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High Court of New Zealand Decisions |
Last Updated: 16 March 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2013-404-3228
[2018] NZHC 292 |
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UNDER
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Criminal Proceeds (Recovery) Act 2009
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BETWEEN
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COMMISSIONER OF POLICE
Applicant
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AND
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STEVEN QUAN LI
First Respondent
FAN YANG
Second Respondent
Continued
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Hearing:
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28 February 2018
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Appearances:
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M A Harborow and D M A Wiseman for Applicant
D P H Jones QC and Y Wang for First and Second Respondents D Dufty (on
behalf of R Reed QC) for Fourth Respondent
S Buckley for Fifth Respondent
B So (on behalf of M Kan) for HLA Trustees Ltd (Interested Party)
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Judgment:
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1 March 2018
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JUDGMENT OF LANG J
[on application by first and second respondents
for an order directing the applicant to file a statement of claim]
This judgment was delivered by me on 1 March 2018 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date...............
COMMISSIONER OF POLICE v LI [2018] NZHC 292 [1 March 2018]
PENGJU CHEN
Third Respondent
JONATHAN LI
Fourth Respondent
AIQING XIANG
Fifth Respondent
[1] In this proceeding the Commissioner of Police (the Commissioner) seeks civil forfeiture orders against the respondents under the Criminal Proceeds (Recovery) Act 2009 (the Act). The evidence for all parties has been filed, and a trial of four weeks duration is due to commence on 11 June 2018. A trial scheduled to take two weeks in June 2017 was vacated after counsel for the Commissioner advised the Court that this would not be sufficient time for the trial to be completed.
[2] The first and second respondents, Mr Li and Ms Yang, have filed an application seeking a direction requiring the Commissioner to file and serve a statement of claim setting out the nature of the relief he seeks together with the grounds upon which he relies. The statement of claim would specify the orders sought against each respondent and the precise grounds on which the Commissioner relies to establish his claim against each respondent.
[3] The fourth and fifth respondents and HLA Trustees Ltd, an interested party, support the application. The Commissioner opposes it.
Approach
[4] Applications under the Act are required to be commenced by way of originating application.1 Originating applications are governed by Part 19 of the High Court Rules. The learned authors of McGechan on Procedure observe, correctly in my view, that the originating application procedure is designed to provide a speedy and inexpensive mechanism for the disposition of numerous types of application that need to be made under specific statutory provisions.2
[5] As Mr Harborow for the Commissioner points out, the originating application procedure is now regularly used for a wide range of defended and undefended proceedings in this Court. By and large, however, such cases raise issues that can be clearly identified and addressed without resort to extensive pleadings.
1 High Court Rules, r 19.2.
2 A C Beck and others McGechan on Procedure (looseleaf ed, Westlaw) at [HRPt19.01].
[6] The procedure also restricts the use of interlocutory procedures such as discovery. Discovery will only be ordered where it is both necessary and proportionate having regard to the need to ensure the just, speedy and inexpensive determination of the proceeding.3 The originating application procedure can therefore place respondents at a disadvantage because of the inability to resort to the full range of interlocutory processes available in the case of general proceedings. That has obviously been deemed necessary to ensure interlocutory procedures do not unnecessarily delay proceedings commenced by way of originating application.
[7] Where a proceeding has been commenced by way of originating application r 19.5A permits a Judge, either by interlocutory order or on his or her own initiative, to direct the parties to file statements of claim and defence. Counsel have only been able to find one case in which an applicant has been directed to file a statement of claim in a proceeding commenced by way of originating application. In Sargison v Anthem Wine Company Ltd the receivers of a company filed an originating application seeking directions from the Court under the Receiverships Act 1993.4 An order was subsequently made by consent directing a statement of claim to be filed. The reasons for that order are not canvassed in the judgment, no doubt because the parties sought the order by consent. It is therefore of little assistance in the present case.
[8] My own researches have unearthed another case in which the issue has been raised but not finally decided. In Ladies Mile Motor Company Ltd v Zhan the applicant filed an originating application seeking relief under the Property Law Act 2007 against the refusal by a lessor to grant a renewal of an unregistered lease.5 The lessor had acquired the property in question from the original lessor under the lease. At the hearing, and without prior notice, counsel for the lessor sought to argue that the lessor was not obliged to recognise the lease because it was not registered. Counsel for the lessee objected to this, and submitted that this issue could not be fairly and properly addressed at the hearing of an originating application for relief against forfeiture. Woodhouse J agreed, and adjourned the hearing. He also directed counsel to confer
3 McCullagh v Robert Jones Holdings Ltd [2015] NZHC 1462, (2015) 22 PRNZ 615 at [6];
Commissioner of Police v Yan [2015] NZHC 3315 at [41].
