The proceeds of crime case against a business owner over health and safety breaches has taken a high risk turn for police with the High Court saying a loss could see the taxpayer covering losses sustained by the company.
Company owner Ron Salter had already been fined and served a home detention sentence when police executed search warrants and served restraining orders across his business, home and other assets.
It placed a freeze across four properties worth $10 million and a business Salter had spent 40 years building up from nothing.
The basis of the police case was that his business, Salters Cartage Limited, was "systemically non-compliant with health and safety and hazardous substances law" and operated "blatantly and dangerously for at least seven years".
As a result, police claimed, Salters Cartage Ltd earnings were "unlawfully derived" and there would be a later application made to recover "unlawful benefits".
In a High Court judgment, Justice Matthew Palmer said the police's case against Ron Salter could impact on the sale price of the business and hurt its ability to borrow money.
"I order that the Commissioner of Police grant an undertaking that he will comply with any order for the payment of damages and costs to compensate the respondents for any damage and costs sustained as a consequence of the restraining orders."
He called the case "novel": "The proceeds of crime regime has not before been applied to an ordinary commercial business that has committed health and safety or hazardous substances offences."
Palmer added that "the Commissioner (of Police) has an arguable case that could result in some sort of forfeiture orders", but it was too early to properly assess the strength of the case.
Jamey Lee Bowring, 24, was killed at Salters Cartage's Wiri yard in 2015 after a large waste fuel tank on which he was welding exploded. Salter - and the company - pleaded guilty to a string of health and safety, and hazardous substances, charges brought by WorkSafe. About $400,000 in fines were ordered and Salter was sentenced to 4½ months' home detention.
The police action - which came after the WorkSafe prosecution - saw Salter tell the Herald last year: "I'd done my time, paid the fines. I thought I'd done everything and it was all over."
The place where Bowring died was the base of a company built by Salter over about 40 years, collecting hazardous substances including waste oil and recycling it. The company now had a fleet of trucks, 25 staff and around 3000 customers.
Ron Mansfield QC, acting for Salter, had told the court the case was "an unprecedented test case" as it was the first time police had used the proceeds of crime law to restrain a legitimate business over health and safety, and hazardous substances, allegations.
He said "loss is both likely and significant" as a result of the impact on the business to be agile, or expand, with constraints on borrowing because of the court orders.
"The Salters can either sell significantly below market value or continue to operate the SCL Group with one hand tied behind its back," said Mansfield.
"If losses are suffered, the Commissioner should be accountable, if he is unsuccessful. If losses are not suffered or the Commissioner's case is as strong as he claims, then he has nothing to fear."
Lawyers acting for police - Mark Harborow and David Wiseman of Meredith Connell - had rejected the claim it was a "test case" and said no undertaking was required.
"The (Criminal Proceeds Recovery) Act does not distinguish between criminal offending involving drug dealing and breach of health and safety requirements.
"It is a straightforward application of the act to serious offending that generated significant financial reward with full knowledge of the numerous illegalities. It is profit-motivated criminal offending."
Police rejected that the restraining order had stifled the business, saying revenue had grown and a sale could still proceed.
Palmer's High Court judgment said ordering an undertaking - having the Crown underwrite losses caused by an unsuccessful police case - was a rare event.
He referred to case law which expressed concern over binding police to undertakings over damages or costs. In a prior case, to which he referred, it was said police could "become excessively cautious and be inhibited from seeking restraining orders because of the spectre of having to face a damages claim" - a position contrary to the public interest.
However, Palmer said: "There is a public interest in ensuring the proceeds of crime regime operates effectively and a public interest in protecting those subject to it from potential injustice."
He said he had not been convinced the restraining orders were having a day-to-day impact on the business, although there was an impact on the ability to borrow and for how much the business might be sold.
Palmer said an undertaking by the Commissioner could help police be more responsive to any commercially-driven changes needed to the restraining orders.
He also rejected the claim police actions in pursuing this case would be "chilled" by an undertaking - "the New Zealand Police are made of sterner and more reasonable stuff".
A spokesman for Salter welcomed the judgment, describing the police case as "experimental".
The spokesman, Matthew Blomfield, said the proceeds of crime legislation had shifted from being used to "prevent criminals from profiting from their actual and known criminal offending".
"The Commissioner wants more. He wants to turn the (act) into his own revenue collecting machine. He wants to turn that machine on any business that commits any offence.
"Thankfully, the court has stepped in and said that is not fair or just - if you lose, you compensate like any other civil litigant would be required to do."