Ortmann v United States of America
[2017] NZHC 189
•20 February 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2015-404-000429 [2017] NZHC 189
UNDER the Extradition Act 1999 IN THE MATTER
of an appeal on questions of law by way of case stated under s 68 of the Extradition Act 1999
BETWEEN
MATHIAS ORTMANN First Appellant
KIM DOTCOM Second Appellant
BRAM VAN DER KOLK Third Appellant
FINN HABIB BATATO Fourth Appellant
AND
THE UNITED STATES OF AMERICA Respondent
cont …/2
Hearing: 29 August to 28 September, 12 October 2016 Appearances:
G M Illingworth QC, PJK Spring and A K Hyde for First and
Third Appellants
R M Mansfield and S L Cogan for Second Appellant
J Bioletti for Fourth Appellant
J C Gordon QC, M Ruffin, F Sinclair and F Biggs for
RespondentJudgment:
20 February 2017
JUDGMENT OF GILBERT J
This judgment is delivered by me on 20 February 2017 at 11 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
ORTMANN v THE UNITED STATES OF AMERICA [2017] NZHC 189 [20 February 2017]
…/2
CIV-2015-404-001733
UNDER the Judicature Amendment Act 1972, Part
30 of the High Court Rules and s 27(2) of the New Zealand Bill of Rights Act 1990
BETWEEN MATHIAS ORTMANN First Plaintiff
BRAM VAN DER KOLK Second Plaintiff
FINN HABIB BATATO Third Plaintiff
ANDTHE UNITED STATES OF AMERICA First Defendant
THE DISTRICT COURT AT NORTH SHORE
Second Defendant
CIV-2015-404-001770
UNDER the Judicature Amendment Act 1972, Part
30 of the High Court Rules and s 27(2) of the New Zealand Bill of Rights Act 1990
BETWEEN KIM DOTCOM Plaintiff
ANDTHE UNITED STATES OF AMERICA First Defendant
Solicitors/Counsel:
G M Illingworth QC, Auckland
G J Foley, Auckland
Keegan Alexander, AucklandCrown Law, Wellington
Anderson Creagh Lai, Auckland
R Mansfield, Auckland
J Bioletti, Auckland
THE DISTRICT COURT AT NORTH SHORE
Second Defendant
INDEX
Introduction [1]-[10]
Background
The Mega companies [11]-[16] The appellants [17]-[20] Indictment and seizure of assets [21]-[22] Arrest of the appellants [23]-[28]
Extradition Act 1999 [29]-[33]
The United States/New Zealand Treaty [34]-[36]
Are the offences in the indictment extradition offences?
The proper approach [37]-[45] The District Court judgment [46]-[56] Count 2 – conspiracy to commit copyright infringement
Appell ants’ subm iss ions [57]-[76] First pathway – art II.16 [77]-[133] Second pathway – s 228 Crimes Act [134]-[160] Third pathway – s 249 of the Crimes Act [161]-[168] Fourth pathway – s 131 of the Copyright Act [169]-[192]
Count 4 – copyright infringement – movie “Taken” [193]-[199] Counts 5 to 8 – other copyright infringement [200]-[201] Count 3 - conspiracy to commit money laundering [202]-[212] Counts 9 to 13 - wire fraud [213]-[216] First pathway – art II.16 [217]-[219]
Second pathway – s 228 of the Crimes Act [220]-[222] Third pathway – s 240 of the Crimes Act [223]-[225] Fourth pathway – s 249 of the Crimes Act [226]-[230]
Count 1 – conspiracy to commit racketeering [231]-[238]
Is there sufficient evidence to justify a trial of the
appellants on each count? [239]-[245]
Is the ROC admissible?
Is the ROC a summary of the evidence
(s 25(2)(a))? [246]-[253] Has the evidence been preserved for trial
(s 25(3)(a))? [254]-[259]
Is Mr P r abhu ’s ce rtificate vali d
(s 25(3)(b))? [260]-[264]
Other alleged errors of law [265] Proof of copyright infringement
– conclusory statements [266]-[268] Weight and sufficiency of evidence [269]-[273]
Transposition [274]-[294] Statutory limitation period: s 131 Copyright Act [295]-[301]
Count 2 – conspiracy to commit copyright infringement [302]-[338] Count 4 – the movie ‘Taken’ [339]-[352] Counts 5 to 7 – other instances of copyright infringement [353]-[361] Count 8 – copyright infringement relating to YouTube [362]-[365] Count 3 – conspiracy to commit money laundering [366]-[369] Counts 9 to 13 – conspiracy to commit wire fraud [370]-[380] Count 1 – conspiracy to commit racketeering [381]-[386]
Other alleged errors of law [387]
Dutyof candour [388] Technical matters [389]-[391] Copyright status of the movie Taken[392]-[396] Provisional arrest warrants [397]-[416] Section 25(3)(b) certificate [417]-[419]
Eligibility requirements under s 24(2)(a) and (b)
of the Extradition Act [420]-[425]
Admissibility of reply evidence [426]-[428]
Funding stay application [429]-[430]
Factual background [431]-[450] District Court judgment [451]-[452] Appellants’ submissions [453]-[455] Procedure [456]-[459] Jurisdiction [460]-[465] Grounds of application
Understanding and responding to the case [466]-[472] The duty of candour [473]-[480] Ascertaining whether the alleged offences
are extradition offences
Conspiracy to defraud [481]-[485]
Deemed offences and double criminality [486]-[488] Other needs for expert evidence on US law [489]-[495] Technical expertise [496]-[511] Delay and distraction [512]-[517] Prejudice to the appellants [518]
Other submissions [519]-[520]
Conclusion [521]
Misconduct stay applications
August stay application [522]-[524] September stay application [525] United States preliminary objection [526]-[527] District Court judgment [528]-[533] Judicial review [534]-[535]
Hearing sequence [536]
Failure to give reasons [537] Dismissal of applications on the merits [538] Criticism of failure to prove matters when
no opportunity given [539] Failure to address the August stay application [540]-[542] Jurisdiction to consider stay applications [543]-[545] Test for abuse of process and stay of proceedings [546]-[552]
Conclusion [553]
Bias/Pre-determination [554]-[561] Conduct of the hearing [562]-[570] Errors in the judgment [571]-[581] Post-judgment – settling the case stated appeals [582]-[584]
Other matters [585]-[588] Summary [589]-[593] Answers to questions of law [594]-[595] Result [596]-[600]
Appendix 1
Case stated appeal Messrs Ortmann, van der Kolk and Batato
Appendix 2
Case stated appeal Mr Dotcom
Appendix 3
Case stated appeal United States of America
Introduction
[1] The United States of America claims that Mathias Ortmann, Bram van der Kolk, Kim Dotcom, Finn Batato (the appellants) and others were members of a worldwide criminal organisation that engaged in criminal copyright infringement and money laundering on a massive scale with estimated loss to copyright holders well in excess of USD 500 million. The United States terms this the “Mega Conspiracy”. The case has been touted as one of the largest criminal copyright cases ever brought by the United States.
