Boumelhem v NSW Crime Commission & Ors

Ha v State of New South Wales & Ors (1997) 189 CLR 465 CASES CITED : R v Eid (1999) 46 NSWLR 116 Peters v Attorney General (NSW) (1988) 16 NSWLR 24 South Australia v The Commonwealth (1942) 65 CLR 373

Amin Boumelhem (1st plaintiff) Leisure Coast Tobacconist & Giftware Pty Ltd (in liquidation) (2nd plaintiff) New South Wales Crime Commission (1st defendant) PARTIES : Michael Nibbs (2nd defendant) Richard Moore (3rd defendant) Robert East (4th defendant) State of New South Wales (5th defendant)

COUNSEL : R Horsley (plaintiffs) I Temby QC and M Buscombe (2nd 4th 5th defendants)

V F Stanizzo Lawyers (plaintiffs) SOLICITORS : John Michael Giorgiutti (1st defendant) I V Knight Crown Solicitor (2nd 4th & 5th defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20477 of 2002 Amin Boumelhem & Anor v New South Wales Crime Commission & Ors

JUDGMENT 1 HIS HONOUR: The first plaintiff, Amin Boumelhem, was a director of the second plaintiff, Leisure Coast Tobacconist & Giftware Pty Ltd, and carried on its business in the wholesale and retail sale and distribution of tobacco products. The business became one of the subjects of an investigation by the first defendant, the New South Wales Crime Commission, into the alleged evasion of the payment of tobacco licence fees under the Business Franchise Licences (Tobacco) Act 1987 (the Tobacco Act). On 28 October 1996, Mr Boumelhem was arrested and charged with conspiring to cheat and defraud the Office of State Revenue of New South Wales. On the same day, search warrants were executed at his private residence and at premises used for the conduct of the business. Business records and a large quantity of tobacco products were seized. 2 On 5 August 1997, the High Court delivered a judgment in which relevant provisions of the Tobacco Act were declared invalid on the basis that they purported to impose an excise, contrary to s90 of the Constitution: Ha v State of New South Wales & Ors (1997) 189 CLR 465. As a result, the prosecution moved to have the charge against Mr Boumelhem dismissed. 3 The plaintiffs instituted proceedings in this Court seeking damages arising from steps taken in the course of the investigation. By an amended statement of claim filed on 27 August 2007, Mr Boumelhem seeks damages for false arrest, false imprisonment and financial loss. The company seeks damages for loss of stock in trade, profits, and loss of business. Both plaintiffs claim damages for the detention of the items seized as a result of the searches, and a declaration that the search warrants were invalid at the time of their issue. 4 Apart from the Crime Commission, two police officers were joined as the second and third defendants, an officer of the Office of State Revenue as the fourth defendant, and the State of New South Wales as the fifth defendant. The second and third defendants arrested Mr Boumelhem and were involved in the searches. The fourth defendant was the inspector under the Tobacco Act dealing with the matter. The State of New South Wales was joined as the fifth defendant on the basis that it is vicariously liable for the wrongs alleged to have been done by the other defendants. 5 The current form of the statement of claim is the result of interlocutory proceedings before Studdert J, in which his Honour gave judgment on 19 December 2006 and on 27 June 2007. It is not necessary to examine the course of those proceedings or the orders his Honour made concerning the statement of claim. However, on 27 June 2007 his Honour also ordered that there be a decision on the following questions before the determination of the remaining issues in the case: 1) Were the search warrants invalid as at the date of their issue?