4 Sargison v Anthem Wine Company Ltd HC Christchurch CIV-2008-409-2517, 26 June 2009.
5 Ladies Mile Motor Company Ltd v Zhan [2018] NZHC 152.
as to the most appropriate means of having the Court consider all relevant issues. His Honour also observed that “it would appear to be appropriate” for the applicant to file a statement of claim and for the respondents to file a statement of defence raising an affirmative defence or counterclaim. The facts and outcome of that case also render it of limited assistance for present purposes.
[9] I consider the same principles that have guided the availability of discovery in the present context inform the approach to be taken in relation to the present application. The discretion to require a statement of claim to be filed should only be exercised in cases where that is both necessary and proportionate having regard to the nature of the proceeding.
The arguments
[10] The first and second respondents contend that the proceeding raises complex and detailed issues of fact and law that warrant a statement of claim being filed. In particular, they say that each respondent is entitled to know the case the Commissioner proposes to advance at trial. It is both unfair and inappropriate that they should be required to wait for the Commissioner’s opening submissions to learn the case against them.
[11] They also submit that such a direction will not prejudice the Commissioner, and that it is consistent with the just, speedy and inexpensive determination of the proceedings. The applicants contend that focussed pleadings will assist the Court to focus on the issues in dispute, thereby reducing unnecessary evidential conflicts and hearing time. They say the interests of justice therefore require the Court to exercise its discretion to require the filing of the statement of claim.
[12] Counsel for the Commissioner submits that the issues raised by the proceeding are clearly identified in both the originating application and the affidavits filed in support. Furthermore, the Commissioner points out that the respondents have proceeded to date on the basis that they understand the Commissioner’s case. This is evidenced by the fact that they have filed detailed affidavits in opposition to the Commissioner’s application and have not to date sought further particulars of it. For
those reasons Mr Harborow submits that the Court should not exercise its discretion to require the Commissioner to file a detailed statement of claim at this late stage.
Decision
[13] The starting point must be the fact that those who drafted the rules considered the originating application procedure to be appropriate to ensure the speedy and inexpensive determination of applications brought under the Act. The fact that the originating application procedure is now used for that purpose as a matter of routine, coupled with the dearth of cases in which a statement of claim has been directed, suggest it is generally suited to the purpose.
[14] In broad terms, and in common with other types of proceeding commenced in this way, the originating application identifies the nature of the relief the applicant seeks and the broad grounds upon which it relies. The applicant then endeavours to establish those grounds through the evidence contained in the affidavits filed in support of the application. The nature and scope of the applicant’s case is therefore communicated to the respondents and the Court through a combination of the originating application and the evidence filed in support.
[15] In Hong Kong and Shanghai Banking Corporation Ltd v Erceg, Asher J drew the following distinction, albeit in a different context, between proceedings suited to determination using the originating application procedure and those best determined by way of general proceeding commenced with the filing of a statement of claim:6
[25] These cases show that the type of proceeding suited to the originating application procedure is a straightforward application, not requiring detailed pleadings or interlocutory orders for its fair resolution. Such a type of proceeding tends to be an application under a specific statutory provision, where the issue that arises can be clearly defined, and the issues confined. The procedure is not well suited to the determination of substantive rights involving the application of common law doctrines as distinct from statutory tests. It is not well suited to cases involving multiple parties, and cases where there is the possibility of cross-claims or counterclaims.
[16] The present case does not involve the determination of substantive rights involving the application of common law doctrines. Rather, it involves an application for forfeiture orders under a statutory enactment. The issues, as distinct from the evidence, are relatively well defined. Although it involves multiple parties, the Commissioner’s case against each is discrete. There is no prospect of cross-claims between those parties.
[17] Against that background, I am satisfied the present case is best suited for determination using the originating application procedure. The Court would only be justified in directing the Commissioner to file a statement of claim where the originating application procedure has failed to achieved its desired object of communicating the Commissioner’s case to the Court and the respondents. Even then the Court would need to have regard to issues of proportionality.
[18] Counsel for the Commissioner has succinctly summarised the Commissioner’s case against the respondents in the submissions filed in opposition to the present application. In short, the Commissioner seeks to establish that the respondents have acquired property, including cash and real estate, in circumstances where the source of the cash or the funds used to acquire the properties cannot readily be identified. The tax returns filed by the respondents do not suggest an ability to acquire those assets through honest means. The Commissioner will also endeavour to disprove the explanations the respondents have given by analysis his witnesses have undertaken of transactions relating to the assets in question.
[19] The Commissioner will therefore argue that the respondents acquired the assets by means of significant criminal activity as that term is defined by the Act. He suggests that the principal, although not the only, such activity is likely to be the use of corporate entities to sell material designed to enable students to cheat in assignments tendered for the purpose of obtaining academic qualifications.
