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What happens when a multi-million-dollar home in St Heliers, Auckland, is frozen due to an overseas criminal investigation and a government-appointed officer tries to sell it before the case is decided?
That was the scenario at the centre of a recent High Court case where McVeagh Fleming successfully acted for the property owner. The Official Assignee, appointed to manage restrained assets under the Criminal Proceeds (Recovery) Act 2009, applied to sell the property early to avoid mounting holding costs. But the Court said no.
This decision sets a clear precedent on when an early sale order can, and can’t be made. It highlights the need to balance asset preservation with the property rights of individuals who have not been convicted.
The Official Assignee is responsible for the custody and care of the asset while it is restrained. This duty includes meeting all associated costs. The holding costs for restraining the relevant property in St Heliers were significant and involved hundreds of thousands of dollars in rates, maintenance, and security.
The Official Assignee was concerned that if the property was not ultimately forfeited, they - and by extension, the Crown, would be left out of pocket. While section 86 of the Act allows for cost recovery if foreign forfeiture orders are made, there’s no reimbursement if no forfeiture occurs.
Under the Criminal Proceeds (Recovery) Act 2009, the Official Assignee can ask the Court for an early sale order - essentially, permission to sell a restrained property before legal proceedings are complete. The purpose of such an order is to protect the value of the asset, particularly if there’s a risk it might depreciate over time.
As a result, the Official Assignee applied for an early sale, arguing that it would preserve the property's value, avoid further costs, and reduce the financial risk to the Crown of not being repaid.
While New Zealand has a strong interest in ensuring that criminal proceeds are not protected or hidden here, that interest must be weighed against the rights of individuals who have not been convicted. Property interests should not be eroded simply because a person is under investigation or facing overseas proceedings.
The key question before the Court was whether selling the property early was “appropriate” under section 34(1) of the Act. In line with previous decisions (notably Commissioner of Police v Parker [2019] NZHC 1506), the Court had to consider several factors, including:
Appreciation in property value vs Depreciation and Holding Costs: The Official Assignee's key argument was that an early sale order was necessary to preserve the Crown's position, as the property's improvements were depreciating and the costs of holding the property were substantial and continuing to mount.
In reply, McVeagh Fleming presented expert evidence showing that the land value was appreciating at a considerable rate - enough to offset both the depreciation of improvements and the holding costs. The Court was satisfied that the Crown’s position remained secure, and that a sale order was unnecessary.
Timing of criminal proceedings: The overseas criminal court was expected to issue a decision soon. McVeagh Fleming successfully argued that the New Zealand Court should preserve the status quo and wait for the outcome, as the property owner could still be acquitted.
The "risk" of innocence: The Official Assignee submitted that the Crown could be left out of pocket if the property was not ultimately forfeited. McVeagh Fleming argued that forfeiture would be inevitable if the owner were found guilty overseas - and that protecting the Official Assignee from the possibility of the owner's innocence was not a legitimate basis for a sale order.
The Court agreed, finding that it would be unfair to protect the Official Assignee from the risk that the owner may be acquitted.
Notional cap: The Court also considered whether a restraining order under the Criminal Proceeds (Recovery) Act 2009 only restrains the value of the property at the time of the order (creating a so-called “notional cap” on the Crown’s potential recovery), or whether it also captures any increase in value while the property remains restrained.
This issue had not previously been tested and was an open question under the current wording of the Act. However, the Court rejected the “notional cap” argument, finding that it was inconsistent with the purpose of the Act - namely, to ensure that crime does not pay.
While this point was not critical to the outcome of the case, we consider it a significant development in the law that may influence how similar cases are approached in the future.
The early sale order was rejected. The Court confirmed that such orders will only be granted where there is clear evidence that the asset is depreciating or that holding costs are disproportionately high. Financial risk to the Official Assignee, or the Crown, is not, on its own, a sufficient reason to justify a sale.
The Official Assignee experiencing a financial loss should not be a consideration, as an acquitted defendant's property interests must be protected. The purpose of the restraint is to preserve the property's value, not to ensure reimbursement of the Official Assignee’s costs.
If you need advice or have any questions regarding any aspect of this article, please contact us for professional assistance.
