Solicitor-General v Bujak

[2012] NZHC 1049

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2007-485-000522 [2012] NZHC 1049

IN THE MATTER OF an application under the Proceeds of Crime Act 1991 and Mutual Assistance in Criminal Matters Act 1992

BETWEEN  THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

ANDSLAWOMIR RYSZARD BUJAK First Respondent

ANDDANUTA ALEKSANDRA ZALWOWSKA-SPISAK Second Respondent

CIV-2008-409-001901 [2012] NZHC 1049

AND BETWEEN            MARCOS ERIK MONASTERIO AND MARIA JOSE MARCOS MOYA Plaintiffs

ANDSLAWOMIR RYSZARD BUJAK First Defendant

ANDDANUTA ALEKSANDRA ZALWOWSKA-SPISAK Second Defendant

ANDHUGH SHEARER Third Defendant

Hearing:         3 April 2012

Counsel:         M F Laracy for Solicitor-General

F C Deliu In Person
M E Monasterio In Person (for part of proceeding only)

Judgment:      14 May 2012

THE SOLICITOR-GENERAL OF NEW ZEALAND V SLAWOMIR RYSZARD BUJAK HC CHCH CIV-2007-

485-000522 [14 May 2012]

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      This judgment determines an application dated 27 April 2010 by Dr F C Deliu, solicitor, in which he seeks the following orders:

(a)     That he be joined to the proceeding with the file number CIV-2008-

409-001901, or alternatively to CIV-2007-485-000522.

(b)That his legal fees for work undertaken on behalf of Mr Slawomir Bujak in relation to his extradition and/or leaky home dispute be paid (as per [amended] invoices).

(c)    That the freezing order in CIV-2008-409-001901 be amended to allow payment of all work he did on behalf of Mr Bujak.

(d)     Such other order as deemed fit by this honourable Court.

[2]      Both these proceedings arise from the affairs of Mr Bujak.   In the present application the Solicitor-General applied for registration of a restraining order on the assets of Mr Bujak issued by a regional court in Poland.  The 2008 proceeding was brought by Mr Monasterio and Ms Moya against Mr Bujak for deceit, negligence and other claims in relation to a leaky building.

[3]      In a judgment dated 24 February 2011 Fogarty J set out the steps taken in the High Court, Court of Appeal and Supreme Court in relation to these proceedings.  It is unnecessary to repeat this summary in this judgment.

[4]      In this country the assets of Mr Bujak comprise real estate and a modest sum in cash, held by the Official Assignee.  Unless it has lapsed (as discussed below) the restraining order in favour of the Polish Government remains in place, and the freezing orders issued in this court, as amended, also remain in force.

[5]      Dr Deliu wishes to be joined to both proceedings and to receive orders that legal fees owed to him by Mr Bujak be paid to him from the cash sum to which I

have referred.  Mr Deliu acted for Mr Bujak in relation to the claims made in the

2008 proceeding, and also in relation to extradition proceedings which ultimately led to Mr Bujak leaving New Zealand and returning to Poland.

[6] As far as I am aware Mr Bujak accepts that the fees charged by Mr Deliu were properly incurred and are payable; although not expressly raised in the Solicitor-General’s notice of opposition or amended notice of opposition to this application, counsel took issue with the quantum of the fees, in her submissions, on the basis that should the Court find that it has jurisdiction to allow payment of reasonable legal expenses under s 42(2) of the Proceeds of Crime Act, the Court is limited by that section to legal expenses in defending criminal proceedings, including proceedings under that Act. She submitted that certain of the invoices related to proceedings which were outside this definition.

