New South Wales Crime Commission v Volkard Kelaita

Court of Appeal (NSW)|2008-10-09|Before: Allsop P, Giles JA, Bell JA, Mr P, McCallum J

Background 3 On 11 August 2005, a Judge of the Court made a restraining order under the Act, s 10 in relation to funds in a bank account with St George Bank Limited in the respondent's name, a nominated motor vehicle, and a nominated motorcycle. 4 The following year, the appellant moved the Court by notice of motion for an order under the Act, s 22 for the forfeiture of the property originally restrained and other property listed in the schedule to the notice of motion, being cash and gambling chips (together having a face value of $7,310) and shares in three public companies. On 21 September 2006, a Judge of the Court (Latham J) granted leave to amend the summons to include the claim for forfeiture made in the notice of motion. Latham J, having heard the matter made two relevant orders: first, an assets forfeiture order in respect of the property listed in the schedule to the notice of motion; and, secondly, an order that there by judgment for the appellant on its claim for a proceeds assessment order in an amount to be assessed. 5 It was that assessment that came before the primary judge over two days in February 2008.

The Act and the approach to its interpretation 6 The purposes of the Act can be derived from at least three sources: the long title of the Act, the statement of principal objects in s 3 and the Second Reading Speech. 7 The long title is as follows: An Act to provide for the confiscation of interests in property that are interests of a person engaged in serious crime related activities; to enable proceeds of serious crime related activities to be recovered as a debt due to the Crown; and for other purposes. 8 Section 3 is in the following terms: The principal objects of this Act are: (a) to provide for the confiscation, without requiring a conviction, of property of a person if the Supreme Court finds it to be more probably than not that the person has engaged in serious crime related activities, and (b) to enable the proceeds of serious crime related activities to be recovered as a debt due to the Crown, and (b1) to provide for the confiscation, without requiring a conviction, of property of a person that is illegally acquired property held in a false name or is not declared in confiscation proceedings, and (c) to enable law enforcement authorities effectively to identify and recover property. 9 On 8 May 1990, the then Premier, Treasurer and Minister for Ethnic Affairs (the Hon Nick Greiner) said the following in relation to the Drug Trafficking (Civil Proceedings) Bill: This legislation is aimed squarely at those associated with major drug crime. Its purpose is to deprive those involved in the drug trade of their illicit profits - profits earned at the expense of their victims and of the community generally. Importantly, it is not only the profits of a discrete transaction but the proceeds of a life of crime that will be confiscated. Also crucial is the fact that it is not only the person directly involved in the transaction but also those who knowingly benefit from his or her activities who will be called to account for drug-derived assets and profits. Therefore, the legislation represents a comprehensive scheme designed to undermine entire organisations engaged in the drug trade. The scheme of the legislation is essentially very simple. It says that if the State Drug Crime Commission can satisfy a Supreme Court judge that it is more probable than not that a person has engaged in activities that constitute serious drug crimes, that person will have to prove to the judge that he or she obtained his or her property and assets lawfully, otherwise they will be forfeited to the Crown. As well, the Supreme Court judge can assess the profits made through serious drug crimes, and order the person to pay these profits to the Crown. The legislation provides that the money and assets recovered can be used to compensate victims of crime, to enhance law enforcement in New South Wales and for drug rehabilitation and education purposes. A serious of royal commissioners - Stewart, Williams, Costigan and Moffitt - have urged governments in Australia to pursue the profits of organised crime. … There is no doubt the proposed legislation is tough. But unless governments are willing to take a tough line on drug profits the situation described by Mr Justice Moffitt will continue to get worse. … The most innovative and controversial aspect of this legislation is that it will create a scheme of asset confiscation that will operate outside and completely independent of the criminal law process. … This legislation, like the Commonwealth Customs Act, treats the question of confiscation as a separate issue from the imposition of a criminal penalty. It essentially provides that a person can be made to account for and explain assets and profits whether or not the person has been convicted, and even if the person has been acquitted in the criminal courts. The critical thing that must be proved is that it is more probably than not that the person engaged in serious drug crime. … I want to emphasise, however, that no criminal consequences will flow from this legislation. Rather, the consequences are that the person has to justify, account for, and explain where his or her assets come from. Only if the person cannot show the assets were derived lawfully will they be retained by the Crown. The Supreme Court can also assess the amount of profit made from a drug activity. This amount becomes a debt recoverable by the Crown out of the person's assets. But once again the focus is on accounting for profits. … No doubt some people will contend that this legislation is unfair - that it amounts to convicting people of offences on a lower standard of proof and without the protection of the criminal law. I have already said that this legislation is all about the accounting of profits in civil proceedings, not imposition of criminal sanctions in criminal courts. The object or focus of the proceedings is recovery of assets and profits, not putting people in gaol. … In the case of drug crime there is normally no identifiable victim with a recognised cause of action in the civil courts. In an important sense the whole community is the victim, and certainly those whose lives are destroyed by drugs are victims. What the proposed legislation will do is analogous to giving the Crown a civil right of action to recover, on behalf of the community, assets and profits obtained illicitly by people who benefit form the drug trade. I am sure that honourable members of this House and all law-abiding members of the community will agree that that is eminently fair. There is also a parallel here with taxation law. Recovery of tax is undertaken through civil proceedings on the balance of probabilities. This measure is analogous to the imposition of a tax of 100 per cent on the profits of those engaged in the drug trade and their associates. Looking at the legislation from this perspective shows its clear deterrent value, as a disincentive to the drug trade. It will deprive the drug trade of its underlying motive and its economic base. There are also clear safeguards in the legislation that I wish to draw to the attention of honourable members. I have already indicated that the relevant proceedings will be brought in the Supreme Court and that a Supreme Court judge must first come to the conclusion that it is more probable than not that a person has been involved in drug-related activities. The power to institute proceedings under the proposed legislation is specifically confined to the State Drug Crime Commission. The commission is headed by Judge Thorley, and the former chief magistrate, Mr Briese, is a member. The commission has the forensic experience, expertise and judgment that will ensure the responsible administration of the legislation. It is critical to note that if the commission restrains a person's assets and commences proceedings against that person, the commission will have to indemnify the person against damages incurred if it is unsuccessful. There are also provisions designed to prevent prejudice to concurrent or subsequent criminal proceedings. 