NSW CRIME COMMISSION v GARDINER

1 HIS HONOUR: An order was made by Newman J of this Court on 12 December 1996 pursuant to the powers residing in this Court under s10 of the Criminal Assets Recovery Act 1990 (the Act). In accordance with usual practice those orders were made ex parte in reliance upon an affidavit of Michael Charles Luland sworn 12 December 1996. 2 The essence of the case put to his Honour on behalf of the New South Wales Crime Commission (the Commission) was that on the search of property occupied by the present applicant money and drugs were found. Orders were sought and obtained relating to a number of items of property, funds in various bank accounts and $40,000 in cash. None of the property was shown to have been owned, in any sense, by Sharyn Allana Gardiner from whose criminal activities alone Mr Luland suspected they were derived. 3 As I understand it, the reasonable suspicion necessary to the exercise of the Court's discretion under s10 of the Act was engendered by the relationship of Sharyn Allana Gardiner to the applicant, namely, she was his ex-wife, and to James Keith Gardiner in particular, their son, added to her conviction in respect of the possession and cultivation of a large quantity of Cannabis plants. 4 Although this evidence was exiguous it seems to me, with unfeigned respect for his Honour, that it was sufficient to engender the reasonable suspicion to which s10(3)(b) of the Act refers. Indeed Mr Steirn SC for the applicant did not seek to maintain the contrary. 5 This application is brought to permit the applicant to show by other evidence, including his own and that of an accountant, that no reasonable suspicion could presently exist that the property is relevantly derived. 6 Without conceding that the applicant is in a position to call such evidence Mr Temby QC for the Commission submits that even were such evidence available this Court either could not or should not permit the question to be litigated. He submits, and rightly, that even if the order made by Newman J was in error this could be corrected only by appeal. He submits that the power to make ancillary orders or vary a restraining order conferred on the Court by s12 of the Act cannot permit an enquiry of the fundamental kind sought by the applicant directed to undermining the continuance of the restraining order and hence cutting short the appropriate succession of hearings involving an application for a forfeiture order under s10, the making of a forfeiture order under s22 and the consideration of any application under s25 of the Act. 7 The significance of this point is of some real substance. Having regard to the questions posed for consideration by ss22 and 25 of the Act and the differing onus which those provisions place upon the parties, the scheme of the Act appears to be that if there is a reasonable suspicion of criminal derivation of assets, a restraining order may be made ex parte which will subsist for more than 48 hours, providing, amongst other things, an application for a forfeiture order is made. That application is determined by the considerations in s22 of the Act which contains two significant elements. The first is that the onus of proof of the relevant crime-related activity is on the Commission, though the standard of proof is the civil standard, namely, a matter of probability; the second is that this enquiry does not concern itself with any link between the crime-related activity and the property in question but, rather, with the existence of a specified criminal history. 8 A person who wishes to obtain relief from an asset forfeiture order must (for relevant purposes) proceed under s25. That provision enables such a person to establish that the property was not illegally acquired. If the person succeeds in establishing this more probably than not then, in substance, it must be returned to the person. 9 The philosophy underlying the Act appears to be that if it is established, first of all, that there is a reasonable suspicion that property is derived from crime-related activity and that some crime-related activity - not necessarily that to which the suspicion attaches - occurred within six years of the application under s22, it is reasonable and appropriate that the property should be forfeited unless the person with an interest can show more probably than not it was innocently acquired. 10 It will be seen, therefore, that a reasonable suspicion under s10(3) of the Act is not only an essential legal requirement to the continuation of proceedings but also provides a basis in justice for requiring a person to establish innocent acquisition of property which is their own and which the Act seeks to expropriate. I refer to the justice of the scheme, not because the Act requires consideration of any such requirement as such, but because in the exercise of any available judicial discretion the justice of the order sought, or sought to be amended in the light of subsequent circumstances, is in a shorthand way material to a consideration of its due exercise. 11 It is not sought to be controverted and could not be controverted that an order which restrains the property of any person is a most serious interference with their civil rights. To go to the next step of expropriating that property is a fortiori so. Accordingly, one should not approach the exercise of the jurisdiction given to this Court under s10 of the Act on the basis that the order is of trivial significance, to be looked at only as a trigger for setting the procedure of the Act in motion. 12 Section 10(2) of the Act permits the Commission to apply to this Court ex parte for a restraining order in specified circumstances. It is conceded by Mr Temby QC for the Commission, if I might say so properly, that the Commission is not required so to proceed and that in an appropriate case the person affected by any restraining order might well be given notice of the application and be present and participate in the hearing at which the order is sought. Indeed, as is accepted, the Act itself envisages the possibility that a person interested in property sought to be restrained might be notified of the application before the order is made: see s11 (2)(b). 