R v C [2023] NZHC 3436 (29 November 2023)

Last Updated: 5 February 2024

ORDER PROHIBITING PUBLICATION OF NAMES, ADDRESSES, OCCUPATIONS OR IDENTIFYING PARTICULARS OF APPLICANTS AND CONNECTED PERSONS PURSUANT TO SS 200 AND 202 CRIMINAL PROCEDURE ACT 2011. SEE http://www.legislation.govt.nz/act/public/2011/0081/latest/DLM3360346.html

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2020-004-806 [2023] NZHC 3436

THE KING

v

C, H and W Applicants

Hearing:	29 August 2023
Appearances:	P Wicks KC, K Hogan and H Moore-Savage for the Crown S Lowery and J Suyker for C M Corlett KC for H Y Y Mortimer-Wang for W
Judgment:	29 November 2023

JUDGMENT OF GAULT J

(Costs applications)

This judgment was delivered by me on 29 November 2023 at 4:00 pm.

Registrar/Deputy Registrar

..........................................

R v C, H and W [2023] NZHC 3436 [29 November 2023]

• [1] Following acquittal on charges of obtaining by deception in relation to a donation made to the Labour Party,¹ three defendants seek costs under the Costs in Criminal Cases Act 1967 (CCCA):

(a) C seeks a sum that is just and reasonable towards the costs of his defence, which totalled $610,286.19;

(b) H seeks indemnity costs in the sum of $770,514.25; and

(c) W seeks a sum that is just and reasonable towards the costs of her defence, which totalled $198,401.25.

• [2] The Crown opposes all three applications. It says the circumstances of the case and the factors in s 5(2) of the CCCA do not justify costs awards.

Background

The charges

• [3] Each defendant faced two (alternative) charges under s 240 of the Crimes Act 1961.

• [4] Charge 1 in relation to the Labour Party donation was:

That YIKUN ZHANG, SHIJIA (COLIN) ZHENG, HENGJIA (JOE) ZHENG,

[C], [H] AND [W] between 10 March 2017 and 1 May 2018 at Auckland, by deception and without claim of right, directly or indirectly obtained possession of, or control over, any property, or any pecuniary advantage or benefit.

Particulars of the deception:

With intent to deceive the Labour Party Secretary and/or the Electoral Commission, the defendants adopted a fraudulent device, trick or stratagem whereby:

a) a donation of at least $34,840 made to the Labour Party on or about 28 March 2017 (“the Donation”) was paid via an intermediary bank account before being paid to, and retained by, the Labour Party; and

¹ R v Zhang [2022] NZHC 2541.

b) five names were provided to create the illusion of five donations of sums less than $15,000 so as to conceal the full amount of the Donation and the identity of the actual donor.

Particulars of the benefit:

The Labour Party obtained possession of, or control over, property, namely the Donation, in circumstances where the amount of the Donation and the identity of the donor was not disclosed in the Labour Party’s Annual Return of Party Donations.

• [5] The alternative charge 2 was the same except the particulars of the benefit were:

Particulars of the benefit:

The true donor of the Donation obtained freedom from any public scrutiny regarding the Donation, in circumstances where the amount of the Donation and the identity of the donor should have been disclosed in the Labour Party’s Annual Return of Party Donations.

• [6] The three defendants (together with others) were all charged in May 2021 following an SFO investigation into donations made to the Labour Party. This investigation came to light as a result of matters identified in July 2020 during another SFO investigation into donations made to the National Party.

Pre-trial applications

• [7] I granted the Crown’s joinder application for the Labour Party charges to be heard together with charges in relation to the National Party, which had already been laid in January 2020.²

• [8] On the Crown’s pre-trial application for the admissibility of co-conspirator evidence under s 22A of the Evidence Act 2006,³ I found there was reasonable evidence of a conspiracy or joint enterprise in relation to donations made by Mr Zhang to the Labour Party in a way that concealed his identity as the donor and thereby avoided any public scrutiny (the Labour Party enterprise). I concluded there was reasonable evidence that H was a member of the Labour Party enterprise. H sought to appeal that decision. The Court of Appeal granted his application for leave but

² R v Ross [2021] NZHC 3213.

