Commonwealth Director of Public Prosecutions v Zhang Xian

Background Facts 9Factually, it was alleged that on 17 September 2008, Australia Post's Corporate Security Group received advice that two parcels that were posted from the Harbord Post Office had insufficient postage. The Corporate Security Group launched an investigation into the Harbord Post Office. The Accused's employers, Mr Jie Xu and Ms Mei Ling Huang, husband and wife, were the proprietors and licensees of the Australia Post outlet at Harbord, having held such licence and operated at Harbord since about 2 October 1999. Further, they were also the owners and licensees of the Banksia Post Office since about 14 April 1997. An investigation into the activities of the licensees revealed that they systematically defrauded the Commonwealth of an amount in excess of $750,000.00 over a period of approximately eight years arising from their operations from both locations. The investigation revealed that the fraud had been perpetrated from about 1 July 2000 to 17 December 2008, on which day the Accused and her employers were arrested. 10The modus operandi of the Accused's employers was to accept money from customers for postage of mail packages and then either fail to affix to the package being posted the correct postage, or fail to affix any postage at all. The Applicant was a trainee assistant who was employed by the licensees at the Harbord Post Office for a period of approximately six months between about May 2008 and December 2008. It was noted during integrity testing that the Accused processed transactions in an identical manner to that of her employers. The Accused's employers purchased properties in 2006 and 2007 valued at $879,000.00 and $2,130,000.00 respectively. Located at the residential address of the Accused's employers and at the Harbord Post Office were large amounts of cash in the sum of $62,708.00 in Australian currency and smaller amounts of United States and Chinese currency. 11The Accused, 30 years of age at the time of her arrest, lived with her husband in a three bedroom shared house paying $60.00 a week in rent and earning approximately $600.00 per week. There was no evidence that any sums of money were found in the Accused's possession. 12The Accused was charged with seven counts of dishonesty related offences arising out of the alleged conduct but on 15 June 2010, after the matter had come before this Court on some 15 prior occasions, all of the charges as against the Accused were withdrawn on the Crown's application and were formally dismissed. An application for costs was made at the time of the withdrawal and dismissal of the charges.

Applicable Law 13Section 116 of the Criminal Procedure Act 1986 (NSW) provides: - "116 When costs may be awarded to accused persons (1) A Magistrate may at the end of committal proceedings order that the prosecutor pay professional costs to the registrar, for payment to the accused person, if: (a) the accused person is discharged as to the subject matter of the offence or the matter is withdrawn, or (b) the accused person is committed for trial or sentence for an indictable offence which is not the same as the indictable offence the subject of the court attendance notice. (2) The amount of professional costs is to be the amount that the Magistrate considers to be just and reasonable. (3) The order must specify the amount of professional costs payable. (4) If the accused person is discharged, the order for costs may form part of the order discharging the accused person. (5) In this section: professional costs means costs (other than court costs) relating to professional expenses and disbursements (including witnesses expenses) in respect of proceedings before a Magistrate." 14Section 117 of the Criminal Procedure Act 1986 (NSW) provides: - " 117 Limit on circumstances when costs may be awarded against a public officer (1) Professional costs are not to be awarded in favour of an accused person in any committal proceedings unless the Magistrate is satisfied as to any one or more of the following: (a) that the investigation into the alleged offence was conducted in an unreasonable or improper manner, (b) that the proceedings were initiated without reasonable cause or in bad faith or were conducted by the prosecutor in an improper manner, (c) that the prosecution unreasonably failed to investigate (or to investigate properly) any relevant matter of which it was aware or ought reasonably to have been aware and which suggested either that the accused person might not be guilty or that, for any other reason, the proceedings should not have been brought, (d) that, because of other exceptional circumstances relating to the conduct of the proceedings by the prosecutor, it is just and reasonable to award costs. (2) This section does not apply to the awarding of costs against a prosecutor acting in a private capacity. (3) In this section: professional costs means costs (other than court costs) relating to professional expenses and disbursements (including witnesses' expenses) in respect of proceedings before a Magistrate." 