August 07 2012
The High Court has recently ruled that warrants used by New Zealand police to undertake a search of the New Zealand residence of Kim Dotcom, founder of Megaupload, on behalf of the US government were unlawful and that the conduct of the police exceeded what would have been permitted even if the warrants were lawful.
In what has become highly publicised litigation in New Zealand, the United States sought the extradition of Dotcom and three of his business associates in relation to charges regarding the Megaupload business, an internet file-sharing service. The US government alleges that Megaupload was used for widespread breach of copyright and has charged Dotcom and his associates with breach of copyright, conspiracy to breach copyright, conspiracy to racketeer and money laundering. It is alleged that they – and the companies in the Megaupload group – conspired to administer internet services which were used by others to reproduce and distribute infringing copies of television programmes, software, music and films and also to use the proceeds of the unlawful transactions. The alleged conspiracy was referred to, for operational purposes, as the "mega-conspiracy".
The US government asked the attorney general of New Zealand for the assistance of the New Zealand police in investigating the suspected offence. The request was made under the Mutual Assistance in Criminal Matters Act 1992. In January 2012, in response to the request, the police carried out highly publicised raids in which they:
An extradition hearing was set down for August 2012.
Dotcom and the others arrested sought judicial review of three search warrants that were issued by the District Court and executed by the police. They sought orders declaring that the warrants and the later removal of clones of various hard drives from New Zealand were unlawful, and also sought directions as to how the seized items were to be dealt with by the police.
General state of warrants
The search warrants were in identical form. They specified that the issuer was satisfied that there were reasonable grounds to believe that there were, at the search address, things "as per Appendix A", in respect of which an offence of breach of copyright and money laundering was suspected of being committed. Appendix A, attached to the warrant, listed a wide range of items, including "all digital devices". To the warrant was also attached a letter from the US government seeking the police's assistance, which referred to the "mega-conspiracy".
The court held that since Entick v Carrington ((1765) 19 St Tr 1029), courts have recognised that, in line with their fundamental duty to uphold the rule of law, their role in respect of search warrants has been to ensure that the state exercises its power in compliance with the law. Searches represent an invasion of privacy and as such, they must have a proper legal basis. Because search warrants are evidence of judicial authority to search, the courts have insisted that warrants make clear the precise limits of the authority to search.
The court considered the concept of international comity underlying the Mutual Assistance in Criminal Matters Act, as well as the expectation that assistance provided by the police in New Zealand would be reciprocated upon request. However, cross-border cooperation did not require a 'hands-off' approach from the courts, and the act contemplated the provision of assistance only within the bounds of domestic laws.
Offences not adequately defined
The court held that the Mutual Assistance in Criminal Matters Act provided that any warrant must relate to a particular offence or offences, and that the power to search and seize under the warrant was limited to those offences. The description of the offences in this case was deficient: the warrants did not specify that breach of copyright and money laundering were offences under US law, nor that they were punishable by a sentence of imprisonment of two years or more. Further, the warrants did not refer at all to the conspiracy charges.
The court considered that those reading the warrants would likely have understood them as authorisations regarding offences under New Zealand law. The words used – "breach of copyright" – were insufficient to describe the offence; copyright could be breached in any number of ways. No reference was made to the Megaupload business, and the reference to the "mega-conspiracy" in the appendix, without explanation, merely added to the confusion. The court commented that those subject to a search warrant should not be left to attempt to guess the purpose of the warrant through deductive reasoning. It concluded that the warrants were general warrants and therefore invalid.
Inadequate definition of authority to search
The scope of the authority to search was closely linked to the description of the offence, and inadequate specificity as to the former was likely to entail inadequate specificity as to the latter. In this case, the court considered that the warrants would most likely be read as authorising the seizure of all the items listed in Appendix A. However, it was clear that the digital devices listed in Appendix A would probably store a large volume of irrelevant material. It was apparent from police evidence that the police sought the authority to seize entire categories of items, in the knowledge that much irrelevant material would inevitably be seized. Because the police could not assess the relevance of any material (and had not been requested to do so by the US Federal Bureau of Investigation (FBI)), they had made an arrangement with the FBI for it to undertake that task offshore.
