THE CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v HK SEARCH LTD [2022] NZHC 444

THE CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v HK SEARCH LTD[2022] NZHC 444 [11 March 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-2229[2022] NZHC 444UNDER the Overseas Investment Act 2005BETWEEN THE CHIEF EXECUTIVE OF LANDINFORMATION NEW ZEALANDPlaintiffAND HK SEARCH LIMITEDFirst DefendantDR WON JOO HURSecond DefendantDR JAEHO CHOIThird DefendantHearing: 24 February 2022; further submissions 28 February 2022Appearances: JCL Dixon QC, SM Lowery and S Scott for the PlaintiffAH Waalkens QC and SA Beattie for the First and ThirdDefendantsTW Kwon for the Second DefendantJudgment: 11 March 2022JUDGMENT OF FITZGERALD JThis judgment was delivered by me on 11 March 2022 at 3.00pm, pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy Registrar DateTo: A Waalkens QC, AucklandJ Dixon QC, AucklandT Kwon, AucklandS Beattie, AucklandAnd to: Overseas Investment Office, WellingtonIntroduction[1] The defendants have each admitted breaches of the Overseas Investment Act2005 (the Act) in connection with the purchase of a property in Helensville (theProperty).1 The plaintiff (referred to in this judgment as "the Regulator") anddefendants have subsequently engaged on the appropriate penalties to be imposed onthe defendants for the admitted breaches. Agreement has now been reached on thosepenalties.[2] The parties request the Court to impose a penalty on each of the defendants inthe agreed amount, pursuant to s 48(2) of the Act. The Court's task in this context isnot to determine the precise penalty it would have imposed on each defendant hadagreement not been reached; rather, it must be satisfied that the penalty proposed bythe parties falls within the appropriate range of penalty amounts which the Courtconsiders available.[3] Foreshadowing the outcome of this judgment, I am satisfied that the penaltiesproposed by the parties fall within the appropriate range. I accordingly make ordersbelow that each defendant pay the penalty in the agreed amount.2Agreed facts[4] The factual background to the breaches is set out in an agreed statement offacts which has been provided to the Court. Through counsel, each defendant hassigned the agreed statement of facts.[5] The following summary of the (detailed) summary of facts is adopted fromcounsel for the Regulator's written submissions. Neither defendant suggested this wasanything other than an accurate summary of the agreed facts.1 Being that property comprised in CT 331543 legally described as Lot 1 Deposited Plan 331543and having a total land area of 18.5531 hectares. The Property is "sensitive land" under s 12 andSchedule 1, Part 1 of the Act because it is non-urban land that has an area that exceedsfive hectares.2 See [101]–[103] below.[6] The first defendant (HK Search) is a company having its registered office at1 Princes Street, Auckland. Its sole director is the third defendant's (Dr Choi's) wife.[7] The second defendant (Dr Hur) is a Korean citizen and a medical doctor byprofession. He holds a New Zealand permanent resident visa and had previouslyowned property in New Zealand. However, because Dr Hur had not been present inNew Zealand for at least 183 days of the 12 months before the acquisition of theProperty, he was not "ordinarily resident in New Zealand" under s 6(2) of the Act.Dr Hur was therefore an "overseas person" under s 7 of the Act.[8] Dr Choi is a Korean citizen with a New Zealand permanent resident visa. At allrelevant times he resided in Auckland and practised as a lawyer on his own account.[9] On 3 July 2016, Dr Hur signed an unconditional agreement for the sale andpurchase of the Property with him or his nominee as purchaser (the Agreement). Thepurchase price was $3 million. Dr Hur paid the deposit of $300,000 on 5 July 2016.Dr Hur acquired an equitable interest in the Property by entering into the Agreementand paying the deposit.[10] The Agreement was not conditional on Dr Hur obtaining consent under the Actto acquire the Property.[11] As an overseas person under s 7 of the Act, Dr Hur was required to obtainconsent under the Act before acquiring an interest in the Property. He did not do so.The real estate agent acting on the transaction did not advise Dr Hur that he mayrequire consent or recommend that he seek legal advice before signing the Agreement.[12] After paying the deposit, Dr Hur engaged a solicitor (referred to in thisjudgment as "Solicitor A") to undertake the conveyancing transaction. Solicitor Aonly considered the overseas investment consent issue within the fortnight beforesettlement was due to take place (being 30 September 2016). On 23 September 2016,Solicitor A engaged another solicitor (referred to as "Solicitor B") to provide specialistadvice regarding consent under the Act. Solicitor B advised that entering theAgreement breached the Act, and Dr Hur should seek to cancel the Agreement. Theagreed statement of facts records that this would likely result in Dr Hur forfeiting hisdeposit and being exposed to a claim for consequential damages.