New South Wales Crime Commission v Cook
[2011] NSWSC 1348
•10 November 2011
Supreme Court
New South Wales
Medium Neutral Citation: NEW SOUTH WALES CRIME COMMISSION v COOK [2011] NSWSC 1348 Hearing dates: Friday 26 August 2011 Decision date: 10 November 2011 Before: Hall J Decision: There is no power under the provisions of s.10B of the Criminal Assets Recovery Act 1990 for consent orders to be made for the reasonable legal expenses of a person without compliance with the provisions of s.16A of the Act which specifies the statutory restrictions that apply to a restraining order making provision for the payment of such expenses.
Catchwords: CIVIL LAW - criminal assets recovery - application by New South Wales Crime Commission for restraining order - restraining order to make provision for legal costs of respondent - application of s.16A - whether consent orders sufficient to make an order Legislation Cited: Crimes Act 1900
Criminal Assets Recovery Act 1990
Drug Trafficking (Civil Proceedings) Act 1990
Drug Trafficking (Civil Proceedings) Amendment Act 1997
Trade Practices Act 1974 (Cth)Cases Cited: International Finance Trust Company Limited v NSW Crime Commission (No 2) [2010] NSWCA 46
New South Wales Crime Commission v Bazi [2009] NSWSC 88
New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116
New South Wales Crime Commission v MacDonnell [2000] NSWSC 913
New South Wales Crime Commission v Younan (1993) 31 NSWLR 44
Thomson Australian Holdings Pty Limited v Trade Practices Commission [1981] HCA 48; 148 CLR 150Category: Procedural and other rulings Parties: NEW SOUTH WALES CRIME COMMISSION v Jenifer Ann Cook Representation: P: I Temby QC
D: P Sim
P: NSW Crime Commission
D: Philip Sim & Associates
File Number(s): 2011/232041
Judgment
HALL J:
The proceedings
The New South Wales Crime Commission ( "the Commission" ) commenced proceedings in this Court under the Criminal Assets Recovery Act 1990 ( "the Act" ) by way of Summons filed on 18 July 2011. In it, the Commission sought orders under the Act including, in particular, proceeds assessment order under s.27.
On 26 August 2011, the Commission sought and was granted leave to file an Amended Summons. The amendments related to orders sought under s.10A (a restraining order) and s.22 (an assets forfeiture order) of the Act as well as the inclusion of an additional schedule, Schedule 3, which included particulars of real property.
The order claimed under s.27 by the Commission in the Amended Summons was in terms that the defendant pay to the Treasurer an amount assessed by the Court as the value of proceeds allegedly derived from illegal activities of the defendant that took place not more than six years before the making of the application.
At the hearing on 26 August 2011, the defendant, Ms Cook, sought and obtained leave to rely upon a Notice of Motion dated that day in which an order was sought in the following terms:-
"1. That pursuant to s.10B(3) of the Act, the restraining order make provision for meeting the reasonable legal expenses of the Defendant, agreed at $10,000 out of the property specified in Schedule 2 hereto, such sum to be paid to Philip Sim & Associates."
Facts
A Statement of Facts and Circumstances was filed with the Summons. Annexed to that Statement was a Police Facts Sheet which revealed that on 26 May 2011, the defendant was stopped by police on the Pacific Highway near Nabiac. Her vehicle was searched by police and the following were found:-
(1) A loaded revolver.
(2) A small quantity of cannabis leaf.
(3) Four mobile phones.
(4) $100,850 in cash (plus $3,200 in the defendant's handbag).
The defendant was subsequently charged with offences including an offence of knowingly dealing with proceeds of crime.
On 19 July 2011, the defendant's solicitor, Mr Philip Sim, entered an appearance on her behalf.
On 16 August 2011, Mr Sim wrote to the Commission suggesting a settlement.
Mr I Temby QC, who appeared on behalf of the Commission, explained in the present proceedings that the Commission wished to enter into a consent order by which an amount of $10,000 was to be paid out to the defendant or her solicitor by way of reasonable legal expenses pursuant to s.10B(3)(b) of the Act and the balance of the property be forfeited to the State.
