[1991] FCA 87
Amalgamated Engineering Union Australian Section (1951) 82 CLR 208
[1951] HCA 3
Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 at 658
[2015] NSWSC 1523
Commissioner of the Australian Federal Police
Source
Original judgment source is linked above.
Catchwords
(1991) 99 ALR 295[1991] FCA 87
Amalgamated Engineering Union Australian Section (1951) 82 CLR 208[1951] HCA 3
Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 at 658[2015] NSWSC 1523
Commissioner of the Australian Federal Policein Re the Application of Cui (2017) 353 ALR 162[2017] NSWSC 1817
Croton v The Queen (1976) 117 CLR 326[1967] HCA 48
DPP (Commonwealth) v Ronen [2005] NSWSC 990
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89[2007] HCA 22
FCT v Cooling (1990) 22 FCR 42[1990] CA 297
Hunger Resources Ltd v Melville (1988) 164 CLR 234[1988] HCA 5
ITP (London) Ltd v Winstanley [1947] 1 All ER 177
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1[2006] NSWSC 289
Pralle v Scharka [1978] 2 NSWLR 450
R v IsaacEx parte Transport Workers' Union (1985) 159 CLR 323 at 334-335[1985] HCA 80
Re Our Town FM Pty Limited and Newcastle Stereo Radio Pty Limited v Australian Broadcasting Tribunal and Newcastle FM Pty Limited (1987) 16 FCR 465[1987] FCA 479
Rudge v Link [2008] NSWSC 1104
Studman v Director of Public Prosecutions (Cth) (2007) 177 A Crim R 34
[2007] NSWCA 285
Taylor v Attorney General (SA) (1991) 55 SASR 46
(1991) 53 A Crim R 166
The Commissioner of the Australian Federal Police v Tjongosutiono [2018] NSWSC 48
Victoria v Sutton (1998) 195 CLR 291
[1998] HCA 56
White v Director of Public Prosecutions for the state of Western Australia (2011) 243 CLR 478
[2011] HCA 20
Yango Pastoral Co Pty Ltd v First Chicago (1978) 139 CLR 410
Judgment (8 paragraphs)
[1]
Background Facts
Mr Gwe (the General Manager) and Ms Hoang (Director/Manager Finance) work for PT Camar Indah Jaya Perkasa, a wholesale cosmetics packaging business in Jakarta, Indonesia: Hoang Affidavit, at [10], [12]-[13]. Gwe, Hoang and the elderly mother of Gwe are the shareholders in the business: Gwe Affidavit, at [19].
Of the two defendants, Hoang was the more directly concerned with financial matters and was the financial officer amongst the two of them: the Commissioner's Submissions, at [28]; Gwe Affidavit, at [52].
For the purpose of sending money to overseas accounts, the defendants (the applicants on the Motion) engaged the service of money-changers and not banks. They did this for a number of purposes, including the paying of suppliers. The applicants have engaged Pt Karya Harapan Valasindo through Rosiyana Ongti (from at least 2006) and Ahong (from 2012) for money changing services: see the Submissions of Gwe and Hoang, at [13]; Hoang Affidavit, at [28]-[33].
Hoang uses money-changers because of the price difference, compared to banks in Indonesia, for the transfer of money to Australia. In or about 2006, someone at the Bank of Central Asia, told her that money-changers were cheaper: second Burtenshaw Affidavit, at [90]-[93]; Hoang Affidavit, at [24]. Money-changers are engaged to send money to Australia for the mortgages of the Sydney properties and to pay Pt Camar's suppliers (predominantly in China and a few in Taiwan) and other business expenses: the Commissioner's Submissions, at [26]; Hoang Affidavit, at [34].
Pt Karya was an authorised and licensed money-changer in Indonesia: Submissions of Gwe and Hoang, at [16]. Pt Karya received commission and profit on the exchange rate from dealing with the defendants/applicants: Submissions of Gwe and Hoang, at [17].
The evidence of Hoang was that the transfer documents sent to her by the money-changers would have shown that money was being transferred to other accounts before being transferred to her accounts: second Burtenshaw Affidavit, at [106]. The steps that Hoang undertook in dealing with the process of the money-changers (Hoang Affidavit, at [34]-[35]) were:
1. to receive confirmation of an order from a supplier;
2. to request exchange rates from the banks;
3. to request daily foreign exchange rates from Rosiyana and/or Ahong via telephone;
4. to enter into an oral agreement at the chosen rate and to exchange account details with the money-changers;
5. Rosiyana or Ahong would provide the amount required to transfer;
6. Ahong maintained two accounts: one with the Bank of Central Asia; and one with Mandiri. Rosiyana had two accounts, both with the Bank of Central Asia;
7. Hoang would attend the bank branch and request the money be transferred to the money-changer's account (using either money from the account or cash), upon which a "red slip" would denote a transfer from the account and a "blue slip" would denote a cash transfer;
8. Once transferred, Hoang would fax a copy of the receipt from the bank to the money-changer as confirmation. If not by fax, Hoang would call or visit to confirm orally and in person;
9. Hoang would receive a call sometime later from the money-changer with the estimated time that the money would be available, which timing depended on the destination of the money. Australia might take several (three to five) days before the money would become available.
The receipts provided to Hoang by Rosiyana for 2015 show amounts that are slightly different to those transferred by Hoang. The difference is assumed, by Hoang, to represent fees and/or charges etc: Hoang Affidavit, at [36].
In November 2012, Hoang and Gwe attended an investment exhibition run by a company called Centurion, an Australian-based property investment group. They attended that exhibition because of a desire to retire in Australia. Eventually, they purchased three apartments in Zetland, Sydney, each of which is the subject of the orders earlier made by the Court and each of which is amongst the property sought to be released by orders sought in the Motion before the Court at present: Hoang Affidavit, at [41].
Gwe and Hoang had three home loan accounts and two savings accounts with Westpac. The accounts were created about the time that the properties were purchased: Hoang Affidavit, at [45]-[46].
The process by which the monies were transferred between Westpac accounts was described by Hoang in her Affidavit. Hoang would transfer between the Westpac accounts using the Westpac online banking application, on her iPad. She says she would only ever look at the home screen/balance page and not the transactions page. When Hoang required money to be transferred to Australia, Hoang would request that the money be sent to her Westpac "Choice" Account: Commissioner's Submissions, at [30]-[31]; Hoang Affidavit, at [47]-[49].
The evidence of Hoang as to her practice of gaining access only to the balance page of the accounts is that in those pages there was no indication that the transactions were not made in a lump sum: Submissions of Gwe and Hoang, at [19]-[20]; Hoang Affidavit, at [47]-[49], about which further comments will be made. Hoang admitted that, although she could not read English, she would not need English to see numbers in bank statements: second Burtenshaw Affidavit, at [94].
On 30 June 2015, officers of the Australian Federal Police entered a room at the Novotel, Sydney. In that room the officers found Leonard Linggo and Kim Cheung and a total of $1,055,920 cash in Australian Dollars: Submissions of the Commissioner, at [15]-[16]; second Burtenshaw Affidavit, at [10] and [11].
The two persons found in the Novotel room were charged with dealing with money suspected to be the proceeds of an offence, contrary to s 400.9 of the Criminal Code Act 1995 (Cth) ("the Criminal Code") and with conducting transactions so as to avoid reporting requirements relating to threshold transactions, contrary to s 142(1) of the Anti-money Laundering and Counter-terrorism Financing Act 2006 (Cth). Each of the two persons found in the room entered a plea of guilty to the offences charged.
Interviews with the offenders uncovered that the men were involved in the collection of large sums of cash for the purpose of making deposits under the value of $10,000 AUD into various bank accounts around Sydney: AFP Submissions, at [17]-[18]; second Burtenshaw Affidavit, at [12] and [13]. Documents that were extracted by the AFP from the computer of Linggo revealed the records of Gwe and Hoang. Evidence from the laptop of Anny Ng also demonstrated similar transactions: AFP Submissions, at [22]; second Burtenshaw Affidavit, at [27], [29] and [30]-[34].
The records located by the AFP demonstrate transactions into the relevant Westpac accounts of Gwe and Hoang, which were structured deposits: AFP Submissions, [19] and [22], being structured in such a way as to avoid the $10,000 AUD limit on the deposit of cash, before reporting requirements operated.
The real property, being the three units or apartments described in Schedule 2 to the Motion, were purchased, at least in part, with money from those accounts. Those properties were, therefore, purchased from money that was part of a scheme in which the defendants' received structured deposits: AFP Submissions, at [23]-[24]; second Burtenshaw Affidavit, at [35]-[46].