10 The Second Reading Speech, whilst of little assistance in understanding the text of the Act in its current form, provides some guidance as to the public purpose behind it, expressed, perhaps more concisely and prosaically, in the long title and s 3. That is not a criticism of the rhetoric in the speech. It reflected an important public policy in attacking criminal undertaking in society, in particular the trafficking in drugs - an aspect of significance for the protection and well-being of any civil society. 11 What is not available from the speech, however, is any purpose of intended precision in the process, as seemed to be derived by the primary judge. For instance, the 100% tax analogy used by the Premier should not be seen as the basis for some legislative purpose requiring precision in the operation of the Act. The reference was an aspect of the (entirely legitimate) political rhetoric of the speech. 12 Further, the speech recognised that the legislation might be perceived to be unfair by some. It was certainly intended to be "tough". Again, these were rhetorical statements which do not assist in resolving questions about the precise linguistic content of the present text. They do, however, assist in appreciating that unless the express safeguards provided for in the Act (often resting on a reversed onus) are engaged, it may be seen as surprising to interpret or construe the Act in a way based on "fairness" to the person proved to have been engaged in serious crime related activities. Indeed, as will be seen, the Act provides in terms for operation of the machinery of recovery in ways that, from one perspective, could be taken to display an element of unfairness. 13 Before turning to the provisions of the Act, something more should be said about the approach to interpretation and construction of the Act. I have already referred to what can be seen as the important public and social policy lying behind the Act in the protection of civil society. Set against that, of course, is the recognition in the common law of the need for clarity in any statute which provides for the confiscation of, or derogation from, property rights. In Studman v Director of Public Prosecutions (Cth) [2007] NSWCA 285; 177 A Crim R 34 at 40 [35] McClellan CJ at CL (with whom Spigelman CJ and Handley AJA agreed), said the following: I accept as the appellant submitted that, being provisions of a statute which provides for the confiscation or derogation from property rights, the statute must be strictly construed. The intention to take away property must be expressed with "irresistible clearness" before it may be applied. ( Jeffrey v DPP (Cth) (1995) 79 A Crim R 514). Any statutory ambiguity should be interpreted so as to respect a person's property rights ( DPP v Saxon (1992) 28 NSWLR 263 at 270; Saffron v DPP (Cth) (1989) 87 ALR 151 at 155; Diez v DPP (Cth) (2004) 62 NSWLR 1 at [42]). 14 No criticism was made of this formulation by Mr Temby before the primary judge or in this Court. It can be accepted as an expression of the principle of legality in the interpretation of statutes: see generally Spigelman CJ writing extra-judicially "The Principle of Legality and the Clear Statement of Principle" NSW Bar Association Conference Working With Statutes 18 March 2005. See also Harrison v Melhem [2008] NSWCA 67 at [2]-[5], [7]-[11], [220] and [235] and the cases there discussed as to fundamental rights. See also in this context Malika Holdings Pty Limited v Stretton [2001] HCA 14; 204 CLR 290 at 298-299 [28]-[30], Gifford v Strang Patrick Holdings Pty Limited [2003] HCA 33; 214 CLR 269 at 284 [36] and the discussion by Basten JA in Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; 174 A Crim R 124 at 146 [95] and New South Wales v Bujdoso [2007] NSWCA 44; 69 NSWLR 302 at [56]. 15 The recognition in the common law of the need for clarity in the confiscation of property rights is rooted in the importance of such rights and their legitimate protection in civil society free from the exercise of arbitrary power, in particular in the use of the prerogative power, or in today's political framework, Executive power. Such concerns are deeply embedded in the common law and are, and have been, reflected in national and international public instruments of government for centuries: French Declaration of Human and Civil Rights 26 August 1789, Articles 2 and 17; United States Constitution, 5th and 14th Amendments; the European Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms, Paris 20 March 1952, Art 1; and the Australian Constitution, s 51(xxxi). Whilst the affectation of property rights in any given context may not necessarily be an interference with "fundamental" rights: see Malika, Gifford and Bujdoso above, the forfeiture of property in circumstances provided by the Act can be seen to be a drastic interference with fundamental rights of property. Of course, that property may have a relationship with criminal activity which engages the Act and its underlying public policy. Nevertheless the interference with property rights is drastic, and the rights at this point in the process can be seen to be fundamental. 16 The common law principle of interpretation discussed in Studman, does not, however, deny, in the process of construction and interpretation, any role for the recognition of the social or public policy lying behind the Act. The ascertainment of the requisite clarity and the resolution of any ambiguity takes place within the ordinary process of statutory construction and interpretation. Penal statutes, likewise, are construed strictly; but the correct approach to their construction and interpretation is to use the ordinary rules of statutory construction and interpretation, and to recognise that if, after those rules are applied, the language of the statute remains ambiguous or doubtful such ambiguity or doubt should be resolved in favour of the subject because there will not be the requisite clarity to justify the application of the penal statute: see, for example, in the field of interpretation of penal statutes Beckwith v The Queen [1976] HCA 55; 135 CLR 569 at 576; Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd [1983] HCA 44; 155 CLR 129 at 145; and Waugh v Kippen [1986] HCA 12; 160 CLR 156 at 164-165. 17 The identification of a relevant cannon of construction such as that in Studman and related cases, or that in Beckwith and related cases, does not mean that the process of statutory construction and interpretation, as a whole, based on close attention to the text and structure of the relevant provisions by reference to the language of the statute viewed as a whole, set in its proper context and recognising the evident aim and purpose of the legislation should not be undertaken. In other words, the recognition of one cannon of construction such as recognised in Studman does not require reversion to a literal analysis of the provision with an eye to the discernment of textual ambiguity through finely spun distinctions. As Professor Pearce said in Statutory Interpretation in Australia, 5th Ed (2001) Butterworths, Sydney at 232, [9.8], speaking of such a literalist or solely textual approach: This somewhat naïve approach leads to the situation where counsel and judges worry away at individual words of Acts, seeking to squeeze out a possible interpretation that will enable a defendant to be acquitted. The intention of the legislature becomes lost in a semantic tournament. This in turn results in the courts being denigrated for not looking to the purpose of an Act, for being too 'legalistic'. 18 Turning to the text of the Act, Part 2 deals with restraining orders and Part 3 deals with confiscation. In Part 1 a number of important definitions are provided in s 4(1), relevantly here: proceeds , in relation to an activity, includes any interest in property, and any service, advantage or benefit, that is derived or realised, directly or indirectly, as a result of the activity: (a) by the person engaged in the activity, or (b) by another person at the direction or request (given or made directly or indirectly) of the person engaged in the activity.