The question posed in the present proceedings is whether an order for legal expenses can be made by consent under s.10B(3)(b) notwithstanding that s.16A(1) has not been complied with.
The relevant statutory provisions
Section 3 of the Act sets of the principal objects of the Act. They are stated as including:-
"(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 ...
..."
Section 5 states that, for the purposes of the Act, proceedings on an application for a restraining order or a confiscation order are not criminal proceedings.
Part 2 - Restraining Orders - contains provisions that relate to applications for and the determination of applications for restraining orders. An application for a restraining order must be supported by an affidavit of an authorised officer stating the matters set out in s.10A(5).
Section 10B, so far as is relevant to the present proceedings, provides:-
"10B(1) A restraining order does not apply to an interest in property acquired after the order is made unless the order expressly provides that it does so apply.
(2) The Supreme Court may, when it makes a restraining order and if it considers that the circumstances so require, order the NSW Trustee and Guardian to take control of some or all of the interests in property that are interests to which the restraining order applies.
(3) A restraining order may, at the time it is made or at a later time, provide 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 interest in property are subject to the restraining order (including the reasonable living expenses of any dependents);
(b) subject to s.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 including defending a criminal charge.
..." (emphasis added)
Section 16A of the Act entitled Restrictions on payment of legal expenses from restrained property imposes restrictions on the power to make provision for legal expenses of a person from restrained property. Section 16A, so far as relevant, is in the following terms:-
"16A(1) The following restrictions apply to a restraining order making provision for the payment of any legal expenses of a person:-
(a) no provision is to be made except to the extent (if any) that the Supreme Court is satisfied that the person cannot meet the expenses concerned out of the person's unrestrained property,
(b) no provision is to be made in relation to any particular interest in property if the Supreme Court is satisfied that the interest is illegally acquired property,
(c) no provision is to be made unless a Statement of Affairs disclosing all the person's interests in property and liabilities and verified on oath by the person has been filed with the Supreme Court,
(d) no provision is to be made unless the Supreme Court is satisfied that the person has taken all reasonable steps to bring all of the person's interests in property within the jurisdiction of the Court,
(e) any such provision must specify the particular interest in property out of which the expenses concerned may be met.
..."
On 16 August 2011, Mr Sim wrote to the Commission proposing a settlement. A copy of the letter was tendered and marked in the present proceedings as Exhibit A.
In the letter, Mr Sim wrote:-
"...
We refer to matters presently before the Supreme Court brought by the NSW Crime Commission against our client Jenifer Cook.
With a view to settling this matter without the need for litigation, and the substantial costs that can flow as a result of that litigation, we are instructed to make the following offer in settlement. From the $100,850.00 cash seized by Police, the payment to this firm of $10,000.00 representing the payment of legal costs to our client. These costs will cover the matter commenced by the NSW Crime Commission against our client, and also the legal costs relating to charges brought by the NSW Police.
The balance is to be forfeited to the State of New South Wales. We have engaged the services of Peter Lander of Counsel to assist in this matter. The funds will form part of legal costs to our client in properly attending to both the civil and criminal proceedings.
Please advise as to whether you would be agreeable to the above proposal.
..."
Submissions
In his written submissions, Mr Temby stated:-
"13. The consent of the parties establishes all facts necessary to the granting of the relief sought. This Court is not put upon enquiry unless and to the extent the Commission seeks to invoke by way of opposition any particular part of s.16A(1), which it does not do. It is, accordingly, submitted that the order sought can be made by consent."
Mr Temby observed that compliance with the provisions of s.16A would not always be practicable. Alternatively, compliance could give rise to difficulty and expense. In the present case, it was noted the defendant resided in Queensland.
In support of his submissions, Mr Temby referred to the decision of the Court of Appeal in International Finance Trust Company Limited v NSW Crime Commission (No 2) [2010] NSWCA 46, a case involving the provisions of s.27(2) of the Act. My attention was also drawn to the judgment of Carruthers AJ in New South Wales Crime Commission v MacDonnell [2000] NSWSC 913. I have considered the judgments in both cases.
Mr Sim supported the arguments advanced on behalf of the Commission.