The foregoing facts are essentially uncontroversial, except on the question of the knowledge of Gwe and Hoang as to the structuring of the deposits in the way earlier described.
[2]
Legislative Framework
The defendants move for orders pursuant to the terms of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR") that they be joined as a defendant to the proceedings. The proceedings were, in accordance with the legislative scheme, originally commenced naming no defendants, as such. The defendants, who are the applicants on the motion, were named, initially, as interested persons, because their property was affected by the terms of the order sought and obtained.
The terms of UCPR r 6.27 are in general terms, namely, that a person, who is not a party to proceedings, may apply to a Court to be joined as a party, relevantly, as a defendant. There can be no doubt, and it is uncontroversial, that the property of the defendants has been frozen by order of the Court on the application of the Commissioner.
Ordinarily, all persons affected by the orders made by a Court ought, where otherwise not a party, be joined as a party to proceedings. Certainly, given the nature of orders that can be and have been, made under the provisions of the Act, the rights of each of the applicants on the motion to property, both personal and real, may be affected by the litigation (and has already been affected by the litigation, if the rights include the right to utilise the property): see Pralle v Scharka [1978] 2 NSWLR 450 (relating to interest of a co-owner); Merrett v Babb [2001] QB 1174 (claim for damages by co-purchasers); London Passenger Transport Board v Moscrop [1942] AC 332 (declarations involving the determination of a will); Rudge v Link [2008] NSWSC 1104 (declarations concerning the validity of planning approval); Cambridge Credit Corporation Ltd v Parkes Developments Pty Ltd [1974] 2 NSWLR 590 (planning authority added as a party in relation to declarations); Peters v Coastace (2006) 227 ALR 750; [2006] NSWSC 289 (applications under s 237 of the Corporations Act 2001 (Cth) (as it then was), for leave to bring proceedings on behalf of a corporation); John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 and Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56.
In the last mentioned proceedings, notwithstanding that trustees of the fund had been notified of the proceedings, the orders that were to be made, if the plaintiff were to be successful, involved a determination and/or declaration of the ownership of trust monies of which the trustees had control. The High Court made clear that a failure to join such persons, where their interests are affected by the proceedings, may involve a denial of natural justice and entitled the affected person to have orders set aside.
[3]
The Proceeds of Crime Act 2002 (Cth) ("the Act")
The Act establishes a scheme for the confiscation of the proceeds of crime and establishes a process by which, amongst others, the Commissioner of the Australian Federal Police may make application for confiscation and interlocutory orders on the way to that confiscation. It also sets out the methods of investigation of that property which may fall within what are described as "proceeds of crime".
Chapter 2 of the Act provides for orders that may be made, being freezing orders, which may limit the use of monies in accounts with financial institutions as an interlocutory step toward the determination of restraining orders and confiscation orders. Further, those freezing orders may enjoin persons from the disposal of, or dealing with, any property.
The Act sets out forfeiture orders that may be made, under which property is forfeited to the Commonwealth, and requires the forfeiture of property to the Commonwealth on conviction of serious offences in relation to property that is relevant to the commission of the offence.
Pursuant to the terms of s 15C of the Act, if an authorised officer (defined in the Act) applies for a freezing order, the application must be accompanied by an affidavit of an authorised officer that sets out sufficient information to identify the account to be frozen; identifies the financial institution in which it is held; sets out the grounds under which the authorised officer suspects that the balance of the account is proceeds of an indictable offence, or of a foreign indictable offence, or of a indictable offence of Commonwealth concern; or, otherwise, is wholly or partly an instrument of a serious offence; and sets out the grounds on which the authorised officer and the Court would be satisfied that, without the order, there is a risk of dissipation of the money in the account.
Under the provisions of s 15Q of the Act, a freezing order made by a magistrate may be varied by a magistrate to allow for the reasonable living expenses of the person affected by the freezing order; the reasonable living expenses of any of the dependants of that person; the reasonable business expenses of that person (assuming the business is not the criminal concern); and a specified debt incurred in good faith by the person. The magistrate may vary the freezing order only if certain conditions are met, which include that the person affected has applied for the variation; the expenses do not relate to legal proceedings under the Act; and the person could not otherwise meet the expenses or debts.
[4]
Defendant's Submissions
Initially, the submissions of the defendants sought orders excluding the property specified in the motion and subject to the restraining orders issued by the Court on two bases: first, that the evidence before the Court shows that the restrained property is not the proceeds or an instrument of an offence; and, secondly, the orders cannot stand as they were made in breach of s 22 of the Act.
The second aspect relates to what is said to be orders otherwise than in compliance with s 22 of the Act. Section 22 of the Act requires that a "restraining order must only relate to one suspect" and the defendants submit that the restraining order relates to four suspects being the two defendants and the two persons arrested in possession of cash, as noted above.
After referring to the ability of the defendants to make application under the Act in accordance with s 29 and in particular to the satisfaction of the provisions of s 31, to which the Court has already referred, the defendants submit that the money in the bank accounts is not the proceeds or an instrument of crime.
The defendants then rely upon the provisions of s 330(4)(a) of the Act to submit that the property ceased to be the proceeds of an instrument, because it was acquired by a third party (the defendants) for sufficient consideration (the commission paid to the money-changers) and in circumstances that would not arouse a reasonable suspicion that the property was proceeds or instrument of an offence.
The defendants submit that the defendants are third parties. The defendants submit that the funds (as property), including the real estate, were acquired by the defendants because the funds were paid into Westpac accounts (from which the real property was purchased, either in whole or in part) and the money in those accounts, being a chose in action, were acquired by the defendants who, on their deposit, had the right to call on repayment of those funds at will: Croton v The Queen (1976) 117 CLR 326; [1967] HCA 48 at [291].
The defendants also submit that their status was as third parties (rather than principals) because they were not the principals to the transaction that deposited the amounts in the accounts.
The defendants concede that, as a necessary inference, there were one or more intermediate transactions between the transfer by the defendants to the money-changers and the ultimate deposit of monies into the defendants' accounts in Westpac. The defendants also concede that those intermediate transactions were transactions that involved "money-laundering" activity.
[5]
The Commissioner's Submissions
After pointing out the nature of the motions before the Court and the history of the proceedings, the Commissioner describes the motion of the defendants/applicants as raising three fundamental issues: whether the Court is permitted to reconsider its decision to make restraining orders; whether, on the evidence before the Court, the Restrained Property is or is not proceeds and/or instruments of an offence under s 330(4)(a) of the Act; and, whether a restraining order must, pursuant to s 22 of the Act, relate to one "suspect" and whether that is a matter that can properly be raised in a motion for an exclusion from a restraining order.
First, the Commissioner contends that it is impermissible and inappropriate to raise s 22 of the Act as a restriction on the making of an order in an application for exclusion from that order, and the application, to the extent that it relies upon that ground, is misconceived. That may be so, but, if the orders when made ought not to have been, because of s 22 of the Act, then the Court ought to ensure regularity of its orders, however raised.
Otherwise, the Commissioner's opposition to the motion is based upon the following premises.
First, all of the Restrained Property is the proceeds of an offence pursuant to s 329(1) of the Act, as the relevant property was "partly derived or realised" from the commission of an offence. For that proposition the Commissioner relies upon DPP (Commonwealth) v Ronen [2005] NSWSC 990 at [7] as to the meaning of the word "derived".
Further, the Restrained Property is an instrument of an offence, again pursuant to s 329(2) of the Act, on the basis that it has been used "in connection with an offence". In that regard, the Commissioner relies upon Commissioner of the Australian Federal Police v Vo (2015) 302 FLR 209; [2015] NSWSC 1523; Taylor v Attorney General (SA) (1991) 55 SASR 462 at [471]; (1991) 53 A Crim R 166; White v Director of Public Prosecutions for the state of Western Australia (2011) 243 CLR 478; [2011] HCA 20; and Commissioner of the Australian Federal Police v Courtenay Investments Ltd (No 4) [2015] WASC 101 at [485].
Thirdly, the Commissioner relies upon the legal status of the relationship between the defendants/applicants and the bank with whom their account is held. That relationship arises, legally, from the proposition that the right to make deposits and withdraw funds from the bank constitutes a "chose in action": see Studman v Director of Public Prosecutions (Cth) (2007) 177 A Crim R 34; [2007] NSWCA 285. It is the "chose in action" that is property and is either derived or acquired. The funds in the bank are not, in that sense, "property" of the defendants/applicants.
[6]
Consideration
As is clear from the foregoing, some of the issues in these proceedings depend upon the interpretation of the Act. In summary form, the submissions before the Court dealt, at length, with the reasons for judgment to which reference has already been made. Ultimately, the Court in these reasons must disclose its approach in considering the applications before the Court.
