THE COMMISSIONER, NEW ZEALAND POLICE v CHENG [2023] NZHC 1167

THE COMMISSIONER, NEW ZEALAND POLICE v CHENG [2023] NZHC 1167 [16 May 2023]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECIV-2016-416-12CIV-2016-416-46CIV-2019-416-4[2023] NZHC 1167UNDER the Criminal Proceeds (Recovery) Act 2009BETWEEN THE COMMISSIONER, NEW ZEALANDPOLICEApplicantAND THOMAS CHENGFirst RespondentMASONIC LIMITEDSecond RespondentREDOUBT HOUSE LIMITEDThird RespondentACTION INVESTMENTS LIMITEDFourth RespondentACTION INVESTMENT LLPFifth RespondentHARVEST PROPERTY LLPSixth RespondentMORTGAGE INTERNATIONAL LLPSeventh RespondentEXPRESS FACTORING LLPEighth RespondentWORLDWIDE MODELS LIMITEDNinth RespondentCML BUILDING LIMITEDTenth RespondentSTARDUST BUILDING LIMITEDEleventh RespondentBAYWIDE CREDIT LIMITEDTwelfth RespondentANDERSONS BUILDING LIMITEDThirteenth RespondentUNITEC INVESTMENT LIMITEDFourteenth RespondentKFC LIMITEDFifteenth RespondentWILLIAM CHENG LIMITEDSixteenth RespondentQUEENS HOTEL LIMITEDSeventeenth RespondentWILLIAM CHENGEighteenth RespondentNYIOH CHEW HONGNineteenth RespondentEMILY CHENG aka JOANNE MCKAYTwentieth RespondentWINSTON GEORGE MAURICERAYMOND FRANKLINTwenty First RespondentUNITEC INVESTMENTS LLPTwenty Second RespondentHARVEST FACTORING LLPTwenty Third RespondentAND WARREN JAMES BORRIEFirst Interested PartyHearing: On the papersAppearances: F E Cleary and V M Rea for the ApplicantL C Ord and E T Blincoe for the First RespondentM T Lennard counsel assisting the CourtEighteenth and Nineteenth Respondents in personJudgment: 16 May 2023JUDGMENT (NO 2) OF COOKE J(Costs)[1] These proceedings involved an application for profit forfeiture orders underthe Criminal Proceeds (Recovery) Act 2009 (the Act). In the principal judgment Iupheld the Commissioner's claim for profit forfeiture orders against the firstrespondent, but declined the application in relation to the 18th and 19th respondents.1[2] The question of costs as between the Commissioner and the first respondenthas been resolved. There are two outstanding issues in relation to costs, however:(a) a claim for costs by the 18th and 19th respondents; and(b) the question whether the Commissioner should meet the costs ofcounsel assisting under s 178 of the Senior Courts Act 2016.Costs claim by 18th and 19th respondents[3] By memorandum dated 28 March 2023 the 18th and 19th respondents appearto make a claim for costs. They say:On 24th March 2023, Judgment was made by the Honourable Cooke J — andwe believe that the underlying principle is that costs and damages should beawarded to us after the Action is completed in our favour.We are not seeking costs for the Court Hearing held on 13th February 2023 —as we were not represented by any lawyer at the said Hearing — but we areseeking costs and damages for the whole 7-years action taken and initiated bythe Applicant.We noted that Our costs and damages was inadvertently overlooked by theHonourable Judge Cooke J.We wish to advise the Honourable Court that We had incurred various costs(like disbursements, professional lawyers fees, etc paid to date) and damages(resulted from the Applicant's Restrain Orders) in defending the 7 yearsAction brought about by the Applicant.1 Commissioner of Police v Cheng [2023] NZHC 606.We therefore humbly seek for an Order that costs and damages be agreed uponbetween Us and the Applicant, failing which same be assessed by Court.[4] I also note in a notice of appeal dated 18 April 2023 the 18th and 19threspondents have appealed against a decision of the High Court not to award themdamages and costs.[5] There is no basis upon which the High Court can award damages in relation tothe conduct of proceedings. Any such claim would have to be in a separate proceeding,and there is no basis for that here in any event. As the 18th and 19th respondents alsoacknowledge, no costs could be awarded to them in relation to the profit forfeitureapplication as they elected not to instruct counsel and participate. The only applicationcould be for costs for the earlier stages of the proceeding.[6] Counsel for the Commissioner has advised that the 18th and 19th respondentswere legally aided at this time, and if they were that would affect the question of costs.But in any event there is no basis upon which costs could be awarded to the 18th and19th respondents for the earlier stages. It was the Commissioner, and not the 18th and19th respondents who succeeded with the applications before the Court at the earlierstages. For example, in Commissioner of Police v Cheng Simon France J upheld anapplication to continue the restraining orders.2 This was opposed. The 19threspondent gave evidence by AVL. The Court did not accept this evidence and foundthat the 19th respondent was not a satisfactory witness.3 The Court awarded costs tothe Commissioner on a 2B basis together with reasonable disbursements.4 This is nota situation where the 18th and 19th respondents could be entitled to costs. Rather costshave been awarded against them. Generally speaking there is no basis for the 18thand 19th respondents to be awarded costs for the earlier stages of the proceeding. Thatis so even if the Commissioner ultimately failed with his subsequent profit forfeitureapplication.[7] Finally I note that the 18th and 19th respondents have complained that theamounts initially restrained by this Court have not been released to them2 Commissioner of Police v Cheng [2016] NZHC 2304.3 At [9].4 At [20].notwithstanding the Court's findings. The fact that the profit forfeiture application inrelation to the 18th and 19th respondents property has been dismissed could have hadthe result of the relevant property being released from restraint.5 However under s 38of the Act a restraining order that is in force at the time the Court declines to make aprofit forfeiture order does not expire if an appeal is lodged within the time specified.That is what has happened in the present case. So the fact that the funds have not beenreleased is not a consequence of any decision by the Court. It simply arises from theoperation of s 38.Costs of counsel assisting[8] As I explained in the principal judgment at [24]–[27] I appointed counsel toassist the Court under r 10.22 of the High Court Rules 2016. The reason for this wasthe existence of issues of principle in relation to making profit forfeiture orders inconnection with suggested tax offending in circumstances where the Commissioner ofInland Revenue had power to recover the taxes, and property is available to meet anysuch liability. These circumstances gave rise to complex interpretation questionsinvolving the inter-relationship between the Act and the revenue statutes.