[2] The United States seeks the extradition of the appellants to face trial on
13 counts set out in a superseding indictment that was filed in the United States District Court for the Eastern District of Virginia on 16 February 2012.1 These counts allege conspiracy to commit racketeering (count 1); conspiracy to commit copyright infringement (count 2); conspiracy to commit money laundering (count 3); criminal copyright infringement by distributing a copyright work being prepared for commercial distribution on a computer network and aiding and abetting of criminal
copyright infringement (count 4); criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (counts 5 to 8); and fraud by wire and aiding and abetting fraud by wire (counts 9 to 13).
[3] The appellants have mounted a comprehensive and determined defence to extradition and this has been met with an equally determined response from the United States. The appellants filed a number of interlocutory applications in the District Court leading to appeals and applications for judicial review in the High Court and further appeals to the Court of Appeal and the Supreme Court. By the time the eligibility hearing commenced, nine judgments had been delivered by
this Court on issues arising out of the extradition proceedings,2 seven by the Court of
1 This indictment superseded the original indictment returned by the Federal Grand Jury on
5 January 2012.
2 Dotcom v United States of America [2012] NZHC 75; United States of America v Dotcom [2012] NZHC 328; Dotcom v Attorney-General [2012] NZHC 1494; United States of America v Dotcom [2012] NZHC 2076; Dotcom v Attorney-General [2012] NZHC 3268; Dotcom v Attorney-General [2013] NZHC 1269; Dotcom v Attorney-General [2014] NZHC 1505; Dotcom v United States of America [2014] NZHC 2550; Ortmann v District Court North Shore [2015] NZHC 901.
Appeal3 and two by the Supreme Court.4 This does not take into account numerous judgments issued in related proceedings concerning the restraint and forfeiture of the appellants’ assets. As a result of these interlocutory processes, the eligibility hearing in the District Court had to be rescheduled nine times before it finally commenced on 21 September 2015. That hearing took three months.
[4] In a judgment delivered on 23 December 2015 in the North Shore District Court, Judge Dawson found that the appellants were eligible for extradition pursuant to s 24 of the Extradition Act 1999 on all counts in the superseding indictment.5 The appellants appeal against this judgment claiming that the Judge made errors of law in virtually every aspect of his eligibility finding. The United States also appeals against several aspects of the judgment.
[5] The appellants also appeal against the District Court’s decision to dismiss three applications which they brought seeking a permanent stay of the extradition proceedings for alleged abuse of process.
[6] These are not general appeals. The appeals are brought pursuant to the former s 68 of the Extradition Act, prior to its amendment by s 413 of the Criminal Procedure Act 2011, and are restricted to questions of law. These questions of law are settled by the District Court.
[7] Additionally, the appellants apply for judicial review of the eligibility determinations and the District Court’s decisions dismissing the stay applications. The appellants contend that each of these decisions was the product of procedural unfairness, breaches of natural justice, errors of law and unreasonableness. The
appellants also argue that the decisions were tainted by bias and pre-determination.
3 United States of America v Dotcom [2013] NZCA 38, [2013] 2 NZLR 139; Attorney-General v Dotcom [2013] NZCA 43, [2013] 2 NZLR 213; Attorney-General v Dotcom [2013] NZCA 488; Attorney-General v Dotcom [2014] NZCA 19, [2014] 2 NZLR 629; Attorney-General v Dotcom [2014] NZCA 444; Attorney-General v Dotcom [2015] NZCA 309; Ortmann v the District Court at North Shore [2015] NZCA 443.
4 Dotcom v United States of America [2014] NZSC 24, [2014] 1 NZLR 355 [Disclosure]; Dotcom v Attorney-General [2014] NZSC 199, [2014] 1 NZLR 745 [Warrants].
5 Ortmann v the United States of America DC North Shore CRI-2012-092-001647, 23 December
2015.
[8] There is significant overlap between the case stated appeals brought by the appellants and their applications for judicial review. Every error of law relied on for the purposes of the judicial review proceeding is replicated in the case stated appeals. This is in accordance with a judgment given by Asher J in this proceeding on
24 March 2016 directing that all aspects of the District Court judgment, including the procedural rulings that led to it, should be dealt with in the context of the appeals, rather than separately by way of judicial review.6 The only issue raised in the applications for judicial review that is not also dealt with in the case stated appeals is the allegation of bias and pre-determination. I will therefore deal with that issue separately, at the end.
[9] This judgment is unavoidably lengthy and has taken some time to prepare because the Court has been required to answer hundreds of questions of law that have been stated in the various appeals as well as consider the applications for judicial review.7 The Court has received some 20,000 documents and hundreds of authorities and has had to consider over 3,000 pages of submissions.
[10] Because almost every aspect of the District Court judgment and the procedural steps that led to it are challenged, a basic understanding of the relevant procedural and factual history is needed to comprehend the many issues requiring determination. It is therefore necessary to start by briefly setting out some of the history.
Background
The Mega companies
[11] In 2005, Mr Dotcom developed a business under the name “Megaupload”. This business enabled users to upload files for storage in the cloud on one of the many servers leased by Megaupload. The user would be provided with a unique link to the file, known as a uniform resource locator. The user could then provide the link
to others enabling them to access the file.
