Hardship relief: ss 25 and 26 | Family Law Barristers

Following on from the previous two, this final article will explore two further claims that may be made in order for an interest to recognised.

Under the Criminal Assets Recovery Act 1990 (NSW), s 25 provides:

(1) If an assets forfeiture order—

(a) has been applied for but not made—a person whose interest in property might be subject to the order if made, or

(b) has been made—a person whose interest in property was forfeited by the order,

may apply to the Supreme Court for an order (in this section called an exclusion order) excluding the interest from the operation of the assets forfeiture order or any relevant restraining order.

Under the Criminal Assets Recovery Act 1990 (NSW), s 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.

However, establishing such an interest under general law principles is not an end in itself. As Campbell J made clear in New South Wales Crime Commission v Tran [2015] NSWSC 542, the partner cannot therefore circumvent the stringent requirements of the Criminal Assets Recovery Act 1990 (NSW) by relying on general law principles alone. Rather, the equitable interest serves as the foundation for an application under s 25 of the Criminal Assets Recovery Act 1990 (NSW) for an exclusion order. The partner must prove that their interest in the property is not illegally acquired property:

[35] Mr Bhalla also argued that the making of orders, perhaps with a deferral, would enable Mrs Tran to take proceedings in equity to establish whatever interest in the disputed property she claims to have. However, I am not convinced that is the appropriate procedure. That would suggest that anyone could circumvent the “drastic“ requirements of s 25 (Ollis 487 [35]). Where s 25 applies it is not enough that a person seeking an exclusion order establishes a competing interest in the property. Section 25(2) requires the applicant to prove, relevantly in the present case, that “the interest in property to which the application relates is not illegally acquired property“. The purposes of the Act would be, if not defeated, substantially undermined, if orders made could be challenged on general law principles that avoided rather faced up to the stringent requirements of the Act for excluding interests from the reach of forfeiture orders. In my view the only path available to Mrs Tran is to bring herself, if she can, within the exceptions created by the Act itself.

The following is relevant from Togias v New South Wales Crime Commission [2019] NSWSC 1556:

[56] Pursuant to s 22 of the Act, an assets forfeiture order was made in the proceedings against Mr Subakti. It was necessary for such an order to “be made so as to apply to specific interests in property”: s 22(4). In this case it was “the interest in property of the Defendant [Mr Subakti] in the property specified in Schedule One hereto”. The latter included a formal description of the Glenwood home and the Seven Hills industrial unit.

[57] Persons and entities may hold interests in real property in a variety of capacities. A person may have the freehold title interest, but someone else may have a mortgage interest and another may have a leasehold interest. As Mr Singleton, counsel for the Crime Commission, pointed out, the order did not operate to forfeit interests other than those of Mr Subakti. Thus, for example, the mortgage interest of Perpetual Trustees Victoria Ltd in the Glenwood home was not caught by the order. Similarly, if Ms Togias had an interest in the property, as she claims, the order did not operate to forfeit that interest.

[58] In NSW Crime Commission v Greer [2000] NSWSC 363; (2000) 112 A Crim R 461; George Greer sought exclusion from an assets forfeiture order that had been made in respect of property of John Duffy. He claimed that he had advanced funds to Mr Duffy to purchase the property many years before. The first of a number of “difficulties” Simpson J (as her Honour then was) identified (at [13]) was derived from the terms of s 25(1); Mr Greer was not “a person whose interest in property was forfeited by the order”. Another of the “difficulties” was that the evidence was insufficient to establish any interest of Mr Greer in the subject motor vehicle or land. There was also the question of the application being made out of time, but for the first two reasons her Honour determined that Mr Greer had no standing to make the exclusion application.

[59] In New South Wales Crime Commission v Keen (2005) 64 NSWLR 515; [2005] NSWSC 1151 , an assets forfeiture had been made, forfeiting and vesting in the Crown the interest of Lloyd Norman Keen in, inter alia, a motor cruiser. Sam Masri sought exclusion orders under ss 25 and 26 in respect of the motor cruiser, claiming that his interest in it was to the value of $64,000. The Crime Commission sought that his standing to make the application be dealt with as a separate question and its motion came before Hall J for determination.

[60] Hall J noted the provision in s 22(4) required an assets forfeiture order be in respect of “specified interests in property” and observed that such an order is “not made in respect of identified property”. Moreover, when an assets forfeiture order takes effect, pursuant to s 23 of the Act, it is the interest in property [in other words, not the property itself] that is forfeited to the Crown, and vests in the NSW Trustee and Guardian on behalf of the Crown.38

[61] Hall J accepted that the construction of s 25(1) was as explained by Badgery-Parker J in New South Wales Crime Commission v Young (Supreme Court (NSW), 10 August 1992, unrep) and said that the contention of Mr Masri was to, in effect, construe the words in s 25(1)(b), “a person whose interest in property was forfeited by the order”, as being equivalent to “a person whose interest in property has been affected by the order”.39 His Honour rejected that contention and held that Mr Masri did not have standing to make the applications under either ss 25 or 26.40

[62] New South Wales Crime Commission v Tran , supra, concerned an objection by one defendant to an asset forfeiture order being made by consent in respect of a co-defendant. Mr Tran was consenting to an asset forfeiture order being made in respect of certain property, but Ms Tran claimed an interest in some of it. Campbell J referred to cases which had followed New South Wales Crime Commission v Young and accepted in relation to s 25(1)(a) that persons “whose interest in property might be subject to” an assets forfeiture order does not mean persons “whose interest in property may be affected” by such an order.

[63] Campbell J continued by discussing a pertinent aspect of that case which distinguishes it from the present. Ms Tran was a defendant who he held was entitled to be heard before a consent order was made in respect of a co-defendant. His Honour made orders adjourning the proceedings to permit Ms Tran to file “a cross-claim” [sic].

[64] The passage upon which counsel for Ms Togias relied appeared later in his Honour’s judgment. Counsel for the Crime Commission contended that it was obiter and wrong. I do not need to decide that, although the implication is that if correct parties with common interests in property, such as banks with mortgages over real estate, would have to bring exclusion applications whenever forfeiture orders are made. This tends to indicate that the construction favoured by his Honour is problematic. For present purposes, there is sufficient analysis in the other cases mentioned above to make it clear that the proper construction of ss 25(1) and 26(1) is as the ordinary meaning of the terms, plainly read, suggests.

[65] The Crime Commission did not take issue with the characterisation of the type of interest that Ms Togias may have in the property. But it was submitted (correctly) that this was not an issue that needs to be determined in this proceeding. It was a matter for Ms Togias to make good her claim in some other proceeding, perhaps in the Equity Division.

[66] Whatever the nature of Ms Togias’ interest in the Glenwood home and the Seven Hills industrial unit may be (assuming without deciding that there is an interest), it is not an interest in property that was forfeited by the assets forfeiture order made by this Court on 5 May 2014.

[67] In short, Ms Togias sought to exclude from an assets forfeiture order an interest that (assuming it exists) has not been forfeited.

[68] The foregoing are my reasons for dismissing the applications under ss 25 and 26 on the basis that they were incompetent.

It would therefore be important to examine the precise wording of the assets forfeiture order and the specified interests in property to which it relates, in order to determine whether the partner’s interest was in fact forfeited and whether they have standing to bring a claim under ss 25 or 26. If their interest was not forfeited by the order, it would then be a matter for them to make good their claim in separate proceedings, namely in the Equity Division.