New South Wales Crime Commission v Kane (No 3)

[2015] NSWSC 1963

Supreme Court

New South Wales

Medium Neutral Citation:	New South Wales Crime Commission v Kane (No 3) [2015] NSWSC 1963
Hearing dates:	4 December 2015
Date of orders:	18 December 2015
Decision date:	18 December 2015
Jurisdiction:	Common Law
Before:	Campbell J
Decision:	Refuse a restraining order in respect of the defendant’s interest in the properties in paragraphs 1 (the Neville property), 4 (the St Marys property), and 5 (the Mt Druitt property) of Schedule One to the summons. Grant liberty to the parties to apply if so advised in respect of previous orders. The plaintiff to pay the defendant’s costs incurred from 12th November 2015 to 18th December 2015 after they have been agreed or assessed. Release Mr Kane from the undertaking given to the Court in respect of the preservation of the properties in paragraphs 1, 4 and 5 of the schedule to the summons.
Catchwords:	CRIME – application for restraining orders by NSW Crime Commission – where the interest in property the subject of the application is serious crime derived property of another person not the defendant – whether there are reasonable grounds for the authorised officer’s suspicion STATUTORY INTERPRETATION – s10A Criminal Assets Recovery Act 1990 (NSW) – whether there is scope for judicial discretion under that section for the making of orders
Legislation Cited:	Criminal Assets Recovery Act 1990 (NSW); Crimes Act 1900 (NSW); Criminal Assets Recovery Amendment Act (Unexplained Wealth) Act 2010 (NSW)
Cases Cited:	George v Rockett [1990] HCA 26; 170 CLR 104; Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; 174 A Crim R 124; Hussien v Chong Fook Kam [1970] AC 942; International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319; New South Wales Crime Commission v Kane [2015] NSWSC 1648; New South Wales Crime Commission v Kane (No 2) [2015] NSWSC 1650; Powell v Lenthall [1930] HCA 43; 44 CLR 470; Queensland Bacon Pty Ltd v Rees [1966] HCA 21; 115 CLR 266; Re Bolton; Ex parte Beane [1987] HCA 12; 162 CLR 514
Category:	Consequential orders (other than Costs)
Parties:	New South Wales Crime Commission (Plaintiff) David Stuart Kane (Defendant)
Representation:	Counsel: A. Miranda (Plaintiff) P. David (Defendant) Solicitors: New South Wales Crime Commission (Plaintiff) Rowlandson & Co Solicitors (Defendant)
File Number(s):	2015/318326
Publication restriction:	Non Publication orders

judgment

1. By summons filed 28th October 2015, the New South Wales Crime Commission (the Commission) seeks an order pursuant to s 28A of the Criminal Assets Recovery Act 1990 (NSW) that the defendant (Mr Kane) pay to the Treasurer an amount assessed by the Court as the value of the unexplained wealth of Mr Kane. This is the only principal relief sought against Mr Kane within Part 3 of the Act. In accordance with the usual practise in matters commenced under the Act, the Commission also seeks interim and ancillary relief in support of its claim for principal relief.

2. Included amongst the interim relief sought is a restraining order under s 10A of the Act. That relief was sought in these terms:

An order pursuant to s 10A [of the Act] that no person is to dispose of, or otherwise deal with or attempt to otherwise deal with the interest in property (within the meaning of “interest in property” as defined in section 7 [of the Act]) of [Mr Kane], in the property specified in Schedule One hereto.

The property specified in Schedule One consists of 5 parcels of real property, which I will describe for the purposes of this judgment as follows:

1. The Neville property;

2. The Neville hotel;

3. The Dural property;

4. The St Marys property; and

5. The Mt Druitt property

Procedural background

3. The matter first came before me on 28th October 2015 as a routine application made when I was sitting as duty judge. Several of these applications may be made to the duty judge each week. Upon reading the evidence put forward in support of the application, I formed the view that the matter had some unusual features, I was persuaded, however, to make a restraining order in respect of the Dural property only and adjourned the matter for further hearing on 29th October 2015: [2015] NSWSC 1648 (publication restriction applies).

4. On the resumed hearing, I declined to make any further orders and directed, under s 10A(4) of the Act that notice of the application be given to Mr Kane before it was dealt with further: [2015] NSWSC 1650 (publication restriction applies).

5. The matter was fixed for further hearing before me on 4th December 2015, on which occasion Mr Kane appeared by and with Ms David of counsel. For reasons I will refer to below, Mr Kane consented to the restraining order being extended to cover his interest in the Neville Hotel, and consented to the making of ancillary orders under s 12 including the provision of particulars sought by the Commission and submitting to examination on oath before the Registrar.

6. Having had the advantage of fuller argument in the matter, and more time for consideration of it, I now have misgivings about whether any order under s 10A, and s 12 should have been made. That is to say I have real misgivings about whether the statutory conditions required to be satisfied under s 10A(5) of the Act before a restraining order is made are made good by the evidence read in this case.