Further, when the matter was first listed, the parties advised that the judgment of Allanson J was the subject of appeal in Western Australia and was likely to be heard expeditiously. Apparently, due to the unavailability of the representatives of the parties in the appeal, the appeal was required to be heard at a much later date and, at least according to Campbell J in Commissioner of the Australian Federal Police v Lee [2017] NSWSC 1205 (28 August 2017), would not be heard before January or February 2018. Unfortunately, the Court is unaware as to the timing and can wait no longer in relation to an appellate consideration of the construction of the Act and its application.
It is necessary to deal with the serious criminal offences to which the restraining orders relate. Each of Messrs Linggo and Cheung are charged with two offences: one offence being a contravention of s 400.9(1) of the Criminal Code which renders it an offence to deal with property reasonably suspected of being proceeds of crime in excess of $100,000. As is clear from the foregoing facts, Messrs Linggo and Cheung were found with cash in the hotel room, being an amount in cash of $1,055,920 AUD.
Each of them is also charged with a contravention of s 142(1) of the Anti-money Laundering and Counter-terrorism Financing Act ("the Anti-Money Laundering Act") which renders it an offence to conduct transactions so as to avoid reporting requirements relating to threshold transactions. As has been earlier stated, the threshold to which s 142(1) of the Anti-Money Laundering Act relates is a threshold of $10,000 per deposit and the deposits were in amounts, on each occasion, of less than $10,000.
On the material before the Court, there can be no doubt that Messrs Linggo and Cheung were guilty of the offences with which they were charged. It goes without saying that there was a reasonable suspicion or a suspicion on a reasonable basis that would allow the making of restraining orders.
[7]
Conclusion
The construction of the statute has its difficulties. It is necessary to emphasise that the language of the statute is generally given its ordinary and grammatical meaning, bearing in mind that the statute must be read as a whole and should be construed so as to achieve the purposes of the statute and harmonious goals. The purpose of the statute and its context is derived from the words of the statute not by an enquiry into the subjective intention of the legislature.
The motion pursued by the defendants/applicants fails on a number of bases. It fails because the defendants/applicants are required to show that the property has ceased to be the proceeds of, or an instrument of, an offence. Whether the property is the chose in action or the right to withdraw the funds, being a right in connection with the funds (which funds are property), it has not, pursuant to the terms of s 330(4) of the Act, been acquired for sufficient consideration; in circumstances that would not arouse a reasonable suspicion that the property (including the interest) was the proceeds of an offence or an instrument of an offence; was not acquired for sufficient consideration; and, therefore, has not ceased to be the proceeds, or an instrument, of an offence.
By the terms of s 31 of the Act, the defendants/applicants were entitled to make application under s 29 of the Act, but the defendants/applicants have not shown that the chose in action or the right to withdraw the funds were not the proceeds of an indictable offence or an indictable offence of Commonwealth concern, nor an instrument of a serious offence.
Lastly, it is necessary for the Court to deal with the submission that the Court ought to make the orders sought in the motion because the terms of s 22 of the Act did not allow the restraining orders to be made. The assertion that s 22 of the Act is "jurisdictional" was not developed.
While the common law suggests that a court of superior record of general jurisdiction, such as the Supreme Court of New South Wales, cannot be the subject of prerogative relief, there are exceptions.
Because of the provisions of The Constitution, a superior court of record may well have imposed upon it jurisdictional limitations. However, it is not only the lack of jurisdiction to which such a rule goes.
Ordinarily, an order of a superior court of record is enforceable, while extant. The fact, if it be the fact, that the order ought not to have been made does not, generally, restrict the enforcement of an order of a superior court of record.
[8]
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: 05 July 2018
Peters v Coastace (2006) 227 ALR 750; [2006] NSWSC 289
Pralle v Scharka [1978] 2 NSWLR 450
R v Isaac; Ex parte Transport Workers' Union (1985) 159 CLR 323 at 334-335; [1985] HCA 80
Re Our Town FM Pty Limited and Newcastle Stereo Radio Pty Limited v Australian Broadcasting Tribunal and Newcastle FM Pty Limited (1987) 16 FCR 465; [1987] FCA 479
Rudge v Link [2008] NSWSC 1104
Studman v Director of Public Prosecutions (Cth) (2007) 177 A Crim R 34; [2007] NSWCA 285
Taylor v Attorney General (SA) (1991) 55 SASR 46; (1991) 53 A Crim R 166
The Commissioner of the Australian Federal Police v Tjongosutiono [2018] NSWSC 48
Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56
White v Director of Public Prosecutions for the state of Western Australia (2011) 243 CLR 478; [2011] HCA 20
Yango Pastoral Co Pty Ltd v First Chicago (1978) 139 CLR 410; [1978] HCA 42
Texts Cited: Oxford English Dictionary, (2nd ed, 1989)
Category: Procedural and other rulings
Parties: The Commissioner of the Australian Federal Police (Plaintiff)
Yoo Tak Gwe (First Defendant)
Tan Soi Hoang (Second Defendant)
Representation: Counsel:
A Moses SC with G O'Mahoney (Plaintiff)
I Temby AO QC with L Chapman (First & Second Defendants)
Nevertheless, the general principles associated with the joinder of parties must give way to the statutory scheme that establishes the right to proceed with the litigation. It is necessary to examine the terms of the Act.
Apart from the powers of a magistrate to which reference is made above, restraining orders may be made by a Court with "proceeds jurisdiction" (a defined term under the provisions of s 335 of the Act), which includes, relevantly, in relation to conduct that occurred in New South Wales, the Supreme Court of New South Wales and the District Court of New South Wales, being Courts that have jurisdiction to deal with criminal matters on indictment in New South Wales.
Section 17 of the Act deals, inter alia, with restraining orders against persons convicted of, or charged with, indictable offences. The terms of s 17 of the Act require the Court, on application, to order that property must not be disposed of or otherwise dealt with by a particular person either absolutely or except in the manner and circumstance specified in the order. The requirement to make such an order occurs if an appropriate authority applies for the order; the person has been convicted of or has been charged with an indictable offence of a relevant kind or it is proposed that the person be charged for such an offence; the affidavit requirements in s 17(3) have been complied with; and the Court is satisfied that the authorised officer, who has made the affidavit, holds the suspicion stated in the affidavit on reasonable grounds.
By s 17(2) of the Act, the order must specify the property over which any restraining order is made and the restrictions imposed upon any dealings with the property and can do so only to the extent that the Court is satisfied that there are reasonable grounds to suspect that the property is one or more of the following: property of the suspect; bankruptcy property of the suspect; specified property of another person (whether or not known) that is subject to the effective control of the suspect; or specified property of another person (whether or not known) that is the proceeds of the offence or an instrument of the offence.
Section 17(3) of the Act sets out the affidavit requirements. It is unnecessary to detail those as there is no issue currently before the Court in relation to same.
Sections 18 and 19 deal, respectively, with persons suspected of committing serious offences and with property suspected of being the proceeds of indictable offences. It is appropriate to deal with the definition of property suspected of being proceeds of indictable offences.
In this case, there is no suggestion that any of the property relates to proceeds of a terrorism offence or of a foreign indictable offence. In that definition one must include the definition of an instrument of a serious offence.
Property is proceeds of an offence if it is wholly or partly derived or realised, whether directly or indirectly, from the commission of the offence and relates to property situated within or outside Australia. Further, property is an instrument of an offence, as defined, if the property is used in, or intended to be used in, or in connection with, the commission of an offence. Neither definition depends upon the conviction of a person for the offence in question: s 329 of the Act.
By the provisions of s 330 of the Act, property becomes proceeds of an offence if it is wholly or partly derived from a disposal or other dealing with proceeds of the offence or wholly or partly acquired using proceeds of the offence. It remains so, notwithstanding its credit to an account or its disposal.
Further, s 330(4) of the Act provides that property only ceases to be proceeds or an instrument of an offence, if acquired by a third party for "sufficient consideration" without knowledge, or without knowledge of the circumstances that would arouse a reasonable suspicion, that the property was proceeds or instrument of an offence; or if the property vests from the distribution of a deceased estate; is distributed in accordance with an order or approved financial agreement under the Family Law Act 1975 (Cth) and six years has elapsed since that distribution; or if the property is acquired as payment for reasonable legal expenses; or if a forfeiture order under the Act in respect of the property is satisfied; or if the property is forfeited, confiscated or otherwise disposed of under the Act or a corresponding law (being State laws in or to the same effect or for the same purpose); or if the property is disposed of under the Act; or other circumstances specified in the regulations.
