Commissioner of the Australian Federal Police v Mulder

Agreed facts 8On 28 March 2012, Mr Mulder was convicted in the Local Court of a number of offences. One of the offences was against s 140 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) that involved him opening an ANZ Access Advantage bank account in a false name. This occurred on 5 October 2010. Mr Mulder used the name of his identical twin brother, Robert Denis Miller (formerly Mulder), who had left Australia in 2003 and never returned. At the time of opening the account, Mr Mulder produced a Western Australian driver's licence and a Commonwealth Bank of Australia keycard, both in his brother's name. 9A sum of $200,512.28 was deposited to the account at the time it was opened. On each of 9 and 10 December 2010, Mr Mulder deposited $125,000 into the ANZ Access Advantage account by way of internet transfer. It is an agreed fact that these funds were not sourced from criminal activity. On each of those days he opened a Term Deposit account, one with the ANZ Bank and one with the National Australia Bank, and transferred $125,000 into each. The ANZ Term Deposit was in the name of Mr Mulder's brother and the NAB Term Deposit was in Mr Mulder's own name. 10The funds in each of the Term Deposits "including any ... any right, power or privilege attached thereto" remain under restraint pursuant to the order made by Hidden J on 4 February 2011. They will be forfeited automatically by the operation of s 92 of the PoC Act unless Mr Mulder is successful in the present application.

Relevant PoC Act provisions 11Pursuant to s 29 of the PoC Act, the Court must, upon application being made under s 31, exclude a specified interest in property from a restraining order if the court is satisfied that "relevant reasons" under s 29(2) or (3) exist. The relevant reason in s 29(2)(c) in respect of a restraining order made under s 18 is that 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. 12The term, "serious offence" is defined in s 338 to include an offence against s 140 of the Anti-Money Laundering and Counter-Terrorism Financing Act. 13Where the offence to which the restraining order relates is, inter alia, against that provision, a further "relevant reason" is provided in s 29(3), but Mr Mulder has not sought to establish it. 14In relation to exclusion of particular property from forfeiture, the Court must be satisfied pursuant to s 94(1), inter alia, that: (e) the applicant's interest in the property is neither proceeds of unlawful activity nor an instrument of unlawful activity; and (f) the applicant's interest in the property was lawfully acquired. 15It is an agreed fact that the $250,000 in total that was deposited into the ANZ Access Advantage account on 9 and 10 December 2010 was not "proceeds of crime". But it was not conceded by the AFP that the funds retained this character once they were converted into standing credit in the ANZ Access Account; that is, once they were deposited with the bank. The AFP disclaimed, in written and oral submissions, reliance upon the sums being "proceeds" and instead argued they were "instruments". So it remains necessary for Mr Mulder to establish that his interest in the property was not "an instrument of any serious offence" (s 29(2)(c)(ii)) or "an instrument of unlawful activity" (s 94(1)(e)). What do these terms mean? 16Section 329(2)(a) provides that property is an "instrument of an offence" if, inter alia, "the property is used in, or in connection with, the commission of an offence". 17Section 329(4) provides that "instrument of an unlawful activity" means "an instrument of the offence constituted by the act or omission that constitutes the unlawful activity". 18"Unlawful activity" is defined in s 338 to mean, inter alia, an offence against a law of the Commonwealth. Mr Mulder's act of opening the ANZ Access Advantage account in the name of Robert Denis Miller was, therefore, unlawful activity. 19Whilst the two different expressions are used in s 29(2)(c)(ii) and s 94(1)(e), at least for the purposes of the present application, there seems to be no material distinction. 20The next provision to note is s 330, which deals with when property becomes, remains and ceases to be proceeds or an instrument. Contrary to a submission made on behalf of the AFP, it is, in my view, unnecessary to refer to s 330(2). That subsection makes additional provision for when property becomes an instrument of an offence through a dealing with another instrument; it is the definition in s 329(2) that is relevant in this case as to whether the property is an instrument of an offence in the first place. 21Property remains an instrument of an offence even if it is credited to an account or is disposed of or otherwise dealt with: s 330(3). That has the consequence that the transfer of the rights and obligations in relation to the credit in the ANZ Access Advantage account to the term deposit accounts has no bearing on the matter. 22Property only ceases to be an instrument of an offence in certain circumstances specified in s 330(4), none of which apply to the present case.