[13] On 26 September 2016, four days before the scheduled settlement, Dr Hurengaged Dr Choi to act for him in relation to the Property. On 28 September 2016,Dr Choi emailed the Overseas Investment Office (OIO) to ask about Dr Hur's options.The OIO suggested he should seek legal advice on whether the Act applied.[14] On 29 September 2016, Dr Choi and Dr Hur met, together with members ofDr Hur's family. Dr Hur and his family urged Dr Choi to find a lawful way to avoidcancellation of the Agreement. The Hur family returned from New Zealand to SouthKorea on 30 September 2016.[15] On 30 September 2016, the vendor's solicitors issued a settlement noticerequiring settlement by 18 October 2016. In the intervening period, Dr Hur andDr Choi continued to try to find a solution to the OIO issue.[16] On 4 October 2016, Solicitor B provided further advice to the effect that therewas no risk-free way to complete the transaction or cancel the Agreement. Dr Choiand Dr Hur tried to cancel or postpone the settlement, but their attempts wereunsuccessful.[17] Dr Hur and Dr Choi discussed the prospect of another person purchasing theProperty on Dr Hur's behalf and holding it for a short period until either:(a) Dr Hur could find another person to whom title could be transferred; or(b) Dr Hur or his wife became eligible for OIO consent.[18] On 18 October 2016, the settlement date, there was a phone call betweenDr Hur and Dr Choi, in which Dr Choi advised nominating HK Search as the purchaserof the Property.[19] Dr Hur followed this advice and nominated HK Search as the purchaser.Dr Hur paid the funds required to settle the transaction ($2.72 million) and theProperty settled, with HK Search as the title holder.[20] It is accepted by the defendants that the intention was that HK Search wouldhold the Property for a short period until either of those matters referred to at [17]above came about.[21] Dr Choi advised Dr Hur to take this course on the basis that it would avoid theprovisions of the Act. Dr Choi accepts that this advice was wrong, and also that helacked the requisite experience to give it. Dr Hur relied on Dr Choi's erroneous advice.[22] Although HK Search held legal title to the Property, it is accepted that Dr Hurwas the Property's beneficial owner. This meant HK Search was Dr Hur's "associate"within the meaning of s 8 of the Act. OIO consent was therefore required before thetitle to the Property could pass to HK Search.[23] Following settlement, HK Search held the Property on Dr Hur's behalf andMrs Choi managed the Property for Dr Hur.[24] When the OIO began to investigate the transaction in early 2017, Drs Hur andChoi initially obstructed the investigation by telling the OIO that the transfer toHK Search took place in an arm's length transaction, and by creating a back-datedloan document to support this version of events. The OIO charged Drs Hur and Choiwith obstruction under s 44(1) of the Act, to which they pleaded guilty in the DistrictCourt. Dr Hur was fined $100,000 and Dr Choi was fined $62,500. Those DistrictCourt proceedings are distinct from the penalty the Court is asked to assess in theseproceedings.[25] After the initial obstruction, the defendants co-operated with the OIO. Thisincluded an OIO-approved process under which the Property was marketed for sale tothe public, so that other eligible purchasers could bid for it. No third party bids werereceived. In the event, HK Search transferred the Property to Mrs Hur, who hadbecome eligible to acquire the Property during these proceedings.Admissions[26] HK Search accepts it:(a) was Dr Hur's "associate" under s 8 of the Act; and(b) breached s 42 of the Act by taking title to the Property without obtainingconsent under the Act.[27] Dr Hur accepts he:(a) was an "overseas person" under s 7 of the Act; and(b) breached s 42 of the Act by taking the following steps without obtainingconsent under the Act:(i) entering into the Agreement; and(ii) nominating HK Search as purchaser of the Property.[28] Dr Choi accepts he breached s 43 of the Act by advising Dr Hur to nominateHK Search as purchaser of the Property, in circumstances where he was not an expertin the area of OIO consent, and where his advice was contrary to that of specialistadvice received from Solicitor B (whom he did not consult on the matter).[29] The defendants filed a notice of admissions admitting the Regulator's first,second and third causes of action to the extent they are admitted in the agreedstatement of facts.3[30] As liability is admitted, the sole issue for the Court is the appropriate penaltyto be imposed under s 48(2) of the Act.3 Notice of admissions dated 29 September 2021.Legislative framework[31] Under the Act, persons who are "overseas persons" include individuals whoare neither a New Zealand citizen nor ordinarily resident in New Zealand.4[32] A transaction requires consent under the Act if it will result in an "overseasinvestment in sensitive land" or in significant business assets.5[33] An "overseas investment in sensitive land" is the acquisition by an overseasperson, or an "associate" of an overseas person, of an estate or interest in land if:6(a) the land is "sensitive" under Part 1 of Schedule 1 to the Act; and(b) the estate or interest acquired is a freehold estate, a lease, or any otherinterest for a term of three years or more and is not an exemptedinterest.