POLICE v HARRISON [2017] NZHC 3140

POLICE v HARRISON [2017] NZHC 3140 [14 December 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV 2016-485-543[2017] NZHC 3140BETWEEN THE COMMISSIONER, THE NEWZEALAND POLICEApplicantAND JOANNE HARRISONFirst RespondentAND PATRICK FREDERICK SHARPSecond RespondentHearing: 18 August 2017Counsel: E M Light for ApplicantN Bourke for First RespondentJudgment: 14 December 2017JUDGMENT OF ELLIS J[1] Can this Court make civil forfeiture orders under the Criminal Proceeds(Recovery) Act 2009 (the CPRA) in relation to KiwiSaver funds? That is the solequestion with which this judgment is concerned.Background[2] As is tolerably well known, Ms Harrison was employed by the Ministry ofTransport (the Ministry) as a General Manager. In that role, she was part of theMinistry's Management Leadership Team and reported to the Chief Executive. Shehad responsibility for three cost centres and authority over the budgets relating tothose cost centres.[3] During an interim audit of the Ministry in April 2016 Audit New Zealandidentified four Ministry vendors who appeared either to be illegitimate vendors ornot to be providing legitimate services.1 Further inquiries established the bona fidesof one of them, with question marks remaining over that other three. The paymentsmade to all three of these vendors were authorised by Ms Harrison.[4] On 27 April 2016 Deloittes were engaged to undertake a forensicinvestigation into the payments. Subsequently the matter was referred to the SeriousFraud Office.[5] The Serious Fraud Office conducted a criminal investigation whichestablished that Ms Harrison had misappropriated $726,836.07 of Ministry funds.She later pleaded guilty to three representative charges of dishonestly using adocument under s 228 of the Crimes Act 1961. The charges related to 83 invoicesshe had submitted to the Ministry in the name of Mazarine, EJW and Sharp Design.Ms Harrison was sentenced to three years and seven months' imprisonment inFebruary this year.The forfeiture application[6] On 30 June 2017, the Commissioner filed applications for profit andforfeiture orders (the forfeiture applications) under the Criminal Proceeds(Recovery) Act 2009 (the CPRA). The application relates to interests in propertywhich is owned or controlled either by Ms Harrison or Mr Sharp, who isMs Harrison's partner. The property concerned is already the subject of restrainingorders.[7] The Commissioner seeks forfeiture of the following property:(a) all interests in the property at 5 Waikuku Road, Waimate North, FarNorth District registered in the name of Patrick Frederick Sharp,described in certificate of title NA117B/467, legal description Lot 31 At the time of the audit, Ms Harrison was on study leave.Deposited Plan 187149 (the Waikuku Road property). The WaikukuRoad property has a recent valuation of $530,000;(b) all funds formerly held in the ASB bank account 12 3140 0097629 50in the name of the second respondent, namely approximately$75,977.35, plus accrued interest;(c) all funds formerly held in the ASB bank account 12 3136 0121198 00in the name of the second respondent, namely approximately$5,105.62, plus accrued interest;(d) a grey BMW 1201 Hatchback, registration PAT999 and ignition keys;(e) NZ$1,440 in cash which was located at Auckland Airport on22 July 2016 plus accrued interest;(f) €1600, (converted to NZ$2,345.70) plus accrued interest;(g) £585 (converted to NZ$1,029.57) plus accrued interest;(h) a Rolex watch and box;(i) a Breitling watch and box;(j) a Tagheuer watch and box;(k) a gold chain necklace with purple stones;(l) a Chopard Geneve silver ring;(m) a Tiffany and Co box containing a sliver ring and gold bracelet;(n) a women's Rolex Watch purchased in April 2015 for $10,400; and(o) the contents of KiwiSaver account number KWK102501 in the nameof the first respondent, with a current balance of approximately$109,211.98 (KiwiSaver funds).[8] The women's Rolex, the KiwiSaver funds and the Waikuku Road propertyare sought for forfeiture on an assets basis (ie on the basis that they are taintedproperty). Additionally, and, insofar as the property alleged to be tainted isconcerned, in the alternative, all of the property is sought on a profit forfeiture basis.2[9] The alleged unlawful benefit is $784,172.16.3 At the time of the hearingbefore me, the property restrained or subject to forfeiture application (including theKiwiSaver account) had a total value of approximately $757,500. So, while therewould be a slight shortfall even if the KiwiSaver is included, if the KiwiSaver fundsare not able to be forfeited there would be a shortfall of approximately $136,000.Ms Harrison's opposition[10] Ms Harrison opposes the forfeiture of the KiwiSaver funds on the groundsthat:(a) they are not tainted property (relevant only to the assets forfeitureapplication);(b) in any event, s 127 of the KiwiSaver Act 2006 (the KSA) is effectiveto prevent the KiwiSaver funds being transferred into the OfficialAssignee's custody and control; and(c) in terms of s 51 or s 56 of the CPRA, undue hardship is reasonablylikely to be caused to Ms Harrison if the KiwiSaver funds are forfeit.2 If any specific assets are forfeit on the basis that they are tainted, their value would be subtractedfrom the amount calculated as owing under a profits forfeiture order.3 This comprises the sum of $726,836.07 which Ms Harrison accepted (by her gulity plea) that shehad obtained through her criminal activity, together with the second respondent's gross salary of$57,336.09. I make no comment in this judgment as to whether that latter sum is capable ofconstituting an unlawful benefit.