³ R v Ross [2022] NZHC 1185.

dismissed the appeal, agreeing that there was evidence of H’s membership of the Labour Party enterprise.⁴

• [9] On 4 February 2022, H filed an application under s 147 of the Criminal Procedure Act 2011 for dismissal of the charges against him on the basis that there was no evidence that an alleged meeting on 24 March 2017 took place. Due to the lack of available hearing time, it was decided that the s 147 application would be determined at the beginning of trial. In the event, H did not pursue the s 147 application.

Trial

• [10] The Judge-alone trial took place over seven weeks between 26 July and 8 September 2022.

• [11] On 5 October 2022, I found each of the Labour Party defendants not guilty on the charges of obtaining by deception. In finding that the charges were not proved beyond reasonable doubt, I concluded it could not be sure that the Labour Party, directly or indirectly, obtained or retained a benefit in the form of a donation of at least

$34,840. It was agreed that pursuant to s 241(a) the Court needed to be sure that the value of the benefit to the Labour Party exceeded $1,000. I could not be sure, on the limited evidence available, that the reasonable market value of the five paintings was less than Mr Zhang’s payment of $60,000.⁵

• [12] Further, in respect of H and W, I found their involvement in the fraudulent stratagem and intention to deceive were not proved beyond reasonable doubt.⁶

Applicable statutory provision and legal principles

• [13] Section 5 of the CCCA provides:

⁴ H v R [2022] NZCA 294.

⁵ R v Zhang [2022] NZHC 2541 at [319]- [325], [374], [396] and [426].

⁶ At [421]-[423] and [451]-[455] respectively.

5 Costs of successful defendant

(1) Where any defendant is acquitted of an offence or where the charge is dismissed or withdrawn, whether upon the merits or otherwise, the court may, subject to any regulations made under this Act, order that he be paid such sum as it thinks just and reasonable towards the costs of his defence.

(2) Without limiting or affecting the Court's discretion under subsection (1), it is hereby declared that the court, in deciding whether to grant costs and the amount of any costs granted, shall have regard to all relevant circumstances and in particular (where appropriate) to—

(a) whether the prosecution acted in good faith in bringing and continuing the proceedings:

(b) whether at the commencement of the proceedings the prosecution had sufficient evidence to support the conviction of the defendant in the absence of contrary evidence:

(c) whether the prosecution took proper steps to investigate any matter coming into its hands which suggested that the defendant might not be guilty:

(d) whether generally the investigation into the offence was conducted in a reasonable and proper manner:

(e) whether the evidence as a whole would support a finding of guilt but the charge was dismissed on a technical point:

(f) whether the charge was dismissed because the defendant established (either by the evidence of witnesses called by him or by the cross-examination of witnesses for the prosecution or otherwise) that he was not guilty:

(g) whether the behaviour of the defendant in relation to the acts or omissions on which the charge was based and to the investigation and proceedings was such that a sum should be paid towards the costs of his defence.

(3) There shall be no presumption for or against the granting of costs in any case.

(4) No defendant shall be granted costs under this section by reason only of the fact that he has been acquitted or that any charge has been dismissed or withdrawn.

(5) No defendant shall be refused costs under this section by reason only of the fact that the proceedings were properly brought and continued.

• [14] The relevant principles may be taken from the Court of Appeal’s judgment in

R v Lyttle:⁷

⁷ R v Lyttle [2022] NZCA 52, (2022) 30 CRNZ 825.

• [18] In Banks v R, Wylie J set out a number of principles arising from cases dealing with awards under s 5(2) of the CCCA. We set out Wylie J’s principles below with slight modifications:⁸

“(a) While success in the proceeding is a jurisdictional prerequisite to an application, the fact of success is neutral when the discretion whether or not to award costs is exercised.

(b) The court has a broad discretion when determining whether or not to make an award under the CCCA.

