THE SOLICITOR GENERAL OF NZ V HUANG HC AK CIV-2005-404-1538

THE SOLICITOR GENERAL OF NZ V HUANG HC AK CIV-2005-404-1538 6 September 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2005-404-1538BETWEEN THE SOLICITOR GENERAL OF NEW ZEALAND Applicant AND GANG HUANG (AKA ALEX KWONG WONG) Respondent AND YAN YAN SIU First Third Party AND DE SHAN HUANG Second Third Party Hearing: 6 August 2007 Appearances: M R Harborow for Crown No appearance for Respondent F Deliu and E Orlov for First and Second Third Parties Judgment: 6 September 2007 at 3:30 pmRESERVED JUDGMENT OF COURTNEY JThis judgment was delivered by Justice Courtney on 6 September 2007 at 3:30 pm pursuant to Rule 540(4) of the High Court Rules Registrar / Deputy Registrar Date. Solicitors: Meredith Connell, P O Box 2213, Auckland Fax: (09) 336-7629 Equity Law, P O Box 8333 Symonds Street, Auckland Fax: (09) 303-2018Introduction[1] The Solicitor General has applied for a pecuniary penalty order under the Proceeds of Crime Act 1991 against the respondent, Gang Huang, who has been convicted of a number of serious drug offences. The first third party, Yan Yan Siu, who is Gang Huang's girlfriend, owns a Porsche Boxter motor vehicle. The second third party, De Shan Huang, who is Gang Huang's father, owns a Mercedes Benz motor vehicle. The Crown asserts that if a pecuniary penalty order is made these vehicles may be used to satisfy it. [2] Since early 2005 the vehicles have been subject to restraining orders preventing their disposition. However, on 12 July 2007 Potter J made an order authorising the Official Assignee to immediately take custody and control of the vehicles. The third parties apply to have that order varied or set aside.Steps taken to this point[3] Counsel spent some time acquainting me with the complicated procedural history of the Solicitor General's application. I need to record that history because it is relevant to the Solicitor General's submission that I do not have jurisdiction to vary or set aside the order. [4] In March 2005, when Gang Huang was facing the charges on which he was later convicted, the Solicitor General applied ex parte for orders that the vehicles not be disposed of and that the Official Assignee take custody and control of them. Priestley J made the restraining order but refused the order permitting the Official Assignee to take custody of the vehicles. The application for that order was to be served on the owners of the vehicles and be reviewed in the Duty Judge List 13 April 2005. [5] The application for custody and control was served and at the next call on 13 April 2005 the Judge directed that affidavits in opposition be filed by 4 May 2005 and listed the matter for 9 May 2005. On 9 May 2005 John Hansen J made ordersthat the restraining order would remain in force and adjourned the application for custody and control over the vehicles to 7 November 2005. On that date the application was adjourned again and there were several subsequent adjournments. [6] By July 2006 the criminal proceedings had been concluded with Gang Huang being convicted on several serious drug-related charges. The Solicitor General applied for forfeiture of the vehicles. Although the Crown wished to have the application for custody and control of the vehicles determined before the substantive pecuniary penalty application, both were adjourned to 4 December 2006. However the hearing did not proceed on that date either and the matter eventually came before Frater J in March 2007, who made directions by consent, including that affidavits by Gang Huang, Yan Yan Siu and De Shan Huang in opposition to the applications, which had still not been filed by 11 May 2007. [7] These orders were not complied with and were subsequently varied by Harrison J who required Gang Huang and the third parties to file and serve their affidavits in opposition by 11 July 2007, failing which they would be debarred from taking further steps. The application was to be listed in the Duty Judge List in the week beginning 23 July 2007 and was allocated a hearing date of 26 July 2007. [8] On 11 July 2007 counsel for the third parties, Mr Deliu, filed a memorandum advising that he had only recently been retained, did not have the full file and that his clients were applying for legal aid. He sought an extension for the filing of affidavits and an adjournment of the 26 July hearing date. The Crown responded, signaling its intention to oppose any extension or variation to the previous orders. [9] These memoranda were placed before Potter J and she issued a minute on 12 July 2007 in which she varied Harrison J's order by permitting the third parties to file affidavits by 4 pm on 18 July 2007 but if they failed to do so they would be debarred from taking further steps in the proceeding. She also made an order authorising the Official Assignee to uplift the vehicles. There is one aspect of the minute that is unclear to me; the Judge referred to affidavits by the third parties having been attached to Mr Deliu's memorandum 11 July 2007. However, that is not consistent with the memorandum itself, which does not refer to the affidavits andactually seeks an extension of time in order to file them. After reflection, however, I do not think this affects the issues I am dealing with. [10] When Potter J issued her minute 12 July 2007, she did not have before her a second memorandum by Mr Deliu faxed to the Court late on 11 July 2007. In it Mr Deliu asserted that the Solicitor-General's application to take custody and control of the property was defective because it was made by way of memorandum rather than interlocutory application as required by the