Application by Commissioner of the Australian Federal Police [2013] VSC 686 (19 December 2013)

**1 The question to be decided is whether the Commissioner of the Australian Federal Police ("the Commissioner") should obtain an order for discovery against Reverend Mah Meng Ling who is bound by a restraining order issued under the Proceeds of Crime Act 2002 (Commonwealth) ("the Act"). Reverend Mah is seeking to revoke the restraining order. The documents which the Commissioner seeks to be discovered are said to be referred to in affidavits filed in support of her application.

2 The Reverend Mah is a Buddhist nun who is the spiritual leader and President of a Buddhist Temple in Malaysia.

3 The property alleged by the Commissioner to be proceeds of crime is the sum of $4.3 million contained in two National Australia Bank accounts that she opened during a trip to Melbourne in 2012. She says that the money is her property which she intended to use to purchase and establish a Buddhist centre in Melbourne. The Commissioner points to the fact that a significant part of the money, he alleged $800,000, but it seems the figure may be $617,000, were made by a number of cash deposits of less than $10,000.**

**4 On 17 June 2003, the Commissioner filed an application under s 25 of the Act for a restraining order under s 19 in respect of property which was suspected of being the proceeds of and an instrument of a serious offence within the meaning of the Act. As I have stated, the property was moneys in two National Australia Bank accounts in the name of Mah Meng Ling. An authorised officer asserted reasonable grounds to suspect that the property was the proceeds of an instrument of a serious offence within the meaning of the Act.

5 The Commissioner sought orders that the matter be heard under s 26(4) of the Act without notice being given to Reverend Mah.

6 I heard the application without notice, and on 18 June 2013 made an order pursuant to s 19 of the Act that money standing to the credit of the two National Australia Bank accounts be not disposed of or otherwise dealt with by any person without the prior written consent of the Commissioner. I also directed that the Bank was to provide to the Australian Federal Police the current balance in each of the above-named bank accounts, as requested by a Federal Agent from time-to-time.

7 On 20 June 2013, the Commissioner filed an application under s 59 of the Act for a forfeiture order under s 49 of the Act in respect of the money standing to the credit of the two National Australia Bank accounts.

8 On 23 July 2013, Mah Meng Ling filed a notice of intention to apply under s 42(1A)(b) of the Act, applying for an extension of time to apply to revoke the restraining order.

9 On 26 July 2013, Macaulay J made orders extending the time to 30 September 2013 as requested and ordering that Mah Meng Ling file and serve with any application for revocation, any affidavit upon which she intended to rely. His Honour also ordered that the Commissioner file and serve any affidavit in reply by 28 October 2013.

10 On 24 September 2013, Reverend Mah filed an application for revocation of the restraining order.

11 By consent orders made on 26 September 2013, Cavanough J extended the time for the filing of affidavits and listing the matter on 28 November 2013.

12 On 21 November 2013, the Commissioner applied under r 6.09(3) of the Supreme Court (Criminal Procedure) Rules 2008 for orders that on or before 20 December 2013, Mah Meng Ling make discovery of the number of categories of documents referred to in affidavits filed on her behalf.

13 That application was argued before me on 28 November 2013. At the conclusion of the hearing, at the request of counsel for Reverend Mah, I permitted written submissions to be filed. When they were received it became apparent that a further oral hearing was required to enable each party to address the other party's written submissions and that occurred on 11 December 2013.

14 In the meantime, the applicant, Mah Meng Ling, had filed an application under r 6.09(3) of the Supreme Court (Criminal Procedure) Rules 2008 for orders that the application for revocation of the restraining order be set down for hearing in the first week of December 2013.

15 The parties argued four main points. I will consider them in the order argued, but first I will set out the terms of r 6.09(3) which is contained in the Criminal Procedure Rules, although proceedings concerning restraining orders are civil proceedings.

6.09 Filing and Directions

(1) In a proceeding to which this Order applies -

(a) in the case of a proceeding under the Act -

(i) an application made without notice;

(ii) a notice of an application or any other notice given;

(iii) an affidavit to be relied on;

(iv) an order made; and

(b) in the case of a proceeding under the Commonwealth Act -

(i) an application;

(ii) an affidavit; and

(iii) a copy of a notice given -

shall be filed in the Court, unless the Court otherwise orders.