The court held that although the operational imperative that drove such an approach was understandable, operational difficulties could not expand the scope of authority available to the police under the Mutual Assistance in Criminal Matters Act. The warrants defined items in such a way that irrelevant items were included. Under the provisions of the act, the warrants could not authorise the seizure of irrelevant material and were therefore invalid. The court noted an affidavit filed on behalf of the United States deposing that the FBI wished to keep all seized material in case any new issues arose, and held that the act could not be construed as permitting irrelevant material to be held in case it subsequently became relevant.
Even if the warrants had been valid and lawfully issued, the police actions, in both seizing and retaining irrelevant material, went beyond what the warrants authorised. If the warrants had been lawful, the police would have been required to conduct a preliminary sorting exercise at the plaintiffs' premises. Provided they acted reasonably in doing so, they would then have been able to remove those items which they reasonably believed to contain material which might be of evidential value. Any necessary offsite sorting process should then have been carried out promptly, and those items which were not found to fall within either of the two categories in the warrant should have been returned promptly to the owner.
The court also considered that if the warrants had been adequately specific as to the offences and the scope of the authority to search, special conditions – which are provided for under the Mutual Assistance in Criminal Matters Act – could have been imposed in relation to the offsite sorting exercise. Such conditions may have achieved the appropriate balance between the investigative needs of the FBI and the rights of the plaintiffs to be free from unreasonable search and seizure of their property and correspondence.
However, in this case the police not only seized irrelevant material, but also continued to hold material which they conceded was irrelevant after the search. In so doing, the court held, the police had exceeded what they would have been authorised to do if the warrants had been valid.
Provision of copies of digital files to FBI
Finally, the court considered whether the provision by the police of copies of digital files to the FBI was unlawful in light of a direction given by the solicitor general of New Zealand on February 16 2012. The direction, made under Mutual Assistance in Criminal Matters Act provisions regarding the custody and disposal of seized items, specified that any items seized were to remain in the custody and control of the commissioner of police until further direction. The issue required, among other things, consideration of the fact that the items that were shipped offshore were copies of original items still retained by the police.
The court held that the information on the hard drives was the property of the plaintiffs, in the same way as private papers were the property of the plaintiffs in Entick v Carrington. Although the physical items remained in the custody of the police, once the hard drive clones were shipped offshore, the police lost the ability to control what was done with the information stored on them. The provision of the clones to the FBI in these circumstances was therefore in breach of the solicitor general's direction that the items remain under the custody and control of the commissioner. In making this finding, the court considered and dismissed evidence put forward for the police in support of a submission that the plaintiffs had consented to the shipping of the information to the FBI in the United States.
The court declined to make any findings regarding appropriate remedies, as any such findings would require it to hear further information from counsel.
Since the release of the High Court's decision, the extradition hearing set for August 2012 has been adjourned to March 2013. In anticipation of that hearing, the plaintiffs have already been granted by the District Court the disclosure of documents relating to whether the US government had a prima facie case against them. Meanwhile, the US government has applied to the High Court for judicial review of that decision. Interim relief has been granted to the US government to the extent that it is excused, in the interim, from providing the disclosure as ordered by the District Court on the condition that it immediately commences preparation of the contested disclosure. The substantive review hearing – in which the US government will argue that under US law, the plaintiffs are required to surrender to jurisdiction (which they have not done) before disclosure would be required – is yet to take place.
Both the High Court decision and the proceedings regarding Dotcom have generated much public interest in New Zealand. The subject matter, concerning the application of copyright law and prosecutorial powers to digital media used by many in everyday life, has ensured widespread media and public attention. From a legal perspective, the charges and proceedings generally raise a number of issues regarding the application of IP law to new media and to the effects of mutual assistance of a foreign power on the rights and protection of persons in New Zealand. The decision is one of a series of significant and high-profile decisions in recent years regarding the parameters of the state's power to authorise search and seizure. The crown is reported to have filed an appeal against the decision and there is little doubt that the "mega-conspiracy" operation conducted by the police will be the subject of further important decisions.
For further information on this topic please contact Chris Browne or Kate Morrison at Wilson Harle by telephone (+64 9 915 5700), fax (+64 9 915 5701) or email (email@example.com or firstname.lastname@example.org).
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