The application by motion relies on the operation of ss 29 and 31 of the Act and it is appropriate for those provisions to be set out:
"29. Excluding property from certain restraining orders
(1) The Court to which an application for a *restraining order under s 17, 18 or 19 was made must, when the order is made or at a later time, exclude a specified *interest in property from the order if:
(a) an application is made under s 30 or 31; and
(b) the Court is satisfied that the relevant reason under subs (2) or (3) for excluding the interest from the order exists.
Note: s 32 may prevent the Court from hearing the application until the responsible authority has had a reasonable opportunity to conduct an examination of the applicant.
(2) The reasons for excluding a specified *interest in property from a *restraining order are:
(a) for a restraining order under s 17 if the offence, or any of the offences, to which the order relates is a *serious offence--the interest is neither *proceeds nor an *instrument of *unlawful Activity; or
(b) for a restraining order under s 17 if paragraph (a) does not apply--the interest is neither proceeds nor an instrument of the offence, or any offence, to which the order relates; or
(c) for a restraining order under s 18--the interest is neither:
(i) in any case--proceeds of unlawful Activity; nor
(ii) if an offence to which the order relates is a serious offence--an *instrument of any serious offence; or
(d) for a restraining order under s 19--the interest is neither:
(i) in any case--proceeds of an *indictable offence, a *foreign indictable offence or an *indictable offence of Commonwealth concern; nor
(ii) if an offence to which the order relates is a serious offence--an *instrument of any serious offence.
Note: One of the circumstances in which property ceases to be proceeds of an offence or unlawful Activity involves acquisition of the property by an innocent third party for sufficient consideration: see paragraph 330(4)(a).
(3) If the offence, or each offence, to which a *restraining order relates is a *serious offence that is an offence against s 15, 24, 29 or 31 of the Financial Transaction Reports Act 1988 or s 53, 59, 136, 137, 139, 140, 141, 142 or 143 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, a further reason for excluding a specified *interest in property from the order is that each of the following requirements is met:
(a) there are no reasonable grounds to suspect that the interest is *proceeds of the offence, or any of the offences;
(b) there is a *suspect in relation to the order, but he or she has not been convicted of, or charged with, the offence, or any of the offences;
(c) the conduct in question was not for the purpose of, in preparation for, or in contemplation of, any other *indictable offence, any *State indictable offence or any *foreign indictable offence;
(d) the interest could not have been covered by a restraining order if none of the offences had been serious offences.
(4) However, the Court must not exclude a specified *interest in property from a *restraining order under s 17 or 18 unless it is also satisfied that neither a * pecuniary penalty order nor a *literary proceeds order could be made against:
(a) the person who has the interest; or
(b) if the interest is not held by the *suspect but is under his or her *effective control--the suspect.
31. Application to exclude property from a restraining order after restraining order has been made
(1) A person may apply for an order under s 29 or 29A if a *restraining order that covers property in which the person claims an *interest has been made.
(1A) An application under subs (1):
(a) must be made to the Court that made the *restraining order; and
(b) may be made at any time after the restraining order is made.
(2) However, unless the Court gives leave, the person cannot apply if he or she:
(a) was notified of the application for the *restraining order, but did not appear at the hearing of that application; or
(b) appeared at the hearing of that application.
(3) The Court may give the person leave to apply if the Court is satisfied that:
(a) if paragraph (2)(a) applies--the person had a good reason for not appearing; or
(b) if paragraph (2)(b) applies--the person now has evidence relevant to the person's application that was not available to the person at the time of the hearing; or
(c) in either case--there are other special grounds for granting the leave.
(4) The person must give written notice to the *responsible authority of both the application and the grounds on which the exclusion is sought.
(5) The *responsible authority may appear and adduce evidence at the hearing of the application.
(6) The *responsible authority must give the person notice of any grounds on which it proposes to contest the application. However, the authority need not do so until it has had a reasonable opportunity to conduct * examinations in relation to the application."
Dealing firstly with the provisions of s 31 of the Act, it seems clear that each of the defendants is a person who may apply under s 31(1) of the Act and has applied to the correct body: s 31(1A) of the Act.
Further, the restraining order enjoining the defendants was made ex parte and the defendants were not notified of the application for the restraining order, before it was made. Nor, obviously, did either of the defendants appear at the hearing of that application.
As a consequence of the foregoing, the Court has jurisdiction under s 31(2) of the Act to determine an application to exclude property from the restraining order made by the defendants. The foregoing conclusion takes into account that the Commissioner of the Australian Federal Police, being the responsible authority, has been given written notice (and has appeared) on the application, thereby satisfying the provisions of s 31(4) of the Act.
The fundamental issue in contention between the parties derives from the operation of s 330(4) of the Act. The defendants submit that the property in question has ceased to be proceeds of an offence and relies upon the provisions of s 330(4)(a) of the Act for their application to succeed.
It is necessary to recite a number of provisions, including ss 329(1), 329(3), 329(4), 330(1), 330(3), 330(4)(a) and 330(6) of the Act. Further s 338 of the Act is the Dictionary and, relevantly, defines "sufficient consideration" and other terms, which are either directly relevant or give context. The Court recites each of the foregoing sections and some definitions:
"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.
…
(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:
(a) the property is wholly or partly derived or realised from a disposal or other dealing with *proceeds of the offence; or
(b) the property is wholly or partly acquired using proceeds of the offence; or
(c) an *encumbrance or a security on, or a liability incurred to acquire, retain, maintain or make *improvements to, the property is wholly or partly discharged using proceeds of the offence; or
(d) the costs of retaining, maintaining or making improvements to the property are wholly or partly met using proceeds of the offence; or
(e) the property is improved using proceeds of the offence;
including because of one or more previous applications 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; or
(b) it is disposed of or otherwise dealt with.
(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); or
…
(6) Property becomes, remains or ceases to be proceeds of an * unlawful Activity, or an instrument of an unlawful Activity, if the property becomes, remains or ceases to be proceeds of the offence, or an instrument of the offence, constituted by the Act or omission that constitutes the unlawful Activity."
In order to come to any conclusion, one needs to examine the definitions of "the proceeds of an offence", "an instrument of an offence", "property", "derived", "lawfully acquired", "deal", "sufficient consideration" and "suspect". Not each of the definitions is directly relevant but each will be recited. An understanding of each of them is necessary for an understanding of the Act, and the terms of the Act, in context.
"336. Meaning of derived
A reference to a person having derived *proceeds, a *benefit, *literary proceeds or *wealth includes a reference to:
(a) the person; or
(b) another person at the request or direction of the first person;
having derived the proceeds, benefit, literary proceeds or wealth directly or indirectly.
336A. Meaning of property or wealth being lawfully acquired
For the purposes of this Act, property or *wealth is lawfully acquired only if:
(a) the property or wealth was lawfully acquired; and
(b) the consideration given for the property or wealth was lawfully acquired; and
(c) the property or wealth is not *proceeds or an *instrument of an offence.
…
338. Dictionary
In this Act, unless the contrary intention appears:
'deal': dealing with a person's property includes:
(a) if a debt is owed to that person--making a payment to any person in reduction of the amount of the debt; and
(b) removing the property from *Australia; and
(c) receiving or making a gift of the property; and
(d) if the property is covered by a *restraining order -- engaging in a transaction that has the direct or indirect effect of reducing the value of the person's interest in the property.
'interest', in relation to property or a thing, means:
(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.
Note: For references to an interest in property of a person who has died, see subs 325(2).
'sufficient consideration': an acquisition or disposal of property is for sufficient consideration if it is for a consideration that is sufficient and that reflects the value of the property, having regard solely to commercial considerations.
'suspect' means:
(a) in relation to a *restraining order (other than a restraining order made under s 20A) or a *confiscation order (other than an *unexplained wealth order)--the person who:
(i) has been convicted of; or
(ii) has been *charged with, or is proposed to be charged with; or
(iii) if the order is a restraining order--is suspected of having committed; or
(iv) if the order is a confiscation order--committed;
the offence or offences to which the order relates; or
(b) in relation to a restraining order made under s 20A or an unexplained wealth order--the person whose *total wealth is suspected of exceeding the value of *wealth that was *lawfully acquired."
The defendants also submit that the consideration that was paid, on the evidence before the Court, by the defendants to either Pt Karya or Ahong were the payment of services to an authorised and licensed money-changer in Indonesia and that, as a consequence, the consideration was the commission which the money-changers earned. There is no evidence, the defendants submit, that the arrangement between the defendants and the money-changers was a fraud, a sham transaction or less than an adequate and competitive remuneration for the money-changer.