(2) At the time when an application or notice of an application is filed, the Prothonotary shall insert the time and place at which the application is to be heard and such time and place shall be included in any copy which is served.

(3) After an application or notice of an application has been filed, a Judge of the Court may give directions for the hearing of the application, including directions for the production to the Court of any transcript of proceedings relating to a conviction relied upon in the application.

Can the Commissioner seek discovery in proceedings under the Proceeds of Crime Act ?

**17 The Commissioner submitted that he could obtain discovery, at least in proceedings seeking a restraining order. The applicant submitted that such an order could not be made.

18 Rule 6.09(3) falls within Order 6, which is entitled "Confiscation of Property and Proceeds of Crime". The provisions of the Civil Procedure Act 2010 do not apply to proceedings under the Act.[1]

19 In DPP v Thomas,[2] Morris J decided r 6.09(3) empowered the Court to require persons seeking to have their interest in a property excluded from a forfeiture order under the Confiscation Act 1997 (Vic) to make discovery. His Honour did not refer to the effect of the privilege against exposure to a penalty.

20 The parties informed me that they were unaware of any other authority on the issues that I am to determine.

21 In my opinion, the power to give directions which is conferred on the Court by r 6.09(3) is sufficiently wide to enable an order for discovery to be made in an appropriate case in proceedings brought under the Act. A power to give directions ordinarily entails full power to regulate the procedural steps in a proceeding, including to order the production of documents. However, there are important qualifications to that statement concerning r 6.09(3). In exercising the discretion to give directions conferred by r 6.09(3), a Court may well decline to order discovery, for instance, because the Act contains its own provisions enabling the Commissioner or an authorised officer to obtain documents compulsorily. Examples of such powers are examination notices which are made under s 185(2) and which can require the production of documents at the examination and production orders made under s 202 which can require a person to produce property-tracking documents.

22 In addition, as I conclude below, despite the generality of the Rule, discovery cannot be ordered in proceedings where forfeiture orders under the Act are sought because to do so would expose the party required to give discovery to forfeiture or a penalty.**

Should discovery be ordered in this proceeding?

**23 The reasons for the Commissioner's application are contained in the affidavit of Ms A Duran, a principal litigation lawyer with Proceeds of Crime Litigation, Australian Federal Police.

24 Ms Duran states that affidavits filed on behalf of Reverend Mah refer to various documents which were not produced or exhibited to the affidavits and contained accounts, unverified by the production of relevant documentation, of the circumstances in which the applicant transmitted very substantial sums of money from overseas to Australia. She made requests of Reverend Mah's solicitors for the documents, but they responded that the Commissioner was not entitled to discovery as of right.

The affidavits filed in support of the Applicant's application refer to matters which, by inference, are relied upon to establish the lawful origin of the moneys deposited in the Australian bank accounts, for example, cash donations to the Applicant, opening and making deposits into Hong Kong bank accounts, and currency trading. Documents evidencing these matters have not been provided or exhibited to the affidavits. Without the documents set out in my letter dated 31 October 2013, the Commissioner cannot properly prepare any material in reply nor provide a response to the Applicant's application which identifies and narrows the issues in dispute. Unless the Applicant makes discovery of material relevant to her assertions as to the origin of the money transmitted by her or on her behalf to Australia, the Commissioner will not be in a position to achieve the overarching purpose of the Civil Procedure Act 2010 nor discharge his obligations under that statute.

**26 On 12 November 2013, Reverend Mah's solicitor sent a number of documents to the Commissioner without prejudice to her rights.

27 Ms W Rix, a member of the Australian Federal Police, made an affidavit referring to new lines of enquiry, which may take several months to complete and that she believed that "the investigation will yield information which will be of critical value in support of the application for forfeiture". She has initiated mutual assistance requests to Malaysia and Hong Kong. She said that she made her affidavit to support the application: "in order to enable the investigations in Malaysia and Hong Kong to proceed expeditiously".