The legislation

7. So far as is material, s 10A of the Act, the power invoked by the Commission to obtain the interim relief sought, is in the following terms:

10A Proceedings for restraining orders

Application for order(1) The Commission may apply to the Supreme Court, ex parte, for a restraining order in respect of specified interests, a specified class of interests, or all the interests, in property of any person (including interests acquired after the making of the order).

…

(5) Determination of applicationsThe Supreme Court must make a restraining order if the application for the order 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 (1)—the authorised officer suspects that:

(i) the person whose interest is the subject of the application has engaged in a serious crime related activity or serious crime related activities, or

(ii) the person whose interest is the subject of the application has acquired serious crime derived property because of any such activity of the person or of another person, or

(iii) the interest is serious crime derived property,

and stating the grounds on which that suspicion is based, and

(b) (Repealed)

…

and the Court considers that, having regard to the matters contained in any such affidavit and any evidence adduced under subsection (4), there are reasonable grounds for any such suspicion.

(7) Undertakings by State as to costs or damagesThe 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 as to the payment of damages or costs, or both, in relation to the making and operation of the order.

(8) 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 as to the payment of damages or costs, or both, as the Court requires.

8. Restraining order is defined by s 10 in the following terms:

10 Nature of “restraining order”

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.

9. Section 28A confers the power on the Court to make an unexplained wealth order in the following terms:

28A Making of unexplained wealth order

(1) The Commission may apply to the Supreme Court for an unexplained wealth order requiring a person to pay to the Treasurer an amount assessed by the Court as the value of the unexplained wealth of the person.

(2) The Supreme Court must make an unexplained wealth order if the Court finds that there is a reasonable suspicion that the person against whom the order is sought has, at any time before the making of the application for the order:

(a) engaged in a serious crime related activity or serious crime related activities, or

(b) acquired serious crime derived property from any serious crime related activity of another person (whether or not the person against whom the order is made knew or suspected that the property was derived from illegal activities).

(3) A finding under this section need not be based on a reasonable suspicion as to the commission of a particular offence and can be based on a reasonable suspicion that some offence or other constituting a serious crime related activity was committed.

(4) The Supreme Court may refuse to make an unexplained wealth order, or may reduce the amount that would otherwise be payable as assessed under section 28B, if it thinks it is in the public interest to do so.

(5) Engagement in a serious crime related activity or the acquisition of serious crime derived property referred to in subsection (2) extends to engagement in an activity or the acquisition of property before the commencement of this section.

Section 28A(2)(b) is of particular potential relevance to this case. The words in parentheses are of significance. An order is to be made if the person has acquired serious crime derived property from any serious crime related activity of another person whether or not the first person knew or suspected that the property is crime derived.

10. Section 9 of the Act defines “serious crime derived property” in broad and detailed terms. I will not set it out in full. It is sufficient for present purposes to bear in mind that ss (1) provides that an interest in property is serious crime derived property if, inter alia, it was wholly or partly acquired using serious crime derived property. In the present case ss (3) and part of ss (5) have relevance:

9 Meaning of “serious crime derived property” and “illegally acquired property”

…

(3) Once an interest in property becomes serious crime derived property it remains serious crime derived property even if the interest is disposed of or otherwise dealt with (including by being used to acquire an interest in property), but this is qualified by subsection (5).

…

(5) An interest in property ceases to be serious crime derived property or illegally acquired property:

(a) when it is acquired by a person for sufficient consideration without knowing, and in circumstances that would not arouse a reasonable suspicion, that the interest was, at the time of acquisition, serious crime derived property or illegally acquired property…

The evidence in the application

11. The Commission relies upon the affidavit of Katie Elaine Bourne sworn on 21st October 2005 and the attached Exhibit KEB – 1. The affidavit has some typographical errors, largely corrected by a subsequent affidavit of 28th October 2015. An uncorrected error is that paragraph 4(1) is incomplete due to an error in printing. However, the overall sense of the evidence is apparent from a consideration of Exhibit KEB – 1 and by reference to the Statement of Facts and Circumstances handed up as part of the Commission’s case. The missing material is obvious from paragraph 3(1)(b)(i) of the Statement of Facts and Circumstances. It consists of a statement of suspicion of the engagement in serious crime related activities of another person. It is not the only statement of that suspicion with regard to that person in the affidavit.

12. It is important at this stage to point out that the ground relied upon by the Commission to found the restraining order sought is the ground expressed in s 10A(5)(a)(1)(ii), set out above at [7]. I adapt the statutory language to the circumstances relied on by the Commission in this case in the following terms:

Ms Bourne suspects that Mr Kane has acquired serious crime derived property because of serious crime related activities of another person (who it is unnecessary to name for the purposes of the present application).

13. I am satisfied, in accordance with s 10A(5), that Ms Bourne is an authorised officer as defined in s 4 of the Act for the purpose of s 10A(5) as she has been authorised in writing by the Commission to act as an authorised officer for the purposes of s 10A and Part 4 of the Act (Affidavit at [1]). Part 4 is concerned generally with the Commission’s information gathering powers.

