Commissioner of the Australian Federal Police v Jieying Sun

Supreme Court of NSW|2017-08-31|Before: Wilson J, Mr P, Simpson JA

Judgment

HER HONOUR: These proceedings are brought ancillary to a summons filed on 21 October 2015 by the Commissioner of the Australian Federal Police ("The Commissioner") seeking restraint of assets the property of the respondent, Ms Jieying Sun, pursuant to s 19 of the Proceeds of Crime Act 2002 (Cth) ("POCA"). The property is, funds standing to the respondent's credit in her ANZ bank account 29**92 or, more properly, a chose in action relevant to those funds, and real property situate at 304/118 Joynton Avenue, Zetland NSW 2017.
By notice of motion filed on 19 November 2015 the respondent seeks orders excluding the property from restraint. The motion was brought under ss 29 and 31(1) of POCA.
The matter proceeded before me with two days of evidence and submissions, after which Ms Sun sought to file further written submissions. Judgment was necessarily reserved to permit that process to occur. In the intervening period, Simpson JA handed down judgment in two matters in which questions of law of relevance to the determination of this case were considered: AFP v Fernandez [2017] NSWSC 1197; AFP v Lordianto [2017] NSWSC 1196. The parties sought leave to file further written submissions addressing those recent decisions. That leave was granted, and further submissions were filed on 13 October 2017.

