[1997] HCA 2
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
[1996] HCA 36
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280
[1993] FCA 456
Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439
[2015] WASC 320
Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1
Source
Original judgment source is linked above.
Catchwords
[1997] HCA 2
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389[1996] HCA 36
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280[1993] FCA 456
Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439[2015] WASC 320
Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1[2018] NSWSC 48
Courtenay Investments Ltd v Director of Public Prosecutions (Cth) [2012] WASCA 121
Croton v The Queen (1967) 117 CLR 326[1967] HCA 48
Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562[2007] HCA 52
N Joachimson v Swiss Bank Corporation [1921] 3 KB 110
National Australia Bank Ltd v Norman (2009) 180 FCR 243[2009] FCAFC 152
O'Sullivan v Farrer (1989) 168 CLR 210[1989] HCA 61
Parsons v The Queen (1999) 195 CLR 619[1999] HCA 1
R v Brown [1996] AC 543
Re SutherlandFrench Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361[2003] NSWSC 1008
Russell v Scott (1936) 55 CLR 440[1936] HCA 34
Taylor v The Owners - Strata Plan No 11564 (2014) 253 CLR 531[2014] HCA 9
Yanner v Eaton (1999) 201 CLR 351
L T Livingston
D Tang (Appellant)
M J McCarthy (Respondent)
Judgment (10 paragraphs)
[1]
Background facts
The factual circumstances were not in dispute. The respondent is an Indonesian citizen and was aged 25 at the time of the proceedings before the primary judge. His father is a wealthy Indonesian businessman. The respondent was employed in his father's business. From 2009 until 2013, he was a student at the University of New South Wales, studying for a degree in commerce. He graduated in 2013. On his arrival in Australia, he opened two accounts with the Commonwealth Bank, and a third in late 2013, before he returned to Indonesia.
While the respondent was living in Sydney, his family transferred money to him from time to time for his living expenses. In May 2015, while he was in Indonesia, the respondent's father gave him a considerable sum of money to be deposited in an Australian account. The respondent opened accounts with the Commonwealth Bank, styled as 'term deposits' but which apparently operated as a current account into which he proposed to deposit the money. In order to transfer the money from Indonesia, he (or a member of his family) contacted a 'money changer' in Jakarta, with whom the family had previously dealt in business matters.
On 11 dates in May, June and July 2015, the respondent's father, through the money changer, purchased Australian dollars from the money changer and directed the deposit of that Australian dollar amount into one of the respondent's Commonwealth Bank accounts. These amounts were in the order of AU$40,000 each time. On occasion, the respondent himself paid money in Indonesian rupiah to the money changer, and directed that an equivalent amount in Australian dollars be deposited in one of his Commonwealth Bank accounts.
The respondent monitored his Commonwealth Bank accounts regularly, usually on a daily basis. Relevantly, he checked his accounts to ensure that the funds had been deposited. On some occasions, he noticed that the funds were transferred in 'full amounts' (presumably meaning the full amount paid to the money changer). On other occasions, the funds were deposited in 'partial amounts'.
The respondent raised this with his father, out of concern that the full amount might not be transferred, but his father reassured him that the money changer could be trusted. The respondent found that, on each occasion, despite being made up of several 'partial deposits', the correct total amounts were always deposited in his accounts.
On 14 July 2015, the Commissioner applied to the Supreme Court for orders including:
1. restraining orders under the Proceeds of Crime Act, s 19 in relation to the respondent's Commonwealth Bank accounts;
2. an order under the Proceeds of Crime Act, s 180 that the respondent be examined about his affairs; and
3. forfeiture orders under the Proceeds of Crime Act, s 49 in relation to the respondent's Commonwealth Bank accounts and funds therein.
The "property" the subject of the above orders was particularised in the application for the restraining order as:
"SCHEDULE ONE
1. Funds standing to the credit of Commonwealth Bank of Australia Savings Account number xxx9650 in the name of Rommy Fernandez and any interest earned thereon.
SCHEDULE TWO
1. Funds standing to the credit of Commonwealth Bank of Australia Savings Account number xxx9669 in the name of Rommy Fernandez and any interest earned thereon."
The application was supported by an affidavit from an authorised Australian Federal Police officer, Darren Burtenshaw, in which he swore that he suspected that the property was "wholly or partly the proceeds, and/or instrument", of an offence of money laundering (contrary to the Criminal Code (Cth), s 400.9), "and/or wholly or partly the proceeds and/or instrument" of a structuring offence (contrary to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), s 142).
Under the Criminal Code, s 400.9, it is an offence to deal with money or other property where it is reasonable to suspect that the money or property is proceeds of crime and, at the time of the dealing, the value of the money was $100,000 or more.
The Anti-Money Laundering and Counter-Terrorism Financing Act, s 142 provides that a person commits an offence if they cause another person to become a party to two or more non-reportable transactions and it would be reasonable to conclude that the person conducted the transactions in the manner or form in which they did for the sole or dominant purpose of ensuring that the money was transferred in such a way so as not to give rise to a "threshold transaction", being a cash transaction of $10,000 or more, that would have had to have been reported under s 43. Under s 43, reporting entities, including banks, are required to report threshold transactions to the Australian Transaction Reports and Analysis Centre within 10 business days of the transaction occurring.
In his s 180 examination, the respondent gave evidence that when he or his father wanted to deposit funds to the Commonwealth Bank accounts, the money changer in Jakarta directed them to pay money into Indonesian accounts nominated by her. These were in the names of individuals not known to the respondent or his father. No documentation was provided by the money changer in relation to the transactions.
An examination of the records of the two accounts numbered xxx9650 and xxx9669, the subject of the restraining order application, revealed significant evidence of structured transactions between May and July 2015. Between 25 May 2015 and 6 July 2015, 50 cash deposits in amounts of under $10,000 were made into the account numbered xxx9650. For example, on 29 May 2015, six cash deposits of $6,000 each were made into the account at various Sydney city branches. On 26 June 2015, five similar cash deposits were made, also at Sydney city branches. On 30 June 2015, five cash deposits of $6,000 in cash were made into the account.
Between 25 May 2015 and 4 July 2015, $481,000 was transferred from the account numbered xxx9650 to the account numbered xxx9669.
