New South Wales Supreme Court CITATION : NSW Crime Commission v Ollis [2006] NSWSC 459 HEARING DATE(S) : 28 April 2006 JUDGMENT DATE : 18 May 2006 JURISDICTION : Common Law JUDGMENT OF : Rothman J at 1 DECISION : (1) Pursuant to Rule 13.1 of the Uniform Civil Procedure Rules 2005 judgment is given for the plaintiff on its claim for a proceeds assessment order against the first defendant for an amount to be assessed by the Court; (2) The first defendant pay the plaintiff's costs. CATCHWORDS : Criminal Procedure - criminal assets recovery - serious criminal activity and illegal activity - whether proceeds of crime to be assessed include proceeds from illegal activity - whether court must specify illegal activity at time of making initial Proceeds Recovery Order - interim orders in assets recovery process LEGISLATION CITED : Criminal Assets Recovery Act 1900 (NSW) CASES CITED : NSW Crime Commission v Ollis (unreported, NSWSC, Rothman J, 21 April 2006) P - NSW Crime Commission D1 - Victor Warren OLLIS D2 - Gail Anne SHIELDS (aka Gail Anne LYE and Gail Anne OLLIS) PARTIES : D3 - Aaron Gregory LYE D4 - Christopher LYE D5 - Koala Development Pty Ltd (ACN 116 719 754) D6 - Parkes Airport Business Centre Pty Ltd (ACN 116 261 913) D7 - Parkes Airport Construction Pty Ltd (ACN 117 091 737) FILE NUMBER(S) : SC 10278/2006 COUNSEL : P - Mr I Temby QC D's - Mr Dibb SOLICITORS : P - Mr J Giorgiutti D's - Mr H Karimjee - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION JUSTICE ROTHMAN 18 May 2006 NSW CRIME COMMISSION v Victor Warren OLLIS 10278/2006 JUDGMENT 1 HIS HONOUR: A question of principle has been raised on the form of orders that should issue, which question raises the appropriateness of the orders usually made in proceedings under s.27 of the Criminal Assets Recovery Act 1990 (NSW) ("the Act"). 2 On 21 April 2006, I issued reasons for judgment on the making of an order under s.27 of the Act, which reasons should be read together with these reasons. 3 The earlier judgment indicated that appropriate orders under s.27 of the Act would be made because the preconditions for the making of such an order had been established. Once the preconditions for the order are established, the Court, subject to an adjournment or other course granted for proper reasons, is required to make the orders. 4 In the judgment of 21 April 2006, I indicated that I would hear the parties on the form of orders that would issue. The matter was listed before me for that purpose at which hearing I was informed that agreement could not be reached. Issue: Particularisation of illegal activity 5 The issue between the parties is whether every initial order issued by the Court must, as a result of the proper construction of the Act, especially s.27, specify the illegal activities from which the assets were derived. 6 The submission of the first defendant is that a proceeds assessment order made by the Supreme Court must specify the illegal activity, or each of the illegal activities, that have occurred, from which the first defendant has, or may have, derived proceeds which would then be the subject of assessment. 7 The difference in approach of the New South Wales Crime Commission ("the Commission") and the first defendant is apparent from the terms of the orders each proposes. The Commission proposes: "Pursuant to Rule 13.1 of the Uniform Civil Procedure Rules 2005 judgment be given for the Plaintiff on its claim for a proceeds assessment order against the First Defendant for an amount to be assessed by the Court." 8 The Commission proposes further consequential directions that deal with the assessment process, which, for the purposes of the proposed Order, includes a determination of all of the illegal activities from which proceeds may have been derived. 9 The first defendant, on the other hand, proposes the following order: "Pursuant to s. 27 of the Criminal Assets Recovery Act 1990, the Court orders there be an assessment by the Court of the amount of the proceeds to the First Defendant of the illegal activity constituted by the filing by the First Defendant of false affidavits in proceedings in Wollongong Local Court on or about 21 December 2005." There are further proposed directions in or to the same effect as the consequential directions proposed by the Commission. Also, there is an Order expressly declaring that summary judgment has been granted. There is, however, no later adjudication of whether there are, beyond the serious crime related activity specified, any other illegal activities for which proceeds would be assessed. 