THE COMMISSIONER OF POLICE v MA [2017] NZHC 2754

THE COMMISSIONER OF POLICE v MA [2017] NZHC 2754 [10 November 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2015-404-1313[2017] NZHC 2754BETWEEN THE COMMISSIONER OF POLICEApplicantAND ZIYANG MAFirst RespondentYUANHUA ZHANGSecond RespondentYUANHONG ZHANGThird RespondentHearing: On the papersCounsel: M Harborow and M Hammer for ApplicantP Dacre QC for Second and Third RespondentsJudgment: 10 November 2017JUDGMENT OF WHATA JThis judgment was delivered by me on 10 November 2017 at 4.00 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Meredith Connell, Auckland[1] I have before me a joint memorandum of counsel proposing settlement of these proceedings. The proposed settlement involves forfeiture of specified property and release of other property currently subject to restraining orders.Background[2] The background is helpfully set out in the joint memorandum. I adopt it for present purposes.Operations 'Ghost' and 'Gem'[3] In 2012, the Organised and Financial Crime Agency of New Zealand began investigating the large-scale importation and distribution of the class B controlled drug, pseudoephedrine, and dealing of the class A controlled drug, methamphetamine. This investigation was called Operation 'Ghost'. Mr Ma, the first respondent, was identified as being heavily involved in the wholesale distribution and delivery of pseudoephedrine.[4] In 2013, police commenced a separate investigation into the supply of pseudoephedrine, called Operation 'Gem'. As a result of this investigation, Mr Ma was identified as being involved in the wholesale distribution and delivery of pseudoephedrine from a different stockpile, maintained by persons unrelated to those under investigation in Operation 'Ghost'.[5] On 4 December 2013, police terminated Operation 'Ghost'. A number ofsearch warrants were executed across Auckland, including at 8 Askerne Drive, Flat Bush, Auckland, where Mr Ma and Mrs Zhang, the second respondent, were living at the time, and 19A Kimpton Road, Papatoetoe, Auckland where Ms Zhang, the third respondent, was living at the time.[6] Ms Zhang is the registered proprietor of both 8 Askerne Drive and 19A Kimpton Road.[7] Police seized a total of $39,626.47 cash from 8 Askerne Drive and vehicles located at that property. In a bedroom at 19A Kimpton Road, police located a sportsbag containing 11.8 kilograms of ContacNT1 with a street value of approximately $459,190.[8] Subsequent investigations into the financial affairs of the respondents identified:(a) a significant proportion of funds used to purchase of 8 Askerne Drive and 19A Kimpton Road were of an unexplained or unverified origin;(b) a number of unverified cash deposits in Ms Zhang's bank accounts, inexcess of that declared to Inland Revenue;(c) Mr Ma declared minimal income to Inland Revenue and he met his living expenses via undeclared sources of income; and(d) Mrs Zhang received Work and Income benefits while not declaring the purchase of the property and subsequent profit from the sale of that property. She declared a modest income to Inland Revenue and her bank accounts received cash deposits from unknown sources.[9] The Commissioner of Police's (the Commissioner) case is that the direct or indirect proceeds generated by Mr Ma's (and associate's) offending has beenlaundered through various persons, including Ms Zhang and Mrs Zhang, and collated together to purchase 8 Askerne Drive and 19A Kimpton Road. In addition, theCommissioner's case is that Ms Zhang and Mrs Zhang have unlawfully benefitted toa very substantial degree from Mr Ma's criminal activity.Criminal proceedings[10] Mr Ma pleaded guilty to 43 charges of supplying pseudoephedrine. He was sentenced to a term of imprisonment of nine years and four months, with a minimum period of imprisonment of four years and six months.1 ContacNT is a cold and flue medication manufactured in China. Each capsule contains 90 mgs of pseudoephedrine.[11] Mrs Zhang was not charged with any offences as a result of Operation'Ghost' or Operation 'Gem'.[12] Ms Zhang was initially charged with possession of a class B controlled drug and permitting premises to be used for drug offending. These charges were subsequently withdrawn.Restraint and forfeiture proceedings[13] On 17 June 2015, the Commissioner applied for restraining orders over 19A Kimpton Road, 8 Askerne Drive and the cash totalling $39,626.47 seized from 8 Askerne Drive.[14] By notice of opposition dated 6 August 2015, the restraining orders were opposed by Mrs Zhang and Ms Zhang, on the basis that:(a) there were not reasonable grounds to believe that the property was tainted property; and(b) there were not reasonable grounds to believe Mrs Zhang and Ms Zhang had interests in, or effective control of, the property, nor that they had unlawfully benefitted from significant criminal activity.[15] That opposition was ultimately withdrawn. The application for restraining orders was accordingly granted on 22 February 2016 by Heath J. The restraining orders were extended by Edwards J on 20 February 2017.[16] The Commissioner is in the process of preparing his civil forfeiture application, but has not yet applied for forfeiture orders.Settlement[17] Counsel for the Commissioner, Mrs Zhang and Ms Zhang have now engaged in discussions regarding the possible settlement of these proceedings. The parties have agreed to settle the matter of forfeiture of assets as between themselves, subjectto the Court's approval under s 95 of the Criminal Proceeds (Recovery) Act 2009(the Act).