Application by the Australian Federal Police (No.2) [2014] VSC 191 (11 April 2014)

For the Commissioner of the Australian Federal Police

1 I delivered an oral judgment in this application on 11 April 2014. This judgment is the revision of that judgment.

2 The Commissioner of the Australian Federal Police ("the Commissioner") applies for restraining orders under ss 18 and 19 of the Proceeds of Crime Act 2002 (Cth) ("the Act") in respect of money in various bank accounts.

3 I was requested by the Commissioner under s 26(4) of the Act to consider the application for restraining orders without notice to any person. Accordingly, at least in the first instance, I am required to so proceed. However, under s 26(5), I have the discretion, before finally determining the application, to direct the Commissioner to give or publish notice of the application to a specified person or class of persons, who would include the owners of the property which the Commissioner seeks to have restrained.

4 Ms Wendy Rix, who is a member of the Australian Federal Police ("AFP") stationed at Melbourne, and an authorised officer for the purposes of the Act, sets out in her first affidavit dated 3 April 2014 the Commissioner's reason for seeking to have the application heard without notice, which is a concern over the withdrawal or transfer of the money if notice is given.

5 One feature of the case that I have taken into account is that there are already proceedings on foot under the Act which involve one of the persons who are the subject of the present application.[1] I have previously made restraining orders against person and determined a discovery dispute following the making of those orders. Both the persons whose property is the subject of this application are represented by solicitors. However, these applications involve new and broader allegations than have been previously made. After consideration, I have decided on the basis of the matters advanced by Ms Rix, that it is not appropriate to make a direction under s 26(5) and I will hear the applications without requiring that notice be given.

6 I deal first with the Commissioner's application concerning property that stands in the name of Mr Chang Song Wong. The details of that application are set out in paragraphs 24, 27, 33-34, 36 and 43 of Ms Rix's first affidavit. The application concerns disposing of money in four ANZ bank accounts and any other ANZ bank account in the name of Chang Song Wong or any variation thereof, save and except for any mortgage repayments.

7 I am satisfied that Ms Rix is an authorised officer for the purposes of the Act.

8 Ms Rix in her first affidavit relies on the contents of an affidavit by Ms Chantelle Emery and the report attached to it. Ms Emery is a forensic accountant with the AFP. Her report details the flow of money between bank accounts in the name of Chang Song Wong and Mah Meng Ling (the Reverend Mah).

9 Two of the four ANZ accounts were opened in June 2013 and two in September 2013. It seems two of the accounts, those ending in the numbers 429 and the numbers 417, have been used more than the other two accounts.

10 Chang Song Wong is resident in, and employed in, Australia.

11 Ms Rix's affidavits describe a large number of structured deposits into bank accounts of Chang Song Wong with the National Australia Bank and the transfer of part of the moneys held in those accounts into other bank accounts that are in Mr Wong's name. The affidavits detail the transfer of substantial sums of money from Mah Meng Ling's accounts with Australian banks into Chang Song Wong's ANZ accounts. They also describe the transfer of substantial sums of money from Chang Song Wong's ANZ accounts into Mah Meng Ling's accounts with the DBS bank in Hong Kong.

12 The matters set out in Ms Rix's affidavits suggest that the four ANZ accounts in the name of Chang Song Wong were opened for similar purposes.

13 Ms Rix states that she suspects that Chang Song Wong and Mah Meng Ling are involved in international money laundering activities and that their bank accounts have been used to facilitate high volumes of structured deposits.

14 Ms Rix's affidavits state her suspicion that Chang Song Wong contravened s 400.9(1) of the Criminal Code Act 1995 (Cth), which concerns dealing with property reasonably suspected of being the proceeds of crime and s 142 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), which prohibits conducting transactions so as to avoid reporting requirements relating to threshold transactions. Such contraventions, if established, would constitute serious offences within s 18 of the Act. She also states her suspicion that the property in the four ANZ bank accounts and any other ANZ bank account in the name of Chang Song Wong is the proceeds of offences and instruments of offences (s 19 of the Act).