15For clarity, it was submitted that the Accused's application, to overcome the limitation on when costs may be awarded, was based on the first component of s 117(1)(b) of the Criminal Procedure Act 1986 (NSW), that is, that the proceedings were initiated "without reasonable cause." 16The onus is on the party seeking costs to establish an entitlement to costs on the balance of probabilities. So much is made clear from the decision in Fosse v DPP [1999] NSWSC 367. 17There is a long line of authority dealing with the issue of whether proceedings had been instituted without reasonable cause. 18In Halpin v Department of Gaming and Racing [2007] NSWSC 81, Hall J considered the meaning of "without reasonable cause" and referred to the decision of Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relation Commission (2006) 156 FCR 275. His Honour stated at [57] - [60] that: - "57 Further, I do not consider that it can be said that the proceedings were "initiated without reasonable cause". In Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission [2006] FCAFC 199; (2006) 156 FCR 275, the Full Court of the Federal Court at [60] stated: 'The question therefore arises whether ... the plaintiff instituted the proceedings vexatiously or without reasonable cause. A party does not institute proceedings without reasonable cause merely because that party fails in the argument put to the court; Regina v Moore; ex parte Federated Miscellaneous Workers' Union of Australia [1978] HCA 51; (1978) 40 CLR 470 per Gibbs J at 473. The section reflects a policy of protecting a party instituting proceedings from liability for costs, but that protection may be lost. Although costs will rarely be awarded under the section, and exceptional circumstances are required to justify the making of such an order ... a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure: Kanan v Australia Postal and Telecommunications Union (1992) 43 IR 257 per Wilcox J; see also Bostik (Australia) Pty Limited v Gorgevski (No 2) (1992) 36 FCR 439; Nilsen v Loyal Orange Trust (1997) 67 IR 180.' 58 The question as to whether at the time the proceeding was initiated it had "no real prospects of success or was doomed to failure" is a question that is required to be determined as a matter of objective fact: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Nestle Australia Limited (2005) 146 IR 379 at [4] citing Spotless Services Australia Limited v Marsh SDP [2004] FCA FC 155 at [13]. 59 The Full Court in Kangan (above) at [63] stated: '[i]t is a matter of judgment, sometimes of fine judgment, in all the circumstances of a particular case whether a proceeding is brought without reasonable cause. The phrase "vexatiously or without reasonable cause" was described by von Doussa J in Bowater Tutt Industries Pty Limited (No 2) [1991] FCA 188 ; (1999) 28 FCR 324 at 327 as 'similar to the one applied by a court on an application for the exercise of summary power to stay or strike out proceedings.' 60 In Canceri v Taylor (1994) 123 ALR 667, the Industrial Relations Court of Australia determined an application for costs assessing whether or not at the time of instituting proceedings upon the facts apparent to the informant, there was no substantial prospect of success. The court, per Moore J at 676, adopted the approach of Wilcox J in Kanan v Australia Postal & Telecommunications Union (1992) 43 IR 27 at 264: 'It seems to me that one way of testing whether a proceeding is instituted 'without reasonable cause' is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceedings as being 'without reasonable cause'. But where, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may be properly said that the proceedings lack reasonable cause.'" 19In R v Manley [2000] NSWCCA 196, Wood CJ at CL stated at [14] that: - "Given the wide variety of cases that might arise for consideration, I am similarly reluctant to attempt any exhaustive definition of the test. It seems to me that the section calls for an objective analysis of the whole of the relevant evidence, and particularly the extent to which there is any ... inherent weakness in the prosecution case. Matters of judgment concerning credibility, demeanour and the like are likely to fall on the other side of the line of unreasonableness, being matters quintessentially within the realm of the ultimate fact finder, whether it be Judge or Jury."