As to the requirement that the circumstances would not arouse a reasonable suspicion, the defendants rely upon the evidence of Hoang, relevantly summarised above, that she, handling the money dealings on behalf of herself and Gwe, did not check the accounts beyond the balance page and did not see or notice that the transaction page displayed details of transactions on the accounts, being details which would have shown deposits in lots of less than $10,000 AUD.
If, as the evidence attests, neither of the defendants looked at the transaction page, the defendants submit that nothing on the remainder of the sheet (i.e. the balance page) would arouse a reasonable suspicion of the kind that would suggest that the deposits were made other than legitimately or in the normal way (i.e. by lump-sum payment).
As to the provisions of s 22 of the Act, the defendants submit that s 22 requires a restraining order to relate only to one suspect. The defendants submit that there are four suspects to which the restraining orders relate and, therefore, on that submission, the orders made by the Court, initially, were beyond jurisdiction.
It is unnecessary to deal with whether s 22 of the Act is jurisdictional or relates to power. For relevant purposes, it makes little or no difference. I have serious doubts as to the proposition that it is, at least in relation to this Court, jurisdictional.
Although not expressed in that way, the submission of the defendants is that non-compliance with the provisions of s 22 of the Act renders the restraining order void. There is no such provision to that effect.
The defendants submit that, because s 338 of the Act defines a suspect "in relation to a restraining order" to mean "the person who is suspected of having committed the offence to which the order relates" and, bearing in mind the provisions of ss 17, 18, 19 and 20 of the Act, which have general application to all restraining orders, once there are two or more suspects, in relation to the restraining order, the restraining order is incapable of being issued.
The defendants submit that the suspicions upon which the authorised officer relies concerned two suspects (Messrs Linggo and Cheung), and the monies were received in joint names; the affidavit identifies four individuals as suspected offenders; and the terms of s 22 of the Act prohibit the Court from issuing the restraining orders that were made.
At the time that the matter was first before the Court, the Court's attention was drawn to the judgment in Western Australia relating to some of the issues in contention, being the judgment of Allanson J in Commissioner of the Australian Federal Police v Kalimuthu (No 3) [2017] WASC 108. The Court was informed that the judgment was the subject of an appeal to the Court of Appeal in Western Australia, which would determine in an authoritative way some, at least, of the issues for determination by the Court: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] (per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). The Court was requested to await that appeal.
In the meantime, judgments of this Court have issued. The first of note is a judgment of Campbell J of 28 August 2017 (Commissioner of the Australian Federal Police v Lee [2017] NSWSC 1205); then two judgments of Simpson J (as her Honour then was) (Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197 and Commissioner of the Australian Federal Police v Lordianto (2017) 324 FLR 237; [2017] NSWSC 1196, each delivered on 7 September 2017; reasons for judgment of McCallum J of 22 December 2017 (Commissioner of the Australian Federal Police; in Re the Application of Cui (2017) 353 ALR 162; [2017] NSWSC 1817); and, relevantly, last, the reasons for judgment of N Adams J of 9 February 2018 in The Commissioner of the Australian Federal Police v Tjongosutiono [2018] NSWSC 48.
The Court, as presently constituted, has not been informed of the result of the appeal from the judgment of Allanson J and cannot defer judgment any longer.
Further submissions were provided in relation to the two judgments of Simpson J to which reference has been made and the Court, at its invitation, received further written submissions on the judgment of N Adams J to which previous reference has also been made.
The defendants/applicants invite the Court to treat the reasons for judgment of N Adams J in Tjongosutiono as involving no expression of general principle and turning on its own facts. Those facts, it is conceded by the defendant, share "a similar narrative" but, according to the defendants, differ on the legal question involved. The judgment did, however, deal with the question, raised by the defendants/applicants, as to whether the restrained property had ceased to be proceeds.
Further, the defendants seek to distinguish the findings of N Adams J (and by reference Wilson J in another judgment) that the persons in the position of the defendants were not "third parties". The defendants/applicants also seek to distinguish the reasons for judgment of N Adams J (and of the comments of Simpson J in Fernandez) on the question of sufficient consideration.
Ultimately, the submission of the defendants/applicants is that each decision depends upon its own facts or, in the alternative, results from a misunderstanding relating to whether the applicant in each case had paid for the funds to be structured in a particular way.
In one issue, at least, the defendants/applicants rely upon the process by which N Adams J concluded that their equivalents in the case before her had no knowledge of the offending. In the proceedings before N Adams J, the Commissioner conceded lack of knowledge and the defendants/applicants submit that the same evidence (or evidence of the same kind) in these proceedings would satisfy the Court in the same manner.
Further, the defendants/applicants submit that N Adams J was correct in concluding that the determination of whether the circumstances would arouse "a reasonable suspicion" involves an objective test. In the proceedings before N Adams J, the evidence was that the applicant did not look at the material provided by the bank beyond the "home screen" and, according to the defendants/applicants, that accords with the evidence before the Court in these proceedings.
In particular, the defendants/applicants rely upon the evidence that Hoang examined only the balance page and did not examine or look at the transaction pages of the online statements provided by the bank to her. The defendants/applicants submit that there is no reason not to accept Hoang's evidence and it would be difficult for the Court to find "other than that the circumstances did not arouse such a suspicion". The latter submission would have the Court treat the suspicion as subjective, not objective.
Fourthly, whether the conduct of the defendants/applicants, including the remitter of monies to money-changers overseas, is legitimate or not does not answer the question or inform the determination of whether the Restrained Property is the proceeds and/or instrument of an offence for present purposes. For that proposition the Commissioner relies upon the Commissioner of the Australian Federal Police v Minh Duc Pham [2015] NSWSC 1383 and Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320.
Fifthly, the Commissioner relies on the fact that the real properties identified and restrained were acquired using proceeds and/or instruments of an offence (at least in part): see Commissioner of the Australian Federal Police v Huang [2016] WASC 5.
Sixthly and lastly, the defendants/applicants are unable to discharge their onus of proof as the persons applying for orders under the Act: see s 317 of the Act.
In respect to s 22 of the Act and the submissions of the defendants/applicants, the Commissioner particularises its submission that the application is a misconception, or adds to the earlier argument noted above, by submitting that the Act clearly envisages that a restraining order may be made with no relationship to any suspect and may cover property of one or more other persons who are not a suspect. Further the Commissioner submits that the Burtenshaw Affidavit does not identify four suspects. On the proper construction of s 22 of the Act, bearing in mind the circumstances of the case, the Commissioner submits that the Court, in making the Restraining Order, did not exceed the limits of s 22 of the Act.
The Commissioner expands upon each of the arguments above, but it is unnecessary to repeat that expansion. Further, the Commissioner filed submissions on 19 February 2018 dealing with the application of the judgment of N Adams J in Tjongosutiono, supra. Essentially, the Commissioner submits that her Honour's consideration of the meaning and operation of s 330(4)(a) of the Act supports the submissions otherwise advanced by the Commissioner as to the application of that provision in these proceedings.
Further, there is no doubt, again on the material currently before the Court, that the amount held to the credit of each of the defendants/applicants was the result of deposits structured so as to avoid the reporting requirements imposed by law and breach of which is an offence, described above.
Further again, the funds standing to the credit of the defendants/applicants in Westpac (each of the accounts) were the result of deposits by Messrs Linggo and Cheung in which Messrs Linggo and Cheung (or others) were dealing with property reasonably suspected of being the proceeds of crime in excess of $100,000.
As the name of the statute implies, the Anti-money Laundering and Counter-terrorism Financing Act is intended to catch 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, s 400.9(1) of the Criminal Code is intended to deter persons from dealing with large amounts of property that is reasonably suspected of being the proceeds of crime.
The kind of activity that is suspected of occurring, by the process in which Messrs Linggo and Cheung were involved, is obtaining legitimate amounts of money from business persons through a non-banking financial actor and, instead of utilising that amount for the purpose of depositing it (or its Australian dollar equivalent) into accounts in Australia, depositing amounts that are, for example, the proceeds of supply or importation of drugs and other criminal activities, rendering both amounts "legitimate".
An analysis of the issues with which the Court is currently faced must commence with an analysis of s 19 of the Act, which is summarised above.
The first aspect with which the Court needs to deal is the effect of the meaning of the word "property" in the context of the Act as a whole. There is now significant authority (and there has been for some period of time) that property includes a chose in action.
The relationship between the bank and the client is such that the client possesses a chose in action, which is property, and the chose in action entitles the client to withdraw sums in accordance with the contract between the client and the bank. The deposit of funds in a bank does not, under principles of general law, affect the property, being the chose in action, but increases (or in the case of a withdrawal, decreases) the amounts that may be withdrawn under the chose in action.