The (More Significant) Evidence

Both parties filed voluminous documentary evidence in support of their respective positions. Ms Sun, who relied upon her affidavit of 4 April 2017, and her father, Mr Liwu Sun (affidavits of 20 January 2016 and 17 March 2016) were required by the Commissioner for cross-examination. The more significant parts of the evidence are set out below.
In her affidavit of 4 April 2017 Ms Sun sought to consolidate the contents of her earlier affidavits of 13 November 2015, 7 March 2016, and 14 March 2016, which had been filed on her behalf at various stages during the overall proceedings.
She deposed that she was a 33 year old Chinese national, who has been a student in Australia since May 2008, studying a number of subjects. An architect with a degree from the Beijing City University, Ms Sun initially studied the English language in this country, for about 12 months from May 2008. From 2009 to 2011 she studied for an accounting degree at the Central Queensland University. From August 2011 to 2014 she studied for certification as a practising accountant, or CPA, although without attaining that qualification. In about late September 2013 Ms Sun commenced a Bachelor of Business with the Australian Institute of Higher Education, graduating in October 2016. In February this year the respondent recommenced her studies towards her CPA.
From time to time over these years the respondent returned to China for short periods, principally on holidays and to see family. During these stays she worked for her father's company, the Beijing Xingpeng Construction Engineering Company Limited ("Building Co"), a company by which she had first been employed in 2007. In July 2011 the respondent was appointed as Office Manager with Building Co, employment which Ms Sun says has continued throughout her years of study in Australia.
During this time, Building Co continued to pay her what Ms Sun refers to as "in part" salary, study allowance, or gift from her father. She deposed that, between October 2009 and May 2015, the period for which she has obtained bank statements, Building Co paid her, on an irregular basis, amounts of money from as little as $1985.00 on 16 July 2010, to $102,270.00 in two payments on 17 February 2015. The company additionally paid for tuition on at least one occasion, and Ms Sun's father sometimes gave her cash payments of $4000.00 on each occasion.
In 2014 Ms Sun discussed with her father the prospect of buying an investment property in Sydney. During a visit by her father to Sydney in July and August 2014 Ms Sun decided to buy a number of apartments "off the plan" from a development in Mascot. She paid some money to satisfy administrative charges related to the proposed purchase, and provided counter cheques to meet the requirement of a 10% deposit, but the sales did not ultimately proceed.
During the course of negotiations for the purchase, she and her father dealt with a Mr Huang, a Haymarket real estate agent. He gave them advice about transferring money from China to Australia to pay for the apartments, telling them he had "a brother" who could arrange the transfer, which could be effected by Mr Sun depositing the necessary funds in Chinese currency into nominated bank accounts in China, after which the money would be moved to Australia. Although Mr Sun is a very wealthy man, Mr Huang also suggested that they should "get a home loan from the bank" to constitute the majority of the purchase monies, as to proceed in that way was "the policy in Australia" (at [76] - [78]).
Ms Sun deposed that she understood Mr Huang to use the term "a brother" as a figure of speech, rather than as a reference to a sibling who could make the funds transfer. She saw nothing wrong in proceeding as Mr Huang suggested and exchanged a number of messages with him about the process using the "WeChat" service.
On 11 August 2014 Mr Sun transferred 3.5 million Yuan Renminbi ("RMB"), [very roughly $670,000] from the bank account of a company in which he was the majority shareholder, Beijing Cai Yu Water Supply Company Limited ("Water Co"), to the account for Building Co, subsequently transferring 3 million RMB [or roughly $575,000] from a Building Co account to the Chinese account nominated to Ms Sun by Mr Huang.
Ms Sun acknowledges the deposit of a total of $517,241.00 into her CBA accounts on 11 and 12 August 2014 in a number of individual transactions, but asserts that she was not aware of any illegality in that process. She did, however, think it "odd" that the funds she was expecting from her father came into her account via multiple transactions from varying Sydney branches of the Commonwealth Bank. [There seems to have been a not insignificant shortfall between the amount of money deposited by Mr Sun into a Chinese account and the amount actually received by Ms Sun, but that was not addressed in the evidence.]
Because of the subsequent collapse of the plan to purchase the Mascot apartments, the respondent retained possession of the money she had received.
Later in 2014 she decided to purchase the Zetland property for $955,000.00. She drew a bank cheque from her Commonwealth account for $95,500.00 to pay a 10% deposit on the purchase and sought a loan from the ANZ Bank for the balance of the purchase monies. The loan for $640,000.00 was brokered by a broker, Mr Guanyu Lai. Ms Sun says she has no recollection of signing any loan application form or related document, and she took no steps herself to provide the bank with documents going to proof of her income or assets, supportive of the loan application.
She later provided Mr Lai with a copy of her passport, photographic identification, the first page of the contract for the purchase of the Zetland property, and the name and address of Building Co.
At an interview with an official from the ANZ, Ms Sun said that she signed some forms given to her for that purpose, but the documents were not explained to her and she did not have a proper opportunity to read them. She signed an Applicant Declaration and a Statement of Financial Position, but without checking either carefully. She observed that the latter document had been completed with relevant information inserted, but "assumed" that her broker had completed it accurately, presumably having obtained financial information from Building Co.
Ms Sun later became aware that a certificate of employment and payslips showing payment of a monthly salary had been provided to the bank in support of the loan application, but denied having anything to do with the provision of that material. She "assumed" that the broker obtained the documents from Building Co in China and submitted them to the bank, even though she had not instructed him to do so.
On 7 January 2015 the respondent transferred $430,000.00 from her Commonwealth Bank account to her ANZ account, of which she used $258,020.22 for the purchase of the Zetland property.
The purchase settled on 23 January 2015.
Ms Sun has not been able to locate the mortgage broker, or obtain affidavits from either him or Mr Huang. She denies that an account of relevant events given to authorities by Mr Huang during an Examination was true. She denies knowing Yi Feng.
Although not prepared to give a full account of his assets, Mr Liwu Sun deposed in his affidavit of 20 January 2016, that his assets exceed 50 million Australian dollars by some considerable margin. He is a builder, and owns 95% of Building Co and was until 2015 the 70% majority shareholder in Water Co, both being profitable companies in China.
Mr Sun said that, having decided to buy property in Sydney, he and his daughter dealt with "Sean", who he now understands to be Sean Huang. Sean recommended a fast method of money transfer from China and Mr Sun subsequently transferred funds to Teng Jingsheng, as nominated by Sean, in 15 individual transfers of 200,000 RMB [or very roughly $38,000.00] each. He did not believe that there was anything wrong in transferring funds in this way.
As to his daughter's employment with Building Co, Mr Sun said that the respondent first worked for him in 2007 after completing her tertiary studies. She was subsequently given a position as Office Manager, and sent to Australia so that she might improve her English language. The company continued to pay Ms Sun when she was in Australia. Mr Sun deposed that, "Her pay rate was averaged out to be $AUD10,880.00 per month gross [later corrected to "net"] for the purposes of the ANZ loan" (at [81] of the affidavit of 20 January 2016).