(c) The seven matters set out in s 5(2), or those that are relevant, are to be considered. The factors set out in s 5(2) are also qualified by the words ‘[w]ithout limiting ... the court’s discretion’, so regard should be had to all relevant circumstances, and not simply those set out in s 5(2). There is a danger in narrowing relevant considerations by reference to s 5(2) or in trying to fit particular circumstances into one of the factors listed in s 5(2).

(d) The matters set out in s 5(2)(a) to (e) refer in a general way to the propriety, conduct and strength of the prosecution case. Affirmative answers might tend to inhibit or weigh against an award of costs or diminish the quantum of the same.

(e) The terms ‘proper steps’ and ‘in a reasonable and proper manner’ in s 5(2)(c) and (d) mean something less than would be adopted by a reasonably prudent prosecutorial authority. It is a difficult burden to surmount.

(f) The fact that a prima facie case is established at a preliminary hearing, or that a judge refuses a discharge, is likely to support the conclusion that there was sufficient evidence at the commencement of the proceeding.

(g) The matters set out in s 5(2)(g) are concerned with behaviour justifying an award, and not with behaviour disqualifying an award.

(h) Costs are not to be awarded only because the defendant has been acquitted. An applicant must be able to point to some relevant circumstances, either within the criteria, or otherwise, that justify an award.”

• [19] The Costs in Criminal Cases Regulations 1987 (the CCCR) prescribe the maximum scale of costs payable under the CCCA. A court may only make an order for costs in excess of the scale set out in the CCCR if it is satisfied that “having regard to the special difficulty, complexity, or importance of the case, the payment of greater costs is desirable”.⁹ The scale has not been updated for so long that it is now “out of date”¹⁰ and fails to reflect the reality of costs actually incurred by successful defendants in criminal trials.

⁸ Banks v R [2016] NZHC 1596 at [41].

⁹ Costs in Criminal Cases Act 1967, s 13(3).

¹⁰ R v Bublitz [2018] NZHC 373 at [59].

• [15] In these circumstances, current Crown rates have been used as the appropriate scale.¹¹ Indemnity costs ought to be exceptional, reserved for cases of bad faith or inexcusable negligence / gross misconduct.¹²

• [16] Although it has been said in this Court that awards should not act as a disincentive for the Crown to prosecute in appropriate cases,¹³ and there is a public interest in not deterring prosecuting agencies from bringing prosecutions,¹⁴ the Supreme Court has said that concern about the fiscal impact of costs awards on the prosecutorial function is misplaced given s 7(1)(a) of the CCCA provides that, if the prosecution was conducted by or on behalf of the Crown, the costs are to be paid by the chief executive of the Ministry of Justice out of money appropriated by Parliament for the purpose.¹⁵

• [17] Costs incurred during an investigation prior to charging may be considered if there is a sufficient nexus between the incurring of the expense and the prosecution.¹⁶ Such a nexus would be unlikely where costs relate to the lawful exercise of the SFO’s investigative powers.

• [18] Where defence costs are paid by a third party, the Court has jurisdiction to award costs unless the facts establish a firm agreement, express or implied, that in no circumstances could the solicitor seek to obtain payment from their client.¹⁷

Benefit

• [19] Given the overlap between the grounds raised for each applicant, it is appropriate to deal first with the Crown’s failure to prove a benefit to the Labour Party, which is particularly relevant to ss 5(2)(b), (c), (d) and (f).

¹¹ R v Connolly (2006) 22 NZTC 19,844 (HC) at [84]-[87], upheld in R v Reid [2007] NZSC 90, [2008] 1 NZLR 575. See also R v Taylor [2014] NZHC 1165 at [22]- [23]; and Sanders v New Zealand Police [2017] NZHC 1838 at [44].

¹² Blackwood v R [2021] NZHC 33 at [11] and n 15.

¹³ McLeod v R [2016] NZHC 221 at [122].

¹⁴ Blackwood v R [2021] NZHC 33 at [10].

¹⁵ R v Reid [2007] NZSC 90, [2008] 1 NZLR 575 at [13].