The primary judge concluded, at [47], that these transactions were sufficient to establish that the account numbered xxx9650 was used in structuring transactions and was, therefore, an instrument of a structuring offence or offences.
Her Honour considered that that conclusion was strengthened by the evidence concerning the arrest on 30 June 2015 of two men, Leonard Dharmananda Linggo and Kim Ching Cheung, at a hotel where they were found to be in possession of more than $1,000,000 in cash. Notebooks containing what were apparently records of bank deposits were also found in their possession. The respondent's name and the account numbered xxx9650 were among those in the notebook. Mr Cheung's mobile phone contained a screen shot showing the respondent's name, the account numbered xxx9650, a reference to "6000+6000+6000+6000+6000" and the date 30 June 2015. This coincided with the deposits into the respondent's account on that date. Mr Linggo and Mr Cheung both made significant admissions and were charged with, and pleaded guilty to, offences of money laundering and structuring.
It was not part of the Commissioner's case that the respondent made the deposits himself or that he was in any way involved in the commission of a crime. The primary judge observed, at [48], that the Commissioner "appeared to accept that [the respondent] was an innocent victim of a sophisticated criminal organisation". However, on the appeal, the Commissioner denied that he made any such acknowledgement.
Her Honour observed, at [49], that it was implicit in the Commissioner's case that the money changer in Jakarta failed to remit the money provided to her by the respondent's father, and that the cash deposited by Mr Linggo and/or Mr Cheung was the proceeds of criminal activity in Australia. Her Honour considered that if that were not so, there would have been no need for the Commissioner to rely on the evidence of the activities of Mr Linggo and Mr Cheung. The mere fact of the structured deposits would have been sufficient to sustain a conclusion that a structuring offence or offences had been committed.
[2]
History of the proceedings
On 14 July 2015, Davies J in the Supreme Court granted restraining orders under the Proceeds of Crime Act, s 19 in respect of funds standing to the credit of the two Commonwealth Bank accounts numbered xxx9650 and xxx9669 and ordered the s 180 examination to which we have referred. His Honour stood over to a future date the remaining prayers for relief.
On 10 February 2016, the respondent filed two notices of motion in the Supreme Court seeking an exclusion order in respect of the restraining orders under the Proceeds of Crime Act, s 29, and an exclusion order in respect of any future forfeiture orders under s 73. On 30 June 2016, the respondent filed a further notice of motion seeking a compensation order under s 77.
On 7 October 2016, the respondent filed a fourth notice of motion seeking leave to withdraw the notices of motion, with the exception of that seeking a compensation order under s 77.
On 13 October 2016, leave was granted to withdraw the notices of motion, with the exception of that seeking a compensation order under s 77.
Accordingly, the issues before the primary judge were:
1. the Commissioner's outstanding application for forfeiture orders under s 49; and
2. the respondent's notice of motion seeking a compensation order under s 77.
In determining whether to make a forfeiture order under s 49(1), there was no dispute that:
1. the responsible authority for a restraining order had applied for forfeiture orders;
2. the restraining order had been in force for at least six months;
3. the court was not required to be satisfied that the property was proceeds of an offence or an instrument of an offence: see s 49(3); and
4. the court was satisfied that the authority had taken reasonable steps to identify and notify persons with an interest in the property.
Given that the conditions in s 49(1) were met, the making of a forfeiture order depended on whether the discretion in s 49(4) was enlivened and should be exercised.
On 7 September 2017, the primary judge dismissed the Commissioner's application for forfeiture orders and ordered that he pay the respondent's costs of the proceedings. Her Honour considered it unnecessary to dispose of the respondent's application for a compensation order. She found that were it necessary, she would be obliged to dismiss it. No cross-appeal was lodged in relation to this aspect of the hearing before the primary judge and it is unnecessary to consider it further.
[3]
Issues on the appeal
The Commissioner's appeal raised the following issues:
1. Whether the respondent's interests in the bank accounts were "proceeds" of an offence: grounds 1 and 2. If the respondent's interests in the bank accounts were "proceeds" of an offence, the "public interest" criterion in s 49(4) was not engaged: ground 3;
2. Whether the respondent, as the holder of the accounts, bore the onus of proving that s 49(4) was applicable and that its requirements were satisfied: ground 5; and
3. Whether the primary judge erred in concluding that the public interest was not served by ordering forfeiture of the respondent's interests in the bank accounts: grounds 4 and 6.
[4]
Relevant legislative scheme
As explained in Lordianto at [26], the Proceeds of Crime Act provides a regime whereby property derived from the proceeds of crime, upon application by the Commissioner, is initially restrained from disposal and ultimately forfeited to the Commonwealth if the conditions prescribed by the legislation are satisfied. The Act contains various provisions whereby a person may seek to have property excluded from a restraining order or the Court may refuse to make a forfeiture order. There are also provisions relating to the payment of compensation in respect of forfeited property. Insofar as is relevant, the following provisions apply:
"49 Forfeiture orders - property suspected of being proceeds of indictable offences etc.
(1) A court with proceeds jurisdiction must make an order that property specified in the order is forfeited to the Commonwealth if:
(a) the responsible authority for a restraining order under section 19 that covers the property applies for an order under this subsection; and
(b) the restraining order has been in force for at least 6 months; and
(c) the court is satisfied that one or more of the following applies:
(i) the property is proceeds of one or more indictable offences;
…
(iv) the property is an instrument of one or more serious offences; and
(e) the court is satisfied that the authority has taken reasonable steps to identify and notify persons with an interest in the property.
(2) A finding of the court for the purposes of paragraph (1)(c):
(a) need not be based on a finding that a particular person committed any offence; and
(b) need not be based on a finding as to the commission of a particular offence, and can be based on a finding that some offence or other of a kind referred to in paragraph (1)(c) was committed.
(3) Paragraph (1)(c) does not apply if the court is satisfied that:
(a) no application has been made under Division 3 of Part 2-1 for the property to be excluded from the restraining order; or
(b) any such application that has been made has been withdrawn.