What happens when a multi-million-dollar home in St Heliers, Auckland, is frozen due to an overseas criminal investigation and a government-appointed officer tries to sell it before the case is decided?
That was the scenario at the centre of a recent High Court case where McVeagh Fleming successfully acted for the property owner. The Official Assignee, appointed to manage restrained assets under the Criminal Proceeds (Recovery) Act 2009, applied to sell the property early to avoid mounting holding costs. But the Court said no.
This decision sets a clear precedent on when an early sale order can, and can’t be made. It highlights the need to balance asset preservation with the property rights of individuals who have not been convicted.
The Official Assignee is responsible for the custody and care of the asset while it is restrained. This duty includes meeting all associated costs. The holding costs for restraining the relevant property in St Heliers were significant and involved hundreds of thousands of dollars in rates, maintenance, and security.
The Official Assignee was concerned that if the property was not ultimately forfeited, they - and by extension, the Crown, would be left out of pocket. While section 86 of the Act allows for cost recovery if foreign forfeiture orders are made, there’s no reimbursement if no forfeiture occurs.
Under the Criminal Proceeds (Recovery) Act 2009, the Official Assignee can ask the Court for an early sale order - essentially, permission to sell a restrained property before legal proceedings are complete. The purpose of such an order is to protect the value of the asset, particularly if there’s a risk it might depreciate over time.
As a result, the Official Assignee applied for an early sale, arguing that it would preserve the property's value, avoid further costs, and reduce the financial risk to the Crown of not being repaid.
While New Zealand has a strong interest in ensuring that criminal proceeds are not protected or hidden here, that interest must be weighed against the rights of individuals who have not been convicted. Property interests should not be eroded simply because a person is under investigation or facing overseas proceedings.
The key question before the Court was whether selling the property early was “appropriate” under section 34(1) of the Act. In line with previous decisions (notably Commissioner of Police v Parker [2019] NZHC 1506), the Court had to consider several factors, including:
Appreciation in property value vs Depreciation and Holding Costs: The Official Assignee's key argument was that an early sale order was necessary to preserve the Crown's position, as the property's improvements were depreciating and the costs of holding the property were substantial and continuing to mount.
In reply, McVeagh Fleming presented expert evidence showing that the land value was appreciating at a considerable rate - enough to offset both the depreciation of improvements and the holding costs. The Court was satisfied that the Crown’s position remained secure, and that a sale order was unnecessary.
Timing of criminal proceedings: The overseas criminal court was expected to issue a decision soon. McVeagh Fleming successfully argued that the New Zealand Court should preserve the status quo and wait for the outcome, as the property owner could still be acquitted.
The "risk" of innocence: The Official Assignee submitted that the Crown could be left out of pocket if the property was not ultimately forfeited. McVeagh Fleming argued that forfeiture would be inevitable if the owner were found guilty overseas - and that protecting the Official Assignee from the possibility of the owner's innocence was not a legitimate basis for a sale order.
The Court agreed, finding that it would be unfair to protect the Official Assignee from the risk that the owner may be acquitted.
Notional cap: The Court also considered whether a restraining order under the Criminal Proceeds (Recovery) Act 2009 only restrains the value of the property at the time of the order (creating a so-called “notional cap” on the Crown’s potential recovery), or whether it also captures any increase in value while the property remains restrained.
This issue had not previously been tested and was an open question under the current wording of the Act. However, the Court rejected the “notional cap” argument, finding that it was inconsistent with the purpose of the Act - namely, to ensure that crime does not pay.
While this point was not critical to the outcome of the case, we consider it a significant development in the law that may influence how similar cases are approached in the future.
The early sale order was rejected. The Court confirmed that such orders will only be granted where there is clear evidence that the asset is depreciating or that holding costs are disproportionately high. Financial risk to the Official Assignee, or the Crown, is not, on its own, a sufficient reason to justify a sale.
The Official Assignee experiencing a financial loss should not be a consideration, as an acquitted defendant's property interests must be protected. The purpose of the restraint is to preserve the property's value, not to ensure reimbursement of the Official Assignee’s costs.
If you need advice or have any questions regarding any aspect of this article, please contact us for professional assistance.
