).
7 Bujak v Solicitor General [2009] NZSC 42, [2009] 3 NZLR 179 at [13], cited in Commissioner of Police v Dotcom [2012] NZHC 634 at [42] and [53] (with respect to how the Commissioner of Police is authorised to conduct proceedings that require mutual legal assistance between states).
8 Yan v Commissioner of Police [2015] NZCA 576, [2015] 2 NZLR 593 at [33]; Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [12]; and Hayward v Commissioner of Police [2014] NZCA 625 at [29].
(2)A further order may be made—
(a)at the time the associated restraining order is made; or
(b)at any later time before the expiry of the associated restraining order.
[40] Under s 35, the Court may, without limiting the generality of s 34(1), make one or more of a number of “further orders” in relation to restrained property, including an order that “directs the OA to sell restrained property (including, without limitation, a business) in order to preserve the value of the restrained property”.
[41] The approach taken to an application for a sale order under s 34 was summarised in Commissioner of Police v Parker as follows:9
Although the Court has the power to order a sale, such orders are not lightly made. The Court has to be satisfied that an order is appropriate. It obviously requires something more than the mere fact of restraint or the Commissioner would be armed with the right of sale for any restrained asset. It needs to be remembered that until an order for forfeiture is made, the goods remain the property of the registered owner, or those laying claim to ownership.
[42]The factors that must be taken into account include:10
(a)the nature and value of the asset;
(b)the length of time before the substantive proceeding will be determined;
(c)the extent to which the asset may depreciate during that period; and
(d)the wishes of the owner of the assets and/or those who may have an interest in them.
9 Commissioner of Police v Parker [2019] NZHC 1506 at [30].
10 At [32], referencing Commissioner of Police v Drummond [2018] NZHC 1730 at [15].
[43] There has been debate about whether storage/holding costs (such as insurance) fall outside the specified purpose in s 35(e)(v) of the Act “to preserve the value of the restrained property”.11 In any event, such expenses and any logistical difficulties can be considered under the broad jurisdiction of s 34.12
[44] Although there have been many early sale orders granted for assets such as motor vehicles,13 counsel have identified only one other case in which an early sale order has been considered in respect of land.14 In that case, the Court declined to make an early sale order over bare land because there was “no evidence that an early order for sale is required to preserve the value of [that] section”.15
[45] If foreign forfeiture orders are made and registered in New Zealand, then the proceeds of the Property will be dealt with in accordance with s 86 of the Act. Under s 86, after paying the OA’s recoverable costs under s 87, the remaining funds are paid to the Attorney-General for disposal as a matter of discretion (exercised with regard to guidelines approved in 1999).
[46] If foreign forfeiture orders are not made, the OA (and through him, the Crown) will not have his costs and expenses met for his custody and control of the Property.
Party submissions
OA’s submissions
[47] The OA submits that the above potential for the OA (and the New Zealand Crown) to be left out of pocket if the Property is not forfeited is a relevant factor in determining whether the sale of the Property is appropriate.
11 Commissioner of Police v Evans [2015] NZHC 1240 at [33]. See also Commissioner of Police v Drummond, above n 10, at [6], where such factors were treated as relevant in the context of low value items; and McQuade v Commissioner of Police [2024] NZCA 46 at [27] which emphasises (as obiter) that s 35 also confers a broad discretion.
12 Commissioner of Police v Parker, above n 9, at [52], where the Court held that a sale under s 34 can be ordered where it is necessary to preserve the potential net realisation value (as opposed to the value per se) of the restrained asset, providing a sale is otherwise considered appropriate.
13 See for example Commissioner of Police v Parker, above n 9; Commissioner of Police v Cavanagh [2014] NZHC 2978; and Commissioner of Police v Drummond, above n 10.
14 Commissioner of Police v Sharma [2023] NZHC 2959.
15 At [20].
[48] In any event, the OA submits that an early sale order is appropriate, taking into account the following:
(a)The Hong Kong confiscation proceedings are unlikely to be determined until at least mid-2026, potentially later. This will impact the time it takes for Hong Kong to request that any confiscation orders be registered in New Zealand. As a result, the OA will have custody and control of the Property for at least a further 18 months.
(b)The Property was abandoned in January 2017 and is deteriorating, requiring increased attendances for maintenance and security.
