International Finance Trust Co Ltd v New South Wales Crime Commission

[2008] NSWCA 291

NEW SOUTH WALES COURT OF APPEAL

CITATION:
International FinanceTrust Company Limited & Anor v New South Wales Crime Commission [2008] NSWCA 291
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
CA 40179/2008
SC 12212/2008

HEARING DATE(S):
26 August 2008-27 August 2008

JUDGMENT DATE:
6 November 2008

PARTIES:
International Finance Trust Company Limited (1st Appellant)
IFTC Broking Services Limited (2nd Appellant)
NSW Crime Commission (1st Respondent)
The Beneficial Owners of Various Bank and Share Trading Accounts (3rd Respondent)

JUDGMENT OF:
Allsop P Beazley JA McClellan CJ at CL   

LOWER COURT JURISDICTION:
Supreme Court

LOWER COURT FILE NUMBER(S):
12212/2008

LOWER COURT JUDICIAL OFFICER:
Hoeben J

LOWER COURT DATE OF DECISION:
13 May 2008

COUNSEL:
T E F Hughes QC/G Jones/G A F Connolly (Appellants)
I D Temby QC/ P F Singleton (1st Respondent)
M G Sexton SC, SG/ J G Renwick (Intervenor)

SOLICITORS:
Atanaskovic Hartnell (Appellants)
New South Wales Crime Commission (Respondents)
Attorney-General NSW (intervening)

CATCHWORDS:
CRIMINAL ASSETS CONFISCATION – Restraining orders – Criminal Assets Recovery Act 1990 (NSW), s 10 – Whether primary judge erred in concluding affidavit of authorised officer disclosed reasonable grounds for the relevant suspicion – Whether primary judge erred in failing to give reasons in relation to orders
CONSTITUTIONAL LAW – Judicial power of Commonwealth – Ch III of the Commonwealth Constitution – Vesting of Federal jurisdiction in State courts – Whether s 10 invests Supreme Court with a power repugnant to or incompatible with its exercise of Federal judicial power – Whether the practical effect of s 10 is to require Supreme Court to make restraining order in ex parte proceedings
EVIDENCE – Whether certain paragraphs of affidavit improperly admitted – Essential to identify purpose for which evidence is admitted – Adducing evidence in interlocutory proceedings
PRACTICE AND PROCEDURE – Whether primary judge erred in entertaining proceedings without an identified defendant – UCPR 6.1A – Whether primary judge erred in entertaining proceedings in the absence of compliance with Schedule J of the Supreme Court Rules
WORDS AND PHRASES – "Reasonable grounds for suspicion" – "Reasonable grounds for belief"

LEGISLATION CITED:
Civil Procedure Act 2005
Commonwealth Constitution.
Community Protection Act 1994 (NSW)
Corruption and Crime Commission Act 2003 (WA)
Crimes Act 1900 (NSW
Criminal Assets Recovery Act 1990 (NSW)
Criminal Proceeds Confiscation Act 2002 (Qld)
Dangerous Prisoners (Sexual Offenders) Act 2003 (Qld)
Evidence Act 1995 (NSW
Judiciary Act 1903 (Cth)
Proceeds of Crime Act 1991 (ACT)

CASES CITED:
Beale v GIO (1997) 48 NSWLR 430
Brittingham v Williams [1932] VLR 327
Carlson v King (1947) 64 WN(NSW) 65
Chapmans Ltd v Davey (unreported, Supreme Court of NSW, Bryson J, 27 April 1998)
Director of Public Prosecutions (ACT) v Hiep (1998) 86 FCR 33
Director of Public Prosecutions v Toro-Martinez (1993) 33 NSWLR 82
Fardon v Attorney-General for the State of Queensland (2004) HCA 46; [2004] 223 CLR 575
Felman v Law Institute of Victoria [1998] 4 VR 324
Forge v Australian Securities and Investments Commission (2006) 228 CLR 45
Garrard v Email Furniture Pty Limited (1993) 32 NSWLR 662
Geoffrey W Hill & Associates v King (1992) 27 NSWLR 228
George v Rockett (1990) 170 CLR 104
Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2008] HCA 4; (2008) 82 ALJR 454
H A Bachrach Pty Ltd v State of Queensland (1998) 195 CLR 547
Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 124
Haji-Ioannou v Frangos [1999] 2 Lloyd’s Rep 337
Hall v Nominal Defendant (1966) 117 CLR 423
Housing Commission of New South Wales v Tatmar Pastoral Co Pty Limited [1983] 3 NSWLR 378
Hussein v Chong Fook Kam [1970] AC 942
John Fairfax Publications Pty Ltd v Attorney General for NSW (2000) 181 ALR 694 Attorney General (Qld) v Fardon [2003] QCA 416
Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51
Lego Australia Pty Limited v Paraggio (1994) 53 FCR 542
Lloyd v Snooks (1999) 9 TasR 41; (1999) 153 FLR 339
McGarry v The Queen (2001) 207 CLR 121
New South Wales Crime Commission v Kelaita [2008] NSWCA 284
New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478
Nicholas v The Queen (1998) 193 CLR 173
North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 Baker v The Queen (2004) 223 CLR 513
P & C Cantarella Pty Limited v Egg Marketing Board (NSW) [1973] 2 NSWLR 366
Pettit v Dunkley [1971] 1 NSWLR 376
Powercoal Pty Ltd v Industrial Relations Commission of New South Wales (2005) 64 NSWLR 406
Public Service Board of New South Wales v Osmond (1986) 159 CLR 656
Queensland Bacon Proprietary Ltd v Rees (1966) 115 CLR 266
R v Moffatt [1998] 2 VR 229
R v MSK and MAK (2004) 61 NSWLR 204
R v Nixon (2000) 159 FLR 296
Re Criminal Proceeds Confiscation Act 2002 [2004] 1 Qd R 40
Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue [2001] HCA 49; 207 CLR 72
Schutt Flying Academy (Australia) Pty Ltd v Mobil Oil Australia Ltd [2000] 1 VR 545 Mobil Oil Australia Ltd v Victoria (2002) 211 CLR 1
Silbert v Director of Public Prosecutions for Western Australia (2003) 217 CLR 18
Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247
The ‘Harima’ [1987] HKLR 770
The ‘Varna’ [1993] 2 Lloyd’s Rep 253
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
Wynbyne v Marshall (1997) 7 NTLR 97; (1997) 99 A Crim R 1

TEXTS CITED:

DECISION:
By majority:
1.Appeal allowed.
2.The following orders of the Court in proceedings 12212 of 2008 be set aside:
(a) orders dated 13 May 2008;
(b) orders dated 16 May 2008, with the exception of the order for joinder of certain unnamed parties and of the orders made under s 33(2) of the Act;
(c) orders dated 20 May 2008; and
(d) orders dated 27 May 2008
3. The first respondent pay the appellants’ costs.
4. Liberty to apply within 7 days in relation to the form of order 2.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40179/2008
SC 12212/2008

ALLSOP P
BEAZLEY JA
McCLELLAN CJ at CL

THURSDAY, 6 NOVEMBER 2008

INTERNATIONAL FINANCE TRUST COMPANY LIMITED & ANOR v NEW SOUTH WALES CRIME COMMISSION & ORS

Headnote

Facts

Section 10 of the Criminal Assets Recovery Act 1990 (NSW) (the Act) invests in the Supreme Court the power to issue an order that no person is to dispose of or attempt to dispose of, or to otherwise deal with or attempt to otherwise deal with, an interest in property to which the order applies except in such manner or in such circumstances as are specified in the order.

The New South Wales Crime Commission (the Commission) may apply to the Court, ex parte, for a restraining order if the application is supported by an affidavit of an authorised officer within the meaning of s 4 of the Act, deposing to that officer’s suspicion that the property is serious crime derived property within the meaning of s 9 of the Act. The Court must make the order if it considers that having regard to the matters contained in the affidavit there are reasonable grounds for the suspicion.

In the proceedings below the Commission made such an application in respect of interests in property held in 48 New Zealand bank accounts, one Australian bank account and two share trading accounts.  The application was supported by the affidavit of an authorised officer, Mr Arthur Moerman, which alleged that the property was the proceeds of a tax avoidance scheme intended to evade Australian company and income tax.  The promoter of the scheme was said to be Mr Robert Agius of accounting firm PKF Vanuatu.

After hearing the application ex parte, the primary judge issued an order restraining any attempts to dispose of or otherwise deal with the property in the subject accounts.  After the making of that order and subsequent related orders, the appellants acknowledged that they were entitled to exercise effective control over the property in the accounts identified in the orders and applied to be joined to the proceedings.

The appellants challenged the making of the orders on the bases that s 10 of the Act was constitutionally invalid; that various paragraphs of Mr Moerman’s affidavit were improperly admitted; that the primary judge erred in concluding that there were reasonable grounds for the relevant suspicion; that the primary judge was required to give reasons for the issuing of the orders but failed to do so; that the primary judge erred in entertaining proceedings which, at least initially, were without an identified defendant and in entertaining proceedings in the absence of compliance with Schedule J of the Supreme Court Rules.

Held

As to the Constitutional validity of the Act:

McClellan CJ at CL (Allsop P and Beazley JA agreeing) –

Section 10 of the Act does not invest the Supreme Court with a power repugnant to or incompatible with its exercise of Federal judicial power as a court invested with Federal jurisdiction under Ch III of the Commonwealth Constitution. Given the nature of the Commission’s function it is essential it be able to make an ex parte application. Once such an application is made, s 10 raises a justiciable issue in which the Court has an evaluative and determinative role. The Court is required to make a judgement before a restraining order can be issued and is not bound to “rubber stamp” the application of the Commission: [2] (subject to [52]), [56], [100] and [101].

Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51; Fardon v Attorney-General for the State of Queensland (2004) HCA 46; [2004] 223 CLR 575 and Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2008] HCA 4; (2008) 82 ALJR 454 applied; Re Criminal Proceeds Confiscation Act 2002 [2004] 1 Qd R 40; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2007] WASCA 49; (2007) 33 WAR 245; Director of Public Prosecutions v Toro-Martinez (1993) 33 NSWLR 82 and New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478 considered.

As to whether certain parts of the affidavit should have been excluded in accordance with the rules of evidence:

Allsop P (Beazley JA agreeing) –

Parliament has made clear that applications under s 10 of the Act are to be governed by the rules of evidence applicable in civil proceedings. Given the application is interlocutory in nature (see point 3 below), the appropriate manner of giving evidence in the proceedings was to identify the source of the evidence and state a belief in its truth. The paragraphs complained of by the appellants contained mere assertions of fact, without identifying the source of the information and should therefore have been rejected by the primary judge [30]-[33] and [56].

Geoffrey W Hill & Associates v King (1992) 27 NSWLR 228; Chapmans Ltd v Davey (unreported, Supreme Court of NSW, Bryson J, 27 April 1998) considered.