[9] I found counsel assisting of assistance on these questions. Ultimately Ideclined the Commissioner's application for profit forfeiture orders in circumstanceswhere the Tax Administration Act 1994 gave the Commissioner of Inland Revenue anability to recover the tax due (together with interest and penalties). I concluded thatthere was accordingly no benefit from any tax evasion to be recovered under the Act.[10] By memorandum dated 11 April 2023 counsel assisting formally raised thequestion whether the costs of counsel assisting, which had been effectively met by theMinistry of Justice, should be met by the Commissioner of Police. That course wasopposed by the Commissioner, and written submissions have been filed following myearlier direction.[11] Section 178 of the Senior Courts Act 2016 provides:5 Albeit then likely subject to recovery action by the Inland Revenue Department.178 Costs where intervener or counsel assisting court appears(1) This section applies to proceedings in any senior court or other court.(2) If the Attorney-General or the Solicitor-General or any other personappears as an intervener or counsel to assist the court in any civilproceedings or in any proceedings on any appeal and argues anyquestion of law or of fact arising in the proceedings, the court may,subject to the provisions of any other Act, make any order it thinksjust—(a) as to the payment by any party to the proceedings of the costsincurred by the Attorney-General or the Solicitor-General in sodoing; or(b) as to the payment by any party to the proceedings or out ofpublic funds of the costs incurred by any other person in sodoing; or(c) as to the payment by the Attorney-General or the Solicitor-General or that other person of any costs incurred by any ofthose parties by reason of his or her so doing.(3) If the court makes an order under subsection (2)(b), the Registrar ofthe court must forward a copy of the order to the chief executive ofthe Ministry of Justice who must make the payment out of moneyappropriated by Parliament for the purpose.[12] In Earthquake Commission v Insurance Council of New Zealand Inc a fullCourt addressed the legislative predecessor to s 178 which was in the same terms. TheCourt said the section:6confers a broad discretion on the Court in relation to such costs. Thediscretion must be exercised on a principled basis but it is not possible todefine the circumstances in which an award will be appropriate. The enquirywill always depend on the particular circumstances of the given case.[13] The Court then set out four principles that would be relevant to whether anorder was appropriate. The principles so listed were relevant to the kind of case theCourt was there considering — an application by a private party who had engaged inthe proceedings under s 178(2)(b). The present case involves an application unders 178(2)(a) where the costs of counsel assisting have or will be met by the Ministry ofJustice from public funds. In terms of principles relevant to s 178(2)(a), and adaptingthe factors listed in Earthquake Commission, I would suggest the following factors arelikely to be relevant:6 Earthquake Commission v Insurance Council of New Zealand Inc [2015] NZHC 457 at [5].(a) Whether counsel assisting provided material assistance to the Court.(b) Whether the involvement of counsel assisting became appropriate ornecessary as a consequence of the conduct of the party against whomthe order is sought, including whether the principles concerning theaward of costs under Part 14 of the High Court Rules may be applicableby analogy.(c) Whether the matters addressed by counsel assisting involved broaderquestions, or matters of public importance.[14] Applying that approach in the present case I accept the arguments for theCommissioner of Police that an order under s 178 is not appropriate in the presentcase.[15] The issue leading to the appointment of counsel assisting was whether propertyshould be forfeit under the Act when that property was also available to theCommissioner of Inland Revenue under the Inland Revenue Department'senforcement powers. There was an associated risk of double recovery by the Crown.That issue had been recognised as one of importance in at least two New Zealanddecisions.7 It is also an issue that has been addressed by overseas cases.8 It wasaccordingly an issue of wider public importance.[16] The second point is that, whilst there are expectations relating to the manner inwhich the Commissioner undertakes litigation, it was to expect too much for theCommissioner to have advanced all of the matters that counsel assisting advanced.Those included matters that were contrary to the Commissioner's interests, and to hisarguments. Moreover the absence of a contradictor on these points arose because the18th and 19th respondents elected not to participate in the proceedings. That is not asituation for which the Commissioner bears responsibility.7 Commissioner of Police v Nabawi [2021] NZHC 2413; Li v Commissioner of Police [2022] NZHC514.8 R v Waya [2012] UKSC 51, [2013] 1 AC 294.[17] Finally, this is not a situation where the Commissioner has conducted litigationin a way that was unreasonable leading to a need to appoint counsel assisting, or whereany other costs rules in the High Court Rules were engaged, or engaged by way ofanalogy. The Commissioner was making an appropriate application and advancingappropriate arguments. The need for counsel assisting arose because of theinterpretation difficulties, and associated wider interests in the matters so arising, incircumstances where there was no contradictor to address those matters.[18] For all of these reasons I accept that the Commissioner of Police should not berequired to meet the costs of counsel assisting under s 178 of the Senior Courts Act.Cooke JSolicitors:Luke Cunningham Clere, Wellington for the ApplicantOrd Legal, Wellington for the First Respondent