Confiscations legislation and Family law have the potential to converge on the same individuals, assets and disputes. It is not hard to imagine a 3 way tussle between the legal owner of an asset (who is suspected of a crime), their former or soon to be former spouse and the authorities responsible for administering the confiscations legislation. Perhaps surprisingly there is very little Australian case law on the topic.1 I have sought to set out some of the basic principles. I also identify the position in different jurisdictions.
The Criminal Property Confiscation Act 2000 (WA) (CPCA) and the Proceeds of Crime Act 2002 (Cth) (POCA) each have a similar policy approach to the scenario.
Broadly each of the CPCA and the POCA:
- Recognise (albeit in different language) the equitable concept of a bona fide purchaser for value without notice.2 Each will allow such a purchaser who acquires tainted property to retain it; even if it is in the Federal language the proceeds/instrument of the crime, or in the State language is Crime-used or Crime-derived.
- Categorise the interests of a former spouse (or de facto partner) as falling within that exception to confiscation/forfeiture, subject to one very important condition.
However, the CPCA and the POCA only recognise interests acquired under the Family Law Act 1975 (Cth) (FLA) if an order has been made by the Family Court. They do not recognise what might be described as a contingent interest.
It must always be remembered that it would amount to a breach of a restraining order or freezing notice for a spouse to apply to the Family Court for a distribution of their (former) partner’s frozen property in their favour. It would at least amount to an attempt to ‘deal’ with the property by altering the ‘effective control’ or ownership of the property.
I address each of the POCA and CPCA in some more detail below. I then briefly summarise the position in other States. Finally I conclude this blog post with some pointers on what must occur where property is frozen or restrained after Family Court proceedings have commenced, but before they have been concluded.
The POCA is more clearly drafted on this issue. Section 330(4)(ba) provides that a former spouse is only protected against forfeiture once 6 years have elapsed from the time of distribution of property pursuant to orders under the FLA. This is clearly designed to stop partners running to file consent orders in the Family Court at the whiff of a proceeds of crime investigation.
Interestingly s 330 POCA is contained in an interpretive part of the Act that is only concerned with forfeiture orders. Those provisions have no application to matters in which the AFP seek either a pecuniary penalty order (PPO) or an unexplained wealth order. Potentially a person faced with such an application by the AFP could seek to thwart it by way of a consent order in the Family Court to vest property in their spouse. However in a practical sense, if an ex parte restraining order has been made at the time the PPO was applied for, this will not be viable.
The drafting of the CPCA is less clear than the POCA. There is no time limit, rather the explanatory notes to the CPCA state that:
“It is appropriate that orders made in relation to Family Court proceedings are taken to be for value. However, if parties to such proceedings consent to orders to avoid the operations of the Act, action may be taken under [section] 135 to have the orders set aside on the basis that it is a sham transaction.” 3
The central provision in the case of the CPCA is s 154 which provides:
154. Term used: value (in relation to transfer of property)
For the purposes of this Act —
(b) property transferred in the course of proceedings in the Family Court of Western Australia or the Family Court of Australia is taken to be transferred for value.
“Value” is an important feature in the definition of “innocent party” in s 153(4) of the CPCA (concerning crime-derived property). The concept of “innocent party” is in turn crucial to the question of whether an objection to confiscation on crime-derived grounds can succeed under s 83(2).
In the context of crime-used property, the question of whether a spouse is an “innocent party” will have more to do with what they ‘knew’ and did about the criminal use of the property. Value is less likely to come into play, and thus Family Court orders are less likely to be relevant.
However if a former spouse suspects their ex has engaged or is engaging in drug offences, and legal title to the assets of the relationship is predominantly vested in the suspect, it makes sense for the innocent party to move quickly for consent orders in the Family Court. Once property has vested in the innocent spouse pursuant to those orders, it will not be confiscable on the drug trafficker ground.
Section 151 of the Criminal Property Forfeiture Act (Northern Territory) and section 192 of the Crime (Confiscation of Profits) Act 1993 (Tasmania) mirror the approach of the CPCA.
Section 7 of the Criminal Assets Confiscation Act 2005 (SA) mirrors the POCA’s approach; although oddly the Serious and Organised Crime (Unexplained Wealth) Act 2009 (SA) is silent on the issue.
The Criminal Assets Recovery Act 1990 (NSW), the Confiscations Act 1997 (Victoria) and the Criminal Proceeds Confiscation Act 2002 (Queensland) are all silent upon the interaction with the FLA.
When property is frozen or restrained after Family Court proceedings have commenced, but before they have been concluded
The FLA provides that a party to proceedings under that Act must notify the relevant Court if s/he is notified that property of either party is covered by a proceeds of crime order or a forfeiture application.4
The pathway to discovering the meaning of the above terms is somewhat convoluted. Those advising potentially affected parties will likely need to consider, among other provisions:
- The definitions in s 4(1) FLA.
- Regulation 17B of the Family Law Regulations 1984 (Cth).
- Regulation 7 of the Proceeds of Crime Regulations 2002 (Cth). Importantly it is this regulation that prescribes the CPCA (and other State legislation) for the purposes of the FLA.
Of relevance in Western Australia, freezing notices (issued by Justices of the Peace) and freezing orders (issued by Judges) under the CPCA are all “proceeds of crime orders” notice of which must always be given to the Family Court of Western Australia (or other Court exercising Family law jurisdiction). That is the case regardless of the basis upon which the freezing notice or freezing order was issued; ie it does not matter whether the notice/order freezes property on the basis that the property is crime-used, crime-derived, property of a potential drug trafficker or any other basis.
Although I do not practice in the Family law field, I am available to advise (nationally) on the interaction between Family law and Proceeds of Crime or Confiscation matters. I work with a number of firms of solicitors in the Proceeds of Crime and Confiscations fields, some of whom also employ lawyers who practice in family law.
Please note the above does not constitute advice.
The only case I am aware of is Adorjany and Adorjany; Commonwealth Director of Public Prosecutions (Intervening), Unreported, No SY 6235 of 1997, 1 June 1998. In that case the Family Court declined to make orders by consent as between a husband and wife once the DPP had intervened and pointed the restraining order that had already been made in the Supreme Court. A discussion of that case can be found at [6.26] of the ALRC’s report Confiscation That Counts. Adorjany concerned the Federal predecessor to the POCA, and also pre-dated the CPCA. ↩
See generally ss 82(4) and 83(2) CPCA and the interpretative provisions that apply to them; s 330(4)(a) POCA. ↩
Page 70 to the Explanatory Notes to the Criminal Property Confiscation Bill 2000 (WA). ↩
See ss 79B, 90M and 90VA FLA. ↩