Accused's Submissions 20The issue as to whether the proceedings were initiated without reasonable cause is, quite properly, to be decided according to the individual facts of each case. 21The Accused, in support of its application that the proceedings were instituted without reasonable cause, submitted that: - (a) there was no substantial prospect of success in the Crown case. The Crown case had inherent weaknesses not dependent upon the credibility or demeanour of the witnesses but, rather, weaknesses stemming from a complete inability to prove the knowledge and intention of the Accused; (b) the Crown case was that the Accused's employers systematically defrauded the Commonwealth of significant sums of money over a long period of time. There would have been, during that period of time, other staff members who, in addition to the Accused, worked at one or both of the licensees' post offices; (c) the Accused was simply a trainee assistant. She had been working as a trainee for six months, at which time she was arrested. As a result of her junior status, she was taught by the licensees how to serve customers and deal with mail packages. The surveillance indicated that she would serve a customer and process the transaction in the same way as her employer(s) at the counter; (d) there was no other evidence of any significance against the Accused; (e) the evidence of the Accused's circumstances point to her being no more than an innocent agent of the licensees; (f) there was no evidence of any wealth or sums of unexplained money in the Accused's possession; (g) there was no evidence that the Accused had any relationship with the licensees before commencing work for them as a trainee postal worker; (h) there was no evidence that the Accused had anything other than an employer/employee relationship with the licensees; (i) the evidence indicated that the Accused simply worked at the counter and processed the packages in the same way as her employer(s); (j) she worked for the licensees for a very short period of time and only in one of the licensees' two stores; (k) the fraud perpetrated by the Accused's employers on the Commonwealth was longstanding and systematic, divided between the two stores owned and operated by the Accused's employers who were husband and wife; and (l) there was no evidence to suggest that the Accused's employers shared the knowledge and process of their lucrative and longstanding fraud with a trainee postal worker such as the Accused. 22The Accused concedes that there is no dispute as to what she did as a part of her day-to-day functions as an employee at the Harbord Post Office. The issue, it was submitted, was whether the Crown was ever going to be able to prove intent and knowledge seeing as, on the Accused's submission, the Accused was acting as an employee/agent of her employers as licensees. 23The Accused contended that it should have been apparent to the Crown that it was never going to be able to prove the elements of the offences with which the Accused was charged. 24The Accused further submitted that if the Crown was alleging that the Accused was involved in conduct separate and distinct from her employers (that is, separate and distinct from any suggestion of a joint criminal enterprise) to give her employers a financial advantage, the bar, in respect of which the Crown would need to overcome to succeed in its case, was raised even higher. 25The Accused submitted that to the extent that the Crown was to rely on recklessness to prove the elements of the offence, having regard to the definition of recklessness ascribed in s.5.4 of the Criminal Code Act 1995 (Cth), it must be recklessness as to the actual deceit.

Crown's Submissions 26The Crown, in opposing the application for costs, tendered, without objection, five volumes of the Brief of Evidence (Exhibit 1); a Schedule of CCTV Camera Observations between 11 December 2008 and 17 December 2008 referable to the Accused (Exhibit 2) which catalogue a series of 153 transactions processed by the Accused; an Affidavit of the Crown's instructing solicitor, Ms Heather Armstrong, sworn 9 November 2010 (Exhibit 3) deposing to the chronology of events of these proceedings between 17 December 2008 and 9 November 2010; and a Facts Sheet (Exhibit 4). 27At this point, I wish to make some brief observations about the Facts Sheet tendered. Reference to the Accused in the Facts Sheet is sparse. The Accused's name is mentioned only once in the Facts Sheet (on page 5) under the heading "Full Facts" and only discloses, merely, that she was arrested and charged. The Facts Sheet is wholly concerned with the Accused's employers, who were charged with, presumably, cognate offences for their involvement in obtaining a financial advantage by deception, thereby defrauding the Commonwealth. 28I have read the pertinent parts of the exhibits forming part of the documents tendered by the Crown. 29The Crown's case was that the elements of the offence of obtaining a financial advantage by deception under s 134.2(1) of the Criminal Code Act 1995 (Cth) are as follows: - (a) the Accused induces a person to believe that a thing is true (the fault element for this element being intention); (b) the thing is in fact false (the thing being a circumstance, the fault element being intention or recklessness, having regard to s 133.1 of the Criminal Code Act 1995 (Cth)); (c) as a result of the conduct of the Accused in element (a) above, the Accused obtains, for another person, a financial advantage from a third person or a third person is induced by the Accused to do something that results in another person obtaining a financial advantage (the fault element in respect of this element being recklessness); (d) the third person is a Commonwealth entity (Absolute liability applies to this element); and (e) the obtaining of the financial advantage is dishonest according to the standards of ordinary people (The fault element for this element requires a restatement of the definition of dishonesty set out in s 130.1 of the Criminal Code Act 1995 (Cth), which defines dishonesty exhaustively as meaning dishonest according to the standards of ordinary people and known by the accused to be dishonest according to the standards of ordinary people). 