The International Finance Trust case
In that case, orders were made by consent by the only parties whose interests were affected, the Commission and a Mr Grimaldi. The appeal in the case raised a question concerning the proper construction of s.27 of the Act . A "proceeds assessment order" made under s.27 requires the person to whom it is directed (in that case Mr Grimaldi) to pay to the Treasurer "an amount assessed by the Court as the value of the proceeds derived by the person from an illegal activity, or illegal activities, of the person or another person that took place not more than 6 years before the making of the application for the order" : s.27(1).
A proceeds assessment order is to be made in accordance with the provisions of s.27 and s.28 of the Act.
Before considering the issue to be decided in the present proceedings, I turn to consider the basis for the decision in International Finance Trust (supra). It was submitted in that case that s.27(2) provided that a proceeds assessment order must be made if the Court "finds" it to be more probable than not that the defendant engaged in relevant crime related activity. It was submitted for the appellants (who were two of a number of defendants) that the requirements for a s.27 order had to be satisfied by evidence adduced in the ordinary way. However, the opposing submission for the Commission was as follows:-
"... It can be satisfied on the basis of an admission, and such an admission will be conveyed by a party's entering into consent orders. There are two reasons for this. First: the term 'finds' is not confined to findings on evidence and includes, for example, findings based on admission. Secondly, and independently: there is a presumption that the vesting of jurisdiction in the Court carries with it all the normal incidents of the exercise of jurisdiction by the Court: it is a normal incident of the Court's processes that it may proceed to judgment by way of orders made by consent to settle a dispute and the Act should not be construed as preventing parties from resolving disputes arising under the Act by a settlement in the ordinary way." (Written Submissions for the New South Wales Crime Commission in proceedings 40386 of 2009 dated 22 October 2009 at [14]).
It was also submitted on behalf of the Commission that as part of the usual incidents of its proceedings, the Court may, by consent, make orders that reflect an "agreed liability" even if the agreed amount is a commercial or other compromise and not strictly referrable to what might be provable in a contested trial. This was the position, it was submitted, with respect to a proceeds assessment order made by consent. In other words, it was contended that such an order can be for an amount agreed upon by the parties for the purpose of settling the proceedings against them: Written Submissions of the Commission at [18].
The appellants in International Finance Trust (supra) sought to impugn the consent orders that had been made by a Deputy Registrar in the Common Law Division.
The question that arose on the challenge by the appellants was whether, in the absence of relevant evidence or admissions by Mr Grimaldi, it was correct to say that the Court "had no jurisdiction" to make the proceeds assessment order.
Basten JA (with whom Allsop P and McClellan CJ at CL agreed), observed:-
"58. The appellant's submitted that the parties could not consent to orders, absent agreement as to a sufficient factual basis upon which the orders could be made, which in turn required advertence to the relevant legal requirements in subs-s 27(2) and (2B). It was apparent, they argued, from the material placed before the Deputy Registrar that there was no agreement as to matters critical to the making of such orders. The consent of Mr Grimaldi, as the person whose property was the subject of the proposed orders, was not sufficient, the appellants said, to overcome any absence of findings as to the basis upon which the orders might properly be made."
Basten JA, however, observed that the allegations that had been made in relation to the matters that were relevant to s.27(2), if admitted or made good, would satisfy the requirements of s.27(2). In such a case, the Court "must" make a proceeds assessment order.
Section 27(2B) provides for a restriction on the Court making a proceeds assessment order in an application that relates wholly to external serious crime related activity unless the proviso to that section is satisfied. It was apparent, however, in International Finance Trust (supra) that the offences in question, being offences under the Crimes Act 1900, did not involve "external serious crime related activity" as defined in s.4(1) of the Act.
Accordingly, Basten JA concluded, at [61], that it was clear that the application did not relate "wholly to" external serious crime related activity and s.27(2B) was not engaged.
Consideration
Restraining orders
The predecessor to s.10B(3)(b) was s.10(5)(b) which was the subject of observations made in New South Wales Crime Commission v Bazi [2009] NSWSC 88 (Hislop J).
In that case, orders had been made on the application of the Commission against the defendant under s.10 and s.10(4) of the Act. On a later date, an order was made pursuant to s.22 of the Act forfeiting to and vesting in the Crown the interests in property of Mr Bazi.
