NSWCC v Davies [1999] NSWSC 354

New South Wales Supreme Court CITATION : NSWCC v Davies [1999] NSWSC 354 CURRENT JURISDICTION : Criminal FILE NUMBER(S) : 70676/91 HEARING DATE(S) : 29-30 March 1999 JUDGMENT DATE : 22 April 1999

PARTIES : New South Wales Crime Commission (Plaintiff) Edwin Davies (Defendant) JUDGMENT OF : Studdert J

COUNSEL : I. Temby QC (Plaintiff) C. Steirn SC/G. Jones (Defendant) SOLICITORS : New South Wales Crime Commission (Plaintiff) Graeme A. Ryan (Defendant) CATCHWORDS : Proceeds of crime; forfeiture proceedings; assets forfeiture order made; relief against forfeiture; application for leave to apply; time for making such application; Criminal Assets Recovery Act, 1990, s.26 ACTS CITED : Criminal Assets Recovery Act Proceeds of Crime Act (Commonwealth) DPP v Logan Park Investments Pty Limited (1995) 37 NSWLR 118 CASES CITED : Project Blue Sky v ABA (1998) 153 ALR 490 Jol v State of New South Wales (unreported, NSWCA, 4 December 1998) DECISION : See para 29

- 14 - IN THE SUPREME COURT OF NEW SOUTH WALES CRIMINAL DIVISION

STUDDERT J

Thursday 22 April 1999

70676/91 NEW SOUTH WALES CRIME COMMISSION v EDWIN DAVIES

JUDGMENT 1 HIS HONOUR: The New South Wales Crime Commission is the plaintiff and Edwin Davies is the defendant in proceedings in this Court which have been on foot since 1991. By notice of motion filed 23 December 1998 the defendant sought leave pursuant to s 26(4)(a) of the Criminal Assets Recovery Act for the making of a declaration under s 26(1)(a) and for an order under s 26(1)(b) of the Act and he also sought the declaration and the order. The defendant's notice of motion prompted the filing by the plaintiff of a further notice of motion seeking orders that: "1. Pursuant to Part 31 Rule 2 of the Rules, before any further steps are taken in the hearing of the Notice of Motion filed by the Defendant on 23 December, 1998, the Court decide as a separate question: Whether the Court has jurisdiction to hear the defendant's application under s 26 of the Criminal Assets Recovery Act 1990 (the Act). 2. The Defendant's Notice of Motion filed on 23 December 1998 be dismissed pursuant to Part 13 Rule 5 as an abuse of process." 2 On 22 February 1999 Barr J made the order sought in paragraph 1 of the plaintiff's notice of motion and the question that paragraph identified came before me as the Duty Judge on 30 and 31 March last. 3 It is appropriate at the outset to record the following chronology: (i) the defendant was arrested and charged with drug offences on 1 October 1991; (ii) a restraining order was made under s 10 of the Criminal Assets Recovery Act on 18 December 1991 restraining all the interests in property of the respondent, and in particular his interest in 36 Hewlett Street, Waverley, of which he was one of two proprietors as joint tenants; (iii) an assets forfeiture order was sought under s 22 of the statute by summons filed on 20 December 1991; (iv) the restraining order and the summons seeking the assets forfeiture order were served on the defendant on 3 January 1992; (v) the defendant filed a notice of motion seeking an exclusion order under s 25 so as to exclude his interest in the property at Hewlett Street, Waverley; (vi) the plaintiff made application for a proceeds assessment order under s 27 of the statute on 28 September 1995; (vii) Black AJ heard the proceedings brought by the plaintiff under s 22 and the defendant's application under s 25 in June 1998. In those proceedings the defendant appeared in person. On 26 June 1998 his Honour made the assets forfeiture order sought by the plaintiff and on the same date he dismissed the defendant's application for an exclusion order under s 25; (viii) the orders made by his Honour were entered on 30 June 1998. 4 As already mentioned, the defendant filed his notice of motion seeking relief under s 26 of the Criminal Assets Recovery Act on 23 December 1998, and the essential issue for my determination now is whether that application is competent having regard to the time restraints imposed by s 26. Section 26 provides: "(1) If it is proved that it is more probable than not that a specified proportion of the value of an interest in property that has been forfeited under an assets forfeiture order is not attributable to the proceeds of an illegal activity , the Supreme Court may: (a) make a declaration to that effect, and (b) order that the person who has forfeited the interest is entitled to be paid the proportion of the proceeds of sale of the interest that is specified in the declaration. (2) Any such declaration is to be made on the basis of the extent to which the interest in property concerned was not, when