McClellan CJ at CL dissenting  –

The affidavit deposed to by Mr Moerman refers to a joint task force investigation between the Australian Federal Police and the Australian Taxation Office. Whilst Mr Moerman does not expressly indicate that he was a member of the joint task force, it can be inferred that he was either a member of it or that the information and conclusions to which he deposed are derived from the information gathered by the joint task force investigation. The issue for the Court under s 10 therefore becomes whether, having regard to the matters deposed to the Court can be satisfied that there are reasonable grounds for the suspicion: [107] and [120].

As to the nature of the application under s 10:

Allsop P (Beazley JA agreeing) and McClellan CJ at CL –

The application is interlocutory in character, being ancillary to forfeiture and proceeds assessment proceedings at which final rights between the parties will be determined in substantive orders: [4], [56] and [76].

Hadjigeorgiou v NSW Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 124 applied; DPP ACT v Hiep (1998) 86 FCR 33 and Hall v Nominal Defendant (1966) 117 CLR 423 considered.

As to reasonable grounds for suspicion:

Allsop P (Beazley JA agreeing) –

There was no admissible evidence before the primary judge on which he could conclude that any of the suspicions held by Mr Moerman were based on reasonable grounds [22]-[24], [39] (subject to [51]) and [56].

McClellan CJ at CL dissenting –

The matters that Mr Moerman deposed to, in particular the activities of Mr Agius, justify his suspicion that the property in the bank accounts identified in the orders, over which the respondents exercise effective control, was serious crime derived property: [120], [132]-[135].

George v Rockett (1990) 170 CLR 104; Queensland Bacon Proprietary Limited v Rees (1996) 115 CLR 266; Hadjigeorgiou considered.

As to the failure of the primary judge to give reasons:

Allsop P (Beazley JA agreeing) –

The subject matter of the Act, the nature of the application under s 10, the consequences for the person the subject of a successful ex parte application by the Commission, the existence of the supervisory appeal and the character of the assessment to be made by the primary judge all point to, or are consistent with, the obligation that the Court provide reasons; although such reasons need not be elaborate: [41], [47], [50] and [56].

Housing Commission of New South Wales v Tatmar Pastoral Co Pty Limited [1983] 3 NSWLR 378; Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue [2001] HCA 49; 207 CLR 72; Public Service Board of New South Wales v Osmond (1986) 159 CLR 656; Pettit v Dunkley [1971] 1 NSWLR 376; Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 cited.

McClellan CJ at CL dissenting –

The cases establish that the content of the duty to give reasons will vary depending upon the circumstances and nature of the case and that there will be cases in which reasons are not required. This was such a case. Section 10 required the primary judge to make only one decision which was amenable to one of two answers. The parties would have been aware of the matters which effected the decision of the primary judge and there is no difficulty for an appellate court in reviewing that decision: [141].

Brittingham v Williams [1932] VLR 327; Carlson v King (1947) 64 WN (NSW) 65; Beale v GIO (1997) 48 NSWLR 430; Tatmar; Pettit; and Soulemezis considered.

As to entertaining proceedings without an identified defendant:

McClellan CJ at CL (Allsop P and Beazley JA agreeing) –

Rule 6.1A of the Uniform Civil Procedure Rules lists various types of proceedings which may be commenced without a defendant. However, it does not otherwise prohibit proceedings where a defendant is not named. Proceedings under the Act are not referred to by the Rule. Nor was the failure to name individual defendants an abuse of process. The orders of the primary judge operated in rem and in any event the appellants subsequently applied to be joined as defendants to the proceedings: [3], [56] and [143].

As to the applicability of Schedule J of the Supreme Court Rules:

McClellan CJ at CL (Allsop P and Beazley JA agreeing) –

A statement as contemplated by Schedule J would not add to an understanding of the nature of the application and, being a rule of procedure, compliance may be dispensed with by the Court: [3], [56] and [145].

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40179/2008
SC 12212/2008

ALLSOP P
BEAZLEY JA
McCLELLAN CJ at CL

THURSDAY, 6 NOVEMBER 2008

INTERNATIONAL FINANCE TRUST COMPANY LIMITED & ANOR v NEW SOUTH WALES CRIME COMMISSION & ORS

Judgment

1. ALLSOP P:  I have had the considerable advantage of reading the reasons of the Chief Judge at Common Law.  I have the misfortune to disagree with his Honour in two respects which means that I cannot agree with the orders that he proposes.  I would allow the appeal and set aside some of the orders made by the primary judge.  His Honour’s comprehensive reasons permit me to direct myself to matters of substance without the need to explain the background to the application and to the appeal.

2. I agree with McClellan CJ at CL’s views as to the Kable point.  In particular, I agree with his Honour’s comments about the Commission’s entitlement to have an ex parte hearing, should it choose to move in that manner.  Nothing said by Giles JA (with whom Mason P agreed) in New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478, especially at 486 [32] is to the contrary. Giles JA’s reference there to an inter partes application was not a conclusion that the Court had authority to deny to the Commission that which Parliament clearly gave it – the ability under s 10(2) and (2AA) to apply to the Court ex parte and, implicitly, to have the application dealt with on the basis of the application as made.

3. I agree with McClellan CJ at CL as to UCPR 6.1A and the Supreme Court Rules, Schedule J.

4. I agree that the application under s 10 is interlocutory in character. The Court in Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; 174 A Crim R 124 treated the matter as interlocutory in character. The Full Court of the Federal Court in Director of Public Prosecutions (ACT) v Hiep (1998) 86 FCR 33 at 48-50 concluded that the restraining order under the Proceeds of Crime Act 1991 (ACT) was interlocutory. It is unnecessary to compare in detail that Act with the Criminal Assets Recovery Act 1990 (NSW) (the “Act”). It is sufficient to say that the considerations there discussed are substantially applicable here: the interim effect of the order as ancillary to forfeiture and proceeds assessment orders, the lack of final determination of rights between the parties in the way that such rights will be determined by the resolution of the substantive orders for forfeiture or proceeds assessment, and the proper characterisation of the restraining order under the Act as not a “principal cause” for the purposes of Hall v Nominal Defendant (1966) 117 CLR 423 at 443.

5. The status of the evidence that was led before the primary judge is more problematic. Before examining the evidence, some further comments about the Act should be made. The purposes and objects of the Act can be derived from the long title to the Act, the statement of principal objects in s 3 and the Second Reading Speech.

6. On 8 May 1990, the then Premier (the Hon Nick Greiner) made clear in the Second Reading Speech to the Drug Trafficking (Civil Proceedings) Bill, the important public policy to which the Act was directed: depriving those involved in crime of illicit gains. This important public policy is an aspect of significance for the protection and well-being of any civil society.

7. Balanced against that important public policy is the clear recognition in our legal and political system of the importance of the protection of individual rights, including the right to own and enjoy private property. Thus, the common law requires a degree of clarity in the wording of any statute which abrogates or confiscates property rights. This is rooted in the importance of such rights and their legitimate protection in civil society free from the exercise of arbitrary power, in particular prerogative or Executive power. As to the approach to the Act, see generally New South Wales Crime Commission v Kelaita [2008] NSWCA 284 at [6]-[17].

8. The Act seeks to accommodate the tension between those two underlying policies in a number of ways.  First, the orders under ss 10, 22 and 27 are made by the Court.  There was no proposition put on appeal that the task in s 10 was other than judicial.  (See generally, in this respect, Basten JA in Hadjigeorgiou at 134-138 [48]-[62].) The extent of the justiciable determination under each of ss 10, 22 and 27 varies. In s 10, the extent of that determination is narrow, but real.

9. Secondly, the Parliament has made clear that the application in s 10 (along with other applications, and although ex parte) is to be governed by the rules of evidence applicable in civil proceedings: the Act, s 5(2)(b). Since an application under s 10 is interlocutory in character, the “rules of evidence” are those which are applicable in interlocutory proceedings. The Evidence Act 1995 (NSW) is a statement of the rules of evidence in New South Wales State courts: see Chapter 1, Preliminary to the Evidence Act.  The Evidence Act by s 4(1)(b) and (c) applies to interlocutory proceedings or proceedings of a similar kind and proceedings heard in chambers. The application under s 10 is a proceeding given that it is made to the Court for the exercise of judicial power. Therefore, the Evidence Act, as it applies to interlocutory proceedings, is applicable.

1. These two important features of the Act reflect the mechanism (the use of the judicial branch of government) that Parliament has chosen to mediate the relationship between the competing, and to a degree conflicting, policies to which I have referred.

2. As to the requirement to comply with the rules of evidence, this applies to an ex parte application under s 10 as much as it does to a contested application under s 22 or s 27. This places important responsibilities upon both the Commission and the Judge hearing the application under s 10. Being an ex parte application, the Commission might be seen to be subject to obligations of disclosure: Garrard v Email Furniture Pty Limited (1993) 32 NSWLR 662 at 676-677; Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-682. The position of the Crown in litigation (P & C Cantarella Pty Limited v Egg Marketing Board (NSW) [1973] 2 NSWLR 366 at 383-384) might be seen to reinforce that. It should be recognised, however, that the subject matter for judicial assessment is narrow: the reasonableness of the suspicion, from the affidavit. Further, there is no discretion in the Court if it is satisfied of the reasonableness of the suspicion. Those considerations may affect the question of the existence of any duty, and if it exists, its extent. The question should be seen as one of statutory construction, at least in the first instance: Lego Australia Pty Limited v Paraggio (1994) 53 FCR 542; and compare The ‘Varna’ [1993] 2 Lloyd’s Rep 253 at 257; Haji-Ioannou v Frangos [1999] 2 Lloyd’s Rep 337 at 353; and The ‘Harima’ [1987] HKLR 770 at 774. This question was not the subject of argument and is unnecessary to discuss further or decide. These considerations do, however, illuminate the different character of an application under s 10 from an ordinary ex parte civil application, which is a matter of particular relevance to the later discussion about the need for reasons.   Given, however, that there is no contested hearing after any ex parte order (New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478) and given that the Judge must make an assessment of the reasonableness of any suspicion by reference to the affidavit, the Judge (and the Commission) will need to be astute to ensure that Parliament’s requirement, that the rules of evidence apply, is followed. If they are not, there will, or may, be appellable error.

3. Given the interlocutory nature of the proceeding under s 10, the Evidence Act, s 9 is of particular relevance:

   (1)This Act does not affect the operation of a principle or rule of common law or equity in relation to evidence in a proceeding to which this Act applies, except so far as this Act provides otherwise expressly or by necessary intendment.

   (2)Without limiting subsection (1), this Act does not affect the operation of such a principle or rule so far as it relates to any of the following:

   (a)     admission or use of evidence of reasons for a decision of a member of a jury, or of the deliberations of a member of a jury in relation to such a decision, in a proceeding by way of appeal from a judgment, decree, order or sentence of a court,

   (b)the operation of a legal or evidential presumption that is not inconsistent with this Act,

   (c)     a court’s power to dispense with the operation of a rule of evidence or procedure in an interlocutory proceeding.