external serious crime related activity means serious crime related activity arising out of an offence under the law of the Commonwealth or a place outside this State (including outside Australia) which, if the offence had been committed in this State, would be a serious criminal offence.

fraudulently acquired property means an interest in property that is fraudulently acquired property as provided by section 9A.

illegal activity means: (a) a serious crime related activity, or (b) an act or omission that constitutes an offence (including a common law offence) against the laws of New South Wales or the Commonwealth, or (c) an act or omission that occurs outside New South Wales, is an offence against the law of the place where it occurs and is of a kind that, if it had occurred in New South Wales, would have been an offence referred to in paragraph (b).

illegally acquired property means an interest in property that is illegally acquired property as provided by section 9.

serious crime derived property means an interest in property that is serious crime derived property as provided by section 9. serious crime related activity means serious crime related activity referred to in section 6. serious criminal offence - see section 6.

19 Sections 9 and 9A, are in the following terms: 9 Meaning of "serious crime derived property" and "illegally acquired property" (1) An interest in property is serious crime derived property if: (a) it is all or part of the proceeds of a serious crime related activity, or (b) it is all or part of the proceeds of the disposal of or other dealing in serious crime derived property, or (c) it was wholly or partly acquired using serious crime derived property. (2) The references in subsection (1) (b) and (c) to serious crime derived property are not limited to serious crime derived property described in subsection (1) (a) but also include interests in property that are serious crime derived property because of a previous operation or previous operations of subsection (1) (b) or (c) or their combined operation. (2A) Without limiting subsection (1), an interest in property is taken to be wholly or partly acquired using serious crime derived property if it is, or has been, subject to a mortgage, lien, charge, security or other encumbrance wholly or partly discharged using all or part of the proceeds of a serious crime related activity or serious crime derived property. (3) Once an interest in property becomes serious crime derived property it remains serious crime derived property even if the interest is disposed of or otherwise dealt with (including by being used to acquire an interest in property), but this is qualified by subsection (5). (4) The meaning of illegally acquired property is ascertained by substituting, in subsections (1)-(3), illegally acquired property for serious crime derived property and illegal activity for serious crime related activity . (5) An interest in property ceases to be serious crime derived property or illegally acquired property: (a) when it is acquired by a person for sufficient consideration without knowing, and in circumstances that would not arouse a reasonable suspicion, that the interest was, at the time of acquisition, serious crime derived property or illegally acquired property, or (b) when it vests in a person as a result of the distribution of the estate of a deceased person, or (c) when the interest is sold or otherwise disposed of under the authority of this Act (including when discharging a proceeds assessment order), or (d) when it is the proceeds of the sale or other disposition of serious crime derived property or illegally acquired property under the authority of this Act except a sale under section 10 (8) (b) or 14, or (e) when it is acquired by a person as payment of reasonable legal expenses incurred in connection with an application under this Act or incurred in defending a criminal charge, or

