Commissioner of the Australian Federal Police v HWCJ GLB Pty Ltd - [2024] NSWSC 482 - NSWSC 2024 case summary — Zoe

NSWNSWSC

Commissioner of the Australian Federal Police v HWCJ GLB Pty Ltd

[2024] NSWSC 482

Supreme Court of NSW|2024-02-26|Before: Dhanji J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2024-02-26

Before

Dhanji J

Catchwords

[2020] NSWCA 117 Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76

Source

Original judgment source is linked above.

Catchwords

[2020] NSWCA 117 Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76

Judgment (42 paragraphs)

[1]

Background

While a significant volume of evidence was tendered there was little factual dispute. The background facts can consequently be set out in relatively brief form.

[2]

Summary of the fraud

In April 2022, the United States Secret Service brought to the attention of the Australian Federal Police ("AFP") its investigation into an organised crime syndicate suspected of perpetuating a complex international investment scam. The AFP consequently commenced its own investigation, known as Operation Wickham.
The scam was conducted online and involved soliciting money from victims by promising significant financial return on foreign exchange markets using a trading platform called "MetaTrader". However, the victims' money was never invested. Instead, funds were siphoned to various bank accounts controlled by the defendants, including some accounts based in Australia.
The modus operandi of the scam is described as follows, at paragraph (27) of the affidavit of Federal Agent Brendan Smith, sworn on 2 November 2022: "(a) A corporate entity (including, relevantly, each of the Defendants) is created and a director is appointed, being a Chinese national who is in Australia on a conditional student visa. (b) The victim will receive an unsolicited message on "WhatsApp", "WeChat", "Line" or other instant messaging application. Upon the victim replying to the message, the scammer will attempt to build rapport with the victim, which is followed by attempts to elicit a conversation with the victim. (c) Over a period of weeks, the scammer begins to forward images and videos of luxury cars, houses and designer products. At this stage, they will discuss their investments and employment. (d) If the victim enquires about the scammer's source of wealth, the scammer will broach the topic of forex trading and the amounts of money that can be made. (e) In the event the victim shows interest in the investment technique, the scammer will provide detailed instructions on how to download the 'MetaTrader' platform, including how to create a demo account. Importantly, the scammer will instruct the victim to search for and load a specific service provider into 'MetaTrader'. (f) The scammer will then provide a series of trade recommendations which falsely appear to the victim to start returning large gains, with most trades falsely returning a positive result. The scammer will profess to have inside knowledge or an expert at their disposal which results in predominantly positive returns. (g) After a period, the scammer will ask whether the victim would like to try the "live" or "real" version rather than the demo account. The scammer points out that the money made on the demo account could have been real using a live account. (h) The scammer will direct the victim to a fraudulent webpage, or otherwise orchestrate receipt of funds from the victim to an account under the control of [one of the defendant companies], under the guise of it being related to the opening of a live account with an investment broker. The scammer, through the use of a fraudulent service provider, will then attempt to obtain further funds by, again, misrepresenting trade executions as positive. This continues until such time the victim attempts to withdraw their funds, and is unable to do so. (i) In some instances, the scammer will attempt to defraud further money out of the victim at this point by falsely asserting that a percentage of the funds sought to be released need to be paid as a lump sum for taxation purposes."

[5]

The Applications

The following applications with respect to the restrained accounts were commenced by Notice of Motion [1] : Proceeding # Applicant Relevant Accounts 002 James Nadel GSL Bud 291 Account HWCJGUSD01 Account 003 Robert Brooks and Maehal Enterprises, Inc JCJUSD01 Account HONGHUSD01 Account 004 John Adams Roesch JR HWCJGUSD01 Account 005 Dr Clifford Librach HWCJGUSD01 Account HONGHUSD01 Account 006 Castle Bespoke Management Limited GSL Bud 291 Account JCJHEUSUSD01 Account 007 John Squires Poelman LJYINUSD01 Account HONGHUSD01 Account GSLUSD01 Account 008 Sukhdev Sandhu JCJUSD01 Account 009 Xiao Yan Dong GSL Bud 291 Account HONGHUSD01 Account 010 Brian Roy Bunzeluk HWCJGCAD01 Account 011 Xiao Xiao HWCJGUSD01 Account HWCJGUSD01 Account HWCJGEUR01 Account* HWCJGCAD01 Account* 012 Isen Chen JCJHEUSD01 Account JCJHECAD01 Account* WHGLBUSD01 Account WHGLBCAD01 Account* 013 Amy Wing Yan Lau HWCJGUSD01 Account 014 Harwin Group Inc GSL Bud 291 Account 015 Mei McNeilly previously Chunmei Yang HWCJGUSD01 Account* GSL Bud 291 Account 016 Fei Tan GSL Bud 291 Account 017 Gang Wu and ValueTek Inc HWCJGUSD01 Account LJYINUSD01 Account HWCJGUSD01 Account 018 James Michael McBrayer GSL Bud 291 Account HONGHUSD01 Account* LJYINUSD01 Account 019 Quanshuai Liu HWCJGUSD01 Account 020 Neil Richardson LJYINUSD01 Account 021 Paul Carney GSL Bud 291 Account HWCJGUSD01 Account 022 Yong-Xiao Wang LJYINUSD01 Account HONGHUSD01 Account LJYINUSD01 Account 023 Steven Michael Rubinstein JCJHEUSD01 Account WHGLBUSD01 Account HWCJGUSD01 Account 024 Rajeev Sharma LJYINUSD01 Account HONGHUSD01 Account* JCJHEUSD01 Account 025 John A Amodeo GSL Bud 291 Account LJYINUSD01 Account 026 Marc Christiaen van der Chijs GSL Bud 291 Account HWCJGUSD01 Account 027 Ching-Liu WU JCJHEUSDO1 Account HONGHSUD01 Account LJYINUSDO1 Account 028 Xiang Yun Luo LJYINUSD01 Account 029 Tony Chen JCJHEUSD01 Account 030 Michael Peter Sampson WHGLBUSD01 Account HWCJGUSD01 Account 031 Dr Yu Geng JCJHEUSD01 Account HONGHUSD01 Account 032 Yu Sun GSL Bud 291 Account 033 Xiang Liao JCJHEUSD01 Account 034 Carlitos Soldevilla Borja GSL Bud 291 Account GSLBNUSD01f Account 035 Jie Bai LJYINUSD01 Account 036 Jeffrey Edel JCJHEUSD01 Account GSL Bud 291 Account LJYINUSD01 Account 037 Ronald Lewis Myers and Digital Properties West, LLC HWCJGUSD01 Account JCJHEUSD01 Account WHGLBUSD01 Account 038 Ravinder Sagoo LJYINUSD01 Account

[6]