6 Ortmann & Ors v United States of America [2016] NZHC 522.
7 Over 300 questions of law are raised in the case stated appeals.
[12] The business grew rapidly. By January 2012, Megaupload claimed to have over 60 million registered users. It was said to be the thirteenth most frequently visited site on the Internet attracting an average of 50 million visits daily and more than one billion visitors in total. At its peak, Megaupload was estimated to account for approximately four percent of all Internet traffic worldwide.
[13] Megaupload and Megavideo were the two most frequently visited websites in the Mega group. Users could upload videos to Megaupload and obtain a link which would provide access to it. A user could repeatedly upload the same video and obtain multiple links. The user could then choose to share these links with others, including through third party websites, enabling them to access the video using Megavideo. Megaupload was not responsible for these linking sites. Only the user could determine whether to make a link available to others. However, the United States contends that Megaupload encouraged this file sharing practice by offering financial rewards and incentives to users who uploaded files that attracted high numbers of views or downloads.
[14] Anyone gaining access to a file stored on Megaupload through a link would be limited to viewing approximately 72 minutes of content, which is less than the length of most motion pictures. The viewer was then prompted to subscribe to Megaupload as a “premium user” in order to continue watching. Premium users were also able to view Mega-hosted videos embedded on third party linking websites.
[15] Subscriptions from premium users provided the main source of revenue to the Mega group, estimated by the United States to be approximately USD 150 million. The other principal source of revenue was from online advertising shown prior to the commencement of each video. The United States contends that total advertising revenue exceeded USD 25 million.
[16] The companies in the Mega group were all registered in Hong Kong apart from one which was registered in New Zealand. In all, 220 staff members were employed in the operation, including 52 in New Zealand.
The appellants
[17] Mr Dotcom is the founder of Megaupload. He was initially the chief executive officer but later became the chief innovation officer. As the sole shareholder of Vestor Ltd, he indirectly held 68 per cent of the shares of Megaupload and all of the shares in Megavideo Ltd. Mr Dotcom was born in Germany and is a citizen of Germany and Finland. He first came to New Zealand in 2008 on a visitor’s permit and was granted permanent residency in November 2010.
[18] Mr Ortmann was the chief technical officer and a director of Megaupload. A company controlled by him held a 25 per cent shareholding in Megaupload. Mr Ortmann is a German citizen and formerly lived in Germany and Hong Kong.
[19] Mr van der Kolk was the chief programmer and held 2.5 per cent of the shares in Megaupload through a company he controlled. Mr van der Kolk is a citizen of the Netherlands. He first came to New Zealand in 2009 and he was granted New Zealand residency in December 2011.
[20] Mr Batato, a German citizen, was employed by Megaupload in late 2007 as the chief marketing and sales officer.
Indictment and seizure of assets
[21] In March 2010, the Motion Picture Association of America made a complaint of criminal copyright infringement arising out of the operations of Megaupload, leading to a lengthy investigation by the Federal Bureau of Investigation.
[22] On 5 January 2012, the Grand Jury returned an initial indictment against the appellants. The United States Court immediately issued arrest warrants and made restraining orders in respect of all of the appellants’ assets worldwide, including real and personal property in Hong Kong, New Zealand, Germany, the Netherlands and Australia. On 20 January 2012, the United States took control of the website domain name and database service of Megaupload and its associated websites, effectively terminating the entire operation. The websites were replaced with an anti-piracy warning issued by the United States Department of Justice in conjunction with the
Federal Bureau of Investigation and the National Intellectual Property Rights
Coordination Centre.
Arrest of the appellants
[23] The extradition proceedings commenced in New Zealand on 18 January 2012 when the United States filed a without notice application in the District Court at North Shore and obtained provisional arrest warrants for the appellants under s 20 of the Extradition Act. The following day, search warrants were issued in respect of the properties of Messrs van der Kolk and Dotcom.
[24] The extradition proceedings had been planned over many months and included liaison between the Federal Bureau of Investigation and the New Zealand Police under the Mutual Assistance in Criminal Matters Act 1992. During the planning period, the Government Communications Security Bureau unlawfully intercepted private communications of Messrs van der Kolk and Dotcom. Mr Dotcom’s Auckland residence was also subject to unlawful surveillance from 16 to 20 January 2012 using a video camera set up on an adjoining property and by a police officer who visited the property on 19 January 2012 wearing a hidden camera.
[25] Execution of the arrest and search warrant applications was timed to coincide
with Mr Dotcom’s birthday party to be held at his Auckland residence on 20 January
2012. It had been ascertained that Messrs Ortmann and Batato were planning to travel to New Zealand to attend this function which made it possible to execute the arrest and search warrants while the appellants were all in New Zealand.
[26] Early in the morning on 20 January 2012, Messrs Ortmann, Dotcom and Batato were arrested in the course of a military-style raid on Mr Dotcom’s Auckland residence where Mr Dotcom was living with his wife, three young children and various staff members. The operation involved a large number of personnel, including members of the Special Tactics Group (a counter-terrorism unit) who were armed with automatic weapons. Police officers were deployed from two helicopters and others arrived in cars and vans.
[27] Mr van der Kolk, who was living in Auckland with his wife and young son, was awakened by three police officers at about 6.30 that same morning. After he was arrested, he was informed that his bank accounts had been frozen and an order had been made to seize their cars. Mr van der Kolk was also taken into custody.
[28] I mention these matters in this background section because they form part of the alleged misconduct relied on by the appellants in support of their applications for a permanent stay of the extradition proceedings for abuse of process.
Extradition Act 1999
[29] The Extradition Act was enacted to enable New Zealand to carry out its obligations under extradition treaties entered into with other countries.
[30] The task of the extradition Court in determining eligibility for surrender is set out in s 24(2) of the Act which defines the circumstances in which a person will be eligible for surrender (subject to various qualifications set out elsewhere in s 24). Because it is central to the task of the extradition Court and this appeal, it is useful to set out the provision in full:
24 Determination of eligibility for surrender
(1) Subject to section 23(4), if a person is brought before a court under this Part, the court must determine whether the person is eligible for surrender in relation to the offence or offences for which surrender is sought.