Instrument of a serious offence 23Counsel for the AFP referred to Studman v Commonwealth Director of Public Prosecutions [2007] NSWCA 285; (2007) 177 A Crim R 34. In that case the Court of Appeal was concerned with the dismissal of an application for orders pursuant to s 31, alternatively s 94, of the PoC Act to exclude funds in a bank account and various shares from a restraining order or from forfeiture. Leave to appeal was revoked upon it being determined that an appeal would be futile because; the time for automatic forfeiture had passed. However, as the matter had been fully argued, the Court made a determination of the merits of the appeal. 24The relevant facts of Studman are similar to those in the present case. The appellant had opened a bank account in a false name. The initial deposit of some $148,000 comprised money that he had held in another bank account, also in a false name. The bank account (and the shares) were the subject of a restraining order which was made on the basis of the appellant having committed offences of defrauding and stealing property from the Commonwealth. The amount that was alleged to have been involved was in the order of $365,000. He was subsequently convicted of those offences. 25There is no suggestion in Studman of any of the proceeds of the offences being the source of the funds deposited in the bank account or used to purchase the shares. Indeed, the balance of the bank account had fluctuated since it was opened and it had been determined that a significant proportion of the money standing to credit in the account (some $90,000) had been provided from legitimate sources by the appellant's domestic partner. It appears to have been the case that while it could not be positively said that all the monies were legitimate, nor was it established that they accrued from unlawful sources. 26McClellan CJ at CL, with whom Spigelman CJ and Handley AJA agreed, observed (at [39]) that opening a bank account creates for the customer rights to do things such as to deposit and withdraw monies. The property that the customer obtained by opening the account was a chose in action. He held (at [41]) that the fact that the money which was deposited may have been lawfully acquired was not to the point, because once deposited the monies became the property of the receiving party (the bank). The appellant in that case committed the offence of opening an account in a false name. "Accordingly, the right to the monies in the accounts was derived directly from the commission of the offence" (at [43]). So, his Honour concluded that property comprised "proceeds of unlawful activity". 27In the present case, the AFP did not rely upon the "proceeds of unlawful activity" aspects of s 29 and s 94. It confined reliance upon the "instrument of an offence"/"instrument of unlawful activity" aspect. 28The appellant in Studman also failed on the "instrument of unlawful activity" point. McClellan CJ at CL noted (at [45]) the provisions of s 329 to the effect that property is an instrument of unlawful activity if it is used in, or in connection with, the commission of an offence. In that case, the chose in action vested in the appellant was the direct result of the offence he committed when the bank account was opened. It was the vehicle by which he operated the relevant account under a false name. So, "the property was both used in and in connection with the offences, making the bank accounts [sic - account] ... instruments of unlawful activity" (at [48]). 29As to whether the property was "lawfully acquired" (s 94(1)(f)), again the reasoning was that whether the appellant may have lawfully acquired the initial monies was beside the point. The property in question was the chose in action. The appellant no longer owned the actual monies. The chose in action was not lawfully acquired because it was derived by the commission of an offence. 30Studman was considered by Simpson J in The Commissioner of the Australia Federal Police [2012] NSWSC 1533. Her Honour was concerned with an application for, inter alia, a restraining order in relation to money in a bank account which had been opened in a false name. The indictable offences suspected to have been committed were the opening and operating of a bank account in a false name, contrary to s 24 of the Financial Transactions Reports Act 1988 (Cth). Her Honour was doubtful whether the funds in the account were the proceeds of an offence when the only offence suggested was the opening and operating of the account in a false name and where the only indication as to the source of the funds was the sale of real estate. 31Her Honour noted the circumstances in which the Court of Appeal came to consider the relevant questions, characterising what was said by McClellan CJ at CL as obiter. It should also be noted that her Honour was dealing with an ex parte application where, by definition, she did not have the benefit of full argument by counsel for competing parties. 32Simpson J expressed doubt about the conclusion reached by McClellan CJ at CL on the "proceeds of unlawful activity" point (at [13]): I found it difficult to accept that lawfully obtained money, deposited in a bank account in a false name in breach of s 24 of the FTR Act, could be said to have been "derived or realised" (whether wholly or partly, directly or indirectly) from that offence ... 33However, her Honour had no doubt about the "instrument of unlawful activity" point (at [25]): By s 329(2) of the PoC Act, property is an instrument of an offence if it is used in, or in connection with the commission of an offence. Plainly, there was evidence sufficient to establish reasonable grounds for suspecting that the funds in the bank account in question were the instrument of a serious offence or serious offences - ie the s 24 offences. 34Whilst neither decision is binding upon me, the reasoning is persuasive in relation to the "instrument of unlawful activity" point. That is particularly so with respect to Studman where the matter was fully argued, considered and determined by the Court of Appeal. Because of the way this application was conducted, I do not have to decide on the "proceeds" disagreement between the above decisions.