High Court Rules and without affidavit evidence in support. It appears that Mr Deliu did not have a copy of the original application filed in March 2005 and had assumed that the Crown was seeking to make its application by way of the memorandum 11 July 2007. [11] Affidavits by Yan Yan Siu and De Shan Huang dated 11 July 2007 are recorded on the Court file as having been filed on 12 and 13 July 2007. Also on 13 July 2007 Mr Orlov filed a memorandum on behalf of Mr Deliu bringing to the Judge's attention the fact that the affidavits had been filed and expressing concern that when she issued her minute 12 July 2007 she may not have had before her Mr Deliu's second memorandum faxed to the Court on 11 July 2007. [12] Mr Deliu filed another memorandum on 17 July 2007. By now he obviously had a copy of the application filed in March 2005 but submitted that the application was stale and could not be taken into account. In the memorandum he asked:Being paramountly mindful of the need to comply with said orders, I do wish to concurrently attempt to stay, vary and/or rescind said orders as their enforcement could not be undone.[13] Filed with that memorandum was an application for orders staying, varying or rescinding the orders that Potter J had made in her minute 12 July 2007. [14] The Judge issued another minute 18 July 2007, by which time she would have had the affidavits of Yan Yan Siu and De Shan Huang filed dated 11 July 2007. Although these were not referred to in either of the Judge's minutes one can assume that the Judge had taken account of them because attention was specifically drawn to them in counsel's memoranda.[15] In her second minute the Potter J acknowledged that when she issued the minute 12 July 2007 she did not have Mr Deliu's second memorandum 11 July 2007. However, she stated that she had since considered the memorandum and nothing in it either caused her or would have caused her on 12 July 2007 to vary the terms of the orders made. The Judge noted that her orders permitting the third parties further time were granted only by a fine margin, having regard to the fact that they were made against the background of gross default of previous orders. The Judge then proceeded to dismiss the third parties' application 17 July 2007 to stay, vary or set aside the orders.Current application[16] The third parties now apply for an order varying or rescinding the orders made by Potter J in her minute 12 July 2007 on the following grounds: a) The orders were only intended to operate until trial (i.e. for several days) and it is unduly harsh and oppressive to continue them due to the unexpected adjournment of the proceedings; b) The Solicitor General has by its failure to comply with the Court timetabling orders and directions caused the very oppression of delay and should not be entitled to benefit from its procedural mistakes; c) The third parties are suffering undue hardship from the continuation of the order; d) There is no prejudice to the Solicitor General by the setting aside of the orders; e) The Solicitor General's case is flawed and weak; f) The general interests of justice favour such an order. [17] The application is supported by affidavits by Yan Yan Siu and De Shan Huang. They describe the effect on them of not having access to the vehicles.[18] The Solicitor General opposes the application on the basis that: a) The merits do not favour the return of the vehicles; and b) This Court does not have jurisdiction to deal with the application.JurisdictionDoes this Court have jurisdiction to vary the orders made by Potter J?[19] Mr Harborow, for the Solicitor General, submitted that once the application to vary the restraining order had been determined by Potter J on 18 July 2007, there ceased to be any jurisdiction for the Court to further vary the order. Instead, the third parties' remedy was to appeal the decision. [20] Potter J's order 12 July 2007 authorising the Official Assignee to take custody of the cars was made under s 42 Proceeds of Crime Act 1991 which provides:(1) Where an application is made to the High Court for a restraining order against any property, the Court may, subject to ss 43 and 44 of this Act, by order - (a) Direct that the property or such part of the property as is specified in the order is not to be disposed of or otherwise dealt with by any person except as provided in the order; and (b) If the Court is satisfied that it is desirable to do so, direct the Official Assignee to take custody and control of the property, or of such part of the property as is specified in the order.[21] Section 47 provides the jurisdictional basis for varying an order made under s 42:(1) Where the Court makes a restraining order against any property, the Court may, at the time it makes the order or at any later time, make such ancillary orders in relation to property if the Court considers appropriate.