COMMISSIONER OF POLICE v COTTON [2018] NZHC 2577

COMMISSIONER OF POLICE v COTTON [2018] NZHC 2577 [2 October 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2016-404-000658[2018] NZHC 2577BETWEEN COMMISSIONER OF POLICEApplicantAND SHEREE DENA COTTONRespondentHearing: 27 September 2018Appearances: L Fraser for the ApplicantS Elliott for the RespondentJudgment: 2 October 2018JUDGMENT OF PALMER JThis judgment was delivered by Justice Palmeron 2 October 2018 at 3.30 pmpursuant to R 11.5 of the High Court RulesRegistrar / Deputy RegistrarDateCounsel/Solicitors:Mr S Elliott, Barrister, AucklandLegal Services Agency, AucklandMeredith Connell, AucklandSummary[1] Ms Sheree Cotton seeks relief from a forfeiture order in respect of her claimedrelationship property interest in a house. In opposing that, the Commissioner of Police(the Commissioner) seeks to rely on without prejudice correspondence. Ms Cottonobjects on the basis the correspondence is privileged. I find it is privileged, she didnot waive privilege and the correspondence must not be disclosed.What happened?Restraint of assets[2] In March 2016, the Police searched a property in Ranui, Auckland, registeredin the name of Mr Eddie Cotton and found a cannabis growing facility. In April 2016,the Commissioner of Police obtained restraining orders over the property, a vehicleregistered in the name of Mr Eddie Cotton and $153,000 in cash.[3] Ms Sheree Cotton, also known as Ms Sheree Edwards, is Mr Cotton's formerwife and, they say, current de facto partner. In June 2016, further restraining orderswere made over two Bonus Bond accounts, one in Ms Cotton's name and one in MrCotton's name, and over a Mitsubishi vehicle registered in her name. In June 2016,the Commissioner applied to sell the Mitsubishi. In November 2016, Ms Cottonapplied to vary the restraining orders to release the Mitsubishi.Settlement[4] The Commissioner and Ms Cotton sensibly negotiated a settlement of theirrespective applications, including via correspondence marked "without prejudice saveas to costs". On 16 January 2017, the Commissioner, Mr Cotton and Ms Cotton fileda joint memorandum of counsel recording the parties had "entered discussions with aview to settling the question of restraint, Ms Edwards' application and forfeiture inrespect of Ms Edwards' property" which was identified as the Mitsubishi and BonusBonds.1 They jointly sought the court's approval of a settlement under s 95 of theCriminal Proceeds (Recovery) Act 2009 (the Act). The proposed settlement provided1 Joint memorandum of counsel of 16 January 2017 at [3.1].the Bonus Bonds and Mitsubishi would vest in the Crown, $5,000 would be paid toMs Cotton, Ms Cotton would not pursue her variation application, the Commissionerwould not pursue his forfeiture application and costs would lie where they fell. Theparties jointly submitted the proposed settlement was consistent with the purposes ofthe Act and in the overall interests of justice. On 19 January 2017, Heath J approvedthe proposed settlement.2 The result was recorded in court orders.Application for relief from forfeiture[5] On 1 May 2018, the court approved a settlement between the Commissionerand Mr Cotton under s 95 of the Act, including a forfeiture order over a house ownedby Mr Eddie Cotton. On 16 August 2018, represented by new counsel, Ms Cottonapplied for relief from that order, under ss 62–67, on the basis she has a relationshipproperty claim over the house. The Commissioner submits Ms Cotton has no standingto bring her application, and should be estopped from doing so, because she hasalready settled her claims. He relies on Heath J's judgment giving effect to thesettlement agreement. The Commissioner has filed a supporting affidavit by DetectiveNicholas Davenport which refers to, and exhibits, the without prejudicecorrespondence between the Commissioner and Ms Cotton.[6] A one hour hearing is scheduled for 18 October 2018 to determine whetherMs Cotton is precluded from applying for relief from the forfeiture order.[7] In the meantime, Ms Cotton seeks urgent directions that the correspondence isprivileged and inadmissible and it, and references to it, should be removed fromDetective Davenport's affidavit. I heard argument from counsel about this in the dutylist on 27 September 2018.Relevant law of privilege[8] Section 53 of the Evidence Act 2006 (the Act) provides a person who hasprivilege in a communication or information has the right to refuse to disclose, and theright to prevent disclosure, the communication, the information in it and any opinion2 Commissioner of Police v Cotton [2017] NZHC 21.formed by a person based on them. Section 53(4) empowers a judge to order thecommunication, information or opinion not be disclosed in a proceeding.[9] Relevantly, s 57(1) deals with privilege in the context of settlementnegotiations. It provides that "a person who is a party to a dispute of a kind forwhich relief may be given in a civil proceeding has a privilege in respect ofcommunication between that person and any other person who is a party to the disputeif the communication: (a) was intended to be confidential: and (b) was made inconnection with an attempt to settle or mediate the dispute between the persons.