In his affidavit of 17 March 2016 Mr Sun added that "it would be fair" to regard most of the monies paid by Building Co to the respondent in Australia as a gift from him, intended to pay for her education and provide an allowance to her.
For the Commissioner, Federal Agent Glyn Roberts deposed to the suspicions that he holds as to the monies deposited to the respondent's CBA account **02, and the purchase of the Zetland property. He observed that the money laundering syndicate he has been investigating since June 2014 has been responsible for the deposit of in excess of 30 million Australian dollars into local financial institutions. Yi Feng, a Chinese national in Australia on a student visa, and who has personally deposited about 4 million dollars in Australia, is one of the syndicate's operatives. He was charged with a money laundering offence in August 2017.
Agent Roberts obtained information from the Australian Taxation Office relevant to Ms Sun that showed she had registered for income tax on 18 May 2008, the day after she arrived in Australia, but had subsequently submitted only one return, for the financial year ending 30 June 2014, when her declared income was $20,519.00.
Inquiries of the Commonwealth Bank determined that the respondent's bank account **02 had been opened on 8 August 2014 at a Haymarket branch. On 11 August 2014 four individual deposits of $70,000 had been made to the account, from three different Sydney branches. A further deposit of $77,241 was made the same day from a different Sydney branch.
On 12 August 2014 three individual deposits (of $50,050, $30,000, and $9,950) were made to the account at the Macquarie Centre branch of the bank, with a fourth deposit of $70,000 made at the Epping branch, by a person nominated as Jieying Sun.
On 18 August 2014 $517,241 was transferred from the respondent's account **02 to her second CBA account, **22. Other substantial transfers between the accounts continued through to December 2014.
In relation to the ANZ loan application, Agent Roberts obtained copies of the documentation filed with the bank in support of the application. An "Employment Certificate" on letterhead from Building Co certified in English that the respondent had been in full time employment as Office Manager since November 2011, with an annual gross salary of 900,000 [RMB, or, very roughly, $176,000] and a net salary of 624,660 [RMB, or, very roughly, $122,000].
Three payslips also on Building Co letterhead, in both English and Mandarin, and which recorded "Staff name: Jieying Sun", note a monthly gross salary for the respective periods 1.9.2014 - 30.9.2014, 1.10.2014 - 31.10.2014 and 1.11.2014 - 30.11.2014, of 75,000 [RMB, or, very roughly, $14,500]. The net salary was 52,055 [RMB, or, very roughly, $10,100], with various amounts recorded as having been deducted for superannuation, housing fund, unemployment and medical insurance, and taxation.
Federal Agent Roberts suspects that the monies used by the respondent to fund the purchase of the Zetland property, other than the loan funds, were derived from the deposits made to her account by Yi Feng and others. On that basis, and having regard to proceedings against Yi Feng for money laundering, he suspects that the Zetland unit, and the monies held on account for the respondent in her Commonwealth Bank accounts, are the proceeds, or an instrument, of crime. He suspects that the respondent is engaged in money laundering.
Federal Agent Scott Matthews deposed in his affidavit of 1 November 2016 that the respondent was examined as to her income and assets pursuant to an order made by Hall J on 24 November 2015. During the course of that examination the respondent said that, during the whole of her time in Australia she had been a student, whilst also retaining a position as Office Manager in her father's company, and working in that capacity on visits to China. Her duties as Office Manager were performed on a full-time basis during the generally annual return trips to China, for the few weeks during which she was in the country. When asked about the nature of her duties, the respondent said, "Just talk - talk to my father and we have a meeting with other office staffs and say what's going on, what's the development now to the business, and what's the next goals we just talking about" (CB 265).
She added (at CB 267), "[…] I have the work in study in Sydney, and the only work to study Sydney. So I just talk to my father how study - how study going on, and what's the property, what's the - sorry, what's the opportunity for invest overseas. That's - this is my job."
As to the multiplicity of deposits to her account on 11 and 12 August 2014, Ms Sun said that, when she asked the real estate agent Mr Huang why the deposits were in "many places", he said "it's good for [her]" (at CB 279). She did not know why.
The respondent told the Examiner that she did not complete the statement of financial position that was lodged with the ANZ Bank in support of her loan application, although she did sign it. Although the respondent said that when she signed the statement she made sure it was correct, she was unable to comment on the accuracy of the information it contained, such as the basis of an estimation of the value of shares she owned.
As to the figures against "gross" and "net" salary, the respondent maintained that these sums represented her salary; a salary paid her for studying in Australia and working a few weeks each year in China. She later said she could not separate her salary from monies given to her as a gift. When asked about the payslips for specified periods that were provided to the bank with the loan application, the respondent conceded that, having been in Sydney in the relevant periods, she had not worked. She denied having provided the payslips to the bank, suggesting that an inquiry be made of the mortgage broker. She conceded that, despite being employed for many years, the three payslips provided to the bank were the only payslips she had ever seen, and they had been created for the purposes of the loan. The respondent agreed that the payslips gave the false impression that she was fully employed: "Q: And really what these payslips were doing were giving the impression that you had a full time job when you weren't doing any work at all, correct? A: Yes. Yes" (at CB 302).
Agent Matthews was present on 18 March 2016 when Yi Feng was examined pursuant to orders made by Hall J. Mr Feng deposed that he did not know the respondent, and had deposited cash into her account at the request of Shiyu Cong, who gave him the BSB and account numbers. Once the monies were deposited, Mr Feng provided Mr Cong with the receipt. They then drove to other places and further deposits were made. Mr Feng understood the account to be Mr Cong's account.
Agent Matthews also attended the examination of Sean Huang, which took place on 18 August 2016, pursuant to an order made by Fagan J. Mr Huang told the Examiner that the respondent asked him how to transfer money from China to Australia and, although his experience of such matters was very limited, he advised her of two methods, either using ten or fifteen friends to make smaller transfers on her behalf (to defeat the $US50,000 transfer limit applicable in China), or to use a "money transfer company".
Later, after the money had been deposited to the respondent's account, Mr Huang said that she asked him about the multiple cash deposits that were made, querying, "is that a bit weird". Mr Huang told the Examiner, "We didn't think too much back then, I thought it was just the way they [the money transfer company] do it, a different way they did it" (at CB 331).
Mr Huang said he subsequently asked Mr Wang (or Wong) about the cash deposits, and was told it was normal and not to worry about it. He assured the respondent, (in a WeChat exchange) "Don't worry, won't be any problem, we've done transactions over hundreds of millions" (at CB 599).
Mr Huang acknowledged that this was a lie, since he had no real experience of transactions of this nature. He also acknowledged that, in his experience, those who used money transfer companies to move money from China to Australia did so to avoid regulations applying in China.