(c)The OA has expended $658,139.55 on holding costs to August 2024. Administration and insurance costs for the estate as a whole continue to mount. Those holding costs will only increase between now and the date that the Property is sold or released from restraint.
(d)The value of the improvements has been negatively impacted, and this is expected to continue. This impacts the overall value that may be realised if the Property is eventually sold.
(e)Despite Mr Chen’s claim of a sentimental attachment to the Property, the OA does not accept that Mr Chen’s relationship to the Property is any more special than another property owner. Mr Chen’s non-payment of rates and disinterest in organising tenancy and/or repairs and security undermines any assertion of sentimental attachment.
Mr Chen’s submissions
[49] Counsel for Mr Chen argues that the Hong Kong Restraining Order was made under s 19 of the Organised and Serious Crimes Ordinance of the Laws of Hong Kong, which provides that the value to be preserved as “the value for the time being” of the restraining order, not the value of the asset having appreciated in the future. An affidavit from a solicitor qualified in Hong Kong says that:
Retrieving the value of any appreciation or capital gain of the restrained property between the restraining order and any confiscation order is not a proper purpose for making a restraining order.
[50] Similarly, counsel for Mr Chen submits the purpose of the New Zealand Restraining Order is to preserve the value of the property at the time the order was granted. In this case, the value referred to in the schedule to the application was
$6,970,000.
[51] As the land value for the Property now far exceeds $6,970,000, counsel for Mr Chen contends that there can be no basis for making the sale orders as:
(a)It is or would be unreasonable/not reasonably necessary to convert the restrained property into a more lucrative form of property to try to improve the value of that restrained property on or after the date of restraint. That would change the focus from “preserve” to “increase”.
(b)It is or would be unreasonable/not reasonably necessary to preserve any incidental increase (that is, any windfall) in the value of that restrained property.
(c)It is or would be unreasonable/not reasonably necessary to incur any holding costs that do not preserve the value of the restrained property.
[52]In addition, counsel for Mr Chen makes the following submissions:
(a)Mr Chen does not want the Property sold because he is sentimentally attached to it and he wishes to return to reside at the Property after the conclusion of the Hong Kong proceedings.
(b)Following the recent bail condition amendments, Mr Chen might now be permitted to return to New Zealand with his wife to fix the condition of the Property or to look after it.
(c)Hong Kong proceedings will likely be determined by mid-2026. This relatively short period of time allows the parties greater certainty that the Property is unlikely to substantially depreciate. The OA has waited over a decade before bringing this application, so a further 18 months or so is not critical.
(d)The value of the improvements on the Property is already minimal and is unlikely to decrease further. The improvements have not decreased in value in the period from 17 June 2021 to 18 March 2024. The security costs and insurance being incurred by the OA appear to be disproportionate to remaining improvement value of the Property.
(e)In any event, the past holding costs to the OA are outweighed by the windfall capital gains on the Property, which are likely to continue throughout 2025.
(f)The OA’s concern that it may be left “out of pocket” for holding costs incurred if the respondent is found innocent or avoids a forfeiture order are not proper considerations for the exercise of discretion under s 34 under the Act. The “risk” that a respondent is acquitted on appeal (or innocent at trial) should not be used as a ground to deprive him of his property rights. Defeating the effect of Mr Chen’s potential acquittal is not an appropriate reason to grant a sale order.
Analysis
Notional cap
[53] There are two types of forfeiture orders available in respect of significant criminal activity under the Act:16
(a)assets forfeiture orders (type 1 or type 2);17 and
16 Heather McKenzie Proceeds of Crime Law in New Zealand (LexisNexis, Wellington, 2015) at [2.2]; and Kiwi v Commissioner of Police [2023] NZCA 106, [2023] 2 NZLR 776 at [80].
17 Criminal Proceeds (Recovery) Act, s 50 (type 1) or s 50C (type 2), with the allied restraining orders under ss 24 and 24A respectively.
(b)profit forfeiture orders.18
[54] The aim of the Act is to “make sure that crime does not pay”.19 This is reflected in the Act’s purpose:
3 Purpose
…
(2) The criminal proceeds and instruments forfeiture regime established under this Act proposes to —
(a)eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity; and
(b)deter significant criminal activity; and
(c)reduce the ability of criminals and persons associated with crime or significant criminal activity to continue or expand criminal enterprise; and
(d)deal with matters associated with foreign restraining orders and foreign forfeiture orders that arise in New Zealand.