[11] By agreement, it is only the second of these issues that is to be determined inthis judgment, although the outcome may, necessarily, have an impact on the firstand third.[12] Before turning to consider that issue, however, it is necessary to saysomething about the relevant statutory provisions (both the KSA and the CPRA) andalso about the relevant authorities.The KiwiSaver Act 2006[13] Section 3 of the KSA sets out the purpose of the Act and provides for theestablishment of KiwiSaver schemes:3 Purpose(1) The purpose of this Act is to encourage a long-term savings habitand asset accumulation by individuals who are not in a position toenjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals' well-being andfinancial independence, particularly in retirement, and to provideretirement benefits.(2) To that end, this Act provides for schemes (KiwiSaver schemes) tofacilitate individuals' savings, principally through the workplace.[14] Members are automatically enrolled in a KiwiSaver scheme on commencingnew employment or may opt in at any time. Minimum contribution rates arerequired for employees and their employers. The "member's interest" comprisesthree elements:4(a) the member's own financial contributions;(b) the employer's financial contribution where applicable; and(c) any initial "kick-start" payment by the Crown of $1,000 and feessubsidies.4 Section 4, definition of "member's interest".[15] A member's KiwiSaver interest is effectively "locked-in" to the KiwiSaverscheme. Subject to specific exceptions discussed below, it is not accessible untilmembers reach the KiwiSaver "end payment date". For most purposes this will bewhen the member turns 65. In the event of the member's death, the value of themember's interest is payable to his or her personal representative.[16] Importantly for the purposes of this application, s 127 provides:127 Member's interest in KiwiSaver scheme not assignable(1) Except as expressly provided in this Act, a member's interest or anyfuture benefits that will or may become payable to a member underthe KiwiSaver scheme must not be assigned or charged or passed toany other person whether by way of security, operation of law, orany other means.(2) However, subsection (1) does not prevent a member's interest or anyfuture benefits that will or may become payable to a member underthe KiwiSaver scheme from being released, assigned, or charged, orfrom passing to any other person if it is required by the provisions ofany enactment, including a requirement by order of the court underany enactment (including an order made under section 31 of theProperty (Relationships) Act 1976).55 Section 31 of the Property (Relationships) Act is headed "Orders in relation tosuperannuation rights" and provides:(1) Where the relationship property to which any application under this Actrelates includes [any superannuation scheme entitlements], the Courtmay make any order under this Act, or any provision of any such order,conditional on either spouse or partner entering into an arrangement or deedof covenant designed to ensure that the other spouse or partner receives hisor her appropriate share of that property, and every arrangement or deedentered into pursuant to any such condition shall have effect according toits tenor.(2) A copy of any arrangement or deed entered into pursuant to subsection (1)of this section may be served on the manager of the superannuation schemefrom which the entitlement is derived.(3) Where a copy of any such arrangement or deed is served on any suchmanager he or she shall, notwithstanding the provisions of any Act, deed,or rules governing the scheme, be bound by the provisions of thearrangement or deed.Permitted withdrawals[17] The rules governing the limited circumstances in which manager of aKiwiSaver may permit early withdrawals may be made are set out in the firstschedule to the KSA.[18] Clause 7 of sch 1 reflects s 127 and provides:7 Release of funds required under other enactments(1) The manager must comply with the provisions of any enactment thatrequires the manager to release funds from the KiwiSaver scheme inaccordance with that enactment.(2) A requirement to release funds from the KiwiSaver scheme underany enactment includes a requirement by order of any court underany enactment (including an order made under section 31 of theProperty (Relationships) Act 1976).