THE COMMISSIONER OF POLICE v MARWOOD & ORS [2019] NZHC 837

THE COMMISSIONER OF POLICE v MARWOOD & ORS [2019] NZHC 837 [16 April 2019]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2012-463-79[2019] NZHC 837IN THE MATTER Of an application pursuant to sections 52,53,55 and 58 of the Criminal Proceeds(Recovery) Act 2009BETWEEN THE COMMISSIONER OF POLICEApplicantANDANDKARL LESLIE RAYMOND MARWOODFirst RespondentERANA KINGSecond RespondentCONTINUEDHearing: 9 July 2018Appearances: C Macklin for the Commissioner of PoliceA Speed for the Second RespondentFurther submissionscompleted28 February 2019Decision notified: 12 April 2019Reasons forJudgment: 16 April 2019JUDGMENT OF POWELL J[Application for Discovery by Second Respondent]This judgment was delivered by me on 16 April 2019 at 3 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:AND THE PERRIN TRUSTThird RespondentAND ANZ BANKFourth Respondent[1] These proceedings are a longstanding application pursuant to the CriminalProceeds (Recovery) Act 2009. The original criminal proceedings arose out of asearch in 2010 and the Criminal Proceeds (Recovery) Act proceedings followed in2012.[2] The proceedings are set down for a nine-day trial commencing on 6 May 2019.Mr Speed on behalf of the second respondent, Erana King, applied for discoveryagainst the Commissioner of Police. The application was couched in wide terms andspecifically Ms King sought that the Commissioner discover:(a) all documents held or obtained by the Commissioner in the course ofthe inquiry, prosecution and application for orders under the CriminalProceeds Recovery Act 2009 that directly or indirectly concern theapplicant; and(b) a copy of former Detective Sergeant Mananui's Police disciplinary file.[3] The application came before me in Hamilton on 9 July 2018. Following ahelpful discussion with counsel, Mr Speed confirmed there were four specific areaswhere discovery was sought. The first are documents relating to an alleged assault bythen Detective Sergeant Mananui of Ms King in the course of the search of MrMarwood and Ms King's house on 6 July 2010 ("the assault issue"). The secondrelates to whether some of the monies in Mr Marwood's bank account related to alegacy received by Ms King ("the legacy issue"). The third involves whether Ms Kingwas entitled to a student allowance, ("the student allowance issue") and the fourthinvolves what information the Commissioner has with regard to Ms King's knowledgeof Mr Marwood's activities ("the knowledge issue").[4] With regard to the four issues, it was agreed that it was appropriate to giveMr Speed the opportunity to give some thought to the relevance of the assault issueand to file supplementary submissions on the point with a view to being able to reacha clear conclusion on the relevance of the issue before making any decision on whetherany discovery should be ordered.[5] On the legacy issue Mr Jenkins, on behalf of the Commissioner, sought theopportunity to ascertain the Commissioner's position as to whether the issue was stilllive after the response filed on behalf of Ms King. With regard to the studentallowance and knowledge issues, Mr Jenkins acknowledged that both of those issueswere indeed relevant and involved matters properly before the Court. As a result, Iindicated that it was likely that focussed orders for discovery may well be appropriate.[6] I therefore issued directions requiring Mr Speed to file further submissions onthe relevance of the assault issue on or before 3 August 2018. Mr Jenkins had until 17August 2018 to respond (including confirming the Commissioner's position on thelegacy issue). Leave was also given for Mr Ryan (acting for the first and thirdrespondent) to indicate his position by the same date on behalf of Mr Marwood shouldhe wish to do so. I indicated that once those submissions were filed I would considerthe relevance of the assault issue and, after determining that relevance, would eitherdirect the filing of further pleadings on that issue, or would move on to what ordersfor particular discovery are required.[7] Unfortunately, notwithstanding the filing of submissions by the parties, the filewas not referred back to me, even after the substantive proceedings were called beforeWylie J in the High Court in Rotorua in February 2019. At that conference the partiesobtained leave to file further submissions on the legacy issue, and those submissionswere filed on 28 February 2019. It was not until 9 April 2019 however that I wasnotified that submissions had in fact been filed and that a judgment was required, andthe Court file was forwarded to me on 11 April 2019.