[34] Each overseas person or associate making the overseas investment must applyfor consent to an overseas investment transaction.7 Consent must be obtained for atransaction before the overseas investment is given effect.8[35] As noted earlier, it is accepted that HK Search was an "associate" of Dr Hur.[36] Section 42 of the Act provides that it is an offence for a person to give effectto an overseas investment without the consent required by the Act.[37] Section 43(1) of the Act provides that:Every person commits an offence who knowingly or recklessly enters into atransaction, executes an instrument, or takes any other step, for the purposeof, or having the effect of, in any way, directly or indirectly, defeating, evading,or circumventing the operation of this Act.(emphasis added)4 Overseas Investment Act 2005, s 7(2)(a).5 Section 10(1).6 Section 12(1)(a).7 Section 22(1)(a).8 Section 11(1).[38] At the time of the admitted breaches in this case, s 48 of the Act relevantlyprovided that:(1) On the application of the regulator, the court may order a person (A)to pay a civil penalty to the Crown or any other person specified bythe court if A has—(a) contravened this Act; or(b) committed an offence under this Act; or(c) failed to comply with a notice under section 38 or section 39 orsection 40 or section 41; or(d) failed to comply with a condition of a consent or of anexemption.(2) The court may order A to pay a civil penalty not exceeding the higherof—(a) $300,000; or(b) any quantifiable gain (for example, the increase in the valuesince acquisition) by A in relation to the property to which theconsent or exemption relates or for which a consent should havebeen obtained; or(c) the cost of remedying the breach of condition; or(d) the loss suffered by a person in relation to a breach of condition.(3) A person cannot be ordered to pay a penalty under this section and berequired to pay a fine under any of sections 42 to 46 for the sameconduct.(4) For the purposes of this section, the court must determine whether aperson's conduct falls within subsection (1) on a balance ofprobabilities.Approach to penalty[39] In assessing appropriate penalties under the Act, the Court has adopted anapproach that is similar to that adopted in sentencing for criminal offending. Thisbroadly involves:99 This approach is similar to the approach adopted when fixing penalties under the Commerce Act1986, which is frequently referred to in decisions of this Court on the proper approach todetermining penalties under the Act; for example, Chief Executive of Land Information NewZealand v Carbon Conscious New Zealand Ltd [2016] NZHC 558 [Carbon Conscious] at [27].(a) determining the appropriate "starting point" for the breaches, byidentifying aggravating or mitigating factors of the contraveningconduct itself; and(b) then adjusting the starting point in light of those factors specific to thedefendant and which warrant an uplift to or reduction from the startingpoint.[40] Decisions of this Court on appropriate penalties to which I was referredacknowledge the benefits of the Regulator and defendants resolving proceedings suchas these, and thus avoiding scarce court resources, and the parties' resources, beingdirected to what could otherwise be lengthy and complex litigation. Because of this,it is recognised that the Court has a role in promoting resolution of proceedings suchas this by accepting penalties in amounts agreed by the parties that are within anappropriate range.10[41] Counsel submit, and I accept, that the following factors will be relevant tosetting a starting point:11(a) the nature and extent of the breach;(b) the nature and extent of any loss or damage caused by the breach;(c) the nature and extent of any financial gain made from the breach;(d) whether the breach was intentional, inadvertent or negligent;(e) the level of civil pecuniary penalties that have been imposed in previoussimilar situations (to ensure consistency); and(f) the circumstances in which the breach took place.10 At [24]; and see Chief Executive of Land Information New Zealand v Tang [2018] NZHC 382 at[19]; and Chief Executive of Land Information New Zealand v Hong [2019] NZHC 1561 at [18].11 Carbon Conscious, above n 9, at [31]; and Chief Executive of Land Information New Zealand vAgria (Singapore) PTE Ltd [2019] NZHC 514 at [41].[42] Aggravating and mitigating factors specific to the defendant, and which maywarrant the identified starting point being increased or decreased, include:12(a) any previous misconduct of a similar nature by the defendant;(b) the size and resources of the defendant;(c) any co-operation with the authorities;(d) any admission of liability; and(e) any compliance programmes put in place by the defendant.Parties' submissions on why the agreed penalties are within range[43] It was evident at the hearing before me that the Regulator had done the "heavylifting" of preparing submissions on why the parties say the agreed end-point penaltiesfall within the appropriate range. I accordingly summarise below why the Regulatorsays the penalties in this case fall within the appropriate range, and then briefly addressany additional points raised on behalf of the defendants.The Regulator's submissionsStarting point[44] For the purposes of s 48(2)(a) of the Act (see [38] above), the parties agreethere is no quantifiable gain in respect of the Property:(a) Dr Hur and HK Search co-operated with the OIO to market the Propertyfor sale to an eligible purchaser, via a public process approved by theOIO. No third party bids were received. The Property wassubsequently transferred to Mrs Hur, who had become eligible toacquire the Property during the proceedings.12 Carbon Conscious, above n 9, at [47]; and Agria (Singapore) PTE Ltd, above n 11, at [42].