Commissioner of the Australian Federal Police v Pratten

Commissioner of the Australian Federal Police v Pratten - [2017] NSWSC 927 - NSWSC 2017 case summary — Zoe

[4]

History of two notices of motion

Having regard to certain applications that were made at the hearing before me on 10 July 2017 it is necessary to set out in some detail the history in relation to the two notices of motion that are before the Court.
On 28 October 2016, Mr Pratten and the Second to Sixth Defendants filed a notice of motion in which various orders were sought. Relevantly, they included: "1. Pursuant to s 29 and s 31 of the Proceeds of Crime Act, the first to the sixth Defendants' interest in the restrained properties be excluded from restrain[t]."
On 23 November 2016, Davies J made a number of interlocutory orders including that the applicants to this notice of motion file and serve their evidence in support of order 1 by 16 February 2017 and that the matter be listed before the Registrar for directions on 23 February 2017. There was also an order that Mr Pratten be examined about his own affairs pursuant to s 180 of the Act.
On 23 February 2017 the Registrar listed the matter for show cause on 27 February 2017.
On 27 February 2017 the Registrar noted that Mr Pratten's solicitor had ceased to act. Time to file and serve evidence was extended to 3 April 2017. The Registrar also ordered, "Should Defendants/Applicants not comply with Order 1 [in relation to filing and serving evidence] then Defendants/Applicants not to rely on any evidence serve[d] after that date without leave of a Judge of the Court".
By 4 April 2017 Mr Pratten's current solicitor had commenced to act. On that day a second notice of motion was filed, solely on behalf of him as the First Defendant. An order was sought pursuant to s 94 of the Act excluding all of the property set out in the First to Sixth Schedules of the summons; alternatively an order was sought pursuant to s 94A(1) of the Act that the same property be the subject of an order pursuant to "s 94A(2)" of the Act.
On 6 April 2017, the Registrar made orders including that Mr Pratten provide to the Plaintiff written grounds pursuant to s 31(4) of the Act in relation to the application under s 29 by 13 April 2017. He also ordered that Mr Pratten file and serve a notice of motion seeking leave to file further evidence in support of the notion of motion filed on 28 October 2016 by 5.00pm on 6 April 2017. The matter was adjourned to 12 April 2017 for directions.
On 12 April 2017, Campbell J extended the time for Mr Pratten to file and serve further evidence to 21 April 2017. He listed the matter for directions before the Registrar on 24 April 2017.
On 24 April 2017, the Registrar ordered that Mr Pratten file and serve evidence in support of the 4 April 2017 notice of motion by 2 May 2017.
On 4 May 2017, the Registrar listed the matter for a two day hearing beginning 10 July 2017. He also ordered that the plaintiff file and serve evidence by 1 June 2017; that Mr Pratten file and serve written submissions by 15 June 2017; and the plaintiff file and serve written submissions in reply by 29 June 2017.
On 22 June 2017, the Registrar extended the time for Mr Pratten's written submissions to 26 June 2017 and, as a consequence, for the Plaintiff's written submissions to 7 July 2017.

[5]