4. Section 9 does not create an independent statutory basis for dispensing with the operation of the rules of evidence.  Rather, it recognises, so as not to affect, any rule of common law or in equity in relation to evidence in a proceeding insofar as it relates to the Court’s power to dispense with the operation of a rule of evidence in an interlocutory proceeding.  In Geoffrey W Hill & Associates v King (1992) 27 NSWLR 228, McLelland J (as his Honour then was) said at 230:

   It seems to me that the actual and long-standing practice of the court in relation to, for instance, urgent ex parte applications for injunctions, which very often are heard in circumstances where admissible evidence of facts is unobtainable, is supportive of the view that on an application for an interim or interlocutory injunction the court is not necessarily concerned to have evidence which on a final hearing would be admissible to establish particular facts, in order to determine whether there is a serious issue to be tried as to those facts, and that there is a discretion to receive other material relevant to the question of whether there is a serious issue to be tried.

5. McLelland J’s reasons in that case reflect the importance of being precise about the purpose of the evidence. In the context of an interlocutory injunction, the evidence was directed to whether there was a serious question to be tried, including what evidence will be, or is likely to be, available at a final hearing: 27 NSWLR at 229-230.

6. Also relevant is the Evidence Act, s 75 which provides as follows:

   In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.

7. Also potentially relevant (though not because the hearing is interlocutory) is the Evidence Act, s 190, which is relevantly in the following terms:

   (1)The court may, if the parties consent, by order dispense with the application of any one or more of the provisions of:

   (a)     Division 3, 4 or 5 of Part 2.1, or

   (b)     Part 2.2 or 2.3, or

   (c)     Parts 3.2–3.8, in relation to particular evidence or generally.

   …

   (3)In a civil proceeding, the court may order that any one or more of the provisions mentioned in subsection (1) do not apply in relation to evidence if:

   (a)     the matter to which the evidence relates is not genuinely in dispute, or

   (b)     the application of those provisions would cause or involve unnecessary expense or delay.

8. The manner of giving evidence in interlocutory proceedings has traditionally been by identifying the source, eg, “I am informed by”, and stating a belief in its truth. The wisdom of such a course under s 75 can be seen in Chapmans Ltd v Davey (unreported, Supreme Court of NSW, Bryson J, 27 April 1998); though see Heydon JD Cross on Evidence (7th Australian Edition) at 1253-1254 [35595].

9. In circumstances of the kind referred to by McLelland J in Geoffrey W Hill v King, the Evidence Act, s 9(2)(c) would permit a court to dispense with a rule of evidence. In circumstances where the application of the rules of evidence referred to in the Evidence Act, s 190(1) would involve unnecessary expense or delay, s 190(3) would enable the Court to order them not to apply. Such powers give flexibility to the Court, on application, to accommodate temporal and other exigencies that may arise in any application under s 10.

10. No such application was made here.  Therefore, the evidence led before the primary judge must be assessed by reference to the Evidence Act, including s 75.

11. Given the place of the requirement of admissible evidence and given the absence of the affected party, there is no reason not to apply the rules of evidence straightforwardly and according to their terms.  If part of an affidavit is inadmissible, it should be rejected, unless, of course, an application is made under or by reference to the Evidence Act s 9 or s 190, and that application is acceded to.

12. Subsections 10(3) and (3A) require affidavits “stating” certain things.  The authorised officer must state (a) the relevant suspicion that he or she holds and (b) the grounds on which that suspicion is based.

13. The admissibility of the first statement will cause little difficulty.  The suspicion is of the deponent.  He or she only has to state it.  Issues may arise, as they did in Hadjigeorgiou, and as they do here, as to whether  the suspicion is stated with sufficient particularity to enable an assessment to be made as to the reasonableness of the grounds.  That is another issue, and is not a question of admissibility.

14. The statement of the grounds needs to be approached with a recognition as to what is being stated.  The statement does not require expression of, and admissible evidence to prove, the underlying facts constituting the elements of the serious crime related activity or as to the derivation of the property.  What must be stated can be discerned from George v Rockett (1990) 170 CLR 104 at 112 and Queensland Bacon Proprietary Ltd v Rees (1966) 115 CLR 266 at 303. The facts that induce the state of mind of the person must be stated. Such facts are not necessarily the underlying facts which constitute the criminal conduct or the relevant derivation of property; they are the matters that have led to, or induced, the authorised officer to the “positive feeling of actual apprehension or mistrust amounting to a slight opinion … more than a reason to consider or look into the possibility of its existence”: Queensland Bacon at 115-116. In other words, the deponent must state why he or she has the suspicion that, for instance, the person in question has engaged in serious criminal activity.

15. What needs to be deposed to will depend upon why the suspicion is held.  It may be held because of information received from a third party; it may be held because of what a colleague has said; it may be held because of observations that have been made by the deponent.  There is no particular complexity or difficulty about this.  However, a deponent does not state the grounds of a suspicion that x has engaged in serious criminal conduct by merely asserting that x has engaged in serious criminal misconduct.  Thus, if the deponent says in paragraph 1 of the affidavit “x murdered y”; then in paragraph 2 says “I suspect x murdered y”; then in paragraph 3 says “the suspicion in paragraph 2 is based on the matters in paragraph 1”, he has not stated the grounds of his suspicion.   Paragraph 1 is both inadmissible and irrelevant.  The bare assertion by the deponent that x murdered y is a conclusionary assertion without foundation in personal knowledge or observation.  It is not saved by the Evidence Act, s 75.  Nor is it relevant evidence for the purpose of the Evidence Act, s 55 because it does not explain why the suspicion is held. It is not the fact or circumstance that induced the suspicion.

16. With these comments by way of introduction, it is necessary to examine the evidence here.  McClellan CJ at CL has set out [2]-[22] of Mr Moerman’s affidavit.  The suspicions deposed to in [17] and [19] were stated, in effect, to be based on the contents of [2]-[14].  Mr Moerman deposed:

    Having regard to the matters in 2 to 14 above, I suspect that …

17. The appellant submitted that most of these paragraphs were inadmissible.  I will only deal with the paragraphs attacked.

18. By way of introduction, the following should be noted.  Mr Moerman was the officer who arrested Mr Agius (see [3]).  There has been a joint task force investigation between the Australian Federal Police and the Australian Tax Office.  Mr Moerman gave no evidence in his affidavit about whether he has taken any part in the investigation, beyond the fact that he arrested Mr Agius.  Mr Moerman gives no evidence as to the source of any knowledge as to the matters deposed to in the affidavit.

19. As to [4] of the affidavit, objection is taken to the passage in bold below:

    Agius was arrested and charged following a joint task force investigation between the AFP and the ATO (“the joint investigation”) into an overseas money laundering scheme (“the Scheme”).  Agius is the promoter of the Scheme.

20. The basis for the characterisation of the “Scheme” is not given.  Nor is any foundation provided for the assertion that Mr Agius was the “promoter”.

21. The paragraph contains mere assertions of fact, without any basis in personal knowledge or knowledge from material gained in any investigation.

22. Paragraphs 5, 6, 7, 8, 9, 11 and 14 are all assertions of fact.  No basis for Ms Moerman’s knowledge about them is given.  No attempt is made to identify how Ms Moerman comes to know of these matters:  that is, no information is given as to how the information about these matters can be seen to ground his suspicion.

23. Paragraphs 10, 12 and 13 are in a slightly different category.  In these paragraphs, he asserts that the joint investigation has revealed certain things.  Nowhere, however, is the source of any such knowledge disclosed.  The paragraphs are therefore in the same category as [5]-[9], [11] and [14].

24. In my view, none of [4] (to the extent it was objected to) and [5]-[14] contains admissible evidence to prove the grounds of the suspicion in [17] and [19] of the affidavit.

25. The above conclusions and the reasons for it are not inconsistent with Hadjigeorgiou. In that case, Giles JA said at 130 [23]:

    Statement of grounds is less than proof of facts.

26. That statement should be read in context.  His Honour was dealing with an affidavit in a particular form which can be seen in Hadjigeorgiou at 128-129 [13]-[17]. The method of proof of the grounds was clearly admissible in that case. The evidence went directly to explaining by reference to particular documents what it was that led the deponent to have the suspicion. Giles JA was making the point that proof is not required of underlying facts as to criminality; what is relevant is proof as to what it was that the person’s suspicion was based on.

27. That being so, the only ground that was proved for the relevant suspicions was the material in [1]-[3] and [4] (to the extent it was not the subject of objection).

28. The Crimes Act 1900 (NSW), ss 176, 176A and 178BA, being the sections of State legislation to which the suspicion was directed in [17] of Mr Moerman’s affidavit are set out in the reasons of McClellan CJ at CL.

29. The fact (without more) that Mr Moerman arrested Mr Agius on a first instance warrant on the Commonwealth charges set out in [3] of his affidavit does not provide reasonable grounds for the suspicions in [17] and [19] of his affidavit.  No submission was put by the respondent that it did.

30. These reasons are sufficient for me to conclude that the primary judge erred by making the orders in circumstances where there was no admissible evidence before him on which he could conclude that any of the suspicions held by Mr Moerman were based on reasonable grounds.

31. Regrettably, I also disagree with McClellan CJ at CL on another matter, the giving of reasons.

32. It has not been the practice of the Judges of the Common Law Division to give reasons. The primary judge followed that practice. What follows is not intended, in the slightest, as a criticism of the primary judge. My view, however, is that the subject matter of the Act, the nature of the application, including its judicial character, the consequences to the person of a successful ex parte application by the Commission, the lack of an inter-partes interlocutory hearing, the existence of the supervisory appeal and the character of the assessment to be made by the Judge all point to, or are consistent with, the obligation by the Court to provide reasons.

33. I have no disagreement with the relevant statement of principles as discussed in the reasons of McClellan CJ at CL.  The giving of reasons is not always an incident of the exercise of judicial power:  Housing Commission of New South Wales v Tatmar Pastoral Co Pty Limited [1983] 3 NSWLR 378 at 386. As Mahoney JA said in Tatmar at 386:

    In determining whether, in a particular case, there is a duty to give reasons and the extent of it, regard should, in my opinion, be had to the function to be served by the giving of reasons. Thus, the statement of reasons may be necessary to enable a party to exercise his right of appeal or such other rights as he may have to contest the decision: this is one of the conventional functions of the requirement: see Pettit v Dunkley (at 387, 388). But in my opinion, the requirement that reasons be given should not be limited to cases where there is an appeal. There is as yet no finally authoritative decision on this question. I think that the requirement should be seen as an incident of the judicial process. However, the fact that the function of the requirement is, at least in part, to allow a party to exercise appeal rights is of significance in determining the extent of the duty and what will be a discharge of it. Thus, in some case where ordinarily an appeal is not contemplated, there may not be a need for reasons. Thus, in England, it has been said that reasons need not be given in certain procedural applications: see Capital and Suburban Properties Ltd v Swycher [1976] Ch 319, at 325, 326. In such cases, and in cases of, eg, applications for leave, where the considerations of fact and law are clear, reasons need not ordinarily be given.

34. Tatmar should now, however, be viewed in the light of what was said in Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue [2001] HCA 49; 207 CLR 72 at 83-84 [24]-[26] and 85-86 [32]-[33].