The defendant filed a Notice of Motion seeking various orders including an order relating to "the making of provision for reasonable legal expenses pursuant to s.10(5) of the Act" at [5(a)].
An alternative order was sought for "provision for reasonable legal expenses pursuant to the ancillary provisions in s.23(4) of the Act " at [5(b)].
The Commission opposed the order sought by the defendant. Its submissions were directed solely to the question of whether the Court had power to make the order sought.
The defendant and his solicitor had each apparently filed affidavits and reference was made to the fact that neither the defendant nor his solicitor were required for cross-examination on their affidavit: Bazi (supra) at [9]. Further, no submissions were made that, if there was power to make the order sought, the order and declaration should not be made. In particular, it was not submitted that the application should be refused on the basis of the restrictions in s.16A. The provisions of s.10(5) were in similar form to those now to be found in s.10B(3)(b).
One issue that had to be determined in that case was whether the defendant's interest in property was subject to a restraining order that had been made. A concession had been made on behalf of the plaintiff that confirmed the defendant's interest in the property and which was one that continued to be held pursuant to the restraining order made on 17 January 2006.
It was against that background that Hislop J concluded that the Court had power to make an order under s.10(5) of the Act "... in the circumstances of this case" .
I do not consider that the issue that presently arises in the present case was one that fell for determination by Hislop J in Bazi (supra).
In New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116, the Court of Appeal (Gleeson CJ, Kirby P and Hope AJA) considered the provisions of s.10 and s.17 of the then Drug Trafficking (Civil Proceedings) Act 1990. Section 10(5) of that Act provided for the making of a provision in a restraining order, for meeting out of the property in question or a specified part (a) the reasonable living expenses of the relevant person and (b) the reasonable legal expenses of the relevant person. In respect of the latter, there was, at the time Fleming (supra) was decided, no imposition of a requirement before making an order for expenses for consideration to be given to the restrictions now to be found in s.16A of the Act. As discussed below, such restrictions were later inserted.
Gleeson CJ, however, noted at 120-121 that the Court was required, when considering the subject of living expenses or legal expenses, to address the question of reasonableness having regard to the evident legislative policy behind the provisions. In that respect, the Chief Justice observed:-
" The policy behind this is obvious. The property involved is potentially subject to confiscation and forfeiture , and, whilst justice may dictate that the owner should not be deprived of the necessary means of meeting living expenses or legal expenses, that qualification only operates insofar as the expenses in contemplation are reasonable. Finally, except in one important respect which is the occasion of the present appeal, no standard or measure of reasonableness in relation to either living expenses or legal expenses is provided by the Act. The exception to that proposition is that, in the case of legal expenses, there is a provision whereby the resolution of actual or potential disputes as to what is reasonable may be facilitated by resort to a well-established procedure for dealing with disputes of that kind, that is to say, taxation of costs." (emphasis added)
The present jurisdiction and power of the Supreme Court under the Act to make a restraining order is conferred by the provisions of s.10A(5) of the Act, Proceedings for restraining orders . The Court is required by those provisions to make such an order on an application made under that provision if the application is supported by an affidavit that meets the requirements specified in s.10A(5) or s.10A(6).
Section 10B, on the other hand, is concerned with the scope or contents and effect of restraining orders. As such, it is not, in my opinion, a jurisdictional provision. It is a facultative provision that confers a discretionary power on the Supreme Court to make provision in a restraining order for either or both of the two kinds of expenses identified in s.10B(3)(a) and (b) - living expenses and legal expenses (see relevant extracts of s.10B(3) set out in paragraph [14] above).
Section 10B(2), accordingly, confers a discretionary power upon the Supreme Court to, in effect, exempt out of the "property" or a part of the property, legal expenses incurred for the purposes specified in the section. Similar provisions appeared in s.10(5) of the former Drug Trafficking (Civil Proceedings) Act , New South Wales Crime Commission v Younan (1993) 31 NSWLR 44 at 47. In that case, the Court noted the purposes of that Act, observing (at 49):-
"What is required in each case is an exercise of the judicial discretion pursuant to the subsection. That discretion will take into account the purposes of the Act ( including the preservation of property allegedly derived in whole or in part from criminal activities ) and correlatively, the reasonable demands of a person for access to that person's own property for legal expenses incurred in defending criminal charges." (emphasis added)
The power to exempt specified "property" from the operation of a restraining order under s.10B(3)(b) is not at large. That is evident, inter alia, from the phrase "subject to s.16A" appearing in s.10B(3)(b).