(b) Dr Choi did not receive any financial benefit from the transaction, otherthan his fee of $3,071.74 plus GST and disbursements (in all,$3,622.50).[45] Accordingly, the maximum penalty to be imposed on each defendant is$300,000.[46] Turning to the appropriate starting point, the Regulator submits that thedefendants' breaches were moderately serious. The Property's sale price ($3 million)and size (18.5531 hectares) are significant, but accepted as lower than in many of thecomparable cases. The Property has no special historical value and is not located onthe foreshore.[47] The first breach, being Dr Hur's acquisition of an equitable interest in theProperty by signing the Agreement, is accepted by the Regulator to have beeninadvertent. Dr Hur was not advised of his responsibilities under the Act and whileresponsibility for being aware of his obligations sat with him, there is no suggestionof prior knowledge on his part (as has been the case in some of the earlier authoritiesto which I was referred, for example Chief Executive of Land Information NewZealand v Tang).13[48] The Regulator submits that the second breach, being Dr Hur's nomination ofHK Search as the purchaser, was negligent by Dr Hur and reckless by Dr Choi. Thisis said to be because:(a) Dr Hur sought Dr Choi's assistance to find a lawful means of settlingthe transaction.(b) Dr Hur relied on Dr Choi's incorrect legal advice when nominatingHK Search. The Regulator accepts that in some cases, reliance onincorrect legal advice may be viewed as a mitigating factor.14 But inthis case, the Regulator submits that Dr Hur would have known13 Tang, above n 10.14 Carbon Conscious, above n 9, at [35].Dr Choi's advice was contrary to that of Solicitor B, a specialist in OIOmatters, and instead preferred to follow Dr Choi's advice rather thanSolicitor B's.(c) Dr Choi provided the incorrect advice to nominate HK Search eventhough he was not an expert in the area (and that must have been knownto Dr Choi), and his advice was contrary to the specialist advicereceived from Solicitor B.[49] Turning to the starting point adopted in other cases, the Regulator submits thatthe approaches to the adoption of starting points in Chief Executive of LandInformation New Zealand v Carbon Conscious New Zealand Ltd,15 Tang16 and ChiefExecutive of Land Information New Zealand v FFG Investment Ltd17 are the mosthelpful.[50] Carbon Conscious (CCNZ) was a subsidiary of an Australian company and anoverseas person under s 7(1) of the Act. It acquired several forestry properties withOIO consent.[51] CCNZ found a further property it wished to purchase but did not have time toobtain OIO consent before settlement of the transaction. It sought legal advice on howit could purchase the property. On legal advice, CCNZ formed a company, Katey LRInvestments Ltd (Katey LR), which was a New Zealand resident company, to take title.Katey LR was an associate of CCNZ in terms of s 8(1)(c) of the Act.[52] Katey LR purchased the property and later agreed to sell it to CCNZ, subjectto OIO consent. In the meantime, it granted forestry rights to CCNZ in respect of theproperty.[53] The defendants' legal advice was accordingly that this structure would notbreach the Act.15 Carbon Conscious, above n 9.16 Tang, above n 10.17 Chief Executive of Land Information New Zealand v FFG Investment Ltd [2019] NZHC 3293.[54] CCNZ was ordered to pay a penalty of $40,000, which was a 50 per centdiscount on the adopted starting point of $80,000. That discount reflected the fact thedefendants had not previously contravened the Act, their co-operation throughout theinvestigation and legal proceedings, and the reliance on erroneous legal advice.[55] Counsel for the Regulator observe that Carbon Conscious was the first penaltyjudgment issued under the Act. By reference to a helpful schedule annexed tocounsel's submissions, counsel submit that penalties have generally increased sincethat time. Counsel submit that that is understandable and appropriate, given the Acthas been in place for longer and market participants have had more time to becomefamiliar with its requirements.[56] Turning to the decision in Tang, Mr Tang was an overseas person under theAct. He entered into an agreement to purchase residential property in Glendowie for$5.1 million. Mr Tang later nominated three other overseas persons to settle thetransaction, which they did. Neither Mr Tang nor the three nominees obtained OIOconsent.[57] Mr Tang was an experienced businessperson with previous experiencepurchasing land in New Zealand. Neither the real estate agent nor the solicitor whoacted for him on the transaction raised the need for OIO consent.