Refusal to make a forfeiture order
(4) Despite subsection (1), the court may refuse to make an order under that subsection relating to property that the court is satisfied:
(a) is an instrument of a serious offence other than a terrorism offence; and
(b) is not proceeds of an offence;
if the court is satisfied that it is not in the public interest to make the order.
…
329 Meaning of proceeds and instrument
(1) Property is proceeds of an offence if:
(a) it is wholly derived or realised, whether directly or indirectly, from the commission of the offence; or
(b) it is partly derived or realised, whether directly or indirectly, from the commission of the offence;
whether the property is situated within or outside Australia.
(2) Property is an instrument of an offence if:
(a) the property is used in, or in connection with, the commission of an offence; or
(b) the property is intended to be used in, or in connection with, the commission of an offence;
whether the property is situated within or outside Australia.
(3) Property can be proceeds of an offence or an instrument of an offence even if no person has been convicted of the offence.
(4) Proceeds or an instrument of an unlawful activity means proceeds or an instrument of the offence constituted by the act or omission that constitutes the unlawful activity.
330 When property becomes, remains and ceases to be proceeds or an instrument
(1) Property becomes proceeds of an offence if it is:
(a) wholly or partly derived or realised from a disposal or other dealing with proceeds of the offence; or
(b) wholly or partly acquired using proceeds of the offence;
including because of a previous application of this section.
(2) Property becomes an instrument of an offence if it is:
(a) wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence; or
(b) wholly or partly acquired using an instrument of the offence;
including because of a previous application of this section.
(3) Property remains proceeds of an offence or an instrument of an offence even if:
(a) it is credited to an account …
(4) Property only ceases to be proceeds of an offence or an instrument of an offence:
(a) if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires) …"
[5]
Reasons of the primary judge
The primary judge stated, at [2], that having regard to the manner in which the matter was argued before her, three questions arose for determination: first, whether the property the subject of the restraining order had ceased to be proceeds of an indictable offence or an instrument of a serious offence: see s 330(4)(a); secondly, whether the court should make a forfeiture order under s 49(1) or, alternatively, decline, under s 49(4), to do so; and thirdly, whether the court should make a compensation order under s 77. Her Honour observed that if the first question was answered favourably to the respondent, the second and third questions did not arise, and that if the second question was answered favourably to the respondent, the third question did not arise.
Notwithstanding the identification of the three matters for determination, her Honour observed, at [36], that it was difficult to see how the first question relating to s 330(4)(a) was properly before the court. Her Honour stated that s 330(4) was merely declaratory of circumstances in which property which had been proceeds of an offence or an instrument of an offence ceased to be so. Thus, the respondent's reliance on s 330(4)(a) involved an assumption that the property was proceeds of an offence or an instrument of an offence or both.
Her Honour observed that while s 330(4) does not provide an avenue for orders under the Proceeds of Crime Act, the declaratory nature of the provision has work to do in circumstances where an application for an exclusion order is made in respect of property that has been made the subject of a restraining order. Pursuant to s 29(2)(d), the court, upon application being made, must exclude a specific interest in property from the operation of a restraining order if it is neither the proceeds of an indictable offence nor an instrument of any serious offence. Accordingly, if property has ceased to have that character, an exclusion order must be made. Nonetheless, in the absence of any opposition from the Commissioner, her Honour considered it appropriate to consider the argument advanced in relation to s 330(4)(a) in respect of which she made the following findings.
Having regard to her Honour's view that the property in a bank account, that is, the chose in action, is acquired at the time that the bank account is opened, it followed, as her Honour also found in Lordianto at [81]-[83], that there was no acquisition of property within the meaning of s 330(4)(a): see [57]-[58]. The respondent's choses in action had been acquired prior to any criminal activity having occurred. Thus, the property was not even partly derived or realised, directly or indirectly, from the commission of the relevant offences within the meaning of the Proceeds of Crime Act, s 329.
[6]
Whether the respondent's interests in the bank accounts were "proceeds" of an offence: grounds 1 and 2; if the respondent's interests in the bank accounts were "proceeds" of an offence, the "public interest" criterion in s 49(4) was not engaged: ground 3
It is important at the outset to identify the "property" that is contended to be proceeds of an indictable offence. This was the same question that arose in Lordianto. Having identified the relevant "property", it can then be determined whether that property is "proceeds" as defined, having regard to the relevant indictable offence.
However, it bears emphasising, as the primary judge found, that the Commissioner did not need to prove as an element of the s 49 forfeiture order that the property was either proceeds of an offence or an instrument of an offence. This was because the respondent withdrew his application for an exclusion order. The Proceeds of Crime Act, s 49(3) has the effect that only if an exclusion order has been sought (and not withdrawn) is it necessary to prove that the property is proceeds of an offence or an instrument of an offence.
As we discuss below in relation to the second and third issues on the appeal, the gateway to s 49(4) is that the relevant property was an instrument of a serious offence and is not proceeds of an offence. However, the Commissioner was not required to prove that the property was proceeds of an offence in order to resist the respondent's claim for discretionary relief under s 49(4). Rather, the respondent bore the onus of demonstrating why the s 49(4) discretion should be exercised in his favour.
The Commissioner's contention under grounds 1 and 2 of the appeal was that the property acquired by the respondent was "proceeds of one or more indictable offences". If that is correct, then forfeiture would ensue under s 49(1), as the discretion conferred by s 49(4) does not arise if the property was proceeds of an offence. This contention, the Commissioner submitted, was premised upon the respondent's "interest" in property being a "right or power" in or in connection with the respondent's chose in action to enforce the debt represented by his credit balance at any particular point in time.
The respondent submitted that the property in question was a chose in action, but contended that the definitions of "property" and "interest" in s 338 did not generate some additional and separate interest in the form of "funds standing to the credit of the account".
[7]
Whether the respondent, as the holder of the account, bore the onus of proving that s 49(4) was applicable and that its requirements were satisfied: ground 5
If we are correct in relation to grounds 1 and 2, this question does not arise. In any event, the matter can be dealt with briefly.
The primary judge considered that, pursuant to s 317, the Commissioner bore the onus of establishing that it was not in the public interest to refuse to make the forfeiture order. Section 317 provides, relevantly:
"317 Onus and standard of proof
(1) The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for."