30The Crown submitted that a costs order should not be made in favour of the Accused for the following reasons: - (a) the Accused induced Australia Post to believe that she was making stamp sales by entering them into Australia Post's EPOS (Electronic Point of Sale) cash register and that this could be inferred from her conduct having regard to, amongst other things, Exhibit 2, being the Schedule of CCTV Camera Observations of the Accused; (b) the stamp sales did not occur because there were either no stamps or insufficient stamps placed on parcels and, therefore, the representation that the Accused was making stamp sales is false; (c) recklessness is established by the Accused's knowledge that she was not putting stamps on the parcels or was putting insufficient stamps on the parcels; (d) by entering stamp sales and not affixing stamps or affixing insufficient stamps on parcels, the Accused obtained a financial advantage for her employers or, more relevantly, the Accused induced Australia Post to pay redemptions to her employers that resulted in them (her employers) obtaining a financial benefit. It is submitted that the Accused was, similarly, reckless as to this circumstance; (e) the fact that Australia Post was and is a Commonwealth entity is not in issue; (f) the Accused's employers obtained a financial advantage in circumstances where it was dishonest according to the standards of ordinary people and that it can be inferred from the factual scenario that the Accused knew that this was dishonest according to the standards of ordinary people; (g) the reason for the withdrawal of the proceedings is not relevant to the determination this Court is required to ultimately make in that, for the purposes of s 117(1)(b) of the Criminal Procedure Act 1986 (NSW), the Court is required to asses the evidence available at the time the proceedings were initiated, and not with the benefit of hindsight, in order to ascertain whether they were initiated without reasonable cause; (h) the test parcels and revenue checks conducted by Australia Post's Corporate Security Group investigators revealed a significant volume of mail parcels being processed by the Accused in the manner referred to earlier, that is, with the deficient affixation of stamps to parcels or no affixation of stamps to parcels at all. This was more prevalent in the month of December 2008; (i) there were two forms of investigation undertaken. First, Australia Post investigators posed as undercover customers and, secondly, Australia Post investigators weighed various parcels at an off-site sorting centre hub and determined the deficiency in postage that should have been affixed to the various parcels. Those deficiencies were highlighted in the revenue checking summaries forming part of the Brief of Evidence tendered as Exhibit 1; (j) the Accused knew that she was not affixing stamps to some of the parcels; (k) the Accused was aware that she was entering stamp sales into the register but not affixing stamps to some of the parcels; (l) given that the Accused was aware that she had not affixed stamps, she would have been aware that there was a risk that the stamps would not have been affixed at all; (m) to the extent that the Accused entered stamp sales for parcels into the EPOS (Electronic Point of Sale) cash register and placed the parcels to one side behind the counter, it is somewhat easier to show recklessness in that the Accused was aware of the pick-up deadline for mail parcels at the conclusion of the day's trading;

Findings 31The Crown conceded that there was no direct evidence as to the Accused's training as a postal worker. There was a manual as to how to process mail but that was a document addressed to the licensees and the Crown conceded that the task fell on the licensees to direct staff on how to process mail. This, in my view, is a key point which supports the line of argument propounded by the Accused. The Accused submitted that a rational inference to be drawn from the Accused's conduct as depicted on the CCTV footage of the Accused and her employers is that the Accused was told by her employers to enter the stamp sales and process the mail packages in the manner depicted in the CCTV footage and that her employers would affix the necessary stamps at the close of business or at some other time. The Accused submitted that there was no evidence, insofar as those transactions where a deficiency in postage was concerned, that she was the person who affixed the stamps to the pertinent mail parcels. 32The Accused's submission on this point is not entirely correct. In Volume 18 of the five volumes of the Brief of Evidence tendered (Exhibit 1), a CCTV footage observation log, similar to that of Exhibit 2, appears as an exhibit to the Statement of Mr Ali Alishah of Australia Post's Corporate Security Group dated 10 September 2009. That observation log catalogues some 724 transactions processed between 11 December 2008 and 17 December 2008 at the Harbord Post Office. In six of the 724 transactions, the Accused is seen affixing stamps on various parcels. On one of those occasions, there were no customers present; on the other occasions, it is not made clear whether her affixation of stamps on the said parcels arose out of the immediately preceding transaction. There are, however, numerous references in the observation log to Ms Mei Ling Huang, one of the licensees, affixing stamps to parcels. Whilst reference is made to other staff members being present and serving customers throughout the specified period of surveillance, there is no evidence that either of those other staff members affixed any stamps to any parcels. 