The above table includes applications made with respect to accounts which contain no, or only nominal, funds (such as HONGHUSD01). Those are the accounts not included in the table of relevant accounts set out (at [10]) in the discussion of the POCA proceedings initiated by the Commissioner. No orders will be made in relation to those accounts given the absence of any utility in doing so.
A significant number of persons who contributed to restrained accounts did not participate in these proceedings.
Each applicant, with the exception of applicant 008, Mr Sandhu, provided evidence of their interest in the particular accounts in relation to which a claim was made, together with sufficient evidence of the source of the funds to establish that they were not disentitled to relief with respect to that interest. This evidence was not challenged. This entitled the particular applicant to their interest leaving the question of how that interest is to be determined.
At the commencement of the hearing, the Commissioner read two affidavits of Mr Charlie Nasr, a forensic accountant employed with the AFP who provided evidence of the various accounts and the contribution of funds into those accounts including by the applicants. With respect to the distribution of funds Mr Nasr's evidence was that there are at least two available methods of distribution. The first is commonly described as a simple pari passu distribution and the second by applying what is commonly called the Lowest Intermediate Balance Rule (LIBR). The pari passu method might be better called proportional distribution, however, having regard to the existing jurisprudence, it may be too late to resort to English. For present purposes it is sufficient to note that prior to the hearing Mr Nasr provided calculations of the entitlement of each applicant based on the pari passu and the LIBR methods of distribution.
Based on Mr Nasr's evidence and the background facts, the Agreed Facts [2] set out a calculation of each particular applicant's entitlement to the funds in particular accounts in the following permutations: 1. having regard to the (potential) interests of all contributors (that is including the interests of contributors who have not brought an application in these proceedings) applying: 1. the pari passu approach; and 2. the LIBR approach; and 1. Having regard to only to the interests of the applicants in the proceedings applying: 1. the pari passu approach.
No figures were provided for the application of the LIBR approach limited to the interests of the active applicants. This was not able to be provided as such a limitation is inconsistent with the foundation of the LIBR approach.
At the hearing, a third method was proposed, described as a hybrid approach. This involves first applying the LIBR approach. As the LIBR approach calculates the (potential) entitlement of all contributors this necessarily leaves a balance representing the unclaimed amounts contributed by the inactive contributors. The hybrid approach involves distributing this balance amongst the applicants on a pari passu basis. The calculations in relation to this method are set out in two affidavits of Mr Nasr provided after the hearing of the matter in accordance with orders made at the hearing.
I will later in these reasons provide a brief explanation of the alternative methodologies by which the interests of the applicants might be calculated.

[7]

A very brief overview of the legislative scheme in the context of the present applications

It is unnecessary to canvas the legislative scheme in detail. The objects of the POCA are set out in s 5 as follows: 5 Principal objects The principal objects of this Act are: (a) to deprive persons of the *proceeds of offences, the *instruments of offences, and *benefits derived from offences, against the laws of the Commonwealth or the *non‑governing Territories; and (b) to deprive persons of *literary proceeds derived from the commercial exploitation of their notoriety from having committed offences; and (ba) to deprive persons of *unexplained wealth amounts that the person cannot satisfy a court were not derived or realised, directly or indirectly, from certain offences; and (c) to punish and deter persons from breaching laws of the Commonwealth or the non‑governing Territories; and (d) to prevent the reinvestment of proceeds, instruments, benefits, literary proceeds and unexplained wealth amounts in further criminal activities; and (da) to undermine the profitability of criminal enterprises; and (e) to enable law enforcement authorities effectively to trace proceeds, instruments, benefits, literary proceeds and unexplained wealth amounts; and (f) to give effect to Australia's obligations under the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, and other international agreements relating to proceeds of crime; and (g) to provide for confiscation orders and restraining orders made in respect of offences against the laws of the States or the *self‑governing Territories to be enforced in the other Territories.
While no reference is made in those objects to victims of crime, the Commissioner accepts that the POCA makes provision for victims of crime such as the present applicants to have their interest in property, or at least some part of it, restored to them.
Section 338 contains a dictionary of terms used in the Act including the following definitions: "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 … property means real or personal property of every description, whether situated in *Australia or elsewhere and whether tangible or intangible, and includes an *interest in any such real or personal property."
There is no actual money in any of the accounts. The nature of funds in a bank account as a form of property was explained in Lordianto v Commissioner of the Australian Federal Police (2018) 100 NSWLR 630; [2018] NSWCA 199. Whilst inaccurate, it is convenient, for present purposes, to refer to money or funds in an account. On contributing funds to the various accounts, the legal title to the money was transferred to the defendants. The defendants, however, received and held that money on trust for the particular contributor. Based on the expansive definitions above, it is common ground that each applicant has an interest in property with respect to a particular account as a result of their contribution to that account.
As noted above, orders were made in November 2022 restraining the various accounts. Orders were made pursuant to both s 18 and s 19 of the POCA, the former making provision for restraint of property of persons suspected of a serious offence, and the latter making provision for restraint of property suspected of being proceeds of indictable offences. Under the POCA, subject to applications to exclude interests in the restrained property from the restraining orders, or from forfeiture, it would be expected that the Commissioner would obtain orders forfeiting the property pursuant to ss 47 or 49 of the Act.
Restraining orders having been made, it is open to the applicants to seek orders releasing their interest in the property from restraint pursuant to s 29 of the POCA. Ancillary orders are available which would have that interest paid to the particular applicant. Alternatively, it is open to applicants not to challenge the restraining orders but to seek orders excluding their interests from forfeiture pursuant to s 73 of the POCA, again with an ancillary order directing payment to the applicant of the relevant amount. A further alternative available to the applicants is a compensation order pursuant to s 77. By this route the property would, pursuant to the Commissioner's application, be forfeited and would vest in the Commonwealth, but a payment would be made to the particular applicant reflecting that applicant's interest in the property (subject to proportional adjustment to account for the costs involved in dealing with the property as set out in s 70(1)(b)).
Irrespective of the route by which an applicant seeks recompense, it is necessary for the applicant to establish certain matters. While the requirements differ depending upon the provision under which the restraining order was made, and the particular mechanism by which the applicant seeks recompense, an applicant will satisfy their burden by establishing the interest was not the proceeds of unlawful activity or the instrument of an offence, as defined in ss 329 and 330 of the POCA.
Given the absence of any factual dispute the Commissioner helpfully provided, with the assistance and consent of the various applicants, a set of Agreed Facts which set out, with respect to each applicant, the particular payments made, specifying the date and the account credited, together with a statement that the funds used to make the transactions were not the proceeds of unlawful activity or the instrument of an offence so as to disentitle the applicant from the relief sought. (The Agreed Facts on this issue adopted the terms specific to each of the provisions pursuant to which relief might be granted, however, the preceding general statement is sufficient.)
While the "funds" in the various accounts are the proceeds of unlawful activity, the applications for exclusion (from restraint or forfeiture) or for compensation focus not on the funds themselves but on the applicants' interest in those funds. The applicants' interests are not tainted by the fact that the funds became proceeds of crime as a result of the manner in which they were obtained by the defendants (or those associated with the defendants). Similarly, while the applicants' "money" was used in the commission of offences and became, in the defendants' hands, an instrument of an offence, the applicants' interests in the funds was not so used and that interest did not become an instrument of the particular offence.
Having regard to the above, it was accepted that each of the applicants with the exception of applicant 008 should succeed in obtaining an order providing relief in relation to their interest in the funds in the accounts to which those funds were deposited. The particular provisions pursuant to which that relief should be granted are considered below.