14. Ms Bourne suspects that the other person has engaged in serious crime related activity as defined in s 6 of the Act. The relevant activities are fraud offences, punishable by a term of imprisonment of 5 years or more within the meaning of s 6(2)(d) of the Act. Those offences are of obtaining money by deception; obtaining a financial advantage; causing financial disadvantage; and dealing with the proceeds of crime contrary to the provisions of ss 178BA(1) (as then in force), s 192E1(b) and s 193B(2) of the Crimes Act 1900 (NSW) respectively.

15. In summary, the detailed evidence in Exhibit KEB – 1 demonstrates that the police have charged the other person with 105 counts of these fraud offences and associated money laundering offences. The victim is his former employer. In short, he was employed by a large construction company as an accountant and by means which it is unnecessary to go into for present purposes, he was able, by a tortuous route, to direct $2,108,083.40 in 82 fraudulent transactions to bank accounts in his name or the name of another member of his family. Mr Kane has not been charged with anything in relation to these matters and it is not suggested or even alleged that he, himself is directly engaged in any serious crime related activity.

16. What the evidence does suggest is that the police allege that some of the proceeds of the other person’s suspected serious crime related activity may have been used to acquire the Dural property and perhaps, at least in part, fund the business conducted through a company named Total Excavations and Demolition Pty Ltd of which the other person and Mr Kane are directors.

17. The evidence grounding Ms Bourne’s suspicions is largely, not wholly, sourced to admissions made by the other person in a lengthy record of interview with police before he was charged.

18. The other person was employed by the large construction company between 28th May 2001 and 1st November 2013.

19. The evidence also demonstrates that Mr Kane holds an eight-tenth share of the Dural property as tenant in common with the other person and the family member each holding a one-tenth share. The property was acquired by contract dated 18th November 2011, settlement on 17th January 2012, and the transfer was registered on 7th February 2012 (Exhibit KEB – 1, tab 5 pp 257 – 9).

20. The other person explained the circumstances of Mr Kane’s acquisition of the interest in the Dural property in his record of interview with police, given in July 2015. The other person and his family were then living at the Dural property. When asked about his current occupation, the other person said he had started an excavation company in May 2013 with a “friend of mine”, Mr Kane (Exhibit KB – 1, p 45). At that latter time he was still employed by the large construction company. His account seems to be that the company was set up in relation to a proposed development of the Dural property (Exhibit KEB – 1, p 46). The record of interview is extremely discursive, somewhat disjointed and difficult to follow because of the interjection of questions by the investigating police disrupting the narrative. The account seems to be that the excavation company was set up to do work at the Dural property. The other person said that Mr Kane “pretty much” bought the Dural property and then he and a family member “put in with them … there was a lot of earth work to be done on the place”. Initially they had someone else doing excavation work but “it was just so expensive that we couldn’t afford … we just decided to set up the business and buy a machine” (Exhibit KB – 1, p 47) but they did not advertise for business. In fact, only one job was done for another builder who was a friend of Mr Kane’s. He said “from there the business started”.

21. The other person said in fact he borrowed the money used to acquire Dural from ANZ Bank (Exhibit KEB – 1, p 59). The amount of the loan was $947,369. Those funds were put towards the purchase price, stamp duty and “everything on top” (Exhibit KEB – 1, p 60). When challenged about whether Mr Kane had purchased the Dural property as he seemed to suggest initially, the other person said “we were all together. He’s a builder…so we used … our house to be able to get the property and then he, so we’ve got a … solicitors document to show that … he was entered [to undertake] all the renovations and everything on the property”.

22. As happens with many “developments” it all “went sour” because of “issues with the earthworks and everything” (Exhibit KEB – 1, p 61). Because of this he sold his home and moved into the Dural property where he was still living. He seemed to say he said he used the proceeds of this sale to pay-out the loan from ANZ. In answer to a question whether he still had the loan for Rozella he said (Exhibit KB – 1, p 63):

I don’t even know where that’s at now. That got cleared out again when we got another loan, we took out another loan for six, so, so [Mr Kane] ended up selling, he had his own properties, he ended up selling those to then help to pay out the rest of the home loan so now, we’ve just got one loan of six hundred thousand…or six hundred and fifty thousand.

This loan was apparently taken out by Mr Kane with his bank in the name of each of the registered proprietors of the Dural property. Mr Kane’s properties were put up as security for the Bank mortgage (Exhibit KEB – 1, p 64). This was necessary because the Dural property was “still a construction site” and the Bank did not regard it as adequate security.

23. The other person agreed with a suggestion by police that when the Dural property was purchased “basically” the other person and the family member “financed it and it was agreed that [Mr Kane] would build it” (Exhibit KEB – 1, p 64). Mr Kane was covering “all the materials and all the labours and everything with his apprentices” (Exhibit KEB – 1, p 65). For this reason he was given the 80 per cent interest: “he was doing all the work”. The Dural property was not habitable when it was purchased (Exhibit KEB –1, p 66). Mr Kane assured the other person “that he’d be able to…fix it up”.

24. It is relatively clear that the other person agreed with police that the money derived from his ongoing fraud was used to pay off his mortgage on his previous home and doubtless fund other aspects of his lifestyle. There may be evidence that some funds were used to purchase equipment in the excavation business. But he denied that he “put 80 per cent of the Dural property in [Mr Kane’s] name” to hide the fact that he was using “fraudulently obtained funds … to purchase it” (KEB – 1, p 136).