35. The giving of reasons is a normal incident of the judicial process, especially when the order is subject to appeal:  Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 667; Pettit v Dunkley [1971] 1 NSWLR 376; and see the discussion in Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 at 277-278.

36. Of particular importance in the judicial process is the foundation of the duty to give reasons:  “the principle that justice must not only be done but … be seen to be done”:  Soulemezis at 278 (per McHugh JA) and see Roy Morgan at 85-86 [33].

37. Here, the Act deals with the restraint and later forfeiture of the property of individuals. The operation of the Act is of the utmost gravity. The power being exercised is judicial. It is not the approval of a search warrant or a listening device; it is the making of an order, in the absence of the relevant party, for the freezing of property for, potentially, a significant period of time. There is no review at first instance: Ollis; only an appeal.  Confidence in the judicial system and ensuring that justice is seen to be done between State and subject require in my view an explanation of the exercise of such a drastic power.  That explanation is the giving of reasons.

38. Such reasons need not be elaborate: see Roy Morgan at 84 [26].  It is true, as McClellan CJ at CL points out, there is one ultimate issue for the Judge:  the reasonableness of the grounds for the suspicion.  In many cases, that will be a straightforward analysis.  This will be especially so if the affidavit is clear, specific and admissible.  That may not be the case.  It was not the case in Hadjigeorgiou.  It is not the case here.  Though in one sense a simple evaluative task, the assessment of the reasonableness of the stated grounds may require some explanation.  Thus, the extent of any reasons will or may vary from case to case.  It may be enough to state with economy and conciseness why the suspicion is reasonably grounded.  In other cases, if the affidavit is unclear in the possible relationship between the grounds and the suspicion more explanation might be required.  A reading of Hadjigeorgiou reveals the difficulties that can be provoked in some cases.

39. Even if the task is straightforward and short (as it may well be in many cases) someone who has had all his or her property frozen indefinitely without notice by an order of the judicial branch of government at the request of the Executive branch of government and without an opportunity to be heard and without an opportunity to persuade the judge to the contrary on a review after the event is entitled to a statement by the judicial branch as to why this has happened and how it can happen in accordance with law.

40. That said, the unitary character of the question on appeal and the existence of an affidavit will rarely, if ever, mean that the Court of Appeal cannot decide the matter for itself.  In that respect, the Court of Appeal can exercise its appellate functions without reasons.  But that is the case with respect to many issues.  If the Court of Appeal has the benefit of the primary judge’s views as to why the grounds are reasonable for the foundation of a suspicion it will be in the position of being able to identify any error.

1. In my view, reasons were required.  Nothing in these reasons is directed, or should be taken as relevant, to the usual practice in dealing with urgent ex parte applications for relief in civil proceedings where the defendant will be brought before the Court for an inter-partes interlocutory hearing promptly.

2. If I am wrong about the inadmissibility of evidence, and if Mr Moerman’s knowledge can be understood as sourced in the way McClellan CJ at CL does, I would agree with the conclusions reached by his Honour about the reasonableness of the grounds for suspicion.

3. Whilst I have earlier expressed my agreement with McClellan CJ at CL’s views on Kable, if it were to be concluded (though it was not argued here) that the character of the task was administrative and not judicial, the applicability of Kable might arise.  Also, if it were to be considered that a Judge should not, or must not, give reasons (though, clearly, the legislation in its current form does not say so) the applicability of Kable might also arise.

4. Various orders were made by the Court: On 13 May 2008 the Court made orders pursuant to the Act, s 10. On 16 May 2008 the Court made orders pursuant to the Act s 12 for the examination on oath of eight people. An order under s 12 can only be made when a restraining order is or has been made. Given my view that the restraining order should be set aside the orders for examination should likewise be set aside. Also on 16 May 2008, the Court made orders joining the beneficial owners of various bank and shared trading accounts (without naming them) to the proceedings and orders under s 10 in relation to property of the kind made on 13 May 2008 against them. There is no reason why the order for joinder should not be made but the balance of the orders under s 10 should be set aside. Also orders were made on 16 May 2008 relating to the Public Trustee, requiring production of documents by the Commonwealth Bank and by Commonwealth Securities Limited. The orders for the production of documents made on 16 May pursuant to s 12 should be set aside. The order made under s 33(2) of the Act against the Commonwealth Bank of Australia on 16 May 2008 should not by reason of these reasons be set aside. Likewise the order under s 33(2) against Commonwealth Securities Limited. On 20 May 2008 an order was made varying the orders made on 13 May 2008. This order should be set aside. On 27 May 2008 an order was made for the examination of Mr Agius. This order was made under s12. For the same reason that the first order of 16 May 2008 should be set aside so should this be. There may be aspects of any order on appeal dealing with the existing orders that require argument. For this reason I would permit liberty to apply in relation to the order setting aside the orders below.

5. The notice of appeal sought that proceedings in the court below be dismissed.  Given my views expressed above I do not see a basis for making that order.

6. In the circumstances in my view the orders of the Court should be:

   1.            Appeal allowed.

   2. The following orders of the Court in proceedings 12212 of 2008 be set aside:

   (a)          orders dated 13 May 2008;

   (b)orders dated 16 May 2008, with the exception of the order for joinder of certain unnamed parties and of the orders made under s 33(2) of the Act;

   (c)orders dated 20 May 2008; and

   (d)          orders dated 27 May 2008

   3.            The first respondent pay the appellants’ costs.

   4.Liberty to apply within 7 days in relation to the form of order 2.

7. BEAZLEY JA:  I agree with Allsop P.

8. McCLELLAN CJ at CL: This is an appeal from a decision of Hoeben J made on 13 May 2008 to restrain certain property in the control of the appellants pursuant to s 10 of the Criminal Assets Recovery Act 1990 (NSW) (“the Act”) and subsequent related orders. The application made by the New South Wales Crime Commission was heard ex parte. The orders which his Honour made on 13 May 2008 were as follows:

   1.Pursuant to section 10 of the Criminal Assets Recovery Act 1990 no person is to dispose of, or attempt to dispose of, or otherwise deal with or attempt to otherwise deal with the interest in property of the beneficial owners of the accounts described in Schedule One Schedule Two and Schedule Three hereto (within the meaning of “interest in property” as defined in section 7 of the Criminal Assets Recovery Act 1990) in the accounts described in Schedule One, Schedule Two and Schedule Three hereto.

   2.Pursuant to section 10(4) of the Criminal Assets Recovery Act 1990 the Public Trustee take control of all the interest of the beneficial owners of the accounts described in Schedule One, Schedule Two and Schedule Three hereto in the accounts described in Schedule One, Schedule Two and Schedule Three hereto.

   3.Pursuant to section 12(1)(d)(i) of the Criminal Assets Recovery Act 1990 the Public Trustee:

   (a)hold money obtained from the accounts specified in Schedule One and Schedule Two hereto pursuant to order 2 above in the same currency and upon the most favourable at call interest rate available; and

   (b)hold shares obtained from the accounts specified in Schedule Three hereto pursuant to order 2 above and invest any dividends at the most favourable at call interest rate available.

   4.Liberty to the plaintiff and defendant to apply on three (3) days notice.

   5.            That the costs of obtaining these orders be costs in the cause.

   6.Pursuant to Part 36 Rule 36.4(3) of the Uniform Civil Procedure Rules 2005 (“UCPR”) these orders are to take effect as of the date hereof.

9. Schedule One to the orders refers to 48 bank accounts with ANZ National Bank Limited and 4 accounts with Bank of New Zealand. Schedule Two refers to an account with the Commonwealth Bank of Australia in the name of IFTC Broking Service Pty Ltd (“IFTC Broking”). Schedule Three refers to two share trading accounts in the name of IFTC Broking.

10. His Honour made further orders on 16 May, 20 May and 27 May which either made minor variations to the order of 13 May or were in aid of the proceedings. The details of these further orders are not presently relevant. However, the appeal challenges each of the orders.

11. The application made by the Commission was supported by an affidavit sworn by Arthur Berry Moerman, an agent with the Australian Federal Police. He deposed that he is an authorised officer within the meaning of s 4(1) of the Act and is a person authorised in writing to act as an authorised officer for the purposes of s 10 of the Act.

12. Apart from the first paragraph the affidavit reads as follows:

    “2.Robert Francis Agius (“Agius”) has been the Senior Partner of PKF Vanuatu (“PKF”) since 1979. PKF commenced operations as a firm of chartered accountants in 1971 following the passing of legislation in the then New Hebrides which encouraged the establishment of an offshore financial centre. PKF is a member of PKF International Limited which is a network of 380 independent accounting and consulting firms in 119 countries. With many offshore clients attracted by benefits afforded by the tax haven the partners of PKF have accumulated considerable experience in offshore tax planning and are familiar with taxation procedures in many jurisdictions. PKF has 2 resident partners and in excess of 35 staff. PKF owns and manages a Vanuatu government licensed trust company, International Finance Trust Company Limited (“IFTC”). Agius is also the International Liaison Partner of PKF and through this exposure has an interest and knowledge of taxation and accounting practices of most international jurisdictions.

    3.On 28 April 2008, I arrested Agius in Perth, WA on a first instance warrant which had been issued in NSW on 24 April 2008. Agius was charged with the following offences:

    (a)Conspiracy to defraud, contrary to sections 86(2) with 29D of the Crimes Act 1914 (Cth) in that between about 1 January 1997 and 23 May 2001, Agius, Fiona McConnochie and divers others at Sydney, in the State of NSW and elsewhere did conspire to defraud the Commonwealth, to wit, the Australian Taxation Office (“the ATO”);

    (b)Conspiracy to defraud, contrary to section 135.4(3) of the Criminal Code Act 1995 (Cth) (“the Criminal Code Act”) in that between 24 May 2001 and 23 April 2008, Agius, Kelly Fawcett-Mourgues and divers others at Sydney, NSW and elsewhere, did conspire, with the intention of dishonestly causing a loss to the ATO, being a Commonwealth entity, and

    (c)Money laundering, contrary to sections 11.5(1) with section 400.3(1) of the Criminal Code Act in that between about 1 January 2003 and 23 April 2008, Agius, Kelly Fawcett-Mourgues and divers others at Sydney, in the State of NSW and elsewhere, did conspire to deal with money to the value of $1,000,000 or more, and intended for that money to become an instrument of crime.

    4.Agius was arrested and charged following a joint task force investigation between the AFP and the ATO (‘the joint investigation’) into an overseas money laundering scheme (‘the Scheme’). Agius is the promoter of the Scheme.

    5.The Scheme (which commenced in May 1997) operates as follows:

    (a)An Australian incorporated company remits money to a bank account in New Zealand (either with ANZ National Bank Limited or Bank of New Zealand);

    (b)The remittance to the bank account in New Zealand is recorded in the accounts of the Australian company as a trading expenses – being payment for an invoice for some sort of service provided (consultancy fees, management fees, insurance premiums) which service was not in fact provided; and

    (c)The money is then transferred to other New Zealand bank accounts (either with ANZ National Bank Limited or Bank of New Zealand). The money is then finally remitted back to either the Australian bank account of the Australian company or a personal bank account of a director of that Australian company.