As a consequence, ordinarily, funds in the bank are not "property" of a client, or any person, other than the bank, in which it is deposited. Relevantly for present purposes, it should be explained that a "chose in action" is personal property that includes the right to bring an action for damages or recover a debt.
Ordinarily, also, an "interest" in property would not include the amount of funds deposited in a bank account, as the bank account amounts are realisable only as a consequence of the chose in action. Nevertheless, the definition of "interest" in s 338 includes "a right, power or privilege in connection with the property".
Funds, or the amount of money that constitutes funds, are property, but not the property of the client. If, as is defined, an "interest" in property includes, apart from its ordinary meaning, a right, power or privilege in connection with the property, then the exercise of the right to withdraw money or the exercise of the privilege or power to withdraw money held by the bank (and being the funds of the bank), may well be included in the definition of "interest" in relation to property, even though, under ordinary principles, the funds in the bank are not the property of the client and the client has no interest in the property.
As is clear from the foregoing recitation of the provisions of the Act, s 330(4) of the Act provides that property ceases to be proceeds or an instrument, and only ceases to be proceeds or an instrument, of an offence, relevantly, if the property is acquired by a third party "for sufficient consideration", without knowledge that the property was proceeds or an instrument of an offence of the relevant kind and in the absence of circumstances that would arouse the reasonable suspicion that the property was proceeds or an instrument of an offence of the relevant kind.
If property includes the funds in a bank (being property of the bank) over which the defendants/applicants have, pursuant to the chose in action, "a right, power or privilege" to withdraw the said funds, the defendants/applicants may well have an "interest" (as defined) in relation to the funds held by the Bank.
Earlier in these reasons, the Court has recited the definition of "interest", which utilises two connecting terms. First it refers to an interest "in relation to" property (or a thing) and, secondly, in paragraph (b) thereof, a right, power or privilege "in connection with" the property to which the interest relates.
The connection described by the term "in relation to property" means that the connection or relationship between the interest and the property is that the interest must "relate to" the property. The term "relating to" is usually a term of wide import that is used to describe a relationship between one thing and another. Here, it seems not to be so used.
If it were used in that way, it would require a relationship between the "interest" (as ordinarily understood) and the "property" (as defined). The relationship does not need to be direct; causal; or temporal, and it can be a relationship with a contemplated future event, a past event or a present circumstance. It has a similar meaning to the words "in connection with" which are used in this definition in (b): see R v Isaac; Ex parte Transport Workers' Union (1985) 159 CLR 323 at 334-335; [1985] HCA 80; Re Our Town FM Pty Limited and Newcastle Stereo Radio Pty Limited v Australian Broadcasting Tribunal and Newcastle FM Pty Limited (1987) 16 FCR 465 at 479-480; [1987] FCA 479. The use of the term "in connection with" tends to disclose narrower use of the term "in relation to".
The wide meaning of the expression "in relation to" still requires a connection between the interest and the property. Further, the definition then seems to extend the relationship between the interest and the property by the promulgation of (b) of the definition, which utilises the term "in connection with".
The term "in connection with" is a term of wider import than the use of the term "in" and the term "incidental to". It is, together with "in respect of", the broadest and widest connection and/or relationship between two or more items or concepts. Its use in the phrase "in connection with any trade or business" has been the subject of much authority but has been said to require:
"some nexus … between the carrying on of the competition and the trade or business in respect of which it is said to have been carried on." (ITP (London) Ltd v Winstanley [1947] 1 All ER 177 at 178, per Lord Goddard CJ.)
In Australia, the High Court considered the phrase in the context of the then Income Tax Assessment Act 1936 (Cth):
"The words 'for or in connection with' imply that a consideration may satisfy the definition as being 'in connection with' one of the subjects mentioned, although not 'for' it. Now, while it is true that a payment cannot be described as a consideration 'for' anything but that which is given in exchange for it, to speak of a consideration being 'in connection with' an item of property parted with is to use language quite appropriate to the case of a payment received as consideration 'for' something other than the property in question, so long as the receipt of the payment has a substantial relation, in a practical business sense, to that property. A consideration may be 'in connection with' more things than that 'for' which it is received" (Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 at 658; [1953] HCA 70, per Kitto J).
As earlier stated, the term "in connection with" is also far wider than the term "in" or the term "incidental to". Thus, in relation to these proceedings, the question posed by (b) of the definition of "interest" is not fully answered by a determination whether the defendants/applicants have an interest (in its ordinary meaning) in the funds held by the bank but whether, to paraphrase Kitto J, "in a practical business sense", the defendants/applicants have a "right, power or privilege" that has a substantial relation to the property, being the funds. A construction of "interest" in this broader manner is consistent with the purposes of the Act and supported by the definition of "deal", supra, particularly by (d) thereof.
One then turns to the provisions of s 19 of the Act, summarised above. Section 19(1) of the Act (assuming an appropriate Court, such as this Court) deals with the requirement to make orders that property not be disposed of or otherwise dealt with "by any person", either absolutely or on terms.
The order under s 19 of the Act relates to property that, but for the order, may be dealt with by a person. The property does not need to be property of the person. As a consequence, an order may be made under s 19(1) of the Act (again assuming the jurisdictional preconditions have been met) that the defendants/applicants not dispose of or otherwise deal with the property in question, being the funds, even though that property may not be the property of the defendants/applicants.
The statutory preconditions for the making of an order involve, as earlier stated: the authority of the body applying for the order (in this case the Commissioner); reasonable grounds to suspect that the property is, relevantly, proceeds of an indictable offence of Commonwealth concern (whether or not the person who committed the offence is known), or an instrument of a serious offence; the grounds for the suspicion are set forth in an affidavit; and the suspicions are based on reasonable grounds.
The statutory preconditions, for an order under s 19(1) of the Act, do not require or relate to the existence of or the knowledge of a "suspect". Section 19(2) of the Act makes clear that the order relates to the property and applies to any person so long as there are reasonable grounds to suspect that the property is the proceeds of the offence or, in the case of a serious offence, an instrument of the offence.
The restraining orders that the Court issued on 9 July 2015 related, in part, to the funds held by Westpac. Schedule 1 related to the property being the cash that was found in the hotel room of $1,055,92 AUD and Schedule 2 related to the Westpac accounts and the real estate purchased, at least in part, by the funds from Westpac. Those orders were varied on 8 December 2015, but not in any way affecting the substance of the proceedings now before the Court. None of the restraining orders identify a "suspect".
The application currently before the Court is an application for exclusion of the property pursuant to the terms of ss 29 and 31 of the Act. Those provisions are recited above. Pursuant to the terms of s 317 of the Act, the defendants/applicants bear the onus of proving the matters necessary to establish the grounds for making out the exclusion order.
The application by the defendants/applicants for an exclusion order under s 29 of the Act must, necessarily, rely upon the provisions of s 330(4) of the Act. There are no other avenues for such orders under the Act.
Unlike the situation before Simpson J in Fernandez, supra, in these proceedings, there is an application for an exclusion order. The operation of s 29 of the Act arises as the defendants/applicants have made application under s 31 of the Act for an exclusion order in circumstances where the restraining order has already been made.
Pursuant to s 29(2) of the Act, the only reasons for excluding an interest in property from a restraining order under s 19 of the Act are those prescribed in s 29(2)(d) of the Act and require that the interest in property is neither: proceeds of an indictable offence, a foreign indictable offence or an indictable offence of Commonwealth concern; nor, because the current offences are serious offences, an instrument of any serious offence.
Relevantly for the present proceedings, each of the defendants/applicants claims an interest in the property that has been restrained, being a right, power or privilege in connection with the funds in Westpac and a legal or equitable estate or interest in the real estate. As a consequence, s 31 of the Act applies and allows the defendants/applicants to apply to this Court (being the Court that issued the restraining orders), in circumstances where the proceedings were determined ex parte and without notice to the defendants/applicants.
The terms of s 330(4)(a) of the Act have been recited. Pursuant to the terms of s 29(2)(d) of the Act, the defendants/applicants are required to satisfy the Court that their interest in property is not the proceeds of an indictable offence (in this case of Commonwealth concern, but it matters not). Further, the defendants/applicants must prove that the interest in property is not an instrument of any serious offence.
The property only ceases to be proceeds of an offence if it is "acquired" by a third party. Assuming for present purposes that the defendants/applicants are each a third party, then the property would have to be acquired for "sufficient consideration". The term "sufficient consideration" has been defined and recited above.
First, it is necessary to deal with the meaning of the term "acquisition" or "acquired". In Lordianto, supra, Simpson J dealt, at length, with the proper interpretation of the meaning of acquisition of property for the purposes of s 330(4)(a) of the Act. In her judgment in Fernandez, Simpson J summarises the findings Lordianto: see Lordianto at [70]-[71].
