Asset Forfeiture: Commissioner of Police v. Investments Ltd

Companies operating the Masala restaurant chain along with Masala management Supinder Singh and Joti Jain negotiated an eight million dollar deal to settle a proceeds of crime claim following investigations for tax fraud, immigration fraud and labour fraud.  This followed a series of prosecutions against companies and individuals involved with Masala.

Investigations by Inland Revenue and Immigration New Zealand identified widespread and systemic tax evasion and immigration-related offending.  Action was taken under the Criminal Proceeds (Recovery) Act to seize assets derived from criminal offending.  In an agreed settlement, 34 properties in Auckland, Waikato and Bay of Plenty are to be sold with the net proceeds used to pay the multi-million dollar settlement.  These properties were either sites for Masala restaurants or housing for staff.  Outside the court settlement, Masala investors have separately agreed how the eight million dollar cost will be spread between themselves.

High Court approval of this asset seizure does not stop Inland Revenue bringing criminal charges for tax evasion.

Commissioner of Police v. Investments Ltd – High Court (28.02.17)

17.018

Corruption: R. v. Borlase & Noone

Sentencing principles on conviction for corruption and bribery mirror those for commercial fraud ruled Justice Fitzgerald when sentencing contractor Stephen James Borlase to five years six months jail and Auckland City employee Murray John Noone to five years jail for corruption in relation to local authority roading contracts.

As director of contractor Projenz (2005) Ltd, Borlase was convicted of corruption after providing benefits in excess of one million dollars to employees of Rodney District Council and Auckland City over a seven year period.  Payments covered overseas travel, hotel accommodation, iPads, mobile phone bills and invoices for non-existent consulting services.  Auckland City employee Noone was the direct recipient of benefits totalling some $1.1 million.

This was not a victimless crime, Justice Fitzgerald said. Auckland City incurred substantial legal and accounting costs investigating the relationship between Borlase and Noone.  Auckland City and Auckland Transport employees suffered reputational damage and ongoing public suspicion after news of corrupt payments became public.  This offending also tarnished New Zealand’s reputation as a nation where public corruption is virtually non-existent.

The level of corruption described in evidence exceeded anything previously before the courts.  Justice Fitzgerald used principles applied to commercial fraud convictions in deciding length of jail terms for the two convicted: the magnitude and sophistication of the offending; motivation for the offending; extent of losses; period over which the offending took place; seriousness of any breaches of trust; and the impact on victims.   

R. v. Borlase v. Noone  - High Court (22.02.17)

17.014

Family Trust: McLaren v. McLaren

A no-holds-barred family dispute has broken out over the McLaren family’s Marlborough mussel farm with the High Court reversing actions by son Bruce who had removed his parents as beneficiaries of a trust controlling farm operations.

The McLaren family started mussel farming in the late 1970s.  After nearly thirty year’s operation the business was restructured into two separate family trusts: operating assets into the BDM Trust and capital assets to the MFT Trust.  David and Mary McLaren were appointed trustees of each Trust along with their only son Bruce.

Evidence was given that son Bruce fell out with his parents after hearing of their plans to sell off farming assets owned by the MFT Trust.  He retaliated by exercising a power of appointment granted him in the BDM Trust, removing his parents as discretionary beneficiaries of the BDM Trust and appointing two new trustees.  This increased the number of trustees to five ensuring a 3-2 voting split in Bruce’s favour if the new appointments voted with him against his parents as trustees.   

Justice Dobson said this is a sorry tale of what can occur when a family adopts an inappropriate form of trust deed without adequate advice or sufficient understanding of the legal effect of its terms.  Parents David and Mary McLaren had established the business but sold operating assets to a Trust giving son Bruce control through his power as an appointer.

Justice Dobson reversed the decision to remove parents David and Mary as beneficiaries.  He said son Bruce did not have unfettered power to decide who should be removed; the appointer’s power was governed by some basic fiduciary duties.  Circumstances in which the BDM Trust was established meant Bruce could only remove his parents as beneficiaries after acting in good faith bearing in mind the purposes of the Trust.  The likely inference is that Bruce was nominated as appointer to enable the business to keep operating after his parents retired or on their death, he said.  Given the shared aspirations of Bruce and his parents it was an expropriation of trust property to remove his parents as beneficiaries leaving Bruce and his immediate family as the only beneficiaries.  It was not a reasonable exercise of trustee powers when removing his parents and this was disproportionately punitive, he said.

Bruce’s appointment of two extra trustees to the BDM Trust was not overturned.

McLaren v. McLaren – High Court (15.02.17)

17.016