The Oral Evidence

The respondent gave evidence on 30 August 2017. She gave her evidence substantially in English, but had the assistance of an interpreter for questions she did not understand, or where her answer was given in Mandarin.
She confirmed the assertion in her affidavit that she did not know Yi Feng, or know anything of him. She was not able to say why the monies she was expecting to receive by way of transfer from China arrived in her account via nine separate cash deposits at various Sydney Commonwealth Bank branches. She denied any knowledge of the other named depositors to her account. She denied making a deposit herself of $70,000 on 12 August 2014. The respondent said that she was "not worried" (at T65:04) about the multiple cash deposits to her account, but she asked Mr Huang about them because, "I just worried why they go to different place. Why they don't deposit into one place and why they go to many of them, because I think it is little bit weird, so I with Mr Huang" (T65:13 - 15).
The respondent deposed that, although she did not need a home loan to buy the Zetland property, her father wanted to get a loan. Whilst she understood that banks need to know an applicant's income and assets to assess any loan application, the respondent said that she had no involvement at all in providing necessary documents to the bank. She thought the employment certificate and payslips supplied to the bank were created for that purpose, but not by her. She did not arrange to supply any of the other supportive documents to the bank.
As to the regular payment to her of a salary Ms Sun claimed that a monthly salary was paid to her. She denied having inflated her income to secure the bank loan. She did not agree that the amounts remitted to her from China were a gift from her father, saying she could not differentiate between "gift or my payment or tuition fee or some studying for something" (T45:48). When shown her affidavit of 29 November 2015, she acknowledged that she had at that time described the whole of the monies she was paid from China as a gift from her father.
Although asked a number of questions about her current employment status, Ms Sun was not able to say whether her employment with Building Co continued or not; she said she was not sure and did not know, but it was possible her employment had continued since 2011. Her attention was drawn to her affidavit of 13 November 2015, prepared in support of her application to this Court to be paid a living allowance from the frozen funds, in which she said "I do not have a job". Ms Sun said that, in making that statement, she had intended to say that she did not have a job in Australia, as opposed to at all. She said, "Because I living in Australia. I have expense to living in Australia. So I mention I don't have a job. That means in Australia. Because I have people, money, I don't have money in my account, so I ask, to call to give me living expense. I don't have a job, means I don't have a job in Australia because at the time I'm study" (T60:44 - 48).
She addressed a similar assertion in her affidavit of 29 November 2015 in the same way: "I have no job. I have a job or not, depends on my father. I have a job in China, he want to continue employing me or not, depending on my father. But in Australia, at the time when I do this affidavit, I don't have a job" (T61:34 - 37).
The evidence continued, "Q. You put those two affidavits I was just taking you to and you put them together in support of living expenses application, didn't you? A. WITNESS: Yes. Q. You sought living expenses on the basis you didn't have income, didn't you? A. WITNESS: Yes, yeah, I didn't have income in Australia. Q. You never said in those affidavits, did you, Ms Sun, that you had any sources of income overseas, did you? A. WITNESS: Because I leave out the day, on the day I do the affidavit, I stay in Australia, I stay in Sydney. Q. Could you answer my question: You never said in either of those affidavits I just took you to, that you had any source of income overseas, did you? A. WITNESS: I didn't mention" (T62:23 - 38).
Liwu Sun also gave evidence on 30 August 2017, entirely through a Mandarin interpreter. He was asked about his assertion in his affidavit of 20 January 2016 that the monies paid to the respondent by his company were averaged out at an amount of $10,880 per month gross, and confirmed the accuracy of that figure. He said the monies accrued monthly but were not necessarily paid monthly, and denied that the figure was produced for the purposes of the ANZ loan. He denied trying to make a gift look like regular income to support the loan application, saying (at T71:16) "As I own this company, so I do not separate the income or the gift or I do not break down the payment".
Mr Sun was referred to his affidavit of 17 November 2016 in which he had sought to clarify the status of payments made to the respondent, by saying "it would be fair to consider most of my daughter's payments she received from Building Co to be a gift from me via Building Co". Notwithstanding that assertion in his affidavit, Mr Sun denied that most of the monies paid to Ms Sun were a gift. The following evidence was given: "Q. The reason you wanted to change paragraph 81 was because earlier in your earlier affidavit in paragraph 81 you have made it look like all of the money received from your company by your daughter was income? A. INTERPRETER: Yes, that's correct" (T74:38 - 41).
He said both that the respondent did not work for him when studying in Australia, and that she was always employed with his company. Contrary to the concession of the respondent, he denied that the payslips provided to the ANZ Bank had been created for the purposes of the loan application, saying that the payslips were required to comply with rules and regulations set by the Bureau of the Labourforce in China. There was no explanation sought as to the presence on the payslips of entries in the English language, in circumstances where the company's staff and operations were wholly based within China.

The Law

The respondent's application to have the restrained property excluded from the restraining order is brought under ss 29 and 31 of the Proceeds of Crimes Act 2002 (Cth). Section 31 is procedural, and provides the mechanism by which an application of this nature can be made. Section 29 provides, "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) […]; or (b) […]; or (c) […]; 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)."
Section 338 of the Act defines "indictable offence" as "an offence against a law of the Commonwealth [..] that may be dealt with as an indictable offence". A "serious offence" is defined in the same section (relevantly) as, "(a) an *indictable offence punishable by imprisonment for 3 or more years, involving: (i) [..]; (ia) [..]; (ii) unlawful conduct constituted by or relating to a breach of section 81 of the Proceeds of Crime Act 1987 or Part 10.2 of the Criminal Code (money-laundering); or (iii) unlawful conduct by a person that causes, or is intended to cause, a *benefit to the value of at least $10,000 for that person or another person; or (iv) [..]; (aa) [..]; (b) [..] (c) [..] (d) [..] (e) [..] (ea) [..]; (eb) [..] (ec) an offence against either of the following sections of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006: (i) section 142 (conducting transactions so as to avoid reporting requirements relating to threshold transactions); (ii) section 143 (conducting transfers so as to avoid reporting requirements relating to cross-border movements of physical currency); if transactions in breach of that section by the person committing the offence total at least $50,000 in value during any 6 month period; or (ed) [..] (f) [..] (g) [..] (h) [..]".
Section 329 of the Act provides for the meaning of "proceeds" and "instrument": "329 Meaning of proceeds and instrument (1) Property is proceeds of an offence if: (a) it is wholly derived or realised, whether directly or indirectly, from the commission of the offence; or (b) it is partly derived or realised, whether directly or indirectly, from the commission of the offence; whether the property is situated within or outside *Australia. (2) Property is an instrument of an offence if: (a) the property is used in, or in connection with, the commission of an offence; or (b) the property is intended to be used in, or in connection with, the commission of an offence; whether the property is situated within or outside *Australia. (3) Property can be proceeds of an offence or an instrument of an offence even if no person has been convicted of the offence. (4) Proceeds or an instrument of an *unlawful activity means proceeds or an instrument of the offence constituted by the act or omission that constitutes the unlawful activity."
"Unlawful activity" is defined in the definitions section (s 338) as an act or omission that constitutes an offence against a law of the Commonwealth, a State or Territory, or a foreign country.
Property will become, remain, or cease to be "proceeds" or an "instrument" in accordance with relevant parts of s 330: "330 When property becomes, remains and ceases to be proceeds or an instrument (1) Property becomes *proceeds of an offence if it is: (a) wholly or partly derived or realised from a disposal or other dealing with proceeds of the offence; or (b) wholly or partly acquired using proceeds of the offence; including because of a previous application of this section. (2) Property becomes an *instrument of an offence if it is: (a) wholly or partly derived or realised from the disposal or other dealing with an instrument of the offence; or (b) wholly or partly acquired using an instrument of the offence; including because of a previous application of this section. (3) Property remains *proceeds of an offence or an *instrument of an offence even if: (a) it is credited to an *account; 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 (b) [..] (ba) [..]".
"Sufficient consideration" is defined in s 338 to mean, "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."
The onus of proof is on the person making the application. Section 317 provides: "317 Onus and standard of proof (1) The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for. (2) Subject to sections 52 and 118, any question of fact to be decided by a court on an application under this Act is to be decided on the balance of probabilities."