it first became illegally acquired property , acquired using the proceeds of an illegal activity. (3) The Supreme Court may make a declaration and order under this section in relation to an interest in property on the application of the person whose interest it was when forfeited under an assets forfeiture order . (4) After an assets forfeiture order has been made, an application for an order under this section may not be made by a person: (a) if the person was given notice of the proceedings that led to the assets forfeiture order -unless it is made within 6 months after the assets forfeiture order took effect and leave to apply has been granted by the Supreme Court , or (b) in any other case-unless it is made within 6 months after the assets forfeiture order took effect or the Supreme Court has granted leave to apply after that time. (5) Notice of an application for an order under this section is to be given to the Commission and any other person required by the regulations to be given notice and a person entitled to be given notice may appear, and adduce evidence, at the hearing of the application. (6) The applicant for an order under this section must give the Commission notice of the grounds on which the order is sought. (7) If the Commission proposes to contest an application for an order under this section it must give the applicant notice of the grounds on which the application is to be contested." (Emphasis added) 5 In the present case, as appears from the above chronology, the defendant was given notice of the proceedings that led to the assets forfeiture order by the service effected on 3 January 1992. The notice was plainly effective because the defendant appeared to oppose the making of that order and to pursue his application under s 25 before Black AJ, as earlier mentioned. It follows that s 26(4)(a) applies, and the time restraint imposed for the application under s 26 prevented the making of such application "unless it is made within six months after the assets forfeiture order took effect and leave to apply has been granted by the Supreme Court." 6 The assets forfeiture order took effect, the plaintiff submitted, either on 26 June 1998 or at the very latest when the order was entered on 30 June 1998. Mr Steirn of Senior Counsel, for the defendant, did not seek to argue otherwise, and I accept Mr Temby's submission that the order took effect when entered on 30 June 1998,. 7 Mr Temby submitted that it followed as a matter of construction that s 26(4)(a) not only required that the application under s 26(1) be made within six months of 30 June 1998 but that before the making of that application leave to apply be granted by this Court. 8 It is common ground that no order has yet been made granting leave to apply. Indeed, such leave was sought in the defendant's notice of motion filed on 23 December 1998. It follows, if Mr Temby's submission is correct, that although the application may be treated as having been made within time by the filing of the defendant's notice of motion on 23 December 1998, the time constraints of s 26(4)(a) have not been met by the defendant because leave to apply was not granted before 30 December 1998, that is to say within six months of the assets forfeiture order taking effect. 9 The issue faced then is one of the construction of s 26(4). Does the sub-section require this Court to grant leave to apply under s 26 prior to the expiration of the six month period specified in s 26(4)(a) and before the making of the application for the order under s 26? Alternatively, does the sub-section permit of the making of the order provided the application for such order is made within six months and provided, before the order under s 26(1) is made, this Court has first granted leave, whether the grant is inside or outside the six month period? 10 Mr Temby argued that the failure on the defendant's part to obtain leave before the period of six months elapsed was fatal, and the consequence was that the Court has no jurisdiction to entertain the defendant's application. Hence, he submitted, the question posed is to be answered in the negative. Mr Temby advanced submissions which I trust can fairly be summarised as follows: (a) Section 26 contemplates a two stage process, the first being the leave application and the second stage being the substantive application. Section 26(5), (6) and (7) are all provisions concerned with the second stage, not the first. The legislation recognises because of the procedural requirements that whilst the substantive application must be made within six months, it would not necessarily be heard within that period. (b) The construction