[19] Clauses 10–13 govern applications for withdrawal in the case of significantfinancial hardship and serious illness. Of note is that:(a) the definition of "significant financial hardship" in cl 11 and therequirement for proof in cl 10 suggests that the threshold is high;(b) the amount of that significant financial hardship withdrawal may,subject to the manager's approval be "up to the value of the member'saccumulation less the amount of the Crown contribution (disregardingany positive or negative returns for the purpose of calculating theamount of the Crown contribution) on the date of withdrawal";6(c) before permitting any such withdrawal the manager:7(i) must be reasonably satisfied that reasonable alternativesources of funding have been explored and have beenexhausted; and6 Cl 10(2).7 Cl 10(3).(ii) may limit the amount withdrawn be limited to an amount that,in the opinion of the manager, is required to alleviate theparticular hardship.[20] Because Ms Harrison has made it known that she intends to leaveNew Zealand upon her release from jail, cl 14, which permits withdrawals bymembers who permanently emigrate from New Zealand, is also relevant. Itprovides:(1) Unless clause 14B applies, a member may, on application to themanager, and no earlier than 1 year after the member's permanentemigration from New Zealand, withdraw an amount equal to themember's accumulation, at the time of the withdrawal, less the totalof the following 2 amounts:(a) the amount of the Crown contribution arising from a taxcredit under section MK 1 of the Income Tax Act 2007(disregarding any positive or negative returns for thepurpose of calculating the amount of the Crowncontribution):(b) the amount that was transferred from an Australiancomplying superannuation scheme (disregarding anypositive or negative returns for the purpose of calculatingthat amount).[21] Clause 14(2) permits a member who has permanently emigrated to apply totransfer the same amounts to a foreign superannuation scheme.[22] Subclause (3) requires any application to be in a form which includes —(a) a completed statutory declaration in respect of the member to theeffect that the member has permanently emigrated from NewZealand; and(b) proof to the satisfaction of the manager—(i) of the member's departure from New Zealand (for example,evidence of confirmed travel arrangements, passportevidence, and evidence of any necessary visas); and(ii) that the member has resided at an overseas address at sometime during the year following the member's departure fromNew Zealand.[23] Subclause (4) permits a manager to require any documents, things, orinformation produced in an application to be verified by oath, statutory declaration,or otherwise.The CPRA[24] Section 3(1) of the CPRA provides that the primary purpose of this Act is toestablish a regime for the forfeiture of property—(a) that has been derived directly or indirectly from significant criminalactivity; or(b) that represents the value of a person's unlawfully derived income.[25] And subs (2) states that:The criminal proceeds and instruments forfeiture regime established underthis Act proposes to—(a) eliminate the chance for persons to profit from undertaking or beingassociated with significant criminal activity; and(b) deter significant criminal activity; and(c) reduce the ability of criminals and persons associated with crime orsignificant criminal activity to continue or expand criminalenterprise[.][26] As s 3(1) indicates, the CPRA provides for two forms of civil forfeiture order.The first (assets forfeiture) involves the forfeiture of specific property on the groundsthat the property is tainted, as defined.8 The second (profits forfeiture) involves theforfeiture of any property in which a respondent has an interest in order that theCrown may realise that property in order to recover an amount equal to the value ofthe proceeds of his or her unlawful activity. Because counsel have agreed that thequestion whether KiwiSaver funds could be said to be "tainted" is for another day, itis the second of these types of order with which this judgment is primarily8 The phrase "tainted property" is defined in s 5(1) as meaning any property that has, wholly or inpart, been either acquired as a result of significant criminal activity; or directly or indirectlyderived from significant criminal activity; or directly or indirectly derived from, more than oneactivity if at least one of those activities is a significant criminal activity.concerned.9 It is necessary to set out the relevant statutory provisions governingthose in a little more detail.Profit forfeiture orders[27] Section 52 requires that an application for a profit forfeiture order must:(a) name the respondent; and(b) describe the significant criminal activity within the relevant periodof criminal activity from which the respondent is alleged to haveunlawfully benefited; and(c) state the value of that benefit; and(d) identify the property in which the respondent holds interests and thenature of those interests.