[18] Further, Mr Ma has confirmed he has no financial or personal interests in the property subject to restraint, and does not want any further involvement in this matter. To date, he has taken no steps in the proceeding.Proposed settlement[19] The proposed settlement is as follows:(a) Mrs Zhang and Ms Zhang will raise funds sufficient to discharge the mortgage to ANZ Bank New Zealand Ltd over 19A Kimpton Road. Upon the raising of those funds, they will be applied to clear the mortgage on that property, rendering 19A Kimpton Road unencumbered;(b) assets forfeiture orders are to be made under s 50(1) of the Act, by consent, over the following property:(i) the unencumbered property at 19A Kimpton Road; and(ii) the cash;(c) 8 Askerne Drive will not be forfeited and the Official Assignee will, upon being satisfied that 19A Kimpton Road is unencumbered, arrange for the restraining orders to be lifted from the title of the property;(d) the Commissioner will not pursue an application for profit forfeiture orders against any of Mr Ma, Mrs Zhang or Ms Zhang; and(e) costs will lie where they fall in relation to all matters.[20] The approximate value of the property being forfeited is $719,626 (including cash seized), and the value of the property returned to Mrs Zhang and Ms Zhang is approximately $605,000 (taking into account current and likely borrowing).Assessment[21] Section 95 of the Act provides that the High Court must approve a settlement if it is satisfied that it is consistent with:(a) the purposes of the Act; and(b) the overall interests of justice.[22] The Court's jurisdiction pursuant to s 95 is supervisory, ensuring settlements are consistent with Parliament's intent in enacting the statute.2 This means theCourt's role is not to merely rubber stamp agreements.[23] The primary purpose of the Act is contained in s 3(1), namely, the establishment of a regime for forfeiture of property that has been derived directly or indirectly from significant criminal activity, or that represents the value of a person'sunlawfully derived income. Furthermore, as submitted by counsel, the reference to"overall interests of justice" indicates a broad enquiry is required.[24] In terms of the present case, there is a debate between the parties as to thestrength of the Commissioner's case. The consensus reached represents acompromise, having regard to the merits. There is nothing before me to suggest the compromise is not a sensible one. Pragmatic compromises serve the overarching purpose of the Act and the overall interests of justice.3 In this regard, I consider the saving of time and cost, and the avoidance of a litigation risk for both sides, is desirable.4 Additionally, the certainty and finality achieved by settlement is in the public interest.5 I am therefore satisfied that the expeditious resolution of the2 Commissioner of Police v Know-All Group Ltd HC Auckland CIV-2010-404-403, 7 November 2011, at [11].3 Commissioner of Police v Douglas [2015] NZHC 1293 at [6].4 Commissioner of Police v Kree [2013] NZHC 2972 at [11].5 Commissioner of Police v Moutray [2012] NZHC 2940 at [5].proceedings by forfeiture of the identified properties and release of the remaining property subject to restraining orders, serves the purpose of the Act and the overall interests of justice.[25] Accordingly, there shall be orders as sought, namely:(a) Within 15 working days of these orders being made, Mrs Zhang and Ms Zhang must ensure 19A Kimpton Road, Papatoetoe, Auckland becomes unencumbered by:(i) raising sufficient funds to discharge, fully, the mortgage (9160097.3) registered in favour of ANZ Bank New Zealand Ltd on 19A Kimpton Road, Papatoetoe, Auckland;(ii) paying those funds to ANZ Bank New Zealand Ltd; and(iii) taking all other steps necessary to discharge the mortgage (9160097.3) registered in favour of ANZ Bank New Zealand Ltd on 19A Kimpton Road, Papapatoetoe, Auckland.(b) For the purpose of raising sufficient funds to discharge, fully, the mortgage (9160097.3) registered in favour of ANZ Bank New Zealand Ltd on 19A Kimpton Road, Papatoetoe, Auckland in accordance with paragraph (a)(i) above, the restraining order against 8 Askerne Drive, Flat Bush, Auckland is varied so that all or part of those funds may be borrowed against 8 Askerne Drive, Flat Bush, Auckland.(c) Twenty working days after these orders are made, the following property will become the subject of assets forfeiture orders under s 50(1) of the Criminal Proceeds (Recovery) Act 2009 so that it vests in the Crown absolutely and is to be under the Official Assignee'scustody and control:(i) the unencumbered property at 19A Kimpton Road, Papatoetoe, Auckland; and(ii) $39,626.47 cash seized from 8 Askerne Drive, Flat Bush, Auckland (and all interest earned on that sum).(d) Provided that Mrs Zhang and Ms Zhang comply with their obligations under paragraph (a) above, and upon the Official Assignee being satisfied that 19A Kimpton Road, Papatoetoe, Auckland is unencumbered, the property at 8 Askerne Drive, Flat Bush, Auckland will be released from restraint, and the Official Assignee is then directed to lift the restraining orders from the title of that property.(e) The Commissioner will not pursue an application for profit forfeiture orders against any of the respondents.(f) Costs will lie where they fall in relation to all matters.(g) Leave is reserved to all parties to apply to the Court in the event unforeseen circumstances arise.