Solictor-General of New Zealand v Hutton HC Dunedin CIV 2004-412-000446

[2007] NZHC 1774

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV 2004-412-000446

BETWEEN  THE SOLICITOR-GENERAL OF NEW ZEALAND

Applicant

AND  HARVEY ANDREW HUTTON Respondent

Hearing:         11 May 2007

(Heard at Christchurch)

Appearances: A M Toohey & Z R Johnston for Applicant

C S Withnall QC for Respondent

Judgment:      31 May 2007

JUDGMENT OF FOGARTY J

Introduction

[1] In these proceedings the Solicitor-General seeks a restraining order over a helicopter owned by the Hutton Nolan Family Trust. The restraining order is sought under the Proceeds of Crime Act 1991.

[2]      The respondent was convicted of the thefts of Pounamu.  The helicopter was used  during  the  thefts.    It  is  owned  by  the  Hutton  Nolan  Family  Trust.    The respondent was a trustee until he resigned in November 2005 (after the thefts).  The incoming capital beneficiaries to the trust are the respondent, his partner, Ms Nolan,

their children and grandchildren.

THE SOLICITOR-GENERAL OF NEW ZEALAND  V HUTTON HC DUN CIV 2004-412-000446  31 May

2007

[3]      By a judgment in the District Court on 15 January Judge J E Macdonald dismissed an application by the Crown for forfeiture of the helicopter. There had been an interim restraining order prior to the decision of the District  Court. On

5 February 2007 the Solicitor-General made an application to the Court of Appeal for leave to appeal that decision.

The application

[4]      Pending  consideration  of  that  application  and  any  appeal  the  Solicitor- General now seeks a restraining order under Part IV of the Proceeds of Crime Act

1991.

[5]      In  this  application  the  Crown  argues  that  it  is  entitled  to  make  a  fresh application for restraining order to cover the appeal period.   The Crown submitted that the threshold conditions are simply those set out in s 43(1) of the Act which provides:

43     Grounds for making restraining order

(1)      Where an application under section 39 of this Act seeks a restraining order against specified property of the defendant, the Court shall not make an order against the property unless the Court is  satisfied  that  there are reasonable grounds for believing that—

(a)      The property is tainted property in relation to the relevant serious offence; or

(b)     The defendant derived a benefit, directly or indirectly, from the commission of the offence.

[6]      There  is  no  doubt  that  those  two  conditions  are  satisfied.    The  Crown submitted it is not contrary to the scheme of the Act for the Court to consider such an application pending an appeal as the purpose of restraining order is to enable the position to be preserved.

Whether such an application is blocked by s 65(3)(f)

[7]      Mr Withnall QC for the respondent submitted that to make such an order is contrary to the intent of the Act and in particular the express terms of s 65(3)(f).  He submitted that if the legislature had intended that a restraining order should be in place pending an appeal, not only would this subsection not have been enacted, but the Act would have expressly provided that any restraining order should continue in force until the time for filing any appeal had expired, and if that appeal were filed, then the restraining order would continue in force until the appeal had been determined.

[8]      Section 65(3)(f) of the Act provides:

65    Duration and termination of restraining order

…

(3)     Where a restraining order is made—

…

the following provisions shall apply:

…

(f)     If a Court refuses an application for a confiscation order made in reliance on the person's conviction of the offence or a related serious offence, the restraining order ceases to be in force when the Court refuses the application unless, at that time,—

(i)     An application for another confiscation order in respect of the person's conviction of the offence or a related serious offence awaits determination; or

(ii)      Another confiscation order in respect of the person's conviction of the offence or a related serious offence is in force:

The term “confiscation order” includes a forfeiture order.

[9]      In    the    case    of:    Solicitor-General    v    Sanders    HC    Tim    M31/94

2 December 1994 Tipping J, the Solicitor-General had applied to the High Court for an order staying the execution of the judgment  of the High Court  delivered on

14 October declining to  make a  forfeiture order.   The  Crown wished  to  appeal

against that order.   The application was made for an order for stay of execution because of the terms of s 65(3)(f).  In that respect Tipping J said:

There was previously a restraining order which, of course remained in force until such time as Williamson, J. delivered his decision.  Section 65 of the Act deals with the duration and the termination of restraining orders. Subsection (3)(f) says that if a Court refuses an application for a confiscation order the restraining order ceases to be in force when the Court refuses the application.  There are two exceptions to that, neither of which apply in the present case.  Therefore by statute the earlier restraining order terminates on the refusal to make the confiscation or forfeiture order.    There is therefore no capacity, as I see it, for this Court to direct, by whatever method, that the restraining order shall continue in force pending the determination of the appeal.  For me to do that, either directly or indirectly, by some sort of stay of execution, would be to fly directly in the fact of s.65(3)(f) without any statutory power to do so.  That then is the background to the problem.

