New South Wales Crime Commission v Klinger

NSW Crime Commission (Pltf) PARTIES : George Ivor Palmer (2D/Applicant) James Darroch Wallace (3D)

I Temby QC/R Bhalla (Pltf/Respondent) COUNSEL : T G R Parker SC (2D - Palmer - applicant) M W Inglis (3D - Wallace)

NSW Crime Commission (Pltf) SOLICITORS : Norton Rose Australia (2D) Osbornes Lawyers (3D)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2009/296981 NEW SOUTH WALES CRIME COMMISSION v KLINGER & ORS

JUDGMENT 1 HIS HONOUR: The New South Wales Crime Commission has commenced proceedings against 10 defendants including six individuals seeking orders pursuant to s 27 of the Criminal Assets Recovery Act 1990. When it commenced the proceedings, the Commission served on the defendants a summons together with a Statement of Facts and Circumstances pursuant to rule 1.26 of the Uniform Civil Procedure Rules 2005. It later served an Updated Statement of Facts and Circumstances. 2 The original Statement expressly referred to a report entitled the Interim Investigation Report dated 11 November 2009 which was prepared by two forensic accountants. The Commission stated that "the facts and circumstances upon which the Commission will rely … are set out in the Interim Investigation Report." The Updated Statement did not expressly refer to the Investigation Report. However, the Commission sought leave to amend the Statement to refer to it. I granted that leave. 3 The second defendant, George Ivor Palmer has brought a motion seeking that the summons against him be struck out. He also asks that the Updated Statement of Facts and Circumstances be struck out insofar as it relates to the second defendant. No other defendant seeks those orders. In fact the third defendant opposes the orders sought by the second defendant. 4 Although the two orders are sought in the motion only the second order relating to the updated statement of facts and circumstances was pressed before me. 5 The second defendant submitted that the updated statement of facts and circumstances failed to comply with rule 1.26 of the Uniform Civil Procedure Rules 2005. Rule 1.26 which was made for the purpose of the Criminal Asset Recovery Act provides as follows: "the application for an order under the Act must file with the summons a statement in summary form of the general nature of the facts and circumstances relied on." 6 The second defendant submitted that either on its own or when read together with the investigation report the updated statement was inadequate. It was submitted that the second defendant was entitled to a comprehensive and particularised statement of the activities of the second defendant upon which the plaintiff would rely in the proceedings. It was submitted that although the investigation report provided an account of the many actions of the second defendant relevant to the transactions associated with the plaintiff's ultimate claim, the second defendant was not able to understand the case which the Commission would seek to prosecute against him. 7 The Investigation Report is detailed and extends over 40 pages and contains 120 paragraphs. The second defendant is referred to throughout the report. It is apparent from the Report that the Commission will allege that the second defendant has been the accountant and tax agent in Australia for persons who have been involved in arrangements relating to financial transactions designed to avoid paying tax in Australia. In the course of proceedings concerned with those transactions (which are detailed in proceedings in the Court of Appeal and the High Court International Finance Trust Company Ltd & Anor v New South Wales Crime Commission (2008) 251 ALR 479; [2008] NSWCA 291; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 261 ALR 220; (2009) 84 ALJR 31; [2009] HCA 49) orders were obtained in this Court on 13 May and 25 October 2008 restraining dealings with various assets. Subsequently an application was made to the Commission for the release of some of those assets. It was put to the Commission that some of the restrained assets were the property of Mr David Klinger or were assets in respect of which he had provided the funds for their purchase and that because Mr David Klinger was a resident of Hong Kong the assets could not be restrained. The Commission alleges that the representations made to it with respect to the dealings with these assets were false and constituted an attempt to pervert the course of justice by defeating the restraining orders insofar as they related to the relevant assets with the effect that any application which the Commission made for assets forfeiture orders in respect of those assets would also fail. 8 The allegation which the Commission advances is summarised in [120] of the investigation report which is in the following terms: "As a result of the foregoing matters it appears that David Klinger has conspired with Tom Klinger, Jim Wallace, Andrew Neill, McLeish, IFTC, IFTC Broking, Whitetree Holdings and Cheviot and falsely claimed to own the funds and shares held by Whitetree Holdings and Cheviot in order to attempt to secure the Commission's consent to an order removing those funds and shares from the operation of the first restraining order and the further restraining orders, thereby perverting the course of justice in the proceedings, in particular defeating the restraining orders in so far as they relate to those funds and shares and defeating the Commission's applications for assets forfeiture orders in respect of those funds and shares. 9 The Investigation Report makes plain that the Commission will allege that the conspiracy was advanced by a letter forwarded to the Commission on 21 November 2008. The letter is referred to in [81] of the Investigation Report where the following is said: "By letter forwarded to the Commission by facsimile on 21 November 2008 A & H ('the A & H letter of 21 November'): (i) stated that they understood that in appropriate cases, such as that of Makin, the Commission would be prepared to consider consenting to the variation of the restraining orders; (ii) advised that they had been instructed, inter alia, that: A. on liquidation of Cheviot it is intended that the assets of Cheviot would be used to repay loans gifted or distributed by the liquidator to a Hong Kong resident, David Klinger; B. David Klinger provided the initial funds used to purchase the assets of Cheviot; C. David Klinger has been a resident of Hong Kong for approximately 8 years and is ordinarily a resident there; and D. specified shares and funds in the restrained share trading account and New Zealand bank accounts are assets of Cheviot ('the shares and funds of Cheviot'). (iii) attached a draft set of consent orders providing for the variation of the further restraining orders to exclude the shares and funds of Cheviot. The shares and funds of Cheviot specified in the draft consent orders are as follows (as corrected by a further letter dated 27 November 2008 to the Commission): Funds held with ANZ National Bank Limited in New Zealand Account details Account number Fixed Deposit D3999553 for Cheviot Holdings Limited in the sum of $AUD558,188.80 295659-AUD-00001 (held in the name of International Finance Trust Co Ltd) Fixed Deposit D401259 for Cheviot Holdings Limited in the sum of $AUD1,170,291.53 295659-AUD-00001 (held in the name of International Finance Trust Co Ltd) Call Deposit for Cheviot Holdings Limited in the sum of $AUD1,918,309.96 295659-AUD-00001 (held in the name of International Finance Trust Co Ltd Call Deposit for Cheviot Holdings Limited in the sum of $AUD203,807.03 295659-AUD-00001 (held in the name of International Finance Trust Co Ltd