(f) in such other circumstances as may be prescribed.

(6) If an interest in property that is not serious crime derived property or illegally acquired property was once owned by a person and was then serious crime derived property or illegally acquired property, the property becomes serious crime derived property or illegally acquired property, respectively, if and when it is again acquired by the person.

(7) The proceeds of a sale or other dealing do not lose their identity as such merely as a result of being credited to an account.

(8) It does not matter whether the serious crime related activity, illegal activity, disposition or other dealing or acquisition by reason of which an interest in property becomes serious crime derived property or illegally acquired property took place before or after the commencement of this section.

(9) The following are examples of the practical operation of this section showing the ways in which an interest in property can become serious crime derived property and stop being serious crime derived property: (a) if money that is the proceeds of a serious crime related activity is used to buy land, the land becomes serious crime derived property and the money used (which is now in the hands of some other person) continues to be serious crime derived property, (b) if the land is then sold it continues to be serious crime derived property and the money paid for it becomes serious crime derived property, (c) if the money paid for the land is then used to buy a car, the car becomes serious crime derived property and the money used to buy it (now in the hands of the car's former owner) continues to be serious crime derived property unless the purchase was for sufficient consideration from an innocent person. 9A Meaning of "fraudulently acquired property" (1) An interest in property is fraudulently acquired property if the interest is held in a false name and any of the following was knowingly used for the purposes of acquiring, or dealing with, that property: (a) a false instrument (including a birth certificate or other identity document) or signature, (b) a birth certificate or other identity document of another person. (2) In this section: false instrument has the same meaning as it has in Division 2 (False instruments) of Part 5 of the Crimes Act 1900. identity document includes any document that may be used for the purposes of an identity verification procedure under the Financial Transaction Reports Act 1988 of the Commonwealth.

20 By the Act, s 10 the appellant may apply ex parte for a restraining order on the basis set out in that section. The order may, for example, be directed to any interests in property of a person suspected of having engaged in serious crime related activity (s 10(2)(a)). The Court must make the order if the application is accompanied by an affidavit stating the suspicion and the grounds of the suspicion and the Court considers that there are reasonable grounds for the suspicion (s 10(3)). 21 The restraining order, if made, remains in force while there is an application for a forfeiture order or a proceeds assessment order on foot or while there is an unsatisfied proceeds assessment order. 22 By the Act, s 12 the Court may make orders for the examination on oath of persons concerning property and for the provision of information on oath about the existence of property. 23 Confiscation in Part 3 is dealt with in four Divisions: Division 1 dealing with assets forfeiture orders; Division 2 dealing with proceeds assessment orders; Division 2A dealing with further forfeiture and proceeds and proceeds assessment orders in relation to property not disclosed; and Division 3 dealing with the establishment of a Confiscated Proceeds Account. 24 Section 22 (in Part 3 Division 1) sets out the circumstances in which an assets forfeiture order will be made. Relevantly, s 22 is in the following terms: (1) The Commission may apply to the Supreme Court for an order forfeiting to, and vesting in, the Crown all or any of the interests in property that are, or are proposed to be, subject to a restraining order when the assets forfeiture order takes effect. …

(2) The Supreme Court must make an assets forfeiture order if the Court finds it to be more probable than not that the person whose suspected serious crime related activity, or serious crime related activities, formed the basis of the restraining order was, at any time not more than 6 years before the making of the application for the assets forfeiture order, engaged in: (a) a serious crime related activity involving an indictable quantity, or (b) a serious crime related activity involving an offence punishable by imprisonment for 5 years or more. (2A) The Supreme Court must make an assets forfeiture order if the Court finds it more probable than not that interests in property subject to an application are fraudulently acquired property that is also illegally acquired property. (3) A finding of the Court for the purposes of subsection (2) need not be based on a finding as to the commission of a particular offence or a finding as to any particular quantity involved, and can be based: (a) on a finding that some offence or other constituting a serious crime related activity and punishable by imprisonment for 5 years or more was committed, or (b) on a finding that some offence or other constituting a serious crime related activity was committed involving some quantity or other that was an indictable quantity. (3A) A finding of the Supreme Court for the purposes of subsection (2A) need not be based on a particular finding as to the commission of a particular offence and can be based on a finding that some offence or other constituting illegal activity was committed. (4) When an assets forfeiture order is made it must be made so as to apply to specified interests in property.