Adjournment application

Mr Pratten, who is in custody, was not present when the hearing commenced on 10 July 2017. It emerged that no application had been made for an order under s 77 of the Crimes (Administration of Sentences) Act 1999 (NSW) for him to appear either in person or by way of audio-visual link (AVL). Arrangements were then made for an AVL connection and the hearing resumed at 11.02am with Mr Pratten appearing by way of AVL. Counsel for Mr Pratten then asked for the hearing to be adjourned to 11.00am the following day to enable Mr Pratten to appear personally.
The bases of the application were: first, to enable Mr Pratten to give instructions about various documents and related matters, and secondly, to enable Mr Pratten to give oral evidence.
The application was opposed.
Counsel for Mr Pratten indicated that this is "a legal aid matter" and "that gives rise to practical difficulties. It's not as if we can go out there every day".
I failed to see how the matter being funded by Legal Aid NSW had any bearing upon preparation of the matter for hearing. It can be seen from the procedural history of the matter that there have been various extensions of time for Mr Pratten to put on evidence and submissions. It was conceded that his lawyers had received the evidence upon which the plaintiff relied (except for the affidavit of Mr James Paterson affirmed 5 July 2017 to which, ultimately, no objection was taken) more than a month before the hearing. Counsel conceded that he could not suggest that there had not been opportunity to prepare the matter.
The prospect of Mr Pratten giving oral evidence about various matters arising from the plaintiff's documentary evidence, with no prior attempt having been made to determine with any specificity what the nature and extent of that evidence might be, was fraught with difficulty. Counsel appearing for the plaintiff, and those who instruct them, have only been concerned with the confiscation aspect of the proceedings against Mr Pratten; they were not involved in the criminal proceedings. The extent to which time would be required to meet whatever might be raised by Mr Pratten in oral evidence in chief was unknown but there was an appreciable likelihood that a further adjournment would be required (a) to research and prepare for cross-examination and (b) to marshal witnesses and/or documents to provide evidence in response.
The procedural history of the matter set out earlier is indicative of the Court having endeavoured to comply with the objects of case management set out in s 57(1) of the Civil Procedure Act 2005 (NSW). It would be contrary to those objects to allow further delay in the resolution of this matter.
The hearing date of 10-11 July 2017 was fixed on 4 May 2017. There was a deadline in that the matter had to be heard and judgment given before midnight on 28 July 2017. Deferring the hearing until 11.00am on the second of the two days of the scheduled hearing would very likely mean that the hearing would not conclude within the allotted time. Finding time to resume and conclude the hearing would be no easy matter given the competing commitments of the Court; to say nothing of those of the lawyers.
It was for these reasons that the adjournment application was refused.

[7]

A limitation on the applications under s 94 and s 94A of the Act

Counsel for Mr Pratten commenced addressing the application in the second notice of motion by pointing out that he appeared only for Mr Pratten and not for the Second to Sixth Defendants named in the summons. They were only parties to the filing of the first notice of motion.
Mr Pratten's affidavit of 31 March 2017 refers to all of the property described in the First to Sixth Schedules and purports to provide an explanation in respect of each item how (a) he has an interest; (b) the property is neither proceeds of unlawful activity nor an instrument of unlawful activity; and (c) his interest in the property was lawfully acquired.
Senior counsel for the plaintiff identified a difficulty in Mr Pratten applying for all of the items of property to be excluded from forfeiture under s 94 or the subject of an order under s 94A. That is that these provisions must be read together with s 92, which all appear in Div 1 of Ch 2 Pt 2-3 of the Act.
Section 92 (Forfeiting restrained property without a forfeiture order if a person has been convicted of a serious offence) provides, relevantly: "(1) Property is forfeited to the Commonwealth at the end of the period applying under subsection (3) if: (a) a person is convicted of a serious offence; and (b) either: (i) at the end of that period, the property is covered by a restraining order under section 17 or 18 against the person that relates to the offence; or (ii) the property was covered by such a restraining order against the person, but the order was revoked under section 44 or the property was excluded from the order under that section; and (c) the property is not subject to an order under section 94 excluding the property from forfeiture under this Part." (Emphasis added)
Mr Pratten is the person "convicted of a serious offence" (as defined in ss 331, 338). He is "the person that relates to the offence". Automatic forfeiture pursuant to s 92 will apply to property that is covered by a restraining order against him. The only restraining order against Mr Pratten is that referred to in Prayer 1, which relates to property described in the First Schedule, of the summons which became Order 1 in the orders made by Hislop J on 21 November 2011.
Section 94 (Excluding property from forfeiture under this Part) provides, relevantly: "(1) The court that made a restraining order referred to in paragraph 92(1)(b) must make an order excluding particular property from forfeiture under this Part if: (a) a person (the applicant) has applied for an order under this section; and (b) the court is satisfied that the applicant has an interest in property covered by the restraining order; and (d) a person has been convicted of a serious offence to which the restraining order relates; and (e) the court is satisfied that the applicant's interest in the property is neither proceeds of unlawful activity nor an instrument of unlawful activity; and (f) the court is satisfied that the applicant's interest in the property was lawfully acquired."
This provision allows exclusion of property "from forfeiture under this Part". Forfeiture under Part 2-3 is automatic forfeiture under s 92. The property in the Second to Sixth Schedules of the summons is not the subject of automatic forfeiture (as the plaintiff accepts).
Section 94A (Compensating for proportion of property not derived or realised from commission of any offence) is similarly dependent upon a restraining order that is subject to the automatic forfeiture provision in s 92 ("a restraining order referred to in paragraph 92(1)(b)").
What this means is that the present applications must be confined to the shares in two companies set out in the First Schedule. I will deal with them in turn, but it is first necessary to refer to some other statutory provisions.