25. He confirmed that the initial arrangement in relation to the Dural property was that he and a family member would make the repayments on the loan with ANZ and Mr Kane would provide “his labour and everything for … the few years … he was paying the labour of his boys and himself”. The amount of the ANZ repayments was $4,000 per fortnight (KEB – 1, p 138). The total amount involved in his fraud, as I have said, is $2,108,082.40. All he had left of this was his investment in the Dural property (Exhibit KEB – 1, p 140). The other person maintained that Mr Kane trusted him and knew nothing about his fraud (KEB – 1, p 146).

26. Police believe as a result of their investigations that of the 82 fraudulent transactions committed by the other person, 25 totalling $593,134.03 were for the personal use of the other person and a family member some of which, not currently specified, went towards the Dural property in some way or to the use of Total Excavations and Demolition Pty Ltd. Police believe that the loan to the ANZ Bank of over $950,000 for the Dural property was paid off after the other person’s redundancy out of the proceeds of sale of the previous property the acquisition of which was financed with the proceeds of the fraud. (Exhibit KEB – 1, tabs 2 – 4).

23. On the basis of the material I have summarised, Ms Bourne swears that she suspects that Mr Kane has acquired serious crime derived property because of the serious crime related activity of the other person. I accept Ms Bourne has that suspicion and that she has fully set out the grounds on which that suspicion is based in [7] of her affidavit which accords with the material I have summarised above.

Are there reasonable grounds for the authorised officer’s suspicion?

28. Although he appeared by Counsel at the hearing, Mr Kane did not adduce any evidence in accordance with s 10A(4). The question then is whether the material exhibited with Ms Bourne’s affidavit, which I have summarised above, provides reasonable grounds for her suspicion.

29. It is impossible to answer this question without examining the separate components making up the s 10A(5)(a)(ii) ground, always bearing in mind that the suspicion of the state of affairs described in the sub-paragraph is a composite concept. The first question is whether Mr Kane’s interest in the Dural property was acquired using serious crime derived property. If yes, the second question is whether he acquired that interest because of the other person’s serious crime related activity.

30. When answering these questions whether separately or together, there are a number of things to bear in mind. First, the starting point is whether the authorised officer, not the Court, suspects the state of affairs referred to in ss (5)(a)(ii) exists. As I have said, I am satisfied that Ms Bourne has that suspicion. Secondly, “suspects”, or suspicion, connotes a state of mind, generally speaking, well short of actual knowledge, and somewhat short of belief; suspicion has been referred to as a state of conjecture or surmise where proof is lacking: Hussien v Chong Fook Kam [1970] AC 942 at 948 per Lord Devlin.

31. Thirdly, the question for the Court is whether there are reasonable grounds for the officer’s suspicion; I emphasise not whether the Court on reviewing the material entertains the same suspicion. Fourthly, and conversely, if the material does not incite the relevant suspicion in the mind of the judge it may be that reasonable grounds are lacking. Fifthly, in deciding whether reasonable grounds for the officer’s suspicion exist, the Court will bear in mind that the provisions of s 10A impose a significant restraint upon the right of a person to deal with his or her own property. This is a fundamental right which should be displaced only to the extent necessary to give effect to the statute.

32. Sixthly, it is “seldom helpful” to attempt to define what are “reasonable grounds for suspicion” (Powell v Lenthall [1930] HCA 43; 44 CLR 470 at 478). But in Queensland Bacon Pty Ltd v Rees [1966] HCA 21; 115 CLR 266 at 303 Kitto J said:

A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to “a slight opinion but without sufficient evidence”, as Chamber’s Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which “reason to suspect” expresses in [the section] is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes – a mistrust of the payer’s ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between payee and the other creditors.

(See also George v Rockett [1990] HCA 26; 170 CLR 104 at 115 – 6)

33. In George v Rockett (at 112), a unanimous court made clear that “when a statute prescribes that there must be “reasonable grounds” for a state of mind – including suspicion and belief – it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.” (Emphasis added.)

34. What is called for is an evaluative judgment based on a consideration of all of the circumstances appearing from the material available to the officer and put before the Court (and where appropriate from evidence adduced under s 10(4)). In a sense the Court is evaluating the exercise of judgment by another, not exercising a discretion for itself, or afresh: Hadjigeorgiou v New South Wales Crime Commission [2007] NSWCA 197; 174 A Crim R 124 at [43] by Santow JA.

35. Seventhly, a restraining order if made is an interim measure obtainable only in circumstances where the Commission proffers the usual undertaking as to damages. But once made, subject to s 10C, the order continues until the application for principal relief is disposed of, and sometimes beyond: s 10D; and s 20. Eighthly, a person may be taken to have acquired serious crime derived property from serious crime related activity of another person whether or not they knew or suspected the property was derived from illegal activities: s 28A(2)(b). Ninthly, there is no discretion to refuse an order; if the statutory conditions are satisfied as a matter of evaluative judgment, the Court is legally required to make a restraining order: International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; 240 CLR 319 at 360 [77].