… (6) The raising of a doubt as to whether a person engaged in a serious crime related activity or whether a quantity is an indictable quantity is not of itself sufficient to avoid a finding by the Supreme Court under subsection (2). (6A) The raising of a doubt as to whether a person engaged in an illegal activity is not of itself sufficient to avoid a finding by the Supreme Court under subsection (2A). (7) The quashing or setting aside of a conviction for a serious crime related activity or illegal activity does not affect the validity of an assets forfeiture order that was made before or after the conviction was quashed or set aside and was based on the activity. (8) The making of an assets forfeiture order does not prevent the making of a proceeds assessment order under Division 2 which assesses the value of the proceeds of, or is based on, the serious crime related activity or illegal activity on which the assets forfeiture order was based. … 25 As can be seen from the above provisions, if the owner of the property is proved to have engaged in the relevant serious crime related activity in the relevant six year period, all his or her property may be subject to forfeiture. Three provisions, in particular, ameliorate the operation of s 22 in this regard. First, under s 24, the Court, if it is satisfied that a forfeiture order will operate to cause hardship to a dependant, may make orders to prevent that. Secondly, under s 25, the Court is able to make an order excluding property from the forfeiture order, but only in circumstances referred to in s 25(2), as follows: (2) The Supreme Court must not make the exclusion order applied for unless it is proved that it is more probable than not that: (a) in the case of an order relating to fraudulently acquired property - the interest in property to which the application relates is not fraudulently acquired property or is not illegally acquired property, or (b) in any other case - the interest in property to which the application relates is not illegally acquired property.

26 The onus on the person in s 25(2) is a heavy one when one appreciates the width of the meaning of "illegally acquired property" (in s 9) and "proceeds" (in s 4(1)). 27 Thirdly, under s 26, the Court is able to make an order excluding specified proportions of property from the forfeiture. The circumstances in which such an order can be made are set out in s 26(1), (1A) and (2), as follows: (1) If it is proved that it is more probable than not that a specified proportion of the value of an interest in property that has been forfeited under an assets forfeiture order is not attributable to the proceeds of an illegal activity, the Supreme Court may: (a) make a declaration to that effect, and (b) order that the person who has forfeited the interest is entitled to be paid the proportion of the proceeds of sale of the interest that is specified in the declaration. (1A) If it is proved that it is more probable than not that a specified proportion of the value of an interest in property that has been forfeited under an assets forfeiture order on the ground that it was fraudulently acquired property was not fraudulently acquired property or is not attributable to the proceeds of an illegal activity, the Supreme Court may: (a) make a declaration to that effect, and (b) order that the person who has forfeited the interest is entitled to be paid the proportion of the proceeds of sale of the interest that is specified in the declaration. (2) A declaration that an interest in property is not attributable to the proceeds of an illegal activity is to be made on the basis of the extent to which the interest in property concerned was not, when it first became illegally acquired property, acquired using the proceeds of an illegal activity. 28 Sections 27 and 28 (in Part 3 Division 2) set out the circumstances in which proceeds assessment order will be made (s 27); and how the value of the proceeds is to be assessed (s 28). Relevantly, ss 27 and 28 are in the following terms: 27 Making of proceeds assessment order (1) The Commission may apply to the Supreme Court for a proceeds assessment order requiring a person to pay to the Treasurer an amount assessed by the Court as the value of the proceeds derived by the person from an illegal activity, or illegal activities, of the person or another person that took place not more than 6 years before the making of the application for the order, whether or not any such activity is an activity on which the application is based as required by subsection (2) or (2A). (2) The Supreme Court must make a proceeds assessment order if the Court finds it to be more probable than not that the person against whom the order is sought was, at any time not more than 6 years before the making of the application for the order, engaged in: (a) a serious crime related activity involving an indictable quantity, or