Application for joinder

[7] On 24 November 2011 this Court (Fogarty J) issued a judgment on an application by the Solicitor-General under s 59 of the Proceeds of Crime Act for an order setting aside a payment made to a firm of solicitors from the proceeds of sale of one of Mr Bujak’s properties, which had been sold as a result of a variation to the initial freezing order principally to allow repayment of a mortgage secured on that property (the judgment of Fogarty J dated 3 March 2009). At the hearing of the Crown application which was determined by the judgment of 24 November 2011, Dr Deliu appeared and argued the application which is now once more before the Court. It was not until an advanced point in his argument that it became apparent to the Judge that Dr Deliu was seeking orders entitling him to payment of his legal fees, with a consequential amendment to the freezing order (paragraphs (b) and (c) of the present application). The Court determined that the application could not be heard fairly without an opportunity for Mr Monasterio and Ms Mayo to be heard (see paragraph [59] of that judgment). The Judge left the application in place to be pursued at a further hearing, and directed that the matter be the subject of a management conference of which notice was to be given to Mr Monasterio, Ms Moya and the Solicitor-General.

[8]      That conference took place on 9 December 2011. All the required parties and others were represented.  In paragraph [7] of the Minute issued by Associate Judge Osborne after the conference he said:

On the basis of discussion with counsel and the parties it would appear unlikely that other persons would wish or need to be heard at the hearing – all who have been actively engaged will have notice through this minute and through the telephone conference which occurred. Those creditors who have securities or had caveated relevant properties will in due course be entitled to be heard when it comes to priorities of payment in relation to held funds... .

[9]      Directions were then made in relation to contacting Mr Bujak in case he wished to be represented at the hearing. A fixture was allocated.

[10]     No party other than Dr Deliu and the Solicitor-General formally appeared. Mr Monasterio attended the hearing, without legal representation.  He told me he is unable to pay to be legally represented and that by his calculation, even if he were to proceed to judgment and endeavour to enforce any judgment attained, available assets would scarcely meet the costs of so doing.  He did not seek to make further submissions but I acknowledge that his interest may be adversely affected if I were to find, on this application, that the cash fund may be used to pay in full the fees claimed by Dr Deliu.

[11]     Counsel for the Solicitor-General informed me that she accepts that Dr Deliu has status to seek payment of his funds under either proceeding, but submitted that all issues relating to making payments out of restrained moneys should be done after argument on notice to all parties with claims.  There are a number of such parties including, of course, the Polish Government (if registration of its claim has not lapsed, see below) and various parties who have caveats over the remaining real estate.

[12]     Against that background, the appropriate course is to join Dr Deliu to both the proceedings so that his claim may be considered.  The point in time at which that consideration may occur is discussed below.

Application for payment of fees and variation of freezing order to facilitate it

Part I : statutory provisions

[13]     The Mutual Assistance in Criminal Matters Act 1992 makes provision for requests to be made to the Attorney-General by foreign governments for various forms of assistance in this country in relation to overseas criminal activity.  In this case a request was made for registration of a restraining order made in Poland over certain assets of Mr Bujak, and the Solicitor-General on behalf of the Attorney- General applied to the High Court for registration of that order.  That application was granted under s 56.

[14] At the time of registration the Proceeds of Crime Act 1991 was in force. Section 57 of the Mutual Assistance in Criminal Matters Act at that time provided that once registered a foreign restraining order may be enforced as if it were a restraining order made by the High Court under the Proceeds of Crime Act. However, on 1 December 2009 the Criminal Proceeds (Recovery) Act 2009 came into force. This Act altered the law relating to dealing with the proceeds of crime from a conviction-based regime to a civil forfeiture-based regime. Thence, orders under the Act could be made on proof, to the civil standard of balance of probabilities, of criminal activity.

[15]     Sections 171 and 172 provide:

171   Repeal

The Proceeds of Crime Act 1991 (1991 No 120) is repealed.

172Proceeds of Crime Act 1991 continues in force for certain purposes

Despite section 171, the Proceeds of Crime Act 1991 continues in

force for the purposes of –

(a) continuing and completing any proceedings or other matter commenced under that Act before the commencement of this Act (including the making or enforcement of any order arising from those proceedings):

(b)   the exercise of any power or function under that Act in relation to any matter referred to in paragraph (a).