[8] Having considered the material available I was satisfied that the application fordiscovery should be allowed in respect of the legacy issue, the student loan issue andthe knowledge issue. Given the short time before trial it was important I advised theparties the outcome of the applications by minute and indicated the reasons for mydecision would follow. My formal decision and those reasons now follow.The application for a profit forfeiture order[9] The application for a profit forfeiture order against Mr Marwood, Ms King andthe Perrin Family Trust is made pursuant to s 52 of the Criminal Proceeds (Recovery)Act 2009. The criteria for making the orders sought is as set out in s 55 of the Actwhich provides:(1) The High Court must make a profit forfeiture order if it is satisfied onthe balance of probabilities that—(a) the respondent has unlawfully benefited from significantcriminal activity within the relevant period of criminal activity;and(b) the respondent has interests in property.(2) The order must specify—(a) the value of the benefit determined in accordance with section53; and(b) the maximum recoverable amount determined in accordancewith section 54; and(c) the property that is to be disposed of in accordance with section83(1), being property in which the respondent has, or is treatedas having, interests.(3) Subsections (1) and (2) are subject to section 56.(4) A profit forfeiture order is enforceable as an order made as a result ofcivil proceedings instituted by the Crown against the person to recovera debt due to it, and the maximum recoverable amount is recoverablefrom the respondent by the Official Assignee on behalf of the Crown asa debt due to the Crown.[10] This section makes it clear that it is not concerned whether particular propertyis tainted and should be forfeited. Rather in broad terms it requires an assessment ofthe overall value of the benefit obtained by a respondent from "significant criminalactivity",1 with that amount then being able to be taken by the Commissioner out ofany interest in property held by the respondent.[11] In this case the Commissioner has asserted that Mr Marwood, Ms King and thePerrin Family Trust have: in the relevant period of criminal activity (as defined in s 5(1) of the Act),namely, 1 January 2006 and 6 July 2010, unlawfully benefited to the value of$334,130.10 from significant criminal activity, namely:• Cultivation of cannabis;1 See definition in Criminal Proceeds (Recovery) Act 2009, s 6.• Sale of cannabis;• Obtaining by deception; and• Theft of electricity.[12] The Commissioner likewise asserts that the same three respondents haveinterests in property, namely a property at 12A Laughton Street, Taupō; two motorvehicles; and two bank accounts, from which he seeks to realise the $334,130.10.[13] In support of his case the Commissioner has filed affidavits in support withregard to the case against Ms King. First, Detective Warren Johnson has sworn anumber of affidavits for the Commissioner that relevantly convey the basis uponwhich it has been alleged that significant criminal activity has taken place following asearch of Mr Marwood and Ms King's property. He deposed that:(a) Mr Marwood and Ms King had a "modest annual income" principallyderived from [Mr Marwood's] receipt of a benefit from ACC.(b) A large number of deposits were made into Mr Marwood's "00"account, noting in particular that $177,806.26 was deposited into thataccount between July 2005 and December 2010, including "deposits inexcess of $75,700".[14] In addition, the primary analysis on behalf of the Commissioner is provided byLaura MacDonald (subsequently Laura Clay). In relation to Ms King, Ms MacDonaldidentified the legacy payment from Ms King's father's estate and also acknowledgedthat Ms King had received student allowances, accommodation benefits, living costsand course related costs in the sum of $19,797.18.[15] Ms King opposes a profit forfeiture order being made against her. Initially thisopposition focussed on the admissibility of certain evidence but in her amended noticeof opposition Ms King:(a) disputes the value of the benefit asserted by the Commissioner;(b) denies having unlawfully benefitted from significant criminal activity;(c) alternatively argues that undue hardship would result if the Court wasto make the orders sought by the Commissioner; and(d) argues by way of counterclaim/setoff that she was the victim of anunlawful search and seizure on 6 July 2010 that she should be entitledto "such relief as the Court thinks fit".