It is to be noted that, unlike s.10B(3)(b), s.10B(3)(a), which is concerned with "reasonable living expenses" , is not subject to restrictive provisions of the type to be found in s.16A.
The legislative history of s.16A may be briefly stated. The Drug Trafficking (Civil Proceedings) Amendment Act 1997 (No 68), Schedule 1, inserted into s.10(5)(b) of the Drug Trafficking (Civil Proceedings) Act the phrase "subject to section 16A" before the phrase "the reasonable" . The provisions of s.10 of the Criminal Assets Recovery Act included a similar provision (that now appears in s.10B(3)) in s.10(5).
Section 16A is structured in terms of the restrictions specified in sub-paragraphs (a) to (e) therein. Each of the sub-paragraphs (a) to (d) commence with the phrase "no provision is to be made ..." . In relation to sub-paragraphs (a), (b) and (c), the Court is required to consider the specified matters as indicated by the phrase "is satisfied" . The Court must, in other words, act on evidence or other material that makes it possible for the Court to reach the required state of satisfaction in relation to the matters to which sub-paragraphs (a), (b), (c) and (d) refer. Given the possible effect of any exemption upon the achievement of the purposes of the Act, which includes restraint on the disposal of property to abide orders under the Act, the Court has a designated role to be performed in that respect. It must have a proper basis upon which it can be satisfied of those matters. That is, in my opinion, consistent with the underlying rationale underpinning s.16A.
Section 27 is different in its terms, function and operation to s.10B(3)(b). It requires the Court to make a proceeds assessment order if the Court "finds" the matters to which reference is made in s.27(2). This includes that "the person" engaged in: "(a) a serious crime related activity involving and indictable quantity, or (b) a serious crime related activity involving an offence punishable by imprisonment for 5 years or more" .
The Court is also required to have regard to the earlier provisions set out in s.27.
In International Finance Trust Company (supra), the Court of Appeal held that the preconditions to which s.27 referred could be satisfied by the consent of the parties. Accordingly, a "person" may make the necessary admissions in relation to the relevant "serious criminal related activity" .
However, as a matter of statutory construction, the mere fact that the Commission may reach agreement with a person referred to in s.10B(3)(b) as to legal expenses and consent to an order to give effect to such an agreement, cannot provide the required basis for the Court to reach the necessary state of satisfaction of the matters specified in s.16A or otherwise conclude that that section has been complied with in other respects.
The matters to which s.16A(1) are directed are not matters for which a person seeking provision for legal expenses can make any "admission" . They differ from matters to which an admission may be made of having engaged in a particular type of criminal activity as in an application for a s.27 proceeds assessment order.
Section 16A(1)(c) requires the Supreme Court, on an application made under s.10B, to be satisfied of the existence of discrete factual matters that enable the Court to conclude that the "restrictions" specified in s.16A(1) do not apply. Section 16A, in particular, makes it a mandatory requirement that a verified Statement of Affairs, addressing specified matters, is filed. The Court will be required to take into account the disclosed property interests and the liabilities of the person in question before any provision for legal expenses is made.
An agreement between the Commission and the relevant person cannot operate to overcome or set at nought the intractable terms of s.16A(1). It would, in my opinion, be open to argument that a consent order for legal expenses of a person referred to in s.10B(3)(b) made in a case where no verified Statement of Affairs as specified in sub-paragraph (d) has been filed would be invalid.
In International Finance Trust (supra), the sole question was whether, where the two affected parties consented to the orders, it was necessary for the Court to carry out its own inquiry as to the satisfaction of any statutory preconditions.
Basten JA noted in that case that the High Court in Thomson Australian Holdings Pty Limited v Trade Practices Commission [1981] HCA 48; 148 CLR 150 at 164 had stated that a superior court generally has powers to make orders by consent without inquiry.