28 In essence, the Commissioner submitted that discovery was appropriate to assist the conduct of the proceeding and to avoid the delay that might be caused if the documents had to be produced at a later point in the proceedings.

29 In my opinion, if an order for discovery was otherwise available in this proceeding, and the privilege against exposure to a penalty or forfeiture was not available, then in the exercise of the Court's discretion, discovery should not be ordered, certainly not at this point. The parties, at least by the consent order of 26 September 2013, envisaged that each of them would exchange affidavits without waiting for any documents to be provided on discovery. The Commissioner has sought an extension of time in which to file affidavits. I see no reason why the Court should now, after the applicant has complied with the order for affidavits, be required to give discovery based on the contents of those affidavits, when the Commissioner has yet to comply with the orders by filing affidavits.

30 The application to the Court was made ex parte and based on an authorised officer's expression of reasonable grounds to suspect the prescribed matters contained in s 19 (1)(e). The submissions of counsel for Reverend Mah's criticised the fact that further detail of those suspicions had not been provided, particularly as the application had been made ex parte. The completion of the filing of affidavits will serve to identify the issues in the proceeding. In view of the procedural history of the case, I do not see why Reverend Mah should be required to provide discovery at this point, even if it were otherwise available.

31 After considering the remaining issues, I conclude that discovery is unavailable in this proceeding because of the availability of the privilege against exposure to a penalty or forfeiture. If I had not reached that conclusion and considered that discovery was available, I would still have refused to make such an order in the exercise of the discretion conferred by r 6.09(3). I consider it is inappropriate to do so, because of the way in which the parties have conducted the proceeding and in particular because of the orders that were made for the filing of affidavits.**

Does the privilege against exposure to penalty or forfeiture apply to these proceedings?

**32 The Commissioner submitted that the relief that he sought was not punitive and was not a "civil penalty" within the traditional meaning of that term. There was no need for "contumelious conduct" on the part of the possessor of the property for a restraining order or forfeiture order to be made. No finding need be made that a particular person has committed a particular offence. The applicant could have no claim to the $617,300, which comprised 78 structured transactions over a six month period and may be the result of "cuckoo smurfing".[3] Deprivation of the proceeds of crime should not be seen as a civil penalty or forfeiture. A contrary conclusion would defeat the purposes of the Act.

33 Reverend Mah relied on the privilege and disputed the Commissioner's submissions. Her counsel submitted that the Court should be cautious in determining whether the proceeding was seeking a penalty.

34 I accept that under the Act a restraining order and a forfeiture order can be made, although the owner of the property has not committed an offence.

35 The relevant privilege is against exposure to a penalty or forfeiture. Deane J gave the following description of the purpose of the privilege against exposure to a penalty:**

It is a well-established principle that a defendant in proceedings which are solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing his liability to the penalty.[4]

**36 The same principle applies to the privilege against exposure to forfeiture. The High Court in Rich v Australian Securities and Investment Commission[5] pointed to the width of the penalties and forfeitures against which the privilege applied.

37 I do not accept that to attract the privilege against forfeiture that the person whose property is to be forfeited must be shown to be a wrongdoer. Forfeiture is a wide term. As Mason and Deane JJ stated in Legione v Hateley[6] speaking of forfeiture in equity:**

[F}orfeiture involves the loss or determination of an estate or interest in property or a proprietary right, eg, a lease, in consequence of a failure to perform a covenant.

**38 The privilege focuses primarily on the effect of the forfeiture order on the property not on the conduct of the person whose property is affected.

39 I consider that when the Commissioner has obtained a restraining order and in the same proceeding seeks a forfeiture order of the property the subject of the restraining order, he is seeking a penalty or forfeiture, that attracts the privilege. Section 66 of the Act describes the effect of a forfeiture order as follows:**

What property is forfeited and when - general rule

Property specified in a 'forfeiture order' vests absolutely in the Commonwealth at the time the order is made.