2. Was the warrant for the arrest of Mr Boumelhem invalid as at the date of its issue? 6 It was the resolution of these questions which came before me. As a result of a settlement reached between the plaintiffs and the fourth and fifth defendants since I reserved judgment in the matter, the second question need no longer be answered. It is only the validity of the search warrants which I must decide. On both questions, I heard argument from Mr Horsley, counsel for the plaintiffs, and from Mr Temby QC, who appeared with Mr Buscombe for the second, fourth and fifth defendants. The first defendant, the Crime Commission, did not seek to be heard separately, although the validity of the warrants bears upon its case. The third defendant, one of the police officers, has never been served with the statement of claim. 7 Obviously, a crucial part of the plaintiffs' case is that the seizure of property from the private and business premises was unlawful, and the resolution of that question turns upon the validity of the search warrants. It is necessary to examine the statutory scheme by which the Crime Commission's investigation was undertaken and the search warrants were issued. It will then be necessary to determine whether in the present case that investigative process was relevantly affected by the High Court's decision in Ha. 8 The Crime Commission is constituted by the New South Wales Crime Commission Act 1985. Section 24 of that Act creates a Management Committee. By s25(1)(a), one of the functions of that Committee is to refer "matters relating to relevant criminal activities to the Commission for investigation". "Relevant criminal activity" is defined in s3 as "any circumstances implying, or any allegations, that a relevant offence may have been, or may be being, or may be about to be, committed". The term "relevant offence" is also defined so as to include (as the Act stood at the relevant time) an offence "that involves substantial planning and organisation and that involves, or is of a kind that ordinarily involves, the use of sophisticated methods and techniques". 9 The investigation in the present case was initiated by a reference to the Commission under s25(1)(a). By s6(1)(a), one of the principal functions of the Commission is to conduct such an investigation. I shall examine the terms of the reference shortly. 10 Section 11 provides for search warrants, enabling a member of the Commission to apply for such a warrant to a justice authorised under the Search Warrants Act 1985. Relevantly, subs(2)(a) enables such an application if the Commission has reasonable grounds for suspecting that "there may be in or on any premises a thing or things of a particular kind connected with a matter relating to a relevant criminal activity, being a matter into which the Commission is conducting an investigation …". By subs(3), the justice may issue a warrant authorising a police officer or other person to enter the premises and to search for and seize any such things. It was under that provision that the search warrants in the present case were issued and executed. 11 Paragraph 2 of the reference to the Commission describes the subject matter of the investigation as follows: 2. The allegations constituting the relevant criminal activity are that persons engaged in tobacco wholesaling or tobacco retailing in New South Wales may have committed, may be committing or may be about to commit offences that involve substantial planning and organisation and the use of sophisticated methods and techniques. The offences arise from participation in schemes designed to evade the payment of large sums by way of tobacco licence fees under the Business Franchises Licences (Tobacco) Act 1987, and the concealment of such evasion. The offences include: (a) making false statements to the prejudice of the Crown and the public revenue with intent to defraud (common law offence);

(c) falsification of company books with intent to defraud (section 175 Crimes Act 1900);

(d) act with intent to cheat or defraud the Chief Commissioner for Business Franchise Licences (Tobacco) (section 176A Crimes Act 1900); and