urged by the plaintiff is consistent with the statutory intent. This legislation is directed at the confiscation of the ill-gotten gains of those involved in significant drug dealing or other serious criminal activity. There is a need for certainty as to when the property finally vests in the Crown, and there must be an end to litigation. (c) The Second Reading Speech on the introduction of the Bill, including ss 25 and 26, contained this comment: "A person who was not aware of proceedings resulting in the making of an assets forfeiture order may apply to the Supreme Court within 6 months of the making of the order, and may apply after that time with the leave of the Court, for an exclusion order. A person who was aware of the proceedings may apply to the Supreme Court for an exclusion order with its leave up to 6 months after the making of the assets forfeiture order. A person whose property has been forfeited under an assets forfeiture order may also apply to the Supreme Court for an order that the person is entitled to be paid a proportion of the value of an interest forfeited which is shown to be attributable to proceeds that were lawfully obtained when the interest first became illegally acquired property." That Second Reading Speech accords with the construction for which the plaintiff contends. (d) Section 26(4) makes an understandable distinction between the requirements imposed upon an applicant with notice of the proceedings that led to the assets forfeiture order (s 26(4)(a)) and any other applicant (s 26(4)(b)). If leave is not required by s 26(4) to be granted within six months, this would ignore the distinction which it was urged the subsection sought to make in (a) and (b) between a person who had been given the contemplated notice and a person who had not been. 11 Having reflected upon the competing submissions of Mr Temby and Mr Steirn, I have concluded that the provision under consideration should not be construed in the manner for which the plaintiff contends. 12 There are a number of considerations that have led me to this conclusion. 13 Mr Steirn referred to the decision of the Court of Appeal in DPP v Logan Park Investments Pty Limited (1995) 37 NSWLR 118. That case concerned the relationship between s 31 and s 48 of the Proceeds of Crime Act, 1987 (Commonwealth). It is not necessary to consider closely the framework of the Commonwealth statute, but, in common with the State statute, it provides for the confiscation of property and s 31 of the Commonwealth Act provides machinery for relief against the forfeiture of property. In Logan Park Investments Kirby A-CJ expressed matters of principle relevant to the construction of the Proceeds of Crime Act which Mr Steirn submitted, and which I accept, are equally relevant to the construction of the Criminal Assets Recovery Act. His Honour said (at pp 125-127): "1. The Act establishes a scheme for depriving persons of property rights which they otherwise enjoy by law. This is as much true of a company as it is of an individual. The right to own and to control property is an important civic right in a society such as ours. Indeed, it is an attribute of economic liberty. The ownership of property is recognised in the Universal Declaration of Human Rights. Article 17 provides: "17.1 Everyone has the right to own property alone as well as in association with others. 2. No one shall be arbitrarily deprived of his property." Although these provisions are not, as such, part of Australian municipal law, they reflect fundamental principles of the law of civilised countries, including principles upheld by the common law in Australia. To the extent that they state applicable principles of international law, they are available to assist in the construction of ambiguous Federal legislation. It will be presumed that such legislation is written against the background of an acceptance of such fundamental principles: see, eg, Minister for Immigration and Ethnic Affairs v Teoh (1995) 69 ALJR 423 at 430 and 447; 128 ALR 353 at 384; Wentworth v New South Wales Bar Association (1992) 176 CLR 239 at 252. Therefore, it can be accepted that the Act, in so far as it manifests ambiguity or obscurity, would have been intended to respect basic property rights: see Director of Public Prosecutions for Commonwealth v Saxon (at 266). To deprive property owners (and I would say property owners contingently divested of their rights) of such rights, clear legislation is required. Although in the present case, it is true that the respondents' property had been forfeited to, and vested in, the Commonwealth, a proper view of the scheme of the Act, including s31, is that