10 The Commission has, for the purpose of the proceedings, adduced only sufficient evidence to satisfy the conditions prescribed in s.27(2) of the Act. It is and was its intention to deal with the determination of illegal activity, if any, during the assessment process, which it understood would occur after the initial orders. It has not adduced evidence of illegal activity, if there were any, other than the serious crime related activity on which it relied to satisfy s.27(2) of the Act. It is necessary to examine the scheme of the Act so far as is relevant and to recite the relevant provisions of the Act, which includes some of the definitions and some extracts of s.27 and s.28 of the Act. Scheme of the Act 11 The Act contains the following relevant definition: "illegal activity means: a) a serious crime related activity; or b) an act or omission that constitutes an offence (including a common law offence) against the laws of New South Wales or the Commonwealth…" 12 Section 6 of the Act defines serious crime related activity as conduct that was at the time "a serious criminal offence". This phrase, in turn, is defined as a limited class of criminal activity. 13 The purpose of the Act is partly described in its long title, which is an "Act to provide for the confiscation of interests in property that are interests of a person engaged in serious crime related activities; to enable proceeds of serious crime related activity to be recovered as a debt due to the Crown; and for other purposes." The Act has other purposes. They include the confiscation of property from persons, not themselves engaged in serious crime, if the property is derived from crime: see, for example, s.9 and s.10(2)(b), s.10(3)(b), s.22(2A), s.26 and s.27(2A) of the Act. 14 The scheme of the Act, relevantly, provides for restraining orders (s.10) to issue from the Supreme Court to stop dealings in property or interests in property where the property belongs to a person suspected of having engaged in a serious crime related activity, or, where the property, or the interest in the property, is suspected of being serious crime-derived property. 15 The Supreme Court is required to make orders under s.10 if the application for such orders is supported by an affidavit of an officer, reciting the officer's suspicion, and if the Court considers that there are reasonable grounds for that suspicion. 16 By s.12 of the Act the Court may, either at the time that it makes an order or at any later time, vary the property described in any restraining order. 17 Section 22 of the Act provides for the making of assets forfeiture orders. It requires the Court to make such an order if the Court finds that the person, whose suspected serious crime related activity formed the basis of the Restraining Order, was involved in certain serious crime related activities. The finding of the Court is on the balance of probabilities. Section 22 also requires the making of an assets forfeiture order in relation to an interest in property acquired in certain circumstances. An order made under s.22 of the Act, either against a person, engaged in the relevant activity in relation to her/his property, or against other persons in relation to property of such persons, which is serious crime-derived property, need not be based on a finding of a particular kind or the commission of a particular offence. 18 Section 25 of the Act allows the Court to exclude property from a forfeiture order on the application of a person affected thereby and on proof, on the balance of probabilities, that the property is not property that ought to have been caught by an order originally made under s.22. Proceeds Assessment Orders 19 The most relevant part of the Act for the purposes of these proceedings is Division 2, and in particular s. 27 and s.28 of the Act. It is necessary for me to reiterate some extracts of those sections. Subsection 27 (1) is in the following terms: "(1) The Commission may apply to the Supreme Court for a proceeds assessment order requiring a person to pay… 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, … whether or not any such activity is an activity on which the application is based." 20 Section 28 is, relevantly, in the following terms: "1) For the purpose of making an assessment under s.27 in relation to the proceeds derived by a person (in the section called the defendant ) from any illegal activity, or illegal activities, of the person or another person the Supreme Court is to have regard to the following matters: a) the money, or the value of any interest in property other than money, directly or indirectly acquired by: (i) the defendant, or (ii) another person at the request, or by the direction, of the defendant, because of the illegal activity or activities, b) the value of any service, benefit or advantage provided for: (i) the defendant, or (ii) another person at the request, or by the direction, of the defendant, because of the illegal activity or activities, c) the market value...[ of the illegally utilised goods]… d) the value of the defendant's property before and after… e) the defendant's income and expenditure before and after the illegal activity or activities. 2) If evidence is given at the hearing of an application for a proceeds assessment order that the value of the defendant's property after an illegal activity, or illegal activities, of the defendant exceeded the value of the defendant's property before the activity or activities, the Supreme Court is to treat the excess as proceeds derived by the defendant from the activity or activities, except to the extent (if any) that the Supreme Court is satisfied the excess was due to causes unrelated to an illegal activity or activities. 