Submissions 35Counsel for Mr Mulder referred to a number of cases as authority for the proposition that it is a question of fact for me to determine whether the property is an instrument of crime. As I indicated at the hearing, I accept that as being uncontroversial. 36For Mr Mulder it was argued that because the funds were only placed in the account after it had been opened, it could not be said that they were themselves used in connection with the offence. Accordingly, pursuant to s 329(2), they were not an "instrument of the offence". But the reasoning in Studman was not in any way dependent upon whether the money standing to credit in the bank account was that which had been deposited upon opening the account or credited subsequently. 37Counsel for Mr Mulder sought to distinguish Studman, submitting that this had already occurred in another case. This was a reference to Caruana v DPP (Vic) [2011] VSC 658. In that case the property in question had been lawfully acquired and had been deposited to a legitimate bank account. The only reason exclusion was refused was because the money was required to satisfy an order made by a sentencing court in criminal proceedings for the payment of compensation. There was no disagreement or criticism of the reasoning in Studman. It may be that confusion arose from the following, at [89] - [90], of Caruana: In Studman, the appellant deposited legitimately acquired funds in a bank account that he opened in a false name. Section 24(1) of the Financial Transaction Reports Act 1988 (Cth) made it an offence to open an account in a false name. The New South Wales Court of Appeal held that the appellant's right to deal with the monies in the account was derived directly from the commission of that offence. In my opinion, neither Jeffrey nor Studman has any application to the facts of this case. In both of those cases, the appellant engaged in the impugned transactions and also committed the relevant offences, and this infected the transactions with illegality. The "relevant offences" refers to the opening of the accounts, not the means by which the funds were originally acquired. 38The point of distinction sought to be made in the present case was that in Studman, the offences giving rise to the restraining order involved the theft from, and defrauding of, the Commonwealth of $365,000. In the present case there was "a lack of [a] foundational crime" (T14.39). I do not see this as a point of distinction at all. It was no part of the reasoning that money in the bank account, or that which was used to acquire the shares, was derived from the offences that gave rise to the making of the restraining order. Indeed, McClellan CJ at CL specifically said (at [41]), "the fact that the money which the appellant deposited may have been lawfully acquired by him is not to the point". 39It was asserted in the submissions for Mr Mulder that in Studman a pecuniary penalty order was available. For that reason alone, an exclusion order under s 29 could not be made: 29(4). Attention was invited to the judgment of McClellan CJ at CL at [7] where his Honour referred to the provisions of s 29(4). It was submitted that it was unnecessary for the Court in Studman to decide the point because the appeal was futile, but that if it had been necessary, it would have concluded that no exclusion was possible for that reason. In the present case there could be no pecuniary penalty order and so that was said to be another point of distinction between the two cases. 40The problem with that submission is that the reference by his Honour at [7] to s 29(4) was only relevant to his later observation (at [34]) that a submission that s 29(4) did not preclude the court from making an order excluding property from the restraining order had been abandoned. The appellant then confined himself to seeking an exclusion order under s 94. 