(b) a serious crime related activity involving an offence punishable by imprisonment for 5 years or more. … (5) The quashing or setting aside of a conviction for a serious crime related activity does not affect the validity of a proceeds assessment order. (6) The making of a proceeds assessment order does not prevent the making under Division 1 of an assets forfeiture order based on the serious crime related activity, or on all or any of the serious crime related activities, in relation to which the proceeds assessment order is made. (7) The amount a person is required to pay under a proceeds assessment order is a debt payable by the person to the Crown on the making of the order and is recoverable as such. … (12) The Supreme Court may, when it makes a proceeds assessment order at any later time, make any ancillary orders that the Court considers appropriate. 28 Assessment of proceeds of serious crime related activity (1) For the purpose of making an assessment under section 27 in relation to the proceeds derived by a person (in this section called the defendant ) from an illegal activity, or illegal activities, of the person or another person the Supreme Court is to have regard to the following matters: (a) the money, or the value of any interest in property other than money, directly or indirectly acquired by: (i) the defendant, or (ii) another person at the request, or by the direction, of the defendant, because of the illegal activity or activities, (b) the value of any service, benefit or advantage provided for: (i) the defendant, or (ii) another person at the request, or by the direction, of the defendant, because of the illegal activity or activities, (c) the market value, at the time of the illegal activity or of each illegal activity, of a plant or drug similar, or substantially similar, to any involved in the illegal activity or each illegal activity, and the amount that was, or the range of amounts that were, ordinarily paid for an act similar, or substantially similar, to the illegal activity or each illegal activity, (d) the value of the defendant's property before and after the illegal activity or each illegal activity, (e) the defendant's income and expenditure before and after the illegal activity or activities. (2) If evidence is given at the hearing of an application for a proceeds assessment order that the value of the defendant's property after an illegal activity or illegal activities of the defendant exceeded the value of the defendant's property before the activity or activities, the Supreme Court is to treat the excess as proceeds derived by the defendant from the activity or activities, except to the extent (if any) that the Supreme Court is satisfied the excess was due to causes unrelated to an illegal activity or activities. (3) If evidence is given at the hearing of an application for a proceeds assessment order of the amount of the defendant's expenditure during the period of 6 years before the making of the application for the order, the Supreme Court is to treat any such amount as proceeds derived by the defendant from an illegal activity or activities, except to the extent (if any) that the Supreme Court is satisfied the expenditure was funded from income, or money from other sources, unrelated to an illegal activity or activities. (3A) The Supreme Court is not to take expenditure into account under subsection (3) to the extent that the Court is satisfied that it resulted in the acquisition of property the value of which is taken into account under subsection (2). (4) In making an assessment as provided by this section, none of the following amounts are to be subtracted: (a) expenses or outgoings incurred by the defendant in relation to the illegal activity or activities, (b) the value of any proceeds derived as agent for or otherwise on behalf of some other person (whether or not any of the proceeds are received by that other person). (5) This section applies to, and in relation to: (a) property that comes into the possession, or under the effective control, of a person either within or outside New South Wales, and (b) proceeds acquired either within or outside New South Wales in relation to an illegal activity. (6) Despite any rule of law, or any practice, relating to hearsay evidence, the Supreme Court may, for the purposes of this section, receive evidence of the opinion of: (a) a member of the Police Force, or (b) a member of the Australian Federal Police, or (c) an officer of Customs within the meaning of the Customs Act 1901 of the Commonwealth, or (d) a member or officer of the Commission, who is experienced in the investigation of illegal activities involving plants or drugs, being an opinion with respect to: (e) the amount that was the market value at a particular time of a particular kind of plant or drug, or (f) the amount, or range of amounts, ordinarily paid at a particular time for the doing of anything in relation to a particular kind of plant or drug. The proper construction of the Act and decision on appeal