[8]

Proceeds or instrument of unlawful activity

"Proceeds of unlawful activity" in s 94(1)(e) is understood by reference to definitions to be found at the end of the Act.
"Unlawful activity" is defined in the Dictionary in s 338 so as to include "an offence against a law of the Commonwealth". The offences for which Mr Pratten was convicted are within this term.
Section 329 provides: "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."
Section 330 sets out some circumstances in which property may become proceeds or an instrument of an offence, or remain or cease to be the same. For the purposes of this application, the relevant provisions are: "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. … "

[10]

The evidence

Mr Pratten relied upon two affidavits of Timothy Charles Pratten dated 31 July 2017 (except [4]) and 20 April 2017, and a Certificate of Incorporation (Change of Name) issued by the Vanuatu Financial Services Commission evidencing a change of name of Rural and General International Insurance Limited to Commercial Pacific Insurance Limited on 20 August 2002 (Exhibit A).
The plaintiff relied upon the affidavits of Penelope Jane Kelton dated 1 June 2017 and James Paterson dated 1 June 2017 and 5 July 2017. It also relied upon current and historical company extracts relating to RGIB and Sonarpia (Exhibits 1 to 4).
Counsel for Mr Pratten objected to the judgment of Rothman J on sentence (R v Pratten (No 25)) being received into evidence on the basis of s 91 of the Evidence Act 1995 (NSW) which provides: "91 Exclusion of evidence of judgments and convictions (1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding. (2) Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose. Note. Section 178 (Convictions, acquittals and other judicial proceedings) provides for certificate evidence of decisions." (Emphasis added)
The objection was curious, given that a copy of the judgment was annexed to an affidavit by Mr Pratten's solicitor that had been filed and served. However, that affidavit was not read. The judgment, nevertheless, is otherwise available, but whether it can be relied upon in relation to questions of fact in these proceedings must be considered subject to s 91.
I propose to have regard to the judgment but not in any way as proof of the existence of facts that were in issue in the criminal proceedings. It is available, however, to discern what those proceedings were about and what the issues were. Otherwise, Mr Pratten's application would be hopeless. He bears the onus of establishing the matters in s 94 of the Act and it seems to me that it would be impossible for him to establish that his interest in the property in question is neither proceeds of unlawful activity nor an instrument of unlawful activity if there is nothing before the Court to indicate the nature of the unlawful activity that is presently relevant. Mr Pratten did not put on any evidence on this subject.

[12]

One fully paid share issued to, and held by Timothy Charles Pratten in Rural & General Insurance Broking Pty Ltd