[22] Essentially the Crown's submission was that once Potter J had refused the application to vary the order on 18 July 2007 this Court ceased to have jurisdiction to make any further variation and that the proper course was to appeal against therefusal to vary the order. Mr Harborow relied on the Court of Appeal's decision inDe Bruin & Anor v Solicitor General of New Zealand1 where the Court accepted that a restraining order made under s 82 Proceeds of Crime Act 1991 could be the subject of a general appeal under s 66 Judicature Act 1908. [23] Counsel for the third parties did not deal with the issue of jurisdiction save to assert that Potter J's order was only intended to be effective pending the hearing of the substantive proceeding and as an incentive for the third parties to comply with the timetable. I do not accept this submission, for reasons that I discuss later. [24] I therefore return to the Crown submission that disposal of the application to vary meant that the only available course for the third parties was to appeal. I do not accept that once an application to vary an order under s 47 has been determined, this Court is precluded from making any further ancillary orders under that section. A change in circumstance may give rise to a legitimate reason for making a further application to vary the orders again. In that case an appeal would be inappropriate, not only because there may have been a significant lapse in time but also because it would require the Court of Appeal to consider circumstances that were not able to be considered by the High Court when it determined the original application. [25] However, it is clearly the case that once an application has been made and determined that same application cannot be made again. If the position is really that party applying to have the order varied is unhappy with the decision and simply wishes to have the argument re-run any further application would be an abuse of process. Moreover, it is an abuse to raise grounds that could and should have been dealt with at the earlier stage 2 . In the absence of a genuine change in circumstance or some development that requires the terms of the order to be considered afresh the proper course would be to appeal the earlier determination.1 CA 187/05 14 December 20052 Fraser v Robertson [1998] 3 NZLR 257 at 260Is the present application an abuse of process?[26] I therefore turn to consider whether the application brought in this case is effectively the same application that Potter J dismissed or is based on grounds that should have been raised at that time. [27] In their application 17 July 2007 the third parties sought orders relating to discovery and further particulars but that aspect of the application is not relevant for present purposes. The relevant part of the application sought the following orders:1. An order staying the Further Orders dated the 12 th of July 2007; and 2. An order varying or rescinding the Further Orders dated the 12th of July 2007.[28] The grounds on which the application for stay, variation or recision was brought were specified as follows:1. The Further Orders entered were not based on the totality of circumstances and nor was there any basis for them in any event; 2. The above files and information are necessary for the Third Parties defence and a fair trial [this would appear to be a reference to the application for discovery and further particulars]; 3. The Applicant's filings are defective and inadequate; 4. The Third Parties may not have been served all of the relevant materials, or at least do not have them currently in their possession and therefore are not in the position to properly defend this proceeding; [this would also appear to be a reference to the application for discovery and further particulars]. 5. The Third Parties are respectively the owners of the property.And the following further grounds were noted:1. As outlined in counsel's memorandum and support filed earlier today. 2. Fundamental fairness and the interests of justice demand that these joined parties access the evidence. 3. Were memorialized in the Third Parties' affidavits filed on the 11 July 2007 and the affidavit in support of the first Third Party filed on the 17 July 2007.[29] The affidavits of De Shan Huang and Yan Yan Siu 11 July 2007 dealt almost entirely with the circumstances in which the vehicles had been acquired. However, in Yan Yan Siu's affidavit 17 July 2007 she states that it would be unfair for the vehicle to be seized as it is her primary source of transportation and paid for with her own funds. The affidavits filed for the purposes of this present application go into considerably more detail in relation to the inconvenience/hardship aspect. However, it is apparent from the affidavits that this information was available and could have been included in affidavits filed in support of the 17 July 2007 application. [30] The application brought on 17 July 2007 sought exactly the same relief as the present application, namely the variation of the orders made by Potter J in her minute 12 July 2007. The grounds specified in support of the application 17 July 2007 were general, almost to the point of vagueness, and could easily have included hardship to the third parties as a ground. [31] Further, when the substantive application came before Randerson J on 26 July 2007 and was adjourned to enable the Crown to provide the transcript from the criminal trial, the third parties sought to have the vehicles returned at that stage. At [19] of his judgment 26 July 2007 Randerson J said:I am not persuaded that I should order the return of the vehicles in the short period of one week between now and the adjourned date of hearing. On 18 July 2007 Potter J dismissed an application made by memorandum by the third parties to vary the orders so that they could be returned to the third parties. I am not persuaded that it is appropriate for those orders to be further varied to permit the return of the vehicles. The application is an abuse of process. However, for the sake of completeness, I go on to consider the substantive grounds advanced.