[8]

The form the relief should take

As might be expected in the context of the number of applicants, there was a variety of approaches proposed as to the form the relief should take. As explained above, under the POCA it is open for persons in the position of the applicants to seek orders excluding their interest from restraint (ss 29 and 31) together with an ancillary order effecting payment of that amount to them (s 39); exclusion from forfeiture (ss 73 and 74) together with an ancillary order effecting payment of that amount to them (s 39); or, on ordering the forfeiture of the property (ss 47 and 49) an order for compensation reflecting the applicant's interest in the property (s 77).
I have before me applications for forfeiture brought by the Commissioner pursuant to both s 47 and s 49 with respect to all the property. I have applications brought by applicants for each of the various available forms of relief, and in some cases multiple forms of relief. Some have also sought declarations.
At the hearing of the applications an issue was raised as to how to deal with the various forms of relief sought. The parties, helpfully, agreed that uniform orders should be made to provide relief to all applicants reflecting their interest in the property. An apparent (but not real) obstacle is that each of the provisions providing for the various orders sought, that is forfeiture, exclusion and compensation, is expressed in mandatory terms on satisfaction of the various preconditions. Thus s 29(1) of POCA commences: 29 Excluding property from certain restraining orders (1) The court to which an application for a *restraining order under section 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: …
Sections 73 and 77 commence with analogues of the above.
Section 47(1) of POCA provides: 47 Forfeiture orders - conduct constituting serious offences (1) A court with *proceeds jurisdiction must make an order that property specified in the order is forfeited to the Commonwealth if: …
Sections 49 commences with an analogue of the above.
The mandatory form of each provision raises a question as to how I comply with the apparent dictate of each. The solution is provided by s 315A of POCA: 315A Court may hear multiple applications at same time (1) A court may hear and determine 2 or more applications under this Act at the same time. (2) However, if: (a) a *proceeds of crime authority applies for a *forfeiture order relating to particular property; and (b) a person applies for an order (the exclusion order) under section 29 or 29A to exclude a specified *interest in that property from a *restraining order; and (c) the application for the exclusion order has not been withdrawn; the court may only hear the application for the forfeiture order after the application for the exclusion order has been determined.
It follows from the above that I must hear the applications for exclusion from restraint made pursuant to s 29. The applications for forfeiture must wait. The applications for exclusion from forfeiture and for compensation following forfeiture must also wait. This is coherent having regard to the scheme of the POCA. By proceeding with the s 29 exclusion from restraint first, excluded property will not be subject to forfeiture - it is only the restrained property that is subject to forfeiture. The applicant having succeeded under s 29 will, as a result, not have an interest in the relevant property for the purposes of ss 73 or 77 (obviating any issue with otherwise mandatory terms of those sections).
Happily, each of the applicants either maintained their applications made pursuant to s 29, or agreed with their application being treated as an application for exclusion pursuant to s 29 (and thus as an application under s 31) together with an application for an ancillary order pursuant to s 39.
Section 31(1) provides: 31 Application to exclude property from a restraining order after restraining order has been made (1) A person may apply for an order under section 29 or 29A if a *restraining order that covers property in which the person claims an *interest has been made. (1A) An application under subsection (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.
Section s 29 provides as follows: 29 Excluding property from certain restraining orders (1) The court to which an application for a *restraining order under section 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 section 30 or 31; and (b) the court is satisfied that the relevant reason under subsection (2) or (3) for excluding the interest from the order exists. Note: Section 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 section 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 section 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 (c) for a restraining order under section 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 section 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 section 15, 24, 29 or 31 of the Financial Transaction Reports Act 1988 or section 53, former section 59 or section 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 offices; (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 section 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.
The granting of the restraining orders insofar as s 19 was relied on, was based on the commission of proceeds of crime offences under the Criminal Code: Commissioner of the Australian Federal Police v HWCJ GLB Pty Ltd [2022] NSWSC 1574 at [3]. Section 29(3) consequently does not impose additional requirements. The Commissioner accepted, as reflected in the Agreed Facts, each applicant has satisfied the requirements of s 29 (2).
Each applicant is, consequently, entitled to an order excluding their interest in property pursuant to s 29(1) from the restraining orders currently in force. Those exclusion orders, will, however, do nothing to recompense the applicants. It is appropriate in each case to make an ancillary order pursuant to s 39. Leave should be granted to each applicant to apply for such an order pursuant to s 39(2)(d). As a result of the orders made by Campbell J, the property is in the custody and control of the Official Trustee. Section 39(1)(e) provides as follows: 39 Ancillary orders (1) The court that made a *restraining order, or any other court that could have made the restraining order, may make any ancillary orders that the court considers appropriate and, without limiting the generality of this, the court may make any one or more of the following orders: … (e) if the *Official Trustee is ordered under section 38 to take custody and control of property: (i) an order regulating the manner in which the Official Trustee may exercise its powers or perform its duties under the restraining order; or (ii) an order determining any question relating to the property, including a question relating to the liabilities of the owner or the exercise of powers or the performance of duties of the Official Trustee; or (iii) an order directing any person to do anything necessary or convenient to enable the Official Trustee to take custody and control of the property; …
An order should be made pursuant to s 39(1)(e)(i) directing the Official Trustee to pay to the applicants an amount representing their interest as excluded from the restraining orders. The orders should be made with reference to the same currency as held in the particular accounts. It will then be for the applicants to determine how those payments are dealt with.
A number of applications were brought on behalf of a natural person and a corporation without distinguishing between the interests of those (corporate and natural) persons. It was agreed that orders in these cases should be made in favour of natural persons, except in the case of Robert Brooks and Maehal Enterprises, Inc (applicant 003) where it was requested that any order in respect of the HWCJGUSD01 and JCJHEUSD01 accounts be in favour of the corporation and that any order in respect of the HONGHUSD01 account be in favour of Mr Brooks (noting that no order will be made with respect to HONGHUSD01 given the absence of funds in that account). This approach reflects the provenance of the contributions (as between Mr Brooks and Maehal Enterprises, Inc) paid into the relevant accounts. Given this, it is appropriate to make orders as requested.

[9]

How to treat the claims - as claims against the defendants' property generally, or as claims on particular accounts?