(2) Subject to subsections (3) and (4), the person is eligible for surrender in relation to an extradition offence for which surrender is sought if –
(a) the supporting documents (as described in section 18(4)) in relation to the offence have been produced to the court; and
(b) if –
(i) this Act applies in relation to the extradition country subject to any limitations, conditions, exceptions, or qualifications that require the production to the court of any other documents; or
(ii) the terms of an extradition treaty in force between New Zealand and the extradition country require the production to the court of any other documents –
those documents have been produced to the court; and
(c) the court is satisfied that the offence is an extradition offence in relation to the extradition country; and
(d) the court is satisfied that the evidence produced or given at the hearing would, according to the law of New Zealand, but subject to this Act, –
(i) in the case of a person accused of an extradition offence, justify the person’s trial if the conduct constituting the offence had occurred within the jurisdiction of New Zealand; or
(ii) in the case of a person alleged to have been convicted of an extradition offence, prove that the person was so convicted.
[31] Proceedings to determine eligibility for surrender are conducted in the District Court in the same manner and exercising the same jurisdiction and powers as if the proceedings were a committal hearing of an information for an indictable offence alleged to have been committed within the jurisdiction of New Zealand.8
[32] Sections 72 and 73 of the Act deal with appeals. It is worth setting out s 72 in full at this stage because it prescribes the powers of the High Court on an appeal on questions of law:
72 Powers of court on appeal
(1) The High Court must hear and determine the question or questions
of law arising on any case transmitted to it, and do 1 or more of the following things:
(a) reverse, confirm, or amend the determination in respect of which the case has been stated:
(b) remit the determination to the District Court for reconsideration together with the opinion of the High Court on the determination:
(c) remit the determination to the District Court with a direction that the proceedings to determine whether the person is eligible for surrender be rehead:
(d) make any other order in relation to the determination that it thinks fit.
(2) In hearing and determining the question or questions of law arising on any case transmitted to it, the court –
(a) must not have regard to any evidence of a fact or opinion that was not before the District Court when it made the determination appealed against; and
(b) may in the same proceeding hear and determine any application for a writ of habeas corpus made in respect of the detention of the person whose surrender is sought.
8 Extradition Act 1999, s 22(1).
[33] Section 101B of the Act is also an important provision but it will be convenient to set out its terms later in this judgment.
The United States/New Zealand Treaty
[34] The Treaty on extradition between New Zealand and the United States of America was the first extradition treaty to be negotiated by New Zealand and came into force on 8 December 1970. Article I contains the commitment by each contracting party to extradite to the other, subject to the terms of the Treaty, persons found in its territory who have been charged with or convicted of any of the offences mentioned in art II and committed within the territory of the other.
[35] Two offences in art II are relevant in this case, items 16 and 19:
Article II
Extradition shall be granted, in accordance with the provisions of this
Agreement, in respect of the following offences:
16.Obtaining property, money or valuable securities by false pretences or by conspiracy to defraud the public or any person by deceit or falsehood or other fraudulent means, whether such deceit or falsehood or any fraudulent means would or would not amount to a false pretence.
19.Receiving and transporting any money, valuable securities or other property knowing the same to have been unlawfully obtained.
[36] As will be discussed below, the Extradition Act was amended in 2002 by the insertion of s 101B which has the effect of deeming certain serious crimes with transnational aspects to be offences listed in any existing treaty. Some of these deemed offences are also relevant in this case.
Are the offences in the indictment extradition offences?
The proper approach
[37] The primary role of the District Court in extradition proceedings is to determine whether the requested persons are eligible for surrender in relation to the offences for which surrender is sought. Assuming the relevant documents have been produced to the Court in terms of s 24(2)(a) and (b), the first step is to determine
whether the offence for which surrender is sought is an extradition offence in relation to the extradition country under s 24(2)(c). This is one of the key issues in this case.
[38] “Extradition offence” is defined in s 4 of the Act as meaning, in relation to an extradition country, an offence punishable under the law of the extradition country for which the maximum penalty is imprisonment for not less than 12 months, and which satisfies the following condition:
(2) The condition referred to in subsection (1)(a) is that if the conduct of the person constituting the offence in relation to the extradition country, or equivalent conduct, had occurred within the jurisdiction of New Zealand at the relevant time it would, if proved, have constituted an offence punishable under the law of New Zealand for which the maximum penalty is imprisonment for not less than
12 months or any more severe penalty.
[39] However, where there is an extradition treaty, s 11 requires the provisions of the Act to be construed to give effect to the terms of the treaty. This does not apply to the provisions listed in s 11(2), which may not be overridden, but s 4 is not one of the listed provisions. The result is that where extradition offences are listed in a treaty, as is the case with the United States/New Zealand Treaty, the treaty definition prevails over s 4.
[40] This analysis was confirmed by the Court of Appeal in United States of America v Cullinane.9 The Court held that, for the purposes of requests for extradition made by the United States, the definition of “extradition offence” in s 4 is replaced by art II of the United States/New Zealand Treaty:10
We consider that the test in art II of the United States/New Zealand treaty replaces the test set out in s 4, instead of merely being added to it (especially given the added “subject to” qualification in s 4 itself). The proper enquiry for a Court faced with an extradition request made by the United States is therefore whether the alleged conduct satisfies the requirements of the United States/New Zealand treaty.
[41] It follows that any offence listed in the United States/New Zealand Treaty is an extradition offence in relation to the United States, as the extradition country, for
the purposes of s 24(2)(c) of the Act.
9 United States of America v Cullinane [2003] 2 NZLR 1 (CA).
10 At [55].
[42] The Extradition Amendment Act 2002 inserted s 101B into the principal Act in response to the United Nations Convention against Transnational Organised Crime (UNTOC). As noted, s 101B of the Act has the effect of deeming various offences to be extradition offences under existing treaties with foreign countries that are party to UNTOC. This applies to the United States/New Zealand Treaty. The deemed offences include, by virtue of s 101B(1)(a), an offence against s 98A of the Crimes Act 1961 (participation in an organised criminal group) as well as any offences falling within s 101B(1)(c):
(c) any offence against any enactment if –
(i) it is punishable by imprisonment by a term of 4 years or more; and
(ii) the offence for which extradition is requested is alleged to involve an organised criminal group (as defined in article
2(a) of the TOC convention); and
(iii) the person whose extradition is sought is, or is suspected of being, in or on his or her way to the requested country.