[32] It is clear to me that the third parties have had every opportunity to adduce the evidence now relied on and that they have already made two applications to have the orders 12 July 2007 varied or set aside. They cannot make this application again.Grounds for present application[33] Notwithstanding my conclusion at [33], for the sake of completeness I go on to consider the grounds advanced in support of the application. The grounds advanced in support of staying or varying the order are:a) That the orders were only intended to operate until the trial i.e. for several days and it was unduly harsh or oppressive to continue them due to the unexpected adjournment of the proceedings; b) The Crown had itself failed to comply with timetabling orders; c) The third parties would suffer hardship from the continuation of the order; d) There was no prejudice to the Crown by setting aside the orders; and e) That the Crown's case was fundamentally flawed and weak.Orders only intended to operate until trial[34] There is no indication whatsoever in Potter J's minutes either of 12 July 2007 or 18 July 2007 that the orders she made were intended to be only temporary. It is true that in the minute 12 July 2007 Potter J confirmed the fixture then scheduled for 26 July 2007, which was adjourned. But that statement in itself could hardly have the effect contended for by the third parties. There is simply nothing to support this assertion.The Crown has failed to comply with the Court timetabling orders[35] Both Mr Orlov and Mr Deliu asserted that the adjournment of 26 July 2007 date was due to the Crown's failure to have available the evidence it required and that the adjournment was granted for the purpose of enabling the Crown to file further evidence. While this is partly true it does not seem to fully reflect what happened on 26 July 2007. [36] Randerson J's judgment relating to that hearing shows that only an hour had been allocated in anticipation of the application being dealt with as a formal proof. This was presumably done at a time before the third parties had filed their affidavits. In the several days leading up to the hearing the third parties had given notice that they wished to cross-examine the police officers who had sworn affidavits in theproceeding and the Solicitor General gave notice that he wished to cross-examine the third parties. Mr Deliu and Mr Harborow had conferred prior to the hearing and both agreed that an hour was insufficient. [37] The Crown appears to have proceeded on the basis that only an hour would be available and that time would simply be used for attending to various outstanding issues relating to cross-examination and discovery. It appears however that further time could have been available but that, because the Crown had stood down its police officers, it was not in a position to proceed. It also became apparent that the Crown would need the transcript from the trial and that neither the third parties nor the Solicitor General had had the opportunity to consider that. It appeared that Meredith Connell's copy of the transcript had been sent to Wellington for the purposes of the appeal which had only recently been concluded. [38] It seems from Randerson J's decision that the outstanding matters that the Crown needed to attend to were ones that had become apparent during the course of argument and were not really instances of the Crown having failed to comply with timetabling orders. In any event, I agree with Randerson J's comment that, given the substantial indulgences granted the third parties in the proceeding it does not lie in their mouths to criticise the Crown. The unavailability of some of the Crown evidence on 26 July 2007 could not possibly justify the variation or setting aside of Potter J's orders.Hardship to third parties[39] The third parties have sworn affidavits in support of the submission that continuation of the order depriving them of their vehicles will cause ongoing hardship. Ms Siu, the owner of the Porsche is a sole trader who says that she needs the vehicle for her work and also for personal reasons. The essential points of her affidavit are she needs the car for meeting clients, stock delivery, banking and general operating. The car is a promotional item for the business linking her garments with success and quality and the lack of a car may have a negative effect on her business because of the perception that she is unsuccessful. Ms Siu asserts that she cannot afford to hire or buy another car of reasonable quality and that it isimpractical transport to use public transport to visit her son and former mother-in- law in Howick. In addition she needs a car for her busy social life and feels isolated at home without her vehicle. [40] In his affidavit De Shan Huang explains that he is a pensioner. As a result of surgery in 2004 he only walks short distances. His wife has diabetes and high blood pressure. They must go to the doctor every fortnight or so. Mr Huang is not fluent in English and he finds it difficult to communicate with bus drivers. His doctor is in Otahuhu, a 30-minute drive from his home. He and his wife use the car for food shopping, the nearest shop being ten minutes drive from the house. [41] I accept that Yan Yan Siu has and will be inconvenienced by the loss of her car. However, the circumstances she describes can hardly be viewed as hardship. [42] I accept that the loss of the Mercedes has and will continue to cause De Shan Huang a high level of inconvenience, although I note from his earlier affidavits that he does have a daughter living in Auckland and so presumably has family assistance for things like doctor's visits. Balanced against the strength of the Crown case the circumstances do not reach a threshold that justifies varying the orders.No prejudice to Solicitor-General[43] The next ground relied on is that there would be no prejudice to the Solicitor General in setting aside the orders. While