As set out above, various bank accounts have been restrained. Applications in relation to accounts holding nominal funds were not pursued. There are claims made on a number of accounts in relation to which more than a nominal amount is restrained. There are also a number of accounts, holding a substantial quantity of funds, in relation to which no claims have been made.
The matter proceeded on the basis that the applicants were all victims of the same scam. Thus, while there are several defendants in whose names restrained funds are held and multiple accounts in those names, the monies in those accounts, in a practical sense, represent a single pool of funds obtained by the criminal group. If claims are determined on the basis of the property in particular accounts, there are, in relation to at least some accounts, insufficient funds to meet those claims. At the same time there are large amounts of money in restrained accounts on which no claims have been made. There are other accounts on which some claims have been made but where there may, after meeting those claims, be a surplus.
While viewing the various accounts as a single pool of money obtained by the criminal group may represent the practical reality, no applicant submitted that the funds could be treated in this way. Under the legislative scheme, they were right not to do so. The restraining orders in force under ss 18 and 19 of the Act attach to property. That "property" is the money in each of the accounts. The ultimate relief sought by the Commissioner in the summons is forfeiture pursuant ss 47 and 49 of the Act respectively, again of that property. The motions brought by the various applicants, whether for exclusion from restraint pursuant to s 29, exclusion from forfeiture pursuant to s 73, or for a compensation order pursuant to s 77, are all applications with respect to the applicants' claimed interest in the property. That interest is an interest in the monies in the particular account. Each claim on each account must consequently be considered individually and not in the context of the broader pool.
When considering the accounts individually, the distribution is affected by the fact that each of the accounts on which claims have been brought by the applicants have been depleted to some extent. The result is that if, in dividing the available money in an account, regard is had to all contributors to the fund, there are insufficient monies to allow the return of the applicants' full investments. If regard is had only to the present applicants, there is, in relation to some accounts, sufficient funds available to allow a full refund. In relation to other accounts if regard is had only to the present applicants more money will be available for distribution. It becomes necessary therefore to determine whether the restrained funds should be distributed based only on the claims of the present applicants.
A supplementary submission was made on behalf of Xiao Yan Dong (applicant 009) to the effect that orders should be made against the banks to make up for the shortfall in funds returned to the applicant. The short answer to the submission is that the various banks are not parties to these proceedings.

[10]

How should the contributions of the non-participants to these proceedings be treated?

As observed above, large number of contributors to the accounts did not come forward to participate in these proceedings, despite efforts by the Commissioner, set out below, to notify prospective applicants.
On 4 September 2023, Registrar Jones made orders by consent which required the Commissioner to send correspondence by 25 September 2023 to persons (both natural and corporate) identified by the Commissioner as potentially having an interest in the HWCJGUSD01 account, the JCJHEUSD01 account and the GSL Bud 291 account. At the time, these were the only accounts the subject of applications by third parties for exclusion, or compensation. Subsequent to the Registrar's orders, applications were made in relation to the other accounts. Consequently, from 18 to 22 September 2023, letters were sent by the Commissioner's legal representatives to postal addresses available for 325 persons or entities which were identified as having made credit transactions into any of the relevant accounts. Those addresses were obtained through the banking records. Given substantial deposits were being made the contact details provided by the account holders can be expected to have been accurate.
Evidence led by the Commissioner established that the Commissioner's legal representatives received correspondence from at least 136 persons to whom these letters were sent. No response was received from some 188 persons or entities to whom letters were posted. [3] These figures suggest that one person or entity remains unaccounted for, however this is potentially explained by the fact that some natural persons were also behind deposits made by companies.
Based on the responses to the notification process it appeared that only a small proportion of those to whom notification letters were sent on behalf of the Commissioner would actively take part in the proceedings. Those parties were entitled to have their cases heard and the matter thus proceeded before me. A question necessarily arises as to how the property that has been restrained ought to be divided between the parties actively seeking exclusion orders, and in particular what, if any, regard should be had to the contributions of non-participants.
The determination of this point will have an impact on the extent to which the active applicants recover funds representing their interest in the relevant accounts. If the Court accepts that the non-participants' interests should be disregarded for the purposes of determining the value of the "active applicants'" interests in the relevant accounts, then the active applicants may recover an amount greater than they would if the Court did not take that approach.
A number of applicants submitted that the Court should adopt an approach analogous to that taken by the High Court of England and Wales in National Crime Agency v Robb [2014] EWHC 4384, [2015] Ch 520 ("Robb"'), to the effect that the contributions of those transferors who have not participated in the litigation, are deemed either to not have an interest in the relevant property, or, if they have such an interest, to have relinquished their claims.
Mr Amodeo, (applicant 025) in his written submissions, endorsed this approach, stating: "the case of Robb represents both a practical and equitable approach to the distribution of mixed funds derived from a fraud in analogous circumstances. The case provides a model for how this Court may wish to consider distributing the property in respect of which the various applicants…"
These submissions were supplemented by Mr McBrayer (applicant 018), who noted that there is an onus on those seeking to recover with respect to an interest in restrained funds. He referred to the remarks of Gordon J in Commissioner of the Australian Federal Police v Hart (2018) 262 CLR 76; [2018] HCA 1 ("Hart") at [66] that: "The POCA contains procedures for property to be excluded from a restraining order and for a restraining order to be revoked. Consistent with the intended reach of the POCA, the circumstances are limited and the conditions strict. (emphasis added) (footnotes omitted)" That observation has been echoed many times since. See, for example Lordianto at [93].
The Commissioner in his written submissions, also stressed that the onus for the release of property restrained under the POCA rests upon the person who seeks to exclude the property (s 317(1)).
Counsel for Mr McBrayer submitted that potential victims of the scam who have not filed any application for exclusion may have decided against doing so for any number of reasons. These reasons may be benign (for example, a cost-benefit analysis weighing against commencing legal proceedings). Equally however, Mr McBrayer, through his counsel, posited that contributors to the accounts may have "skeletons in the closet" which they did not wish to bring to the attention of law enforcement authorities with resultant concerns about their ability to establish their claim under the Act. (See s 317(1) of the POCA, which makes it clear, if it was not already so, that the onus is on the applicant to prove the matters "necessary to establish the grounds for making the order applied for". That is to say, the fact that a person paid funds into a fraudulent bank account does not speak to the nature of the funds so placed.)
These arguments, raised by Mr McBrayer, were endorsed by the Commissioner in written submissions.
Ultimately, the issue was not heavily disputed between the parties, noting that none of the active applicants had an interest in advocating that the potential interests of non-participants should be taken into account for the purposes of the distribution of funds. The Commissioner conceded that the approach in Robb provides a "potentially helpful practical illustration of how claims by victims of an investment scam were dealt with in proceeds of crime proceedings in an analogous jurisdiction."
I am of the view that the Court should not have regard to potential interests of non-participants. As set out above, reasonable practical steps have been taken to bring to the attention of all contributors to the accounts their rights to make a claim. As additionally set out above, there are a number of possible explanations as to why some contributors to the accounts may have chosen not to make a claim. The Court cannot reach any definite conclusion that an individual or entity that has not filed an exclusion application, and has therefore, not subjected themselves to the scrutiny of the Act, meets the "strict conditions" described in Hart which would entitle them to relief under this Act.
The hearing took place in circumstances where a considerable time had elapsed since the Commissioner took steps to notify contributors. Those that made applications are entitled to have those claims determined. They should not be prejudiced by the potential for claims that may never be made, or if made may not succeed. The applications that have been made and sustained at the hearing before me are the competing claims against the funds in the particular accounts.
In relation to Mr Sandhu (applicant 008), as noted above, he did not satisfy his evidentiary onus. He did not participate in the hearing. Having failed to substantiate his claim, any interest in property that he otherwise may have had, should be treated in the same way as that of all other contributors who failed to make a claim in time to be joined in the hearing before me.
It should be noted that, in Robb the Court accepted the funds of those investors who had not participated in the litigation should be treated, for tracing purposes, as if they had been dissipated before the traceable money of the claimants who had, in fact, participated in the litigation. The effect was, obviously, enough to enlarge the participating claimants' interests (see [74]-[76]). In the present case no submission was made that the interests of non-participants should be treated in this way. That is, no submission was made that the accounts should be treated as other than containing co-mingled funds as between all contributors - including the non-participants. Treating the non-participants funds as separate (and dissipated first) would not affect any pari passu calculation of the distribution (assuming only active participants are to be considered). It would affect the application of the LIBR. However, no calculations were made on this basis. Consequently, it is not an approach available to be considered by me.
Since reserving judgment in this matter, and in the course of drafting these reasons, it has come to my attention that a number of other applicants have lodged motions in this Court claiming an interest in the funds in the restrained accounts. I know nothing of the merits of those claims. The matters that have been heard before me, as a result of the compliance by the current applicants with the Court's directions, have been argued over three days. Those applications should be determined based on the evidence adduced and submissions made at that hearing. Any alternative course has the prospect of inducing a never-ending cycle. The present applicants are entitled to finality. That said, there are persons with a potentially legitimate claim to the funds I am to distribute. Acknowledging this, I will stay my orders for a period of 28 days following judgment. Those other interested parties may take such action as they see fit in that time.