36. As Ms Miranda, solicitor, who appeared for the Commission pointed out s 10A takes its present form from amendments made by the Criminal Assets Recovery Amendment Act (Unexplained Wealth) Act 2010 (NSW). I will refer to her argument in more detail below. The same amending Act enacted ss 28A, 28B and 28C dealing with the making of unexplained wealth orders. In his agreement in principle speech, the Minister for Police and Minister for Finance explained the purpose of the legislation in the following terms:

Our new provisions for unexplained wealth will not affect ordinary citizens who are not criminals and who are lucky enough to experience a financial windfall. That is stating the obvious The proposals are clearly aimed at those suspected criminal persons, or their family members and associates who law enforcement discovers have wealth well in excess of that which their legitimate occupations could explain. The court will only consider wealth about which the Crime Commission has presented evidence.

And also

The bill also clarifies that the suspicion of the authorised officer may also attach to the serious crime-related activities of another person. This will mean an unexplained wealth order may be obtained for persons who are suspected of having derived their wealth from the crimes of their family or associates regardless of whether they have been able to keep their own noses clean. These provisions will ensure that when serious criminals attempt to hide their money by giving it away to their family or allies (who may well be aware of the source of that wealth) those persons are still made to account for it.

37. The explanatory notes to the amendments to s 10A explain that the provisions were to:

[E]nable a restraining order to be sought over all the interests in property (and not just specified interests) of a person suspected of deriving proceeds from serious crime related activities as a consequence of the application of the unexplained wealth order provisions to such a person.

I bear in mind Ms Miranda’s reference to Re Bolton; Ex parte Beane [1987] HCA 12; 162 CLR 514, and the principle that “the words of the Minister must not be substituted for the text of the law … The function of the Court is to give effect to the will of Parliament as expressed in the law”.

38. Bearing all of these considerations in mind, I am not satisfied that there are reasonable grounds for Ms Bourne’s suspicion that Mr Kane’s interest in the Dural property was acquired by him as serious crime derived property because of the serious crime related activities of the other person.

39. I am satisfied that there are reasonable grounds for Ms Bourne’s suspicion that the other person has engaged in serious crime related activities. For what it is worth, I would also be satisfied there are reasonable grounds for Ms Bourne’s suspicion that his interest in the Dural property is serious crime derived property. But bearing in mind that an interest in property ceases to be serious crime derived property when it is acquired by a person for sufficient (not adequate) consideration without knowing, and in circumstances that would not arouse a reasonable suspicion, that the interest was, at the time of acquisition, serious crime derived property or illegally acquired property, I am not satisfied that the Commission has made good its case.

40. It may well be that the other person’s statements to the police should be treated with a deal of circumspection for this purpose. He was certainly motivated to protect his family member. He may have wished to protect Mr Kane, or his own interest in the Dural property. But discounting what he said for reasons like these does not provide a basis for suspecting the opposite of his assertions.

41. What the other person did say suggests that he and Mr Kane entered into a commercial relationship for the development of the Dural property. Notwithstanding the questions posed to that effect by the police officer, there is just nothing to suggest that Mr Kane’s name was put on the title as a subterfuge to hide the other person’s true interest. Quite the contrary. Although the development does not seem to have been successful from what the other person said about it, there is nothing particularly unusual or suspicious arising from that circumstance. Rather, the material suggests that the arrangement was that the other person would put up the capital to acquire the property and Mr Kane would provide the labour and materials to bring the development to fruition. Even if, without knowing more about it, the arrangement, at first blush, appears to be more advantageous to Mr Kane than the other party, there is nothing to suggest that the consideration he brought i.e. the promise to provide labour and material, was insufficient, as opposed to inadequate, for the advantage he would potentially receive. There is nothing in any of the material put before the Court to suggest Mr Kane knew, or ought to have been suspicious, of the source of the capital. Apparently he had performed previous work for the other person on the latter’s home. He would probably have been aware that the other party was raising funds to buy the Dural property by way of a bank loan. It is not clear whether the other home which had been paid off from the proceeds of the fraud was also put forward as security. This seems to be unlikely as its sale was used to discharge the ANZ loan after the other party was made redundant from his employment. From these circumstances it appears unlikely that the Dural property was purchased using the proceeds of the other person’s fraud. And if that is so, there is no reason to suspect that Mr Kane’s interest was wholly or partly acquired using serious crime derived property. The funds from the ANZ bank were lawfully raised. But more importantly he seems to have given sufficient consideration, on the imperfect materials before me, for the acquisition of his interest by way of his promise to undertake the development, and had no reason to suspect the other party’s engagement in his serious crime related activities.

42. From this analysis I am not satisfied there are reasonable grounds for Ms Bourne’s suspicion. The material available to the authorised officer did no more than provide “a reason to consider or look into the possibility” that Mr Kane acquired some serious crime derived property because of the other person’s serious criminal activities. It did not rise to the relatively low level of supplying reasonable grounds for “an actual apprehension or fear” that the state of affairs required under s 10A(5)(a)(ii) existed.

