Elfar v New South Wales Crime Commission

Court of Appeal (NSW)|2009-09-08|Before: Spigelman CJ, Allsop P, Hodgson JA, Hislop J

CITATION: Elfar v New South Wales Crime Commission [2009] NSWCA 348

JUDGMENT OF: Spigelman CJ at 1; Allsop P at 52; Hodgson JA at 53

1 Extend time for filing the summons up to and including 6 March 2009. 2 Grant leave to appeal. DECISION: 3 Subject to the appellant filing the Notice of Appeal, appeal allowed. 4 Set aside the order made by Hislop J on 24 October 2008. 5 Orders 3 and 4 to take effect one week from the date hereof. 6 The respondent pay the appellant's costs.

CATCHWORDS: APPEAL - duty to give reasons - person subject to Order entitled to know more than that primary judge "had regard to" certain matters - CRIMINAL LAW - procedure - confiscation of proceeds of crime and related matters - restraining or freezing order - evidence and procedure - requirements of affidavit under s 10 Criminal Assets Recovery Act 1990 - CRIMINAL LAW - procedure - confiscation of proceeds of crime and related matters - restraining or freezing order - evidence and procedure - police officer issuing charge not sufficient to establish reasonable grounds for suspicion under s 10 Criminal Assets Recovery Act 1990 - WORDS AND PHRASES - "reasonable grounds for suspicion".

Criminal Assets Recovery Act 1990 LEGISLATION CITED: Drug Misuse and Trafficking Act 1985 Evidence Act 1995

George v Rockett (1990) 170 CLR 104 Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 124 International Finance Trust Company Limited v New South Wales Crime Commission [2008] NSWCA 291, (2008) 251 ALR 479 CASES CITED: New South Wales Commission v Beneficial Owners of Various Bank and Share Trading Accounts [2009] NSWSC 322 New South Wales Crime Commission v Ollis [2006] NSWCA 76; (2006) 65 NSWLR 478 New South Wales Crime Commission v Vu [2009] NSWCA 349 Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247 Warren Coombes (1979) 142 CLR 531

PARTIES: Karim John Elfar (Appellant) New South Wales Crime Commission (Respondent)

COUNSEL: T J Rickard (Appellant) I Temby QC with P Singleton (Respondent)

SOLICITORS: M J Woods & Co (Appellant) New South Wales Crime Commission (Respondent)

12 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40056/09

SPIGELMAN CJ ALLSOP P HODGSON JA

Thursday 22 October 2009 Karim John Elfar v New South Wales Crime Commission

On 23 October 2008 the appellant was charged with possession of precursor drugs for the manufacture or production of prohibited drugs under the Drug Misuse and Trafficking Act 1985. The appellant had been under electronic and physical surveillance and was observed passing containers, allegedly containing Sassafras Oil (the precursor drug) to another party. A search of the appellant's home the next day uncovered approximately $100 000 in cash.

On 24 October 2008 Justice Hislop issued an order pursuant to s 10 of the Criminal Assets Recovery Act 1990 restraining the appellant from dealing with his property. An Order under s 10 must be made where an application is supported by an affidavit of an authorised officer stating, relevantly, that the officer has a suspicion that the person has engaged in a serious crime related activity and the Court considers that there are reasonable grounds for that suspicion. In this case, the affidavit deposed a suspicion on the basis of a police Facts Sheet and a search of the records of the NSW COPS system.

The issues before this Court were whether his Honour failed to give reasons and whether his Honour erred in finding that there were reasonable grounds for the suspicion.

A constitutional challenge to the legislation was abandoned in light of a presently reserved High Court decision.

HELD (Spigelman CJ, Allsop P and Hodgson JA agreeing)

1 An extension of time to lodge the appeal should be granted, as there is no suggestion of prejudice. The effect of the freezing of all the appellant's funds is an impediment to obtaining legal advice, the delay was short, and this appeal is the appellant's only recourse against the Order. [6] [52] [53] Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 214, followed.

2 A person subject to the consequences of an Order is entitled to know more than that the judge "had regard to" the affidavit. The necessity to give reasons is such that the Court should be slow to exercise its discretion to refuse leave on the basis of a perception that the same order will be made on remitter, particularly when the original proceedings were ex parte. [11] [13] [15] [18] [52] [53] International Finance Trust Company Ltd v New South Wales Crime Commission [2008] NSWCA 291; (2008) 251 ALR 479, applied.