[16] Ms King has filed an affidavit in opposition in which, among other things hasdetailed:(a) various medical issues;(b) her account of what took place on 6 July 2010 and in particular herclaim she was assaulted by Detective Sergeant Mananui in the courseof the search of the home she shared with Mr Marwood;(c) that she had been in receipt of a student allowance in the relevantperiod;(d) that the monies in Mr Marwood's "00" account included a paymentfrom the estate of her father of $77,964.40 dating from December 2011;and(e) information about papakāinga land in the south Hokianga.[17] In response the Commissioner has filed further affidavits fromDetective Johnson and Ms Clay. These do not however appear to comment further onthe matters raised by Ms King. The Commissioner also filed affidavits from a numberof those present on 6 July 2010, including Mr Mananui.Discovery and applications for profit forfeiture orders[18] There was no dispute as to the principles that apply to discovery in respect ofproceedings commenced by way of originating application as in the present case. Assummarised by the Commissioner:2a. The Court has a discretion to order discovery.b. The documents sought must be capable of supporting the applicant'scase or adversely affecting the opponent's case.c. Any orders for discovery should be subject to the proportionality andpracticality requirements identified in r 8.2 of the Rules and shouldaccord with the objective of "just, speedy, and inexpensivedetermination" under r 1.2 of the Rules.d. The approach to discovery in originating applications should beconservative.e. Discovery will be appropriate in marginal cases where the party makesout an outline case, but the Court encounters genuine difficulty indetermining, without documentary evidence which is likely to assist,whether the threshold test is satisfied.[19] With regard to proceedings in the Criminal Proceeds (Recovery) Act, Thomas Jnoted in the Commissioner of Police v Yan:3 whether discovery should be ordered is discretionary and depends uponwhether the documents sought are relevant to the issues before the court andis subject to considerations of proportionality.Submissions[20] As noted at the outset of this judgment, the Commissioner initially submittedthat the ambit of the discovery sought was too wide and that there was otherwise noreason to apply discovery in this case. At the hearing on 9 July 2018, after Mr Speedlimited the scope of the application to the four categories now at issue, the focus ofthe Commissioner's submission changed to the lack of relevance in the documentsrelating to the assault issue and its position on the legacy, conceding at the hearing thatboth the student allowance issue and the knowledge issue were relevant.2 See Gibson v Official Assignee [2018] NZHC 1077 at [7]-[8], per Muir J, citing Commissioner ofInland Revenue v Elementary Solutions Limited [2017] NZHC 2411.3 Commissioner of Police v Yan [2015] NZHC 3315 at [41].[21] Since then the additional submissions filed by Mr Speed on the assault issuefocussed on the proposition that Ms King was entitled to a financial remedy for theunlawful search/detention/assault on 6 July 2010 which, if proven, would enable herto bring a counterclaim or setoff against the Commissioner. Mr Speed went further tosuggest that, as part of this application, I should direct the Commissioner to file astatement of claim on the proceeding to enable Ms King to file a counterclaim, notingthat in the absence of such a direction: it is difficult to see how [Ms King] could pursue her counterclaim underthe existing originating application procedure.[22] In response the Commissioner essentially agreed with Mr Speed that Ms King"cannot simply allege an assault and seek a counterclaim in the instant proceedings"and went on to submit that whether an assault took place is of no moment to theforfeiture issue as there is no evident link between the claimed assault and theforfeiture.[23] In relation to the legacy issue the Commissioner submits that this is notrelevant for the following reasons:(a) The legacy claimed relates to one $77,964.40 payment, referred to inthe second respondent's affidavit of 12 July 2017: at [91]-[94].(b) The applicant reserves its position on whether this payment was alegacy payment, as claimed. Even if it was, this is not relevant. Theapplicant refers to the Issues Sheet, at [6]-[13].(c) The substantive application is for profit forfeiture, pursuant to ss 52-55 of the Criminal Proceeds (Recovery) Act 2009 (CPRA). This isnot an order that "traces" actual proceeds of illegal activity. Rather, itseeks recovery of money made from unlawful activity, from therespondents' property. Where the respondent's property came from isirrelevant. The only requirement is that the respondent(s) has/have aninterest in the property targeted: s 55(1)(b) CPRA.