¹⁶ Barr v Police [2009] NZSC 109, [2010] 2 NZLR 1 at [23].

¹⁷ R v Rada Corporation Ltd [1991] 2 NZLR 122 (HC) at 128. See also R v T [1992] NZHC 2668; [1992] 3 NZLR 215 (HC); Long v R [1996] 1 NZLR 377 (HC); R v Connolly [2006] 22 NZTC 19,844 (HC); and Frith v H [2008] DCR 472 (HC).

• [20] Mr Lowery, for C, submitted that proper steps were not taken to investigate the reasonable market value of the paintings. He submitted the chronology indicated that the prosecution was aware of the insufficiency of the value evidence from an early stage and decided to proceed regardless. In particular, on 15 October 2020, Mr Taylor from the SFO swore an affidavit in support of an application for a search warrant outlining the SFO’s understanding of the paintings’ value at that stage, and saying: “it is necessary to do further investigation to verify this”. However, the SFO did not obtain a valuation for the two paintings donated by H.

• [21] When asked in evidence at trial why the SFO did not value the paintings, Mr Taylor said it was a topic of discussion “but ultimately we decided just against trying to value the paintings”.

• [22] Mr Taylor filed an affidavit for the costs application. This included the following statements:

The decision to not obtain an independent valuation of the paintings did not arise because the SFO believed the value to be higher than the donation itself.

...

The investigation team ultimately relied on the value that was accepted by the Labour Party for the purposes of accounting for the donation in its Annual Return.

...

There was no deliberate decision to omit to get a valuation of the two paintings.

• [23] Mr Lowery submitted that these statements by Mr Taylor attempted to back away from his evidence at trial. While accepting the statements at face value, Mr Lowery submitted that I should adopt Mr Taylor’s position at trial; that is, that there was a decision for whatever reason not to obtain a market valuation. Mr Lowery acknowledged that this was an investigative error but submitted it was a serious one because the need for valuations was on the SFO’s radar. Ms Mortimer-Wang, for W, submitted that I can infer that the Crown did not seek a market valuation because the Crown feared it would be unhelpful.
• [24] Ms Mortimer-Wang also submitted that the SFO’s failure to investigate and make proper enquiries as to the element of benefit under charges 1 and 2 was critical. She submitted it meant that those charges never could have succeeded at trial and should not have been pursued in the manner they were. She relied on R v Burr,¹⁸ where the defendant was awarded 17.5 per cent of his legal costs (following a reduction which reflected the fact that the applicant had contributed to the Crown’s perception on the issue), primarily because the prosecution failed to investigate a small but critical factual issue.

• [25] Mr Wicks KC, for the Crown, submitted that the absence of an independent valuation was an error in the Crown’s assessment of the evidence that was somewhat less than serious. He submitted that notwithstanding that absence, there was evidence of the value of the benefit; namely, the values H attributed to the paintings in his text messages and the values attributed in the Labour Party donations and loans returns. Mr Wicks acknowledged the error was more serious because the paintings’ value was on the SFO’s radar and it decided to rely on the evidence it had. He also submitted that, while not determinative, it was open to the defendants to advance s 147 applications if they considered the Crown evidence was not sufficient to prove the benefit element of the charges.

• [26] I consider that, in terms of s 5(2)(b), at the commencement of the proceedings the prosecution did not have sufficient evidence of benefit to support the conviction of the defendants in the absence of contrary evidence. As Mr Lowery submitted, H’s text messages were weak evidence of value and were not advanced as admissible against C. Similarly, as Ms Mortimer-Wang submitted, it was not reasonable to rely on H’s rough estimates as against W. The Labour Party records were only evidence of the Party’s accounting treatment, not of value other than based on the text messages. The failure to obtain market valuations was an investigative error. Further, I do not consider the opportunity to pursue s 147 applications weighs against an award of costs.

• [27] I accept the Crown’s submission that the case attracted high public interest. However, the need to take proper steps to investigate applies just as much in such

¹⁸ R v Burr [2016] NZHC 1388.

cases. A costs award reflecting significant failure to take proper steps would not have a chilling effect.