Consideration

In bringing her application for the exclusion of the relevant property from the restraining order, the respondent bears the onus of proving on the balance of probabilities all necessary matters to establish a basis upon which the relief she seeks may be granted. She argues that she herself did not engage in any unlawful activity, and nor is the property the proceeds or an instrument of a money laundering (or any other) offence.
A "money laundering" offence is one contrary to s 400.9(1) of the Criminal Code, which is in these terms: "400.9 Dealing with property reasonably suspected of being proceeds of crime etc. (1) A person commits an offence if: (a) the person deals with money or other property; and (b) it is reasonable to suspect that the money or property is proceeds of crime; and (c) at the time of the dealing, the value of the money and other property is $100,000 or more. Penalty: Imprisonment for 3 years, or 180 penalty units, or both."
"Proceeds of crime" for the purposes of s 400.9(1)(b) is defined by s 400.1 of the Code: "proceeds of crime means any money or other property that is wholly or partly derived or realised, directly or indirectly, by any person from the commission of an offence against a law of the Commonwealth, a State, a Territory or a foreign country that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence)".
It follows that any money or property derived from an offence that falls within Part 4AA of the Crimes Act, such as an offence contrary to s 192G; or a money laundering offence contrary to s 400.9 of the Criminal Code, is the proceeds of crime, and not able to be the subject of an exclusion order pursuant to s 29 of POCA.
The onus is on the respondent to prove on balance that the property and money is neither the proceeds nor an instrument of any serious offence, and she submits that the Court would be satisfied of that.
It is submitted that Ms Sun is a student in Australia with limited understanding of business and financial affairs who had no basis to suspect anything untoward about the deposits of monies into her account, or to be more diligent in the submission of information in support of her home loan application. Indeed, counsel for the respondent went so far as to suggest to the Court that Ms Sun was "not particularly bright and somewhat spoilt" (at T100:03) and not "the brightest light bulb" (at T125:05).
The respondent's submission is that she was in Australia to study, and to acquire skills and experience that may be of use to her in working in, and ultimately managing (along with her siblings), her father's company. She had, in her Counsel's phrase, "her training wheels on", and it could not be reasonably concluded that she would be alive to suspicious business practices, such as the multiple deposits made to her account, or understand the need for care in completing financial documents, such as a statement of assets relevant to a loan application.
Further, it is submitted that the funds credited to the respondent's Commonwealth Bank account and, by extension, the funds and the Zetland property, ceased to have the character of funds being the proceeds of or an instrument of crime (if they ever bore such a character), because the monies were acquired by her as a third party for sufficient consideration, as contemplated by s 330(4)(a) of POCA.
On this basis it is contended that, either, Mr Sun is the relevant "third party" who paid an amount in RMB as consideration for the payments to the respondent's account of monies in Australian dollars, or, Ms Sun is the third party, who acquired the monies following payment of sufficient consideration by her father, "in circumstances that would not arouse reasonable suspicion".
Having considered the documentary evidence, and having observed the respondent and her father give their evidence viva voce, I am not satisfied that, on balance, the respondent has established either, that the property is not the proceeds or an instrument of an offence or a serious offence, or that, if it was, it has ceased to be so.
Although I am conscious of the fact that English is not the respondent's first language, I found Ms Sun a most unsatisfactory witness. She was frequently evasive in her answers, often proffering information about which she had not been asked, rather than giving a direct answer. The content of her evidence was frequently contradictory; Ms Sun contradicted parts of the evidence she gave before me, but also some of the content of her affidavits, and the evidence that she gave when she was examined. She gave the overall impression of a witness who would say whatever she thought best suited her interests.
An example is her contradictory evidence of her indigence or otherwise. When asking this Court in 2015 to permit payment to her of a living allowance from the restrained funds, Ms Sun swore an affidavit in which she gave an impression of herself as being without the financial means to sustain herself, being without employment. For a different purpose, to support the accuracy of the information provided to the ANZ Bank in her loan application, she claimed in evidence before me continuous employment and income, including during the period in which she had previously asserted she was unemployed. When the differing accounts were drawn to her attention, she endeavoured to explain her contrariness by asserting that her claim to being without employment should be read as confined to Australia, "Q. Can you see any language there in this affidavit that would support what you've just said, that it is about within Australia? A. WITNESS: Because I living in Australia. I have expense to living in Australia. So I mention I don't have a job. That means in Australia. Because I have people, money, I don't have money in my account, so I ask, to call to give me living expense. I don't have a job, means I don't have a job in Australia because at the time I'm study" (T60:42 - 48).
There was no such qualification in the original evidence, and I was unpersuaded by the respondent's testimony. Rather, I formed the distinct impression that Ms Sun had knowingly sworn a false affidavit to persuade the Court to order payment of a living allowance to her, even though her maintenance was assured by continuing gifts of money from her father.
Mr Sun's evidence also was incredible in some regards. I was not able to accept his apparent unworldliness as to the transfer of funds to Australia, or the means by which property is purchased in Australia. It seemed inherently unlikely that a successful businessman with the ownership or management of two large companies could be so naïve about ordinary commercial practices, as to deposit a large sum of money into the bank account of an unknown individual, on trust that something like an equivalent amount would be transferred to Australia, or to accept that property could only be purchased in Australia by means of a bank loan, regardless of the purchaser's means.
I am also conscious that the respondent's evidence differed in some material aspects from that of Mr Sun, such as with respect to the issue of the creation or otherwise of payslips that were submitted to the ANZ Bank.
Informed by my rejection of the reliability of the evidence of the respondent and Mr Sun, I am, firstly, unable to conclude to the civil standard that the respondent has demonstrated that the relevant property is neither the proceeds of an indictable offence, nor an instrument of a serious indictable offence. Secondly, even if Ms Sun or her father can be regarded as a "third person" (something of which I am not convinced), I cannot conclude that she acquired the property in circumstances that would not arouse reasonable suspicion. For the reasons set out below, the respondent's application must fail.