29 The first matter of importance in the structure of the Act is that the orders under ss 22 and 27 are made by reference to different criteria. A forfeiture order must be made by the Court under s 22(2) in relation to any property in respect of which the relevant person the subject of suspicion and of proof has a specified interest. If the Court finds it more probable than not that that person (whose suspected serious crime related activity formed the basis of the restraining order under s 10) was, in the last six years, engaged in a relevant serious crime related activity, it must make an assets forfeiture order against that person's property, to the extent it can be identified: see s 22(4). Such property may have been purchased at any time. It may have been given to the person. The basis for the order under s 22(2) is not that it is proven that proceeds of crime have funded its acquisition, either in whole or in part. 30 The order under s 27, on the one hand, is made by reference to the value of proceeds derived from an illegal activity in the prior six years. It is based on a calculation (such as can be proved by the appellant) as to proceeds in that period. 31 The forfeiture under s 22(2) is as to property that may have not been purchased directly or indirectly by the proceeds that the appellant can prove were illegally derived in the six years. The Act calls for no investigation of that issue. Yet, the primary judge saw ss 27 and 22 as necessarily complementing each other such that "value" in s 27 was to take into account the value of property forfeited under s 22(2). 32 The basis for forfeiture under s 22(2A), being directed to the acquisition of property, can be seen to have a possibly closer relationship to s 27 than does s 22(2). Nevertheless, there is no clear identity of foundation in ss 22(2A) and 27. For instance, there is no six-year period in s 22(2A), as there is in s 27. 33 Sections 22(8) and 27(6), though not directed to calculation of value in s 28, are a clear indication of the independent operation of the two orders, the statutory bases for which are in separate Divisions of Part 3. No attempt was made in this context to express any regime for their complementary or contemporaneous operation. 34 The Act has a number of provisions for the amelioration of the rigours of its application. As to forfeiture orders, under ss 24, 25 and 26, applications can be made on behalf of dependants for orders to ameliorate the effect of forfeiture and applications can be made to excise property, or interests in the property, from forfeiture. The provisions contain clear criteria and a clear onus of proof. The avoidance of some double counting is expressly dealt with in the calculation of proceeds: see ss 28(2), (3) and (3A). 35 The Court's role is clearly laid down at all stages. Its powers are clearly circumscribed. 36 In these circumstances, it would be curious to imply, by a process of construction and interpretation, an ameliorating provision or power, available to be used by the Court in circumstances it thought fair. 37 It is true that s 27 uses the word "value". That can be easily understood by reference to the assessment task in s 28. The proceeds may be in the form of money or other kinds of property to which a monetary value must be given. 38 The assessment task set out in s 28 is an apparently comprehensive and complete regime. Section 28 sets out relevant considerations (s 28(1)) and the kinds of evidence that can be led with relevant consequences (s 28(2) and (3)). For instance, s 28(3) is clear that the Court "is to treat" the amount of expenditure in the period as relevant proceeds. This is not an indication of flexibility as the primary judge thought. 39 It can also be seen that in s 28 the proceeds are calculated without regard to the costs or outgoings of the criminal operation: s 28(4)(a) and without regard whether proceeds are derived as an agent: s 28(4)(b). From one perspective, neither of these provisions is fair. 40 The terms and structure of Parts 2 and 3, and Divisions 1 and 2 of Part 3 in particular, do not display any intention to be fair beyond those specific provisions that deal with amelioration of the effects of the Act. 41 The Act does not reflect a use of finely balanced processes of accounting; yet, that kind of accounting (a 100% tax, but no more) appeared to influence the primary judge. 42 For there to be a link between ss 27 and 22 through the vehicle of the word "value" in s 27(1) more would be required than a mere recognition that property of the person, who has been ordered to pay an amount under s 27, was forfeited under s 22 and investing the word "value" with some plasticity. The value of the forfeited property would need to be assessed. This would give rise to a valuation case. Who would bear the onus in such an exercise? The Act is silent. 43 If fairness is the implied criterion, value may not be the appropriate test. The acquisition cost would be a more appropriate reference point. Yet, it is difficult to imply this into "value" in s 27(1). 44 An enquiry would need to be made as to the proportion of value (or acquisition price) of the asset attributable to the proceeds the subject of the s 27 order. The Act does not provide for this. Who would bear the onus? One could imagine a complex financial investigation over many years to resolve this issue. 45 These kinds of factual enquiry (some involving a measure of precision and complexity) not otherwise provided for under the Act, would need to be made in circumstances where the evident purpose of the legislation is to throw on to persons who have engaged in serious criminal conduct the burden of proving the matters that Parliament has set out in sections such as ss 24, 25 and 26. 46 Further, to make ss 22 and 27 complement each other through the word value, as her Honour did, may be unfair to the Crown. Unless it can be proved that the proceeds calculated under s 28 for the order under s 27 did purchase (in full) the forfeited asset and that there were no other illegally derived proceeds, the approach of the primary judge may limit the recovery of assets that may have been illegally derived. Unless the Court were satisfied that the value of proceeds proved under s 28 for the order under s 27, was the extent of illegally derived proceeds that had been generated by the person, some double counting under ss 22 and 27 may not be "unjust". The appellant proves what it can under s 28. It is then entitled to an order under s 27. That does not mean, however, that it can be assumed that all illegally derived proceeds have been identified. Double counting may be unfair, it may not be. To be concluded that it is, one would need to be satisfied of the full universe of illegally derived proceeds. 47 The kind of value judgements as to what is fair or not, what degree of precision is required and when double counting should be taken into account are all matters to which Parliament has directed itself expressly. 48 I see no ambiguity or lack of clarity in ss 27 and 28. The order under s 27 can be made even though an asset forfeiture order can also be made: s 27(6). The order under s 27 is in relation to the value of proceeds calculated by reference to s 28. 49 There is no basis to read into the word "value" in s 27(1), or into any part of s 27 any authority to deduct from a calculation made under s 28, a sum referable to the value of assets forfeited under another section in another Division of Part 3. 50 The above analysis does not take account of the approaches of similar statutes of the States and the Commonwealth. At the conclusion of the hearing, the Court asked the Commission to provide a note as to such statutes and how they treated, if they did, the question of any set-off in the orders for forfeited property. A helpful conspectus was provided by junior counsel. The respondent did not wish to add anything by way of further submission consequent upon the provision of this note by the Commission. 51 Each of the Commonwealth and the States has an Act comparable to the Act. All of the Acts (except that of Tasmania) provide for confiscation in the absence of conviction. All the Acts (except that of Western Australia) follow a broadly similar pattern. All of the Acts (except that of New South Wales) make express provision for adjusting the amount of the equivalent of a proceeds assessment order by reference to the making of a forfeiture or similar order. 52 In the Proceeds of Crime Act 2002 (Cth), s 130 provides for a reduction of a pecuniary penalty order on account of relevant forfeited property. Sections 131 and 132 provide for reductions on account of tax paid in respect of the offence and on account of any fine, compensation, damages or restitution paid in respect of the offence. Section 130 is in the following terms: The penalty amount under a pecuniary penalty order against a person is reduced by an amount equal to the value, as at the time of the making of the order, of any property that is proceeds of the offence to which the order relates if: (a) the property has been forfeited under this Act or another law of the Commonwealth or under a law of a non-governing Territory, in relation to the offence to which the order relates; or (b) an application has been made for a forfeiture order that would cover the property. 53 The Confiscation Act 1997 (Vic) makes provision for forfeiture orders and pecuniary penalty orders. Under s 63, dealing with pecuniary penalty orders, the Court is to assess the value of the benefits derived by the defendant in relation to an identified offence. In s 68(3), provision is made for the assessment of a pecuniary penalty in relation to the offence and an express provision is made for the non-inclusion of any property which is being forfeited to the Minister under the Act. 54 Under the Criminal Proceeds Confiscation Act 2002 (Qld), forfeiture orders and proceeds assessment orders can be made. The relationship between them is provided for in s 79(3), which gives the Supreme Court a power, if it considers it appropriate, to deduct from the value of the proceeds in a proceeds assessment order the value of any property forfeited under a forfeiture order made in relation to a person's illegal activities. 55 Under the Criminal Assets Confiscation Act 2005 (SA) provision is made for forfeiture orders and pecuniary orders. Section 107 provides for the avoidance of double counting in the following terms: If a pecuniary penalty order relates to benefits derived from the commission of a serious offence, the penalty amount under the order is reduced by an amount equal to the value, at the time of the making of the order, of any property that is proceeds of the serious offence if - (a) the property has been forfeited, under this Act or any other law, in relation to the offence to which the order relates; or (b) an application has been made for a forfeiture order that would cover the property.