A question of law

43. Given the aforegoing finding of fact, it is strictly unnecessary to resolve the principal question of law which was agitated before me which was whether, where s 10A(5)(a)(ii) is relied upon, it must be shown that the authorised officer suspects, and there are reasonable grounds for that suspecting, that each specified interest, specified class of interest, or all of the person’s interests sought to be made the subject of the restraining order were acquired as serious crime derived property because of any serious crime related activity of that person or another.

44. The Commission argued that it need only establish that there are reasonable grounds for the relevant suspicion and in that event, a restraining order must be made in respect of all of the interests in property the subject of the application. It submitted that such a broad approach was necessary to give effect to the provisions of s 28A. In particular, it argued that s 28A(2)(b) justified this approach because the threshold for making an unexplained wealth order was reasonable suspicion that the person against whom the order was sought has, at any time before the making of the application for the order, acquired serious crime derived property from any serious crime related activity of another person whether or not the person against whom the order is sought knew or suspected the source of the property. On the material before the Court, as disclosed in the police record of interview, a portion of the proceeds of the 25 transactions totalling $593,000 may have been used for the Dural property or for Total Excavations and Demolitions Pty Ltd, and there is currently a mortgage on the title (which may have been raised by Mr Kane, the mortgage raised by the other person having been discharged). In the circumstances, Mr Kane’s interest in the Dural property may be insufficient to satisfy any unexplained wealth order that may be made against him in due course. Section 10A operates in aid of, in this case, s 28A. The Court’s power is wide and the Commission has given the usual undertaking as to damages.

45. The Commission also argued that this expansive approach is supported by the legislative history of the provision. Before its amendment in 2010, s 10A was expansive in relation to the interests in property of a person suspected of having engaged in serious crime related activity, but restricted in respect of other persons. In respect of the latter category of person, under the former s 10A(1)(b), the Commission could only apply for a restraining order in respect of specified interests, or a specified class of interest in the property of those other persons. But the current provision applies alike in respect of both categories of person. Moreover, the former s 10A(5)(b) was also more restricted than the current provision. The relevant suspicion was that the interest (the subject of the application) is serious crime derived property. From these considerations only an interest in property of a person not suspected of having engaged in serious crime related activity, which was serious crime derived property could be made the subject of a restraining order.

46. Mr Kane argued, having regard to the purpose of the amended Act as explained in the agreement in principle speech, that the combined effect of s 10A(1) and 10A(5)(a)(ii) does not provide a basis for restraining property other than property that can reasonably be suspected of being serious crime derived property. That is to say, a necessary condition of the making of a restraining order is that the officer suspects (on reasonable grounds) that each of the interests sought to be restrained is “an interests which reflects the unexplained wealth of the Defendant… by reason of the serious crime related activities” of another. Mr Kane pointed out that there is nothing in the evidence to found any suspicion that his interest in the three remaining properties was serious crime derived property because of the serious crime related activities of the other person. It was argued that given that the principal relief sought is an unexplained wealth order, it was only that wealth, which the Commission suspects to be the takings of serious criminal activity, which can be the subject of those proceedings. It followed that only such interests in property can be the subject of a restraining order in aid of s 28A.

Decision on point of law

47. The object of the Act is to enable the State to claw back the ill-gotten gains of criminals for the public benefit. The Act enables this to be done, as s 9 demonstrates, even when the immediate benefit obtained has been converted into other property or put to work, even legitimate work, to produce income from which other assets might be acquired. All of these things, the original gain, the converted gain, the profit, and the new assets into whomsoever’s hands they come, subject to s 9(5), fall within the definition of serious crime derived property. The 2010 amendments extended the reach of the Act into the unexplained wealth of family, associates and allies of serious criminals. After all, putting property in the name of a family member, associate or ally is an old and simple means of a criminal attempting to cover his tracks, or hide his ill-gotten gains. Given these objects as Santow JA observed in Hadjigeorgiou (at [39]): “The legislature clearly intended … an intrusion into personal and property rights” by way of restraining order “where there are reasonable grounds for any such suspicion” as sworn to by the authorised officer (original emphasis). Moreover, it may be that an “innocent” person who has acquired serious crime derived property from a serious criminal may himself or herself convert that property to something else or use it to acquire other assets. Subject to s 9(5), the new interest too is serious crime derived property. In the present case, Mr Kane concedes that he has used his interest in the Dural property to raise funds to acquire the Neville Hotel. A mortgage, I infer likely, to secure those funds, is registered on the title of the Dural property (Exhibit KEB – 1, p 257).

48. Bearing in mind the objects and purposes of the Act, and the width of the Court’s power to grant principal relief under Part 3 of the Act, the legislative history does favour the argument advanced by the Commission. To these considerations, I would add that the enactment of sub-paragraph (iii) of paragraph (a) provides additional contextual support for the Commission’s argument. It provides a third ground of suspicion as a condition of making a restraining order in these terms (I repeat): “the interest is serious crime derived property”. The existence of this express ground for making a restraining order limited to interests which are serious crime derived property strongly suggests that Parliament does not intend a restraining order based on the grounds stated in sub-paragraphs (i) and (ii) should be so limited.