[43] In determining whether the offences in the indictment are extradition offences under s 24(2)(c), the Court must identify the essential factual allegations underpinning each count and consider whether the totality of these alleged acts or omissions comes within the description of an extradition offence for the purposes of the Treaty. In carrying out this exercise, the Court should not take a narrow view, focusing on the nomenclature or the constituent elements of the offence. Rather, the Treaty should be interpreted in accordance with cl 31(1) of the Vienna Convention
on the Law of Treaties.11 This provides:
(1) … a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
[44] The Court of Appeal stated in Edwards v United States of America that it was “not appropriate to limit the terms of art II by tying them exclusively to the detail of national definitions”.12 Keith J, who gave the judgment of the Court, explained the
proper approach in these terms:13
11 At [67].
12 Edwards v United States of America [2002] 3 NZLR 222 (CA) at [27].
13 At [28].
[the Court’s] task is not to reach a decision solely under the law of one particular jurisdiction. Rather, it is to determine whether the counts as charged do fall within the ordinary meaning of [the relevant items in art II] in their context and in the light of the Treaty’s purpose and object. A primary purpose, emphasised for us by s 12(a) of the Act, must be to fulfil New Zealand’s obligations under the Treaty. It is not however a matter of simply using dictionary definitions, which, in any event, differ and which must be affected by context. Part of the critical context is that the terms are commonly used for legal purposes, they have legal meanings, even if again those meanings may vary in detail, and the members of the delegations of the two countries who in 1970 prepared the list of property offences included in items 12 – 20 of art II would have been fully aware of that general legal usage.
[45] The Court also confirmed in Cullinane that it does not matter that the offence charged by the requesting State may contain additional elements beyond those implicit in an art II offence so long as the additional elements do not substantively change the nature of the conduct alleged.14
The District Court judgment
[46] The District Court judgment is divided into three parts. Part A contains an introductory section followed by a recitation of the evidence relied on by the United States to support a prima facie case for the purposes of s 24(2)(d) of the Act. Part B addresses the stay applications and Part C deals with eligibility for surrender.
[47] Despite receiving lengthy submissions from all parties directed to the first fundamental step required under s 24(2)(c) of the Act, the District Court gave little attention to it. After quoting s 24 in full at [11] of his judgment, the Judge focused almost exclusively on the second step under s 24(2)(d) of considering whether the evidence produced at the hearing would justify the requested person being committed for trial if the conduct constituting the offence had occurred within the jurisdiction of New Zealand. This approach reflects a misdirection at the outset of the judgment where the Judge summarised the Court’s task when determining eligibility under s 24 of the Act but omitted reference to the requirement under s 24(2)(c):
[16] Section 24(1) of the Act requires this Court to determine whether each of the respondents is eligible for surrender. Section 24(2)(d)(i) says this Court will be satisfied if the conduct constituting the offence would justify
14 United States of America v Cullinane, above n 9 at [82].
the respondents’ trial on the charges if the offence had occurred within the jurisdiction of New Zealand. …
[48] The Judge then turned to consider the sufficiency of the evidence, being the enquiry under s 24(2)(d), without first examining whether there was an extradition offence in terms of s 24(2)(c). The Judge commenced by recording the counts in the superseding indictment, the essence of the United States’ case as set out in the record of the case and supplements and then summarised the appellants’ factual responses. The next 383 paragraphs in Part A of the judgment are almost entirely cut and pasted from volume 2 of the submissions made by the United States. These submissions were devoted to the topic of whether there was a prima facie case to satisfy the requirements of s 24(2)(d).
[49] The Judge briefly addressed the requirements under s 24(2)(c) of the Act in Part B of the judgment where he dealt with the stay applications. However, he incorrectly stated that the relevant enquiry under s 24(2)(c) is whether the offence is an extradition offence in the United States:15
[526] Under s 24 of the Act, the onus is upon the applicant to present to this Court a prima facie case to establish that the respondents are eligible for extradition. If a prima facie case is established, then under s 24(2) the person is eligible for surrender. This Court must be first satisfied:
(1) the offence is an extradition offence in the extradition country (the
USA).
(2) the evidence would justify the person’s trial if the conduct constituting the offence had occurred in the jurisdiction of New Zealand.
[Emphasis added].
[50] The Court is not required to determine whether an offence is an extradition offence in the requesting State. Rather, the question is whether the offence is an extradition offence in relation to the requesting State. In this case, this requires consideration of whether the conduct described in the indictment is covered by the offending listed in the United States/New Zealand Treaty or deemed to have been
listed in it by virtue of s 101B of the Act.
15 The Judge did, however, correctly state the test at [435].
[51] Having incorrectly stated that under s 24(2)(c) the Court must be satisfied that the offence charged in the indictment is “an extradition offence in the extradition country (the USA)”, the Judge reasoned that the certificate provided under s 25 of the Act “established a prima facie case that the alleged offences are extradition offences in the USA”:
[527] … This Court can be satisfied that an offence is an offence in the extradition country (USA) if a person described in [s 25(3A)] certified that “in his or her opinion the record of case discloses the existence of evidence that is sufficient under the law of the exempted country to justify a prosecution in that country”: s 25(3)(b). On the face of the documents the ROC and its supplements have been so certified pursuant to s 25(5), and on the face of it the applicant has established a prima facie case that the alleged offences are extradition offences in the USA.
[52] Section 25 is not relevant to the enquiry under s 24(2)(c). Section 25 stipulates the requirements of a record of the case that may be submitted by an exempted country such as the United States to satisfy the prima facie case test under s 24(2)(d):
25Record of case may be submitted by exempted country at hearing
(1) For the purposes of any determination under section 24(2)(d)(i), a record of the case may be submitted by or on behalf of an exempted country.
(2) A record of the case must be prepared by an investigating authority or a prosecutor in an exempted country and must contain –
(a) a summary of the evidence acquired to support the request for the surrender of the person; and
(b) other relevant documents, including photographs and copies of documents.