[19]

The approach favoured in Caron v Jahani (No 2)

In Caron, Bell P acknowledged that the pari passu approach may be preferred where the funds are all received at the one, or within a reasonably short, time (at [88]) or "where the nature of the investment involves investors knowing that their funds will be pooled with those of other investors for investment purposes" (at [89]). It may also, as a matter of evidence or practicality be possible to apply the LIBR approach. Subject to these matters, the President said (at [146]): "Where evidence is available … the lowest intermediate balance rule has been applied and provides what, in my opinion, is the fairest, most equitable and principled outcome for the allocation of limited funds between investors."
The above reflects Bell P's earlier analysis of the authorities. His Honour (at [133]) quoted from McKenzie v Alexander Associates Ltd (No 2) (1991) 5 NZCLC 67,046 where McGeechan J said "where there can be tracing, there shall be tracing, and where there cannot, the "nearest approach practicable to substantial justice" shall be taken." That is to say that the LIBR method should be applied where practicable (at [133]); and where impractical, an alternative such as the pari passu method should be favoured (at [122]).
His Honour acknowledged at [147] that, under the LIBR method, more recent investors will experience more favourable outcomes than earlier investors, but stated that this: "… result follows from the application of established principle and respects the historical operation of the account in which funds have been co-mingled and the investors' underlying proprietary interests. This quintessentially factual approach is superior to the fiction or presumption upon which the so-called rule in Clayton's Case rests, and is also superior to the simple pari passu approach because, whilst incorporating a modified form of rateability, it is more consistent with equitable principle and the rules of tracing. The simple pari passu approach may also result in later investors whose funds were not, or were not significantly, dissipated, cross-subsidising earlier investors whose funds had, at least to some extent, been lost prior to any involvement of later investors." This analysis formed the basis of the Commissioner's submission, at least initially, that the facts underlying the active exclusion applications, and the available forensic evidence, suggest that the LIBR method is the most appropriate method of distribution in this case.
In the present proceedings it was not submitted by any applicants in favour of the pari passu approach that their investment was made on the understanding that the funds would be pooled for the purposes of investment. That is, each applicant proceeded, implicitly if not explicitly, on the on the basis that the funds were provided on the understanding those funds were to be treated as a discreet investment on which a return would be provided.
Mr Roesch (applicant 004) in his written submissions, in a submission relevant to all, argued that the cost and complexity of ascertaining his interest in the relevant account pursuant to the LIBR method does not provide a basis for departing from the rule in this case. This must be so given that Mr Nasr, forensic accountant for the AFP, has already undertaken the necessary analysis in relation to each active applicant.
Whether the LIBR is, in fact, the most appropriate approach falls to be determined in the particular circumstances of the claims on each individual account.

[20]

A hybrid approach

In Caron, there was no issue of absent contributors. As a result, it was possible to apply the LIBR method to distribute all available funds. In the present circumstances, the absence of claims in relation to a significant proportion of the contributions to the accounts has the result that after applying the LIBR, there will remain significant funds in the accounts. The evidence of Mr Nasr was that he was unable to perform LIBR calculations having regard only to the active applicants. He explained that the underpinning of the LIBR method is inconsistent with having regard only to some contributions and not others. This is because the presence or absence of claims by other contributors makes no difference to the LIBR calculation because the LIBR rule effectively traces a contribution to a mixed pool of funds, including the proportionate depletion of that contribution with each withdrawal. Thus, while the LIBR approach has the attraction of more accurately reflecting reality by treating funds in an account as mixed at the time of deposit and consequently affected proportionately by withdrawals made after that deposit, it has, in the present circumstances, a decidedly unattractive downside in that it will leave substantial funds undistributed while applicants are left with losses. This is to be understood in a context in which the Commissioner (very reasonably) does not seek to retain the funds in any account while an applicant remains out-of-pocket. Indeed, while the Commissioner had initially submitted that the LIBR method should be employed on the basis that it is the most principled approach, at the commencement of the hearing this position was abandoned in favour of a pari passu distribution in order to allocate all funds in the accounts on which claims have been made.
In the course of the hearing an alternative, hybrid, solution allowing application of the LIBR while avoiding a remainder was suggested by Mr Greaves, counsel for Mr McBrayer (applicant 018). This would involve the application of LIBR in the ordinary way (with the attractions referred to in Caron), but with a pari passu division of any remaining funds. Such an approach has the benefit of adopting, at the first stage the principled approach of tracing the applicant's contribution, while also distributing the remainder. There is, it must be acknowledged, something artificial about tracing an applicant's share by use of the LIBR and arguably therefore determining their "interest" in the property), and then supplementing that share (or "interest") with a division of the remainder. The short answer to that quibble is that a technical view ought not be taken so as to result in obvious injustice. A more substantial answer is that, while the LIBR is closer to reflecting reality, all options work on fictions. Money itself is a fiction. Money credited to an account is a fiction on a fiction. An interest in money credited to account is a further layer of fiction. The pari passu method will in some circumstances be the most appropriate method of distribution. If this fiction can be applied at the outset, there is no reason why it cannot be applied at a second stage.
It is useful to recall the observations of Bell P in Caron at [18], where, having discussed as the available approaches the three alternatives referred to above, his Honour said: "There is room for debate as to which approach is the fairest and most consistent with principle or, as Williams J perhaps more aptly put it in International Investment Unit Trust at [73], which approach is 'the least unfair result for the investors, bearing in mind that, regrettably, no method of distribution will result in perfect justice for all'." Thus, while there is merit in seeking to reflect a sense of reality by seeking to trace contributions in a logical fashion, ultimately what is sought is the least unfair outcome.
The hybrid approach did not arise for consideration in Caron (there being no absent contributors). A form of hybrid approach was applied by Farrell J in Pirina, in the matter of fund options (Australia) Pty Ltd) (in liquidation) (No 2) [2023] FCA 681. There, her Honour was faced with a problem similar to that which presents here, albeit in a different legal context. Her Honour was dealing with the liquidation of a company which, like the present defendants, had been used for the purpose of defrauding innocent investors. Like the present case, some but not all investors had come forward seeking their share of the assets of the company. Her Honour was not, of course, concerned with determining applicants' "interest in property" within the meaning of the POCA. Even so, the liquidators had indicated their view that they could not advocate the adoption of a hybrid approach on any principled ground, the choice effectively being between LIBR alone or pari passu alone (at [132]). Her Honour found that a form of hybrid approach should be employed, it being "likely to provide the fairest outcome overall" (at [135]). Her Honour considered that the totality of the funds in an account was subject to a trust in favour of the depositors who had made them. This, at least, in part, formed the foundation for her Honour's view that it was "fairer and appropriate to distribute any surplus on a pari passu basis" (at [137]). Her Honour's approach, including her analysis that all the funds held in the account were held on trust, provides support for the availability of a hybrid approach to determine the various applicants' interests in the available property.

