COMMISSIONER OF POLICE v BORLASE [2020] NZHC 3103

COMMISSIONER OF POLICE v BORLASE [2020] NZHC 3103 [24 November 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-2123[2020] NZHC 3103UNDER the Criminal Proceeds (Recovery) Act 2009BETWEEN COMMISSIONER OF POLICEApplicantAND STEPHEN JAMES BORLASEFirst respondentCATHERINE RUTH BORLASESecond respondentCATHERINE BORLASE and RLATRUSTEE SERVICES NO 51 LIMITEDThird respondentPROJENZ HOLDINGS LIMITEDFourth respondentHearing: 16 November 2020Appearances: H E Macdonald for the applicantR M Mansfield and S L Cogan for the respondentsR B Lange for the non-partiesJudgment: 24 November 2020JUDGMENT OF JAGOSE JThis judgment was delivered by me on 24 November 2020 at 3.00pm.Pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarCounsel/Solicitors:R M Mansfield, Barrister, AucklandS L Cogan, Barrister, AucklandMeredith Connell, AucklandSimpson Grierson, Auckland[1] In this proceeding, the Commissioner of Police seeks profit and asset forfeitureorders under the Criminal Proceeds (Recovery) Act 2009, by which the respondentswould forfeit identified property as acquired by or derived from significant criminalactivity. The activity is that underlying charges brought against Mr Borlase and othersof corrupt bribes of successive local government entities' employees in respect of theirofficial capacities,1 on conviction for eliciting which with the intention of influencingthe recipient employees in their official capacities he was sentenced to five and a halfyears' imprisonment.2[2] The proceeding necessarily is brought by originating application.3 On thepresent interlocutory application, the respondents – comprehending an enlargement ofthe Commissioner's case in reply evidence, to extend to 'actual influence' had by therecipient employees – seek filing of more orthodox statements of claim and defence,and consequential discovery from the Commissioner and/or the entities employing therecipients.Background[3] Mr Borlase was a director and shareholder of the fourth respondent("Projenz"), which provided professional engineering services to particular andsuccessive local government entities over time. At his direction, Projenz providedbenefits to certain employees of those entities. As set out in greater detail in FitzgeraldJ's reasons and verdict judgments, and sentencing notes, the judge concluded, asbenefits intentionally provided in connection with the employees' "official capacity",they were made in breach of s 105 of the Crimes Act 1961.[4] Section 105 provides:105 Corruption and bribery of official(1) Every official is liable to imprisonment for a term not exceeding 7 yearswho, whether within New Zealand or elsewhere, corruptly accepts orobtains, or agrees or offers to accept or attempts to obtain, any bribe forhimself or herself or any other person in respect of any act done or1 Crimes Act 1961, s 105.2 R v Borlase [2016] NZHC 2970 (reasons); [2016] NZHC 2971 (verdict); [2017] NZHC 236(sentence).3 High Court Rules 2016, r 19.2(r).omitted, or to be done or omitted, by him or her in his or her officialcapacity.(2) Every one is liable to imprisonment for a term not exceeding 7 years whocorruptly gives or offers or agrees to give any bribe to any person withintent to influence any official in respect of any act or omission by him orher in his or her official capacity.[5] Critically, for present purposes, the judge held:4 I do not accept that s 105(2) requires an intent to influence an official todepart from his or her duty or act in some dishonest or immoral way. Thelegislature has deliberately cast the provisions in wide terms. The SupremeCourt has confirmed the safeguards that protect against legislative over-reach.Finally, there was no dispute that the Crown does not need to prove any actualinfluence – an intent to influence is sufficient. Nevertheless, the absence ofproof of any actual influence may be evidentially relevant to the question ofwhether there was an intent to influence in the first place. The absence of proofof any actual influence may also be relevant to sentencing.[6] In sentencing, the judge observed:5[T]here was no evidence of actual assistance provided by [the recipientemployees] to Projenz during this tender process . Nor was there anyevidence that Projenz would not have been successful to a similar or the samedegree in that tender process, absent the significant benefits being provided.A number of Council witnesses gave evidence that Projenz was ultimatelyvery good at what it did.But she also rejected the suggestion there was no scope for the recipient employees toinfluence matters to Projenz's advantage.6Statutory context[7] To repeat what I said in Commissioner of Police v Gong,7 under the 2009 Act,the Commissioner may pursue on notice assets forfeiture orders for tainted propertyto vest absolutely in the Crown. Orders are made if the Court "is satisfied on thebalance of probabilities that specific property is tainted property".8 Typically, such willbe in relation to property already restrained, for which the Court only required to be4 Reasons judgment, above n 2, at [124]–[125].5 Sentence