[16]     At  the  same  time  amendments  were  made  to  the  Mutual  Assistance  in Criminal Matters Act 1992.  Section 12 of the Mutual Assistance in Criminal Matters Amendment Act 2009 provides:

12      Savings and transitional provisions

The Mutual Assistance in Criminal Matters Act 1992 continues in force as it did before the commencement of this Act for the purpose of

completing any request or any matter relating to or arising from a request made under that Act before the commencement of this Act, including, without limitation, -

(a)   taking action in relation to any matter relating to an application under the Mutual Assistance in Criminal Matters Act 1992; and

(b)   continuing  or  completing  any  proceedings  or  other  matter commenced under that Act; and

(c)   enforcing orders made or registered under that Act; and

(d)   the exercise of any power or function under the Act in relation to any matter in paragraph (a).

[17]     Thus  the  Mutual  Assistance  in  Criminal  Matters  Act  1992  in  its  pre- amendment format continues to apply to the Polish restraining order.  In its original form s 57(3) of the Mutual Assistance in Criminal Matters Act 1992 provides:

Subject to section 66B of the Proceeds of Crime Act, a foreign restraining order registered in accordance with section 56 of this Act has effect and may be enforced as if it were a restraining order made by the High Court under that Act and entered on the date of registration.

[18] Section 66B(1) of the Proceeds of Crime Act 1991 elaborates upon the effect of registration of a foreign restraining order. Section 66B(2) provides that a foreign restraining order registered in New Zealand under the Mutual Assistance in Criminal Matters Act ceases to be in force when the registration is cancelled in accordance with that Act.

[19] The effect, therefore, of s 12 of the Mutual Assistance in Criminal Matters Amendment Act is that the restraining order in this case, which was registered under s 56, continues to have effect, and may be enforced, as if it were a restraining order made by this Court under the Proceeds of Crime Act. However, the difficulty with that position is that the latter Act has been repealed, subject only to continuing in force for limited purposes. It is necessary to determine whether it remains in force for the purpose of enforcement of registered foreign restraining orders.

[20] Dr Deliu argued that s 57(3) in its pre-amendment format can now be of no effect because the enforcement provisions of the Proceeds of Crime Act have been repealed by s 171 of the Criminal Proceeds (Recovery) Act 2009. He submitted that s 172 of the Criminal Proceeds (Recovery) Act 2009, which provides that the Proceeds of Crime Act 1991 continues in force for limited purposes, does not change this position. The limited purposes are set out in [15] above. It will be observed that these purposes relate to proceedings commenced under the Proceeds of Crime Act.

[21] Dr Deliu submitted that the registration of the Polish judgment under the Mutual Assistance in Criminal Matters Act was a proceeding commenced under that Act, not a “proceeding or other matter commenced” under the Proceeds of Crime Act

1991. All that s 57 of the Mutual Assistance in Criminal Matters Act 1992, in its original format, did was to provide that a registered restraining order has effect and may be enforced as if it were a restraining order made by the High Court under the Proceeds of Crime Act. For that reason, Dr Deliu submitted, s 171 applies, without modification by s 172, and accordingly the Proceeds of Crime Act no longer applies to the registered Polish order.

[22] The next stage of Dr Deliu’s argument was that the restraining order has lapsed. If s 66B(2) continues to apply to it the order would only cease to be in force when cancelled in accordance with the Mutual Assistance in Criminal Matters Act, which is by order of the High Court upon application of the Solicitor-General: s 58. However, he submitted that as s 66B has been repealed by s 171 of the Criminal Proceeds (Recovery) Act 2009 and s 172 does not apply, it is necessary to turn to the Mutual Assistance in Criminal Matters Act (as amended) to determine the present status of the order. Section 57 of the Mutual Assistance in Criminal Matters Act, as amended, provides that a registered foreign restraining order has effect as though it is an order made under the Criminal Proceeds (Recovery) Act 2009, but subject to ss 136 to 139 of that Act. Section 136 provides that registration lapses on the earliest of certain events, the relevant event here being the expiration of two years from the date of registration. Thus, Dr Deliu submitted, the registration has lapsed.