[21]

Which method?

The determination of the method to be applied cannot be done in the abstract. It is necessary to consider the particular account, the evidence available in relation to that account, the position of the respective applicants and the impact of the competing methodologies.
Evidence of the result of the application of the pari passu and LIBR methodologies was contained in the affidavits of Mr Nasr of 15 November 2023 [4] and 29 February 2024 [5] . Those affidavits were tendered without objection. As noted above, the results set out in those affidavits were incorporated in the Agreed Facts. In the course of the hearing the Commissioner accepted a hybrid approach was also available and Mr Nasr was asked to perform the necessary calculations. Mr Nasr had not completed the calculations by 29 February when the hearing otherwise concluded. Leave was given to the Commissioner to file Mr Nasr's further affidavit later that day, with provision for the applicants to notify of any objections to the affidavit. Given the admission into evidence of the Agreed Facts and the evidence on which that document was based, it was not anticipated that Mr Nasr's further affidavit would raise any issues. That is, the further evidence was assumed to involve (with no disrespect intended to Mr Nasr) an essentially mechanical calculation dividing any money left over after an LIBR distribution on a pari passu basis. In the event a number of objections were raised. All but one of these objections related to factual issues which resulted in Mr Nasr swearing a further affidavit on 4 March 2024 correcting a number of matters in the 29 February 2024 affidavit. The Commissioner indicated his intention to rely on the affidavit of 4 March 2024.
On 8 March 2024, I heard the sole objection to Mr Nasr's affidavits of 29 February and 4 March which was brought by Mr Rubinstein (applicant 023). It was submitted on Mr Rubinstein's behalf that the affidavit should not be admitted as Mr Nasr had not explained how he had accounted for a payment made to Mr Chen (applicant 012), such that he had not demonstrated the facts on which his opinion was based. The accounting for this payment was not an issue peculiar to Mr Nasr's calculations based on the hybrid methodology. As was acknowledged on behalf of Mr Rubinstein in argument, the objection was necessarily to all of Mr Nasr's evidence including the affidavits of 15 November 2023 and 26 November 2023. Those affidavits were already in evidence having been admitted without objection. Mr Nasr had been called at the hearing for the purposes of cross-examination. Mr Rubinstein's representatives did not put any questions to him. Indeed, no questions were put to him by any applicant challenging his methodology. Mr Nasr's affidavits of 29 February and 4 March 2024 in relation to the application of the hybrid methodology were based on the assumption his calculation of the LIBR entitlements in his earlier affidavits was correct, the further calculations were, in effect, an extension of that evidence. Mr Rubinstein was bound by his forensic decision not to challenge that evidence. That was particularly so when the issue was raised after the hearing, and in circumstances where the other applicants did not have an opportunity to be heard with respect to any challenge to Mr Nasr's first two affidavits. There was, in any event, no reason to think that Mr Nasr's analysis was flawed. On this basis, I overruled Mr Rubinstein's objection to Mr Nasr's affidavits of 29 February 2024 and 4 March 2024 and admitted them into evidence.
The result of the above is I have available to me evidence as to the result of a distribution of each account employing a simple pari passu approach, the LIBR approach and an hybrid approach. As noted above, the choice of approach must be considered in the context of the account in question.

[22]

The GSL Bud CBA accounts

Two separate Commonwealth Bank accounts in the name of GSL Bud were restrained, they being accounts numbered 062759 10597291 and 062319 10881183. The applicants' deposits were all made to the first account. The funds in the second account were sourced solely from a transfer from the first account. The claims of the various applicants on the first account can therefore be traced to the second account. It was accepted that in these circumstances the two accounts should effectively be treated as one, in effect reversing the transfer from the first account the second account. The first account (062759 10597291) is a US$ account. The second account (062319 10881183) is in AUD$. Given all the contributors made deposits to the first account and the funds in the second account have been treated as having been added back to that account, Mr Nasr calculated the entitlements of the applicants in US$.
A total of 102 persons or entities contributed funds to the GSL Bud account. Less than half have participated in these proceedings. The total of funds deposited by all contributors was US$8,132,528.98. Of those funds, approximately $1,148,275.08 have been restrained. While the restrained funds represent a relatively small proportion of the total, the absence of claims from a large number of contributors has the result that there are sufficient funds in these accounts to restore a significant proportion of the applicants' contributions to them.
The table below sets out the position of the applicants with claims on the GSL Bud accounts together with their entitlements based on the employment of the three alternative methodologies. (I have, for the reasons given above, not included for consideration the application of the pari passu method based on all contributors. This is the case for all accounts which fall for consideration.) GSL Bud CBA Accounts Remitter Name Net Credits % of total credits to account LIBR (USD) Pari Passu (USD) - active applicants Hybrid Methodology (USD) USD Carlitos Soldevilla Borja (034) $8,004.32 0.10% $7.23 $7,102.88 $7,072.54 Castle Bespoke Management (006) $13,325.25 0.16% $0.30 $11,824.57 $11,772.69 Fei Tan (016) $4,989.76 0.06% $0.11 $4,427.82 $4,408.39 Harwin Group Inc (014) $9,985.00 0.12% $62.53 $8,860.50 $8,828.88 James Michael McBrayer (018) $5,000.00 0.06% $4,696.31 $4,436.90 $4,964.62 James Nadel (002) $188,750.00 2.32% $10.69 $167,493.14 $166,759.04 Xiao Yan Dong (009) $39,965.10 0.50% $601.08 $35,464.26 $35,378.61 John A Amodeo (025) $325,000.00 4.00% $7.22 $288,398.79 $287,133.47 Marc Christiaen van der Chijs (026) $394,992.53 4.86% $50.15 $350,508.82 $348,975.82 Mei McNeilly (015) $3,975.00 0.05% $0.09 $3,527.34 $3,511.86 Paul V Carney (021) $100,000.00 1.23% $2.22 $88,738.09 $88,348.76 Ronald Lewis Myers and Digital Properties West, LLC (037) $109,977.76 1.35% $37,817.81 $97,592.16 $101,570.04 Yu Sun (032) $90,040.03 1.11% $11.43 $79,899.80 $79,550.35