[28] There are statutory definitions of "significant criminal activity" and "relevantperiod of criminal activity", although these do not need to be considered further inthe present context. There is no issue that Ms Harrison has unlawfully benefittedfrom significant criminal activity,10 which occurred during a specified period. Theambit of the word "property", however, is potentially relevant. The s 5 definitionprovides that, unless the context otherwise requires, it:(a) means real or personal property of any kind—(i) whether situated in New Zealand or a foreign country; and(ii) whether tangible or intangible; and(iii) whether movable or immovable; and(b) includes an interest in real or personal property[.][29] Once the Commissioner proves on the balance of probabilities that arespondent has unlawfully benefitted from significant criminal activity, s 53 placesthe onus on the respondent to disprove the level of that benefit. Again, I do not needto be concerned with that here – it may be assumed that the level of benefit can beprecisely quantified and is in the vicinity of $727,000.9 As will become evident, however, my conclusion that KiwiSaver funds cannot be the subject ofan profit forfeiture order necessarily also apply equally to assets forfeiture orders.10 Dishonestly using a document carries a maximum penalty of seven years' imprisonment, so fallswithin the definition in s 6 of the CPRA.[30] Section 54 requires that, before making a profit forfeiture order, the Courtmust determine the maximum recoverable amount by:(a) taking the value of the benefit determined in accordance with section53; and(b) deducting from that the value of any property forfeited to the Crownas a result of an assets forfeiture order made in relation to the samesignificant criminal activity to which the profit forfeiture order relates.[31] Next, s 55(1) provides that the High Court must make a profit forfeitureorder: if it is satisfied on the balance of probabilities that—(a) the respondent has unlawfully benefited from significant criminalactivity within the relevant period of criminal activity; and(b) the respondent has interests in property.[32] Section 55(2) requires that the order specify the value of the benefitdetermined in accordance with section 53, the maximum recoverable amountdetermined in accordance with 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 treated ashaving, interests.[33] And s 55(4) provides that a profit forfeiture order is enforceable as if it werean order made against the respondent in debt proceedings and that the maximumrecoverable amount is recoverable by the Official Assignee on behalf of the Crownas a debt due to the Crown.[34] Section 58 empowers the High Court to order that particular property is to betreated as if a respondent has an interest in it, if satisfied that he or she has effectivecontrol over that property. The section makes it clear that such an order may:(a) be made even if the respondent has no interest in the property; and(b) specify an interest that differs from the interest that the respondent hasin the property.[35] Subsection (3) provides that (without limiting the generality of the power)that the Court may have regard to—(a) shareholdings in, debentures over, or directorships of, any companythat has an interest (whether direct or indirect) in the property; and(b) any trust that has a relationship to the property; and(c) family, domestic, and business relationships between persons havingan interest in the property or in companies of the kind referred to inparagraph (a) or in trusts of the kind referred to in paragraph (b), andany other persons.[36] Property that is subject to an "effective control" order under s 58(1) may beincluded in any profit forfeiture order and in any restraining order that is madeagainst the respondent.11[37] Section 59(1) confers further powers on the Court making a civil forfeitureorder. Thus, the Court may:(a) declare the nature, extent, and value of any person's interest inproperty specified in the civil forfeiture order: [and/or](b) give any directions that may be necessary and convenient for givingeffect to the civil forfeiture order.[38] And, without limiting the generality of subsection (1)(b), subs (2) providesthat: if a Court makes a civil forfeiture order against any property the title towhich is passed by registration on a register maintained under any NewZealand enactment, the Court may direct an officer of the Court to doanything reasonably necessary to obtain possession of any documentrequired to effect the transfer of the property and for that purpose may, bywarrant, authorise an officer to enter and search any place or thing and seizeany document.11 Subsection (5) imposes notice requirements on the Commissioner and gives the respondent andothers claiming an interest in the property a right to be heard and to adduce evidence.