41I was referred to authority for the proposition that legislation such as the PoC Act "requires a strict construction respecting fundamental property rights". I accept that proposition. The point was addressed by McClellan CJ at CL in Studman at [35]. Counsel stressed this point in the context of submitting that Mr Mulder was not "a drug dealer or a person accumulating profits", but rather had "accumulated zero profits from the crime" (T14.48). There was, however, no statutory interpretation issue raised; no point was developed as to how any relevant provision of the PoC Act was ambiguous or uncertain and so should be construed in a manner favourable to Mr Mulder. 42It was also submitted to be relevant that Mr Mulder had been convicted and sentenced for his crime and had served a term of imprisonment. Thus, it was submitted that this case does not serve any of the "principal objects" of the PoC Act as listed in s 5. It is arguable, however, that construing the legislation and deciding the case in the manner for which the AFP contends would serve the objects listed in (a) and (c) of s 5: depriving persons of, inter alia, the instruments of offences and punishing and deterring persons from breaching, inter alia, Commonwealth laws. 43A claim was made that Mr Mulder's brother had an "interest" in relation to a portion of the property and so that portion should be "excised". This argument was based upon the fact that the ANZ Term Deposit account was in the brother's name. The problem with this is that there is no evidence that the brother had an interest (as defined in s 338). The evidence is simply that Mr Mulder deposited money into the ANZ Access Advantage account and then moved it to the term deposit accounts. I am not persuaded that falsely opening a bank account in someone else's name gives that other person an interest. 44Counsel urged that there should be a finding of fact akin to that made by O'Keefe J in DPP (NSW) v King [2000] NSWSC 394; (2000) 49 NSWLR 727. That case involved a question as to whether a boat, upon which it was alleged certain sexual offences had occurred, was not "used ... in connection with, the commission of" such offences. That was part of the definition of "tainted property" in the confiscation of proceeds of crime legislation there being considered which employed the same terminology as used in the definition of "instrument of an offence" in s 329(2) of the PoC Act. 45O'Keefe J reviewed a number of authorities dealing with such a question and concluded (at [33]): However, the over-arching principle that in my opinion can be extracted from the cases in relation to that part of the statutory definition of tainted property presently under consideration is that some activity connected with the relevant crime must have involved the utilisation or employment of the property with the aim or purpose of committing or furthering the commission of the crime in question. 46His Honour concluded (at [36]) that the boat had not been used in connection with the sexual offences alleged. It was no more than the place where the alleged offences took place. As counsel for the AFP submitted, cases dealing with property that was the physical location at which an offence was committed are not analogous to the present case and do not assist in making a finding of fact as to whether the property in question was "an instrument of an offence". 47For the AFP it was submitted, in effect, that the fundamental flaw in the arguments advanced on behalf of Mr Mulder was a failure to recognise that the property in question is not money, or funds in an account, but a bundle of rights and obligations acquired or derived through the commission of a serious offence; the opening of the ANZ Access Advantage account in a false name. Those rights and obligations arose from the time of opening the account and continued through to the time when there was the transfer of funds to the term deposit accounts. I accept that characterisation of the submissions for Mr Mulder.

Conclusion 48I am not satisfied Mr Mulder's interests in the funds standing to the credit of the two term deposit accounts are not an instrument of a serious offence (s 29) or are not an instrument of unlawful activity (s 94).

Order 49The applications for exclusion of property from the restraining order and from forfeiture are refused. 50The applicant/defendant to pay the plaintiff/respondent's costs of the motion as agreed or assessed.

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