Can the Property be shown to be Neither Proceeds of Crime nor an Instrument of a Serious Offence?

The answer to that question must be no on two bases: the circumstances surrounding the acquisition by the respondent of the monies subsequently used (in part) to fund the purchase of the Zetland property were such as to clearly point to a context of crime; and, the acquisition of the Zetland property was funded (in part) by loan monies which it is reasonable to conclude were fraudulently obtained.
The whole of the circumstances surrounding the "transfer" of monies to Australia from China and received by the respondent on 11 and 12 August 2014 are such as to point clearly to illegality, even setting aside the crime committed in that regard by Yi Feng .
The respondent asserts that she and her father adopted the particular method of money transfer at the suggestion of Sean Huang, but I am unable to accept the evidence of either concerning the transaction.
The amount of money to be transferred was very large, being in excess of half a million dollars, and yet, on the evidence of both the respondent and Mr Sun, neither made any proper inquiries about the method of transfer suggested by Huang, or about the persons responsible for making the transfer. Mr Sun is a successful businessman with considerable personal wealth; Ms Sun is a university graduate with business qualifications. It is inherently unlikely that either would trust such a large sum of money to a transfer scheme about which no inquiries had been made, and against which no guarantees of security had been extracted. Whilst it may be that Mr Sun would be prepared to take a greater risk with his money than would ordinarily be the case to defeat restrictions that applied to the transfer of funds out of China (an offence not relied upon by the Commissioner in these proceedings) to risk so much money in the hands of unknown persons seems unlikely at best.
Neither Ms Sun nor her father seem to have made any inquiries about the bona fides of the transferor, the exchange rate applicable to the transfer, any fee payable to the transferor for the service, or even how long the transfer process would take, other than that it was "fast". The failure to make such basic inquiries seems incredible, and not consistent with what might be regarded as ordinary prudence in financial matters.
Mr Sun thereafter deposited the transfer monies into a bank account in China, the details of which had been received via a WeChat message, and without information about the account holder and his or her bona fides. The funds that Ms Sun subsequently received arrived not, as might have been expected of such a transaction, as a single electronic transfer accompanied by a payment advice detailing such matters as exchange rate and commission payable, but by a series of cash deposits made into a number of bank branches in Sydney, with no accompanying documentation to explain the amount paid, as against the amount transmitted from China.
It would be reasonable for the receiver of funds paid in such a way to be suspicious of the transaction: why were the funds paid in such an unusual way; why was no invoice or other statement received setting out the details of the transfer; why was the amount received significantly less than the amount paid, even allowing for an unfavourable exchange rate and payment of a commission? Other than an inquiry of Sean Huang, Ms Sun appears not to have asked any of the questions that are inevitably raised by such an odd transaction.
In her examination on 30 September 2016 the respondent said that she inquired of Sean Huang about the transaction and was told that it was good for her. She understood that it was "good for" her because it would mean that she was not required to lodge "or report something". She said that she accepted this.
Particularly having observed Ms Sun and her father give evidence about this aspect of the matter, I am unable to accept the account of either of this transaction. The WeChat exchanges in evidence, with a translation from Mandarin to English, demonstrate that the respondent understood there to be something wrong with the way in which the funds were deposited to her account. She had noted the deposits into her account of cash from different locations, regarded it as "weird", and queried Mr Huang, "A different place is sending money to me. It shouldn't be a problem, right". That she did not make further inquiries to allay her concerns is unbelievable.
It is reasonable to conclude that her failure to make those inquiries amounted to wilful blindness, or was based upon her knowledge that illegality was involved.
The respondent has failed to establish that it would not be reasonable to suspect that the funds she received, or chose in action in respect of those deposits of funds, were connected to illegal activity, and specifically, that they were the proceeds of crime within the meaning of s 400.9(1) of the Criminal Code.
Property derived from the commission of an offence, whether wholly or in part, whether directly or indirectly, is the proceeds of an offence. The respondent has failed to demonstrate that the chose in action in respect of the monies in her account on 11 and 12 August 2014 is not the proceeds of crime. The respondent, bearing the burden of proof, has not proven that she had no reasonable grounds for suspecting that the money was either directly or indirectly derived from some form of unlawful activity.
These funds were used in two ways by the respondent with respect to the purchase of the Zetland property. Firstly, the fact that she had such an asset as the funds held on account went to support the commercial viability of the loan she asked the ANZ Bank to make to her. Secondly, some of the monies were used to fund the purchase.