In relation to this (and the other item in the First Schedule, dealt with below) there is no dispute about the matters in s 94(1)(a)(b) and (d). At issue is whether Mr Pratten is able to establish on the balance of probabilities the matters in (e) and (f) , being that: (e) his interest in the property is neither proceeds nor an instrument of unlawful activity, and (f) his interest in the property was lawfully acquired.
Mr Pratten's affidavit evidence in relation to this item is as follows: "Rural and General Insurance Broking Pty Ltd (ACN 093 483 928) (formally Presidential Financial Services Pty Ltd) ("RGIB") was incorporated on 26 June 2000. RGIB presently has 67 ordinary shares in issue and I am the owner of 1 of those 67 ordinary shares. I paid a total of $1.00 for 1 share which is fully paid. I do not recall exactly how I paid for this 1 share, but it was organised by Mr John Greer and I think the cost of the share formed part of the set up costs of buying the shelf company. I did not use any funds from Vanuatu that I received to purchase this share in RGIB. I rely on my income tax return for the year ending 2001 (notionally annexed at paragraph 4 of this affidavit) to evidence that I had sufficient, legitimate income to purchase this 1 share. As a shareholder, I have never used funds from dividend or capital distribution for any unlawful activity. I have never used my vote, attached to my share ownership, for any unlawful activity." (Affidavit 31.3.17 at [9]-[15])
Mr Pratten relied upon tax records to show that he had an income sufficient for him to lawfully acquire the share (by paying $1.00). He also relied upon material in an affidavit read by the plaintiff to establish that the share must have been acquired in August 2002 and this was said to be before any offending conduct occurred. It was contended that this showed that the property was lawfully acquired and was not the proceeds of lawful activity.
It emerged that there was no issue about the share being acquired on 13 August 2002. A proposal to adduce oral evidence from Mr Pratten on the subject was abandoned.
Although his evidence - "I did not use any funds from Vanuatu that I received to purchase this share in RGIB" - is not supported by any documentation, I have no doubt that Mr Pratten had available to him $1.00 from a legitimate source which he could have used to purchase the share in this particular company.
The plaintiff contended that item (f) in s 94(1) was not established, but given the timing (preceding, it would seem, any of the funds transfers in question) and the minimal amount ($1) required for the acquisition, it seems probable that Mr Pratten lawfully acquired the share.
Counsel for Mr Pratten raised an issue about evidence which he sought to rely upon in order to meet any claim by the plaintiff that the share in RGIB was an instrument of unlawful activity. He was instructed that there was an expert report commissioned by the Australia Federal Police for the purpose of the criminal prosecution ("the Celona Report") which would show that in relation to the activity of Mr Pratten which was relied upon to constitute the offences charged, "at all times RGIB acted above board, paid all its taxes, ticked all its boxes effectively". Having regard to the provisions of ss 329 and 330, particularly s 330(2), this was said to be evidence that would rebut any assertion that the share in RGIB was an "instrument of unlawful activity". Again, a delay in the hearing was suggested in order for counsel to obtain a copy of the report.
In response to this, senior counsel for the plaintiff submitted that it was for Mr Pratten to show that the share was not an instrument of unlawful activity. The affidavit evidence indicated that his legal representatives have had access to the exhibits from the trial for some time. I note also that Mr Pratten interjected at one point to say that he in fact had a copy of the Celona Report with him in gaol.
In any event, whether RGIB did something unlawful or not is irrelelvant as it seems the prosecution case was that it was used as an instrument to achieve an unlawful benefit for Mr Pratten. Mr Pratten interjected at this point to explain that the Celona report demonstrated that no money, in terms of what was alleged to have been his unlawful financial advantage, was derived by him from RGIB. I do not understand the prosecution to have contended that they were. This made an adjournment in order to obtain and tender the Celona report of no apparent practical utility. Moreover, the time for filing documentary evidence had well passed. Again, an adjournment was refused.
Counsel for Mr Pratten addressed the question whether the share in RGIB was an instrument of unlawful activity (s 94(1)(e)). He relied upon Milne v The Queen [2014] HCA 4; 252 CLR 149 which is a case concerned with the provisions of Div 400 of Ch 10 Pt 10.2 of the Criminal Code (Cth) as it stood in April 2004-September 2005, and in particular, the term "instrument of crime". Putting aside for the moment the different statutory context, the factual context in which the term was considered in that case is quite different to the present. There, the issue was whether, in a swap of shares through which a capital gain was realised but not declared for tax purposes, the shares disposed of were intended to be or become an instrument of crime. Counsel for Mr Pratten relied upon the following in the judgment of the Court (at 164 [37]) "The definition of "instrument of crime" and the deployment of that term in s 400.3(1)(b)(ii) require a temporal separation between the requisite dealing and the intended use of the property. They also require an instrumental connection between the intended use of property and the commission or facilitation of the commission of an offence. Conduct involving property which is no more than a necessary condition of the commission of a subsequent offence does not on that account amount to the use of the property in or to facilitate the commission of that offence. Nor is the instrumental connection demonstrated merely by an intention to take advantage of circumstances arising after and as a result of the requisite dealing. A fortiori, that is the case where that property has been put beyond the reach of the accused by sale to a third party."
In the present case the issue is whether RGIB was used, or intended to be used, in, or in connection with, an offence (s 329(2)). The prosecution case was that there was a continuing use in, or in connection with, the transactions that were the foundation of the offences alleged. Milne v The Queen does not assist Mr Pratten.
It was submitted that s 330(2) "has not been satisfied". However, I do not understand s 330(2) to be a relevant consideration in this case. It seems more to the point to consider whether Mr Pratten's shareholding in RGIB was "used in, or in connection with, the commission of an offence" (s 329(2)(a)). Section 330(2) does not purport to lay down all of the circumstances in which property may "become" an instrument of crime. So, to submit that the property "initially isn't an instrument of crime" and then to assert that it did not "become an instrument of crime" because the circumstances referred to in s 330(2) were not established is not to the point. The issue seems to be that Mr Pratten's shareholding in RGIB might well have been property that was not an instrument of crime at the point of acquisition but it may subsequently have been used as such, and thereby would be caught by s 329(2)(a). Mr Pratten bears the onus of establishing that it was not.
Item (e) in s 94(1) has not, in my view, been established. The allegation against Mr Pratten was that he used RGIB as a vehicle for the transmission of funds to Vanuatu with a view to having a proportion of those funds returned to him for the perpetration of, in effect, tax fraud. The use of RGIB for that purpose raises an issue as to whether his shareholding in RGIB was an instrument of unlawful activity. There is no acceptable evidence that would establish on the balance of probabilities that it was not. The bare assertion in Mr Pratten's affidavit that he had never used his vote that attached to his shareholding for any unlawful activity is inadequate.