(3) The record of the case is admissible as evidence if it is accompanied by –
(a) an affidavit of an officer of the investigating authority, or of the prosecutor, as the case may be, stating that the record of the case was prepared by, or under the direction of, that officer or that prosecutor and that the evidence has been preserved for use in the person’s trial; and
(b) a certificate by a person described in subsection (3A) stating that, in his or her opinion, the record of the case discloses the existence of evidence that is sufficient under the law of the exempted country to justify a prosecution in that country.
(3A) A person referred to in subsection (3)(b) is –
(a) The Attorney-General or principal law officer of the exempted country, or his or her deputy or delegate; or
(b) any other person who has, under the law of the exempted country, control over the decision to prosecute.
(4) Nothing in this section –
(a) prevents an exempted country from satisfying the test in section 24(2)(d)(i) in accordance with the provisions of this Act that are applicable to countries that are not exempted; or
(b) limits the evidence that may be admitted at any hearing to determine whether a defendant is eligible for surrender.
(5) A court to which a certificate under subsection (3)(b) is produced must take judicial notice of the signature on it of a person described in subsection (3A).
[53] Given that the Judge considered that the requirement under s 24(2)(c) was satisfied by the certificate provided under s 25, it is unsurprising that he concluded that the principal purpose of the eligibility hearing was to see whether a prima facie case had been made out under s 24(2)(d):
[529] The principal purpose of this eligibility hearing is as set out in s 24(2)(d), to decide if the evidence in the ROC and supplements would justify the respondent’s trial if the conduct constituting the offences had occurred in New Zealand’s jurisdiction. …
[54] This may explain why the Judge did not address the lengthy submissions he received on the s 24(2)(c) issue in relation to each of the counts in the superseding indictment. Instead, he focused on whether the evidence disclosed by the record of the case and the supplements disclosed a prima facie case. On the pivotal issue under s 24(2)(c), the Judge confined himself to the following brief observations on each of the 13 counts, but even then he appears to confuse the separate enquiries needed for the purposes of ss 24(2)(c) and 24(2)(d) by referring to the “evidence in the ROC”:
(a) Count 1 – conspiracy to commit racketeering – no finding. (b) Count 2 – conspiracy to commit copyright infringement:
(i)Conspiracy to defraud in terms of item 16 of art II of the treaty.
[544] Adopting a liberal interpretation of the Treaty, its purpose, and the rights and obligations of the parties, this Court finds that the counts in the ROC relating to copyright do come within the description of “conspiracy to defraud” in Art II.16 in the Treaty.
[Emphasis added].
(ii)Accessing a computer system for a dishonest purpose in terms of s 249(1) and (2) of the Crimes Act.
[609] The alleged conduct in count 2 correlates with the offences in both s 249(1) and 249(2).
(iii) Dishonestly using a document in terms of s 228(1)(b) of the
Crimes Act.
[615] The respondents are therefore eligible for surrender under the Act under s 228(1)(b) due to the correlation of that section with the conduct alleged in count 2.
(iv) Criminal liability for dealing with infringing objects in terms of s 131(1)(c) and (d)(ii) and (iii) of the Copyright Act.
[617] The evidence in the ROC supports the conduct alleged in count 2. The same alleged conduct translates to breaches of s 131(1)(c) and of s 131(1)(d)(ii) or (iii).
[618] For s 131(1)(c), the evidence supports:
(1) The respondents possessed objects (digital files);
(2) The objects included infringing files of a copyright work;
(3) The respondents knew those objects were infringing copies of a copyright work;
(4) They were possessed with a view to committing an act infringing the copyright;
(5) They did not possess the objects pursuant to any copyright licence; and
(6) They possessed the objects in the course of a business.
[619] For s 13(1)(d)(ii) or (iii) there is evidence that: (1) The respondents exhibited in public the
objects (digital files) or distributed the
objects;
(2) The objects included infringing files of a copyright work;
(3) The respondents knew those objects were infringing copies of a copyright work;
(4) The respondents did so other than pursuant to a copyright licence; and
(5) They did so in the course of a business.
[627] … The conduct alleged in count 2 therefore translates to a deemed extradition offence under both s 131(1)(c) and s 131(d)(ii) or (iii).
[Emphasis added].
(c) Count 3 – conspiracy to commit money laundering – no finding.
(d) Counts 4 to 8 – criminal copyright infringement:
[641] As described in [588] to [589] above, this same analysis places the alleged offending as falling within art II.16 of the Treaty…
[643] It is alleged that each of counts 4 to 8 is a furtherance of the copyright conspiracy in count 2. The correlating offences are in the Crimes Act, s 249(1), s 249(2), s 228(b), and in the Copyright Act, s 131(1)(c) and 131(1)(d)(ii) or (iii), and s 137.
(e) Counts 9 to 13 – fraud by wire:
[671] Counts 9-13 allege conduct of fraud by wire, aiding and abetting fraud by wire. They relate to particular occasions when Mega email accounts were used to send messages to copyright owners that are alleged to be deceptive. The evidence in the ROC alleges a plan to deceive copyright owners by:
(i) Encouraging them to believe that files would be removed from Mega servers when infringing content had been identified when, in reality, only the link specified by the copyright owner, and by which the infringing file was detected, was deleted.
(ii) Encouraging them to believe that repeat infringers would have their user access terminated.
(iii) Encouraging them to believe that the operation of the Abuse Tool would result in content or files being deleted, when in fact only specific links were removed by the Tool.
(iv) Encouraging them to believe that Mega was taking active steps to curb or prevent copyright infringement.
(v) Maintaining a façade of Mega’s compliance with obligations imposed by copyright laws.
[672] The alleged conduct translates into a Treaty offence under
Art II.16. It would amount to a joint enterprise to defraud
copyright owners by deceiving them into believing that the Mega business was taking active steps to prevent copyright infringement. Such deception would allow the respondents to continue to profit from the use of that copyright content. For essentially the same reasons the alleged specific acts of fraud are captured by s 249 and s 228(b) Crimes Act as set out in the earlier counts.
[Emphasis added].