The Commissioner submitted that her Honour erred in finding that he bore the onus of proving the matters necessary for a forfeiture order under s 49 without the qualification that the respondent bore the onus of proving that the property was not proceeds of crime and that it was not in the public interest to make a forfeiture order under s 49(4). The respondent submitted that her Honour correctly applied the onus but that, in any event, the question of onus was of little relevance in determining whether there was error in the exercise of her Honour's discretion in refusing to make the forfeiture order.
We consider that, if her Honour's finding that the Commissioner bore the onus of proving the matters necessary for a forfeiture order under s 49 encompassed an onus to prove why a forfeiture order should not be made under s 49(4), her Honour erred in the application of s 317 on this issue. As mentioned earlier, at [45], although the Commissioner bore the onus of proving the matters necessary for the making of the forfeiture order, he did not bear the onus to establish why a s 49 order should not be made.
[8]
Whether the primary judge erred in concluding that the public interest was not served by ordering forfeiture of the respondent's interests in the bank accounts: grounds 4 and 6
Given our conclusion in respect of grounds 1, and 2 and 3, this issue does not arise. There is little utility in addressing the question of the public interest in this case on assumptions contrary to our construction of the term "proceeds" of an offence and contrary to our finding as to the onus of proof under s 49(4). We will limit ourselves to stating that had the question been in issue, we would have disagreed with her Honour on this issue. In doing so, we confine our observations to noting that the term "public interest" is not defined in the Act, but in accordance with the usual principles of statutory construction, the term must be construed having regard to "'the subject matter and the scope and purpose' of the enactment in which it appears": see Hogan v Hinch (2011) 243 CLR 506; [2011] HCA 4; O'Sullivan v Farrer (1989) 168 CLR 210; [1989] HCA 61. We also express our agreement with the Western Australian Court of Appeal in Courtenay Investments Ltd v Director of Public Prosecutions (Cth) [2012] WASCA 121, where it was held by Buss JA (McLure P and Mazza JA agreeing), at [115], that "the concept of 'public interest' … is sufficiently broad to include, as factors requiring consideration, any relevant prejudice or hardship".
[9]
Orders
We propose the following orders:
1. Appeal allowed.
2. Set aside orders 1 and 2 made by the primary judge on 7 September 2017 and in lieu thereof make the following orders:
1. Pursuant to the Proceeds of Crime Act 2002 (Cth), s 49, the following property is forfeited to the Commonwealth:
1. The respondent's rights to demand payment from the Commonwealth Bank of Australia of the funds standing to the credit (including any interest earned thereon) in savings account number xxx9650 in the name of Rommy Fernandez;
2. The respondent's rights to demand payment from the Commonwealth Bank of Australia of the funds standing to the credit (including any interest earned thereon) in savings account number xxx9669 in the name of Rommy Fernandez;
1. The notice of motion filed by the respondent on 30 June 2016 is dismissed;
2. The respondent to pay the Commissioner's costs of the trial before the primary judge;
(d) The respondent to pay the Commissioner's costs of the appeal.
McCOLL JA: I have read the reasons of Beazley P and Payne JA. I agree with their Honours' conclusion that the primary judge erred in finding that the chose in action constituted by the respondent's right to the funds standing to the credit of his Commonwealth Bank accounts numbered XXX9650 and XXX9669 were not the proceeds of an offence or offences within the meaning of s 49(4) of the Proceeds of Crimes Act 2002 (Cth). Accordingly, I also agree with their Honours' conclusion at [82] that the discretion to refuse to make a forfeiture order under s 49(4) did not arise and her Honour was required to make the forfeiture order pursuant to s 49(1).
I agree with the orders their Honours propose.
[10]
Amendments
24 April 2020 - Corrected typographical errors at [9], [16], [39], [51], [55] and coversheet.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 24 April 2020
(in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008
Russell v Scott (1936) 55 CLR 440; [1936] HCA 34
Taylor v The Owners - Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9
Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53
Texts Cited: Mark Hapgood QC (ed), Paget's Law of Banking (13th ed, 2007, LexisNexis)
Category: Principal judgment
Parties: Commissioner of the Australian Federal Police (Appellant)
Rommy Fernandez (Respondent)
Representation: Counsel:
A R Moses SC; L T Livingston; D Tang (Appellant)
M J McCarthy (Respondent)
Solicitors:
Commissioner of the Australian Federal Police, Criminal Assets Litigation (Appellant)
Slater and Gordon Lawyers (Respondent)
File Number(s): 2017/301075
Decision under appeal Court or tribunal: Supreme Court
Jurisdiction: Common Law
Citation: Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197
Date of Decision: 07 September 2017
Before: Simpson J
File Number(s): 2015/205574
[This headnote is not to be read as part of the judgment]
The respondent, an Indonesian citizen, opened several bank accounts with the Commonwealth Bank of Australia while he was living in Australia. In May 2015, while the respondent was in Indonesia, his father gave him a considerable sum of money to be deposited into one of his Commonwealth Bank accounts in Australia. In order to do so, the respondent used a "money changer" in Indonesia. The money changer directed the respondent to pay the money into nominated Indonesian accounts. An equivalent amount in Australian dollars was deposited into one of the respondent's Commonwealth Bank accounts. Between May and July 2015, a number of cash deposits under $10,000 were made into the respondent's account amounting in total to the sum paid into the Indonesian accounts.
The appellant sought restraining orders pursuant to the Proceeds of Crime Act 2002 (Cth), s 19, in respect of the funds standing to the credit of two of the respondent's Commonwealth Bank accounts, on the basis that there were reasonable grounds to suspect that the funds were either the proceeds or an instrument of money laundering and structuring offences. Restraining orders were made on 14 July 2015.
The appellant also sought forfeiture orders pursuant to the Proceeds of Crime Act, s 49, subsection (4) of which permits the court to refuse to make a forfeiture order where the relevant property is an instrument of a serious offence, but not proceeds of an offence, and it is not in the public interest to make the order. The primary judge dismissed the appellant's application on the basis that s 49(4) was satisfied.