[10] Section 57(3) provides s 57 does not apply to:(b) evidence necessary to prove the existence of such an agreement in aproceeding in which the conclusion of such an agreement is in issue;or(d) the use in a proceeding of a communication or document made orprepared in connection with any settlement negotiations or mediationif the court considers that, in the interests of justice, the need for thecommunication or document to be disclosed in the proceedingoutweighs the need for the privilege, taking into account the particularnature and benefit of the settlement negotiations or mediation.[11] In Sheppard Industries Ltd v Specialized Bicycle Components Inc, the Court ofAppeal admitted evidence of without prejudice correspondence in a mediation contextwhere there was no written settlement agreement.3 The Court considered suchevidence to be admissible where it goes to whether there is a genuine settlementagreement or goes to its meaning.4 The Court said that reinforces, rather thanundermines, the policy underlying the without prejudice rule that parties should beencouraged to settle rather than litigate disputes.5[12] Section 65(3)(a) provides a person waives privilege by acting so as to put theprivileged communication in issue in a proceeding.3 Sheppard Industries Ltd v Specialized Bicycle Components Inc [2011] NZCA 346, [2011] 3 NZLR620.4 At [42].5 At [43].Submissions[13] Mr Elliott, for Ms Cotton, submits the correspondence is privileged and cannotbe produced in the proceeding without Ms Cotton's consent, which she has not given.He submits the exceptions in s 57(3)(b) and (d) do not apply. He submits this is not acontract case where pre-contractual negotiations are relevant, there is no ambiguity inthe settlement orders and nothing in the correspondence supports it being a full andfinal settlement. He submits the issue is appropriately resolved before the hearing. Heseeks directions the correspondence is privileged and requiring it, and references to it,to be removed from the affidavit and an amended copy filed.[14] Mr Fraser, for the Commissioner, submits the correspondence is not privilegedunder s 57(3)(b) as there is a dispute as to whether an agreement exists requiringMs Cotton not to take any further part in the Commissioner's proceedings. He submitsit should fall under the s 57(3)–(d) exception in the interest of justice. That is because,at the hearing of the estoppel application, the Commissioner has to establish theCommissioner had a reasonable belief the settlement was "full and final" and theproperty identified in the settlement memorandum was the only restrained property inwhich Ms Cotton had an interest. The Commissioner also has to establish hereasonably relied on the belief to his detriment and it would be unconscionable forMs Cotton to depart from that position. He submits the correspondence is relevantand necessary to determine that. Alternatively, if the communications are privileged,Mr Frasesr submits, privilege has been waived by Ms Cotton putting in issue theinterpretation of the settlement agreement. He seeks directions to that effect, meaningthe communications are admissible for the purpose of determining the reliefapplication.Can the Commissioner rely on the documents?[15] There is no dispute the correspondence is privileged and not disclosable unlessone of the exceptions in s 57 applies. I do not consider the exception in s 57(3)(b)applies because it is not, here, necessary to prove the existence of the settlementagreement. The parties agree the settlement agreement exists. It was cited and reliedupon by Heath J in his judgment approving settlement. The dispute is as to itsinterpretation, not its existence.[16] It is possible the exception under s 57(3)(d) might apply. A settlementagreement is a contractual document, as noted by the Court of Appeal in SheppardIndustries Ltd.6 Section 95's requirement that settlement agreements under the Actare not binding unless approved by the High Court does not alter that character. Butit does mean settlement itself is the effect not only of the agreement but also of thejudgment approving the agreement. That may impact on what is required for anestoppel argument to succeed. Because that is not before me here and it will beconsidered at the forthcoming hearing, I do not consider that further.[17] In any case, however, I do not consider the correspondence, which I havereviewed, adds anything material to the facts or the understandings of the parties thatare reflected in the settlement agreement itself. It does not assist in interpreting themeaning of the settlement agreement. There is no need for the correspondence to bedisclosed, and certainly not enough of a need to outweigh the need for privilege.Accordingly, s 57(3)(d) does not apply to the correspondence here.[18] For the same reasons, I do not consider Ms Cotton has waived privilege. Shehas put in issue the interpretation of the settlement agreement but not thecorrespondence, which does not add anything material to the agreement.Result[19] I direct the without prejudice correspondence between Ms Cotton and theCommissioner is privileged and inadmissible at the hearing scheduled for 18 October2018. Detective Davenport's affidavit should be revised as soon as practicable, toomit the correspondence at annexes one to four and the references to its substance inparagraphs 3.1 to 3.9 in preparation for that hearing.Palmer J6 At [41].