    6.The primary purpose of the Scheme is to evade Australian income tax otherwise payable by the Australian company. A secondary purpose of the Scheme is to evade Australian income tax otherwise payable by the director of the Australian company.

    7.Agius promoted the Scheme through his trusted friends. One of those close trusted friends was Owen T Daniel (now deceased) (‘Daniel’) who was a chartered accountant operating in Burwood, NSW under the firm Owen T Daniel and Company. Following the death of Daniel in February 2006 Agius continued to promote the Scheme through the successors of Daniel’s business. Twenty companies and 30 directors have been identified as being involved in the Scheme (‘the Daniel clients’). Agius personally promoted the Scheme to the Daniel clients.

    8.Agius arranged and/or prepared all of the necessary documentation, invoices, and loan documentation in connection with the Scheme. PKF charged an establishment fee of AUD$8,000, an annual fee of US$1,380 for maintaining the financial accounts of the Vanuatu company, and a further fee of between 3% and 6% of the money remitted to the New Zealand bank account. For each Australian company which participated in the Scheme a company was incorporated in Vanuatu (‘the Vanuatu company’). The Vanuatu company provided invoices to participants in the Scheme covering the above charges.

    9.The Daniel clients have remitted a total of AUD$21,779.036 to New Zealand bank accounts and the Daniel clients have paid an estimated AUD$1,400,000 to PKF.

    10.The joint investigation has revealed that in respect of one of the Daniel clients there were 11 remittances to New Zealand bank accounts between 24 March 2003 and 11 August 2006. A total of approximately AUD$736,221.83 was transferred to two New Zealand bank accounts. That money was transferred to another New Zealand bank account. The money was then transferred to IFTC. The amount of approximately AUD$635,710 was then returned to the bank account of the director of the Australian company.

    11.Agius is an Australian citizen but resides in Vanuatu as a permanent resident. Agius owns premises at 16/533 Kent Street, Sydney (‘the Agius premises’) and stays there regularly. Between 20 November 2006 and the date of his arrest, AFP lawfully intercepted both the landline telecommunications service at the Agius premises, and a mobile telecommunications service used by Agius. Those intercepts reveal that:

    (a)Agius has direct control and manages the movement of funds from Australia through various bank accounts in New Zealand and other offshore destinations utilising Vanuatu and UK based companies.

    (b)Agius has set up bank accounts in Singapore and the USA because of his belief that New Zealand bank accounts have been targeted and that the USA does not require any form of tax reporting from foreign residents.

    (c)Agius provided false information as to where he would be residing in Australia on his incoming passenger card so that he would not be ‘raided’.

    (d)Agius was careful when returning to Australia due to the attention placed on offshore tax promoters.

    12.The joint investigation has identified bank accounts in New Zealand in 49 foreign company names established and operated by PKF and through which over AUD$100,000,000 has been moved since November 2000. Only 26 of these foreign companies have credit funds as at 12 May 2008 (‘the foreign NZ bank accounts’). Those 26 companies, and the associated account numbers are specified in the Schedule hereto.

    13.          The joint investigation has also identified:

    (a)an account with Commonwealth Bank of Australia numbered 06 2000 10980897 (‘the CBA account’);

    (b)an Australian share trading account with Commonwealth Securities Limited (a wholly owned subsidiary of Commonwealth Bank of Australia) numbered 577406 (‘the first CommSec account’);

    (c)an international share trading account with Commonwealth Securities Limited numbered 892136 (‘the second CommSec account’),

    all in the name of IFTC Broking Service Pty Ltd (‘IFTC Broking’). IFTC Broking is incorporated in Vanuatu and the funds in the CBA account, the first CommSec account and the second CommSec account are sourced to IFTC.

    14.          Since the arrest of Agius:

    (a)There have been no deposits to any of the foreign NZ bank accounts.

    (b)A total of approximately NZ$10,000,000 has been withdrawn from the foreign NZ bank accounts.

    (c)The General Manager of PKF has sought to increase the cap on withdrawals from the foreign NZ bank accounts to over NZ$6,000,000 per transaction.

    (d)PKF have started using electronic banking to withdraw money from the foreign NZ bank accounts in lieu of dealing directly with the relevant bank for the foreign NZ bank accounts.

    15.As at 12 May 2008 there is approximately NZ$29,000,000 in the foreign NZ bank accounts. As at 1 April 2008 there was approximately AUD$14,100,000 in the CBA account, the first CommSec account and the second CommSec account.

    16.On 28 April 2008 the Commonwealth Director of Public Prosecutions commenced proceedings under the Proceeds of Crime Act 2002 (Cth) and restrained specified property of Agius (but not the foreign NZ bank accounts, the CBA account, the first CommSec account or the second CommSec account).

    17.Having regard to the matters in paragraphs 2 to 14 above, I suspect that Agius has engaged in serious crime related activities (within the meaning of ‘serious crime related activity’ as defined in section 6 of the Act), in that he has engaged in offences punishable by imprisonment for 5 years or more, and involving fraud, namely of conspiracy to commit or incitement to commit or of aiding or abetting offences contrary to the provisions of sections 176, 176A and 178BA of the Crimes Act 1900 (NSW).

    18.Having regard to the Scheme and section 7(3) of the Act the interest in property in the foreign NZ bank accounts, the CBA account, the first CommSec account and the second CommSec account are interests in property of the beneficial owners of those accounts (namely directors of Australian registered companies) and not the interest in property of the corporate entities in whose name those accounts are held.

    19.Having regard to the matters in paragraphs 2 to 14 above, I suspect that the interest in property of the beneficial owners in the foreign NZ bank accounts, the CBA account, the first CommSec account and the second CommSec account are serious crime derived property (within the meaning of ‘serious crime derived property’ as defined in section 9 of the Act) because of the serious crime related activity or serious crime related activities of Agius, in that the money in those accounts are all or part of the proceeds of serious crime related activities.

    20.The joint investigation has not yet identified the beneficial owners of the foreign NZ bank accounts, the CBA account, the first CommSec account and the second CommSec account. Pursuant to a Mutual Assistance Request police in Vanuatu executed 23 search warrants in Vanuatu on 28 April 2008. On 29 April 2008 PKF obtained an injunction preventing AFP access and access of the seized documents and things.

    21.Having regard to paragraphs 2 to 14 and paragraph 20 above, I believe the circumstances require that pursuant to section 10(4) of the Act the Public Trustee take control of the interests in property of the beneficial owners in the foreign NZ bank accounts, the CBA account, the first CommSec account and the second CommSec account.

    22.I believe that the circumstances require that pursuant to section 12(1)(d)(i) the Public Trustee:

    (a)Hold money obtained from the foreign NZ bank accounts and the CBA account pursuant to any control order in the same currency and upon the most favourable at call interest rate available; and

    (b)Hold shares obtained from the first CommSec account and the second CommSec account pursuant to any control order and invest any dividends at the most favourable at call interest rate available.”

13. Beyond the matters disclosed by the orders themselves consistent with the practice his Honour did not provide reasons.

14. Section 10 of the Act is in the following terms:

    “10         Restraining orders

    (1)A restraining order is an order that no person is to dispose of or attempt to dispose of, or to otherwise deal with or attempt to otherwise deal with, an interest in property to which the order applies except in such manner or in such circumstances (if any) as are specified in the order.

    (2)The Commission may apply to the Supreme Court, ex parte, for a restraining order in respect of:

    (a)specified interests, a specified class of interests or all the interests, in property of a person suspected of having engaged in a serious crime related activity or serious crime related activities, including interests acquired after the making of the order and before the making of an assets forfeiture order affecting the interests that are subject to the restraining order, or

    (b)specified interests, or a specified class of interests, in property that are interests of any other person, or

    (c)interests referred to in both paragraph (a) and paragraph (b).

    (2AA)The Commission may apply to the Supreme Court, ex parte, for a restraining order in respect of specified interests, or a specified class of interests, in property that are held in a false name.

    (2A)A restraining order does not apply to an interest acquired after the order is made unless the order expressly provides that it does so apply.

    (3)The Supreme Court must make the order applied for under subsection (2) if the application is supported by an affidavit of an authorised officer stating that:

    (a)in the case of an application in respect of an interest referred to in subsection (2) (a)—the authorised officer suspects that the person has engaged in a serious crime related activity or serious crime related activities and stating the grounds on which that suspicion is based, and

    (b)in the case of an application in respect of any other interest—the authorised officer suspects that the interest is serious crime derived property because of a serious crime related activity or serious crime related activities of a person and stating the grounds on which that suspicion is based,

    and the Court considers that having regard to the matters contained in any such affidavit there are reasonable grounds for any such suspicion.

    (3A)The Supreme Court must make the order applied for under subsection (2AA) if:

    (a)the application is supported by an affidavit of an authorised officer stating that the authorised officer suspects that the interest is fraudulently acquired property that is illegally acquired property and stating the grounds on which that suspicion is based, and

    (b)the Court considers that having regard to the matters contained in any such affidavit there are reasonable grounds for any such suspicion.

    (4)When the Supreme Court makes a restraining order, the Court may, if it considers that the circumstances so require, order the Public Trustee to take control of some or all of the interests in property that are interests to which the restraining order relates.

    (5)A restraining order may, at the time it is made or at a later time, make provision for meeting out of the property, or a specified part of the property, to which the order applies all or any of the following:

    (a)the reasonable living expenses of any person whose interests in property are subject to the restraining order (including the reasonable living expenses of any dependants),

    (b)subject to section 16A, the reasonable legal expenses of any person whose interests in property are subject to the restraining order, being expenses incurred in connection with the application for the restraining order or an application for a confiscation order, or incurred in defending a criminal charge.

    (6)The Supreme Court may refuse to make a restraining order if the State refuses or fails to give to the Court such undertakings as the Court considers appropriate with respect to the payment of damages or costs, or both, in relation to the making and operation of the order.

    (7)For the purposes of an application for a restraining order, the Commission may, on behalf of the State, give to the Supreme Court such undertakings with respect to the payment of damages or costs, or both, as are required by the Court.

    (8)If a restraining order is in force in respect of an interest of a person in property, the restraining order does not prevent:

    (a)the levying of execution against the property in satisfaction, or partial satisfaction, of the debt arising under a proceeds assessment order in force against the person, or

    (b)with the consent of the Supreme Court, the sale or other disposition of the interest to enable the proceeds to be applied in satisfaction or partial satisfaction of that debt, or

    (c)with the consent of the Supreme Court, the application of the interest in satisfaction or partial satisfaction of that debt.

    (9)After the first 2 working days of its operation, a restraining order remains in force in respect of an interest in property only while:

    (a)there is an application for an assets forfeiture order pending before the Supreme Court in respect of the interest, or

    (b)there is an unsatisfied proceeds assessment order in force against the person whose suspected serious crime related activities formed the basis of the restraining order, or

    (c)there is an application for such a proceeds assessment order pending before the Supreme Court, or

    (d)it is the subject of an order of the Supreme Court under section 20 (Effect on restraining order of refusal to make confiscation order).”