13 It was weakly suggested by Mr Steirn SC for the applicant that the Commission in this case should have given notice of its application to the present applicant but this submission did not long survive examination. In order to protect the assets sought to be restrained it is clear that proceeding ex parte was appropriate. Mr Steirn SC submits that by analogy with similar proceedings arising otherwise in the Court an ex parte order should be interim or temporary only and that a person affected by a restraining order should be able to be heard on its continuation in respect of the issues raised by s10(3) in particular. 14 A difficulty facing this submission is that there appears not to be, in terms, any jurisdiction for that to occur if the Judge when first making the order did not so qualify it. Mr Steirn SC concedes that he cannot argue that the order made by Newman J erred in failing so to do. Rather he says there is a prima facie basis upon which those orders are now seen to be inappropriate in an unqualified form and should be varied, pointing to the provisions of s12(1) of the Act as a source of power to do so. 15 Mr Temby QC, for the Commission, rightly points out that if the restraining order be not continued then the application for a forfeiture order upon which it depends must fall since it is a necessary condition of such an application that a restraining order be in existence. I do not find this argument persuasive since it would only be in the event that there was no relevant reasonable suspicion that the restraining order would not be continued and if there were no reasonable suspicion the basis for the proceedings under s22 of the Act would be rightly removed. 16 The more substantial argument is that the scheme of the Act envisages that once the initial obstacle is past and an order obtained so that the reasonable suspicion as to the derivation of the property is established, though only ex parte the resolution of any outstanding questions must be left, as the Act, it is argued, clearly envisages, to the procedures provided in s22 and (relevantly) s25. 17 Where the relevant criminal activity is that of the person whose interest is sought to be expropriated this argument is fairly strong. However, where the person who is the owner of the property must answer for the actions of another which is the effect in this case of s25 it is, to my mind, somewhat weakened. Of course, the specific provisions of the Act must override any such misgivings which, in the end, are based upon policy considerations, admittedly both longstanding and very important but which the Legislature has undoubted power to qualify, especially so where it is grappling with an extremely dangerous attack upon the integrity of the civil community. 18 The judicial approach to this legislation has been set out both eloquently and accurately, if I may say so with respect, in DPP v Logan Park Investments Pty Limited & Anor (1995) 37 NSWLR 118 by Kirby P (as he then was) at 125, the correctness of which is not in question in this case, and which was heeded by Studdert J in New South Wales Crime Commission v Davies (unreported) [1999] NSWSC 354, a case in which the Act in question before me required consideration. 19 If Mr Steirn's application is to succeed it can only do so if s12(1) of the Act permits it. That subsection relevantly is as follows -

"12(1) The Supreme Court may, when it makes a restraining order or at any later time, make any ancillary orders (whether or not affecting a person whose interests in property are subject to the restraining order) that the Court considers appropriate and, without limiting the generality of this, the Court may make any one or more of the following orders: (a) an order varying the interests in property to which the restraining order relates, (b) an order for the examination on oath of: (i) the owner of an interest in property that is subject to the restraining order, or (ii) another person, before the Court, or before an officer of the Court prescribed by rules of court, concerning the affairs of the owner, including the nature and location of any property in which the owner has an interest. (b1) an order for the examination on oath of a person who is the spouse or a de facto partner (as defined in the De Facto Relationships Act 1984) of the owner of an interest in property that is subject to the restraining order, before the Court or before an officer of the Court prescribed by the rules of court, concerning the affairs of the person, including the nature and location of any property in which the person or that owner has an interest, (c) an order with respect to the carrying out of any undertaking with respect to the payment of damages or costs given on behalf of the State in connection with the making of the restraining order, (c1) an order directing a person who is or was the owner of an interest in property that is subject to the restraining order or, if the owner is or was a body corporate, a director of the body corporate specified by the Court, to furnish to the Commission or Public Trustee, within a period specified in the order, a statement, verified by the oath of the person making the statement, setting out such particulars of the property, or dealings with the property in which the owner has or had an interest as the court thinks proper, (d) if the restraining order requires the Public Trustee to take control of an interest in property: (i) an order regulating the manner in which the Public Trustee may exercise functions under the restraining order, or (ii) an order determining any question relating to the interest, including any question affecting the liabilities of the owner of the interest or the functions of the Public Trustee, or (iii) (Repealed) (e) an order requiring or authorising the seizure or taking possession of property." 