There is nothing in the Proceeds of Crime Act which gives this Court, or indeed, it appears, the Court of Appeal, any power to freeze the situation pending the determination of the appeal.  The problem is, of course, that if a forfeiture or confiscation order is refused the person concerned, on the face of it, is free to deal with the property between the time the High Court refuses the application and the Court of Appeal hears the appeal.

[10]     There is no provision in the Act  which specifically addresses the risk of tainted  property,  in respect  of which a  forfeiture  order  has  been  refused,  being disposed of pending an appeal against that refusal.

[11]     By contrast, where a forfeiture order is made the property vests in the Crown, but cannot be disposed of until any appeal rights have been exhausted.  (See s 16.) Similarly,  if the Official Assignee, has custody and control of property under  a restraining order and a defendant is convicted and a penalty imposed, the Official Assignee is restrained from selling or otherwise disposing of the property to satisfy the penalty until after any appeal rights have been exhausted.  See s 51(2).

[12]     The scheme of the Proceeds of Crime Act is built around confiscation orders. It is an Act to provide for confiscation of the proceeds of serious criminal offending, including in that respect the confiscation of  property used to commit or facilitate the commission of the offence (“tainted property”).  Confiscation orders are made after a person has been convicted.  (See s 8.)  They cannot be made beforehand.

[13]     Restraining  orders  fall  short  of confiscation  orders.    A  restraining  order prevents a property being disposed of, and may include giving the Official Assignee custody and control of the property during the time of the restraining order.   (See s 42.).  Section 39(1)(b) makes it clear that applications for restraining orders can be made when a defendant “has been, or is about to be” charged with a serious offence.

[14]     Restraining laws are akin to interim injunctions.  Similarly to that branch of the law, the Court may decline to make a restraining order unless the Crown gives to the Court undertakings in respect of payment of damages or costs.  (See s 45.)

[15]     Section 65 of the Act comes near the end of Part IV of the Act dealing with restraining orders.  It comes under the sub-heading “Revocation and Termination of Restraining Orders”.  Section 64, the first section under that heading, empowers the High Court to revoke a restraining order in certain circumstances, where the person gives the Court satisfactory undertakings for security.

[16]     Section 65 deals with duration and termination of restraining orders.  In subs (1) it basically provides that every restraining order shall expire at the end of a period of six months subject to some qualifications.  Section 66 allows the period to be extended.

[17]     Subsection (2) provides that where a restraining order is made in reliance on the proposed charging of a person with a serious offence the order shall cease to be in force at the end of a period of 48 hours if the person is not charged.

[18]     Subsection (3) then deals with various contingencies where the charge is withdrawn (c); the person is acquitted and has  not  been charged with a related serious offence (d);  where a confiscation has been made (e);  where a confiscation order has been refused (f);  and where an application for extension has been made (g).

[19]     I have considered whether or not the text of s 65(3)(f) can be construed to apply only to a final refusal of a confiscation order when all rights of appeal are exhausted.  I am satisfied it cannot.  The point was not pursued by counsel for the

Crown.  Indeed, both counsel agreed that this sub-section brings restraining orders to an end upon the judgment of the District Court dismissing the application for the forfeiture order.

[20]     Restraining orders are a partial  interference on the right  of alienation  of property.     The  power  to  make  them  is  accordingly  on  normal  constitutional principles to be expressed in a statute, not implied by a Court.

[21]     Placing s 65(3)(f) within its immediate context of s 65, and placing s 65 within the scheme of the Act, I am satisfied that Parliament did  not intend that ss 39-43, and in particular s 43, could be availed by the Crown making a fresh application following the refusal by a Court of a confiscation order.

[22] The New Zealand statute follows the Proceeds of Crime Act 1987 (Commonwealth of Australia). In Australia the 1987 Act has been repealed and replaced by the Proceeds of Crime Act 2002. Section 57(2)(f) of the 1987 Act is similar to s 63(3)(f) of the New Zealand statute. When the 1987 Act was repealed, the 2002 Act, replacing it, specifically provided for continuation of restraining orders after the refusal of a forfeiture order where there was an appeal. See s 45(3)(b).

[23]     In the Sanders decision Tipping J concluded his judgment in this way:

I have some considerably sympathy for the Solicitor-General’s position because there is the capacity to render appeal rights nugatory because of this apparent gap in the legislation.  The cure, however, in my view, is not to be found in this Court stretching the present law beyond breaking point but in Parliament  redressing the problem at  an  early  time.    The application  is declined.

[24]     I am left with the same conclusion as that of Tipping J that there is a gap in the statute.  I am reinforced in that conclusion by having noted that the gap has been remedied in Australia.  I am satisfied that Mr Withnall’s argument must be correct, that the power to make a restraining order in ss 39-43 of the Act was never intended by Parliament to be exercised following the cessation of an earlier restraining order by reason of the application of s 65(3)(f).

[25]     Accordingly, this application is dismissed.  Costs are reserved.

Solicitors:
Raymond Donnelly & Co, Christchurch, for Applicant
Checketts McKay, Alexandra, for Respondent (Counsel:  C S Withnall QC)