[39] As indicated in s 55(2)(c), s 83 governs how a profit forfeiture order is to bedischarged by the Official Assignee. It states:(1) If the High Court makes a profit forfeiture order, the OfficialAssignee must, as soon as practicable after the expiry of thespecified period (as described in subsection (2)), dispose of theproperty specified in the order and apply the money resulting fromthe disposal as follows:(a) first, by paying the costs recoverable by the OfficialAssignee under section 87:(b) secondly, by paying to the Secretary for Justice the amount(if any) payable by way of legal aid granted to the formerinterest holder (less any contributions paid by the formerinterest holder):(c) thirdly, by paying, in the order of priority set out in section86E of the Summary Proceedings Act 1957, any of thefollowing amounts imposed on the former interest holder:(i) any amount of reparation (as defined in section 79 ofthe Summary Proceedings Act 1957):(ii) any offender levy (as defined in section 79 of theSummary Proceedings Act 1957):(iii) any other type of fine (as defined in section 79 of theSummary Proceedings Act 1957):](d) fourthly, by paying to the Crown the following amount, lessthe sum of the payments made under paragraphs (a) to(c),—(i) if the sum resulting from realising the property isequal to, or more than, the maximum recoverableamount specified by the Court under section 55, themaximum recoverable amount:(ii) if the sum resulting from realising the property isless than the maximum recoverable amount, the sumresulting from realising the property:(e) fifthly, by paying any remaining money to the formerinterest holder.(2) The specified period expires—(a) on the date that is 6 months after the time for bringing anyappeal against the profit forfeiture order expires, if no appealhas been filed; or(b) on the date that is 6 months after all appeals in respect of theprofit forfeiture order have been withdrawn or finallydetermined, if an appeal or any appeals have been filed.(3) Despite subsections (1) and (2), if the period for bringing an appealagainst the profit forfeiture order has expired and no appeal has beenfiled or all appeals have been withdrawn or finally determined, theOfficial Assignee—(a) may realise any asset that makes up the property that is thesubject of the profit forfeiture order; but(b) must, if he or she does so, hold the proceeds of realisingthose assets until the expiry of the specified period.(4) Subsection (1)(d)(ii) does not prevent the Official Assignee fromrecovering, by any lawful means, the balance of the maximumrecoverable amount that remains due to the Crown, after the Crownis paid a sum less than the maximum recoverable amount under theprovision.(5) This section is subject to section 84 and any regulations made undersection 173(d).[40] For reasons that will become obvious later it is necessary also to note thats 84 (to which s 83 is subject) deals with the relationship between the InsolvencyAct 2006 (the IA) and the forfeiture regime. It provides:(1) If, after a profit forfeiture order is made, the Official Assignee isgiven notice in writing of the filing of a creditor's application inrespect of the person under section 13 of the Insolvency Act 2006,the Official Assignee must, until the petition has been withdrawn orbeen disposed of, refrain from taking, or continuing to take, any ofthe following actions:(a) selling or disposing of the property specified in the order:(b) paying the amounts specified in section 83.(2) If a person whose property is the subject of a profit forfeiture orderbecomes bankrupt, the property that is the subject of the profitforfeiture order, if it has not yet been disposed of, ceases to be in thecustody and control of the Official Assignee and is deemed to bevested in the Assignee of the bankrupt's property under section 101of the Insolvency Act 2006.(3) A profit forfeiture order made against a person is provable in thebankruptcy of that person.(4) To avoid doubt, subsection (3) applies despite anything in section232(2) of the Insolvency Act 2006.[41] There is no equivalent provision in relation to asset forfeiture orders,presumably reflecting a policy that tainted assets (ie assets that can be traced directlyor indirectly to criminal proceeds) should not be available to meet debts owed to arespondent's creditors.Trustees Executors[42] In Trustees Executors Ltd v Official Assignee the Court of Appeal wasrequired to consider whether s 127 of the KSA operated to prevent the KiwiSaverinterests of a person who is adjudicated bankrupt vests in the Official Assignee underthe Insolvency Act 2006 (the IA).12[43] The Court proceeded on the basis that the parties accepted the finding in theHigh Court that a member's KiwiSaver interests constituted a chose in action ratherthan a mere expectancy and were, accordingly, within the definition of "property"under the IA.13[44] The critical provisions were, ss 101, 102 and 105 of the IA. These relevantlyprovide:14101 Status of bankrupt's property on adjudication(1) On adjudication,—(a) all property (whether in or outside New Zealand) belongingto the bankrupt or vested in the bankrupt vests in theAssignee without the Assignee having to intervene or takeany other step in relation to the property, and any rights ofthe bankrupt in the property are extinguished; and(b) the powers that the bankrupt could have exercised in, over,or in respect of any property (whether in or outside NewZealand) for the bankrupt's own benefit vest in the Assignee.12 Trustees Executors Ltd v Official Assignee [2015] NZCA 118, [2015] 3 NZLR 224.13 At [5]. See the lengthy discussion of the issue by the High Court in Official Assignee v TrusteesExecutors Ltd [2014] NZHC 345 at [23] – [53].14 Section 127 of the KSA is set out at [17] above.102 Status of property acquired during bankruptcy(1) Between the commencement of bankruptcy and discharge of thebankrupt,—(a) all property (whether in or outside New Zealand) that thebankrupt acquires or that passes to the bankrupt vests in theAssignee without the Assignee having to intervene or takeany other step in relation to the property, and any rights ofthe bankrupt in the property are extinguished; and(b) the powers that the bankrupt could have exercised in, over,or in respect of that property for the bankrupt's own benefitvest in the Assignee.105 Effect of other laws(1) Nothing in the Land Transfer Act 1952 restricts the operation ofsections 101 to 104.