the forfeiture is not complete until all rights of the property owner (including any rights enjoyed under s31) are exhausted; 2. Provisions for the forfeiture of property have conventionally been construed strictly. The Act contains an elaborate scheme, the predecessor of which was first introduced into Australian Federal law by the Customs Act 1901 (Cth). That Act contains a number of provisions for the forfeiture of goods. A strict approach to the construction of forfeiture provisions was endorsed by the majority of the High Court in Murphy v Farmer (1988) 165 CLR 19 affirming the decision in this Court: see Murphy v Farmer (1987) 87 FLR 149; 72 ALR 691. In the High Court (at 27f) Deane, Dawson and Gaudron JJ explained: "... there were competing arguments which are based on the substantive content of [the section]. They point in opposite directions. On the one hand, it is arguable that the purpose of forfeiture provisions ... is 'to ensure the strict and complete observance of the Customs laws'... and that that purpose would be best served by the automatic forfeiture ... [o]n the other hand, it seems to us to be more strongly arguable that clear words should be required before there is attributed to the Parliament an intention to take the draconian step of imposing automatic forfeiture as a penalty for "any" wrong ... regardless of whether the wrong information was provided as the result of an innocent mistake or excusable ignorance. The effect of the penalty of automatic forfeiture ... can be devastating and quite disproportionate in that it applies regardless of the value of the goods or the importance or effect of the wrong statement which was made ... [i]t is... in our view, proper to approach the construction of the actual words of the Act on the basis that it is to be presumed that clear words would have been used if it were intended to impose automatic forfeiture. ..." This approach is equally applicable to the deprivation of the property of a company associated with the "defendant" (and let it be assumed under its control) but neither used in the commission of the offence nor the proceeds of the actual offence. S31 of the Act must be given its meaning bearing in mind the whole range of cases to which the section will apply. It must take into account the variety of innocent interests which may be affected by forfeiture of company property which is not itself "tainted" within the meaning of s4 of the Act; 3. Whilst it is legitimate to have regard to the Explanatory Memorandum and the purpose of the drafter, and whilst I would accept that the legislation here is ambiguous, permitting that course, the ultimate duty of a court is one of fidelity to the language which parliament has actually used: see Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518. Ministerial speeches and Explanatory Memoranda cannot substitute for the language of parliament which is expressed in its statutes. The experience of the courts shows how, on many occasions, legislation misfires. Whilst courts should strive to avoid that result (and use Explanatory Memorandum in aid of that laudable objective) they may not use such memoranda to put words into an Act of Parliament which the legislators have not themselves added: see Dallikavak v Minister for Immigration and Ethnic Affairs (1985) 9 FCR 98 at 102; 61 ALR 471 at 475; cf Tokyo Mart Pty Ltd v Campbell (1988) 15 NSWLR 275 at 283; Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at 299. No hard and fast rule can be laid down. Each statutory quandary must be resolved by reference to the language and apparent purpose of the legislation under scrutiny… …Relief against forfeiture legislation is typically regarded as beneficial and protective of the rights of individuals. It will not be construed narrowly: see, eg, Minister for Lands and Forests v McPherson (1990) 22 NSWLR 687 at 699." 14 The correctness of the above statements of principle is not in question here and I heed what was said in Logan Park Investments in approaching my task of construction in this case. 15 Consistently with the above expressions of principle, s 26 is to be approached as an integral part of the statutory scheme for forfeiture of property under the Criminal Assets Recovery Act and the provisions relating to such forfeiture are to be construed strictly against the plaintiff. Allied with this is the proposition also expressed in Logan Park Investments that legislation providing for relief against forfeiture (and s 26 is such a provision) is not to be construed narrowly against a person seeking such relief. It would have been a simple matter for the legislature to have expressed in clear terms, if this was the legislative intention, that the leave application was to be determined within six months of the making of the assets forfeiture order. This could have been done by adding to s 26(4)(a) the following words, or words to the like effect: "Within such period of six months." 