Having regard to my conclusion about the likely illicit origins of these funds, without more the Zetland property is necessarily the proceeds of crime. However, here, as the Commissioner argues, there is additionally clear evidence of fraud surrounding the respondent's application for finance to the ANZ Bank.
I found the respondent's evidence about her application to the ANZ wholly incredible, and the circumstances surrounding it indicative of illegality.
I am unable to accept that the respondent or her father accepted the supposed assertion from Sean Huang that it was "the policy" to obtain a home loan with which to purchase property in Australia.
Ms Sun had been living in Australia since 2008. She had completed a degree in business in this country. It defies common sense that she would believe such an assertion or, at least, make no inquiry about it.
Since one of the purposes of the purchase was as a learning exercise for Ms Sun, it is reasonable to expect that she or her father would have made some more fulsome inquiries about property transactions in this country beyond accepting an assertion from a real estate agent that a home loan was "policy".
The other purpose of the Zetland purchase on the respondent's evidence and that of Mr Sun was as an investment, and yet neither made any apparent investigation of the cost benefits of obtaining a mortgage over the property, upon which interest was payable. Since Mr Sun on his own evidence is a man of vast wealth, there could have been no need to obtain finance with which to make the purchase; there could have been no favourable taxation offset, since the property was not to be leased, Mr Sun's companies have no presence in Australia, and the respondent does not appear to pay tax in this jurisdiction (if anywhere) on the monies she is paid by her father's company.
On all of the evidence, there was no need for a home loan and no benefit in obtaining one, and yet a loan was sought.
The respondent's evidence concerning the documentation submitted in support of the loan application and the manner in which it came to be completed is also quite incredible.
In seeking finance in excess of half a million dollars the respondent asks the Court to accept that she approached the matter as if doing nothing more significant than acknowledging receipt of her dry cleaning. She deposed that she took no steps at all herself to complete loan application documents and, at a meeting with a bank official, she signed documents without checking their accuracy or even necessarily knowing what they were. If the loan was intended as a learning exercise for Ms Sun she could have learnt nothing but carelessness and neglect in money matters.
She claims to have had no involvement in obtaining documents which appear to have been provided from Building Co in China, including an Employment Certificate which appears to be misleading, and payslips which are entirely misleading. The former certified continuing employment by Building Co of Ms Sun in circumstances where her relationship with that company at the relevant time was clearly not that of employer and employee; the latter provided evidence of a regular monthly salary paid to the respondent, along with taxation and other fees deducted, in circumstances where the respondent's case is that she did not in fact receive such monies regularly paid to her.
Even the asserted fact of her employment appears to rise to nothing more than fiction.
Both the respondent and her father were at great pains to contend that Ms Sun's relationship with Building Co was that of employee to employer, even though all of the objective and credible evidence is to the contrary. The only reason for seeking to maintain the truth of such an obvious falsehood is to endeavour to support the legitimacy of the claims made by Ms Sun to the ANZ Bank.
As was submitted before me, there is nothing wrong with a wealthy father providing generous support to an adult child to permit and encourage that child to undertake tertiary studies. It was open to Mr Sun to pay whatever amounts of money he wished to pay the respondent for her maintenance in Australia, as it was open to him to provide the funds to permit her to purchase a property for investment or in which to live. The difficulty here is with the language applied to that arrangement, and the clear attempt to falsely portray it as a situation of employment, apparently to secure loan monies on a fraudulent basis.
I am satisfied that Ms Sun was not employed by Building Co at the time at which she applied for the ANZ loan; she was in receipt of funds apparently irregularly remitted to her by that company, as well as separately by her father, but those funds were in the nature of an allowance or a gift. They were not a salary regularly paid in exchange for work performed. They were not paid monthly, after the deduction of taxation and other charges, and payment was not subject to a genuine contract of employment.
I have concluded that the certificate of employment and the payslips were documents specifically created to facilitate the loan process, necessarily at the behest of the respondent or her father. I do not accept Ms Sun's evidence that the mortgage broker, who did not give evidence in these proceedings, took it upon himself to obtain these documents from China, and complete a statement of financial position, without referring to Ms Sun or obtaining her instructions to do so.
Much about the transaction to obtain a loan from the ANZ Bank, and purchase the Zetland property, is suggestive of criminal intent. The ANZ loan was, because of the false representations made to the Bank by Ms Sun or her agent, contrary to s 400.9 of the Criminal Code, there having been an intention to defraud by false or misleading statement (the statement of financial position) contrary to s 192G of the Crimes Act.
Certainly, I cannot be satisfied that the Zetland property is neither the proceeds of an indictable offence, nor an instrument of any serious offence.

Has the Property Ceased to be Proceeds or an Instrument of Crime?