[55] Under s 50(1) (type 1 asset forfeiture), if the High Court is satisfied on the balance of probabilities that specific property is “tainted property”, the Court must make a type 1 asset forfeiture order in respect of that specific property.
[56]Section 5 defines “tainted property” as follows:
tainted property —
(a) means any property that has, wholly or in part, been —
(i)acquired as a result of significant criminal activity; or
(ii)directly or indirectly derived from significant criminal activity; and
(b) includes any property that has been acquired as a result of, or directly or indirectly derived from, more than 1 activity if at least 1 of those activities is a significant criminal activity
18 Section 55, with the allied restraining order under s 25.
19 Commissioner of Police v Harrison [2021] NZCA 540, [2022] 2 NZLR 339 at [7], cited in
McFarland v Commissioner of Police [2024] NZCA 16 at [9].
[57] For example, it is well-established that using money derived from significant criminal activity to make mortgage payments can “taint” the mortgaged property.20 The effect of the definition is that the whole of the property will be tainted, even if only part of a property has been acquired as a result of significant criminal activity, or indirectly derived from such activity.21
[58] Persons other than the respondent may apply for relief if they claim an interest in the property to be forfeited and they have not unlawfully benefited from the significant criminal activity.22 In addition, other relief (including to the respondent) can be granted based on the concept of “undue hardship”.23 For dealing with third party interests, those interests are excluded where possible,24 rather than the Crown paying sums of money in relation to relief.25 Otherwise, if the third party’s interest is not severable, the Court must direct the Crown to pay the applicant an amount equal to the value of their interest.26
[59] Given the above legislative regime, I reject the allegation that a New Zealand restraining order is limited to the value of the property at the time the restraining order was granted. The whole of the property is restrained and may be found to be tainted. Allowing criminals to retain any increase in value as a matter of right would undermine the aim of ensuring that crime does not pay, without any rationale that could be reconciled with s 3. Rather, the regime provides different safeguards of potential relief against asset forfeiture for undue hardship; or profit forfeiture orders limited to the value of the benefit determined under s 53 and the maximum recoverable amount determined in accordance with s 54.
20 Commissioner of Police v Heron [2024] NZHC 2497 at [54]–[61]; Commissioner of Police v Wright [2024] NZHC 1531 at [17]; Commissioner of Police v Snowden [2020] NZHC 2036 at [117]; Duncan v Commissioner of Police [2013] NZCA 477, (2013) 26 CRNZ 796 at [18]–[19] and [32]–[33]; Doorman v Commissioner New Zealand Police [2013] NZCA 476, [2014] 2 NZLR 173 at [32]; and Commissioner of Police v Geddes [2013] NZHC 1199 at [24].
21 McFarland v Commissioner of Police, above n 19, at [13].
22 Criminal Proceeds (Recovery) Act, ss 61–62 and 66.
23 Proceeds of Crime Law in New Zealand, above n 16, at [6.2.6].
24 Criminal Proceeds (Recovery) Act, s 68.
25 Proceeds of Crime Law in New Zealand, above n 16, at [3.3].
26 Criminal Proceeds (Recovery) Act, s 69.
[60] I do not assume that the position would be any different under the wording of the legislation in Hong Kong. The evidence on that point was from the first respondent’s own solicitor firm, not an independent expert, and was conclusory in nature with no supporting authority. In any event, s 57 of the Mutual Assistance in Criminal Matters Act provides that once a foreign restraining order is registered in New Zealand, it has the effect and may be enforced in New Zealand as if it is a restraining order made by the High Court under the Criminal Proceeds (Recovery) Act.
[61] On the facts alleged in [6] above, the benefits of the criminal offending directly led to acquisition of the Property and those benefits exceed the current value of the Property itself, under an asset forfeiture or profit forfeiture approach. I also note the position of the interested party that it has a civil claim to the Property. Therefore, I reject the suggestion that there is any notional cap on the restraining order over the Property to a value of $6,970,000.
[62] The purpose is to restrain the subject matter of the property in its existing form (in this case real estate), so as to preserve that value in real terms, with the ability to make further orders under ss 34 and 35 in appropriate circumstances.