15 Ms Rix's affidavits contain grounds for her suspicions.

16 I initially had some doubt whether money that was already in a bank account and was then used for money laundering could be described as the proceeds of crime. However, having considered counsels' submissions and the judgment in Sunshine Worldwide Holdings Limited v South East Group Limited,[2] I am persuaded that such money could be regarded as the proceeds of crime.

17 After hearing further argument from counsel on the issue, I am satisfied that it is also appropriate to make an ancillary order under s 39 of the Act restraining the disposing of monies standing to the credit of Chang Song Wong in any other ANZ bank account in his name or any variation thereof except for the payment out of it of any mortgage repayments.

18 The Commissioner's second application for restraining orders concerns moneys in accounts with DBS bank in Hong Kong in the name of Mah Meng Ling. That application raises the question whether the Court has jurisdiction to make such orders as Reverend Mah does not live in Australia and the property is money in bank accounts in Hong Kong. Her address listed on her affidavit made in this proceeding is Selangor in Malaysia. It appears that Reverend Mah visited Australia for a week in December 2012. She has opened a number of Australian bank accounts.

19 The basis of the Commissioner's application concerning Mah Meng Ling is set out in Ms Rix's affidavits. The first affidavit in paragraphs 18-22 and 35 deals with the transfer of funds into Reverend Mah's Australian bank accounts and transfers of money by Mr Chang to Reverend Mah's accounts. Paragraph 36 of Ms Rix's first affidavit describes transfers of money from Mr Chang's ANZ account which ends with the numbers 417 to Reverend Mah's accounts with the DBS Bank in Hong Kong.

20 In her second and third affidavits, Ms Rix refers to a number of accounts held in the name of Mah Meng Ling with the DBS Bank in Hong Kong. Ms Rix refers to one as the AUD account and the other as the Hong Kong bank account or HKD account. Ms Rix states that the AUD account was opened on 4 March 2014. That was one day after the money in Mr Chang's ANZ account, the number of which ends with 417, amounting to A$930,000, was transferred to Reverend Mah's DBS account ending with the numbers 700. She suspects that the moneys were transferred into the AUD account for the purpose of frustrating any attempts to trace them.

21 Ms Rix states that on 7 April 2014, she was informed by the AFP Liaison Officer in Hong Kong that, following advice by the Hong Kong police regarding the anticipated application for a restraining order in relation to bank accounts held by Reverend Mah in Hong Kong, the Hong Kong police initiated a freeze on the AUD account. On 7 April 2014, the DBS Bank created a new account and transferred the moneys in the AUD account into the new account. Those moneys, totalling A$930,000, or US$840,000, were transferred from Chang Song Wong's ANZ account in Australia into Reverend Mah's DBS account.

22 Ms Rix's affidavits record that Reverend Mah has three other DBS bank accounts. One of them contains no money and she states her suspicion that the money held in the other two DBS accounts was transferred and consolidated into the DBS HKD bank account. She refers to the deposits made into two of the DBS accounts between 2010 and 2013, which she says show sometimes multiple deposits made on the same day at different branches. She states that that was consistent with the structuring activities undertaken in Australia. She states her suspicion that this method was employed to avoid detection by law enforcement and government regulations.

23 Ms Rix states that she suspects that Reverend Mah has committed serious offences being contraventions of s 409(1) of the Criminal Code Act 1995 (Cth) and s 142 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (s18 of the Act). She states her suspicion that the moneys transferred into the DBS AUD account on 4 March 2014 were transferred for the purpose of frustrating any attempt to trace them.

24 Ms Rix also states her suspicion that the moneys formerly held in the AUD account are the proceeds of crime and have been used as instruments of a serious offence within s 19 of the Act.

25 Ms Rix further states her suspicion that the money held in the DBS HKD account represents the proceeds of foreign indictable offences. She suspects that there have been breaches of Malaysian law. The offences identified by counsel were breaches of s 53 of the Malaysian Income Tax Act 1967, the Malaysian Anti-Money Laundering and Anti-Terrorism Financing Act and Malaysian Foreign Exchange controls.