The circumstances in International Finance Trusts Company (supra), however, were such that it was clear that there was an admission as to the relevant matters under s.27(2) and from the record it was apparent that s.27(2B) did not have operation on the facts of that case. However, it is not possible, in my opinion, to conclude that Mr Sim's letter of 16 August 2011 (Exhibit A) or the terms of the proposed consent order contain either admissions or other material that satisfy the preconditions or the exemptions from the restrictions in s.16A(1).
It is appropriate at this point to examine the nature of the issue and the analysis of the High Court in Thomson Australian Holdings (supra).
There, the then Trade Practices Commission sued a number of persons alleging facts which would have constituted contraventions of s.45 of the Trade Practices Act 1974 (Cth). The defendants were corporations which sold liquor by retail from licensed hotels and from certain persons. It was alleged that the defendants were parties to and gave effect to an arrangement or understanding in restraint of trade or commerce whereby they recommenced to each other prices for the sale of liquor to the public from licensed hotels.
The parties to the proceedings agreed on terms of settlement which involved five defendants giving undertakings to the Court in similar terms and to the making against each defendant of consent orders in similar terms.
The appellant in that case disputed that s.80 of the Trade Practices Act authorised the grant of an injunction where the injunction is not limited to the contraventions of s.45.
The High Court determined that the provisions of the Trade Practices Act did not empower the Federal Court to grant injunctions restraining, or relating to, contraventions of the Trade Practices Act in situations falling outside the boundaries drawn by s.80 of that Act.
The Court held that the parties, by consent, could not confer power upon a Court to make orders which the Court lacked power to make.
It was stated in Thomson Australian Holdings (supra) at 164:-
"... In deciding whether consent orders sought are in conformity with legal principle, the Court is entitled to treat the defendant's consent as involving an admission of all facts necessary or appropriate to the granting of the relief sought."
However, this observation is not applicable, in my opinion, to the basis upon which an order may be made under s.10B(3)(b). As earlier discussed, there are, and can be, no "admissions" in the proposed consent order for the purpose of the Court determining whether the restrictions under s.16A apply or not. It is not, as earlier indicated, for the parties to determine whether or not the statutory restrictions apply. That is a matter that can only be resolved by a determination by the Supreme Court (as indicated, for example, by the use of the phrase "is satisfied" in the abovementioned sub-paragraphs of s.16A(1)).
In Thomson Australian Holdings (supra), Gibbs CJ, Stephen, Mason and Wilson JJ observed at 163:-
"... However, we should not wish it to be thought that it was necessary for the appellant to show an absence of jurisdiction or power in order to succeed. The appellant as a party to the proceedings is entitled to argue that any order made by the Court should conform to legal principle. In the ordinary case where a third party in the appellant's situation is not a party to the proceedings, the Court will be justified in making consent orders, if it has jurisdiction and power to do so and the orders are such as to be capable of enforcement. Even in such a case, the Court would be justified in refusing to make the orders if they do not conform to legal principle. And in a case such as the present, when the third party has been joined in the proceedings, the Court should consider and decide whether the orders sought conform to principle ... " (emphasis added)
It is, in my opinion, equally necessary for an order under s.10B(3)(b) to conform with the specified statutory requirements.
Conclusion
I have concluded that, unlike the position with proceeds assessment orders under s.27, an order under s.10B(3)(b) of the Act is not one that can be made by consent of the Commission and another. It requires the Court itself, on a proper basis, to determine that an order under s.16A(1) of the Act meets the exemptions from the legislative requirements.
Accordingly, I do not consider that an order may be made by consent pursuant to the proposal set out in Exhibit A without evidence upon which the Court may consider the statutory restrictions.
The refusal of relief sought in the defendant's notice of motion would not, of course, preclude a further application being made, properly supported by evidence, establishing the matters to which s.16A is directed.
Accordingly, before proceeding to make final orders, I have decided the preferable course is to stand the motion over to a date to be determined in accordance with the paragraph below.
Order
The proceedings are stood over for mention and directions on a date convenient to the parties by arrangement with my Associate.
Decision last updated: 11 November 2011
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