COMMISSIONER OF POLICE v LI [2018] NZHC 1566

COMMISSIONER OF POLICE v LI [2018] NZHC 1566 [27 June 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2013-404-003228[2018] NZHC 1566UNDER Criminal Proceeds (Recovery) Act 2009BETWEEN COMMISSIONER OF POLICEApplicantAND STEVEN QUAN LIFirst RespondentFAN YANGSecond RespondentPENGJU CHENThird RespondentJONATHAN LIFourth RespondentAIQING XIANGFifth RespondentAppearances: M Harborow and D Wiseman for ApplicantDPH Jones QC and Y Y Wang for First and Second RespondentsD Dufty and R Patel for Fourth RespondentS Buckley for Fifth RespondentJudgment: 27 June 2018JUDGMENT OF WOOLFORD J[Approving settlement]This judgment was delivered by me on Wednesday, 27 June 2018 at 4:30 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: Meredith Connell, AucklandCounsel: DPH Jones QC, AucklandD J Dufty, AucklandS Buckley, AucklandIntroduction[1] Assignment4U was in the business of writing tailored assignments for students.The Commissioner of Police considers that in doing so the business operators, and thestudents that used the services, committed various offences.[2] No-one has been charged, but the Commissioner sought forfeiture in respect ofthe business' proceeds. The investigation also uncovered alleged mortgage fraud bythe business operators, and members of their family. Forfeiture was sought in respectof that too. Three days into the four-week hearing, the parties agreed to settle.[3] The main issue is, therefore, whether the settlements should be approved unders 95 of the Criminal Proceeds (Recovery) Act 2009. I also determine applications foraccess to documents from the media.BackgroundThe assignment writing business[4] The name, Assignment4U, gives a fair indication of the business.1 It involvedselling tailored assignments to students. The Commissioner says that in doing so thefirst and second respondents, Mr Steven Li and Ms Fan Yang, were effectively usingthe business to provide "cheating services", enabling students to fraudulently submitpurchased assignments as their own work.[5] The first and second respondents, on the other hand, say that they simplyprovided "model answers". These were only to be used as study aids – not forsubmission. Any students that submitted the purchased assignments did so on theirown volition and contrary to Assignment4U's disclaimers.[6] No charges have been laid. A description of the Commissioner's case follows.[7] Students would lodge requests with Assignment4U for assignments to bewritten. They would provide the assignment question, word limits, relevant textbooks1 It is said to have been operated through several companies but it is unnecessary to consider thecorporate structure in this judgment.and even their university login details. The turnaround would be set by reference tothe deadline set by the relevant tertiary institution.[8] Generally, Assignment4U's fee would be set by reference to the word count.But students could also request assignments of a particular standard. The price wouldadjust accordingly – pay more for a better grade. Students could also pay more forfaster turnarounds. If the desired grade or turnaround was not achieved, the studentwould be provided "Assignment4U store credit".[9] All correspondence with students would be accompanied by a disclaimer to theeffect that the product provided by Assignment4U was only to be used as a study aidand should not be submitted. Such a disclaimer was also displayed at Assignment4U'spremises. The first and second respondents say these disclaimers were intended toguide the students as to the proper use of their services, to safeguard both the businessand the students. The Commissioner, on the other hand, describes the disclaimers asa "sham".[10] When a request was received, Assignment4U would turn to its network ofindependent contractors, the ghost writers, to find someone to write the assignment.Once written, the ghost writer would provide the completed assignment toAssignment4U. The business then passed it on to the student. The ghost writers werepaid a portion of Assignment4U's fee, on a staged basis. The final payment would bemade after the student received their grade. Ghost writers would be penalised ifdesired grades were not achieved.[11] Plagiarism would be detected by the software used by tertiary institutions.That was obviously a concern. Assignment4U attempted to obtain access to thatsoftware to develop its own. On the Commissioner's case, this indicates the businesswas not simply providing model answers.[12] Assignment4U carried on business in this manner until May 2013, when thepolice executed search warrants at its premises.The alleged offending[13] The Commissioner says that, through Assignment4U, the first and secondrespondents committed offences under Pt 10 of the Crimes Act 19612 and s 292E ofthe Education Act 1989.3[14] The legality of its operations is untested in New Zealand. The respondents'business is the first of its kind to come under judicial scrutiny in New Zealand. Evenif the alleged actions could satisfy the elements of the offences, it would then need tobe determined whether the elements were in fact met. Given the settlement, it wouldbe inappropriate to discuss whether any offences were committed. But I make twoobservations.[15] First, assignment writing businesses are not a recent invention. A 1972 casefrom New York illustrates as much.4 In that case, the Court appointed a receiver inrespect of a "ghost-writing" company on the basis that its business was fraudulent.The company used independent contractors to write the assignments. A flyerdistributed by that company too contained a disclaimer, saying "this material isintended to be used for research and reference purposes only". But the Courtconsidered that, based on students' evidence of the detailed instructions they providedto the company, it must have been clear to the company that the students were planningon submitting the assignments as their own work.