49. For these reasons, I accept the Commission’s argument that a restraining order founded on the ground provided by sub-paragraph (ii) is not limited to an order over the interests in property of a person which are “acquired serious crime derived property”.

Is there any scope for judicial discretion?

50. If the conditions contained in ss (5) are satisfied, the Court “must make a restraining order”. But does it follow that the Court must make the restraining order sought by the Commission? Section 10A(1) confers a “discretion” on the Commission to apply for one of three types of restraining orders: a restraining order in respect of specified interests in property of any person; a restraining order in respect of a specified class of interests in property of any person; or a restraining order in respect of all of the interests in property of any person. Before the 2010 amendments, the Commission was not empowered to apply for a restraining order in respect of all of the interests in property of a person who was not suspected of having engaged in serious crime relates activity like Mr Kane. In that case, as I have said, the Commission could only apply for an order over specified interests which were “serious crime derived property”. As pointed above, that has changed.

50. Although the Court must make a restraining order if the ss (5) conditions are satisfied, need that order conform to the order sought by the Commission? That is to say, does there remain a discretion as to the form the order should take?

51. The making of orders under s 10A is an exercise of judicial power: International Finance Trust. By majority the High Court of Australia held that the provisions of the former s 10 of the Act (the equivalent of s 10A) and related provisions established a “distinct regime” for the making and operation of restraining orders which excluded “the general powers and traditional procedures of the Supreme Court in its administration of equitable relief” (International Finance Trust at 388 [165] per Heydon J; at 350[44] per French CJ; 360 [79] per Gummow and Bell JJ). That distinct regime in its then form was held to be “repugnant in a fundamental degree” to the integrity of the Supreme Court as part of the national judicial system: 367 [98] per Gummow and Bell JJ. Quite apart from that constitutional conclusion, it was held that the “plain intendment to establish a distinct regime” (360 [79] per Gummow and Bell J) ousted the presumption that the legislature intended to take the Supreme Court as it found it “with all its incidents”. But it may be one thing to say that s 10A(5) confers upon the Court a power with a duty to exercise it if a Court decides the conditions attached to the power are satisfied (360 [77] per Gummow and Bell JJ), and another to say that if the conditions are satisfied the Court must make an order in the terms and subject to the conditions sought by the Commission (cf International Finance Trust at 372-3 [120] 378 [135] per Hayne, Crennan and Kiefel JJ). Section 10 defines “restraining order” by reference to “an interest in property to which the order applies”. Who decides to which interests the order will apply? The Commission in formulating its application pursuant to s 10A(1); or the Court in making the order in discharge of its duty under s 10A(5)?

52. As I have pointed out previously, the restraining order in this case is sought in aid of an unexplained wealth order. Under s 28A, subject to a public interest exception, the Court must make an unexplained wealth order if it finds there is a reasonable suspicion that the defendant, inter alia, acquired serious crime derived property from any serious crime related activity of another person whether the defendant knew or suspected the property was so tainted. If that condition is satisfied, the amount of the defendant’s unexplained wealth is the whole or any part of the current or previous wealth of the defendant which the Court is not satisfied on the balance of probabilities is not, or was not, illegally acquired property or the proceeds of an illegal activity. The burden of proof is on the defendant. The expression “illegally acquired property” (also defined under s 9 of the Act) connotes a much less demanding threshold of criminality than the expression “serious crime derived property”. The scheme of the legislation is then if the Commission calls evidence which engenders in a judge of the Supreme Court a reasonable suspicion that a person, even “innocently”, has acquired a single item of serious crime derived property that person is put on his or her proof to justify himself or herself not simply that all of his or her wealth is not serious crime derived property, but the whole of his or her property present and past was acquired entirely lawfully. This is a remarkable interference with the personal and property rights of the individual. In Mr Kane’s case, potentially, it means that he must not only prove that the Dural property is not covered by s 9, but also that none of his other property is covered by s 9 in the extended sense of “illegally acquired property”.

53. The breathtaking reach of these provisions cuts both ways as contextual indicators of the meaning of s 10A. On the one hand, their potential reach is a reason for interpreting s 10A as leaving to the Commission the scope of the orders it will seek in a given case and requiring the Court to make the order sought if the s 10A(5) conditions are satisfied. On the other hand, the potential reach of an unexplained wealth order is a reason for ascribing a meaning to s 10A which preserves the power of the Court acting judicially to prevent overreach of administrative action. On this basis, the Commission has a discretion as to the scope and terms of the orders sought but the Court retains the judicial power of making orders appropriate to all the circumstances of the case established by the evidence.

54. There is a minor, but significant contextual indication that the second option is to be preferred. That is the use of the indefinite article in the phrase “a restraining order” in the chapeau to s 10A(5); the Court was not required to make “the” restraining order sought by the Commission; the Court is only required to make a restraining order. The definition of restraining order contained in s 10 supports an interpretation which confers a discretion on the Court, to be exercised judicially, and for proper purposes, as to the terms in which the order which must be made should be made. In my judgment this is the preferable approach and I will apply it in this case.