notes, above n 2, at [19].6 Reasons judgment, above n 2, at [384]; sentence notes, above n 2, at [32].7 Commissioner of Police v Gong [2019] NZHC 2735 at [4] and [18]–[23].8 Criminal Proceeds (Recovery) Act 2009, s 50(1)."satisfied it has reasonable grounds to believe that any property is tainted property":9that is, property acquired by or derived from significant criminal activity.10 TheCommissioner also may pursue profit forfeiture orders, to recover the net value ofunlawful benefit from significant criminal activity from the respondent as a debt dueto the Crown. Orders are made if the Court is satisfied on the balance of probabilitiesof such benefit, and the respondent's interest in property to realise it.11[8] A claim for forfeiture orders must be formulated in accordance with HCR7.19.12 The originating application must "state the relief sought and the groundsjustifying that relief", with reference to "any particular enactments or principles of lawor judicial decisions on which the applicant relies".13[9] On application for an assets forfeiture order, then, the relief sought is theproperty vests in the Crown absolutely and is in the custody and control of the OfficialAssignee.14 The ground justifying that relief is the property is "tainted property":15(a) any property that has, wholly or in part, been—(i) acquired as a result of significant criminal activity; or(ii) directly or indirectly derived from significant criminal activity; and(b) includes any property that has been acquired as a result of, or directly orindirectly derived from, more than 1 activity if at least 1 of those activitiesis a significant criminal activity.In other words, formulation of the claim will require a sufficiently-pleaded assertionof the property's acquisition as a result of or derivation from significant criminalactivity. By 'significant criminal activity' is meant "activity engaged in by a personthat if proceeded against as a criminal offence would amount to [specified] offending",whether or not the person is charged, acquitted, or convicted of an offence.169 Section 24.10 Section 5(1).11 Section 55.12 High Court Rules 2016, r 19.10(a).13 Rule 7.19(1)(a) and (b).14 Criminal Proceeds (Recovery) Act 2009, s 50.15 Section 5(1) (definition of 'tainted property').16 Section 6.[10] On application for a profit forfeiture order, the relief sought is the Court'sspecification of each the value of the respondent's unlawful benefit from relevantsignificant criminal activity, the maximum recoverable amount (after deduction of thevalue of forfeited assets from the value of the benefit), and the property for disposal.17The grounds justifying that relief are the respondent has unlawfully benefited fromsignificant criminal activity within the relevant period of criminal activity, and hasinterests in property. Again, formulation of the claim will require a sufficiently-pleaded assertion of the value of the benefit and its derivation from significant criminalactivity, as well as the respondent's interests in property.[11] But formulation of a claim in proceedings commenced by originatingapplication goes further than mere specification of the relief and its grounds. Despitethe oral evidence alternative provided by HCR 19.13, "[a]ny affidavit in support of theapplication must be filed at the same time as the application".18 As with the HCRs'requirement for particularised claims,19 the accompanying affidavit is to ensure theopposing party is not taken by surprise.20 In context, the expectation on originatingapplications is the whole of relief and grounds on which it is sought, and evidence inits support, is filed contemporaneously – all that being the formulation of the claim.Discussion—filing a statement of claim[12] The Commissioner's grounds for the orders sought here are, on the balance ofprobabilities, the respondents benefited to the value of $20.340 million in revenuesobtained in provision of engineering services to the local government entities duringthe period from 2006 to 2013, and any of their remaining specified property is 'tainted'as acquired or derived, from the significant criminal activity addressed by s 105. The17 Section 55.18 High Court Rules 2016, rr 19.10(1)(b) and 7.20.19 Rule 5.26: in addition to showing the general nature of the plaintiff's claim to the relief sought,giving "sufficient particulars of time, place, amounts, names of persons, nature and dates ofinstruments, and other circumstances to inform the court and the party or parties against whomrelief is sought of the plaintiff's cause of action".20 Premier Events Group Ltd v Beattie [2012] NZHC 1025 at [30].Commissioner formulates his claim by reference to the judge's findings, in particular,there was "scope" for the officials to influence matters in Projenz's favour.21[13] Philip James Taylor's affidavit sworn 13 December 2018 in support of theCommissioner's application asserts:[T]here was significant scope for influence and a direct financial return toProjenz. Had the relationships (and bribery) been disclosed, Projenz'[s]contracts with [the entities] would have been terminated.He demonstrates that scope, and disclosure's prospective consequence, by referenceto various evidence from trial, including the recipient officials' "influence in theday to day management of contracts once won". The Commissioner nonetheless isexpress his case for forfeiture is only "inferential" of the required intent to influence.