[23]   The conclusion of his argument was that the only potential remaining impediment to payment of his fees is the freezing order, but as varied this would now permit the payment of his legal fees.

[24] Ms Laracy submitted that s 12 of the Mutual Assistance in Criminal Matters Amendment Act 2009 preserves the application of s 66B of the Proceeds of Crime Act in relation to registration of the Polish judgment. She submitted that the intention of s 12, when read with ss 171 and 172 of the Criminal Proceeds (Recovery) Act 2009 is that the effect and management of the foreign restraining order continues to be governed by s 66B. This, she submitted, is consistent with s 18 of the Interpretation Act 1999.

[25] After carefully drawing the distinction between the making of orders under the Proceeds of Crime Act, and the registration of orders under the Mutual Assistance in Criminal Matters Amendment Act, Ms Laracy submitted that the provisions of s 66B of the Proceeds of Crime Act link a foreign restraining order into the domestic law set out in the Proceeds of Crime Act, as s 57(3) of the former provides that the foreign restraining order shall, after registration, be treated as if it were a restraining order made under the Proceeds of Crime Act.

[26] Section 66B of the Proceeds of Crime Act provides that Part 4 (with the exception of certain sections) applies to a registered restraining order so far as applicable, and she submitted that consistent with the distinction between the making of an order, in New Zealand, and the registration of an overseas restraining order, those provisions within Part 4 which relate to making orders should not apply but those which are broader in their application than to merely the making of orders should apply to foreign restraining orders. In accordance with this analysis counsel sought to exclude s 42 of the Proceeds of Crime Act from applying to a registered foreign order, because foreign orders are registered in their own terms, not on conditions imposed by the Court in New Zealand. It is s 42 which allows a restraining order made in this country to be made on conditions permitting the payment of reasonable living expenses and, of particular present relevance, reasonable expenses in defending any criminal proceedings. Thus, counsel

submitted, without the application of s 42, the registered foreign restraining order prevents payment of any legal fees to Dr Deliu.

Discussion

[27] In my opinion ss 171 and 172 of the Criminal Proceeds (Recovery) Act 2009 have the effect of continuing the provisions of the Proceeds of Crime Act 1991 in relation to proceedings or other matters commenced under that Act, but cannot be read as applying to proceedings or other matters commenced under the Mutual Assistance in Criminal Matters Amendment Act 2009. In my opinion that interpretation is not available on the wording of these sections. The Proceeds of Crime Act 1991 continues in force beyond its repeal solely for the purpose of continuing and completing proceedings or other matters commenced under that Act, and the exercise of any power or function under that Act in relation to such matters. Thus s 12 of the Mutual Assistance in Criminal Matters Amendment Act 2009, though clearly extending the application of that Act as it was before the commencement of the Amendment Act, does not have the effect of continuing the provisions of the Proceeds of Crime Act 1991 to registered orders. Again, s 12 simply does not say that and it cannot be inferred from this section that such was its intention.

[28]     The Mutual Assistance in Criminal Matters Act 1992 continues to apply to the registered restraining order in this case, in the form it was in before the commencement of the 2009 amending Act.  Section 58 provides for application to be made to the High Court for cancellation of registration.  There is no provision in the Mutual Assistance in Criminal Matters Act 1992, in its pre-amendment state, providing for lapse of registration with time.

[29]     As noted above [22], Dr Deliu argued that the Criminal Proceeds (Recovery) Act 2009 now applies to the registered foreign order in issue in this case.   The consequence  of  that  would  be  that  s  136  of  that Act,  which  provides  for  the expiration  of registered  foreign  restraining orders at  the end  of two  years after registration, would apply, meaning that the registered order has lapsed.