[55] Because the Judge did not engage in any meaningful way with the extensive submissions he received on whether the essential conduct alleged in each count translates to an extradition offence (the critically important enquiry under s 24(2)(c)), it is necessary to undertake the exercise afresh for the purposes of answering the questions of law directed to this issue in the case stated appeals.
[56] Racketeering (count 1), money laundering (count 3), and the wire fraud charges (counts 9 to 13) depend on the predicate offending of criminal copyright infringement. It is therefore convenient to start with count 2 which alleges conspiracy to commit copyright infringement, and then address counts 4 to 8 which relate to specific instances of alleged copyright infringement. I will then turn to count 3, money laundering, and counts 9 to 13, wire fraud. Finally, I will deal with count 1, racketeering, an umbrella charge alleging a criminal enterprise formed for the purpose of committing criminal copyright infringement (covered by counts 2 and
4 to 8), money laundering (count 3) and wire fraud (counts 9 to 13).
Count 2 – conspiracy to commit copyright infringement
Appell ants’ subm iss ions
[57] Mr Illingworth QC submits that it is necessary to examine the context in which the Treaty was negotiated in order to understand what was intended by the categories of offences listed in it. This context includes the legal meanings of terms and their general legal usage at that time. He argues that it is significant that the negotiators would not have been aware of any case decided prior to 1970 in the United States or in New Zealand in which a conspiracy to infringe copyright had been held to constitute a species of conspiracy to defraud.
[58] The two major international instruments dealing with copyright at the time the Treaty was negotiated were the Berne Convention for the Protection of Literary and Artistic Works and the Universal Copyright Convention. The United States and New Zealand were parties to the Universal Copyright Convention at the time the Treaty was negotiated. Neither of these instruments required State parties to implement criminal sanctions for breach of copyright or treated breach of copyright as a type of fraud. Mr Illingworth submits that this is important context in considering whether the State parties can have intended that conspiracy to commit copyright infringement would be covered by the concept of conspiracy to defraud in art II.16 of the Treaty.
[59] I deal with Mr Illingworth’s submissions relating to the other pathways relied
on by the United States for count 2 separately below.
[60] Mr Mansfield submits that the United States/New Zealand Extradition Treaty must be interpreted in good faith in the light of its object and purpose in accordance with art 31(1) of the Vienna Convention on the Law of Treaties. He contends, based on the observations of Glazebrook J in Cullinane, that the object and purpose of art II of the Treaty is to limit the types of conduct in relation to which extradition
may be ordered:16
“[t]he aim [behind Article II] was to ensure that extradition can only occur where certain threshold requirements regarding an accused’s conduct are met.
[61] Mr Mansfield also emphasises the importance of the legislative context in determining the object and purpose of art II and interpreting its meaning. The Extradition Act 1965 was in force at the time the Treaty was negotiated in 1970. The First Schedule to that Act listed the offences that New Zealand treaty negotiators were permitted to include as extradition offences under an extradition treaty. Almost all of these offences were under the Crimes Act. The only exceptions were for specified offences under the Bankruptcy Act 1908 and the Dangerous Drugs Act
1927. Mr Mansfield points out that copyright infringement, which was then an offence under s 28 of the Copyright Act 1962 and only punishable by up to three
months’ imprisonment, was not on the list.
16 United States of America v Cullinane, above n 9 at [82].
[62] Copyright infringement was similarly not regarded as a serious offence in the United States at the time the Treaty was negotiated. Wilful infringement of a protected copyright for profit was a misdemeanour punishable by up to one year in jail and/or a fine of between $100 and $1,000.
[63] Mr Mansfield submits that it is clear that extradition would be available only for conduct constituting serious criminal offending. He argues that the State contracting parties cannot have intended that individuals could be extradited merely for allegedly infringing copyright because this was not a serious offence in either country at the time the Treaty was negotiated. He submits that this apparent intention of the Treaty partners should not be undermined by interpreting the concept of “conspiracy to defraud” in art II.16 as extending to cover copyright infringement.
[64] Mr Mansfield argues that this conclusion is reinforced if one considers the general legal usage of the term “conspiracy to defraud” in New Zealand and in the United States at the time the Treaty was entered into. At that time, copyright infringement had never been prosecuted as a conspiracy to defraud in New Zealand. Mr Mansfield referred to Davison CJ’s observation some 14 years later in Busby v Thorn EMI Video Programmes Ltd, recorded without disagreement by Cooke J on
appeal, that:17
… he knew of no charge of conspiracy to defraud based on copyright
infringement ever having been brought in New Zealand. …
[65] Mr Mansfield contends that any such prosecution could only be brought under the Copyright Act and that conspiracy to defraud does not extend to copyright infringement. He submits, in reliance on Baragwanath J’s decision in World TV Ltd v Best TV Ltd, that the Copyright Act is a discrete legislative code for the
enforcement of copyright:18
The purpose of the copyright legislation, to be inferred from the 181 pages of meticulously specific text contained in the statute book, is to provide a legislative code dealing exhaustively with the subject of copyright of which its enforcement is a vital component.
17 Busby v Thorn EMI Video Programmes Ltd [1984] 1 NZLR 461 (CA) at 471.
18 World TV Ltd v Best TV Ltd (2005) 11 TCLR 247 at [48].
[66] On that basis, Baragwanath J held that an unauthorised broadcast of a copyright protected work could not be characterised as “misleading or deceptive conduct” for the purposes of s 9 of the Fair Trading Act 1986 and was therefore not actionable under that Act.
[67] Mr Mansfield contends that the position was even clearer in the United States where copyright infringement could only be sanctioned within the bounds of the Copyright Act. He maintains that in the United States, copyright infringement cannot be re-characterised as a criminal fraud to subvert the careful balance of interests struck by Congress in the Copyright Act. He refers to Dowling v United States in which the United States Supreme Court held that mail order shipments of recordings of vocal performances by Elvis Presley in breach of copyright did not come within the reach of a penal statute prohibiting the interstate
transportation of property taken by theft, conversion or fraud.19 Blackmun J, who
delivered the majority opinion of the Court, stated that:20
The copyright owner, however, holds no ordinary chattel. A copyright, like other intellectual property, comprises a series of carefully defined and carefully delimited interests to which the law affords correspondingly exact protections. … the property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple “goods, wares, [or] merchandise”, for the copyright holder’s dominion is subjected to precisely defined limits.