With respect, I agree with Simpson J that s 330(4)(a) firstly, depends upon an acquisition of the tainted property; secondly, is predicated upon an acquisition of the property by an innocent third party; and, thirdly, the acquisition is required to have occurred after the activity that caused the property to become tainted.
Further, property is defined as including an interest in any property. The term interest has been discussed above.
The ordinary natural meaning of the word "acquire" means to obtain, gain or get something: see Allina Pty Ltd v Federal Commissioner of Taxation (1991) (1991) 28 FCR 203; 99 ALR 295 at 301 (Full Court); [1991] FCA 87. That accords with the Oxford English Dictionary, (2nd ed, 1989) which gives the meaning as "to gain, obtain or get as one's own, to gain the ownership of (by one's own exertions or qualities)".
A secondary meaning, referred to in Allina, supra, is to receive or to come into the possession of something. Although ordinarily there must be something in existence that can be obtained or gained, the word is also capable of applying to a situation where an asset is created and transferred that hitherto did not exist, for example, an option; a lease; et cetera: see Allina, supra, and Commissioner of Taxes (Queensland) v Camphin (937) 57 CLR 127 at 133-134; [1937] HCA 30, cited in Allina, supra; see also the reference to Hill J in FCT v Cooling (1990) 22 FCR 42 at 63-64; [1990] FCA 297.
The issue that must then be considered is whether the defendants/applicants "acquired" property or an interest in property after it became tainted.
If the property acquired is a reference to the chose in action, the bank accounts were opened well before the transfer of funds and well before any relevant funds were deposited. As a consequence, the chose in action was "acquired" (if that be an acquisition) at a time where the acquisition would not meet the terms of s 330(4)(a) of the Act.
If, on the other hand, the broader definition of property is applied, such that the property acquired includes the broader definition of interest, the question that must be answered is whether the defendants/applicants "acquired" the right, power or privilege "in connection with" the funds after the funds were tainted. There is little doubt that the capacity to withdraw the funds was a right, power or privilege (under contract) that existed, in relation to the amounts deposited, only after the funds were deposited.
Nevertheless, there is some doubt as to whether the right, power or privilege in connection with those funds was acquired after the funds were tainted or was acquired at the same time as the chose in action was acquired. I am prepared for present purposes to assume that the acquisition of the right, power or privilege in connection with the tainted funds was acquired or obtained at a time after the criminal offence occurred, namely upon the funds being deposited.
The defendants/applicants must establish that each is a third party to the property dealing, namely, that each has acquired the interest in the property subsequent to the commission of the offences that caused it to be tainted and is, in that sense, a third party to the commission of the offences. I accept the analysis on this issue of Simpson J in Lordianto, but, it seems, not the summary thereof in Fernandez. The "third party" must be a third party to the commission of the offences that caused the property or interest in property to be tainted.
With respect to Simpson J her analysis at [101] of Lordianto is adopted. Her Honour's view of a "third party" is informed by her Honour's analysis of the definition of "property", without consideration of an interest (as broadly defined) being a right "in connection with" property. Nevertheless, the result is the same.
A third party to the criminal conduct is a person to whom the property passes (or by whom the property is acquired, including an interest, as broadly defined, in the property) and was not a person involved or connected with the offence that caused the property to be tainted. In other words, on the evidence in these proceedings, the defendants/applicants, whom the Commissioner does not allege were involved in the commission of the offences, acquired the property (if they acquired a right in connection with the funds) after the property was tainted.
I deal next with whether it was acquired "innocently" and, in particular, whether it was acquired for sufficient consideration.
On one view of the meaning of the word "acquires" it requires purchase or the application of consideration. That is not the meaning I have given it. Nevertheless, the Act requires that the acquisition be for "sufficient consideration", thereby importing the notion that the acquisition must be "purchased". Again, sufficient consideration is a defined term in the Act, which is recited above.
The definition of "sufficient consideration" clearly requires a consideration that "reflects the value of the property" having regard solely to commercial considerations. Again, on one hand, if the property be the chose in action, which was "acquired" prior to the commission of the offences and the tainting of the funds, the creation of the chose in action was, no doubt, obtained for sufficient consideration. But, in such a case, because of the lack of an acquisition at the relevant time, i.e. after the funds were tainted, there is no acquisition that is governed by the terms of s 330(4) of the Act.
If, on the other hand, the property that was "acquired" is the interest in being the right, power or privilege "in connection with", the funds that were deposited in the Westpac bank account, that acquisition occurred after the commission of the offences in question and after the interest in property was tainted and so is within the terms of s 330(4) of the Act. Did that acquisition occur for "sufficient consideration" being a consideration that "reflects the value of the interest in the property"?
The simple answer that the question posed is in the negative. The funds were deposited in the account at a time after the monies were tainted for no consideration. If there were consideration for the funds, that consideration was for an acquisition or service that was "acquired" prior to the tainting of the funds.
In the circumstances of this case, the defendants/applicants transferred money to money-changers. From that money was deducted a commission for the service of "transferring" the money. The money was to have been transferred into the Westpac accounts and, ultimately, was. It was transferred in a manner that was the commission of an offence.
The only consideration that was paid to the money-changers was a consideration for the "transfer"; it was not a consideration (or not sufficient consideration) for the "funds" or the interest (as defined) in the funds. On the other hand, the provision of the Indonesian money to the money-changers may amount to a consideration for the deposit of monies into the Westpac accounts. However, that consideration, assuming it was an acquisition of an interest in connection with the funds to be deposited in Australia, occurred well before the commission of the offence and was not an acquisition at a time after the commission of the offence.
In other words, regardless of whether the property is the chose in action or includes an interest, which is the right to withdraw funds under the chose in action, the consideration was provided well before the commission of the offences and before the funds were tainted and, therefore, the acquisition occurred well before the commission of the offences and the tainting of the money.
If, contrary to the foregoing, the acquisition of the interest in the funds (as broadly defined) occurred after the funds had become tainted by the commission of the offences, there was no consideration for the obtaining of that interest.
The next question to be considered is whether the defendants/applicants knew that the property was the proceeds of an offence or an instrument of an offence. The evidence is uncontroverted and unchallenged that the defendants did not know that the property had been transferred in a manner which resulted in the funds being the proceeds or an instrument of an offence.
The alternative issue that the defendants acquired the property "in circumstances that would not arouse a reasonable suspicion" is more difficult to determine.
The defendants/applicants rely upon the evidence, also uncontroverted and unchallenged, that the relevant actor looked only at the balance of the account and not at the transactions that occurred to cause that balance to be effected. There are a number of issues that need to be noted.
The fact, if it be the fact, that the defendants/applicants did not know that structuring deposits in such a way as to avoid the reporting requirements rendered the conduct an offence, does not seem, in my view, to be relevant. Some of the decisions to which reference has been made in these reasons seem to suggest that ignorance of the offence is a circumstance to which s 330(4) of the Act refers.
However, it seems that a proper reading of the subsection requires that the acquirer of property not know of the circumstances that, if the offence were known, would render that conduct an offence. Similarly, the legislature's requirement that the lack of knowledge was required to occur "in circumstances that would not arouse a reasonable suspicion" imposes an objective test on the conduct of the third party.
To meet the "objective test", as I have described it, the defendants/applicants rely upon the affidavit of Ms Hoang of 15 April 2016. At [47]-[48] of that affidavit Ms Hoang refers to training she received on the use of online banking at the Westpac online banking system on her iPad and her use of online banking to transfer between her Australian accounts. Ms Hoang exhibits (pages 111-112 of Exhibit 1, Exhibit TSH1 of the affidavit of Ms Hoang) screenshots showing the Westpac home screen and the transfer screen. It is not suggested that Ms Hoang exhibited all of the screenshots over a period of time, or any period of time, relating to the relevant transactions.
At [49] of the aforesaid affidavit, Ms Hoang attests to the following:
"[49] The 'home screen' is the screen which is accessed by a user once they have successfully logged-on to their account. It shows nothing more than the respective balances of a customer's account it does not show any detail in respect of transactions on the account. If a customer wishes to access the detail of their accounts (i.e. such as view each transactions on the account) they would need to click on the account name which would take them to that section of the account. I did not perform this function as I do not know how to do it in respect of these accounts, and have only ever been concerned with the balance to confirm that a transfer from our money changer had arrived. I knew that the funds had been transferred when there was a significant change to the balance of the account."