(d) Whether the claimed legacy explains the property or not, it does notchange the interest that the respondents have in the cash. The "legacyissue" is of no moment in these proceedings.(e) Returning to the discovery point, first the applicant submits that the"legacy issue" is irrelevant and does not warrant discovery. Theapplicant's secondary submission is that the second respondentalready has all that she requires to plead the legacy, as set out in theaffidavit of 12 July 2017.Discussion – the assault issue[24] Since the additional submissions on the assault issue were filed, Ms King hasmade formal application to this Court for an order that the Commissioner file astatement of claim so as to enable her to formally file a counterclaim on the wrongfulsearch/unlawful detention/assault issues.[25] That application was dismissed by Lang J on 10 April 2019. In his judgmentLang J concluded:4I acknowledge that Ms King is entitled to know the basis on which theCommissioner seeks a profit forfeiture order against her. She must be takento have a broad understanding of the Commissioner's case, however, becauseshe has already filed and served evidence in opposition to it. A statement ofclaim is not necessary to enable Ms King to understand the case that she faces.The second argument is more problematic. In effect Ms King is asking theCourt to require the Commissioner to take a step that is not necessary so faras the proceeding in its present form is concerned. It is only necessary toenable her to commence a claimMs King has known of her potential claim for many years. The events thatunderpin it occurred more than eight years ago. This proceeding has been inexistence since 2012. Furthermore, the alleged breaches arising out of thesearch of Ms King's address have been the subject of consideration by thisCourt, the Court of Appeal and the Supreme Court in judgments relating tointerlocutory issues that have been ongoing for many years. I acknowledgethat the parties to this proceeding have been required to consider manyimportant issues during the seven years the proceeding has been in existence.Even so, Ms King has had ample opportunity to bring her claim before now ifshe wished to do so.This Court has the undoubted power under r 19.5A of the High Court Rules2016 to require the Commissioner to file and serve a statement of claimnotwithstanding the imminence of the trial. In doing so it should be guidedby r 1.2, which provides that the objective of the rules is to secure "the just,speedy, and inexpensive determination of any proceeding". I see that objectiveas relating to an existing proceeding rather than a prospective proceeding.There may well be arguments as to whether it is just in the broader sense forMs King to be denied the ability to bring her claim when it would be arelatively simple matter to require the Commissioner to file and serve astatement of claim and thereby provide her with a means by which to do so. Iconsider, however, that this wider issue of access to justice is effectively takeninto account by the policy issues underlying the imposition of limitationperiods generally. These seek to balance the right of a litigant to bring a claimwithin a reasonable period and the right of the opposing party to be free frompotential claims at the expiration of that period. I do not consider the Court4 The Commissioner of Police v Marwood & Ors [2019] NZHC 760 at [8] – [12].should exercise its discretion to enable Ms King to advance a counterclaimwhich she is barred by statute from bringing by way of a fresh proceeding.(Citations omitted.)[26] Given this position and notwithstanding the fact that the Commissioner hasfactually responded to the allegations made by Ms King, including, as noted, filing anaffidavit by Mr Mananui, there can be no basis for continuing to assert that the assaultissue is relevant to the determination of a profit forfeiture application in so far asMs King is concerned. This category of discovery is accordingly not relevant, and theapplication for discovery is dismissed in respect of the assault issue.Discussion – the legacy issue[27] The situation is different with regard to the legacy issue. As noted theCommissioner argues that the legacy claimed by Ms King is not relevant to theforfeiture application because the orders sought by the Court do not seek to trace actualproceeds of illegal activity. As a result, the Commissioner submits whether theclaimed legacy explains the property or not does not change the interest that therespondents have in the cash.