• [28] However, as Gendall J said in Sanders v Police, investigative errors alone are insufficient to justify an award of costs.¹⁹ This was made clear earlier in Solicitor- General v Moore,²⁰ in which the Court of Appeal overturned an award where investigative errors did not result in any real prejudice to the defence.

• [29] In relation to prejudice and whether the failure to prove benefit may be characterised as a technical point in terms of s 5(2)(e), Mr Lowery submitted that C had suffered prejudice in terms of the time and effort spent. He acknowledged it was harder to establish prejudice if there was no evidence of the reasonable market value of the paintings. He relied on H’s statement that the two paintings were worth “way more” and his wife’s evidence that they were “very expensive”. These statements might also be characterised as matters which suggested that the defendants might not be guilty and which the prosecution should have taken proper steps to investigate in terms of s 5(2)(c). But I characterise the failure as an error rather than a deliberate omission because the Crown feared valuations would be unhelpful.

• [30] Mr Corlett KC, for H, submitted this case was more akin to McLeod v R,²¹ involving the South Canterbury Finance Ltd prosecution, than Solicitor-General v Moore.²² In McLeod, the Crown failed to call evidence from Dr Whitehead, Secretary of the Treasury. The result was that Mr McLeod (and others) were found not guilty because the Judge was not persuaded beyond reasonable doubt that the Crown would inevitably have refused (or deferred a decision about) South Canterbury’s application to enter the Crown Guarantee Scheme had the alleged false information been disclosed. In the absence of evidence from Dr Whitehead, Heath J drew an adverse inference against the Crown on this point. He considered that the failure to interview Dr Whitehead meant that the prosecution did not have sufficient evidence to support

¹⁹ Sanders v Police [2017] NZHC 1838 at [17].

²⁰ Solicitor-General v Moore [1999] NZCA 269; [2000] 1 NZLR 533 (CA).

²¹ McLeod v R [2016] NZHC 221.

²² Solicitor-General v Moore [1999] NZCA 269; [2000] 1 NZLR 533 (CA).

a conviction of Mr McLeod in the absence of contrary evidence. He concluded that an order for costs should be made in respect of that charge.²³

• [31] These cases do not suggest that where a prosecution has failed for such a lack of evidence, it is necessary or appropriate to enquire further into the factual position on the costs application. As Mr Corlett submitted, on the costs application in McLeod, the applicant did not show that Dr Whitehead’s statement would have supported the defence. It is appropriate to make an assessment based on the evidence at trial.

• [32] Here, although the Crown failed to prove beyond reasonable doubt that the Labour Party obtained a benefit, and benefit is an essential element of the offence, the limited evidence does not justify the conclusion that there was no benefit to the Labour Party.²⁴ In this narrow sense, the Crown’s failure can be seen as a technical error since I considered it unlikely that H would have understated the value.²⁵ Thus, the SFO’s investigative failure to obtain market valuations likely favoured rather than prejudiced the defence. It is unlikely that obtaining valuations would have meant the prosecution was not pursued.

• [33] I now turn to address the other relevant factors for each applicant.

C

• [34] Mr Lowery accepted that the prosecution acted in good faith despite the prosecutorial failure in relation to the market value of the paintings. He did not suggest, in terms of s 5(2)(d), that the SFO investigation was otherwise conducted in an unreasonable or improper manner.

²³ In McLeod the Crown did not challenge the reasonableness of the costs incurred in defending count 10. Heath J took a broad-brush approach designed to compensate Mr McLeod defending count 10, with a modest uplift to respond to an acquittal on count 8 ($225,000 and $15,000 respectively), and acknowledging the Crown had sufficient grounds to prosecute Mr McLeod on the remaining charges.

²⁴ I note the Court of Appeal has recently concluded that s 240(1)(a) cannot apply where A donates his money to B thereby conferring a benefit on B without providing any benefit to A or his nominee, even where the donation involves A engaging in deceptive conduct: Zheng v R [2023] NZCA 551 at [107].