The respondent submits that she acquired her interest in the restrained property in circumstances that would not arouse a reasonable suspicion that the property was the proceeds or an instrument of crime, as contemplated by s 330(4)(a) of the Act. That section is in these terms: "330 When property becomes, remains and ceases to be proceeds or an instrument (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)."
The question is whether a reasonable person, in the position of the third party and with that person's knowledge, would have formed a reasonable suspicion as to the property.
There is a threshold question of whether, as submitted, either the respondent or Mr Sun is a third person for the purposes of this section. Having regard to the involvement of each in the arrangements for the transfer of the funds between China and Australia (with Mr Huang, the unknown Chinese account holder, and each other), I am not satisfied that either Ms Sun or Mr Sun is a third party.
The provision seeks to protect persons in a category referred to in the Explanatory Memorandum to the introduction of the Proceeds of Crime Bill 2002 as an "innocent third party". It is difficult to see how either the respondent or her father have a sufficient degree of distance from transactions connected with the movement of the relevant funds to be a third party; each has a significant role in the events, and one which I am not able to conclude is necessarily innocent.
Further, there is an issue as to the provision of sufficient consideration for the acquisition of the property. Funds in RMB were paid by Mr Sun to an account in China; he received no consideration from the account holder. In Australia, funds were deposited to the respondent's bank account; Ms Sun had paid no consideration with respect to these monies. Insofar as the funds Ms Sun received in Australia can be said to be the equivalent of the funds paid by Mr Sun in China, the monies were, on my analysis of the evidence, a gift from Mr Sun to his daughter. I have concluded that she was not employed by Building Co in any realistic sense at the relevant time, but was rather in receipt of an allowance and regular gifts of money from her father.
Whilst "sufficient consideration" need not be confined to a monetary payment or other valuable item exchanged for the property (see Director of Public Prosecutions (Victoria) v Le (2007) 232 CLR 562 for example) there is no evidence of any benefit received by Mr Sun from Ms Sun in exchange for the monies (by way of the chose in action relevant to the funds held by the bank) given to her to assist her to purchase the Zetland property.
Even if those conclusions are wrong, and Ms Sun or her father is a third party, and the property was acquired for sufficient consideration, I am not able to conclude that the property was acquired in circumstances that would not arouse reasonable suspicion. As I have discussed above, much about this transaction was such as to readily excite suspicion in a reasonable person, as Ms Sun's WeChat queries to Ms Huang tend to confirm.
In Commissioner of Australian Federal Police v Kalimuthu [No 3] [2017] WASC 108, Allanson J stated the test to be applied in this way (at [125]): "The question posed by the section is objective: would the circumstances arouse that reasonable suspicion in a person in the position of the respondents, knowing what they knew: see Director of Public Prosecutions v Le [2007] VSCA 18; (2007) 15 VR 352 [24]. The decision was overturned in the High Court, but the approach of the Court of Appeal to 'reasonable suspicion' was approved: see Director of Public Prosecutions (Vic) v Le [2007] HCA 52; (2007) 232 CLR 562 [1] (Gleeson CJ), [127] (Kirby and Crennan JJ)."
Both Mr Sun and Ms Sun were aware that, at the suggestion of a real estate agent of whom neither had any personal knowledge, Mr Sun was to and did deposit a very large amount of money in RMB to the China based account of a person unknown to either him or his daughter, apparently without ascertaining the bona fides of the account holder or those facilitating the transfer, and without inquiry as to the security of the arrangement, the rate of exchange, or fee payable as commission, and in circumstances where payment was subsequently received not as a single electronic transfer with accompanying documentation, but as multiple cash deposits from various Sydney based bank branches.
That information was enough to raise the gravest suspicions.
The respondent has failed to establish that the property ceased to be proceeds or an instrument of crime.

The Decisions of Fernandez and Lordianto

The parties referred the Court to these decisions and sought to make further submissions based upon them. Fernandez was an application by the Commissioner for forfeiture pursuant to s 49(1) of POCA. Lordianto was an application pursuant to s 29 for exclusion of property the subject of restraint. Simpson JA intended the two decisions to be read together.
Her Honour considered s 330(4) of POCA, and the meaning of "acquisition" with respect to the deposit of funds into an account, concluding that the relevant acquisition was the opening of a bank account, thereby acquiring a chose in action, rather than the deposit of funds to that account: Lordianto [81] - [83].
Respectfully, I am unable to agree with such an interpretation of "acquisition". Property may well have been acquired when the respondent opened her CBA account on 8 August 2014, but further property was acquired when the deposits were made to it on 11 and 12 August 2014.
Ms Sun had a contractual right to the credit balance held in the relevant account at any particular point in time; as at 12 August 2014 that was a right to the credit balance representing the monies deposited by Yi Feng and others, as against the CBA. See Studman v Commonwealth Director of Public Prosecutions [2007] NSWCA 285; (2007) 177 A Crim R 34; and AFP v Pham [2015] NSWSC 1383 at [36] - [37].
Consideration was also given in Lordianto and Fernandez to the meaning of "third party" and "sufficient consideration" but nothing turns on that for present purposes.
Whilst these decisions are helpful, nothing in either judgment has caused me to change the conclusions set out above. Ultimately, this matter turns on its own facts and evidence.

orders

The orders of the Court are: 1. The application for exclusion orders is dismissed. 2. Ms Sun is to pay the Commissioner's costs.

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: 02 November 2017

Proceeds of Crimes Act 2002(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (9)

Cited By (3)