Analysis of “appropriate”
[63] The starting point is that an early sale order will not lightly be made under s 34. Rather, the Court must be satisfied that an order is appropriate.
[64]To analyse that issue, I take into account the following factors:
(a)There is no particular dispute about the valuation of the Property dated 18 March 2024 finding that the improvements (that is, buildings on the property) are now worth only $200,000 and the value of the Property sits almost entirely with the land value of $8,300,000. Given the 1 February 2025 capital value for the land and other comparative prices, if anything this seems conservative. While the OA argues that some potential purchasers might be interested in restoring the Property, it seems that the primary value rests in its potential for development for
multiple residential dwellings. This might explain the low value for the improvements, even if the house is substantial and capable of being restored. In other words, for a development market the house may need to be demolished anyway. Even if repairs are contemplated, the marginal degree of damage might be of limited relevance (for example, if a bowing ceiling needs to be replaced, further bowing in the interim might not impact value).
(b)I consider that this application should focus on the future under the two alternatives, namely to maintain the asset restrained in its current form or to order an early sale to convert the asset into cash proceeds. Mr Bates’ evidence about likely increases in value during 2025 of 5−7 per cent is uncontradicted. Taking the base land value as at 18 March 2024 and applying an uplift of five per cent produces an expected increase in land value of at least $415,000 this year. On my assessment, this increase will exceed the OA’s holding costs over the same period, based on the level of those costs to date (such as for insurance, maintenance, and security). Accordingly, my assessment is that the assets that are the subject of this restraining order are not expected to depreciate either in their own right, or using a net approach, by mid-2026 when the outcome of the Hong Kong proceedings might be known.
(c)The OA has had custody and control of the Property since 2013. I acknowledge that the maintenance and security costs have been increasing in recent years because of concerns about break-ins at the Property, but those costs have not reached a point where they are uncommercial or disproportionate relative to the value of the asset restrained. I also accept the first respondent’s submission that there is a question of proportionality if the value sits in the land rather than the improvements. Even allowing the improvement value to fall to zero would only have an adverse impact of $200,000 based on the most recent valuation (2.35 per cent of the value).
(d)I acknowledge that the OA’s duties in providing security and addressing criminal conduct extend beyond merely seeking to preserve the value of the improvements. There is the public interest to consider, and neighbours have legitimate concerns about how the Property is being managed. However, my evaluation of what is appropriate in the present circumstances is based on the likelihood that the OA will be entitled to recover those holding costs if forfeiture orders are later made. While there might be some uncertainties about how the proceeds of any assets ultimately forfeited will be distributed under the cross-border regime, I consider those matters primarily fall for assessment when deciding whether to provide assistance and/or when deciding whether the restraining orders should be sustained at all.
(e)I do not think it would be fair to seek to protect the OA from the possibility that Mr Chen might ultimately be acquitted with no forfeiture orders made in Hong Kong, leaving the OA (and the Crown) with unrecoverable holding costs. That possibility should not operate to Mr Chen’s disadvantage, given that the Court must seek to balance the wishes of the owner who, in those circumstances, would be entirely vindicated. Indeed, the OA did not suggest that any deductions would be made for outstanding holding costs to date from the proceeds in that scenario. The OA’s concern is to prevent such costs from further accumulating.
(f)I remain sceptical whether the Property is of true sentimental value to Mr Chen, given the short time he and his family lived in it and their lack of apparent care or co-operation since it was abandoned. However, in assessing whether a sale order is appropriate now, I must take into account that Mr Chen’s company is the current owner entitled to benefit from retaining, selling or developing the Property if forfeiture orders are not ultimately made (subject to the interested party’s civil claims and pending application to enforce its worldwide freezing order). Given that the value of the Property is currently increasing at a rate that exceeds holding costs, I see no proper basis for changing the status quo.
(g)There is only a short duration before the outcome of the current appeal in Hong Kong will be known. This will not necessarily provide certainty, because Mr Chen might seek to pursue a further appeal if unsuccessful. However, if his conviction is set aside, then this would further undermine the rationale for the OA selling the Property. I am unwilling to make a sale order that would pre-empt that further information becoming available within a relatively short time frame.
[65] For the above reasons, I do not consider that a sale order is appropriate in the current circumstances.
Result
[66]I decline the OA’s application for a sale order.
O’Gorman J
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