1. The application made by the Commission sought a restraining order in respect of specified interests as provided by s 10(2)(b). As the affidavit of Mr Moerman disclosed, although the Commission was aware of the various financial accounts it had not at the time he swore the affidavit established the name or names of the beneficial owners of those accounts. As a consequence the application did not name individuals or corporations as defendants but merely referred to the beneficial owners of the accounts. The orders were made in the same terms.

2. Since the orders were made the present appellants applied to be joined to the proceedings. Orders to this effect were made on 13 June 2008. The appellants have acknowledged that they are entitled to exercise effective control over the property in the various accounts identified in the orders. Accordingly, pursuant to s 7(3) of the Act the property in those accounts is deemed to be vested in the appellants. Mr Moerman deposed in an affidavit sworn on 16 May 2008 that Mr Agius (and certain other persons) are signatories to the accounts subject to the restraining orders, confirming the suspicion he deposed to in para 11(a) of his original affidavit.

3. The appellants challenged the orders on various grounds. They are shortly described as the constitutional validity of s 10 of the Act; the wrongful admission of various paragraphs of Mr Moerman’s original affidavit; errors by the primary judge in concluding that there were reasonable grounds for suspicion; the failure of the primary judge to give reasons; entertaining proceedings without an identified defendant and entertaining proceedings in the absence of compliance with Schedule J of the Supreme Court Rules. I shall deal with the issues in that order. However, before doing so it is necessary to identify relevant provisions of the Act.

   The structure of the Act

4. Section 10 of the Act forms part of a legislative scheme by which the State can restrain dealings with property suspected of being the proceeds of serious crime, or property of a person who has engaged in serious crime, pending the determination of an application for an assets forfeiture order. The principal objects of the Act are described in s 3 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 probable 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.”

5. It is significant and, in my opinion, consistent with the appropriate understanding of the Act that the principal objects of the Act do not refer to the making of restraining orders. The power to make restraining orders is a power in aid of the right of the State to seek orders under the Act for the confiscation of relevant property.

6. Section 4 of the Act contains various definitions. For present purposes they include a definition of “illegal activity”, “serious crime derived property” and “serious crime related activity”. The definition of “serious crime derived property” draws upon s 9 of the Act and “serious crime related activity” on s 6.

7. Section 5 of the Act provides that proceedings for a restraining order or a confiscation order are not criminal proceedings (ss(1)). Section 5(2) makes plain that the rules of evidence applicable to civil proceedings apply to proceedings for a restraining order or a confiscation order.

8. Part 3 of the Act contains the provisions which permit the making of asset forfeiture orders. Section 22 provides that the Commission may apply to the Supreme Court for the forfeiture and vesting in the Crown of interests in property that are, or are proposed to be, subject to a restraining order when the assets forfeiture order takes effect. The section provides the regime under which the court must consider and determine whether to make such an order.

9. Section 25 of the Act provides that a person who has an interest in property which might be subject, if made, to an assets forfeiture order may apply to the court for an exclusion order. The Act otherwise provides for orders relieving hardship and for the exclusion of innocent interests (ss 24 and 26).

10. A restraining order made pursuant to s 10 is made in rem but is of limited duration. Section 10(9) provides that after two working days a restraining order will remain in force only in limited circumstances. Section 10(9)(a) provides that it will remain in force if there is an application for an assets forfeiture order pending before the court in respect of the relevant interests. The confiscation provisions in Part 3 operate in relation to property proposed to be or subject to a restraining order: see s 22(1A).

11. Section 10B of the Act provides for an application for a restraining order to be made to the Court by telephone. In the event that an order is made s 10B(5) requires it to be supported by evidence on affidavit no later than 2 working days after the order is made.

12. Section 12 provides for the Court to make ancillary orders. Section 12(1)(a) contemplates an order varying the interests in property to which the restraining order relates. However, this does not entitle the beneficial owner of that property to make an application to have property removed from the restraining order. That right is confined to an application pursuant to s 25 of the Act: see NSW Crime Commission v Ollis [2006] NSWCA 76; (2006) 65 NSWLR 478 at [30].

13. The nature of proceedings pursuant to s 10 of the Act have been considered by this Court on previous occasions. In Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; (2007) 174 A Crim R 124 Basten JA queried whether the proceedings were administrative or judicial in nature. However, his Honour and the other members of the court accepted that the power being exercised was judicial power and that any order made under s 10 is interlocutory.

    The constitutional issue

14. The appellants submitted that s 10 of the Act is invalid as being inconsistent with the provisions of Ch III of the Commonwealth Constitution. The appropriate notice was given under s 78B of the Judiciary Act 1903 (Cth). The Solicitor-General for New South Wales appeared and was granted leave to intervene. Neither the Commonwealth or any other State sought leave to intervene.

15. It was submitted that the practical effect of s 10 is to require the Supreme Court to make a restraining order following an ex parte application by the Crime Commission, without affording persons whose rights may be affected any opportunity of being heard. It was submitted that by conferring this power on the Supreme Court the Parliament had enacted legislation repugnant to or incompatible with its exercise of the judicial power of the Commonwealth as a court invested with Federal jurisdiction under Ch III of the Commonwealth Constitution. It was argued that the legislation is incompatible with the integrity, independence and impartiality of the Supreme Court. The appellants relied upon the decision of the High Court in Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51 per Gaudron at 103, McHugh J at 118 and Gummow J at 135. Further reliance was placed on the decision of the Court of Appeal of Queensland in Re Criminal Proceeds Confiscation Act 2002 [2004] 1 Qd R 40.

16. Both the Commission and the State of New South Wales submitted that s 10 is valid. It was submitted that in two recent decisions (Fardon v Attorney-General for the State of Queensland (2004) HCA 46; [2004] 223 CLR 575 and Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2008] HCA 4; (2008) 82 ALJR 454) the High Court has refined the principles identified in Kable with the consequence that s 10 is within the legislative power of the State.

17. Kable was concerned with s 5(1) of the Community Protection Act 1994 (NSW) which authorised the Supreme Court to make an order for the detention of a specified person in prison for a specified period, if it was satisfied on reasonable grounds that the person was more likely than not to commit a serious act of violence and that it was appropriate for the protection of a particular person or the community generally that a person be held in custody. By majority the High Court held the provision to be invalid.

18. The essential principle which emerges from Kable is that a law conferring a function or power on a State court will be struck down if it is incompatible with or repugnant to the exercise by the State court of the judicial power of the Commonwealth, because it compromises the integrity of that Court as an institution and its independence from the Executive and the Legislature (Kable at 107 per Gaudron J; 116, 121 per McHugh J and 133 per Gummow J).

19. McHugh J said of the legislation (at 122-123):

    “The Act is thus far removed from the ordinary incidents of the judicial process. It invests the Supreme Court with a jurisdiction which is purely executive in nature. Indeed, the jurisdiction conferred on the Court is hardly distinguishable from those powers and functions, concerning the liberty of the subject, that the traditions of the common law countries have placed in Ministers of the Crown so that they can be answerable to Parliament for their decisions.

    …

    Instead of a trial where the Crown is required to prove beyond reasonable doubt that the accused is guilty of a crime on evidence admitted in accordance with the rules of evidence, the Supreme Court is asked to speculate whether, on the balance of probabilities, it is more likely than not the appellant will commit a serious act of violence.

    …

    Having regard to the object of the Act, it is impossible to suppose that the Court has any discretion to refuse to imprison the appellant once it concludes that he is more likely than not to commit a serious act of violence.”

20. His Honour concluded (at 124):

    “At the time of its enactment, ordinary reasonable members of the public might reasonably have seen the Act as making the Supreme Court a party to and responsible for implementing the political decision of their executive government that the appellant should be imprisoned without the benefits of the ordinary processes of law. Any person who reached that conclusion could justifiably draw the inference that the Supreme Court was an instrument of executive government policy. That being so, public confidence in the impartial administration of the judicial functions of the Supreme Court must inevitably be impaired.”

21. The decision in Kable has been invoked by litigants in appellate courts in a number of cases:

    (a)in the High Court, see H A Bachrach Pty Ltd v State of Queensland (1998) 195 CLR 547; Nicholas v The Queen (1998) 193 CLR 173; McGarry v The Queen (2001) 207 CLR 121; Silbert v Director of Public Prosecutions for Western Australia (2003) 217 CLR 18; North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146; Baker v The Queen (2004) 223 CLR 513; Fardon v Attorney General (Qld) (2004) 223 CLR 575; Forge v Australian Securities and Investments Commission (2006) 228 CLR 45; Gypsy Jokers Motorcycle Club Incorporated v Commissioner of Police; and

    (b)in intermediate appellate courts, see Powercoal Pty Ltd v Industrial Relations Commission of New South Wales (2005) 64 NSWLR 406; R v MSK and MAK (2004) 61 NSWLR 204; Schutt Flying Academy (Australia) Pty Ltd v Mobil Oil Australia Ltd [2000] 1 VR 545 at par [46] (Kable point abandoned on appeal in Mobil Oil Australia Ltd v Victoria (2002) 211 CLR 1); R v Nixon (2000) 159 FLR 296; John Fairfax Publications Pty Ltd v Attorney General for NSW (2000) 181 ALR 694 (appeal to the High Court upheld on other grounds); Attorney Genral (Qld) v Fardon [2003] QCA 416; Lloyd v Snooks (1999) 9 TasR 41; (1999) 153 FLR 339; Felman v Law Institute of Victoria [1998] 4 VR 324; R v Moffatt [1998] 2 VR 229; Wynbyne v Marshall (1997) 7 NTLR 97; (1997) 99 A Crim R 1.

22. However, there has only been one occasion on which the approach in Kable has been adopted in relation to other legislation. In Re Criminal Proceeds Compensation Act the Court of Appeal of Queensland declared s 30 of the Criminal Proceeds Confiscation Act 2002 (Qld) (“the Queensland Act”) to be invalid. The Queensland Act is the legislative regime relating to the confiscation of criminal assets within that State and is similar, although not identical, to the Act. Section 30 of the Queensland Act expressly stated that if the State applied for a restraining order without notice to any person to whom it relates the court must hear the application in the absence of that person.

23. In striking down the provision Williams JA, who delivered the leading judgment, referred to the decision of Gaudron J in Nicholas v The Queen where her Honour emphasised the essential character of a court and the nature of judicial power. Her Honour said (at 208-209):

    “In my view, consistency with the essential character of a court and with the nature of judicial power necessitates that a court not be required or authorised to proceed in a manner that does not ensure equality before the law, impartiality and the appearance of impartiality, the right of a party to meet the case made against him or her, the independent determination of the matter in controversy by application of the law to facts determined in accordance with rules and procedures which truly permit the facts to be ascertained and, in the case of criminal proceedings, the determination of guilt or innocence by means of a fair trial according to law. It means, moreover, that a court cannot be required or authorised to proceed in any manner which involves an abuse of process, which would render its proceedings inefficacious, or which brings or tends to bring the administration of justice into disrepute.”