16 I do not find that I am much assisted by the Second Reading Speech upon which Mr Temby relied. As Kirby A-CJ pointed out in Logan Park Investments, such a Speech cannot substitute for the language of the statute or, more importantly in this case, it cannot add words to it which Parliament has not used. Parliament has not used the words I suggested could so easily have been used if the sub-section was intended to call for the grant of leave within the period of six months. 17 Whilst the statutory object of finality to which Mr Temby referred is suggested by the imposition both in s 25 and in s 26 of a six month period for the making of an application as contemplated, neither section requires the resolution of a substantive application within six months of a forfeiture order. Indeed, sub-ss (5) and (7), contemplating as they do the need for the giving of notice and the possibility of a contest, render it impracticable to achieve finality in six months. The legislature has recognised this also in sub-s (4) itself, since the sub-section only requires the making of the application within six months, and not its determination. It is difficult to see why the legislature would have necessarily intended that leave must be granted as a prerequisite within the period of six months provided, as the sub-section does require, that the application for substantive relief is itself made within that period. I do not see a clear legislative need to have the leave application disposed of in six months; what is important in the legislative scheme is that there be notice of the application for relief and that that be given in the time frame expressed. 18 Nor am I persuaded that the contrast between s 26(4)(a) and s 26(4)(b) conveys the legislative intent for which Mr Temby contends. 19 Section 26(4)(a) addresses an application made by a person who was given notice of the proceedings that led to the assets forfeiture order. Such a person must satisfy two requirements before a declaration and/or an order can be made in his favour under s 26(1). In his case an application for an order may not be made unless: (i) it is made within six months and (ii) leave to apply has been granted by the Supreme Court. 20 Section 26(4)(b) addresses applications made in any other case. An application for an order may not be made by an applicant in this latter category unless: (i) it is made within six months or (ii) the Supreme Court has granted leave to apply after that time. 21 Reading s 26(4) strictly, there is a distinction drawn between applications made under s 26(4)(a) and s 26(4)(b), even if in the former category of application leave is not required to be granted within six months. The application in the former category must be made (but not determined) within six months; otherwise leave cannot be granted at all. In the case of an application under s 26(4)(b), there is no mandatory requirement that the application of such an applicant be made within six months. If it is so made then unlike an application under s 26(4)(a), leave to apply is not required at all. If it is not so made then the court may grant leave after the lapse of six months. 22 Hence there is a clear and meaningful distinction between the different categories of applicants contemplated in s 26(4)(a) and s 26(4)(b), absent any legislative intention that s 26(4)(a) requires the grant of leave within the six months period after the assets forfeiture order was made. That distinction takes due account of the fact that the applicant under s 26(4)(b) has acquired knowledge of the forfeiture order later than the applicant to whom s 26(4)(a) applies. 23 In my opinion s 26(4)(a) is not to be read as though containing language not expressed, so as to require the grant of leave within six months of the assets forfeiture order. I consider that the provision is to be read only as requiring that there be a grant of leave before any relief is given under s 26(1), the application for which relief must be made within such period of six months. 24 If, contrary to the manner in which I have construed s 26(4)(a), the sub-section was to be read as requiring the grant of leave within six months, then it seems to me that on such an approach to the sub-section, the defendant's failure to obtain such leave within that period should be regarded as an irregularity rather than a nullity. 