(2) Sections 101 to 104 do not affect the operation of any other law thatprevents any property from vesting in the Assignee.[45] In the High Court, Ronald Young J had found that the balances in thebankrupt's KiwiSaver account at the date of adjudication and any further fundsaccruing subsequently during their bankruptcy vested in the OA. However, he alsoheld that because the OA could only stand in the shoes of the bankrupt KiwiSavermember, the funds were locked in and so could not be accessed by the OA until therelevant interests crystallized – either by virtue of one of the early withdrawalprovisions or, ordinarily, when the bankrupt turned 65. He rejected the propositionthat the interests had already crystallized because bankruptcy would invariablytrigger the "significant financial hardship" ground for early withdrawal.[46] TEL (the bankrupt's KiwiSaver fund manager) appealed, submitting thats 127 of the KSA meant that the funds do not vest in the OA at all. The OAcross-appealed, arguing she could automatically access the funds under the"significant financial hardship" early access provisions.[47] After discussing the relevant provisions of the two Acts in detail, the Court ofAppeal disagreed with the High Court on the s 127 issue, saying:15Given the strong language of s 127(1), we consider that divestment of amember's KiwiSaver interest is not "required by the provisions of anyenactment" in terms of s 127(2) unless the enactment expressly provides forthe vesting in a third party of the member's interest in a KiwiSaver scheme.[48] The Court then found that ss 101 and 102 of the IA "are stated in generalterms and do not expressly require the vesting of the member's interest in aKiwiSaver scheme".16 Therefore the interest is not "required" by the enactment topass to the OA in terms of s 127(2), so s 127(1) prevents the interest from vesting inthe OA.[49] The Court found support for this analysis in:(a) the reference in s 127(2) to s 31 of the Property (Relationships)Act 1976 (the PRA), which specifically refers to superannuationschemes;(b) the express purpose of the KSA, namely encouraging long-termsavings and the accumulation of funds for the member. The Courtnoted that there was nothing to suggest that the accumulation of fundsfor the benefit of creditors in the case of bankruptcy was also such apurpose;(c) s 105(2) of the IA which recognises that other enactments mightprevent the vesting that would otherwise occur; and(d) (to a limited extent) the specific focus and purpose of the KSA ascompared with the more general purpose of the IA.15 At [52] (emphasis added).16 At [52].[50] The Court then went on to consider the second and alternative question,namely whether, if the funds did vest in the OA, they could be accessed immediatelyby her using the early withdrawal provisions in sch 1 of the KSA. It held that theycould not. The Court agreed with the High Court that the early withdrawalprovisions are directed to the personal circumstances of members. More specifically,and in terms early withdrawal for significant financial hardship, the Court noted thatthe (non-exclusive) listed grounds are largely compassionate, and directed at basicneeds of the member. Those grounds were not capable of being extended to includehardship arising from a bankrupt's need to pay his creditors. The Court also foundthat using a bankrupt's KiwiSaver interest to pay general creditors would notordinarily alleviate the bankrupt's financial hardship.[51] The Court also noted the practical difficulties that would arise if the interestsvested but the OA had to wait until the member turned 65 before realising them:(a) the trustees would have to run two sets of accounts, one for the OA'sinterest in the account and one for the member's contribution afterdischarge from bankruptcy, and would potentially have to acceptseparate instructions from each;(b) the bankrupt would lose the right to apply, during the bankruptcy, forthe early withdrawal of funds in the case of serious illness. Even ifthe money had not already been withdrawn to pay creditors, thebankrupt would be dependent on the goodwill of the OA to apply;(c) the Crown contribution to KiwiSaver would vest in the OA, when thestatute is clear that the Crown contribution is to remain for the benefitof the member in retirement (it is, for example, excluded from earlywithdrawal);(d) creditors may no longer exist/be alive when the member turns 65;(e) the other long term assets administered by the OA are very different innature to KiwiSaver; and(f) the value of the assets represented by the KiwiSaver fund might besignificantly diminished, both in terms of real purchasing power anddue to the impact of administrative costs and investment risks.