On appeal, the issues were as follows:
Whether the respondent's interests in the bank accounts were "proceeds" of an offence within the meaning of the Proceeds of Crime Act;
Whether the respondent bore the onus of proving that the Proceeds of Crime Act, s 49(4) was satisfied;
Whether the primary judge erred in finding that it was not in the public interest to make the forfeiture orders.
Beazley P and Payne JA (McColl JA agreeing) held, allowing the appeal:
(i) The respondent possessed "property" within the meaning of the Proceeds of Crime Act, namely two choses in action enforceable against the Commonwealth Bank constituted by the right to compel the bank upon demand to pay an amount equivalent to the amount standing to the credit of each of his accounts. The respondent's right to demand payment was an "interest" in relation to the property that was partly derived or realised from the commission of money laundering and structuring offences. Accordingly, the respondent's interests in the bank accounts were "proceeds" of an offence: [43]-[82].
N Joachimson v Swiss Bank Corporation [1921] 3 KB 110; Russell v Scott (1936) 55 CLR 440; [1936] HCA 34; Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2; Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52; National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152; Taylor v The Owners - Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9; Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320; Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383; Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1; Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48 considered.
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456; Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36; R v Brown [1996] AC 543; Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1; Commissioner of the Australian Federal Police v Kalimuthu (No 3) [2017] WASC 108 referred to.
(ii) Although it was unnecessary to consider this issue, the Court stated, in obiter, that the respondent bore the onus of proving that s 49(4) was satisfied: [45], [83]-[86].
(iii) Again, it was unnecessary to finally determine whether the primary judge erred in finding that it was not in the public interest to make the forfeiture orders. However, the Court stated, in obiter, that it would have come to a different conclusion: [87].
Courtenay Investments Ltd v Director of Public Prosecutions (Cth) [2012] WASCA 121 considered.
O'Sullivan v Farrer (1989) 168 CLR 210; [1989] HCA 61; Hogan v Hinch (2011) 243 CLR 506; [2011] HCA 4 referred to.
For that reason alone, the respondent's reliance on s 330(4)(a) failed. As there was no acquisition of property, the respondent was a not a "third party" for the purposes of the section: see [59].
Her Honour proceeded to consider the remaining elements of s 330(4)(a) on the assumption that she was in error in respect of her findings as to the first two elements. Her Honour considered, at [61], that there was no reason to suppose that the interests that the respondent acquired on opening the bank accounts, that is, the choses in action, were not acquired for sufficient consideration.
Her Honour held, at [74]-[75], that the property, being the chose in action, was not "proceeds" of an indictable offence within the meaning of the Proceeds of Crime Act, ss 329 and 330. This finding, which is challenged on the appeal, is of particular importance, as the public interest basis for refusing to make a forfeiture order under s 49(4) does not apply if the relevant interest in property is "proceeds" of an offence. However, her Honour was satisfied, at [76], that the respondent's interests in the accounts were an instrument of a serious offence, although not one committed by him.
Her Honour also concluded at [65]-[66], that the respondent did not know that the funds in the accounts were an instrument of an offence. She considered that although he knew that the funds were deposited in an unorthodox manner, any fears that he had were allayed when he was reassured by his father that the money changer could be trusted. It should be noted that her Honour also held, at [64], that the respondent did not know that the funds in the account were the proceeds of crime.
However, her Honour was not satisfied that a reasonable person in the position of the respondent, observing the manner in which the funds were deposited into the account, "would not reasonably have suspected that the funds deposited were the proceeds of some form of criminality": see [68]. Likewise, her Honour was not satisfied that a reasonable person in the position of the respondent would not have suspected that the deposits were being made in contravention of rules requiring reporting of threshold transactions. Accordingly, her Honour held that the respondent had not satisfied this element of s 330(4)(a).
The next question for the primary judge's consideration was whether the court was obliged to make a forfeiture order under s 49(1). That depended on whether the conditions in s 49(1) were satisfied and, if so, whether, in the exercise of the discretion conferred by s 49(4), the court should refuse to make an order. As mentioned earlier, it was not in dispute that the conditions of s 49(1) were satisfied.
However, where the court is satisfied that property is an instrument of a serious offence, other than a terrorism offence, and is not proceeds of an offence, the court may refuse to make a forfeiture order if satisfied that it is not in the "public interest" to do so. Her Honour considered, at [78]-[82], the authorities and principles relating to the concept of "public interest". These are discussed more fully below.
The primary judge concluded, at [94], that "the public interest is not served by ordering forfeiture of [the respondent's] interest in the property". Her Honour stated her reasons for this conclusion at [92], as follows:
"I appreciate the gravity of offences of money laundering and structuring, and that they protect the profits of criminal activity; I fully appreciate the need for the confiscation system to operate to short circuit the use of those means of criminal profit protection. Forfeiture of the property of an innocent victim does not achieve that, and does not in any way operate as deterrent to those who use the property of innocent victims to achieve their criminal ends."
The terms of the contract between the Commonwealth Bank and the respondent were not in evidence. Her Honour, and the parties, each approached the bank accounts on the basis that they operated as current accounts in credit. We will adopt that same assumption, although it should be observed that the rights of parties in a modern banker-customer relationship may well be very different depending on the precise contractual terms between them, as modified by relevant statutes.
Assuming this, however, we would characterise the relevant property in the same way that we did in Lordianto. At the outset, it is necessary to consider the meaning of "property". In Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562; [2007] HCA 52, a majority of the High Court (Kirby and Crennan JJ with whom Gleeson CJ agreed at [1]) said of cognate Victorian legislation:
"[80] Section 3(1) also defines interest in property:
''interest', in relation to property, means -
(a) a legal or equitable estate or interest in the property; or
(b) a right, power or privilege over, or in connection with, the property'.'
[81] Far from distinguishing 'property' as signifying only a thing or an object (eg, Blackacre) from 'property' as signifying a 'legal relationship with a thing' [Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [17]] (eg, a joint tenancy), the definitions in s 3(1) indicate that the statutory meaning of property comprehends 'property' in both manifestations."