26 Ms Rix bases that suspicion on the manner in which the monies were deposited in the previous Hong Kong bank accounts, the creation of a Malaysian bank account and the transfer of moneys from that account into another bank account, the use of multiple transfers and remitters to move the money and the failure of Reverend Mah, despite repeated requests, to provide any material which establishes that she has declared the money said to be donations made to her as income.

27 I will next deal with the question of jurisdiction. The question for determination is whether the Act confers jurisdiction on Australian courts to make orders against property in foreign countries where there is no in personam jurisdiction. Neither Reverend Mah nor the money in the bank accounts that are sought to be restrained are in Australia.

28 It is important to bear in mind that the Act applies to property. Section 13 of the Act is significant. It states:

This Act extends, except so far as the contrary intention appears,

(a) to acts, matters and things outside Australia, whether or not in or over a foreign country; and

(b) to all persons, irrespective of their nationality or citizenship.

29 Although, the section does not use the words "extraterritorial", I am satisfied that s 13 gives the Act extraterritorial effect.

30 The definition of property in s 338 is also important as it states that:

property means real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.

31 Counsel referred me to other provisions of the Act that they relied on to demonstrate the extraterritorial nature of the legislation: ss 39(1)(g), 326(b), 329(1), 335(3) and 335(5). It is unsurprising that the Act is intended to have extraterritorial application, given the international character of much organised crime, including money laundering.

32 The width of Australia's extraterritorial jurisdiction conferred by s 51 (xxix) of the Commonwealth Constitution was emphasised in XYZ v The Commonwealth of Australia.[3] The joint judgment of Gummow, Hayne and Crennan JJ quoted the statement of five members of the Court in the Industrial Relations Case[4] that:

The modern doctrine as to the scope of the power conferred by s 51 (xxix) was adopted in Polyukhovich v The Commonwealth. Dawson J expressed the doctrine in these terms: [T]he power extends to places, persons, matters or things physically external to Australia. The word 'affairs' is imprecise, but it is wide enough to cover places, persons, matters or things. The word 'external' is precise and is unqualified. If a place, person, matter or thing lies outside the geographical limits of the country, then it is external to it and falls within the meaning of the phrase 'external affairs'. Similar statements of the doctrine are to be found in the reasons for judgment of the other Justices: Mason CJ; Deane J; Gaudron J; and McHugh J. They must now be taken as representing the view of the Court. (citations omitted)

33 The question is, can an Australian court make orders restraining dealings in property, being money in a bank account in a foreign country, in the name of a person who does not live in Australia? There is little authority on this point. In the Sunshine Worldwide Holdings Case[5] an order appears to have been made restraining dealings in a bank account in Hong Kong. However, it is not clear whether the company whose account it was, was an Australian company.

34 The United Kingdom Supreme Court dealt with a similar problem in Perry v the Serious Organised Crime Agency.[6] In that case, the legislation, the Proceeds of Crime Act 2002 (UK), defined "property" as all property wherever situated and included money, all forms of property, real or personal, heritable or moveable, things in action and other intangible or incorporeal property. A majority of the Supreme Court considered that the United Kingdom Act did not have extraterritorial effect. It set aside the world wide property freezing order which had been made at first instance and which had been upheld by the United Kingdom Court of Appeal.[7]

35 In Perry's Case, Lord Phillips referred to the following statement of principle :

It is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated in the jurisdiction of the foreign state, or compelling its citizens to do acts within its boundaries.[8]

36 There is also a presumption that the legislation does not have extraterritorial effect.[9]

37 Lord Reed, who formed part of the majority in Perry's Case, referred to a submission made by the respondent, to illustrate why he did not accept an extraterritorial reading of the Act, which would have required no connection between the property owner, the property and the United Kingdom. His Lordship stated:

This is perhaps an appropriate point at which to note SOCA's submission that there need not be any connecting factor: POCA, it is argued, enables the enforcement authorities to bring proceedings in the High Court or the Court of Session to vest property situated abroad in a trustee for civil recovery, even where there is no connection with the United Kingdom whatsoever. As it is put in SOGA's written case, 'Parliament has decided that a Chinese thief, living in China, who has stolen property in China from a Chinese citizen may be the subject of a civil recovery action. It is however inherently unlikely that such a result could have been intended by Parliament; in such circumstances, there would be no reason for the holder of the property to submit to the jurisdiction of the courts of this country, and no likelihood that any order granted by those courts without appearance would be given effect overseas. Again, however, it is necessary to examine the legislation further in order to determine what Parliament has done.[10]

38 The English legislation has been subsequently amended to enable the granting of orders in relation to property held outside the United Kingdom.[11]

39 A number of situations can be envisaged where the jurisdiction conferred by the Proceeds of Crime Act 2002 (Cth) might be the subject of argument. There may be a person resident in Australia with property overseas. An Australian citizen or resident may be overseas but their property in Australia. In the present situation, both the person and the property are overseas.

40 In Centurion Trust Co Ltd v Director of Public Prosecutions (WA),[12] the Western Australian Court of Appeal considered the extraterritorial operation of the Criminal Property Confiscation Act 2007(W.A.). McLure JA stated:

The Act applies to property in Western Australia and, to the fullest extent of the capacity of the parliament to make laws with respect to property outside the State, to property outside Western Australia (s 5(3)). The extraterritorial effect of the Act was upheld in Director of Public Prosecutions (WA) v Hafner.

41 I have taken into account that I have heard the argument concerning jurisdiction in an ex parte application.

42 However, I consider that, where neither person nor property is present in Australia, an authorised Australian court has jurisdiction to make a restraining order under the Act, where there is some substantial and relevant connection in existence between Australia and the property. That construction gives adequate effect to the extraterritorial operation of the Act. Here, the facts described in Ms Rix's affidavits show that some, or perhaps all, of the money in the DBS AUD bank account came through a bank transfer from Australia. Some or all of the money was transferred by Mr Chang, who is resident in Australia, to Reverend Mah's DBS AUD bank account.

43 I do not regard the Act as conferring jurisdiction on an Australian court to make a restraining order in respect of money in an overseas bank account merely because it is the proceeds of crime committed in a foreign country. I would not regard the fact that the persons who engaged in the criminal conduct in a foreign jurisdiction were the same persons who had engaged in similar conduct in Australia, and thereby breached Australian laws, as being sufficient to confer jurisdiction on an Australian court in respect of property that was the result of criminal conduct in the foreign jurisdiction.

44 The evidence suggests that Mr Chang transferred A$930,000 to Reverend Mah's DBS AUD bank account. In my opinion, dealings in that property can be restrained by an order under the Act.

45 The evidence does not suggest that money in the other DBS account, the HKD account, was transferred from Australia. Accordingly, I would not make a restraining order in respect of money in the HKD bank account. Because of my conclusion that the Court's jurisdiction depends on the existence of a substantial and relevant connection between the money in the Hong Kong accounts and Australia, I would not make a general order restraining dealings in money in all DBS bank accounts in the name of Reverend Mah.

46 I refer to two other matters that are relevant to the question of jurisdiction.

47 I was referred to the Australia-Hong Kong, China MLA Treaty and particularly to Articles I and XIX. The Treaty concerns the provision of mutual legal assistance in criminal matters. Article I deals with the Scope of Assistance which the parties shall provide under the Treaty. Article I(2)(h) provides that 'Assistance' shall include:

tracing, restraining, forfeiting and confiscating property used in or derived from criminal activities and the proceeds of criminal activities.

48 Article XIX deals with the 'Proceeds of Crime' and states:

(1) The Requested Party shall, upon request, endeavour to ascertain whether any proceeds of crime against the law of the Requesting Property are located within its jurisdiction and shall notify the Requesting Party of the result of its inquiries. In making the request, the Requesting Party shall notify the Requested Party of the basis of its belief that such proceeds may be located in its jurisdiction.