3 Section 10 requires that the deponent of an affidavit hold the relevant suspicion or belief. Section 75 of the Evidence Act 1995 requires a deponent of an affidavit to give evidence as to the source, of relevantly, their suspicion. Here, there was no reference to persons who witnessed the relevant acts or who could attest to the relevant facts. In particular, there was no stated basis upon which the relevant substance had been identified as a precursor drug. [36]-[37] [39] [45]-[47] [49] [52] [53]

4 The fact that a person has been charged by a police officer is not sufficient, in and of itself, to ground a reasonable suspicion that a person is involved in a serious crime related activity. Reliance on an opinion held by a police officer that an offence had been committed does not identify any fact or matter relating to such conduct. [34]-[36] [52] [53] International Finance Trust Company Ltd v New South Wales Crime Commission [2008] NSWCA 291; (2008) 251 ALR 479, considered.

5 The suspicion as to intent to manufacture was reasonable having regard to the background facts such as the large quantity of oil involved, the covert nature of the transaction and the quantity of cash found at the appellant's premises. [41]-[42] [52] [53]

ORDERS 1 Extend time for filing the summons up to and including 6 March 2009. 2 Grant leave to appeal. 3 Subject to the appellant filing the Notice of Appeal, appeal allowed. 4 Set aside the order made by Hislop J on 24 October 2008. 5 Orders 3 and 4 to take effect one week from the date hereof. 6 The respondent pay the appellant's costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40056/09

SPIGELMAN CJ ALLSOP P HODGSON JA

Thursday 22 October 2009 Karim John Elfar v New South Wales Crime Commission Judgment 1 SPIGELMAN CJ: This an application for leave to appeal, heard together with the appeal, with respect to orders made by Hislop J on 24 October 2008. Those orders were made pursuant to s 10 of the Criminal Assets Recovery Act 1990 ("the Act") restraining the appellant from dealing with his property, including identified property set out in schedules to the orders. 2 Section 10 relevantly provides: "10(1) A restraining order is an order that no person is to dispose of or attempt to dispose of, or to otherwise deal with or attempt to otherwise deal with, an interest in property to which the order applies except in such manner or in such circumstances (if any) as are specified in the order. (2) The Commission may apply to the Supreme Court, ex parte, for a restraining order in respect of: (a) specified interests, a specified class of interests or all the interests, in property of a person suspected of having engaged in a serious crime related activity or serious crime related activities, including interests acquired after the making of the order and before the making of an assets forfeiture order affecting the interests that are subject to the restraining order, or … (3) The Supreme Court must make the order applied for under subsection (2) if the application is supported by an affidavit of an authorised officer stating that: (a) in the case of an application in respect of an interest referred to in subsection (2) (a) - the authorised officer suspects that the person has engaged in a serious crime related activity or serious crime related activities and stating the grounds on which that suspicion is based, and … and the Court considers that having regard to the matters contained in any such affidavit there are reasonable grounds for any such suspicion." 3 A number of matters were raised in the draft Notice of Appeal and in written submissions. The appellant abandoned a constitutional challenge to the legislation, upon which the High Court is presently reserved on appeal from the judgment of this Court in International Finance Trust Company Limited v New South Wales Crime Commission [2008] NSWCA 291; (2008) 251 ALR 479 ("the IFTC case"). As the oral submissions developed there were two issues which remained to be determined on the appeal. First, the appellant contends that his Honour erred in failing to give reasons. Secondly, the appellant contends that his Honour erred in finding that there were reasonable grounds for the suspicion to which a relevant officer had testified in an affidavit filed in the proceedings.

Extension of Time 4 The appellant originally filed a Notice of Appeal on 22 December 2008, together with a Notice of Motion seeking an extension of time to lodge an appeal. As the order of Hislop J was interlocutory, leave to appeal was required. On 23 February 2009 the Registrar of the Court of Appeal made orders that the original proceedings be withdrawn and the present summons seeking leave be filed. An extension of time to file the summons is sought. An explanation for the delay between 21 November and 22 December has been proffered, most relevantly due to an inability to obtain legal advice because all of his assets had been frozen by the orders. The respondent opposes the extension but does not suggest any prejudice. 5 As Giles JA said in Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 124: "[4] I … do not think that the failure to make a timely application for leave to appeal was satisfactorily explained. Settlement discussions do not obviate the need to comply with the Rules prescribing the time within which an application for leave to appeal must be made. It appears that the claimant preferred absence overseas to attention to his interests in the proceedings, and there was at best leisurely attention to setting aside the orders prior to April 2007. However, the opponent did not assert prejudice, and the orders are a significant interference with the claimant's rights. In the circumstances, I do not think he should be shut out from his application and am prepared to extend time." 6 The orders were made ex parte. On the unchallenged evidence, they had the effect of freezing all the applicant's funds. It is understandable that that fact alone would impede a person from obtaining legal advice. The delay was short. The applicant's only recourse on an ex parte application is to this Court. Time should be extended. The legitimate interest of the prosecution can be accommodated by a short stay to permit a further application to be made.

