The High Court is on fire at the moment. It has handed down a case declaring certain procedures under the Criminal Assets Recovery Act 1990 (NSW) as unconstitutional: International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49. Put shortly, Acts such as these allow the government to effectively force disgorgement of profit earned as a result of criminal enterprise. Of course, being the gain-based damages freak I am, I don’t have a problem with causing people to cough up ill-gotten gains as long as the procedures are appropriately handled. But from this case, I suspect the new High Court will be less predictable than of yore.
The particular case in question arose in relation to some companies which were owned and operated a firm of accountants, PKF Vanuatu, the senior partner of which is Robert Agius. Agius has been accused of facilitating tax fraud and running Australia’s largest money laundering scheme. Agius is an Australian citizen who stays regularly in Sydney but resides in Vanuatu. The New South Wales Crime Commission (“NSWCC”) suspects that Mr Agius has engaged in large-scale fraud. The companies owned by PKF Vanuatu are International Finance Trust Company (“IFTC”), a Vanuatu government licensed trust company and International Finance Trust Company Broking Services (“IFTCBS”), which conducts share trading accounts. It was alleged that these companies held money and shares which represent the proceeds of crime. Therefore, the NSWCC applied to the Supreme Court of New South Wales pursuant to s 10 of the Criminal Assets Recovery Act 1990 (NSW) to freeze the proceeds of the bank accounts and share accounts held by IFTC and IFTCBS. Pursuant to s 10(2), the NSWCC is entitled to apply ex parte for a restraining order over property or interests which are held by “a person suspected of having engaged in a serious crime related activity or serious crime related activities.” Once it has frozen the assets, it can then require the assets be handed over to the state as a proceed of crime. “Ex parte” means that the application is brought by one person in the absence of, and without representation or notification of, the other party or parties.
IFTC and IFTCBS appealed against the restraining orders granted over the bank accounts and share trading accounts. They argued that s 10 of the Criminal Assets Recovery Act was constitutionally invalid. For the non-lawyers (if you’ve actually made it this far, that is), Federal Courts must act in a way which is compatible with Chapter III of the Constitution. That is to say, courts must be independent from the legislature and the executive (Boilermaker’s Case), and must exercise their powers in a way which is impartial. As a result, Parliament may not enact a law which is inconsistent with the nature of judicial power. However, this doctrine also extends to State Courts exercising Federal powers (see Kable v Director of Public Prosecutions (NSW) [1996] HCA 24), including the New South Wales Supreme Court in this case.
The appellants argued that the Act required the Supreme Court to freeze the assets of a person on a mere suspicion by the NSWCC that a crime had been committed (and on no other evidence). They stressed that the person whose assets were the subject of an order had no opportunity to contest the basis upon which the order would be made. In order to overturn a restraining order, the appellants had to prove that it was “more probable than not” that the property was not acquired fraudulently or illegally. Accordingly, the appellants argued that this meant that the Supreme Court was exercising in activity in a way which was “repugnant to the judicial process in a fundamental degree” and thereby gave the Court an appearance of not being sufficiently independent or impartial. Once s 10 was invalidated, the whole Act could no longer work, because the making of other orders such as asset forfeiture orders presupposed that the assets had been frozen in the first place.
A majority of the New South Wales Court of Appeal found that the affidavit in support of the application for the restraining order was not adequate because it did not identify the source of the evidence and state a belief in its truth. Therefore, the evidence upon which the restraining order was based was found to be inadmissible. However, the NSWCA found that s 10 was constitutionally valid.
It was a close case. The appellants succeeded, with a majority finding that the exercise of judicial power under s 10 of the Act was unconstitutional (French CJ, Gummow and Bell JJ and Heydon J). Hayne, Crennan and Kiefel JJ dissented.
French CJ stated at [54]:
Procedural fairness or natural justice lies at the heart of the judicial function. In the federal constitutional context, it is an incident of the judicial power exercised pursuant to Ch III of the Constitution. It requires that a court be and appear to be impartial, and provide each party to proceedings before it with an opportunity to be heard, to advance its own case and to answer, by evidence and argument, the case put against it.
The Act gave the Court no discretion to allow the other party to put its case. It was this that rendered the Act unconstitutional according to French CJ. He concluded at [46]:
It [the Act] deprives the Court of the power to determine whether procedural fairness, judged by reference to practical considerations of the kind usually relevant to applications for interlocutory freezing orders, requires that notice be given to the party affected before an order is made. It deprives the Court of an essential incident of the judicial function. In that way, directing the Court as to the manner of the exercise of its jurisdiction, it distorts the institutional integrity of the Court and affects its capacity as a repository of federal jurisdiction.
Gummow and Bell JJ pointed to the limited facility of a person to appeal the restraining order, and to the potentially longevity of such an order. It was also significant that the restraining order must be granted if the Commission had a mere suspicion of criminal activity. They concluded at [97]:
The Supreme Court is conscripted for a process which requires in substance the mandatory ex parte sequestration of property upon suspicion of wrong doing, for an indeterminate period, with no effective curial enforcement of the duty of full disclosure on ex parte applications. In addition the possibility of release from that sequestration is conditioned upon proof of a negative proposition of considerable legal and factual complexity.
Accordingly they found that s 10 caused the Supreme Court to engage in activity which is “repugnant in a fundamental degree” to the judicial process.
Heydon J found that it was the specific difficulty in challenging the restraining order which rendered the procedure under s 10 unconstitutional. It was not the ex parte nature of the application or the requirement that the court make an order if the conditions were made out, or the lack of discretion held by the court.