the Crown did submit that it was preferable for the cars to be in the Official Assignee's custody so that they could be maintained, insured and valued, there was no real suggestion that the cars were in any danger of deteriorating or being damaged whilst in the care of the third parties. However, the absence of prejudice to the Solicitor General would not in itself establish any justification for varying or setting aside the orders. It would simply be a factor that might weigh in favour of the third parties if other more substantial grounds were made out.Solicitor General's case is fundamentally flawed and weak[44] Section 43 relevantly provides:(3) Where an application under s 39 of this Act seeks a restraining order against specified property of a person other than the defendant, the Court shall not make an order against the property unless the Court is satisfied that there are reasonable grounds for believing that – a) The property is tainted property in relation to the relevant serious offence; or b) The property is subject to the effective control of the defendant, and the defendant derived a benefit, directly or indirectly, from the commission of the offence. (4) In determining for the purposes of subsection (3)(b) of this section, whether there are reasonable grounds to believe that property is subject to the effective control of the defendant, the Court may have regard to the matters referred to in s 29(2) of this Act. (4) Subject to subsections (1) to (3) of this section, the Court may make a restraining order in respect of property whether or not the Court considers there is a risk of the property being disposed of, or otherwise dealt with, in such a manner as would defeat the operation of this Act.[45] Section 29(3) provides that:The Court may have regard to – (a) Shareholdings in, debentures over, or directorships of, any company that has an interest (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 having an interest in the property, or in companies of the kind referred to in (a) of this subsection or trusts of the kind referred to in (b) of this subsection, and any other person.[46] The Crown relies on s 43(3)(b). Mr Harborow submitted that it is unusual for vehicles of this type not to be placed in the custody and control of the Official Assignee where there are reasonable grounds for believing that the respondent has benefited significantly from serious crime and that the vehicles were subject to the respondents' effective control. Further, the fact that the respondents' appeal against conviction has now been dismissed heightens the desirability of leaving the vehicles in the control of the Official Assignee. The Crown is concerned that there is no incentive for the vehicles to be maintained given the now real prospect of a pecuniary penalty order.[47] The third parties essentially submit that the grounds on which the Crown's application in respect of the vehicles is based is weak. They say that there is no evidence that the vehicles were gifted by Gang Huang to them or that he intended to have effective control over them. [48] The Crown points out that Gang Huang was convicted of importing 3.6 kilograms of methamphetamine and was a top level organiser. In addition he was convicted of money laundering $750,000. It is therefore difficult to suggest that he did not obtain a benefit from the offending. The exact quantity of the benefit is to be determined. [49] Sean Brennan's affidavit 2 August 2006 sets out the evidence that is relied on of Gang Huang's effective control in respect of the vehicles. First, Gang Huang was identified by the previous owner of the Porsche as having been the purchaser of the Porsche for $90,000 in cash on 10 June 2004. Secondly, the sales representative at Coutts Cars Limited in Newmarket has produced documentation relating to the purchase of the Mercedes in March 2004 showing Gang Huang's sister, Ying Huang, as the registered owner but the contact person and driver as Alex Wong (Gang Huang's alias). The purchase price of $133,500 comprised $13,500 cash and two cheques drawn on Moneyworld for $70,000 and $50,000. These cheques were subsequently confirmed as having been purchased with cash. There were also statements made to Mr Brennan by De Shan Huang (through an interpreter) in which De Shan Huang said that he let Gang Huang use the vehicle and that Gang Huang had handled the purchase of the vehicle. [50] In relation to the Mercedes, Mr Deliu made the additional point that this vehicle was purchased in March 2004 and the offending took place in April to July 2004. He submitted that this vehicle cannot be the subject of any order and this is a significant issue in the substantive application to be determined. However, the Crown says that since it is not asserting that the Mercedes is tainted property the question is simply whether Gang Huang had effective control over it and that the date that it was acquired is not relevant.[51] I am satisfied that on the basis of the evidence produced by the Crown there were reasonable grounds for believing that Gang Huang had effective control over the vehicle. The evidence is quite compelling that he paid for both vehicles and had primary use of the Mercedes. The personal circumstances advanced by the third parties are simply insufficient to outweigh the strength of this evidence. Given the proximity of the substantive hearing and the strength of the Crown evidence I do not consider that there are grounds on which to set aside or vary Potter J's order authorising the Official Assignee to seize the vehicles. [52] The application is therefore dismissed. ____________________ P Courtney J