²⁵ R v Zhang [2022] NZHC 2541 at [324].

• [35] Mr Lowery also acknowledged that I found that C’s involvement in the fraudulent stratagem and intention to deceive were proved beyond reasonable doubt. I was sure that C must have known he was not entitled to allow his name to be provided in relation to Mr Zhang’s $60,000 payment to the Labour Party and to arrange the names of two others to be provided when he and they had not made any payment, and that his conduct involved an intention to deceive. C’s conduct in February 2020 is also relevant. He sent false messages intended to deceive those conducting enquiries within the Labour Party.²⁶ I do not view this as conduct disqualifying an award but nor does C’s conduct justify one. Any costs award would have to be substantially reduced.

• [36] Mr Lowery acknowledged that $53,201.42 of C’s costs were incurred during the investigation stage. There is insufficient evidence of a nexus between the incurring of this expense and the prosecution. Mr Lowery also recalculated C’s remaining costs applying Crown rates, resulting in the reduced sum of $263,656.

• [37] Mr Lowery also acknowledged that C’s defence costs were paid by a third party. C’s affidavit stated that his legal costs were paid by a funder (unnamed) because C could not afford to pay his own lawyer. C said his arrangement with the funder was that any costs awarded by the Court would be returned to the funder. The evidence of C’s funding arrangement was underwhelming but I accept it is likely the arrangement did not preclude C’s lawyer from seeking payment from C and therefore there is jurisdiction to make an award under s 5. Mr Lowery acknowledged, however, that I should exercise my discretion based on the limited material before the Court.

• [38] Having regard to these matters, including the prosecutorial failure to prove the market value of the paintings, its somewhat technical nature as indicated, my other findings in relation to C’s involvement and subsequent conduct, and the other cases referred to, I do not consider that a costs order towards the costs of C’s defence under s 5 is justified or appropriate.

²⁶ R v Zhang [2022] NZHC 2541 at [390].

H

• [39] Mr Corlett submitted that the SFO fell short due to its own mistakes, and the Crown case failed on its own terms. He referred to Blackwood v R,²⁷ where Woolford J awarded $90,000 in respect of the costs of Mr Blackwood’s first aborted trial that ran for nine months in large part due to the Crown’s excessively numerous charges and very lengthy particulars, which the Judge considered was a serious failing.

• [40] Mr Corlett submitted that, in terms of s 5(2)(b), the Crown lacked sufficient evidence to support the conviction of H in the absence of contrary evidence. He noted the test is not whether the SFO had sufficient evidence to bring the prosecution.

• [41] While H did not assert bad faith, Mr Corlett submitted the SFO had no proper basis for believing H was responsible for any offence and there was a pre-determined desire to present the Labour Party case on a parallel basis to the National Party case with H as a party insider.

• [42] I do not consider the prosecution lacked good faith. I have addressed the failure to obtain a market valuation of the paintings, which was an investigative failure rather than bad faith. In relation to the alleged 24 March 2017 meeting, the SFO could, and should, have asked H about such a meeting but I do not consider there was a deliberate tactical decision not to do so. This was also an investigative failure rather than bad faith.

• [43] H also alleged that the SFO misled the Court in its search warrant application. I do not consider the dispute about whether H owned or used a Macbook Air is material. I accept Mr Taylor’s evidence that he believed H did so. Mr Taylor’s affidavit incorrectly summarised Mr Son’s affidavit in relation to H deleting messages but I also do not find that this was deliberate.

• [44] Turning to the Crown’s failure to prove H’s engagement in a fraudulent stratagem, I was not sure that the only or proper inference was that H was involved in an understanding with Mr Zheng that Mr Zheng personally would acquire the

²⁷ Blackwood v R [2021] NZHC 33.

paintings for $60,000 and his name as donor would not be disclosed. I accept that H did not pursue his s 147 application for tactical reasons. Not pursuing the application does not itself indicate there was sufficient evidence. However, there was some evidence to support the inference sought by the Crown albeit that evidence was ultimately insufficient.