[52] The Court found that the fact that the early withdrawal provisions did notapply, together with these practical difficulties underscored its view that s 127 of theKSA prevented the vesting of KiwiSaver funds in the OA. It said that its conclusionon that issue was partly based on:17 the inherent unlikelihood that Parliament would have intended the vestingof the bankrupt's interest in a KiwiSaver scheme to result in the OA beingleft with an impractical and ineffective remedy. Unless the legislationcompels no other alternative, Parliament should not be taken to haveintended that the OA and creditors would in most cases have to wait as longas 15 years before being able to access a bankrupt's KiwiSaver funds This case[53] As noted earlier, Ronald Young J in the High Court Trustees Executorsdecision considered whether a member's KiwiSaver funds constitute a chose inaction and can therefore be said to be the "property" of that member at some length.His conclusion that they can was accepted by the parties on appeal and the Court ofAppeal's judgment is predicated on that finding. Given the breadth of the definitionin the CPRA, and in the absence of any real argument to the contrary, I proceed onthe same basis here.[54] Rather, the central question in the present case is whether the statutorypowers conferred on the Court to make civil forfeiture orders, together with theancillary power to make any directions necessary to give effect to such orders, fallwithin the s 127(2) exception to s 127(1) of the KSA.[55] The following points appear to me to be material to that question. I list themin no particular order.17 At [80].[56] First, and like the IA, there is no specific provision in the CPRA that providesthat civil forfeiture orders may be made in relation to monies or interests held insuperannuation schemes generally (as in the PRA) or in relation to KiwiSaver fundsin particular. Thus, the Court of Appeal's stipulation in TEL that "the enactmentexpressly provides for the vesting in a third party of the member's interest in aKiwiSaver scheme" is prima facie not satisfied.[57] That said, however (and unlike the IA) the CPRA contains no equivalent to s105 of the IA. There is, accordingly, no express statutory recognition that theforfeiture provisions of the CPRA might be overridden by another statute.[58] Next, and in terms of the respective legislative purposes:(a) the IA is, in part, concerned with protecting or furthering the interestsof individual creditors who are in jeopardy of having all or part of thedebts owed to them by the bankrupt unpaid. As Ronald Young J saidin Trustees Executors:18 the Insolvency Act 2006 is designed to ensure thatcreditors are entitled to the maximum return from abankrupt's estate, so that all assets of the bankrupt can beused to pay the highest possible percentage of their debtsbefore discharge.(b) the CPRA forfeiture provisions are primarily concerned with deterringcriminal activity by preventing criminals from profiting from suchactivity.[59] So, although the CPRA is partly remedial in focus it does not purport tovindicate individual rights or provide specific redress to the victims of the relevantcriminal activity. By contrast, the IA has a more specific remedial purpose ofrectifying (so far as possible) civil wrongs done to individuals (unpaid creditors).On that analysis, it is difficult to see why the important policy purposes underlyingthe KSA should yield to the CPRA when they do not yield to the IA.18 Trustees Executors (HC), above n 12, at [20].[60] The proposition that the interests protected by the IA can be seen as relativelymore important than the interests protected by the CPRA gains further support fromthe fact that the OA's powers to dispose of property which is the subject of a profitforfeiture order under s 83 of the CPRA are (under s 84) subject to creditors' rightsunder the IA. In particular:(a) if the OA becomes aware of a creditor's application under the IA inrelation to a person whose property is the subject of a profit forfeitureorder he must refrain from selling or disposing of the forfeitedproperty or paying out any proceeds in accordance with s 83; and(b) if a person whose property is the subject of a profit forfeiture orderbecomes bankrupt, the property that is the subject of the profitforfeiture order, if it has not yet been disposed of, is deemed to bevested in the Assignee of the bankrupt's property under section 101 ofthe Insolvency Act 2006.[61] And as s 84(3) goes on to makes clear, the debt arising as a result of the profitforfeiture order then simply becomes provable in the bankruptcy of the person whois the subject of the profit forfeiture order.