33The evidence is indicative of a repetition of instructions and the Accused readily conceded that she processed the mail parcels in the manner referred to in the Schedule of CCTV Footage Observations. This involved entering the transaction into the EPOS (Electronic Point of Sale) cash register, accepting payment from the customer, taking the mail parcel and putting the parcel to one side behind the counter without affixing a stamp. On some occasions, the Accused recorded, in her own handwriting, figures on the mail parcel before then putting the parcel behind the counter. These actions, in my view, typify an ordinary method of discharging her duties as a trainee postal worker under the supervision and instruction of her employers. There was no evidence to suggest, for example, that the Accused placed deficient or no postage at all on every third transaction she processed. The Accused submitted that it could be inferred that her employers were affixing the deficient stamps on various parcels before sending those parcels. There is no evidence that the Accused was involved in this process, not that this issue is finally determinative of the matter. It is, however, in my view, a link in a chain of reasoning which appears to be lacking. 34I accept that knowledge and intention on their own, as elements of the offences with which the Accused was charged, were not readily identifiable based on the evidence before me. The question then becomes whether the Accused's conduct was reckless, and whether such recklessness would satisfy the fault element for a physical element of the offence by proving intention, knowledge or recklessness, in that she was aware of a substantial risk and, having regard to the circumstances known to her, it was unjustifiable to take the risk. 35By virtue of s 5.4 of the Criminal Code Act 1995 (Cth), "recklessness" is defined as follows: - " 5.4 Recklessness (1) A person is reckless with respect to a circumstance if: (a) he or she is aware of a substantial risk that the circumstance exists or will exist; and (b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk. (2) A person is reckless with respect to a result if: (a) he or she is aware of a substantial risk that the result will occur; and (b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk. (3) The question whether taking a risk is unjustifiable is one of fact. (4) If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element. " 36I do not accept that six out of some 724 transactions during the closed period of observation is conducive of recklessness on the part of the Accused sufficient to make out the necessary fault element(s) under s 134.2(1) of the Criminal Code Act 1995 (Cth). 37One must be circumspect when dealing with applications of this kind. The ultimate decision is susceptible to error and a misapplication of the appropriate test if not formulated properly. It must be borne in mind that whilst I am required to turn my mind to the evidence available at inception of the proceedings, I am not conducting a committal hearing which requires the exercise of an executive function in receiving, examining and permitting the testing of evidence introduced by the Crown to determine whether or not there is sufficient evidence to warrant the person being charged put on trial: Grassby v R (1989) 168 CLR 1 and Moss v Brown (1979) 1 NSWLR 114. The test is not that provided under s 62 of the Criminal Procedure Act 1986 (NSW), that is, whether the Crown's evidence is capable of satisfying a jury, properly instructed, beyond reasonable doubt, that the Accused has committed an indictable offence. Nor is test that provided under s 64 of the Criminal Procedure Act 1986 (NSW), that is, whether there is a reasonable prospect that a reasonable jury, properly instructed, would convict the Accused of an indictable offence. Rather, I am required to determine whether the proceedings were, without the benefit of hindsight, assessed objectively at the time the proceedings were instituted, initiated without reasonable cause. 38The particulars of each of the offences set out in the Court Attendance Notices on which the prosecution is based enunciate the actual offence of obtaining a financial advantage by deception as occurring between 1 January 2004 and 17 December 2008 by deceptions alleged to have taken place between 1 January 2000 and 17 December 2008. There is no evidence that the Accused was employed by the licensees at the Harbord Post Office, or elsewhere, between 2000 and May 2008. Indeed, the prefacing words in the "Antecedents" paragraph of the Facts Sheet disclose that the Accused commenced working at the Harbord Post Office in May 2008. The Court Attendance Notices were documents prepared contemporaneous to the date on which proceedings were instituted and on which the Crown relied for the life of the proceedings in this jurisdiction. The circumstances of the cessation of the Accused's employment was that she, along with her employers, was arrested. It may have been the case that, had the Accused been committed to stand trial in the District Court of NSW, the indictment would have been drafted with greater particularity with respect to the Accused's alleged involvement. 39On the evidence before me, assessed from the point of view at the time the proceedings were instituted, there does not appear to have been a substantial prospect of success, applying the test in Kanan v Australian Postal & Telecommunications Union (1992) 43 IR 257. I do not accept that, on the evidence presented, either intention, knowledge or recklessness would have been capable of being imputed to the Accused. The same might not be said for the Accused's employers, however, I am not required to decide that issue in the present proceedings. It follows then that the proceedings were, in my opinion, initiated without reasonable cause.

Orders 40In the circumstances, and for the reasons given, I find that the proceedings were initiated without reasonable cause and I make the following orders: -

1. The Crown is to pay the Accused's costs.
2. The Accused is to file and serve written submissions on the quantum of costs on or before 29 March 2011.
3. The Crown is to file and serve written submissions in reply on the quantum of costs on or before 5 April 2011.
4. 4.Liberty to restore the matter to the list on seven days' notice.
5. The matter is adjourned to 9.30 a.m. on 27 April 2011 for a decision as to quantum. 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: 20 April 2011