3) If evidence is given at the hearing of an application for a proceeds assessment order of the amount of the defendant's expenditure during the period, … the Supreme Court is to treat any such amount as proceeds derived by the defendant from an illegal activity or activities, except to the extent (if any) that the Supreme Court is satisfied the expenditure was funded from income, or money from other sources, unrelated to an illegal activity or activities.' 21 The defendant's submission is that the proper construction of s.27 requires the Court to specify, at the time of making an order under s.27, the activity or activities said to be illegal, which activities are capable of being assessed by the Court. 22 The Commission agitates for a continuation of the practice that has been generally adopted by the Court, namely, the making of a general order requiring assessment, which assessment includes the determination of any and all illegal activities from which income was derived. 23 The defendant refers to the opening words of ss.(2) and (3) of s.28 as a demonstration of a legislative intention that it is at the initial hearing that the illegal activity or illegal activities be specified. Conclusion 24 A proceeds assessment order may relate to illegal activities, which are activities beyond those defined as "serious crime related activity". 25 A proceeds assessment order under s.27 of the Act must be made upon proof, on the balance of probabilities, of the requirements of ss.27(2) of the Act. For an order to be made, the Court need not inquire into each and every illegal activity of the defendant. Of course, it may. But an "illegal activity" is not confined to serious crime related activities; it extends to other acts or omissions, being offences. 26 The proceedings before the Court are civil in nature (see s.5 of the Act) and, subject to submissions of the parties and the interest of justice, the Court may deal with the subject matter of the proceedings in one or more separate hearings. Usually the Court hears and determines the initial liability of the defendant to an order, being the issue of whether the requirements of ss.27(2) have been satisfied. After hearing the parties, the Court, as another course, may determine all of the issues in one hearing. A third alternative is for the Court to have three hearings: a hearing to determine whether the preconditions in ss.27(2) have been satisfied; a hearing to determine each and every illegal activity; and, thirdly, a hearing to assess the proceeds of each such illegal activity. 27 The opening words of ss.28(2) and (3) refer to the totality of the hearing process for the making of a final order, being a proceeds assessment order. On the other hand, the opening words of ss.28(1) of the Act make clear that a hearing may involve only the assessment process. 28 There is no reason for s.27 and s.28 of the Act to be construed in a manner that would restrict the Court to the inconvenient process of hearing all evidence for each of the three aspects of the final orders at once. Were the Court's discretion so constrained, it would mandate a lengthening of proceedings unnecessarily and, in some instances, require a large amount of detailed evidence, on other illegal activities and the proceeds derived from them, in circumstances that do not satisfy the requirements of ss.27(2) of the Act. 29 A proper construction of s.27 and s.28 of the Act requires the Court, in circumstances that satisfy ss.27(2), to make the relevant orders. Once the Court is satisfied under ss.27(2), the Court need not be satisfied of every detail required for the making of final orders before making any order. The Court is capable of dealing with the assessment process in a separate hearing and, likewise, it is capable of dealing, in a separate hearing, either at the same or a different time to the assessment hearing, with the determination of each and every illegal activity alleged. 30 The above analysis recognises that the proceeds assessment order described in s.27(1) requires three major matters to be determined: the criteria in s.27(2) of the Act; the extent of any other illegal activity; and the proceeds from both such criminal activities. The Court may deal with each of these areas in one hearing or it may deal with one or both of the first two adumbrated matters separately and on an interlocutory basis. Traditionally, it has dealt with the s.27(2) criteria, at least, on an interlocutory basis. This is a sensible and convenient approach in the instant matter. 31 For the above reasons, I propose to make the orders sought by the Commission, which have been given to the Court and marked MFI 1, and, otherwise, adjourn the matter to a date convenient to the parties. I will hear the parties on the appropriate dates for the consequential orders. * * * * * * DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.