(e) money laundering (section 73 Confiscation of Proceeds of Crime Act 1989). 12 The application for the search warrants complied with s11(2)(a), setting out the necessary suspicion entertained by the Commission and what were said to be the reasonable grounds for it. A copy of the reference was attached to it. Also attached was a statement by Detective Senior Sergeant P K Nolan, which contained the information upon which the application was based. Section 11(5)(a) requires a search warrant issued under the section to include "a statement of the purpose for which the warrant is issued, which shall include a reference to the matter relating to a relevant criminal activity into which the Commission is conducting an investigation and with which the things of the relevant kind are connected". In compliance with that provision, the search warrants concluded with a statement of the nature of the Commission's investigation derived from paragraph 2 of the reference. 13 Subject to the decision in Ha, there was no issue that each of the offences specified in the reference could be a "relevant offence" for the purposes of the Act and that the conduct alleged could amount to a relevant criminal activity. As I have said, the charge laid against Mr Boumelhem was the common law offence of conspiracy to cheat and defraud 14 For the plaintiffs, Mr Horsley noted that an allegation or suspicion of relevant criminal activity is basal to a reference to the Commission under s25 of a matter for investigation, as it is to the issue of a search warrant under s11. Unless an investigation can be said to relate to a relevant offence, giving rise to relevant criminal activity, it is not authorised by the Act, and a search warrant purportedly issued for the purpose of it would not be valid. In the present case, he argued, this means that the investigation must relate to alleged conduct which, if proved, would constitute a relevant offence. 15 He observed that the focus of the investigation was the alleged participation in schemes designed to evade payment of tobacco licence fees under the Tobacco Act, together with the concealment of that evasion. So much was apparent from Det Nolan's statement and from the terms of the reference, the application for the search warrants and the search warrants themselves. Thus, it was participation in that evasion which would be the foundation of any offence which might be charged. Put shortly, his submission was that the conduct alleged "evaporated" as an offence "with the invalidation of the imposts" under the Tobacco Act by the High Court's decision. 16 He relied upon the decision of the Court of Criminal Appeal in R v Eid [1999] NSWCCA 59, (1999) 46 NSWLR 116. It is unnecessary to explain the procedural steps whereby that matter came before the Court. It is sufficient to say that the decision turned upon whether or not a warrant issued by a judge of this Court under the Listening Devices Act 1984 (since repealed) was valid. The warrant was expressed to have been issued for the purpose of investigating an offence of conspiracy to defraud, involving conduct leading to loss of revenue to the State of New South Wales. It was common ground that the investigation was into the evasion of licence fees under the Tobacco Act, so that the suspected offence was similar to that charged in the present case. The warrant was issued a little over a year before the decision in Ha. 17 The conspiracy charge was a "prescribed offence" for the purposes of the Listening Devices Act, and s16(1)(a) authorised the issue of a warrant upon application by a person who suspected or believed that a prescribed offence"has been, is about to be or is likely to be committed". Adams J, with whom Abadee and Barr JJ agreed, referred to the High Court's decision that the legislation imposing the licence fees was invalid, and said at [9]: The effect of the invalidity may be shortly stated; since the State of New South Wales was not entitled to any licence fee, an agreement by persons so to arrange things (even dishonestly) that such a fee was not payable could not deprive the State of anything. 18 Thus, there was no prescribed offence which could have founded the issue of a valid warrant. That was so even though the warrant was issued before the High Court's decision, because that Court's conclusion meant that the legislation was void ab initio. Adams J (at [12]) referred to the following passage from the judgment of McHugh JA (as he then was) in Peters v Attorney General (NSW) (1988) 16 NSWLR 24 at 38: The effect of an unconstitutional statute has not been authoritatively determined by the High Court. In South Australia v The Commonwealth (1942) 65 CLR 373 at 408, however, Latham CJ said: "…The law is not valid until a court pronounces against it - and thereafter invalid. If it is beyond power it is invalid ab initio ."

After citing American cases and later Australian authority, McHugh JA observed (at 39) that "Australian constitutional theory seems to have generally proceeded upon the void ab initio doctrine". 19 Approaching the question of the validity of the listening device warrant in that way, Adams J concluded at [14]: I am of the view that the effect of the decision of the High Court in Ha declaring the Act invalid meant that it was invalid at the time of the issue of the warrant. It follows that the warrant was sought to investigate activities which were not contrary to the law. The warrant was therefore not authorised by the Act. 20 Mr Horsley submitted that the present case is determined by the reasoning in Eid, and that that case is not relevantly distinguishable. The retrospective effect of the decision in Ha, he said, is that the conduct the subject of the Commission's investigation was not criminal. He referred to the five offences specified in paragraph 2 of the reference, quoted above, and noted that the first four of them required proof of defrauding or intent to defraud. Those elements could not be established because, to adopt the words of Adams J, "the State of New South Wales was not entitled to any licence fee". The fifth offence, money laundering, required proof that the offender knew the money to be "proceeds of a serious offence": s73(3) of the Confiscation of Proceeds of Crime Act 1989. For the same reason, the commission of a "serious offence" could not be established. 21 For the defendants, Mr Temby argued that Eid is distinguishable from the present case because of the terms of the legislation involved. By virtue of s16(1)(a) of the Listening Devices Act, the issue of a warrant under that Act was contingent upon suspicion that a specified offence had been committed. The effect of the decision in Ha was that the conduct alleged could not amount to that offence. Section 11 of the New South Wales Crime Commission Act does not require the allegation of a specific offence as the foundation for the issue of a search warrant. All that is required by subs (2) is the suspicion that there may be on premises a thing or things connected with a relevant criminal activity which the Commission is investigating. I have referred earlier to the broad definition of "relevant criminal activity", which embraces "any circumstances implying," or "any allegations" of, the commission of a relevant offence. The term "relevant offence", as it bears on this case, is itself broadly defined. 22 As Mr Temby put it, consistently with the scheme of the legislation, the reference to the Commission under s25 of the Act did not assume that any particular offence had been committed but, rather, required the Commission to investigate whether any offence or offences had been, or were to be, committed. Paragraph 3 of the reference is in these terms: 3 The general purpose of the investigation is to:

(b) determine whether relevant offences have been committed, are being committed, or may be about to be committed;

(d) assemble evidence that would be admissible in the prosecution of any such offenders for relevant offences, and furnish such evidence to the Director of Public Prosecutions. 23 Mr Temby pointed out that the five specific offences referred to in paragraph 2 of the reference were not intended to be exhaustive. The investigation might have uncovered the commission of other offences, falling within the definition of "relevant offence", proof of which did not depend on the validity of the relevant provisions of the Tobacco Act. A scheme for the evasion of license fees, he said, might have involved persons making false statutory declarations, an offence under s25 of the Oaths Act. False documentation might have been created to avoid the payment of license fees, which could have constituted an offence under s178BB of the Crimes Act of making false statements with intent to obtain a financial advantage or, possibly, the offences of making or using false instruments under s300 of that Act. 24 In that context, he referred to certain parts of Det Nolan's statement which alleged conduct incidental to a scheme to evade payment of the licence fees which could amount to criminal offences. It was said that false declarations had been made, and false and misleading documentation had been supplied, to the Customs Service. It was also said that police had seized a large sum of money received by a person in connection with the scheme, that that person had been charged with goods in custody as a result of that seizure, and that there was a plan to produce false documents to the police in an attempt to recover that money. 25 Mr Temby emphasised that he was not reliant upon that material to make good his argument. His principal submission was that, although the focus of the Commission's investigation was the alleged evasion of the licence fees, the scope of the investigation was not confined to offences of which the evasion of those fees, or the intent to evade them, was an element. 26 To this, Mr Horsley responded that the reference for investigation was deprived of its substratum because, as he put it, the alleged evasion of licence fees "itself turns out to be entirely lawful". Thus, the conduct which the management committee sought to be investigated was "substantially activities that would not be offences because of the invalidity of the excise", and the reference could not be saved by the fact that "there may be some incidental offences that one could dream up that might not be so caught". On the view urged by Mr Temby, he argued, the Commission could undertake an investigation of an activity not suggested to be unlawful on the speculative basis that it might expose conduct in the course of that activity which amounts to a relevant offence. Of course, the argument was by way of reductio ad absurdum, but he emphasised the need for "touchstones" to impose appropriate restraint upon the Commission's exercise of its extraordinary powers. 27 I appreciate the force of that argument, but I am persuaded that Mr Temby's approach is correct. Obviously, at the time of the reference for investigation and the issue of the search warrants, the licence fees were believed to be valid and the evasion of them understood to be an offence. In the light of the High Court's decision, it must be accepted that that is not, and never was, the case. Accordingly, the prosecution of any offence to which the validity of the licence fees was essential would be without foundation. No doubt, that is why the prosecution of Mr Boumelhem for conspiracy to cheat and defraud was terminated. Nevertheless, the prospect of an investigation of a scheme to evade the licence fees bringing to light offences which were not contingent upon the validity of the fees was by no means fanciful. Relevant offences of such a kind might have been detected. 28 Given the broad scope of an investigation conferred upon the Crime Commission by its enabling legislation, it cannot be said that the decision in Ha rendered the reference in the present case nugatory. For the same reason, it cannot be said that the issue of the search warrants was not an appropriate exercise of the power conferred by s11. My conclusion, then, is that the search warrants were not invalid as at the date of their issue.

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