[28] With respect, the Commissioner's analysis appears flawed. Looking throughthe evidence filed by the Commissioner to date it is clear that the basis for assertingthat the respondents, including Ms King, have unlawfully benefitted has been throughan assessment of the monies received by the respondents and whether those have alawful explanation. As Mr Jenkins conceded at the hearing before me, in the face ofevidence from the Commissioner that the respondent had a modest annual income butsubstantial deposits into Mr Marwood's "00" account, whether Ms King had beeneligible for a student allowance was clearly relevant.[29] The same must also be true of the claimed legacy. To an extent, it goes toexplaining a possible lawful source of that amount of income and also potentiallystands to be considered with regard to the amount of benefit that a respondent may ormay not have received from substantial unlawful activity. Finally, while MsMacDonald appeared to accept that the legacy payment was not the result of unlawfulcriminal activity the Commissioner continues to reserve its position as to whether thiswas in fact a legacy payment from Ms King's father's estate, and as a result the issueremains live.[30] In those circumstances it is appropriate for the Commissioner to disclose anyinformation held with regard to the legacy issue that has not already been disclosed inthe exhibits to Ms MacDonald's affidavit.Discussion – the student loan issue and the knowledge issue[31] As has been noted, Mr Jenkins accepted that these issues were relevant at thehearing on 9 July 2018. It follows, for the same reasons as I have noted in respect ofthe legacy issue, the student loan issue goes directly to whether there was any unlawfulbenefit and how much benefit, if any, was the result of significant unlawful activity.Ms MacDonald has clearly reached conclusions on what was paid to Ms King by wayof student allowances, accommodation benefits, living costs and course related costs.It is therefore appropriate that all documents relating to those calculations, and thepayments of such allowances; benefits; living costs; and course related costs held bythe Commissioner, are discovered and made available to Ms King to the extent thatthese have not already been provided in the exhibits to Ms MacDonald's affidavit.[32] The issue is slightly different with regard to the knowledge issue, but Inevertheless conclude that discovery is appropriate on this issue as well. Although theCommissioner is not required to establish knowledge on the part of a respondent inorder that a profit forfeiture order be made,5 it is clear that the circumstances of thesignificant criminal activity to which an order relates are relevant to the Court's abilityto exclude property from a profit forfeiture order because of undue hardship.6[33] It follows that any information held by the Commissioner with regard to theextent of Ms King's knowledge of significant lawful activity or unlawful benefitalleged is clearly relevant to the proper disposal of the application and should thereforebe discovered.5 Criminal Proceeds (Recovery) Act 2009, s 55.6 Section 56.Decision[34] The following orders were therefore made in my minute of 12 April 2019:(a) in relation to the application for discovery on the legacy issue, studentloan issue and knowledge issue the application is allowed. Havinglooked at the evidence filed to date and considering that it is unlikelythat there will be much substantive material on any of these issues andgiven the close proximity of the substantive fixture an affidavit ofdocuments covering the documents relevant to those three issues is tobe filed by the Commissioner no later than 5 pm on 17 April 2019.Inspection is to be carried out by the second respondent by 5 pm on 24April 2019;(b) the application is otherwise dismissed including the application fordiscovery on the assault issue;(c) any further issues arising are to be dealt with by the trial Judge;(d) as Ms King has substantially succeeded on this application she isentitled to costs on a 2B basis.Ms MacDonald's affidavit[35] As noted this affidavit, sworn on 25 July 2013, appears to be an important partof the Commissioner's case. Unfortunately, it was not on the Court file and a copyhad to be obtained from the Commissioner in order to determine this application. Theexhibits are however not on the Court file and in order to ensure that there are nofurther delays the Commissioner is requested to file a further set of exhibits no laterthan 26 April 2019._______________________________Powell J