[13]

Ten fully paid shares issued to, and held by Timothy Charles Pratten in Sonarpia Pty Ltd

Mr Pratten's affidavit evidence in relation to this item is as follows: Sonarpia Pty Ltd ACN 104 232 082 ("Sonarpia") was incorporated on 28 March 2003. Since its incorporation, Sonarpia has had 10 ordinary shares on issue and I have been the owner of those 10 ordinary shares. I paid a total of $10.00 for the 10 shares which are fully paid. I do not specifically recall the arrangements for the incorporation of Sonarpia, however I think the $10.00 I paid for the shares formed part of the set up costs of Sonarpia. Stuart Berry of Addison Partners obtained the shelf company, Sonarpia. I did not use any funds from Vanuatu that I received to purchase these shares in Sonarpia. I rely on my income tax return for the year ending 2003 (notionally annexed at paragraph 4 of this affidavit) to evidence that I had sufficient, legitimate income to purchase these 10 shares. As a shareholder, I have never used funds from dividend or capital distribution for any unlawful activity. I have never used my vote, that attaches to my share ownership, for any unlawful activity. On 28 March 2003, I agreed to hold the 10 ordinary shares in Sonarpia on trust for Lucille Eve-Marie Pratten (annexed to this affidavit and marked 'Annexure D' is a true copy of the declaration of trust dated 28 March 2003). Sonarpia is the trustee of the Pratten Family Trust (annexed to this affidavit and marked 'Annexure E' is a true copy of the Pratten Family Trust deed dated 9 May 2003). All assets held by Sonarpia are held on trust for the Pratten Family Trust." (Affidavit 31.3.17 at [16]-[25])
The shares in Sonarpia were acquired during the period of the offending. However, for the simple reason that the acquisition of these shares was at such a minimal cost ($10), I am prepared to accept that Mr Pratten would not likely have needed to have recourse to illegitimately acquired funds for the purpose.
However, the allegation was that Mr Pratten directed payment from Vanuatu to Sonarpia for the purchase of a helicopter. That gives rise to a question of whether he has established that his interest in Sonarpia was not used in, or in connection with, the commission of an offence (s 329(2)(a)). Again, the bare assertion in his affidavit that he had never used his vote that attached to his shareholding for any unlawful activity is inadequate in discharging his onus of proof.
Counsel for Mr Pratten, in reply submissions, said that "there's no suggestion … that Sonarpia … was receiving funds that were tainted". That submission must be rejected. Bearing in mind who bears the onus of proof, the significant point is that there is no proof that Sonarpia received funds that were not tainted.
I am not persuaded that Mr Pratten's interest was not an instrument of unlawful activity for the purposes of s 94(1)(e).

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (3)

Cited By (1)