The explicit reference in this context to Yanner v Eaton is important. At [17], Gleeson CJ, Gaudron, Kirby and Hayne JJ said:
"The word 'property' is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, 'property' does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of 'property' may be elusive. Usually it is treated as a 'bundle of rights'. But even this may have its limits as an analytical tool or accurate description, and it may be, as Professor Gray has said, that 'the ultimate fact about property is that it does not really exist: it is mere illusion'. Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by 'property' in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of 'property' as an analytical tool. No doubt the examples could be multiplied." (footnotes omitted)
The law is settled that the contract between a customer and a bank is established at the time that a bank account is opened, and does not comprise a series of loans from the customer to the bank each time a deposit is made: see N Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 127; Croton v The Queen (1967) 117 CLR 326 at 330; [1967] HCA 48 at 330; Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at [31]-[32].
Atkin LJ's conclusion in N Joachimson v Swiss Bank Corporation that there is only one contract made between the bank and its customer has prevailed in Australia.
As Dixon and Evatt JJ said in Russell v Scott (1936) 55 CLR 440; [1936] HCA 34 at 450-451, a "bank account" is nothing more or less than a chose in action, consisting "in the contractual right against the bank, i.e., in a debt, but a debt fluctuating in amount as moneys might be deposited and withdrawn".
In Croton, Barwick CJ said, uncontroversially and, in any event, in a passage approved in Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 at [17]:
"But, though in a popular sense it may be said that a depositor with a bank has 'money in the bank', in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action."
The ratio of N Joachimson v Swiss Bank Corporation was described in Mark Hapgood QC (ed), Paget's Law of Banking (13th ed, 2007, LexisNexis) at 148, as being that:
"… it is an implied term of the contract that the banker is not liable to repay the customer until demand is made. Until then, there is no presently due debt owed by the banker to his customer."
These principles have been cited with approval on a number of occasions, including in the decisions of Commissioner of the Australian Federal Police v Kalimuthu (No 3) [2017] WASC 108; Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320; and Commissioner of the Australian Federal Police v Tjongosutiono (2018) 329 FLR 103; [2018] NSWSC 48, which are considered in our judgment in Lordianto.
Notwithstanding that there is but a single contract between the bank and the customer and, subject to the terms of the contract, there is no accrued cause of action unless and until the customer makes a demand for payment, that does not answer the questions in issue in this case. Those questions, namely, whether the deposits into the respondent's bank account were, first, proceeds of an offence and, secondly, had ceased to be proceeds of an offence, are not answered solely by reference to the legal characterisation of a customer's interest in a bank account as comprising a single chose in action. These questions must be answered having regard to the proper construction and application of the Proceeds of Crime Act.
Consistent with the authorities referred to above, authority at first instance in relation to the Proceeds of Crime Act has generally accepted that in respect of a current account, there is only one contract giving rise to the debt, as opposed to a series of contracts made by reason of each separate deposit. Nevertheless, with the exception of the primary judge's decisions in this case and in Lordianto, judges at first instance have held that the language of "partly derived or realised, whether directly or indirectly" in s 329 is sufficiently broad to capture a debt fluctuating in amount by reason of a deposit of proceeds into an account, regardless of when the account was opened and when the chose in action was acquired by the customer.
Thus, in Fitzroy All Pty Ltd, Mitchell J considered that funds standing to the credit of a bank account which received structured deposits were the proceeds of an offence contrary to the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. His Honour said:
"[26] 'Property' is defined by s 338 of the POC Act to include personal property. In the present case the relevant personal property is the chose in action which Fitzroy has against NAB for payment of the amount standing to Fitzroy's credit in the Account. That is, the property is not cash but a debt which is owed to Fitzroy by NAB in the amount of funds standing to the credit of the Account. The contract giving rise to the debt is a single continuing contract, as opposed to a series of contracts made on each deposit. Therefore, the debt owed by NAB to Fitzroy is a single obligation to pay the amount standing to the credit of the Account from time to time. It is not a series of debts relating to each deposit credited to the Account.
…
[43] The fact that not all of the debt is derived from deposits which are suspected of being made in contravention of s 142(1) does not prevent an order being made under s 19 of the POC Act in relation to the whole debt. The definition of 'proceeds' in s 329 of the POC Act makes it sufficient that the debt is partly derived or realised from the commission of an offence. The debt owed by NAB to Fitzroy was partly derived from the suspected offence which involved in making the series of cash deposits between 21 and 30 April 2015. Since this debt was partly derived from the commission of an offence the whole of the debt is the 'proceeds' of an indictable offence."
In Commissioner of the Australian Federal Police v Pham [2015] NSWSC 1383, Beech-Jones J said:
"[36] There is no doubt that the relevant property that is the subject of this application is of the intangible kind that I referred to earlier; namely, the chose in action represented by the rights that each of the three defendants have against the CBA and the ANZ concerning the amounts standing to their credit in those bank accounts ... The question raised by this matter is whether those rights are the proceeds of a contravention of s 142(1) of the [Anti-Money Laundering and Counter-Terrorism Financing Act].
[37] As I stated earlier, the essence of the contravention of s 142(1) was the causing of the banks to become a party to two or more non-reportable 'transactions', specifically the deposits of less than $10,000 that occurred in the manner I stated earlier. In my view, when the criminality is understood in those terms it follows that the amount standing in a bank account as a consequence of the giving effect to the non-reportable transactions referred to in s 142(1) is clearly property that is either wholly or partly realised or derived, whether directly or indirectly, from the commission of that offence. The connection between that form of property and the commission of the offence is, in my view, much more direct than the circumstances addressed in Studman. The relevant property is in a very direct way the consequence of those transactions having been engaged in.
[38] Accordingly, I am satisfied that the property identified in the schedule is the proceeds of one or more indictable offences for the purposes of s 49(1)(c)(i) of the Act."