[62] So, if a person's KiwiSaver funds could be vested in the OA as a result of anorder under the CPRA, but the person then becomes bankrupt, then those fundswould become available to satisfy creditors under the IA. That position cuts directlyacross the decision in Trustees Executors which is that KiwiSaver funds may not beused to pay creditors under the IA. Although as a matter of fact, this is likely toarise in only the rarest of cases, as a matter of statutory interpretation it clearlysuggests that the effective hierarchy between the interests protected by the relevantstatutes is:(a) the KSA; then(b) the IA; then(c) the CPRA.[63] Thirdly, to the extent that it might be suggested that permitting the KSA toprevail over the CPRA might lead to a person involved in significant criminalactivity to try and avoid civil forfeiture by depositing any surplus funds (whetherill-gotten or not) in a KiwiSaver fund, section 167 of the CPRA is a generalanti-avoidance provision which would permit the Court to unwind any arrangementdesigned to defeat the Act.[64] Fourthly, there are practical problems of the kind discussed in TrusteesExecutors.19 In the absence of any specific statutory provisions dealing with theinteraction between the two statutes, it is difficult to see how the Court would be ableto make workable orders under the CPRA in relation to KiwiSaver accounts or howthe OA would practically be able to act upon them.[65] More particularly, if a civil forfeiture order is made vesting KiwiSaver fundsin the OA then Trustees Executors makes it clear that the OA can take no steps torealise the funds, pending either the 65th birthday of the respondent or some othertriggering early release event. It may be arguable that the debt due to the Crown thatis the result of the making of a profit forfeiture order might, in an individual case,create significant financial hardship such that the early withdrawal rules wouldapply. But where it does not, all the practical difficulties arising from vestingwithout the ability to realise noted by the Court of Appeal would still arise.[66] Moreover, the very possibility that the OA might be required to wait for someconsiderable time before he is able to realise the funds sits poorly with s 83(1) of theCPRA which contemplates more or less immediate action by the OA to realise anyassets that are identified in a profit forfeiture order. It cannot, for example, be rightthat "as soon as practicable" contemplates that the OA might potentially have to waitfor 15 years (in Ms Harrison's case) or for 35 years (for example, if the respondentwere aged only 30) before realisation.19 Although not all of these apply; for example, creditors dying or no longer existing is not relevantin the present context. But the issue of how the the Crown contribution is to be dealt withremains particularly problematic.[67] The only conceivable way in which these practical problems might beavoided is if the power either to make an effective control order under s 58 orancillary directions under s 59 could somehow be interpreted as permitting the Courtto make an order that the funds be immediately released. But I do not think suchinterpretations are tenable. In particular:(a) absent some triggering event I do not think it can properly be said thata member has "effective control" over his or her KiwiSaver fundsuntil the occurrence of a triggering event or the member turns 65.Both the terms and the purpose of the KSA make that very clear;(b) the s 59 powers are clearly intended to be ancillary rather thansubstantive in nature. Even without the Court of Appeal's view thatexpress language is required in order to come within the exceptioncontemplated by s 127(2) of the KSA, it would be stretching thecapacity of s 59 beyond all reasonable limits to interpret it asauthorising the Court to override another statute (ie the KSA).[68] These practical problems are not, in my view, resolved by the possibility thatMs Harrison may trigger potential release of the funds under cl 14 by movingpermanently overseas once she has served her sentence. Notwithstanding that cl 14has no merits-based requirements and does not involve the exercise of discretion, itwould still require the resolution of issues (such as the Crown contribution) whichare simply not dealt with by the legislation. Nor does that possibility affect myoverall assessment that the language and scheme of the respective statutes are suchthat the KSA should be interpreted as prevailing over the CPRA.Conclusion[69] In my view the matters canvassed above point overwhelmingly against theconclusion that a civil forfeiture order under the CPRA can be made in relation to arespondent's interest in his or her KiwiSaver funds. For the reasons given I considerthat the provisions of the KSA prevail over those of the CPRA; the Court has nopower to make a civil forfeiture order in relation to the KiwiSaver funds of a personwho has been engaged in significant criminal activity. No doubt it follows that thereis no power to make a restraining order over such funds either, although I heard noargument on the point.[70] It seems unlikely that the relationship between the two Acts was consideredat the time the KSA was enacted. It may well be that legislative amendment isrequired.________________________Rebecca Ellis J