[16] Second, businesses of this nature appear to be common around the world andmostly operate in broad daylight. The first and second respondents referred me to aUnited Kingdom business, Law Teacher (www.lawteacher.net), which they say hasbeen operating lawfully for around 15 years. That business has a sophisticatedwebsite. It openly advertises "law essay writing" services, even "law dissertationwriting services". In addition to providing their assignment question, customers canselect the country of study, required grade, paper length, delivery time and so on.Essentially, students can order a highly customised product with plagiarism-free2 The Commissioner alleges the first and second respondents committed offences under ss 228, 240and 257 as parties to students' offending and under s 256 as principal offenders.3 The Education Act offence is clearly targeted at offending of the type alleged here, but it onlycame into force on 30 August 2011.4 New York v Saksniit 69 Misc 2d 554, NYS 2d 343 (1972).guarantees. But the website states that what they provide should only be used as a"model answer" and a "learning aid". The website also expressly states that studentsshould not submit the work as their own, as that would be cheating.The mortgage fraud[17] The Commissioner says that during the investigation into Assignment4U, itbecame apparent that several members of the Li family committed mortgage fraud. Inbrief, the Commissioner says that Ms Yang, the second respondent, Mr Jonathan Li,the fourth respondent and Ms Aiqing Xiang, the fifth respondent committed variousmortgage frauds. They materially misrepresented their financial position (in terms ofassets and employment) in applications for mortgage finance. They also providedsham rental agreements to the relevant bank.The forfeiture sought – first and second respondents[18] The Commissioner estimates Assignment4U sold 11,549 assignments from20 June 2006 to 20 June 2013, at an average price of $406.81 per assignment.Accordingly, he says the first and second respondents derived an unlawful benefit ofapproximately $4,698,000 (number of assignments multiplied by the average price).[19] A profit forfeiture order was sought in that sum in relation to the followingproperties: unit 2, unit 2a, unit 4, unit 8a, unit 24, unit 32, unit 6 and unit 6a – all at88 Cook Street, Auckland. Assets forfeiture orders in respect of these properties werealso sought, on the basis that the properties had been tainted due to the proceeds of theAssignment4U business being used to fund their purchase and/or service mortgagessecured against them. I note these properties are currently subject to restraining orders.The forfeiture sought – fourth and fifth respondents[20] The Commissioner argued that Mr Jonathan Li derived an unlawful benefit of$1,697,000 and that Ms Xiang derived an unlawful benefit of $1,120,000, being thetotal amounts of the loans advanced to them respectively. In respect ofMr Jonathan Li, the order sought was in relation to unit 1a at 88 Cook Street,Auckland, and 29 Takutai Street, Auckland. In respect of Ms Xiang, the order soughtwas in relation to unit 7a and unit 15 at 88 Cook Street, Auckland, and 3 Fowler Street,Auckland. Assets forfeiture orders were also sought in relation to these properties andthe properties are currently subject to restraining orders.Applications for access to documents[21] Mr Edward Gay (Radio New Zealand) and Mr Jared Savage (NZME) haveapplied for access to documents in this proceeding. Both seek access to this judgmentand Mr Gay also seeks access to the joint memoranda regarding settlement. Theapplication falls to be determined under the Senior Courts (Access to CourtDocuments) Rules 2017. It is made on the grounds that there is public interest in thismatter and that access is necessary to ensure fair and accurate reporting.[22] As regards this judgment, Mr Gay and Mr Savage have the right to access itunder r 8(1). That rule provides that every person has the right to access the formalcourt record relating to a civil proceeding. Rule 4 defines formal court record asincluding judgments. That general right of access should be exercised pursuant tor 10(1), by orally asking the Registrar of the relevant court registry that holds the filefor access.[23] The applications insofar as they relate to this judgment were premature. Thejudgment had not been written when they were made. Moving forward, I consider themost pragmatic approach is for the Registrar to treat the applications as requests underr 10(1) and to provide the applicants access to this judgment.[24] The request for access to the joint memoranda regarding settlement must beconsidered under rr 12 and 13 of the Senior Courts (Access to Court Documents)Rules. Rule 12 sets out factors to be considered in determining requests for access.None of these factors have primacy; there is no hierarchy of considerations.5 Theconsiderations are mandatory to the extent that they are relevant, but not all the statedmatters will necessarily be relevant to an application.6 Rule 13 addresses the approach5 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017]NZAR 1617 at [21].6 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017]NZAR 1617 at [21].to balancing those matters at different stages, reinforcing the distinction in theapproaches to be taken to applications made at the pre-hearing, hearing andpost-hearing stages.7[25] I decline access to the settlement memoranda because of two reasons.