[24]

The appropriate methodology

I would not apply the LIBR approach to distribution of the GSL Bud funds. While the LIBR approach reflects the reality of contributions and withdrawals made on the account, it leaves a substantial pool of funds undistributed. Only Mr McBrayer (applicant 018) would benefit from the LIBR approach over the pari passu approach but even for him the difference is relatively minor.
The pari passu approach has some appeal in the distribution of the GSL Bud accounts. It would distribute the entirety of the available funds. It benefits the greatest number of applicants. Looking at the table above it is not difficult to see why the vast majority of applicants favoured the pari passu approach over the LIBR approach. A difficulty with placing weight on the position of the applicants' in favour of pari passu is that prior to the hearing commencing it was presented as a choice between pari passu and LIBR. It was not until the hearing was underway that the hybrid method was suggested. The result of the hybrid method was not known until after the applicants had indicated their preferred position. That said, each of the applicants in favour of pari passu will, as it transpires be worse off if the hybrid approach is taken. In most instances the difference is marginal. Most significantly worse off is Mr Amodeo (applicant 035), with a difference of about $1,265, although having regard to the size of the claim, the difference remains relatively small. Other applicants are worse off in amounts in the order of between approximately $500 and $350 (Mr Nadal (applicant 002) $534, Mr Van der Chijs (applicant 026) $500, Mr Carney (applicant 021) $400 and Ms Sun (applicant 032) $350. Again, having regard to the claims, the these are not substantial sums.
Considering only the deposits and the withdrawals on the accounts, the hybrid approach would appear to represent an appropriate distribution of the funds restrained in the GSL Bud accounts. It has the advantage that by applying the LIBR approach, each applicant receives at least the amount represented by their contribution as affected by subsequent deposits and withdrawals, with the remaining funds distributed by the fairest available method. There is, however, another consideration particular to these accounts.
Despite the advantages of the hybrid approach, I am of the view that the pari passu method provides the fairest distribution of the funds in this particular account. There are two reasons for this. Firstly, all but two applicants (Mr McBrayer (applicant 018) and Mr Myers (applicant 037)) are advantaged by the pari passu approach. Secondly, and most importantly, the hybrid approach will disadvantage Mr Nadel (applicant 002), in the particular circumstances of his case. Mr Nadel took action in July 2022 to in the County Court of Victoria and obtained orders restraining various accounts including the GSL Bud accounts. This action pre-dated the action taken by the AFP by which restraining orders under the POCA were obtained on 3 November 2022. It can be accepted that Mr Nadel's actions are likely to have preserved some, and probably significant, funds for distribution. If Mr Nadel is treated as, in effect, adding funds back into the account that would have otherwise been dissipated, he should not be disadvantaged in their distribution. I am aware that in taking this approach Mr Myers (applicant 037) and Mr McBrayer (applicant 018) are worse off in amounts of approximately $4,000 and $500 respectively. However, in circumstances where it is uncertain those applicants would have received anything close to their pari passu allocations but for the actions of Mr Nadel, on balance, the pari passu method represents the least unfair method of distribution.
Orders will be made reflecting the application of the simple pari passu approach.

[25]

The JCJHEUSD01 account

The affidavit of Mr Nasr of 26 February 2024 provided calculations of potential entitlements for all applicants including Mr Sandhu (applicant 008). For the reasons above, Mr Sandhu is not to be treated as an active applicant. No calculations were provided representing a pari passu distribution of active applicants excluding Mr Sandhu. The calculations in Mr Nasr's affidavits of 29 February and 4 March 2024, provided only the results of the hybrid methodology, treating Mr Sandhu as a non-participant. I note that the entitlements of the applicants under the LIBR approach is not affected by the presence or absence of Mr Sandhu's claim (or that of anyone else).
The following table sets out the calculations provided noting that the pari passu figure includes, as discussed above, a return to Mr Sandhu: JCJHEUSD01 Remitter Name Net Credits % of total credits to account LIBR (USD) Pari Passu (USD) - active applicants Hybrid Methodology (USD) USD Robert Brooks and Maehal Enterprises, Inc (003) $454,995.00 6.15% $196.54 $16,857.51 $10,317.41 Ronald Lewis Myers and Digital Properties West, LLC (037) $250,000.00 3.38% $19,655.89 $9,262.47 $24,781.85 Isen Chen (012) $100,000.00 1.35% $9,925.52 $3,704.99 $11,929.99 Jeffery Edel (036) $27,474.00 0.37% $11.87 $1,017.91 $623.00 John Squires Poelman (007) $210,590.00 2.84% $39.63 $7,802.34 $4,725.11 Rajeev Sharma (024) $90,000.00 1.22% $11.64 $3,334.49 $2,014.20 Steven Michael Rubinstein (023) $1,349,960.00 18.23% $23,711.35 $50,015.87 $53,225.04 Ching-Liu Wu (027) $499,990.00 2.70% $41.44 $18,524.57 $11,167.06 Tony Chen (029) $20,000.00 0.27% $3.23 $741.00 $448.23 Xiang Liao (033) $199,995.00 2.70% $14.66 $7,409.79 $4,464.93 Dr Yu Geng (031) $160,000.00 2.16% $9.34 $5,927.98 $3,569.69 Sukhdev Sandhu (008) $72,000.00 0.97% $9.32 $2,667.59 Not calculated

[28]

Account NAB LJYINUSD01

The following table sets out the contributions and entitlements of the applicants calculated according to the various methodologies with respect to the funds held in the NAB account LJYINUSD01: Remitter Name Net Credits % of total credits to account LIBR (USD) Pari Passu (USD) - active applicants Hybrid Methodology (USD) USD Ronald Lewis Myers and Digital Properties West, LLC (037) $131,270.00 0.95% $12,080.20 $7,393.55 $17,856.73 Gang Wu and ValueTek Inc (017) $309,990.00 2.24% $248.25 $17,459.63 $15,259.88 James Michael McBrayer (018) $100,000.00 0.72% $592.28 $5,632.32 $5,410.07 Jie Bai (035) $47,000.00 0.34% $24.26 $2,647.19 $2,300.93 John A Amodeo (025) $319,000.00 2.31% $5,694.66 $17,967.11 $20,879.00 John Squires Poelman (007) $580,163.00 4.19% $146.69 $32,676.65 $28,257.17 Neil Richardson (020) $500,000.00 3.61% $258.05 $28,161.61 $24,478.04 Rajeev Sharma (024) $60,000.00 0.43% $1,409.47 $3,379.39 $4,249.06 Ravinder Sagoo (038) $1,200.59 0.01% $67.26 $67.62 $122.19 Steven Michael Rubinstein (023) $699,940.00 5.06% $5,762.24 $39,422.88 $39,405.56 Ching-Liu Wu (027) $20,000.00 0.14% $1,120.49 $1,126.46 $2,035.49 Xiang Yun Luo and Sze Yu Wong (028) $405,000.00 2.93% $209.02 $22,810.91 $19,827.21 Yong-Xiao Wang (022) $249,925.00 1.81% $659.96 $14,076.58 $12,740.59