The Duty to Give Reasons 7 At the time that Justice Hislop made the orders, the practice in the Common Law Division of the Supreme Court, being a practice that had existed for many years, perhaps twenty, was that an order would be made without a statement of reasons. This Court has subsequently determined that that practice was wrong in the IFTC case. The respondent contended that leave to appeal should not be granted in this respect. 8 Mr I Temby QC, who appeared with Mr P Singleton for the respondent, advanced four reasons for refusing leave. 9 Mr Temby drew attention to the contents of the "order" made by Hislop J on 24 October 2008. Perhaps, unusually, the paragraphs containing the actual orders made by the Court were introduced by the following words: "Considering that, having had regard to the matters contained in the affidavit of Jonathon Lee Spark on 24 October 2008, there are reasonable grounds for the suspicion therein." 10 Mr Temby did not submit that this reference satisfied the requirement for reasons, determined to be required by this Court in the IFTC case. He did, however, note that this sentence incorporated by reference the contents of the affidavit upon which the respondent relied before Justice Hislop, and continues to rely in this Court. The statement "there are reasonable grounds for the suspicion therein", although more conclusory in its form than a statement of reasons, nevertheless indicates that his Honour had directed his attention to the relevant matters. 11 There is some force in this submission. Reasons in a case of this character do not have to be elaborate. However, the formulation "having had regard to" does not indicate any reasons. 12 Secondly, the respondent noted that the application for leave was out of time. That is the case, but it was only some three weeks out of time. For the reasons given above, time should be extended. 13 The third reason that the respondent submitted was a basis for refusing leave was that the substantive matters of principle had been determined by this Court in the IFTC case. As will appear below, in my opinion, there are additional issues raised by this case. In any event, reasons are an important part of the administration of justice applicable to each case, not only to cases which raise issues of principle. 14 Finally, the respondent submitted that the application had poor prospects of success. This latter submission depended on the outcome of the submissions with respect to the reasonable grounds point, which I would uphold. 15 In my opinion, the reasons advanced by the majority of this Court in the IFTC case for the necessity to give reasons are such that the Court should be slow to exercise its discretion to refuse leave, on the basis of a perception that the same order will be made on remitter. That is particularly so where the original proceedings were ex parte. 16 As Allsop P, with whom Beazley JA agreed, said in the IFTC case: "[41] … the subject matter of the Act, the nature of the application, including its judicial character, the consequences to the person of a successful ex parte application to the Commission, lack of an inter-partes interlocutory hearing, the existence of the supervisory appeal and the character of the assessment to be made by the Judge all point to, or are consistent with, the obligation by the Court to provide reasons." 17 As his Honour went on to say: "[46] Here, the Act deals with the restraint and later forfeiture of the property of individuals. The operation of the Act is of the utmost gravity. The power being exercised is judicial. It is not the approval of a search warrant or a listening device; it is the making of an order, in the absence of the relevant party, for the freezing of property for, potentially, a significant period of time. There is no review at first instance … only an appeal. Confidence in the judicial system and ensuring that justice is seen to be done between State and subject require in my view an explanation of the exercise of such a drastic power. That explanation is the giving of reasons." 18 I adopt these reasons and, accordingly, believe that this is an appropriate case for the grant of leave. A person subject to such drastic consequences is entitled to know more than that the judge has "had regard to" an affidavit. 19 I would have been of that opinion even if the substantive issues raised by the appellant on its second basis for appeal were less convincing than is the case, as will appear below. Suffice it to say that the force that I see in the second ground of appeal is such that the grant of leave follows as a matter of course. 20 I note that the respondent could have listed the matter before Hislop J for his Honour to provide reasons. Indeed, his Honour did just that on the application of the Commission in another case which he had also decided before judgment in the IFTC case. (See New South Wales Commission v Beneficial Owners of Various Bank and Share Trading Accounts [2009] NSWSC 322.) The Commission has not done that here and, in my opinion, that reinforces the case for a grant of leave in a situation when the applicant has no other recourse. (See New South Wales Crime Commission v Ollis [2006] NSWCA 76; (2006) 65 NSWLR 478 at [34].) 21 This ground of appeal should be upheld.