24. Williams JA concluded that s 30 of the Queensland Act failed to provide the essential elements for the proper exercise of judicial power. Because it provided that only the State could bring evidence his Honour concluded that any decision made by the court makes a “mockery of the exercise of the judicial power in question”. His Honour said (at [57]-[59]):

    “Returning now to the Act under consideration. As already noted the initial order made on an application brought pursuant to s. 28 affects significant property rights in that the property owner is prevented from dealing in any way with the property, and must subsequently discharge the onus of proving that the property the subject of the order was not illegally acquired property if it is to be released from the order. Further, and not without significance for present purposes, the Supreme Court in making the initial order must also be satisfied that the “public interest” is not such as to require the court to refuse to make the order. How could a judge possibly be so satisfied in the exercise of judicial power when the only entity entitled to place material before the court on which a judgment on that issue could be formed was the State? Similarly, how could a judge possibly determine whether or not it was appropriate to require the State to give an undertaking as to damages and costs when the only entity entitled to place material before the court was the State? Asking a judge to make a decision on such issues in those circumstances makes a mockery of the exercise of the judicial power in question. The statutory provision removes the essential protection of the citizen inherent in the judicial process. Effectively the provision directs the court to hear the matter in a manner which ensures the outcome will be adverse to the citizen and deprives the court of the capacity to act impartially.

    Given the reasoning in, and in particular the passages quoted from, Kable, Bachrach and Nicholas, I have come to the conclusion that the direction or command to the judge hearing the application to proceed in the absence of any party affected by the order to be made is such an interference with the exercise of the judicial process as to be repugnant to or incompatible with the exercise of the judicial power of the Commonwealth. Then, because the Supreme Court of Queensland is part of an integrated Australian judicial system for the exercise of the judicial power of the Commonwealth, such a provision is constitutionally invalid.

    It therefore follows that s. 30 of the Act is invalid. Importantly, it should be noted that the remainder of the Act can work effectively without s. 30. In an appropriate case (and when one is dealing with criminal activity it is often justifiable for such an application to be made speedily and without notice) an application under s. 28 may be made ex parte, and would then be dealt with by the Court as any other ex parte application. The judge would be in control of the proceedings, could determine the appropriateness of proceeding ex parte, and could mould any interim order to ensure that the rights of all parties were adequately protected. Such a procedure would give full recognition and effect to the objects stated in s. 4(2) of the Act.”

25. The others members of the court agreed with Williams JA.

26. In Fardon the High Court considered s 5 of the Dangerous Prisoners (Sexual Offenders) Act 2003 (Qld) which provides a legislative regime for the continuing detention or supervised release of persons who had committed serious sexual offences. The High Court held that the legislation was valid. In the course of his reasons Gleeson CJ said of Kable that it established the principle that the Australian Constitution created an integrated court system “and contemplates the exercise of federal jurisdiction by State Supreme Courts. State legislation which purports to confer upon such a court a function which substantially impairs its institutional integrity, and which is therefore incompatible with its role as a repository of federal jurisdiction, is invalid” (at [15]).

27. The legislation under challenge in Kable was extraordinary. Although the original intention was to legislate more generally, the Bill enacted by the Parliament provided for the preventative detention of only one person. Being concerned only with the liberty of Mr Kable the High Court held that the Supreme Court was effectively required to implement the political will of the Parliament.

28. The essential distinction between the legislation in Kable and that considered in Fardon was that the Queensland Act was of general application being a law authorising the preventative detention of any prisoner within the relevant category and not confined to providing for the potential detention of one individual. Gleeson CJ concluded at [19]:

    “The Act is a general law authorising the preventive detention of a prisoner in the interests of community protection. It authorises and empowers the Supreme Court to act in a manner which is consistent with its judicial character. It does not confer functions which are incompatible with the proper discharge of judicial responsibilities or with the exercise of judicial power. It confers a substantial discretion as to whether an order should be made, and if so, the type of order. If an order is made, it might involve either detention or release under supervision. The onus of proof is on the Attorney-General. The rules of evidence apply. The discretion is to be exercised by reference to the criterion of serious danger to the community. The Court is obliged, by s 13(4) of the Act, to have regard to a list of matters that are all relevant to that criterion. There is a right of appeal. Hearings are conducted in public, and in accordance with the ordinary judicial process. There is nothing to suggest that the Supreme Court is to act as a mere instrument of government policy. The outcome of each case is to be determined on its merits.

1. Basten JA, who reached a different conclusion, said (at [109]) that the affidavit of the relevant officer was inadequate to provide the foundation for a restraining order under s 10 “because the deponent’s suspicions were not stated with adequate precision to allow a view to be formed as to what those suspicions were, which was a necessary preliminary to consideration of whether there were, in the material contained in the affidavit, reasonable grounds for any such suspicion”. His Honour said (at [106] to [108]):

   “The relevance of this material for present purposes is that, on the contention as to jurisdiction accepted above, the restraining order was to be treated as an interlocutory order for the purpose of proceedings which sought the making of a proceeds assessment order. The application under s 27 was not dealt with at the time that the restraining order was made, but it gives further weight to the importance of the authorised officer identifying the serious crime related activity on which he sought to rely.

   The failure to put before the Court full information as to the material placed before Interstar in relation to each of the loan applications makes it difficult to know whether the authorised officer suspected the claimant of obtaining a secured loan, dishonestly, by some form of deception, for the purposes of s 178BA of the Crimes Act. Similarly, it is unclear whether he held a suspicion that the claimant had sought to obtain a loan secured over real property, by some statement which was false or misleading in a material particular. Indeed, to know whether such a suspicion could arise, one might wish to know the full extent of the material placed before Interstar and whether the company thought that it had provided the loan as a result of deception or a false or misleading statement. There would be a certain irony in the Commission obtaining an order that a person pay to the Treasurer an amount equal to the value of property purchased with finance provided by a lender who relied upon the property as security for the loan: cf s 25 in respect of an assets forfeiture order. There is a further irony where the Commission seeks a restraining order preventing the borrower from making payments to the lender from his or her bank accounts, as occurred in the present case.

   These matters do not cast doubt on the fact that the Parliament has authorised such orders to be made: rather, when combined with the absence of discretion in the Court to determine whether a restraining order should be made or not and, indeed, whether a "proceeds assessment order" under s 27(2) should be made or not, the importance accorded to the suspicion of the authorised officer is accentuated. The need for that suspicion to be stated with adequate particularity for the Court to assess whether it is supported by reasonable grounds, based on the material set out in the affidavit, is reinforced.

   Mr Moerman’s grounds

2. In his affidavit Mr Moerman deposed to two relevant suspicions. In para 17 he said that he suspects that Mr Agius “has engaged in serious crime related activities … in that he has engaged in offences punishable by imprisonment for five years or more, and involving fraud, namely of conspiracy to commit or incitement to commit or of aiding or abetting offences contrary to the provisions of s 176, 176A, and 178BA of the Crimes Act 1900.” In para 19 he deposed that he suspects “that the interest in property of the beneficial owners in the foreign NZ bank accounts, the CBA account, the first CommSec account and the second CommSec account are serious crime derived property … because of the serious crime related activity or serious crime related activities of Agius, in that the money in those accounts are all or part of the proceeds of serious crime related activities.” Both suspicions are said to be based on the matters in paras 2 to 14 of his affidavit and are expressed in the language of s 10 of the Act.

3. Mr Moerman identified Mr Agius as the senior partner of PKF Vanuatu (“PKF”). PKF is a firm of accountants which owns and manages the appellant trust company International Finance Trust Company Limited (“IFTC”).

4. Mr Moerman said that he arrested Mr Agius in Perth in April this year and charged him with various offences including conspiracy to defraud the Australian Tax Office and money laundering. His arrest followed a joint task force investigation between the Australian Federal Police and the Australian Tax Office into what Mr Moerman described as an “overseas money laundering scheme”. Mr Agius is identified by Mr Moerman as the promoter of the scheme.

5. Although Mr Moerman does not expressly indicate that he was a member of the joint task force I am completely satisfied that he was either a member of it or that the information and conclusions to which he deposed are derived from the information gathered by the joint task force investigation. The conclusions expressed by Mr Moerman are his conclusions having regard to that information.

6. In para 5 of the affidavit Mr Moerman described the elements of the alleged money laundering scheme. It is simple. As he described it an Australian company remits money to a bank account in New Zealand in purported response to a false invoice. The remittance is recorded in the accounts of the Australian company as a trading expense for a service which has not been provided. The money is then transferred to other New Zealand bank accounts and finally remitted back to either the Australian bank account of the Australian company or a personal bank account of a director of that company.

7. Mr Moerman is of the opinion that the primary purpose of the scheme is to evade Australian tax otherwise payable by the Australian company. A secondary purpose of the scheme is to evade Australian income tax otherwise payable by the director of the Australian company. This latter purpose is allegedly achieved by returning the money originally transferred to the New Zealand bank account to the personal bank account of the director. Presumably it would not be identified as income in the hands of the director and being an expense of the company the effect would be to diminish the company’s tax liability. In this way the director having received the monies directly from the New Zealand bank both the director and the company would avoid paying tax.

8. It is apparent that much of the work of the task force has been conducted by telephone intercepts. Those intercepts have revealed that Mr Agius has direct control and manages the movement of funds from Australia through various bank accounts in New Zealand and other off-shore destinations. They have also revealed a concern that the New Zealand bank accounts have been targeted and as a consequence Mr Agius has set up bank accounts in Singapore and the USA.

9. Mr Moerman said that Mr Agius promoted the scheme through his trusted friends including an accountant Owen T Daniel, now deceased. He described the nature of the arrangements with Mr Daniel’s clients and said that those clients had remitted a total of AUD$21,779.036 to New Zealand bank accounts and have paid fees estimated at AUD$1,400,000 to PKF. He provides, in para 10, by way of illustration an account of one of the transactions.

10. The joint investigation has identified bank accounts in New Zealand in 49 foreign company names established and operated by PKF through which over $100 million has been moved since September 2000. Mr Moerman deposed to the fact that only 26 of these companies had credit funds at 12 May 2008 being the bank accounts in respect of which restraining orders were sought. Orders were also sought in relation to an account with the Commonwealth Bank and share trading accounts with Commonwealth Securities Limited in the name of IFTC Broking Service Pty Limited.

11. Mr Moerman deposed to the fact that since the arrest of Mr Agius deposits to the New Zealand bank accounts have ceased, approximately $10 million has been withdrawn and the General Manager of PKF has sought to increase the cap on withdrawals to $6 million per transaction.

12. Mr Moerman deposed that having regard to the provisions of s 7(3) of the Act the interest in the relevant accounts are interest in property of the beneficial owners of those accounts (the directors of the Australian registered companies) being the persons with effective control, and not the interests in property of the corporate entities in whose name the accounts are held. It was noted in [11] above that the appellants have effective control of the accounts and that Mr Agius and others are signatories to those accounts. The beneficial owners of the relevant accounts have not yet been identified.