56 In the Criminal Property Confiscation Act 2000 (WA) there is a provision for the confiscation of "unexplained wealth", "criminal benefits", "crime-used property", "crime-derived property" and the property of "declared drug-traffickers"; see ss 4, 144, 145, 146, 148 and 159. Provision is made for "freezing notices" and "freezing orders" (Pt 4) and for "unexplained wealth declarations" (Pt 3, Div 1) and "criminal benefits declarations" (Pt 3, Div 2). The relationship between the various orders is dealt with in ss 13 and 18. In s 13(4), when assessing the value of a respondent's unexplained wealth, the Court is not to take account of, inter alia, "any property that has been confiscated under this Act or other enactment or any property, service, advantage or benefit in relation to which a criminal benefits declaration has been made". Under s 18, dealing with criminal benefits declarations, it is provided that the Court is not to make a declaration in respect of property if: (a) a criminal benefits declaration has already been made in relation the property, service, advantage or benefit; (b) the property, service, advantage or benefit has been confiscated under this Act or any other enactment; or (c) the property, service, advantage or benefit, or its value, has been taken into account for the purpose of making an unexplained wealth declaration against the respondent. 57 From the above provisions, it can be seen that all States, other than New South Wales, have made some provision in relation to possible double counting. Under the Commonwealth provision the property must relate to the offence to which the order relates. The Victorian provision is in relation to an offence. The Queensland provision gives a power to the Court. The South Australian Act requires a relationship between the forfeiture and the proceeds of a particular offence. 58 The provision by each of the States and Commonwealth reflects the underlying proposition in the reasons above that the matter is one for the express attention of Parliament. It was, and remains, open to the Parliament of New South Wales to legislate in relation to this issue. It is not a matter, in my view, legitimately within the province of interpretation and construction of the statute. 59 To the extent that the operation of the Act is or remains unfair that is a matter for Parliament to remedy. 60 The material provided by the Commission after the hearing threw light on how the issue in question had been treated by Parliaments in the Federation. The statutes, though later than the Act, were of some real assistance. In any proceeding in which the meaning of the Act falls for consideration, it would be generally helpful for the Court to be assisted by some understanding as to how cognate statutes in other States and the Commonwealth have dealt with the issue in question.

61 For the above reasons, I would make the following orders: 1. Appeal allowed. 2. Order 2 made by the Court on 20 February 2008 be set aside. 3. Order that the respondent pay the Treasurer the sum of $401,356. 4. The respondent pay the appellant's costs.

62 GILES JA: I agree with Allsop P. 63 BELL JA: I agree with Allsop P.

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.

Criminal Assets Recovery Act 1990(NSW)ss 22, 27, 28, s 27(1)

Under the Criminal Proceeds Confiscation Act 2002(Qld)

Under the Criminal Assets Confiscation Act 2005(SA)

Reported Decision: 189 A Crim R 47475 NSWLR 564[2010] ALMD 3032

CITATION: New South Wales Crime Commission v Volkard Kelaita [2008] NSWCA 284

Beckwith v The Queen [1976] HCA 55; 135 CLR 569 Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd [1983] HCA 44; 155 CLR 129 Gifford v Strang Patrick Holdings Pty Limited [2003] HCA 33; 214 CLR 269 Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; 174 A Crim R 124 CASES CITED: Harrison v Melhem [2008] NSWCA 67 Malika Holdings Pty Limited v Stretton [2001] HCA 14; 204 CLR 290 New South Wales v Bujdoso [2007] NSWCA 44; 69 NSWLR 302 Studman v Director of Public Prosecutions (Cth) [2007] NSWCA 285; 177 A Crim R 34 Waugh v Kippen [1986] HCA 12; 160 CLR 156

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