The Evidence 22 The affidavit in support of the application before Hislop J was sworn by Mr Jonathan Spark, who is the Assistant Director of Financial Investigations at the New South Wales Crime Commission. He deposed to the fact that he had a suspicion that the applicant "has engaged in serious crime related activity". 23 Section 6(1) of the Act identifies "serious crime related activity" in terms of conduct constituting a "serious criminal offence", which is further defined in s 6(2)(b) to encompass a "drug trafficking offence". For present purposes, by s 6(3)(b1), a drug trafficking offence is an offence under specific provisions of the Drug Misuse and Trafficking Act 1985 including under s 24A of that Act, 'possession of precursors for manufacture or production of prohibited drugs'. It is relevant to note that mere supply is not included in the offence presently under consideration. 24 Mr Spark stated that his suspicion was determined as follows: "3 The suspicion … is held by me having had regard to: (a) the contents of a 3 page Facts Sheet dated 23 October 2008 prepared by Detective Maree Kiem of the New South Wales Police Force and forwarded to the Commission, a copy of which is annexed hereto and marked 'A' ('the Facts Sheet'); and (b) a search of the records of the New South Wales COPS system which revealed that on 23 October 2008 Elfar was charged with the offence described in the Facts Sheet." 25 It is this paragraph upon which the respondent relies as satisfying the requirements of s 10(3) of the Act. 26 The annexed Facts Sheet identified the author as Detective Maree Kiem, who was one of two arresting officers. She was also the informant on the charge. She was identified as an officer in the Drug Squad. The Facts Sheet referred to investigations under the name of Strike Force Guardian, which "utilised various electronic and physical surveillance techniques". No reference is made to the product of any electronic surveillance. However, physical surveillance of the appellant revealed that on 22 October 2008 he drove a car on the Hume Highway and met a co-accused, Mr Balog, at a service station. The Facts Sheet stated "a number of police monitored the meeting between the accused and Mark Balog". 27 The monitoring revealed that the accused and Balog removed four large plastic containers from the rear of the accused's vehicle and placed them in the vehicle driven by Balog. Balog was subsequently stopped and an inspection of the plastic containers revealed that "each of these containers had a 10 litre capacity and were filled with a yellow coloured oil type liquid". 28 On the next day a search was executed at the home of the appellant, where he was arrested. Approximately $100,000 in cash was discovered during that search. 29 The Facts Sheet contained the following statement, which appears in the context of the meeting between the appellant and Balog: "It was believed that the accused was to supply a large quantity of prohibited drug or drug precursor." 30 Furthermore, the concluding paragraph of the Facts Sheet stated: "It is believed that approximately forty (40) litres of Sassafras Oil is contained within the four plastic drums. If this was manufactured into MDMA it could result in excess of 100,000 MDMA pills being produced with a street value of over three million dollars ($3,000,000)." 31 It was common ground that Sassafras Oil is identified as a precursor drug in Schedule 1 to the Drug Misuse and Trafficking Regulations 2006.