**40 Although the title given to an order is not conclusive as to its nature, in my opinion, a forfeiture order made under the Act in respect of a person's property is a forfeiture for the purposes of the privilege against exposure to forfeiture.

41 The Act, in some respects, abrogates the privilege against self-incrimination and to exposure to a penalty: see eg 197(2)(a) s 206 dealing with production orders. But there is no legislative indication of an intention to abrogate those privileges in all proceedings brought under the Act. I do not consider that the recent High Court decision of Lee v New South Wales Crime Commission,[7] on which the Commissioner relied, provides any assistance on this issue.

42 I do not consider that r 6.09(3) operates so as to abrogate the privilege against exposure to a penalty or forfeiture. It does not expressly do so nor is that result a necessary implication.

43 The Commissioner contended that the application of the privilege to the Act would thwart its operation and impede the investigation of the proceeds of crime. No evidence was led as to how often discovery was sought in proceedings under the Act and therefore what effect the absence of discovery orders would have. As previously noted, the Commissioner has a number of powers under the Act to investigate transactions and the privilege has been abrogated in respect of the operation of some of those powers.

44 The parties referred me to the decision of Garling J in Director of Public Prosecutions v Hicks,[8] which dealt with an application for a literary proceeds order under ss 152 and 178 of the Act. The Director sought an order that the defendants file and serve their evidence in advance of the hearing.

45 Garling J declined to make that order, considering that the literary proceeds order that was sought was a penalty to which the privilege attached, because the order would amount to a monetary exaction by the Commonwealth. No abrogation of privilege was found in that case.

46 When a civil proceeding is brought to obtain a forfeiture or enforce a penalty, the rule is that neither discovery nor interrogatories will be allowed and the respondent is not obliged to claim the privilege.[9] However, the privilege can still be waived[10] and I next consider that issue.**

Has the applicant Mah Meng Ling waived the privilege in respect of the documents?

**47 The Commissioner submitted that waiver had occurred because the "document being sought is relevant to the account being advanced",[11] rather than from the terms in which the document is referred to in the affidavits. Reliance on assertions of fact amounts to a waiver of privilege at least with respect to those facts. The applicant had voluntarily produced documents and also produced documents pursuant to production orders without claiming the privilege. It would be unjust to permit positive defences to be advanced while denying the Commissioner the opportunity to test the defences or examine the documents.

48 Counsel for Reverend Mah submitted that there had been no waiver, in many instances the references in the affidavits relied on were not to specific documents and some of the requests were onerous.

49 I do not consider that privilege in any of the documents was waived by the references upon which the Commissioner relies in the affidavits filed on behalf of Reverend Mah.

50 At common law, the test of whether waiver has occurred is whether the privilege holder has engaged in conduct which is inconsistent with the maintenance of the privilege. In Mann v Carnell,[12] Gleeson CJ, Gaudron, Gummow and Callinan JJ stated:**

What brings about the waiver is the inconsistency, which the courts, where necessary informed by the consideration of fairness, perceive, between the conduct of the client and the maintenance of confidentiality; not some overriding principle of fairness operating at large. [13]

**51 Privilege will often be waived if the privilege holder discloses the substance of evidence, because that may be an inconsistent act. However, there is a no waiver by mere reference to matters the subject of privilege, in pleadings or in other court documents.[14] The test under the Evidence Acts is sometimes said to be a "quantitative one".[15]

52 Reverend Mah could have refused to file any affidavit in reliance on the privilege. She chose to file extensive affidavits, including her own. That conduct might be seen as inconsistent with the maintenance of confidentiality. However, it has to be borne in mind that she filed those affidavits in circumstances where it was not suggested that there would be discovery.

53 In any event, it is necessary to consider what use Reverend Mah's affidavits make of each of the categories of documents of which the Commissioner seeks discovery. The Commissioner relies on statements contained in her affidavit and in an affidavit made by Wong Peng Wah, a businessman associated with the Temple and Reverend Mah's work.[16] These affidavits seek to explain why money was transferred to bank accounts in Melbourne. I will deal first with the passages relied on in Reverend Mah's affidavit.**

Documents sought by reference to the affidavit of Mah Meng Ling of 24 September 2013

(i) Copies of the last reports of the in-house accountants and external independent auditors referred to therein in relation to Yayasan Kebajikan SSL Heamodialysis and Yayasan Kebajikan SSL Strok & Pembangunan Masyarakat (paragraph 33).

