Second issue on the appeal: Did the property remain serious crime derived property in the hands of the claimants?
50 Counsel for the claimants submitted that there was nothing in Mr Spark's affidavit that would constitute reasonable grounds for suspicion that the property to which the orders were directed was serious crime derived property in the hands of the claimants, even if there were reasonable grounds for suspecting that that may have been the case in respect of the orders made in respect of Ollis' property.
51 This submission had a number of bases. First, counsel for the claimants submitted that the Commission bore the onus of establishing under both ss 9(1) and (5) that the interest in property is referable to the serious crime related activity and that there is a reasonable suspicion that the interest in property has not ceased to become serious crime derived property.
52 The Commission accepted that it bore the onus under s 9(1), but contested that it did not carry an onus in relation to s 9(5). Senior counsel for the Commission pointed out that s 9(5) may not even arise on an application for a restraining order. In this case, the Commission submitted that if it arose, it did not do so with such force as to displace Mr Spark's suspicion, because there was no basis for concluding that the property was acquired for sufficient consideration.
53 I am of the opinion that the claimants' argument in respect of s 9(5) is misplaced. The Court may only make a restraining order in respect of property that is suspected on reasonable grounds to be serious crime derived property. Section 9 specifies what is "serious crime derived property". If the material before the Court is not sufficient to establish the relevant suspicion on reasonable grounds, an order under s 10 cannot be made. Such a suspicion would not be excluded unless the evidence disclosed that the property was acquired 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. Pursuant to the provisions of s 9(5), such property would have ceased to be serious crime derived property.
54 In my opinion, it is not necessary for the purposes of s 10 that the affidavit filed in support of an application for a restraining order, as well as establishing on reasonable grounds that there is a suspicion that the property sought to be restrained is serious crime derived property, also prove that that property has not ceased to be serious crime derived property. There is nothing in the section which imposes that obligation.
55 Should the Commission be in the possession of such information, it would be under an obligation to disclose it to the court at the time that it made the application under s 10. However, that is quite different from stating that there is an initial onus on the Commission to establish that property has not ceased to be serious crime derived property.
56 It is also relevant to observe that the provisions of s 9 are not only relevant to the operation of s 10, but are also relevant to an application under s 25 for an exclusion order. If property had ceased to be serious crime derived property, that property could be made the subject of an exclusion order under that section.
57 Counsel for the claimants also relied upon the information contained in the Westpac investigation report to the effect that Ollis had loaned money not only to Shields but also to Mr Smith. It was submitted that it should be inferred that as no restraining order had been sought against the property of Mr Smith, there was no reasonable basis for a suspicion that the moneys so loaned or property acquired by utilising the loan moneys, was serious crime derived property. It was then submitted that a similar inference should be drawn in respect of Shields.
58 With respect, this argument involves a non-sequitur. It may be that restraining orders were not made in respect of the property of Mr Smith because the Commission did not have a reasonable basis for a suspicion that in his hands moneys loaned to him by Ollis, or property acquired from such loan, was serious crime derived property. It may also be that the Commission had not at that time moved to apply for a restraining order against Mr Smith. It may be that its investigations were continuing.
59 Counsel for the claimants next submitted in relation to Shields that none of the information contained in Mr Spark's affidavit supported a reasonable suspicion that the property sought to be restrained was serious crime derived property in her hands. This submission involves a more detailed consideration of both the affidavit and the property restrained.
60 By order 2 made by Sully J on 19 January 2006, his Honour restrained dealing with property described in schedules 6-15 to the order. The property to which the present submission was directed was the property contained in schedules 6-11.
61 In his affidavit, Mr Spark set out the evidence that established that Shields was the registered owner of the property specified in each schedule; the date of acquisition; particulars of the vendors; the consideration paid; the history and present status of any encumbrance on the property. He stated that he suspected that the property specified in the schedules was serious crime derived property because of the serious crime related activity or activities of Ollis. The basis upon which that suspicion was based were the matters referred to in para 4 of his affidavit, including the Westpac investigation report (see [40] above), the facts relating to the ownership of the property and a history of allegations of fraud which had either been the subject of a complaint to police or subject of a criminal charge. Mr Spark revealed in his affidavit that no evidence had been offered when that matter was before the court. It should also be observed that the complaints to the police alleging fraud had been made in 1999 and 2000 and were unconnected with any of the transactions whereby Shields acquired the property subject of the restraining orders.
62 Counsel for the claimants submitted that the history of the allegations of fraud was irrelevant to the question whether there was a reasonable basis for the suspicion that the property was serious crime derived property. He submitted that an examination of the transactional history of the acquisition of the properties demonstrated that the acquisitions were regular on their face. The properties had been acquired for consideration and in some circumstances, were subject to third-party mortgages. Counsel sought to illustrate his point by reference to the property specified in schedules 6, 7, 8 and 11.
63 The property in schedule 6 (comprising six separate lots) had been acquired from Ollis on 6 December 2005 for a consideration of $150,000. Those lots are not subject to any mortgage. That in itself may appear to be regular. However, there are other factors relating to the relationship between Shields and Ollis which may be relevant to the transactional history between the parties and to which I refer below.