[20] In his written submissions counsel for the Commissioner describes his client’s case in the following terms:
Essence of the case
3.2 The essence of the Commissioner’s case is that the respondents profited from the ‘Assignment4U’ business which provided cheating services through the website www.assignment4u.com, from late 2003 or early 2004 through to May 2013. Various entities have been involved in the ‘Assignment4U’ business, including Assignment 4U Consultant Limited, later followed by Atan Ltd and finally by Ateama Limited. The various times that the Commissioner alleges each entity was carrying on the business have been identified. It is the Commissioner’s case that at all relevant times Mr S Li and Ms Yang have controlled the relevant companies.
3.3 The cheating services provided were the completion of assignments and essays by “ghost writers” in return for a fee. Those assignments and essays were handed in by students to various tertiary education providers, with the students passing off the work as their own. That activity is set out in full in the affidavits filed by the Commissioner. A summary can be found at section 2 of Detective Craig Smith’s affidavit sworn 12 June 2015.
Other criminal activity
3.4 While the provision of cheating services is the main criminal activity alleged by the Commissioner, the Commissioner also alleges other criminal activity. That includes specific incidents of mortgage fraud in respect of the purchase of some of the restrained property, being the properties at:
(a) Unit 5A, 88 Cook Street, Auckland (registered in the name of HLA Trustee Limited);
(b) Unit 1A, 88 Cook Street, Auckland (registered in the name of Mr J Li);
(c) 3 Fowler Street, Northcote, Auckland (registered in the name of Ms Xiang); and
(d) 29 Takutai Street, Parnell, Auckland (registered in the name of Xuanxuan Trustee Limited).
3.5 The Commissioner’s evidence identifies the alleged perpetrator of each fraud and identifies, with as much specificity as possible, the time at which each instance of offending took place.
3.6 He also alleges money laundering, on the part of all respondents, of the proceeds generated by the provision of cheating services, and also tax evasion, in that income declared by the respondents to Inland Revenue does not match their actual income (as is the case for almost all beneficiaries of illegal enterprises).
[21] During the hearing Mr Harborow explained that the Commissioner will allege that the respondents were involved in activity that breached s 292E of the Education Act 1989 as from 1 September 2011 when that section came into force. The
Commissioner will rely on the same activity to allege offending prior to that date but will say that this constituted offending under the Crimes Act 1961.
[22] I am not satisfied that the originating application procedure has failed to communicate the nature and scope of the Commissioner’s case to the respondents. I consider the originating application and the affidavits filed in the present case clearly define the orders sought by the Commissioner, as well as the legal and evidential basis on which he relies.
[23] Furthermore, any complexity in the present case arises principally because the Commissioner’s witnesses have carried out a detailed analysis of the respondents’ financial affairs. This has resulted in the witnesses filing lengthy affidavits containing close examination of transactions in which the respondents were allegedly involved. The difficulties posed by this aspect of the Commissioner’s evidence cannot be addressed or resolved by the filing of a statement of claim.
[24] It follows that I do not consider the filing of a statement of claim to be necessary to enable the respondents and the Court to know the basis and scope of the Commissioner’s claim.
[25] Several other factors also persuade me the Court should not exercise its discretion in favour of the applicants. First, I consider it significant that the first and second respondents have filed the application at such a late stage. Logic suggests they would have filed the application much earlier if they genuinely had difficulty in understanding and responding to the allegations made by the Commissioner. The fact that the respondents have been able to file affidavits in response to the Commissioner’s claim indicates they understood the arguments they were required to address.
[26] Secondly, I consider that diversion of the parties’ energies to issues relating to the pleadings at this point carries with it significant risk for all parties. It will inevitably result in increased expense that is unlikely, in my view, to translate into savings at trial. It will also require counsel to undertake a substantial body of extra work in relation to the pleadings at a time when they would ordinarily be preparing for trial. Arguments are also likely to arise in relation to the adequacy of the
particularisation of any statement of claim the Commissioner might produce. It is not difficult to see how these could jeopardise the current trial date.
[27] For these reasons I am satisfied it is neither necessary nor appropriate to require the Commissioner to file a statement of claim.
Result
[28] The application is dismissed.
Costs
[29] The Commissioner has succeeded and is entitled to an award of costs jointly against the first and second respondents.
Pre-trial directions
[30] There is doubt as to whether pre-trial directions are currently in place. Faire J issued a Minute on 21 June 2016 making pre-trial directions by consent but the vacation of the earlier trial means they may no longer be operative. It is therefore appropriate to make new pre-trial directions as follows:
[31] I reserve leave to all parties to ask the Registrar to arrange a telephone conference at any stage prior to trial should any issue arise requiring the assistance or intervention of the Court.
Lang J
Solicitors:
Meredith Connell, Auckland D P H Jones QC, Auckland R Reed QC, Auckland
S Buckley, Auckland
Michael Kan Law, Auckland
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