In paragraph 33 of her affidavit, Reverend Mah states that the finances of those organisations are properly accounted for by "our in-house accountants, and external independent auditors". Apart from the reference to "properly accounted", there is no other reference that suggests that there are reports in existence. I consider that this reference is insufficient to waive the privilege and is not such inconsistency of conduct as to support the conclusion that privilege has been waived.

(ii) Documents evidencing the government subsidies paid by the Malaysian government to the Temple and Associated Entities and the revenue from private donors and client fees referred to therein (paragraph 34).

Paragraph 34 of Reverend Mah's affidavit refers to income that the Temple and the Associated Entities receive from "private donors, followers, government subsidies and client fees".

**56 That paragraph does not refer to documents. It refers to subsidies as one of the payments that have been received. It may be logical that government subsidies will be documented, but I do not consider that the paragraph involves inconsistent conduct that justifies the conclusion that the privilege has been waived.

57 The next two categories of documents can be considered together, they are described as follows:**

(iii) Copies of all documents relating to the opening of the Citibank Hong Kong Bank account, including statements from the opening date to 18 June 2013 (paragraph 38);

(iv) Copies of all documents relating to the opening of the DBS Account, including statements from the opening date to 18 June 2013 (paragraph 39).

Paragraphs 38 and 39 of Reverend Mah's affidavit describe the opening of these two bank accounts in Hong Kong. Part of the moneys sent to the bank accounts in Melbourne came from those two accounts.

**58 I do not consider that the reference to the accounts waives the privilege in respect of the documents which are sought. It does not refer to documents. Obviously bank accounts will generate documents, but the affidavit makes no use of bank statements. Nor does it disclose the detail of those statements.

(v) Copies of all documents pertaining to the currency trading referred to in paragraph 46.

Paragraph 46 refers to the fact that moneys on deposit in the DBS Account were augmented by currency trading carried out by, and on advice from, the DBS bankers in Hong Kong, and on the advice of Mr Wong.

**60 For the same reasons as I gave in respect of categories (iii) and (iv), I do not consider that privilege has been waived. Assuming such documents exist, the paragraph makes no use of those documents and gives no detail of their contents.

61 The next category of documents,[17] which was sought, is:**

(vii) Copies of Ms Mah's passport and travel documents evidencing the international travel referred to in paragraphs 38 and 39;

The passage relied on only refers to travel by Reverend Mah to Hong Kong and does not refer to any passport. Obviously, Reverend Mah will have a passport, but the affidavit makes no use of it in any manner that could be said to be inconsistent conduct that waives privilege.

(viii) Copies of all invoices, accounts, receipts and other documents evidencing the ordering of Buddhist artefacts from Mah Tuck Sang referred to in paragraph 39;

In paragraph 39, Reverend Mah states that she and Mr Wong travelled together to Hong Kong to visit a shop for the purpose of ordering Buddhist artefacts.

**63 For similar reasons, I do not consider that there has been any waiver of privilege in respect of such documents if they do exist. The paragraph makes no use of such documents and there is no inconsistent conduct which could waive the privilege.

(ix) Copies of all documents evidencing the giving of cash reserves and cash sums to Mr Wong referred to in paragraphs 45 and 68;

In those paragraphs, Reverend Mah states how she gave some of the cash reserves to Mr Wong to deposit in the Citibank, DBS and the Maybank accounts.

65 For similar reasons, I do not consider that there has been any waiver of privilege. No documents are referred to and no use is made of them.

Documents sought from the affidavit of Wong Peng Wah of 24 September 2013

66 The first category of documents sought in respect of this affidavit is:

(i) copies of all records, books of accounts and documents evidencing the income detailed in subparagraphs (a)-(f) inclusive in paragraph 23.