The Ground for Suspicion Issue 32 On the issue of whether there are "reasonable grounds" for the suspicion expressed by Mr Spark, it is significant that no person is identified as having provided any information that is contained in the Facts Sheet. Nor does Mr Spark express any belief in the contents of the Facts Sheet. 33 Mr Temby submitted that the very fact that a person had been charged with an offence by a police officer is sufficient, in and of itself, to indicate that there was a reasonable basis for the belief. 34 In my opinion, this submission should be rejected. Allsop P also rejected this proposition in the IFTC case, at [38], whilst acknowledging that the point was not fully argued in that case. Accordingly, it is necessary for this Court to decide the issue rather than to simply apply Allsop P's conclusion. 35 The mere fact that a charge has been laid by a police officer is not sufficient, in and of itself, to establish that there were reasonable grounds for the suspicion of the deponent of an affidavit in support of a restraining order. It is no more than evidence that some other person had such a suspicion or belief. 36 What is required by s 10(3) on the part of the deponent is an affidavit stating, relevantly, "the grounds on which" the suspicion that a "person has engaged in serious crime related activity … is based". The word "grounds" suggests that the requisite facts and matters must relate to the conduct which constitutes the serious criminal offence. Reliance on a belief or opinion held by a police officer that an offence had been committed does not identify any fact or matter relating to such conduct. 37 Of particular significance for present purposes is the absence of any reference in the Facts Sheet to the identity of any person who witnessed any of the relevant events or could attest to any of the relevant facts. Specifically, the use of the passive voice in the two phrases "it was believed that the accused was to supply a large quantity of … drug precursor" and "it is believed that approximately 40 litres of Sassafras Oil is contained within the four plastic drums" renders them far removed from any statement of fact of an element of the offence, namely that there was in fact a precursor drug. There is no reference of any character to the basis upon which any person formed the belief that what was in fact transferred and transported was a precursor drug. 38 Mr Temby pointed out that the author of the Facts Sheet was a member of the Drug Squad. However, this is of little assistance as that officer does not state that she had any relevant belief. Nor does she identify any pertinent fact, other than that the liquid was yellow and oily. 39 In my opinion, the absence of any stated basis upon which the relevant substance could be identified as a precursor drug is such that the Court should not have found that there were reasonable grounds for believing that a serious criminal offence had been committed. 40 Mr T Rickard, who appeared for the appellant, also submitted that there was an absence of any proper basis for reasonable grounds for suspicion that other critical elements of the offence could be established. He referred particularly to the proof that the applicant intended to be involved in manufacture, which was an essential element for the manufacturing offence under s 24A of the Drug Misuse and Trafficking Act. Section 24A extends to manufacture by another person, ie, the appellant did not have to intend to do the manufacturing himself, but there must be an intent to manufacture. Mr Rickard emphasised that mere supply of a precursor drug was not a serious criminal offence for purposes of the application before the Court. 41 In this regard, Mr Temby pointed to a number of background facts. He placed particular reliance on the very large quantity of the oil involved. A supply of this size, he submitted, was clearly likely to be used for the manufacture of a drug. He reinforced this inference by reference to the covert nature of the transaction and the fact that, on the next day, approximately $100,000 in cash was found at the appellant's premises. 42 In my opinion, on this matter, the respondent's submissions should be accepted. There was a proper basis for a suspicion that the intent to manufacture limb of the offence could be satisfied. 43 However, in my opinion, there was no admissible evidence with respect to the critical matter of the identification of the oil. 44 It is sufficient for present purposes to concentrate on the statement in the Facts Sheet that: "It is believed that approximately forty (40) litres of Sassafras Oil is contained within the four plastic drums". This is critical because without this identification the alleged offences would not constitute "serious criminal activity". 45 The reference "it is believed" indicates that, at best, this evidence is hearsay. 46 Section 75 of the Evidence Act 1995, identified as the basis for admission of the Facts Sheet in the IFTC case at [15], requires a deponent of an affidavit to give evidence of the "source" of, relevantly, his or her suspicion. 47 In the present case that evidence is in the form of a Facts Sheet which was the only stated source of the suspicion with respect to the identification of the "yellow coloured oil type liquid" as Sassafras Oil. That Sheet does not state any basis for that identification. 48 The issue is whether his Honour erred in determining that there were reasonable grounds for suspicion. In a judgment to be handed down simultaneously with this judgment (New South Wales Crime Commission v Vu [2009] NSWCA 349), this Court has determined that an appeal from an s 10 order is to be determined in accordance with the principles in Warren Coombes (1979) 142 CLR 531. The absence of reasons becomes particularly pertinent. As the authorities have frequently emphasised, one of the purposes served by reasons is informing the appellate process. (See Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247 at 280.) All this Court has before it is the statement that his Honour "had regard to the affidavit". This Court is not aware of what, if any, consideration his Honour gave to the deficiency in the identification of the Oil. 49 On the above analysis, some basis in fact was required to identify the oil as Sassafras Oil. Absent any such basis there was no evidence of "the existence of facts which are sufficient to induce … in a reasonable person" a suspicion that the appellant has engaged in serious crime related activity within s 10(3) of the Act. (George v Rockett (1990) 170 CLR 104 at 112.) 50 This ground of appeal should be upheld.

Orders 51 The orders I propose are: 1 Extend time for filing the summons up to and including 6 March 2009. 2 Grant leave to appeal. 3 Subject to the appellant filing the Notice of Appeal, appeal allowed. 4 Set aside the order made by Hislop J on 24 October 2008. 5 Orders 3 and 4 to take effect one week from the date hereof. 6 The respondent pay the appellant's costs. 52 ALLSOP P: I agree with the Chief Justice and also refer to my additional comments in New South Wales Crime Commission v Vu [2009] NSWCA 349. 53 HODGSON JA: I agree with Spigelman CJ. **********

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