[58] Lang J viewed the poor legal advice Mr Tang received as a mitigating factor,although his Honour considered Mr Tang's culpability to be higher than in CarbonConscious, due to his experience as a businessman (and thus he ought to have beenaware of or at least alert to OIO consent issues) and the presence of the "OIA consent"checkbox on the agreement for sale and purchase (which should have further alertedMr Tang to the consent requirement).18[59] Counsel for the Regulator observe that in the context of penalties under theCommerce Act 1986, the Court has not always viewed the receipt of legal advice as amitigating factor. Receipt of legal advice has been described as "the absence of an18 Tang, above n 10, at [23].aggravating factor, rather than one that attracts a credit, by way of mitigation".19However, the Regulator accepts that the receipt of legal advice may show that a breachwas not deliberate.[60] The Court in Tang approved the parties' proposed starting point of $130,000,though Lang J observed it was at the upper end of the available range.20 Afterdiscounts, Mr Tang's end penalty was $110,500.[61] In FFG Investment, Mr Cai, a New Zealand resident, entered into an agreementto purchase land, which was deemed sensitive under the Act because it adjoined ascenic reserve. The property had an area of 2.78 hectares and a purchase price of $4.76million. The intention was to develop the property into a 27-lot subdivision.[62] Mr Cai entered a deed of nomination with FFG Investment Ltd (FFG) prior tosettlement. FFG was an overseas person. It held equitable and legal title to the landfrom September 2013 until February 2016. FFG subsequently entered into anagreement to sell the land to Grand Sky Ltd (Grand Sky). At the time of the agreement,on 18 December 2015, Grand Sky was also an overseas person, but when the sale wascompleted a month later, it was no longer an overseas person due to changes in itsshareholdings.[63] The maximum penalty for each of FFG and Grand Sky was $300,000, as therewas no quantifiable gain. The Court held that the breaches were not deliberate butwere also more serious than in Carbon Conscious. The starting point for FFG was setat $103,000. After a discount of 20 per cent for co-operation, early acceptance ofliability and agreement as to penalties, the end penalty was $82,500.[64] The starting point for Grand Sky was $54,000. It received a 25 per centdiscount for full co-operation, early acceptance of liability, agreement on penalties,and undertaking to retain sufficient funds in trust from the sale of its sections to enableit to meet any civil penalty. The end penalty was $40,500.19 Commerce Commission v Barfoot & Thompson Ltd [2016] NZHC 3111 at [27].20 Tang, above n 10, at [24].[65] As against the agreed facts in this case, the Regulator submits that theappropriate starting point for Dr Hur is a penalty of around $140,000. The Regulatorsays that Dr Hur's culpability is higher than in all of Carbon Conscious, Tang andFFG because:(a) In FFG, the defendants addressed the breach before settlement bychanging the shareholdings such that consent was not required. Therewas no corrective action by Dr Hur prior to settlement.(b) The breach in FFG was also less serious because the consentrequirement was triggered by the shareholdings in the purchasingcompanies. For Dr Hur, the situation was more straightforward sincehe is a natural person who plainly required OIO consent.(c) As in Tang and Carbon Conscious, Dr Hur relied upon poor legaladvice. In this case, however, there was an element of Dr Hur "runningthe risk" of a breach, since Dr Choi's advice to nominate HK Searchwas contrary to specialist advice received earlier from Solicitor B.[66] Nevertheless, the Regulator accepts that the starting point should not be nearthe top end of the range because:(a) there was no intentional breach by Dr Hur of the Act;(b) the acquisition was not for a commercial purpose;(c) unlike the defendant in Tang, Dr Hur's experience is in medicine ratherthan commercial transactions; and(d) the $3 million purchase price was lower than many of the other casesthat have come before the Court.[67] The Regulator therefore submits that a starting point of around $140,000 isappropriate for Dr Hur.[68] Turning to Dr Choi, the Regulator submits that the starting point should behigher than Dr Hur's, and that $150,000 to $160,000 is appropriate.21[69] This is submitted to be because Dr Choi advised Dr Hur to nominateHK Search to purchase the Property, which was reckless and contrary to the specialistadvice of Solicitor B. Dr Choi has acknowledged that he was acting outside his areaof expertise. Balanced against that, Dr Choi did not benefit from the breach, otherthan through his fee, and was at all times attempting to assist Dr Hur as a client.[70] In setting a starting point for Dr Choi, the Regulator submits that the decisionin Tang is of greatest assistance. As noted, the Court adopted a $130,000 starting pointfor a client who relied on incorrect legal advice. The Regulator submits that Dr Choi'sstarting point should be higher since he was the provider of the incorrect advice, ratherthan the recipient, and in circumstances where the provision of that advice wasreckless.