25 Competing submissions were advanced as to whether the words "may not be made" should be treated as mandatory. However that depends on the intention of the legislature: did it intend the failure to obtain leave within the time frame to invalidate an application? In Project Blue Sky v ABA (1998) 153 ALR 490 at 516 McHugh, Gummow, Kirby and Hayne JJ addressed the problem of the validity of an act done in breach of a statutory provision where their Honours said: "The classification of a statutory provision as mandatory or directory records a result which has been reached on other grounds. The classification is the end of the inquiry, not the beginning (McRae v Coulton (1986) 7 NSWLR 644 at 661; Australian Capital Television (1989) 86 ALR 119 at 147). That being so, a court, determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. This has been the preferred approach of courts in this country in recent years, particularly in New South Wales (Hatton v Beaumont [1977] 2 NSWLR 211 at 213, 226; Attorney General (NSW); Ex re Franklins Stores Pty Ltd v Lizelle Pty Ltd [1977] 2 NSWLR 955 at 965; Tasker v Fullwood [1978] 1 NSWLR 20 at 24; National Mutual Fire Insurance Co Ltd v Commonwealth [1981] 1 NSWLR 400 at 408; TVW Enterprises Ltd v Duffy (No 3) (1985) 8 FCR 93 at 102; 62 ALR 63 at 71; McRae v Coulton (1986) 7 NSWLR 644 at 661 and see Australian Broadcasting Corp v Redmore Pty Ltd (1989) 166 CLR 454 at 457-60; 84 ALR 199; Yates Security Services Pty Ltd v Keating (1990) 25 FCR 1 at 24-6; 98 ALR 68 at 90-2. See also two recent decisions of the Court of Appeal of the Supreme Court of the Northern Territory: Johnston v Paspaley Pearls Pty Ltd (1996) 110 NTR 1 at 5; Collins Radio Constructions Inc v Day (1997) 116 NTR 14 at 17; and Wang v Commissioner of Inland Revenue [1994] 1 WLR 1286 at 1294, 1296; [1995] 1 All ER 367 at 375, 377). In determining the question of purpose, regard must be made to 'the language of the relevant provision and the scope and object of the whole statute' (Tasker v Fullwood [1978] 1 NSWLR 20 at 24)." 26 The above passage was cited and applied in a more recent decision of the Court of Appeal in Jol v State of New South Wales (unreported, 4 December 1998). In this case it was held that the failure to obtain leave of the court under s 4 of the Felons (Civil Proceedings) Act, 1981 was an irregularity and did not nullify the proceedings that had been taken. The statute, of course, in Jol's case was quite different from that with which I am here concerned, but in his judgment, with which the other members of the court agreed, Sheller JA, having cited the passage from Project Blue that I have set out above, went on to apply the test expressed in that passage: "Applying that test to the present case and taking account of the language of s 4 and the scope and object of the Act, I can see no reason why the legislature should have intended that a civil action instituted without the leave of the court by a person in custody on a conviction of felony should be treated as a nullity rather than as an irregularity. The purpose of the Act, as appears from s 5, is to enable the court to supervise such proceedings by ensuring that they do not go forward to trial if they amount to an abuse of process or there is no prima facie ground for them. That purpose is equally well served if leave must be obtained but may be obtained after the proceedings have been instituted." 27 Adopting the approach taken in Jol towards the Criminal Assets Recovery Act and taking account of the language, the scope and the object of the Act, I do not see why the legislature should have intended, and I am not persuaded that it did intend, that a substantive application under s 26 made within six months, but without the leave of the court having been obtained within six months, should be treated as a nullity rather than as an irregularity. It follows that even if, contrary to the view I have taken, s 26(4)(a) is to be read as though the words "within such period of six months" are to be added to it, this Court would not be deprived of jurisdiction on the defendant's notice of motion. 28 In my opinion, therefore, this Court has jurisdiction to entertain the defendant's applications under s 26 of the Criminal Assets Recovery Act and it follows that the defendant's notice of motion should not be dismissed as an abuse of process. 29 The formal orders of the Court are as follows: 1. The question asked in paragraph 1 of the plaintiff's notice of motion is answered in the affirmative. 2. The order sought in paragraph 2 of the plaintiff's notice of motion is refused. 3. The plaintiff is to pay the defendant's costs on this motion. **********