64 The property in schedule 7 had been acquired from Ollis on 11 November 2005 for a consideration of $400,000. There is no mortgage registered on the property. Counsel for the claimants submitted that that did not mean that the property was not the subject of a mortgage. It could mean that no mortgage was registered. He pointed out that in the Westpac investigation report Ollis had claimed that he had loaned $2.5m to Shields and that he held mortgages in respect of those funds. No other submission was advanced on behalf of Shields in respect of this property.
65 The property in schedule 8 was transferred from Ross and Suzanne Smith for a consideration of $385,000 on 3 August 2005. Prior to that, on 16 February 2005, Ollis had registered a caveat on the property. On the date of transfer, a mortgage was registered on the property securing an amount of $288,000, with a term of one month and with a minimum interest rate of 48 per cent. That mortgage was discharged on 5 October 2005 and a mortgage from Liberty Funding Pty Ltd was registered, securing an amount of $308,000.
66 Counsel for the claimants submitted that this transactional history indicated that Shields was financing this purchase from sources other than Ollis. An immediate response to this is that there was a difference of almost $100,000 between the purchase price and the mortgage amount. There is also the admitted lending by Ollis to Shields. I deal with this further below.
67 The property in schedule 11 was acquired by Shields on 11 November 2005 from MCA Properties Pty Limited and Gizmo Properties Pty Limited for a consideration of $940,000. There is no mortgage on that property. Counsel for the claimants submitted that there was no evidence to indicate that Ollis was in any way connected with this property or with its purchase.
68 It may be that the transactional history, taken on its own, may not have been sufficient to establish, for the purposes of s 10, that the interests in the property of Shields that were made subject of the restraining orders, was serious crime derived property. However, that was not the only evidence.
69 It was apparent from Mr Spark's affidavit that Ollis and Shields were in both a personal and business relationship, and had been for many years. In 1985, Ollis had been sentenced to 12 years imprisonment for theft and fraud. In 2000, a number of allegations of fraudulent conduct had been made to the police against Shields. The amounts involved were relatively small, from which a reasonable suspicion could be formed that Shields did not have substantial funds at her disposal at that time. In addition, there had been allegations of fraudulent activity by both Ollis and Shields together.
70 Westpac had, as at the date of the investigation report, traced payments of approximately $460,000 from Ollis' accounts to Shields' accounts.
71 Ollis had admitted to Westpac that he had lent $2.5m to Shields, $1m to purchase property and a further $1.5m for future development of that land. The Westpac investigation report does not specify the land to which reference was being made. However, it would seem that it was most likely the land specified in schedule 11.
72 The Westpac investigation report indicated that at least one of the properties had been purchased with funds transferred to Shields' account from Ollis, the moneys in Ollis' account having been acquired through the fraudulent use of the ATR facility.
73 Ollis had indicated to Westpac that he was prepared, subject to developing the properties held by himself and Shields, to repay the money. This in itself indicated that Ollis had an interest in or control over the property registered in Shields' name.
74 I have already indicated that counsel for the claimants limited his submissions to the properties specified in schedules 6, 7, 8 and 11. The reason for his doing so is, perhaps, transparent. The property specified in schedule 9 was transferred from Ollis to Shields on 27 October 2005 for a consideration of $300,000 and there is no mortgage registered on that property. The properties specified in schedule 10, comprising three separate lots, were transferred from Ollis to Shields for a consideration of $50,000 each on 16 November 2005. There is no mortgage on those properties. Shields acquired the property specified in schedule 12 on 12 January 2006 from third parties for a consideration of $450,000. Ollis previously had a caveat over that property which he withdrew on the date of the transfer to Shields. There is no mortgage registered on that property.
75 I have earlier referred to the obligation on the Commission, in the making of an application for a restraining order under s 10, to accurately inform the Court of such information as it has in respect of the property that might indicate that the property sought to be restrained was not serious crime derived property. A failure to do so would constitute an abuse of process. There has been no suggestion in this case that there has been an abuse of process, so the Court was not required to confine its consideration to the affidavit material and to determine whether on that material it was satisfied that there was a reasonable suspicion that the property sought to be restrained was serious crime derived property.
76 The state of the evidence before the Court, therefore in relation to the property of Shields was that between August 2005 and January 2006 she acquired property for a total consideration of $2,775,000. The total amount secured by mortgage was initially $288,000, which subsequently increased to $308,000. The net acquisition cost of the properties was thus perilously close to $2,500,000, being in terms of quantum the same amount Ollis admitted he gave to Shields from his activities using the ATR facility. None of those properties are subject to a registered mortgage in favour of Ollis.
77 In addition, there was the evidence of transfers of moneys from Ollis' bank accounts to Shields' bank accounts. Ollis and Shields are personal and business partners, from which an inference could be drawn, sufficient for the purposes of there being a reasonable basis for suspicion, that Shields would know the source of the moneys that she received from him, or at least would know that those moneys could not have been honestly arrived.
78 In my opinion, the evidence was sufficient to establish that there were reasonable grounds for Mr Spark to have a suspicion that Shields' property was serious crime derived property. In reaching this conclusion, I have not given any specific attention to the property specified in schedules 13, 14 and 15. The property specified in schedules 13 and 14 relate to bank accounts. The property specified in schedule 15 was a specification of 'interests in property' acquired as a result of using moneys derived from Ollis. No separate submissions were advanced on this issue in respect of these schedules. My reasons generally in respect of this issue are sufficient in these circumstances to also apply to those schedules.