Some limited support for that construction is provided by Campbell J in Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq). The context of his Honour's remarks was the rules of tracing and the operation of Clayton's Case (Devaynes v Noble (1816) 1 Mer 572) in the case of proposed distributions by a liquidator appointed under the Corporations Act 2001 (Cth). His Honour determined that Clayton's Case was not applicable in the distribution of trust monies held by the liquidator. In the particular circumstances of that case, the liquidator was justified in making a pari passu distribution amongst claimants on the trust fund. His Honour said, at [61]:
"At one level of legal analysis, there is a vast difference between a credit in a bank account, and money in a bag. The first is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on), while the second is a chose in possession. Coins in a bag are each separate and individually identifiable things, even though coins of the one denomination are for most practical purposes interchangeable, and adding more coins to a bag is simply adding an additional number of things of that type to the bag. In contrast, a debt owed by a banker to a customer is a single thing - an obligation to pay X dollars - and the client's paying more money into a bank account results in the creation of a different thing - an obligation to pay some larger number than X dollars. However the purpose of the activity that the Court of Appeal was engaged in was working out whether the defaulting solicitor could, conscientiously, deny that some of the money which remained in the bank account - the inchoate chose in action to pay the balance to the customer - was money of a particular client. For that purpose, there was no difference between a bank account, and coins from various sources placed in a bag. Functionally, the bank account and coins in the bag operated identically …" (emphasis added)
To similar effect is the Full Federal Court decision in National Australia Bank Ltd v Norman (2009) 180 FCR 243; [2009] FCAFC 152, where Graham J (with whom Spender J generally agreed), referring to the passage above, observed, at [53]:
"A credit in a bank account is not a chose in possession. Rather it is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on). A debt owed by a banker to a customer is a single thing - an obligation to pay $X - and the client's paying more money into a bank account results in the creation of a different thing - an obligation to pay some larger amount than $X ..."
The context of these remarks was an appeal in relation to orders winding up an alleged unregistered managed investment scheme under Chapter 5C of the Corporations Act. The National Australia Bank in that case held the account into which the putative manager of the unregistered managed investment scheme made deposits, which he styled for the purpose of soliciting funds for deposit as "trust account" bank funds. Graham J was explaining why it was that the National Australia Bank was not a trustee of monies standing to the credit of the putative manager of the unregistered managed investment scheme.
Both of these cases direct attention to the purposes for which the question of the true nature of a debt owed by a banker to a customer is being posed.
The breadth of the meaning of "derived" in the Proceeds of Crime Act has been explained by the High Court in Commissioner of the Australian Federal Police v Hart (2018) 351 ALR 1; [2018] HCA 1. Kiefel CJ, Bell, Gageler and Edelman JJ said:
"[14] Contrary to the conclusion of the majority of the Court of Appeal, s 329(1) and (4) indicate that property can be derived from an act or omission that constitutes a relevant offence even if the property is not 'wholly derived' from that act or omission. In that respect, the juxtaposition of s 329(1)(a) and (b) makes clear that property is sufficiently derived from the act or omission that constitutes the relevant offence if the property is either 'wholly derived' or 'partly derived' from the act or omission. In either case, the property is 'derived'. The difference between the two cases is one of degree. Property would not answer the description of being 'partly derived' from an act or omission if the degree of derivation were no more than trivial. Beyond that, however, there is no requirement that the degree of derivation must be substantial. And there is no requirement that the degree of derivation must be proportionate to the forfeiture that has occurred.
[15] Section 330(1) is also important in indicating that property can be derived from an act or omission that constitutes a relevant offence by reason of being wholly or partly derived from a disposal of, or other dealing with, other property that has been derived from that act or omission.
[16] Conformably with the question of whether property has been used in or in connection with a relevant offence, the question of whether property has been derived by a person from an act or omission that constitutes a relevant offence turns on considerations of substance and economic reality which can be expected to vary in different factual settings. Derivation might in one factual setting be constituted by a non-trivial causal connection between the relevant act or omission and the acquisition or continued holding by the person of the thing forfeited (or a legal or equitable estate or interest in that thing, or a right, power or privilege in connection with that thing). Derivation might in another factual setting be constituted by the act or omission resulting in money or some other property being disposed of or otherwise dealt with so as to make a non-trivial contribution to payment for the thing forfeited (or a legal or equitable estate or interest in that thing, or a right, power or privilege in connection with that thing). Those examples are not exhaustive. As with the use condition, the derivation condition does not lend itself to detailed exposition in the abstract." (footnotes omitted)
Gordon J, in her Honour's separate judgment, also emphasised the breath of the concept of "derived" in the Proceeds of Crime Act, stating, at [98], as follows:
"During the course of oral submissions about the proper construction of the source limb, possible tests for determining whether property was 'derived' from unlawful activity, including proportional tests - for example, whether most or a substantial proportion of the funds used have come from unlawful activity - or a 'but for' test - whether the property would not have been obtained or retained but for the use of tainted funds - were discussed. As the preceding analysis demonstrates, the statutory question is one of fact and degree, and will be fact‑specific and often fact-intensive. In considering the application of the source limb to the facts and circumstances of a specific asset, including, in particular, the extent and nature of the connection between the unlawful activity and the derivation, a proportional test, or a 'but for' test, may be of assistance. However, the answer provided by either test will not be decisive because, consistent with the broad construction of the source limb explained earlier, the statutory question is better approached by asking whether the extent and nature of the connection between the unlawful activity and the derivation is not insubstantial." (emphasis in original)
There is an additional construction issue. The Proceeds of Crime Act contains an extended definition of an "interest" in property, which is defined in s 338 to mean:
"(a) a legal or equitable estate or interest in the property or thing; or
(b) a right, power or privilege in connection with the property or thing;
whether present or future and whether vested or contingent."
This additional issue was addressed in Tjongosutiono, where N Adams J found, first, that each time there is a deposit into or withdrawal from a current account with a bank, a new chose in action is created and the previous one no longer exists. That conclusion is inconsistent with Russell v Scott and Croton and must therefore be rejected.
However, her Honour gave a second reason for her conclusion. By reason of the definitions of "property" and "interest" in the Proceeds of Crime Act, an account holder's right to withdraw funds standing to the credit of an account is an "interest" in or in connection with that property. That right or power to withdraw or deal with the credit balance after the structured deposits were made is a different right or power from that which existed before the making of the deposits. There was no right or power to withdraw or otherwise deal with the increased credit balance until the structured deposits were made. At any point in time thereafter, the right or power is to withdraw or deal with the newly deposited funds.