[32]

Surplus Funds

In relation to the accounts where full re-imbursement is possible, there are funds remaining after restoring the applicants' contributions. The surplus in HWCJGUSD01 and HWCJGCAD01 amounts to what I estimate to be close to $US5,000,000. As noted above, there is approximately $1,500,000 contained in accounts in relation to which there were no applications before me.
Despite the existence of this surplus, for the reasons given above, the applicants' interest in property with respect to which they are entitled to recover pursuant to any orders I am empowered to make, is limited to the property in the accounts to which they contributed.
While I am required to deal with the exclusion applications first, it is anticipated that on making the orders I propose, the Commissioner will move for orders forfeiting any remaining funds with the result that it is expected (subject to any applications for exclusion from forfeiture) the surplus referred to above will be forfeited to the Commonwealth pursuant to s 47 and/or s 49 of the POCA. The effect of such forfeiture is set out in Division 4 of Part 2.2 of the POCA. Pursuant to s 66 the property will vest "absolutely in the Commonwealth at the time the order is made". Provision is made in relation to the Commonwealth dealing with the property in ss 69 and 70 including a prohibition on dealing with the property until the time for an appeal has lapsed. Section 70 provides: 70 How must the Commonwealth deal with forfeited property? (1) If the *forfeiture order is still in force at the later time mentioned in subsection 69(1), the *Official Trustee must, on the Commonwealth's behalf and as soon as practicable: (a) dispose of any property specified in the order that is not money; and (b) apply: (i) any amounts received from that disposal; and (ii) any property specified in the order that is money; to payment of its remuneration and other costs, charges and expenses of the kind referred to in subsection 288(1) payable to or incurred by it in connection with the disposal and with the *restraining order that covered the property; and (ba) apply: (i) any amounts received from that disposal; and (ii) any property specified in the order that is money; to payment of an *associated GST entity's liability (if any) to pay *GST in connection with the disposal; and (c) credit the remainder of the money and amounts received to the *Confiscated Assets Account as required by section 296. (2) However, if the *Official Trustee is required to deal with property specified in a *forfeiture order but has not yet begun: (a) the Minister; or (b) a *senior Departmental officer authorised by the Minister for the purposes of this subsection; may direct that the property be alternatively disposed of, or otherwise dealt with, as specified in the direction. (3) Such a direction could be that property is to be disposed of in accordance with the provisions of a specified law. Note: The quashing of a conviction of an offence relating to a forfeiture may prevent things being done under this section: see section 86.
As can be seen, s 70(2) reposes in the Attorney-General (who is the relevant minister) a broad discretion with respect to dealing with forfeited property. That is of some significance in a context where some victims of a single criminal enterprise have been left out-of-pocket as a result of the happenstance of the criminal syndicate's decisions as to the extent to which the various accounts would be depleted. It is also significant in a context where there may be other victims of the fraud who, for some reason, did not bring applications in time to be joined in the hearing before me. It is open to those persons to apply to the Attorney-General seeking relief. While there would appear to be some merit in the argument that some relief or further relief should be allowed to those persons, or at least some of them, it is, of course a matter for the Attorney-General, entirely at his discretion.

Parties

Applicant/Plaintiff:

Commissioner of the Australian Federal Police

Respondent/Defendant:

HWCJ GLB Pty Ltd

Legislation Cited (1)

Proceeds of Crime Act 2002(Cth)

Cases Cited (9)

) 5 NZCLC 67,046 National Crime Agency v Robb [2014] EWHC 4384, [2015] Ch 520 Pirina, in the matter of fund options (Australia) Pty Ltd) (in liquidation) (No 2) [2023] FCA 681 Category: Principal judgment Parties: Commissioner of the Australian Federal Police (Plaintiff) HWCJ GLB Pty Ltd (First Defendant) JCJ Health Pty Ltd (Second Defendant) GSL Bud Pty Ltd (Third Defendant) Hong HZ Pty Ltd (Fourth Defendant) LJ Yin Pty Ltd (Fifth Defendant) Wenhao Globle Pty Ltd (Sixth Defendant) TJL International Pty Ltd (Seventh Defendant) XM Global Pty Ltd (Eighth Defendant)

JUDGMENT

The Commissioner of the Australian Federal Police has brought proceedings under the Proceeds of Crime Act 2002 (Cth) ("POCA" or "the Act") against five corporate defendants with respect to monies held to the credit in various accounts with Australian banks. The plaintiff's summons, filed on 3 November 2022 sought restraining orders with respect to, and forfeiture of, what is conveniently, (although, as later explained, inaccurately), described as funds or monies held in those accounts. Restraining orders were made on an ex parte basis by Campbell J on 3 November 2022: Commissioner of the Australian Federal Police v HWCJ GLB Pty Ltd [2022] NSWSC 1574.
There has been no appearance on behalf of the defendants in the proceedings. The notices of motion with which I am currently dealing have been brought by various individuals, each of whom contributed to the funds in the accounts held by the defendants. It is common ground between the Commissioner and the applicants that the monies in the various accounts are proceeds of crime, the monies having been obtained through frauds perpetrated on the various applicants. The applicants seek, in one form or another, orders that would have their money returned to them. The Commissioner in these proceedings does not, in principle, oppose the return of a share of the restrained funds to the applicants. There are, however, complications. Funds have been dissipated. The amounts dissipated vary between accounts. While all the contributors to the accounts appear to have been victims of the same fraud, a significant number have not joined these proceedings. Questions arise as to: 1. How to treat the claims - as claims against the defendants' property generally, or as claims on particular accounts? 2. How should the contributions of the non-participants in these proceedings be treated, and in particular should they be included as part of the pot to be divided amongst the active participants? 3. Where the funds available in an account are insufficient to restore the contributions of each applicant, how should the funds be divided? 4. What form should the orders take, given the multiple avenues provided by the POCA and the different approaches taken by various applicants? 5. Should the successful applicants receive costs and, if so, against whom and on what basis?

[2018] HCA 1

(2020) 102 NSWLR 537

(2018) 262 CLR 76

(2018) 100 NSWLR 630

[2020] NSWCA 117

[2018] NSWCA 199

[2023] FCA 681

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