(2) Where pursuant to paragraph (1) suspected proceeds of crime are found the Requested Party shall take such measures as are permitted by its law to prevent any dealing in, transfer or disposal of, those suspected proceeds of crime, pending a final determination in respect of those proceeds by a Court of the Requesting Party.

(3) Upon request, the Requested Party shall, to the extent its laws permit, give effect to a final order forfeiting or confiscating proceeds of crime made by a court of the Requesting Party.

(4) In the application of this Article, the rights of bona fide third parties shall be respected under the law of the Requested Party.

(5) Proceeds confiscated pursuant to this Agreement shall be retained by the Requested Party unless otherwise decided by the Parties in a particular case.

(6) In this Article 'proceeds of crime' includes:

(a) property used in connection with the commission of an offence;

(b) property derived or realized, directly or indirectly, from the commission of an offence; or

(c) property which represents the value of property and other benefits derived from the commission of an offence.

49 The Treaty was entered into by Australia and Hong Kong in 1996. I do not consider that the Treaty confers additional jurisdiction on Australian courts. Rather, it provides for the giving of assistance and giving effect to orders of Australian and Hong Kong courts, made within their existing jurisdictions. The Treaty helps to overcome one of the traditional objections to the extraterritorial operation of court orders, namely the difficulty in enforcing them. The parties to the Treaty have agreed to assist in enforcing each other's orders. Sections 66-71 of the Act deal with the recovery of forfeited property. Under s 47 of the Act, forfeiture orders can be made once restraining orders have been in force for six months.[13] I have set out the provisions of Article XIX that deal with how forfeiture orders are implemented under the Treaty. The giving effect to forfeiture orders would require cooperation between Australia and Hong Kong. The Treaty assists the enforcement of forfeiture orders made under the Act, but it does not add to the jurisdiction of Australian courts.

50 The second matter is the significance of the reference to foreign indictable offences in s 19(1)(d) of the Act. I consider that that provision confers jurisdiction to make restraining orders in respect of property present in Australia, when it is the proceeds of foreign indictable offences.

51 The other matter which was raised in the Centurion Case,[14] is whether, when the court makes an order that is to be served overseas, leave is needed under Rule 7.06 of the Supreme Court (General Civil Procedure) Rules 2008, to permit the service of the process overseas. I consider that the provisions of the Act dealing with the requirement to serve orders and other documents apply and that leave under the Rules is not required.

52 In summary, in respect of Mr Chang, I am prepared to make the orders subject to certain modifications. In respect of Reverend Mah, I am only prepared to make orders in respect of the DBS Hong Kong bank account into which the sum of A$930,000 was transferred from Australia.

[1] See Application by the Australian Federal Police [2013] VSC 686.

[2] [2005] NSWSC 117; (2005) 62 NSWLR 400[56].

[3] [2006] HCA 25; (2006) 227 CLR 532, 546 [30].

[4] Victoria v The Commonwealth (1996) 187 CLR 416, 485.

[6] [2012] UKSC 35.

[7] [2011] EWCA Civ 578; [2011] 1 WLR 2817.

[8] [2012] UKSC 35 [16], quoting from Societe Eram Shipping Co Ltd v Cie Internationale de Navigation [2004] 1 AC 260 [54] per Lord Hoffmann. That passage had been referred to by Mitting J, who was the judge at first instance in Perry's Case. See also Australia and New Zealand Banking Group Ltd v Konza [2012] FCAFC 127; (2012) 206 FCR 450.

[9] D C Pearce and R S Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7th ed, 2011) 174-177.

[10] [2012] UKSC 35 [121].

[11] Crime and Courts Act 2013 (UK) s 48.

[12] [2008] WASCA 6; (2008) 35 WAR 463 [91].

[13] Section 53 deals with issues relating to jurisdiction of forfeiture orders.