13. In the present case Mr Moerman said that he holds suspicions in relation to three prospective breaches of the Crimes Act being s 176, 176A and 178BA of that Act. The Commission submitted that the affidavit supported a suspicion that Mr Agius had aided and abetted a breach by others of these provisions. The relevant provisions are as follows:

    “176      Director or officer publishing fraudulent statements

    Whosoever, being a director, or officer, of any body corporate, or public company, makes, circulates, or publishes, or concurs in making, circulating, or publishing, any written statement, or account, which he or she knows to be false in any material particular, with intent to deceive, or defraud, any member, shareholder, or creditor, of such body corporate, or company, or with intent to induce any person to become a shareholder, or partner therein, or to intrust, or advance, any property to such body corporate, or company, or to enter into any security for the benefit thereof, shall be liable to imprisonment for 10 years.

    176A     Directors etc cheating or defrauding

    Whosoever, being a director, officer, or member, of any body corporate or public company, cheats or defrauds, or does or omits to do any act with intent to cheat or defraud, the body corporate or company or any person in his or her dealings with the body corporate or company shall be liable to imprisonment for 10 years.

    178BA   Obtaining money etc by deception

    (1)Whosoever by any deception dishonestly obtains for himself or herself or another person any money or valuable thing or any financial advantage of any kind whatsoever shall be liable to imprisonment for 5 years.

    (2)          In subsection (1):

    deception means deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including:

    (a)a deception as to the present intentions of the person using the deception or of any other person, and

    (b)an act or thing done or omitted to be done with the intention of causing:

    (i)           a computer system, or

    (ii)a machine that is designed to operate by means of payment or identification,

    to make a response that the person doing or omitting to do the act or thing is not authorised to cause the computer system or machine to make.

    (3)For the purposes of and without limiting Part 1A, the necessary geographical nexus exists between the State and an offence against this section if the offence is committed by a public official (within the meaning of the Independent Commission Against Corruption Act 1988) and involves public money of the State or other property held by the public official for or on behalf of the State.”

14. With respect to s 176 as a consequence of the “scheme” it is alleged that a false invoice is prepared and a payment made which would be recorded in the accounts as a payment for a service. That service was never provided. The suspicion that by this means a member or shareholder of the company would be defrauded is supported by the knowledge that in some cases the money is returned from New Zealand to an account of a director of the company rather than to the company itself.

15. The essence of s 176A is that it is an offence for a director of a body corporate or public company to cheat or defraud the body corporate or the company or any person in his or her dealings with the body corporate or the company. In cases where monies are returned to a director the body corporate will be defrauded. In so far as the scheme involves the avoidance of a liability by the company or a director the offence will be committed.

16. Section 178BA is the statutory offence of obtaining money by deception. Both with respect to any monies paid directly to a director of a company, or by reason of the company itself filing a tax return based upon a fraudulent claim, the matters deposed to by Mr Moerman suggest that a breach of this section may have occurred.

17. There can be no doubt that the matters to which Mr Moerman deposed justify the suspicion which he holds. An arrangement by which invoices are created which are utilised to falsely represent that monies have been paid and a business expense can legitimately be claimed for services which have not been rendered suggests at least to the level of suspicion that relevant offences have been committed.

18. The only question is whether, when the evidence before the court is confined to a police officer’s account of the findings of a police investigation and primary documentary material has not been tendered, the Court may be satisfied that there are reasonable grounds for the officer’s suspicion. It was submitted by the appellants that unless admissible evidence tending to prove the matters upon which the suspicion was based was tendered the application should be dismissed.

19. I do not accept the submission. As Rockett makes plain there is a significant difference between legislation which requires a judicial officer to be satisfied of a particular state of facts and legislation which requires a judicial officer to be satisfied that there are reasonable grounds for a suspicion held by another. If the judicial officer must be satisfied evidentiary requirements and the obligation to prove matters to the appropriate level will be engaged. When however the judicial officer is called upon to determine whether there are reasonable grounds for another’s belief it is necessary to make the relevant determination by examining the matters which that person has considered in forming their belief.

20. In the present case the foundation for Mr Moerman’s belief is the joint investigation. Being an investigation to assist in the enforcement of the law it is appropriate for Mr Moerman to have significant regard to the findings of the investigation. In short it is reasonable for him to rely on those findings in forming his suspicion. It may be that it would have been preferable if his evidence had included a copy of any report, if there be one, of the investigation and that he explicitly deposed to the fact he relied on matters in that report when forming his suspicion. That he has not taken this approach may reflect the fact that no written document exists, although this would be unusual. Although it would be preferable if it had been put into evidence the absence of any written material is not in my opinion fatal to the application. The views expressed by Mr Moerman are plainly his own views formed from his involvement in the investigation of these matters and are no doubt also informed by the views of others. His view is expressed having regard to a body of collected investigative material. When it is appreciated that significant monies are being removed from Australia to New Zealand in response to allegedly false invoices and then returned, a relevant suspicion must be created in the mind of any reasonable person. Because that suspicion is based on the work of the joint investigation it has a substantial foundation and is in my judgment based on reasonable grounds.

    Reasons

21. The appellants submitted that the failure of the trial judge to give reasons vitiated his decision. The giving of reasons is an incident, but not always a necessary incident, of the exercise of judicial power: Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386. The content of the duty to give reasons will vary depending upon the circumstances and nature of the case. In Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 the applicant appealed against a finding made in the Compensation Court of NSW that she was “fit for all work” and accordingly no longer entitled to compensation. One question was whether the trial judge had committed an error of law in failing to give reasons for that finding.

22. McHugh J, who was in the majority, provides a useful discussion of the development of the obligation in a trial court to give reasons. His Honour concluded that “neither the need nor the appearance of justice requires that reasons be given for every decision made by a judicial tribunal” (p 279E). However, when the decision constitutes what is in fact or substance a final order “the case must be exceptional for a judge not to have a duty to state reasons.” The extent of the duty to give reasons will be related to “the function to be served by the giving of reasons” (see Mahoney JA in Tatmar at 386). It most cases where an appeal lies to another court the giving of reasons including findings of fact will be an essential requirement of the judicial function: Pettit v Dunkley (1971) 1 NSWLR 376 at 387; see also Carlson v King (1947) 64 WN(NSW) 65: see also Beale v GIO (1997) 48 NSWLR 430 per Meagher JA.

23. However, there will be cases where reasons are not required. In Brittingham v Williams [1932] VLR 327 Cussen ACJ said (at 239):

    “…A case may turn entirely upon a finding in relation to a single and simple question of fact, or be so conducted that the reason or reasons for the decision is or are obvious to any intelligent person; or a claim or defence may be presented in so muddled a manner that it would be a waste of public time to give reasons; and there may be other cases where reasons are not necessary or even desirable. But in many cases, of which this was one, we agree with Irvine CJ in Donovan v Edwards [1922] VLR 87 that a judicial officer should state the facts he finds and the reasons for his decision. Such a statement is desirable for the information of the parties, and in order to afford assistance to the Court of Appeal in the event of there being an appeal.”

24. In Soulemezis Mahoney JA said (at 269 after considering the decision of the High Court in Public Service Board of New South Wales v Osmond (1986) 159 CLR 656):

    “Three things may be taken from what was there said by Gibbs CJ. First, the reasons given must be sufficient, where there is a right of appeal, to allow that right to be exercised. Secondly, the giving of reasons is not limited to cases where there is a right of appeal: there are reasons in the nature of the judicial process which may require that reasons be given as an incident of the decision in question. And, thirdly, the giving of reasons is a normal but not a universal incident of the judicial process: there are some cases, or kinds of cases, where they need not be given. In so far as it may be relevant for me to do so, I would agree with each of these and see them as applicable in determining what reasoning of fact a judge is under pain of error of law, required to set forth in his judgment.”

25. In the present case the decision required of the judge provides the foundation for an order restraining the disposition of property on an interim basis. It is made in order to protect property where the ultimate fate of that property will be determined in confiscation proceedings. The legislation requires a judge to make only one decision pursuant to s 10. That decision requires a determination as to whether the supporting affidavit discloses “reasonable grounds” for the suspicion. That question is amenable to only one of two answers. No findings in relation to disputed facts are required. There may be cases in which a restraining order is sought where the complexity of the relevant facts or the difficulty in construing and applying the Act will require the court to give reasons. However, that case will be rare. In most cases the reasons for the decision, either to grant a restraining order or to deny it, will be apparent on the face of the affidavit.

1. In my opinion reasons were not required in the present case. The affidavit contained a clear statement of the matters which informed the suspicion of Mr Moerman. The only question for his Honour was whether those matters justified a finding that Mr Moerman’s suspicion was based on “reasonable grounds.” There was no difficulty for this Court in reviewing that decision to determine whether error had occurred. This was not a case where reasons were required so that the appellant and the parties would be aware of the matters which influenced the trial judge’s decisions (see Re Criminal Proceeds Act at [63]).

   Lack of a defendant: UCPR 6.1A

2. The appellants submitted that it was impermissible to commence proceedings in which unnamed and unidentified persons were referred to as defendants. It was submitted that the trial judge should have, but failed, to turn his mind to the question arising under UCPR 6.1A as to whether he should permit proceedings to go ahead without any effective joinder of a “real” defendant. It was submitted accordingly that the proceedings were an abuse of process.

3. Rule 6.1A of the UCPR lists various types of proceedings which may be commenced without a defendant. However, it does not otherwise prohibit proceedings where a defendant is not named. Proceedings under the Act are not included in the Rule. In this case the names of the owners of the interests in the property in question were not known to the respondent. However, the purpose of the proceedings is to restrain the disposition of the relevant property. Although notice of an application for asset forfeiture must be given to a person to whom the application relates (s 22(9)), s 10 does not provide a similar obligation. There will obviously be many cases, of which the present case is one, where the Commission will not be able to identify by name the person with the relevant interest in the property at the time the proceedings are commenced. However, as the restraining order operates in rem it will, if made, be effective to control the property pending the resolution of any forfeiture proceedings. The failure to name individual defendants was not an abuse of process. It must be remembered that in any event the appellants have since each applied to be joined as defendants to the proceedings (see [65] above).

   Non-compliance with Supreme Court Rules Schedule J

4. It was submitted by the appellants that the combined effect of Pt 12 r 1A of the Supreme Court Rules and Schedule J to the rules is that the Commission was required to file with any initiating process a statement in summary form indicating the general nature of the facts and circumstances relied on. It was submitted that the statement was cumulative upon the requirement for an affidavit contemplated by s 10 of the Act.

5. Schedule J does provide for the filing of a statement in summary form in the present circumstances. However, it would not seem to have any practical utility with respect to proceedings under s 10. It may be otherwise in relation to proceedings for forfeiture. A statement as contemplated by Schedule J would not add to an understanding of the nature of the application which is not already provided by the affidavit which is required under the Act. Being a rule of procedure compliance may be dispensed with by the court: see ss 14 and 56 of the Civil Procedure Act 2005. The failure to file the statement did not deprive the Supreme Court of jurisdiction and could not vitiate the order made by the primary judge.

6. In my judgment the appeal should be dismissed with costs.

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AMENDMENTS:

16/02/2009 - The word "created" has been deleted after the words "allegedly false invoices". - Paragraph(s) [135]

LAST UPDATED:
6 August 2013