Some support for N Adams J's conclusion is provided by an analysis of the inchoate cause of action in debt possessed by the respondent here before and after the deposits were made giving effect to a non-reportable transaction referred to in the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. It will be recalled that N Joachimson v Swiss Bank Corporation established that it is an implied term of the contract that the banker is not liable to repay the customer until demand is made. Until then, there is no presently due debt owed by the banker to his or her customer. The inchoate cause of action in debt possessed by the respondent here was for a materially smaller amount than the inchoate cause of action in debt after each of the deposits were made giving effect to a non-reportable transaction.
The legislative provisions in this case are complex and the interaction between the Proceeds of Crime Act and the myriad of offence-creating provisions, including the money laundering provisions of the Criminal Code and the Anti-Money Laundering and Counter-Terrorism Financing Act, are opaque. However, having grappled with the complexities of the legislative scheme, we have respectfully concluded that the primary judge's resolution of the issues was not correct.
The meaning of words and phrases is influenced by the immediate context in which they are used. The meaning of the whole may be different to the sum of the meaning of the parts: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397 per Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ, citing Lord Hoffmann in R v Brown [1996] AC 543 at 561. The modern approach to statutory interpretation uses "context" in its widest sense "to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy": CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ. A construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object: Acts Interpretation Act 1901 (Cth), s 15AA.
In Taylor v The Owners - Strata Plan No11564 (2014) 253 CLR 531; [2014] HCA 9, French CJ, Crennan and Bell JJ said, at [39], that:
"… the task remains the construction of the words the legislature has enacted. In this respect it may not be sufficient that 'the modified construction is reasonably open having regard to the statutory scheme' because any modified meaning must be consistent with the language in fact used by the legislature. Lord Diplock never suggested otherwise. Sometimes, as McHugh J observed in Newcastle City Council v GIO General Ltd, the language of a provision will not admit of a remedial construction. Relevant for present purposes was his Honour's further observation, '[i]f the legislature uses language which covers only one state of affairs, a court cannot legitimately construe the words of the section in a tortured and unrealistic manner to cover another set of circumstances.'" (citations omitted)
As Gageler and Keane JJ pointed out in the same case, at [65]-[66], the choice between alternative meanings involves an evaluation of the relative coherence of the alternatives with identified statutory objects or policies. The identified statutory objects or policies of the Proceeds of Crime Act are tolerably clear. Among its principal objects, the Act is intended to "deprive persons of the proceeds of offences, the instruments of offences, and benefits derived from offences, against the laws of the Commonwealth" and to "punish and deter persons from breaching laws of the Commonwealth".
The Anti-Money Laundering and Counter-Terrorism Financing Act is plainly intended to regulate cash deposits of sizeable amounts in order that law enforcement agencies can stop or restrict the laundering of money from criminal activity and the funding of terrorism. Similarly, the Criminal Code, s 400.9 is intended to deter persons from dealing with property that is reasonably suspected of being the proceeds of crime, including by depositing funds into existing bank accounts.
The respondent possesses two choses in action enforceable against the Commonwealth Bank constituted by the right to compel the bank upon demand to pay to, or at his direction, an amount equivalent to the amount standing to the credit of each of his accounts. Those choses in action are a species of intangible personal property within the definition of "property" in the Proceeds of Crime Act, s 338. The property is intangible in the sense that it is incapable of physical possession. It is inchoate as, until a demand for payment is made, the cause of action is not complete.
In this case, funds have been deposited into an existing bank account in contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142. We have concluded that the respondent's right to demand payment of the amount standing to the credit in each of his accounts is a right or power in connection with the property, being the respondent's chose in action, within the meaning of the Proceeds of Crime Act, s 329. This "right or power" was partly derived or realised, directly or indirectly from the commission of the offence. It is "in connection with" the respondent's chose in action as it affects a change in the amount of the demand which may be made by the respondent on the Commonwealth Bank. The words "in connection with" are capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456 at 288 per Neaves, French and Cooper JJ. The judgment of connection depends on the statutory context in which the words are used. In the present context, the connection is close.
This "right or power" to demand payment is directly "in connection with" the property, that is, the chose in action. This is because there is property, as defined, which is "partly derived" from the commission of the offence because, to paraphrase the plurality of the High Court in Hart at [16], derivation in this factual setting is constituted by the non-trivial causal connection between the relevant act (the deposit into an existing bank account in contravention of the Anti-Money Laundering and Counter-Terrorism Financing Act, s 142) and the acquisition by the respondent of a right, power or privilege in connection with the chose in action, being the right, power or privilege to demand payment of an amount, including the deposited amount made in contravention of s 142.
We are fortified in this conclusion by the references in the Proceeds of Crime Act to funds in an "account" retaining their character, for the purposes of the Act, as proceeds of crime. The Proceeds of Crime Act commences with freezing orders. A magistrate is empowered to make orders, including orders directed to a financial institution to freeze an account with that institution, if there are reasonable grounds to suspect that the balance of the account is, inter alia, "proceeds of an indictable offence": see s 15B. That is an indication that what is relevant for the purposes of the Act is a much broader conception of rights and interests in property than the analysis of the traditional banker-customer relationship and the contract between the two. The breadth of the definition of property which is "proceeds of an offence" in s 329 is a further indication of the broad conception of rights and interests in property encompassed by the Act.
A further specific indication of the breadth of the legislative purpose to expose to forfeiture funds derived from or constituting the commission of an offence which are deposited into a pre-existing bank account is the Proceeds of Crime Act, s 330(3), which specifically provides that property remains proceeds of an offence even if it is credited to an account. An "account" itself is broadly defined in s 338, which provides that "it is immaterial whether … any transactions have been allowed in relation to [the] account".
In our opinion, the provisions to which we have referred evince a legislative intent that is radically different from traditional concepts of the banker-customer relationship and the fungibility of money. Critically, for present purposes, these provisions make clear that the legislature intended to create a statutory confiscation regime which permits the forfeiture of a customer's rights in relation to a bank account, regardless of whether that bank account was opened before or after the criminal activity that gave rise to the proceeds of crime.
It follows that the appeal must be allowed. The primary judge's finding that the property in issue "is not proceeds of an offence" within the meaning of s 49(4) was incorrect. It follows that the discretion to refuse to make a forfeiture order under s 49(4) did not arise, and her Honour was required to make a forfeiture order pursuant to s 49(1).