The New Zealand government has exposed itself to what may be an unlimited indemnity in favour of Kim Dotcom, the man the US government is seeking to have extradicted on criminal copyright and related charges from New Zealand.The Megaupload boss had his business closed when New Zealand police raided his mansion in Auckland on 20 January.
Since then a string of victories achieved by the Dotcom legal team have revealed that the original restraining order upon which the police operated was "null and void".The New Zealand High Court, under an order from Justice Potter, required the government to provide an undertaking as to damages that is almost certainly unlimited.According to the National Business Review legal columnist and LawFuel publisher John Bowie the provision of the undertaking could result in the New Zealand taxpayer being on the wrong end of a damages claim running into hundreds of millions of dollars.
"Dotcom lawyers Willie Akel and Greg Towers at Simpson Grierson will not make public comment regarding the current issues, although they are very clear about their continued, vigorous defence of the current charges against their client," the NBR reported. "Kim Dotcom, as majority owner of Megaupload, is believed to have received over $US40 million in dividends from his company during the 2010 financial year. It’s precise value is therefore high, certainly in the hundreds of millions and maybe more.
"In chump change terms, Kim Dotcom’s liable for $6.5 million in respect of alterations to the mansion, should he be unable to complete purchase. The money would be forfeited to the current owners. But that figure is dwarfed by a potential claim for hundreds of millions of dollars under an indemnity that, so far as I am aware, is unlimited and probably unprecedented in its nature. "When Crown lawyer Madeleine Laracy acknowledged that Crown Law had “overlooked” the issue of giving Dotcom notice of the raid, Justice Potter required that the indemnity be given. The Crown became panicky. They either provided the required indemnity and undertaking to the Court or they gave everything back to Kim Dotcom.
The government were in the odious position of being between Dotcom’s rock and a fiscal hard place. Doubtless the issue arrived not only before Cabinet but also on the desk of Finance Minister Bill English who needed to find someone to put their hand up. The hand they found was Police Commissioner Peter Marshall’s. Apart from the Commissioner’s involvement in the matter there was the then Solicitor-General David Collins and in particular his deputy Cameron Mander.
"Cameron Mander, acting on delegated authority from Attorney General Chris Finlayson, was busy advising the US government, the FBI and everyone else stateside who want to get their hands on Mr Dotcom, about their legal rights and obligations in New Zealand. As one lawyer commented, the complex copyright issues upon which the extradition case depended should have seen Crown Law seek advice from a senior intellectual property lawyer, of whom there are several in New Zealand of international repute.
"Instead, Crown Law proceeded and eventually found their indemnity. The question of whether they also obtained a corresponding US government indemnity is open, but almost certainly they did not but rather acted in the spirit of mutual reciprocity and assistance, for which the US government has been so openly grateful. Establishing Crown liability for those carrying out law enforcement obligations is generally not achievable other than in cases of bad faith. Extensive immunities exist, as senior Auckland Law School lecturer and former Crown lawyer Hanna Wilberg told me. However, there is also the tort of “misfeasance in a public office” which requires malice to be proved and the NZ Bill of Rights, which provides for compensation in respect of an unlawful police search, although there are limits to that remedy, she said.
"The issue of bad faith is important here for the Crown because the Crown knew they were acting on an unlawful warrant when they exercised the restraining order and seized the Dotcom assets and closed the Megaupload business. The results, in economic terms for Dotcom, are obviously massive. So too is the taxpayer liability."
The case against Dotcom has looked increasingly shaky and therefore the potential liability increasingly likely, notwithstanding the lack of comment from the Dotcom legal team. If there is no breach of New Zealand copyright law or any other law, then it appears difficult for New Zealand to accede to the US requests to extradict Dotcom, notwithstanding the New Zealand government's bend-over-backwards attempts to assist.The courts, it appears, take a somewhat more rigorously legal approach to these matters, unsurprisingly.