55. Were I satisfied that, properly assessed, the material contained in Exhibit KEB – 1 provided reasonable grounds for any such suspicion as that in fact held by Ms Bourne, I would decline to make a restraining order in respect of the three remaining properties. There is simply no reason to suppose that the other properties are in any way connected with the serious crime related activities of the other person or anybody else. There is no rteason to suppose they are unexplained wealth. The Neville property was acquired in March 2012, admittedly after Mr Kane formed his business relationship with the other person, but at a time when the Dural property was heavily mortgaged. It was purchased for a relatively modest price by Australian standards by a man in business as a builder and presumably having access to finance.

56. The St Marys property was acquired in 2009 before there is any evidence of Mr Kane’s involvement with the other person, again there is no suggestion in any way in any of the material that it may be illegally acquired property. The Mt Druitt property was acquired in 2010 and same observations as made previously apply. These latter two properties are owned in concert with other members of Mr Kane’s family. Although only his interest is sought to be restrained, and their interests are modest, in reality it would be extremely difficult for him to deal with those properties without the consent of his other family members.

57. I accept that it is possible that any unexplained wealth order that may eventually be made will extend beyond the value of the Dural property. But there is no material to suggest that Mr Kane will divest himself of the properties to defeat any order and the argument that even real property may be dealt with, at least by unregistered dealing, with expedition so as to deprive the Commission of its availability is, I think it should be recognised, more theoretical than real. There is no reason to suppose that an assets preservation order would have been called for under Uniform Civil Procedure Rules 2005. For these reasons I would limit any restraining order I am required to make to the Dural property and the Neville Hotel.

Conclusion

59. When making a restraining order in respect of Mr Kane’s interest in the Dural property on 28th October 2015, I said the following (at [13] – [14]):

On the other hand, although there was no evidence to suggest that his involvement in the joint venture is anything other than innocent, on the material before me, it is appropriate to make a restraining order ex parte in relation to Mr Kane’s [interest in] the Dural property given the strength of the material presented to me about the serious crime related activities, in particular of [the other person], and the circumstance that the evidence suggests that funds derived from his serious crime related activity represent the whole of the purchase money for the Dural property.

Doubtless it still remains that Mr Kane, to use the old fashioned expression, may well be a bona fide purchaser without notice of [the other person’s] engagement in serious crime related activity. There are reasonable grounds for the suspicion described in s 10A(5)(a)(ii) concerning Mr Kane’s interest in the Dural property. The grounds for that suspicion have been fully set out and I, having considered the material for myself, regard those grounds as reasonable.

60. I extended that order on 4th December 2015 to include the Neville Hotel property and ancillary orders under s 12 of the Act because Mr Kane consented. As stated above, in respect of the Neville Hotel property it was explained that the funds for its acquisition in 2015 were raised against Mr Kane’s interest in the Dural property.

61. Mr Kane did not seek to adduce any evidence in accordance with s 10A(4) of the Act additional to that lead by the Commission nor did he seek a review under s 10C on the ground that there are no reasonable grounds for Ms Bourne’s suspicion. Moreover, the Commission proceeded before me on the basis that I had made a finding that there were reasonable grounds for Ms Bourne’s suspicion that the Dural property was acquired by Mr Kane as serious crime derived property because of the serious crime related activity of the other person.

62. Having had the benefit of a hearing with an active contradictor, it has been necessary for me to review the evidence in the light of the submissions made, particularly in light of the definition of serious crime derived property in s 9. On carrying out this review, I have come to a different conclusion. In particular it appears, on the material, that the purchase of the Dural property was not financed by the proceeds of the other person’s fraud and that Mr Kane gave sufficient consideration for his interest. This latter consideration suggests he did not acquire his interest because of the other person’s fraud.

63. I acknowledge that neither party took the opportunity to re-visit this issue on 4th December 2015, presumably because of my earlier finding. These decisions are interlocutory decisions and s 10C shows that the findings upon which they depend may be revisited at least in certain circumstances. For the purpose of the balance of the application, dealing with the remaining three properties, I have come to a different conclusion. However, this is not the only reason why I have declined to make an order in respect of the balance of the properties. Rather, I have decided that there is a discretion as to the form the restraining order that must be made should take, and I have exercised that discretion.

64. As the parties have not had the opportunity to address the reasonable grounds issue again, I think it appropriate that I leave the orders previously pronounced in place and provide the parties with liberty to apply in respect of them should they be so advised.

65. My orders are:

1. Refuse a restraining order in respect of the defendant’s interest in the properties in paragraphs 1 (the Neville property), 4 (the St Marys property), and 5 (the Mt Druitt property) of Schedule One to the summons.

2. Grant liberty to the parties to apply if so advised in respect of previous orders.

3. The plaintiff to pay the defendant’s costs incurred from 12th November 2015 to 18th December 2015 after they have been agreed or assessed.

4. Release Mr Kane from the undertaking given to the Court in respect of the preservation of the properties in paragraphs 1, 4 and 5 of the schedule to the summons.

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Decision last updated: 18 December 2015