[30]     I do not agree.  Section 57 of the Mutual Assistance in Criminal Matters Act

1992 as amended provides that a foreign restraining order registered in New Zealand has effect and may be enforced as if it were a restraining order made by the High Court under the Criminal Proceeds (Recovery) Act 2009. This applies only to an order made under s 56. Under that section the procedure for applying to register a foreign order in New Zealand differs from that which applied prior to the Act being amended. Further, the effect of registering a foreign restraining order under the new s 57 is different from the effect under the former s 57, the latter referring to the Proceeds of Crime Act (now repealed) and the amended s 57 cross-referring to the Criminal Proceeds (Recovery) Act 2009.

[31]     For this new statutory regime to apply retrospectively to a foreign restraining order which is already registered it would be necessary for this to be spelt out in clear terms, given that it would be a substantive retrospective alteration of the rights of the holder of the registered order.[1] I have considered whether this intention can be inferred from the fact that the provisions of the Proceeds of Crime Act no longer apply to the registered order, but it cannot in my view. The repeal of the Proceeds of

Crime Act is clearly stated, and its ongoing effect is limited to domestic orders, not registered foreign orders. There is no provision that clearly substitutes the Criminal Proceeds (Recovery) Act 2009 into the role formerly held by the Proceeds of Crime Act, nor any provision from which that intention could properly be inferred. This is an apparent gap in the legislative scheme put in place in 2009.

[1] See the discussion of retrospective effect of substantive legislation in Pickering v Straubel [2012] NZHC 695 HC CHCH CIV-2011-409-463, 5 April 2012.

[32]     However, s 18 of the Interpretation Act 1999 provides:

18   Effect of repeal on enforcement of existing rights

(1)  The repeal of an enactment does not affect the completion of a matter or thing or the bringing or completion of proceedings that relate to an existing right, interest, title, immunity, or duty.

(2)   A repealed enactment continues to have effect as if it had not been repealed for the purpose of completing the matter or thing or bringing or completing the proceedings that relate to the existing right, interest, title, immunity, or duty.

The effect of this provision is to extend the application of the Proceeds of Crime Act to the registered order, notwithstanding ss 171-172 of the Criminal Proceeds (Recovery) Act.

[33]     Section 12 of the Mutual Assistance in Criminal Matters Amendment Act

2009 makes it very clear that that Act in its form prior to amendment continues to apply to requests already made and orders already registered.  The cross-references in  the  Mutual  Assistance  in  Criminal  Matters  Act  to  the  Criminal  Proceeds (Recovery) Act were all inserted by the amending Act and have no application to the existing order.

[34] I agree with the interpretation by Ms Laracy of s 66B of the Proceeds of Crime Act 1991. Section 42, which is within Part 4 of that Act, applies when a New Zealand Court is making a restraining order. I agree with Ms Laracy that this is not a provision which can apply to a registered foreign restraining order, as on a registration application, this Court does not have any discretion to impose conditions. Accordingly, there is no condition on the foreign order allowing payment of fees in terms of s 42(3).

[35]     The foreign restraining order therefore remains binding on the property of

Mr Bujak, in its terms.

Part 2: the New Zealand freezing order

[36]     Dr Deliu argued that payment of his legal fees is expressly authorised by the terms of the freezing order made in the 2008 proceeding, as that order authorises the payment of legal fees for matters which include those upon which Dr Deliu acted for Mr Bujak.

[37]     Dr Deliu argued that as a domestic order, as he put it, the New Zealand order takes  priority over the  registered  foreign  restraining order.    He  relied  on  Child

Poverty  Action   Group   Inc   v  Attorney-General,[2]    where  the  Court   said   that international covenants do not create obligations which are enforceable in judicial proceedings  in  New  Zealand  except  to  any  extent  that  they  are  reproduced  in domestic legislation.   This does not assist Dr Deliu’s argument.   The Polish restraining order is registered in New Zealand under a New Zealand statute, and enforceable obligations are created.