Shares held by the Public Trustee NSW in Commonwealth Securities Limited share trading account number 2332391 in the name of the Public Trustee IFTCbrokingservices a/c and formerly held in the Commonwealth Securities Limited share trading account number 577406 in the name of IFTC Broking Services Limited: 5,500 fully paid ordinary shares in BHP Billiton Limited (BHP)

82,500 fully paid ordinary shares in Challenger Financial Services Group (CGF)

750,240 fully paid ordinary shares in Centamin Egypt Limited (CNT0

2,747,518 fully paid ordinary shares in Corum Group Limited (COO)

700,000 fully paid ordinary shares in Grindalbie Metals Limited (NDO)

1,500,000 fully paid ordinary shares in Nido Petroleum Limited (NDO)

1,325,000 fully paid ordinary shares in Orbital Corporation Limited (OEC)

157,000 fully paid ordinary shares in Roc Oil Company Limited (ROC)

175,000 fully paid ordinary shares in Xceed Capital Limited (XCD)." 10 It is apparent from a reading of the entire Investigation Report that with respect to the second defendant the Commission will allege that he was instrumental in giving advice with respect to the accounting arrangements of some of the alleged co-conspirators including the arrangements which should be made for the recording of the ownership of the assets said to be the subject of the conspiracy. A reading of the Interim Investigation Report makes plain that the Commission will assert that because of the second defendant's involvement in giving advice as the structuring of relevant financial arrangements it can be inferred that he was a participant in the alleged conspiracy. 11 When the second defendant initially filed the present motion it apparently proposed to argue that the Commission was bound to commence the proceedings by a document which conformed to the relevant Supreme Court rule with respect to pleading (UCPR 6.12). However, it was later appreciated that this was not correct and that it was the rule in Schedule 10 which was relevant. That rule requires a plaintiff to file with the summons a statement in "summary form of the general nature of the facts and circumstances relied upon." In its terms it does not require either a comprehensive statement or one with particularity as may be required in a statement of claim. No doubt prior to any hearing a defendant may be entitled to more than the rule requires so that he or she can understand the case which they have to meet. Because the proceedings are commenced by summons the particular facts and circumstances ie the evidence the Commission relies upon will usually be included in affidavits which the Commission intends to rely upon. Those affidavits may of course refer to other documents or evidence obtained in the course of an investigation. If at that stage of the proceedings the Commission fails to provide the necessary degree of particularity then a motion could be brought for the proceedings to be either stayed or deferred pending the provision of further particulars. if there was ultimately a failure to provide necessary particulars leading to an injustice the proceedings might be stayed or dismissed. 12 However, at present I am satisfied that the Updated Statement of Facts and Circumstances incorporating the Interim Investigation Report in the present case satisfies the Commission's obligations under the relevant rule. 13 The motion is dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.