[71] No penalty is sought by the Regulator for HK Search. It operated as the agentof Drs Choi and Hur, and co-operated in an OIO-approved process to market theProperty to the public. The parties accordingly agree that it is appropriate for penaltiesto be limited to the natural persons, being Drs Choi and Hur.Adjustment of starting point to reflect factors personal to defendants[72] Turning first to Dr Hur, the Regulator does not suggest any aggravating factorspersonal to Dr Hur.[73] The Regulator notes that Drs Hur and Choi initially obstructed the OIO'sinvestigation in the manner discussed at [24] above. The Regulator accepts, however,that that conduct has been dealt with through criminal proceedings in the DistrictCourt, and on that basis, accepts it should not be viewed as an aggravating factor inthese proceedings.21 This is in fact the only area of disagreement between the Regulator and Dr Choi.[74] The Regulator accepts there are several mitigating factors in relation to Dr Hur:(a) Dr Hur has admitted liability and agreed to pay a civil pecuniarypenalty.(b) Since Dr Hur engaged Bell Gully in July 2017, he co-operated fullywith the OIO's investigations, including travelling to New Zealand fortwo voluntary interviews, and voluntarily submitting to theNew Zealand jurisdiction.(c) Dr Hur co-operated in an OIO-approved process to market the Property.(d) Dr Hur has not previously breached the Act.(e) Dr Hur was fined $100,000 in the District Court for his part inobstructing the OIO's investigation. While that fine reflected conductdifferent to that at issue in these proceedings, it adds to the overallfinancial burden for Dr Hur in relation to the Property.[75] The Regulator submits that discounts of around 25 per cent are appropriate forall the above factors. This equates to a $35,000 reduction from the proposed startingpoint of $140,000, resulting in a penalty of $105,000. The Regulator accepts it isappropriate to round that amount down to $100,000, which the parties agree is anappropriate end penalty.[76] Turning to Dr Choi, like Dr Hur, Dr Choi co-operated with the OIO'sinvestigation (after admitting the initial obstruction), admitted liability, and has notbreached the Act previously.[77] The Lawyers & Conveyancers Disciplinary Tribunal suspended Dr Choi frompractice for five and a half months due to his conduct in relation to the Property.Dr Choi was also fined $60,250 in the District Court on the obstruction charge, addingto the financial burden to Dr Choi from his involvement in the transaction to purchasethe Property.[78] The Regulator submits that an additional relevant factor is Dr Choi's limitedfinancial means (the size and resources of the defendant being recognised as a relevantfactor, see [42(b)] above). Based on information provided to it, the Regulator issatisfied that Dr Choi is unable to pay a penalty of more than $30,000.[79] The Regulator accordingly agrees that $30,000 is the appropriate penalty, givenit is the most Dr Choi can pay. The $30,000 agreed penalty is lower than the Regulatorwould ordinarily consider appropriate, but adopting this as the "end" penalty isconsistent with a similar approach taken in Commerce Act decisions on penalty, whenit is clear a defendant can pay only a modest, or even no, penalty.[80] The Regulator also does not oppose Dr Choi's request that his penalty be paidby way of payment arrangement at the amount of $500 per month.Submissions for HK Search and Dr Choi[81] HK Search and Dr Choi do not take any issue with the submissions made bythe Regulator, other than Dr Choi says that a slightly lower starting point should beadopted in his case. For the avoidance of doubt, however, Dr Choi endorses theRegulator's submission that an end penalty of $30,000 be adopted.[82] In terms of the (relatively small) difference between the parties on a startingpoint, while Dr Choi acknowledges that he acted recklessly in taking steps that hadthe effect of circumventing the operation of the Act, counsel submits that it isimportant that he did not do so knowingly. That Dr Choi did not benefit from thebreach other than a very modest fee, and that at all times he was attempting to assistDr Hur as his client, is said to further ameliorate the culpability attaching to Dr Choi'sreckless conduct.[83] On this basis, Dr Choi's submission is that a slightly lower starting point ofbetween $120,000 to $130,000 would be appropriate.[84] Counsel for Dr Choi notes that this is the first case where the provider ofincorrect advice on OIO consent has been joined as a defendant. Counsel submits thatthis distinguishes this case from many of those that have previously come before thecourts. Counsel also refers to the decision in Chief Executive of Land InformationNew Zealand v Hong, where deliberate and fraudulent actions led to a starting pointof $200,000 to $220,000.22 Further, counsel notes that the starting point in Tang wasconsidered by the High Court to be "at the upper end of the available range".23Counsel also notes that the property in Tang was considerably more valuable than inthis case, and had special features (being in a coastal setting). Counsel submits thatwhile the defendant in Tang was the recipient of incorrect advice, the other factors infact make Tang a more serious case.Submissions on behalf of Dr Hur[85] Dr Hur is no longer represented by those solicitors representing him during theRegulator's investigation.