[2] Child Poverty Action Group Inc v Attorney-General HC WGTN CIV-2009-404-273,

25 October 2011.

[38]     Secondly, Dr Deliu argued that as the original mareva injunction granted by Chisholm J, which was later amended by Fogarty J, was sealed before the current version of the foreign restraining order was registered, reliance should be placed on the equitable maxim “as between two equitable interests, the first in time prevails”. This argument fails as neither interest is equitable.  The principle referred to has no application whatever.

[39]     Thirdly, Dr Deliu argued that once Fogarty J’s order had been made and sealed it cannot be varied by this Court, rather, only on appeal.   Whilst the fundamental principle on which this proposition relies is correct, it does not assist in this case, at this point. A careful reading of the judgment of Fogarty J dated 3 March

2009, in which he indicated that the terms of the original mareva injunction should be varied to a freezing order on conditions which allowed the sale of one property, repayment of a mortgage and application of funds for living expenses including legal fees, there is no mention whatever of the existing registered Polish restraining order. It appears from the judgment that either this order was not drawn to the Judge’s attention or if it was, the statutory consequences of registration were not argued.  It does not appear that the consequences of registration of the restraining order have been taken into account in subsequent decisions in relation to the freezing orders.

[40]     This Court is not bound by former decisions of this Court though, of course, it will respect and apply earlier judgments where possible.[3]   The present situation is that there is an apparent conflict between the registered restraining order and the

conditions attaching to the freezing order, and there are a number of claimants,

including Dr Deliu, to the proceeds of sale of the remaining real estate in this country, and any remaining cash.  To make an order in favour of Dr Deliu pursuant to the condition attaching to the freezing order would be to give him priority over other claimants in New Zealand, as well as the Polish Government.   Whilst the freezing order permits the payment of legal fees, it does not require that payment take place.  My view is that any order for payment to Dr Deliu for legal fees should await a full and final analysis of the financial position once decisions have been made in relation to the future of the registered restraining order.  I was told by Ms Laracy that regular contact is made with the relevant authority in Poland and advice presently held is that prosecution of Mr Bujak is currently underway.  Apparently a decision on whether the Polish Government wishes to retain and enforce the restraining order will be, at least to a degree, dependent on the outcome of those proceedings.  In addition, the Solicitor-General is keeping the order under review as he is empowered to apply to the Court to discharge it, in any event.   Plainly the situation for New Zealand creditors is dependent to a significant degree on the outcome of these actions.

[3] See generally, Duncan Webb The New Zealand Legal System Structures and Processes (5th ed

LexusNexis 2010) at para 9.8.7.

[41]     Dr Deliu asked that if it was my decision that he could not be paid now, his application be adjourned rather than dismissed, so that it could be reconsidered at a later time.  Given the findings in this judgment, it is appropriate that there be a final judgment on this application.   Dr Deliu’s position can be protected by reserving leave to him to apply again for orders for payment on these two proceedings to which he is now joined as a party.  In that capacity he will now be served with all documents filed, and will thus be aware of any change in the status of the registered order, or other changes sought in relation to the freezing order.  He can then act as he considers appropriate.

Outcome

(a)     Dr Deliu is joined as a party to proceedings 2007-485-000522 and

2008-409-001901.

(b)The application for orders in paragraphs (b) and (c) of his application dated 27 April 2010 is dismissed.

(c)     Leave is reserved to Dr Deliu to apply again, on notice, for orders for payment of his legal fees if and when there is a change or proposed change in the status of the registered Polish restraining order, or the freezing order, such that distribution of the remaining New Zealand assets of the first respondent/defendant falls for consideration.

(c)     Costs are reserved.

J G Matthews

Associate Judge

Solicitors:

Crown Law, PO Box 2858, Wellington 6140. Email: [email protected]

Dr F C Deliu, PO Box 68559, Newton 1145, Auckland. Email: [email protected]
Dr E Monasterio – Email: [email protected]