• [45] Mr Wicks submitted that H’s conduct tells against a costs award. H should have explained his understanding to Mr Kirton, the General Secretary of the Labour Party. In particular, I said that, if H was not involved, he should have told Mr Kirton in April 2017 and April 2018 that he was not and so had no first-hand knowledge of the sale of the paintings.²⁸ In 2020, he engaged in conduct that appeared to misrepresent the true situation.²⁹ There was also evidence that in February 2020 H told W to delete her messages and that he would delete his. With H too, I do not view this as conduct disqualifying an award but nor does his conduct justify one. I make no findings in relation to the disputed affidavits about H deleting irrelevant items in front of the SFO on 10 July 2020.

• [46] H’s claimed costs were overstated insofar as two invoices needed to be split as between H and W. Also, approximately $75,000 was incurred prior to the charges being laid with insufficient evidence of a nexus between the incurring of this expense and the prosecution. H also included costs of $25,875 that were paid by the Labour Party without evidence indicating the nature of that arrangement beyond saying that he hopes to be in a position to reimburse the Party for their contribution. Here too, I accept it is likely the arrangement did not preclude H’s lawyers from seeking payment from H and therefore there is jurisdiction to make an award, but I exercise my discretion based on the limited material before the Court.

• [47] Having regard to these matters, including the prosecutorial failure to prove the market value of the paintings notwithstanding H’s text messages were admissible against him, the somewhat technical nature of that failing as indicated, my other findings in relation to H’s involvement and his subsequent conduct, and the cases

²⁸ R v Zhang [2022] NZHC 2541 at [406].

²⁹ At [418].

referred to, I do not consider that a costs order towards the costs of H’s defence under s 5 is justified or appropriate.

W

• [48] Apart from the SFO’s investigative failure in relation to benefit already addressed, Ms Mortimer-Wang submitted that the SFO investigation showed a lack of care and objectivity in relation to the forensic analysis carried out by Mr Jung Son in respect of phone numbers and SIM cards which were attributed to W. I accept that Mr Son’s formal statement appeared to overstate the position, but this was addressed in cross-examination and I do not consider it material in relation to costs.

• [49] In relation to participation in a fraudulent stratagem and intention to deceive, Ms Mortimer-Wang acknowledged that the Court’s findings tended to show that the Crown had a prima facie case; that is, the case would have survived a s 147 challenge.

• [50] Ms Mortimer-Wang acknowledged that the Court may take into account W’s conduct when first approached by the SFO. W deleted certain WeChat data off her devices. I consider that W’s deletions are relevant, but I found that her subsequent conduct did not necessarily show that she knew in March/April 2017 that Mr Zhang was the purchaser (of the paintings) rather than the five names on the list provided to H and Mr Kirton.³⁰ I do not view this as conduct by W disqualifying an award but nor does her conduct justify one.

• [51] A costs order is not precluded by the fact that the bulk of W’s costs were accrued on legal aid rates and recovery would be applied to reduce W’s legal aid debt.

• [52] Having regard to these matters, including the prosecutorial failure to prove the market value of the paintings, its somewhat technical nature as indicated, my other findings in relation to W’s involvement and her subsequent conduct, and the cases referred to above, I also do not consider that a costs order towards the costs of W’s defence under s 5 is justified or appropriate.

³⁰ R v Zhang [2022] NZHC 2541 at [445].

Result

• [53] The applications for costs are dismissed.

Gault J

Solicitors / Counsel:

Mr P Wicks KC, Mr J Dixon KC and Ms K Hogan, Barristers, Auckland Ms K Bannister and Ms H Moore-Savage, Serious Fraud Office, Auckland Mr S Lowery and Mr J Suyker, Barristers, Auckland

Mr X Zhang (C’s instructing solicitor), Zhang Law, Auckland Mr M Corlett KC, Barrister, Auckland

Mr S McArley (H’s instructing solicitor), Solicitor, Auckland Ms Y Y Mortimer-Wang, Barrister, Auckland