[86] Counsel for Dr Hur noted in his written submissions that none of Dr Hur'sactions were without his lawyers' advice. Counsel was also critical of the fact thatother parties, including the vendor and the vendor's lawyer, have never beeninvestigated or had similar action taken against them as in respect of the defendants inthis case. Of some concern to me prior to the hearing, the written submissionsrecorded that Dr Hur "was innocent as explained above" and that the Regulator isultimately "using an innocent foreigner as a scapegoat for somebody's rich and fame[sic]".[87] Given the content of the written submissions made on behalf of Dr Hur,I sought confirmation from counsel for Dr Hur at the outset of the hearing that itremained appropriate for the matter to be dealt with on an agreed basis. Counsel forDr Hur confirmed that that was the case. In my view that must be so, given the formaladmissions made by Dr Hur in response to the Regulator's claim, and his expressagreement to the agreed statement of facts. There had been no applications or similarto "retreat" from these positions.22 Hong, above n 10, at [28].23 Tang, above n 10, at [24].[88] The written and oral submissions made on behalf of Dr Hur accordinglyendorsed the agreed end penalty of $100,000. However, and perhaps reflecting thoseaspects of the written submissions to which I have referred earlier, counsel for Dr Hursubmitted it would be appropriate to allow deferred payment of the penalty by100 years ("which may not be enforceable on his estate in case he passes away beforethe payment date comes"), or alternatively, payment by instalment of $100 per month,which also may not be accrued to Dr Hur's estate.Discussion[89] For the comprehensive reasons outlined in counsel for the Regulator'ssubmissions, I am satisfied that the proposed penalties fall within the appropriaterange.[90] Turning first to Dr Hur, there is no real dispute about the starting points anddiscounts in this case. In particular, I accept the Regulator's submission that Dr Hur'sculpability is somewhat higher than in each of Carbon Conscious, Tang and FFG forthose reasons outlined at [65] above. In particular, while Dr Hur did rely on legaladvice, he effectively received specialist advice from Solicitor B that there was norisk-free way to settle the transaction in this case. At the hearing before me, counselfor Dr Hur challenged Solicitor B's expertise, though the fact that Solicitor B was aspecialist is an agreed fact set out in the agreed statement of facts which Dr Hur hassigned.[91] Dr Hur was accordingly on notice of that advice from Solicitor B. He thentook and followed Dr Choi's advice, and it must have been evident to him that it wascontrary to the advice received from Solicitor B. Nevertheless, Dr Hur did rely on thatlegal advice. It is accordingly appropriate to categorise his conduct as negligent ratherthan anything more culpable.[92] Reflecting that Dr Hur's culpability is somewhat more serious than that inTang, I am satisfied that the starting point of around $140,000 falls within theappropriate range. I observe, however, that given the starting point in Tang fell at theupper end of the range, so too does the starting point adopted in this case for Dr Hur.[93] Turning to the factors personal to Dr Hur, I have considered whether the activeobstruction of the Regulator's investigation, at least at an initial stage, ought to beconsidered an aggravating factor. I have concluded that it should not be. Rather, fullco-operation is generally regarded as a mitigating factor personal to the defendant. Inthis case, the initial obstruction has the effect of reducing the discount that mightotherwise have been available for co-operation. I also note those steps in particulartaken by Dr Hur in voluntarily travelling to New Zealand on multiple occasions forinterviews and submitting to the courts of this jurisdiction. Those are significant andtangible steps. But for the initial (and serious) obstruction of the Regulator'sinvestigation, the mitigating factors collectively might have warranted a slightlygreater discount than that agreed by the parties. I therefore consider a discount ofaround 25 per cent to be in line with the appropriate range discussed in the authorities,resulting in the "rounded" penalty of $100,000.