20 The order sought by the applicant is to vary the orders made by Newman J by the addition of the words "pending a hearing as to the existence of a reasonable suspicion within the meaning of s10 as at the date of such hearing" so that the commencing words of the orders would then read: "Upon the Plaintiff giving the usual undertaking as to damages (the giving of which by its solicitor being noted) pending a hearing as to the existence of a reasonable suspicion within the meaning of section 10 as at the date of such hearing, the Court orders". 21 It is submitted by Mr Temby QC that such a variation is not an ancillary order within the meaning of s12(1). He submits that ancillary means supplementary and subordinate to the principal matter, citing McCleary & Ors v The Director of Public Prosecutions (Commonwealth) (1998) 157 ALR 301 at 332. In that case, the Full Court of the Supreme Court of Western Australia considered a restraining order against a third party's property made pursuant to the Proceeds of Crime Act 1987 (Cth) and in particular s6K(c)(i) which extends the definition of an exempt proceeding to "a proceeding by way of application for a restraining order or an order that is ancillary to a restraining order". The application concerned proceedings to enforce an undertaking for damages and it was submitted that they were "ancillary to a restraining order" and hence were exempt proceedings with the result that certain evidence was admissible. 22 The Court said (at 332) - "In Koala Motels Pty Limited v Chief Licensing Inspector (1977) 18 ALR 12 at 14, Muirhead J pointed out that the word 'ancillary' has a special meaning.' "It means less than supplementary or supplemental to - it means 'subservient' or 'subordinate'..." According to the Macquarie Dictionary 'ancillary' means 'accessory; auxiliary', and 'ancillary relief' means supplementary or incidental relief sought in addition to the main relief as in matrimonial causes, proceedings for maintenance, custody, settlement of property or damages for adultery". 23 The Court found that the proceedings were brought because the undertaking was given in support of an application for a restraining order and was able to be enforced because the order expired and accordingly the giving of the undertaking had "a close and direct connection with the restraining order". Ipp J (with whom the other judges of the Court agreed) went on to say: "While proceedings for the enforcement of the undertaking are not supplementary or incidental to the main relief (the latter being the obtaining of the restraining order), the enforcement proceedings are incidental and subordinate to the restraining order as they are dependent on the grant of the restraining order and the expiry thereof." 24 I do not consider that the "ancillary orders" to which s12(1) refers mean ancillary only to the restraining order. This is made clear by the language concerning both the time ("at any later time") and the character of the order, which must be ancillary but may affect a person whose interests are subject to restraint. Rather, I consider they are ancillary to proceedings undertaken pursuant to the Act and accordingly ancillary to proceedings under s22 where an application for forfeiture is made and also to proceeding under s25. Since the continuing existence of the restraining order is a necessary precondition to the application for a forfeiture order under s22 of the Act, I consider that whether it should continue is ancillary to proceedings under s22 and, if it were necessary for me to so decide, ancillary to the order made under s10. 25 I must confess that during argument my mind has wavered upon the question posed by the application but I consider that as this matter had been left in a state of ambiguity or at least uncertainty by the Act, s12 should be construed as giving ancillary power to permit a hearing, where there has been an order made ex parte under s10(2) and proper grounds are shown, in respect of the continuance of the restraining order, that is to say concerning the continuance of the reasonableness of the suspicion, providing that by so doing the power is not so exercised, as it were, to allow an appeal from the order made under s10(2) and, in this case, by Newman J. 26 The status of ex parte orders is well-known and takes place in a context which is the subject of well-ploughed forensic fields. Indeed, in McCleary v DPP the Court noted that the similarity in purpose and terms of undertakings for damages provided for under the Commonwealth legislation (and of course in the case here) to those given in civil litigation in support of an interlocutory injunction indicated that Parliament intended that the rules and practices applying to undertakings be followed as far as is reasonably and practically possible in dealing with undertakings under the Act. To my mind such considerations apply also to the approach that should be taken to orders made ex parte for the restraint of private property. Of course such an interpretation must give way to the specific provisions of the Act but I am not persuaded in the end that the Act has the effect contended for by Mr Temby QC although there is much to be said for such an interpretation. 27 Accordingly, I propose to order under s12(1) that the applicant may apply to terminate the effect of the restraining orders made on 12 December 1998 upon grounds directed to the question whether as at the date of such hearing there are reasonable grounds for a suspicion that the applicant's interest is serious crime derived property for the reasons specified in section 10(3)(b) of the Act. 28 I do not think it appropriate to amend the orders made by Newman J since the jurisdiction which I presently apprehend I am exercising is that specifically given by section 12 of the Act, subject to which, necessarily, his Honour's orders were made. 29 I direct the applicant to take out an order in accordance with my reasons by Wednesday next, 8 December 1999. A copy of that order is to be provided to the respondent by the end of next week. Liberty to apply if required. I stand the matter over generally for directions. I reserve the question of costs.

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