[26] First, I consider the principle of open justice is satisfied by the information inthis judgment. It contains sufficient information to ensure fair and accurate reporting,and can be properly understood without access to the memoranda. The onlyinformation contained in the memoranda that is not in this judgment concern themechanics of settlement, such as the amounts to be paid by each party and the timelinefor payment and release of restraining orders. Those details are of minimal publicinterest given the description below at [33]–[36]. As Mallon J said in Chapman v P:8The material evidence is set out in some detail in the judgment and thejudgment can be understood without reference to the file. There is noparticular public interest in the further detail of the private matters that areincluded on the Court file. The principles of open justice and the freedom toseek receive and impart information are given effect to by Fairfax being ableto report on the proceeding without reference to the further detail on the Courtfile which was not material to my decision. In these circumstances I considerthat the parties' privacy interests outweigh the factors relied on by Fairfax onits application for access to the Court file.[27] Second, the privacy and confidentiality interests of the parties weigh againstaccess to the memoranda. As discussed below, it is a term of at least one of thesettlement agreements that its terms will not be relayed to the other respondents.Access to the memoranda, which contain the settlement terms, might compromise thatsettlement.[28] I note, for completeness, that the respondents oppose access to any otherdocuments filed by the parties. However, access has not been requested in respect ofsuch documents. I make some observations, on a preliminary basis, in respect of anyfurther requests. Given the settlement, the reliability and accuracy of the evidence hasnot been tested. The confidentiality and privacy interests of the parties will, therefore,7 Greymouth Petroleum Holdings Ltd v Empresa Nacional del Petróleo [2017] NZCA 490, [2017]NZAR 1617 at [22].8 Chapman v P (2009) 20 PRNZ 330 (HC) at [32].be particularly important in any further requests. And as mentioned, I consider thisjudgment contains sufficient information to ensure fair and accurate reporting inrelation to this proceeding.The law: threshold for approval[29] Section 95 of the Criminal Proceeds (Recovery) Act allows for theCommissioner to enter into a settlement with any person as to the property or any sumof money to be forfeited to the Crown. But such a settlement does not bind the partiesunless the High Court approves it. The section provides:95 High Court must approve settlement between Commissioner andother party(1) The Commissioner may enter into a settlement with any person as tothe property or any sum of money to be forfeited to the Crown.(2) A settlement does not bind the parties unless the High Court approvesit.(3) The High Court must approve the settlement if it is satisfied that it isconsistent with—(a) the purposes of this Act; and(b) the overall interests of justice.[30] The High Court must approve a settlement, under s 95(3), if it is satisfied thatthe settlement is consistent with the purposes of the Criminal Proceeds (Recovery) Actand that it is consistent with the overall interests of justice. In making that assessment,the High Court exercises its supervisory jurisdiction. It is not a cursoryrubber-stamping exercise.9[31] The primary purpose of the Act is set out in s 3(1). It is to establish a regimefor the forfeiture of property that has been derived (directly or indirectly) fromsignificant criminal activity or property that represents the value of a person'sunlawfully derived income. The Supreme Court described s 3(1) as "aspirational" andgiving a "clear and emphatic signal as to the legislative purpose".10 Ancillary9 Commissioner of Police v Leone [2018] NZHC 590 at [5].10 Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [12].purposes, in s 3(2), include eliminating the chance for persons to profit fromsignificant criminal activity and deterring significant criminal activity.[32] A broad inquiry is required. Section 95(3) indicates that much, referring to the"overall interests of justice". But in making the s 95(3) determination, the followingfactors may be relevant:(a) Whether the settlement amount adequately reflects the propertyallegedly derived from criminal activity or income unlawfullyderived.11(b) The strength of the Commissioner's case, the respondent's case, andaccordingly, the likelihood of forfeiture if the case was not settled.12Litigation risk should be considered.13 It may be appropriate to settlefor less if the Commissioner's case has significant shortcomings.(c) If there is a shortfall between the settlement amount and the propertyallegedly derived from criminal activity or income unlawfully derived,the Court should consider the extent to which there are assets availableto meet that shortfall.14(d) The time, cost and resource savings that would flow from settlement.15(e) Any other relevant matters, keeping in mind that decisions to settleproceedings can be made on economic and pragmatic grounds.16 Doesthe settlement reflect a common-sense compromise between theparties?11 Commissioner of Police v Owen [2018] NZHC 626 at [13]12 Commissioner of Police v Antolik [2017] NZHC 2436 at [15].13 Commissioner of Police v Kree [2013] NZHC 2972 at [11].14 Commissioner of Police v Venn [2014] NZHC 361 at [5]15 Commissioner of Police v Investments Ltd [2017] NZHC 284 at [17].16 Commissioner of Police v Taylor [2017] NZHC 1144 at [27].The proposed settlements[33] The proposed settlements are in full and final settlement of all claims made bythe Commissioner under the Criminal Proceeds (Recovery) Act in, or related to, thepresent proceeding. It is on the basis that none of the respondents admit any liabilityor wrongdoing.