It follows that interference with copyright does not easily equate with theft, conversion, or fraud. … The infringer invades a statutorily defined province guaranteed to the copyright holder alone. But he does not assume physical control over the copyright; nor does he wholly deprive its owner of its use. While one may colloquially link infringement with some general notion of wrongful appropriation, infringement plainly implicates a more complex set of property interests than does run-of-the-mill theft, conversion, or fraud. As a result, it fits but awkwardly with the language Congress chose – “stolen, converted or taken by fraud” – to describe the sorts of goods whose interstate shipment § 2314 makes criminal. “And, when interpreting a criminal statute that does not explicitly reach the conduct in question, we are reluctant to base an expansive reading on inferences drawn from subjective and variable
‘understandings’.” Williams v. United States, 458 U.S., at 286, 102 S.Ct., at
3092.
[68] In summary, Mr Mansfield submits that conspiracy to defraud in art II.16 does not capture copyright infringement as this was plainly never intended.
19 Dowling v United States 473 US 207 (1985).
20 At 216-217.
[69] For similar reasons, Mr Mansfield argues that infringement of copyright is not within the reach of the other crimes against property relied on by the United States, notwithstanding that these may now found extradition offences if the other two elements of s 101B(1)(c) of the Extradition Act are satisfied. These crimes are dishonestly using a document (s 228 of the Crimes Act), obtaining by deception (s 240) and accessing a computer system for a dishonest purpose (s 249). Mr Mansfield submits that the scope of the protection that the law affords to copyright, which is conceptually different from other types of property, is determined by Parliament after it has carefully balanced competing interests and is detailed in the Copyright Act. In other words, he argues that any unlawful interference with copyright can only be sanctioned under the legislative code that created the right. He drew support for this proposition from Professor Nimmer’s text
on the law of copyright in the United States:21
The Dowling decision establishes that Congress has finely calibrated the reach of criminal liability [in the Copyright Act], and therefore absent clear indication of Congressional intent, the criminal laws of the United States do not reach copyright-related conduct. Thus copyright prosecutions should be limited to Section 506 of the Act, and other incidental statutes that explicitly refer to copyright and copyrighted works.
[70] Mr Mansfield contends that this conclusion is reinforced by s 225(4) of the
New Zealand Copyright Act which provides:
Nothing in this Act affects any right of action or other remedy, whether civil or criminal, available otherwise than under this Act in respect of acts infringing any of the rights conferred by Part 4.
[71] Part 4 of the Act concerns “moral rights” and includes the right not to have a work falsely represented or subjected to derogatory treatment. Section 225(4) would not have been necessary if civil or criminal sanctions outside of the Copyright Act were generally available for breaches of rights conferred under the Act. Mr Mansfield submits that this demonstrates Parliament’s intention that rights created outside Part 4 of the Act can only be enforced by the civil and criminal sanctions provided in the Act.
[72] Since the Treaty was signed, certain types of copyright infringement have become regarded as serious criminal offending, punishable by more than four years’
21 Nimmer on Copyright, § 15.05 at 15-20 (1993).
imprisonment in New Zealand under s 131 of the Copyright Act. These offences are therefore deemed to be extradition offences under the Treaty by virtue of s 101B(1)(c) of the Extradition Act if the other conditions in that section are met. Mr Mansfield submits that the question of whether the alleged conduct falls within s 131 of the Copyright Act had it occurred in New Zealand, is determinative of whether it amounts to an extradition offence.
[73] Mr Mansfield carefully traced the legislative history to support his overall submission that copyright infringement, as alleged in the indictment, is a breach of the communication right in New Zealand created under s 16(1)(f) of the Copyright Act 1994. He submits that this right can only be enforced in New Zealand through civil remedies under s 33 of the Copyright Act, not by criminal sanction under s 131. He argues that Parliament’s clear intention not to treat such copyright infringement as a criminal offence, let alone a serious criminal offence for which extradition could be granted, must be respected.
[74] Mr Mansfield also relies on the safe harbour provisions in Part 3 of the Copyright Act, ss 92B and 92C, which shield Internet service providers from liability in circumstances where a user of the service infringes copyright. He submits that these provisions show that Parliament did not intend that Internet services providers could face criminal sanction merely by providing such services. He contends that Megaupload falls into this category. Mr Mansfield argues that these provisions not only support his submission that art II.16 of the Treaty does not capture the alleged offending but also demonstrate that Parliament did not intend that the Crimes Act provisions relied on by the United States would reach this conduct.
[75] Mr Bioletti supported these submissions. He focused particularly on analysing the guidance provided by the Court of Appeal in Cullinane.
[76] In summary, the appellants submit that the conduct described in the indictment relating to count 2 does not qualify as an extradition offence. They submit that the same analysis applies equally to counts 4 to 8.
First pathway – art II.16
[77] The starting point is to determine whether the essence of the conduct constituting the offence charged in Count 2 falls within the ordinary meaning of the offence described in art II.16. Although the Court looks at the totality of the alleged acts or omissions in making the assessment, the focus remains on the substance of the offence charged, as was confirmed by the United States Supreme Court in Factor
v Laubenheimer:22
No reason is suggested or apparent why the solemn and unconditional engagement to surrender a fugitive charged with the named offense of which petitioner is accused should admit of any inquiry as to the criminal quality of the act charged at the place of asylum beyond that necessary to make certain that the offense charged is one named in the treaty.
[Emphasis added].
[78] The Quebec Court of Appeal emphasised the importance of comparing the conduct with which the fugitive is charged with the relevant extradition offence in United States of America v Manno and in United States of America v Tavormina.23
These cases arose under the Canadian Extradition Act 1985 which required the Court to determine whether the offence with which the fugitive was charged was an extradition offence, similar to the Court’s function in New Zealand under s 24(2)(c) of the Act.24 In Manno, the Court said:25
72.In relation to count 8, was I correct to determine that the respondents were not eligible for surrender under s 131 of the Copyright Act 1994 by reason of the operation of the limitation period in s 131A of the Copyright Act 1994? No.
April 2016
District Court Judge
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