Ms Hoang attests that she did not look at the details of the transactions on the account, but only the home screen of the online banking application. That evidence is unchallenged and uncontroverted. However, a view of the home screen, with the balance displayed, does not necessarily result in Ms Hoang being unaware of the circumstances that the monies were transferred in amounts less than $10,000, which, thereby, constituted an offence. It is necessary to use an example.
Assume that an amount of $100,000 AUD was transferred to Australia and deposited in amounts of $9,000 on each of 11 days. If, as Ms Hoang was told, a transfer of funds to Australia would take 3 to 5 days and the balance was seen on days three, six and nine, the home screen would reflect a balance of approximately $27,000, $54,000 and $81,000 respectively.
In other words, an examination of the "home screen" would, or may, disclose circumstances that showed the structuring of the transfer in amounts less than the funds that were required to be transferred and raise significant suspicion.
Significantly, Ms Hoang does not attest to the lack of knowledge of transfers of larger amounts in a manner that was structured so as to avoid the deposit of $10,000 or more. Even if, as is the evidence, only the balances were examined, as earlier explained, a person would be aware of the structuring of deposits by the depositing of a total amount in parts.
Unless knowledge of the offence of structuring deposits so as to avoid a $10,000 limit was itself required, then, even on the balance of probabilities, the circumstances have not been shown to be such as would not arouse a reasonable suspicion that the property was proceeds of an offence or an instrument of an offence.
In my view, the terms of s 330(4) of the Act do not require a person, who has acquired property or an interest in property, to know that it is an offence to structure transactions in a manner which avoids reportable transactions. The reference to "circumstances" requires the third party to know the circumstances.
Once the circumstances are known, it is not the subjective view of the third party as to a reasonable suspicion that matters. The circumstances must "not arouse a reasonable suspicion", bearing in mind the view already expressed that it must be assumed that a party knows the law and that ignorance of the law is not a basis upon which a reasonable suspicion would not be aroused. See also [9] herein, and the reference to knowledge that may have been acquired from the Indonesian receipts: second Burtenshaw Affidavit at [106].
Given the onus of proof prescribed by s 317 of the Act, the defendants/applicants have not satisfied the Court that they were unaware of circumstances that would arouse a reasonable suspicion, namely, the structuring of amounts transferred into deposits that were significantly less than the amount transferred, accumulating, over a period, to a balance close to the amount transferred (or to the amount transferred less the commission for the transfer).
The foregoing does not suggest that the defendants/applicants were aware of the criminal conduct. Nor does it suggest that the defendants/applicants were party to the criminal conduct. But neither of those attributes are sufficient to render the property or interest in property such that it ceases to be the proceeds of an offence or an instrument of an offence.
Lastly, it is necessary for the Court to deal with whether the property is, in accordance with the definition in s 329 of the Act, recited above, the proceeds of an offence or the instrument of an offence. As seems to be clear from the recited definition in s 329(1) of the Act, the proceeds of an offence are in that category if the property is wholly or partly derived or realised, directly or indirectly, from the commission of the offence. The offence is the offences to which reference has already been made.
The funds that were deposited in the Westpac accounts to the credit of the defendants/applicants were derived and realised, directly or indirectly, from the commission of the offences. It matters not that the persons to whom the funds stood to the credit were not involved in the commission of the offences. The Act deals with the product and the realisation of criminal offences.
In particular, one of the purposes of the Act is to provide, even to innocent actors, an incentive to ensure that money is not dealt with in a way that allows it to be "laundered" or to render legitimate that which is the product of criminal offences.
In light of the above, if, on one hand, the property is the interest in property, being the right, in relation to the funds in the bank that were transferred, to withdraw those funds, the property is the proceeds of an offence,.
If, on the other hand, the property was the chose in action, it was not derived or realised, directly or indirectly, wholly or partly, from the commission of the offence. But that conclusion does not assist the defendants/applicants, because it is not the chose in action that is frozen (although that may be its effect).
More importantly, if the property were confined to the chose in action, then it was an instrument of an offence because that chose in action was used in, or in connection with, the commission of the offences and its existence was essential to the commission of the offences. Alternatively, if the property includes the right in connection with the funds to withdraw the funds, the right has been used "in connection with" the commission of the offence.
On either analysis, the property is the proceeds, or an instrument, of an offence.
The High Court, per Latham CJ, in The King v Metal Trades Employers' Association; ex parte Amalgamated Engineering Union Australian Section (1951) 82 CLR 208; [1951] HCA 3 ("the MTEA case") was dealing with whether the then purportedly created Commonwealth Court of Conciliation and Arbitration was created as a superior court of record. In the course of his reasons, Latham CJ described the five generally accepted ordinary characteristics of a superior court of record as: first, the orders of a superior court are assumed to be valid until the contrary is shown; second, the offices of a superior court are protected in relation to executions effected by them, even though the orders under which they act are void; third, certiorari does not go to a superior court; fourth, in general, prohibition and mandamus do not go to a superior court; fifth, and described as most importantly by Latham CJ, it has power to punish for contempt.
As a consequence, the orders of the Supreme Court having issued, it is not beyond argument that the orders are "invalid" or "void" (whatever that latter term may mean).
The effect of the submission of the defendants/applicants, in this regard, is that the restraining order that does not comply with the provisions of s 22 of the Act is void. I doubt that to be the case.
Whether a provision such as that in s 22 of the Act (to which the Court will shortly come) renders an order void depends upon a construction of the Act as a whole: see Victoria v Sutton (1998) 195 CLR 291; [1998] HCA 56 at [38]. See also Hunger Resources Ltd v Melville (1988) 164 CLR 234 at 251-252; [1988] HCA 5; Yango Pastoral Co Pty Ltd v First Chicago (1978) 139 CLR 410 at 423.
Nevertheless, whether or not s 22 of the Act is "jurisdictional" does not seem to be of great moment. The restraining orders that were made by Fagan J, and amended by Hidden J, on behalf of the Court were interlocutory orders and capable of being re-agitated, subject to the terms of the Act.
If there has been a fundamental error by issuing restraining orders that do not comply with the provisions of s 22 of the Act, the Court is, in subsequent proceedings, whether final or interlocutory, capable of correcting any such error and, relevantly, if the error would involve a situation where the Court ought not to have made orders at all, vacating the orders.
It is therefore necessary to examine, in detail, the provisions of s 22 of the Act.
These restraining orders are orders under s 19 of the Act. They relate to property and restrain dealings in that property by any person, including the defendants/applicants and including Westpac.
As the legislatively inserted note to the provisions of s 22(1) of the Act makes clear, and as is obvious from the terms of the provision, a restraining order under s 19 of the Act might not relate to any suspect. Further, the restraining order may cover (and in this case did cover) the property of one or more persons who are not the suspects or a suspect. Comfort for this narrower view of "related to" is obtained from the terms of s 17 of the Act, which describes other restraining orders, all but one of which relate to a suspect.
A number of comments should be made. First, the terms of s 22 of the Act are, to say the least, infelicitous. They seem to serve no purpose associated with the objects of the Act.
Secondly, the terms of s 19 of the Act make no reference to a "suspect" and, as earlier stated, may be made without any knowledge of the suspect or how many suspects have committed an offence or have created a situation where there are reasonable grounds to suspect that the property is the proceeds of an indictable offence of Commonwealth concern or the instrument of a serious offence. In those circumstances, the expression "relate to" ought not be given the broad meaning that it may otherwise be given in other contexts.
Section 22 is, in the context of this Act, a provision that disentitles the relevant authority from applying for a restraining order that enjoins more than one particular suspect in some way contemplated by the other provisions of the Act. Further, a "restraining order" is each of the orders that may issue in any minute of order. In that sense, paragraph 1 of an order issued by the Court may relate to one suspect and paragraph 2 may relate to another suspect.
In my view, there is no substance in the submission that s 22 of the Act constrains the issuing of an order under s 19 that deals only with property, without identifying a suspect of a criminal offence. Further, the terms of the definition of "suspect" support that approach, because they relate to two distinct situations: one where orders are made under s 20A of the Act and the suspect is the person with "unexplained wealth"; and otherwise to the person who has, relevantly, been convicted of or charged with the offences to which the order relates.
The orders issued by the Court under s 19 of the Act in these proceedings do not relate to any offence or offences. The affidavit does. It is noteworthy that the terms of the definition of "suspect" and the terms of s 22 of the Act do not refer to the evidence of criminal conduct upon which the orders are based.
For the reasons outlined, the Court makes the following orders:
1. The applicants on the motion be joined as defendants to the proceedings;
2. Otherwise, the motion is dismissed;
3. The applicants on the motion shall pay the costs of the Commissioner of the Australian Federal Police of and incidental to the motion.