**67 Mr Wong, in that paragraph states that, aside from the cash reserves, the Temple and its associated medical, patient support, social welfare and rehabilitation facilities and services, currently require a monthly operating income of approximately RM600,000.00. He then states that this money is derived from six sources.

68 The Commissioner sought access to these documents on the basis that they may show intermingling of moneys, that may be relevant to the proceeding.

69 I do not consider that this paragraph does refer to intermingling of money. More importantly it does not refer to documents at all or in a manner which would be inconsistent with the maintenance of privilege.

(iv) Copies of all documents evidencing the use of Rubiy Traders to transfer funds from Malaysia to Reverend Mah's Hong Kong accounts referred to in paragraph 45.

Paragraph 45 refers to Mr Wong's use of Rubiy Traders over a number of years to transfer funds to obtain foreign currency and to transfer funds from Malaysia to Reverend Mah's Hong Kong accounts.

**71 Again, I do not consider that there is any document referred to in respect of which privilege has been waived. No use of such documents is made and none of the substance of documents is disclosed.

(vi) Copies of any documents evidencing a report to "the local police" made by Mr Wong (paragraph 80).

Paragraph 80 contains Mr Wong's account of his visit on 10 July 2013 to the office of Rubiy Traders and his conversation with Naina Mohamed, in which he told him that if he did not cooperate he would report him to the local police. He said that he knew that Mr Mohamed would take him seriously.

73 There is no basis for establishing that any document exists, let alone that it has been used and should be discovered.

**74 The result of the above discussion is that discovery is unavailable in this proceeding because the Commissioner seeks an order in the nature of forfeiture or a penalty. Reverend Mah's privilege against exposure to forfeiture or a penalty has not been waived.

75 If I had concluded that the privilege did not apply or had been waived, I would still have refused to make an order for discovery in the exercise of the discretion conferred on the Court by r 6.09(3).

76 There is one other matter to mention. The application before me is for discovery. I have decided that application only. When the application for revocation of the restraining order is heard, questions may arise as to what use Reverend Mah can make of parts of affidavits which refer to documents which are not exhibited or otherwise produced. However, that is not a question that I have to determine at this time.

77 I dismiss the Commissioner's application for discovery.

[1] Section 4 (2)(d) of the Civil Procedure Act 2010.

[2] [2005] VSC 421.

[3] As to "cuckoo smurfing" see Majeed v The Queen [2013] VSCA 40 [6]-[7] (Kaye AJA).

[4] Refrigerated Express Lines (A'asia) Pty Ltd v Australian Meat & Livestock Corporation (1979) 42 FLR 204, 207 citations omitted and see the judgment of Robson J in Re Australian Property Custodian Holdings Ltd (No.2) [2012] VSC 576.

[5] [2004] HCA 42; (2004) 220 CLR 129, 143 [26] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[6] [1983] HCA 11; (1983) 152 CLR 406, 445.

[7] [2013] HCA 39.

[8] [2011] NSWSC 1060.

[9] Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1983) 152 CLR 328, 336 (Mason ACJ, Wilson and Dawson JJ) and Re Australian Property Custodian Holdings Ltd (No 2) [2012] VSC 576, [89].

[10] See eg Australian Securities and Investments Commission v Mining Projects Group Limited [2007] FCA 1620; (2007) 164 FCR 32, 39 [18].

[12] [1999] HCA 66; (1999) 201 CLR 1.

[13] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1.

[14] See Lyell v Kennedy (No3) (1884) 27 ChD 1 at 24; Infields Ltd v P Rosen & Son (1938) 3 All ER 591 at 597; and AWB Ltd v Cole (No5) [2006] FCA 1234; (2006) 155 FCR 30, 66-76.

[15] Evidence Act 1995 (Cth) and Evidence Act 2008 (Vic) and see Adelaide Steamship Co Ltd v Splavins [1998] FCA 144; (1998) 81 FCR 360, 371.

[16] The Commissioner did not press for an order for discovery of documents as a result of the terms of an affidavit of Naina Mohamed Bin Sahul Hamid which is referred to in the application.

[18] Categories (ii) and (iii) were not pressed.