[94] Turning to Dr Choi, I agree with the Regulator that Dr Choi's culpabilitywarrants a (slightly) higher starting point than that adopted for Dr Hur. But I alsoagree with counsel for Dr Choi that the starting point suggested by the Regulator is alittle high, or at the very least, at the very upper end of the available range. It has beenaccepted by the Regulator and Dr Choi that his conduct was reckless, rather thaninvolving a deliberate or knowing breach. A starting point of around $160,000,particularly when compared with the starting points in Hong for deliberate andfraudulent breaches (see [84] above), would in my view likely fall outside the upperend of the range. I would accordingly see the appropriate range in the case of Dr Choias being more around the $120,000 to $150,000 mark. This range for a starting pointis approaching half of the maximum penalty, reflecting the reckless but not knowingbreach, that there was no gain on the part of Dr Choi, that Dr Choi was seeking toassist his client at all times, and that the Property was not as large or as valuable as inmany of the cases that come before this Court.[95] At the hearing, I sought further information from counsel on whether it wasappropriate to effectively "cap" the appropriate penalty by reference to Dr Choi'sfinancial means, rather than Dr Choi's financial means simply being a factor which istaken into account when assessing the appropriate end penalty. Counsel for theRegulator has helpfully provided me with further authorities in which a similar issuehas been considered in the context of penalties under the Commerce Act.24 InCommerce Commission v Rural Livestock Ltd, a final penalty would have been in theorder of $1.2 million to $1.5 million.25 The parties had nevertheless proposed apenalty of $475,000, reflecting Rural Livestock's financial position. The Commissionin that case accepted that Rural Livestock's conduct did not justify putting it out ofbusiness. The Court stated:26I am satisfied, like the Commission, that a penalty of $475,000 is within, andat the maximum, of Rural's financial means. In those unusual circumstancesI will impose such a reduced penalty.[96] In Commerce Commission v International Racehorse Transport NZ, theCommission made it clear that ordinarily it would seek a pecuniary penalty for thebreaches in that case.27 It did not do so, however, because of the defendant's financialposition, which meant it was unable to pay any penalty. There was also potential forjob losses and a risk of creating a monopoly in the industry if the defendant failed.The Court held in those circumstances that the breaches did not require the impositionof a pecuniary penalty.[97] It is common ground that the maximum financial penalty Dr Choi can pay is$30,000. The Regulator submits that there is no interest in bankrupting Dr Choi.[98] In the particular circumstances of this case, I am satisfied it is appropriate toimpose the agreed penalty of $30,000. There is no reason not to accept the Regulator'sposition that this is indeed the maximum penalty that Dr Choi can pay. This is on thebasis of a statement of financial position that has been provided to and accepted by theRegulator. A $30,000 penalty, to be paid by an individual, is not insignificant. Further,Dr Choi has also been the subject of a substantial fine in the criminal proceedings, andhas been suspended from practice as a legal practitioner. These matters add to thefinancial implications for Dr Choi arising from his advice on the transaction inquestion.24 Commerce Commission v Rural Livestock Ltd [2015] NZHC 3361; and Commerce Commission vInternational Racehorse Transport NZ [2020] NZHC 1716.25 Commerce Commission v Rural Livestock Ltd, above n 24.26 At [59].27 Commerce Commission v International Racehorse Transport NZ, above n 24.[99] I accept that it is not necessary in order to provide for general deterrence inOIO cases to impose a financial penalty in an amount which is accepted to be wellbeyond the defendant's means of paying, at least where the financial ruin of thedefendant is not warranted by their contravening conduct.28 Acceptance of the agreedpenalty in this case also encourages resolution, which is of benefit to all partiesinvolved, and the community more generally, for the reasons outlined at [40] above.[100] Finally, and as noted at [80] above, the Regulator has agreed to accept paymentby Dr Choi at a rate of $500 per month. The orders sought initially envisaged I wouldmake a formal order to that effect. Counsel for the Regulator provided me with twodecisions relating to penalties under the Commerce Act in which the Court did makeorders for payment by instalments.29 However, I consider the precise mode andmechanism for payment of the penalty is generally best left to be agreed between theparty collecting the court-ordered penalty and the defendant. That provides forflexibility if circumstances change in the future (for example, if Dr Choi wanted topay in greater instalment amounts). And given the Regulator has agreed before thisCourt to repayment by Dr Choi by way of instalments of $500 per month, it wouldhardly seek to unilaterally step away from such agreement.Result[101] Dr Hur is ordered to pay a civil penalty in the sum of $100,000.[102] Dr Choi is ordered to pay a civil penalty in the sum of $30,000.[103] There is no penalty imposed on HK Search Limited.[104] No party sought costs.__________________________Fitzgerald J28 Egregious conduct may nevertheless warrant such an outcome; see Commerce Commission vKoppers Arch Wood Protection (NZ) Ltd (2006) 11 TCLR 581 (HC) at [34].29 Commerce Commission v Thai Airways International Public Company Ltd [2013] NZHC 844; andCommerce Commission v Barfoot & Thompson Ltd [2017] NZHC 218.