[14] In response, Mr Borlase – who opposes the Commissioner's application ongrounds including the respondents did not unlawfully benefit from, or acquire orderive the specified property from, any significant criminal activity, because anybenefit was obtained from performance of the contracts won on tender – says Projenzwon the tenders "on the merits", and "not as a result of any influence arising from thepayments and gifts". In particular, he rejects the two recipient employees were in anyposition to be influenced in their official capacities in Projenz's favour. In reply, theCommissioner denies the two employees were without influence, and points to anumber of instances in which they are alleged to have directed work to Projenz.[15] For Mr Borlase, Ron Mansfield argues 'inferential' no longer is a sustainablecharacterisation of the Commissioner's case when, in reply evidence, he alleges actualinfluence. On that basis, Mr Borlase seeks the Commissioner restate his case by filingan appropriately particularised statement of claim. I may order the same on my owninitiative;22 such discretion "should only be exercised in cases where that is bothnecessary and proportionate having regard to the nature of the proceeding".2321 Reasons judgment, above n 2, at [365]–[384].22 High Court Rules 2016, r 19.5A; Commissioner of Police v Marwood [2019] NZHC 760 at [11].23 Commissioner of Police v Li [2018] NZHC 292, (2018) 24 PRNZ 268 at [9].[16] Mr Borlase's argument sets up 'influence' as a false equivalence. The recipientemployees' "actual influence", if any, does not necessarily correlate to s 105(2)'s"intent to influence". The object of s 105(2)'s "intent to influence" is the recipientemployees in their official capacities; the object of their "actual influence", if any, isthe contracts within their gift or sway.[17] The "significant criminal activity" alleged by the Commissioner is notdependent on the recipient employees' 'actual influence', if any; it rests onMr Borlase's proven intent to influence them. Neither does the Commissioner rely onthe recipient employees' 'actual influence', if any, for the respondents' acquisition orderivation of property; he relies instead on the "scope" for such influence and thedisqualifying nature of the benefits provided.[18] In short, Projenz's tender success, even if on merit, is no answer to theCommissioner's allegations of the respondents' acquisition or derivation of propertyfrom or through the significant criminal activity. The Commissioner's reply does notchange the nature or specifics of his pleaded case against the respondents. For thosereasons, it is neither necessary nor proportionate to require the Commissioner toreplead. I will not exercise my discretion to do so.—tailored discovery[19] Mr Mansfield explained the respondents' application for tailored discoverylargely sought to obtain the disclosure made to Mr Borlase in the criminal proceeding,in which the prosecutor was the Serious Fraud Office (and not the Commissioner).[20] At the close of the hearing, I enquired if the Commissioner may seek to obtainthat disclosure for use in the present proceeding.24 The Commissioner subsequentlyadvised, "[c]onsistent with model litigant principles", he had obtained that disclosureand provided it to the respondents.[21] Noting also Mr Mansfield's allowance discovery in arbitral proceedingsbetween Auckland Transport and the respondents need not to be re-discovered if24 Minute, 16 November 2020.available for use in the present proceeding, I am unable to discern what may remainof the respondents' applications for tailored discovery (particularly given the failureof their application for repleading). I therefore will reserve leave to the respondents topress any aspect of the present applications as may remain unanswered by the availabledisclosure(s).Result[22] The respondents' application for an order the Commissioner file and serve astatement of claim is dismissed.[23] The respondents have leave to bring on notice any aspect of the presentdiscovery applications for determination, which otherwise are dismissed.Costs[24] In my preliminary view, no-one presently can claim to be so successful on theapplications such that costs should be ordered in their favour, and costs on theapplications therefore should lie where they fall or fell: that is, be borne by the partyincurring them.[25] If that is not accepted by the parties, or they cannot otherwise agree, I reservecosts for determination on short memoranda of no more than five pages – annexing asingle-page table setting out any contended allowable steps, time allocation, and dailyrecovery rate – to be filed and served by anyone claiming them within ten workingdays of the date of this judgment, with any response and reply to be filed within fiveworking day intervals after service.—Jagose J