The dissenting judges found simply that there were provisions in New South Wales civil procedure laws which may allow parties affected by such orders to appeal them, and that there was no repugnance with the judicial function.
Interesting times indeed. The importance of the decision lies in its potential ramifications for challenges to other Acts, such as the anti-bikie laws, as this article in The Australian notes. Also the case represents a change in approach towards the grant of extensive powers to Crime Commissions and the like, which have generally been given free range in past years. The Executive and the Legislature have been given a bit of a slap on the nose, intended to make them step back and let the judges do their job.
10 Comments
Nice analysis but what you have not considered and should have taken into account is that the original action , from which others followed, when taken to NSW Court of Appeal decided that there was no evidence of criminal activity against anyone. The companies obviously then were in a strong position to challenge such draconian legislation under those circumstances. The legislation stood untested for over 20 years as it was meant to deter criminal behaviour. The weaknesses in the legislation would not have been exposed if real criminal behaviour was there as it would not have been challenged. Now even criminals can challenge the restraining orders. The NSWCC also undertook to pay damages. This has not been mentioned by commentators.
To quote the article – yes – “interesting times indeed”. One correction needs to be made with regard to Mr. Agius’ residency/citizenship status, i.e, the article states – “Agius is an Australian citizen who stays regularly in Sydney but resides in Vanuatu.” Mr. Agius is a CITIZEN of Vanuatu and has been for many years.
It seems to me, in fact, that the Australian Govt. has acted improperly in its treatment of a FOREIGN citizen. As an Australian citizen myself (but resident of Vanuatu), I have been appalled at the behaviour of the AFP on a number of occasions over the past couple of years – notably in the cases of both Robert Agius and Troy Neel (a US citizen resident of Vanuatu). The impression I have is that the AFP/Australian Govt. feels it can ride rough-shod over the legal and judiciary systems in those Pacific Island states that are co-incidentally (?) the recipients of AUS-AID, particularly if it’s politically expedient to do so. And let’s not forget the Julian Moti case in the courts at present which by all accounts appears as though that may also be another instance of political expediency versus ‘natural justice’.
Phil, in saying Agius is an Australian citizen, I took my information from the High Court’s decision and from press articles linked.
Frank, I’ve just been checking up what the NSWCA said. A majority found that there was no admissible evidence before the primary judge that provided reasonable grounds for the suspicion asserted by the authorised officer in the affidavit in support of the application for the restraining order. The problem was one of the correct way to adduce evidence – the officer who swore the affidavit did not say how he came by the information or the basis upon which he believed it to be true.
I’ve updated the post to include this, as I agree that it’s an important part of the case.
I will have to try and find time to read this – a Gummow – Hayne split makes your conclusion a near-cert:
But from this case, I suspect the new High Court will be less predictable than of yore.
Patrick – I know, I know. Can you believe that Gummow and Hayne were on opposite sides? After so many joint judgments…
I am not a lawyer but are you not splitting straws on what evidence is “”adduced” . and what it means. The fact is there was no evidence which met evidential rules. It was all hearsay. This is important factor in this legislation as the only protection that was available on the “”exparte”"nature of the orders was that admissable evidence be adduced. it was not. End of story.
Frank, like any lawyer, I just mince my words carefully. I don’t like to say “there was no evidence” because it seems that there was evidence, it is just that it was not admissible. Further, the dissenting judge thought the evidence was admissible, so it wasn’t a “lay down mazere”. Nonetheless the guy who swore the affidavit did not say that he had direct experience of what he was swearing to. I’m guessing that if the primary judge had alerted them to that, it could have been remedied pretty easily. But it seems a bit sloppy of the NSWCC – presumably they prepared the documents in a hurry (as such things tend to be hurried).
I think we are saying the same thing there was no admissable evidence.
Also why should someone have assets restrained and transferred to third parties on the whim of a public servant who has “”suspicions”" and a Judge has to agree?? The fact is there has been no challenges to the legislation because in most cases the NSWCC finds the drugs and finds the cash and swoops. In a white collar “”crime”" it is not that simple. The rush was not necessary. Probably an expensive mistake. Bullies always have their day of failure.
The High Court was long overdue in its decision striking down section 10 of the Criminal Assets Recovery Act as being repugnant to chapter III of the Constitution.
Long overdue as such an action should have been brought many years ago, the patent unconstitutionality did not manifest itself overnight, however, as the NSW Crime Commission is fond of doing, it renders people “suspected” of an offence – not convicted of anything, without the funds that ITFC and Rob Agius expended on a NSWCA action and then a High Court Action.
The “slap on the nose” to the executive and legislature is again, long overdue. The Courts long ago (before Capt Cook sailed into Botany Bay) abolished the Executive’s ability to sumariliy forefeit assets; and it is more than a slap in the face to the common law for the Parliament to enact legislation such as the Criminal Assets Recovery Act.
Why the existence of such legislation does not provoke public outrage is ratjer concerning. The suspicion of people such as Jon Spark (the accountant at the Crime Commission who swears affidavits as to his suspicions) apparently amounts to far more than a trial by jury.
Thankfully the NSWCA in its decision in Elfar v NSWCC established per totam curiam [2009] NSWCA 348 “The fact that a person has been charged by a police officer is not sufficient, in and of itself, to ground a reasonable suspicion that a person is involved in a serious crime related activity. Reliance on an opinion held by a police officer that an offence had been committed does not identify any fact or matter relating to such conduct”