[34] In broad terms, the Commissioner has agreed to settle for payments totalling$2,120,000 from the five respondents.17 That includes payment of various sums by allfive respondents. The settlement sum will be paid through assets forfeiture orders.[35] I am not outlining the respondents' respective contributions to the total sum asone of the settlement agreements require that its terms not be relayed to the otherrespondents. But per the agreement, the Commissioner is allowed to make a publicstatement which includes reference to the total value of property forfeited in thisproceeding.[36] The proposed settlements further contemplate that the restrained properties bereleased. Some of the restraining orders will be lifted immediately. Others inincrements. This is to allow the Official Assignee to sell some of the restrainedproperties to meet any shortfalls, in the event that the settlement sum is not paid inaccordance with the agreed timeline.Application of s 95 to the proposed settlements[37] I am going to approve the proposed settlements. I consider these settlementsare consistent with the purposes of the Criminal Proceeds (Recovery) Act and theoverall interests of justice because of four broad reasons.[38] First, there will be a significant saving of time, cost and other resources.Significantly, three weeks of the Court's time is saved as the remainder of the allocated17 This judgment addresses the settlements with the first, second, fourth and fifth respondents, andXuanxuan Trustee Limited as an interested party. The amount also includes a settlement with thethird respondent, approved earlier by Brewer J.hearing is no longer required. And a considerable number of witnesses will not haveto be cross-examined.[39] Second, while the Commissioner considers he has a reasonable case, herecognises it is not without risk. He recognises general litigation risk, butacknowledges specifically there are difficulties with the application of the Crimes Actoffences to the first and second respondents. As mentioned, these have not previouslybeen applied to the type of offending alleged in this case.[40] The first and second respondents also maintain that no offences werecommitted. They say the business provided lawful "model answers", as well as otherservices including tutoring, translation services, grammar and spell checking andselling second-hand textbooks. And that in any event, they did not have any realinvolvement with Assignment4U after it was transferred to Atan Limited in 2007.[41] While it is not a pre-requisite for forfeiture orders, I note that no one has beencharged with any offending in relation to Assignment4U's business.[42] As regards the allegations of mortgage fraud, it is denied by all respondents.No steps have been taken by the relevant bank, and no criminal charges have been laidagainst any of the respondents in relation to mortgage fraud. The Commissioner alsoaccepts that the fourth and fifth respondents were not primary actors in thisproceeding. They are not alleged to have been actively involved in Assignment4U,the primary focus of the Commissioner's investigation and this proceeding.[43] Third, I consider the shortfall between the settlement sum and the ordersinitially sought is not as significant as it would appear at first sight. $4,698,000 wassought against the first and second respondents but that amount represents theCommissioner's estimation of Assignment4U's gross revenue between 20 June 2006and 20 June 2013. Section 292E of the Education Act, the primary criminal offencerelied on by the Commissioner, only came into force on 30 August 2011. Asmentioned, the Commissioner acknowledges there are difficulties with the applicationof the Crimes Act offences. Assignment4U sold an estimated 3200 assignments after30 August 2011. That quantum of assignments would, therefore, support a profitforfeiture order in the sum of approximately $1.3 million.[44] I note, further, that apparently about 70 per cent of the price per assignmentwas paid to the ghost writers. The sum excluding that expenditure for the wholeperiod, approximately $1,400,000, is far closer to the settlement sum. As regards theperiod after 30 August 2011, the amount would be around $390,000. I consider thesettlement sum reasonable in that context.[45] The shortfall in relation to the orders originally sought against the fourth andfifth respondents should be viewed in light of their secondary role in this proceeding.[46] Fourth, I am satisfied the settlements represent common-sense compromisesbetween the parties. A lengthy trial will be avoided, and all will have certainty as tothe outcome of a proceeding that was first initiated about five years ago.Result[47] I approve the Commissioner's settlements with the first and secondrespondents, the fourth respondent and the fifth respondent, respectively, under s 95(3)of the Criminal Proceeds (Recovery) Act 2009.[48] By consent, I make the orders set out in:(a) Paragraph 6.1(a) to (i) of the joint memorandum of counsel for theCommissioner and the first and second respondents regarding proposedsettlement, dated 22 June 2018.(b) Paragraph 6.1(a) to (l) of the joint memorandum of counsel for theCommissioner, the fourth respondent and interested party XuanxuanTrustee Limited regarding proposed settlement, dated 15 June 2018.(c) Paragraph 6.1(a) to (g) of the joint memorandum of counsel for theCommissioner and the fifth respondent regarding proposed settlement,dated 19 June 2018._________________________Woolford J