Studman v Director of Public Prosecutions

Judgment 1By summons filed in Court on 26 November 2012, the plaintiff, the Commissioner of the Australian Federal Police ("the Commissioner") claimed orders under s 19, s 38 and s 49 of the Proceeds of Crime Act 2002 (Cth) ("the PoC Act"). By s 19 of the PoC Act the Court is required to make an order (a "restraining order") restraining the disposal of property where certain preconditions are met. By s 38 the Court is empowered to order that the Official Trustee in Bankruptcy take control of the property (if the Court is satisfied that that course is required). By s 49 it is obliged to order that property that has been the subject of a restraining order for at least six months be forfeited (a "forfeiture order"), again where certain preconditions are met. 2Having regard to the provisions of s 49, the Commissioner pressed only for orders under s 19 and s 38, deferring consideration of orders under s 49 to a later date. 3Section 19 of the PoC Act relevantly provides: "(1) A court with proceeds jurisdiction must order that: (a) property must not be disposed of or otherwise dealt with by any person; or (b) property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order; if: (c) a proceeds of crime authority applies for the order; and (d) there are reasonable grounds to suspect that the property is: (i) the proceeds of ... [an] indictable offence ...; or (ii) an instrument of a serious offence; and (e) the application for the order is supported by an affidavit of an authorised officer stating that the authorised officer suspects that: (i) in any case--the property is proceeds of the offence; or (ii) if the offence to which the order relates is a serious offence--the property is an instrument of the offence; and including the grounds on which the authorised officer holds the suspicion; and (f) the court is satisfied that the authorised officer who made the affidavit holds the suspicion stated in the affidavit on reasonable grounds." 4The basis upon which the Commissioner sought the s 19 order was that the property in question (funds in a bank account) was the proceeds of an indictable offence (s 19(1)(d)(i)). Accordingly, the Court was obliged to make the order if (but only if) satisfied that: (i)the Commissioner is a proceeds of crime authority; (ii)the application was supported by an affidavit of an authorised officer stating that he/she suspected that the property was the proceeds of an (indictable) offence; (iii)the grounds for that suspicion are stated in the affidavit; (iv)the officer who made the affidavit holds the suspicion on reasonable grounds. 5The application was supported by the affidavit of Pierre Spano who deposed he was an authorised officer within the meaning of the PoC Act. Mr Spano also deposed that he suspected that the property in question was the proceeds of an indictable offence. He set out his grounds for that belief. 6That means that items (i)-(iii) are established to my satisfaction. The only remaining matter to be so established is item (iv) - that the suspicion was based on reasonable grounds. I did not reach that satisfaction. 7The affidavit evidence established reasonable grounds for believing that an indictable offence (or offences) had been committed (by a person connected with the funds in the bank account constituting the property sought to be made subject to a restraining order). The indictable offences relied upon were: (i)opening; and (ii)operating, the bank account in which the funds were held in a false name. Opening and operating bank accounts in false names are offences contrary to s 24(1) and s 24(2) of the Financial Transaction Reports Act 1988 ("the FTR Act"). By s 4G of the Crimes Act 1914 (Cth) each is an indictable offence (because punishable by imprisonment for a period exceeding 12 months). 8In short, the evidence established reasonable grounds for suspecting the following. In 1990, a false New Zealand passport was used as identification in the opening of the account in the same name as appeared on the false passport. Thereafter various transactions were made on the account that amounted to "operating" that account. These included the deposit and withdrawal of various sums of money, including, in April 2004, the deposit of a sum in excess of $160,000. The evidence suggested that this amount represented the proceeds of the sale of real estate by a person using the same name as the name used to open and operate the bank account. 9The evidence therefore established reasonable grounds for Mr Spano's suspicion that an indictable offence (or indictable offences) has been committed. It also established that Mr Spano in fact suspected that the money held in the bank account was the proceeds of one or other or both indictable offences. 10The critical question then became: did Mr Spano hold that latter suspicion on reasonable grounds? 11I concluded that there was nothing in the affidavit material that was capable of constituting such grounds. There was nothing in the affidavit material that pointed to the source of the funds in the account, other than that amount that was deposited as the proceeds of the sale of real estate. There was nothing in the affidavit to suggest that that property was other than lawfully obtained. 12By s 329(1) of the PoC Act property is proceeds of an offence if it is wholly or partly derived or realised, whether directly or indirectly, from the commission of the offence. Counsel for the Commissioner urged that funds standing in a bank account opened and/or operated in a false name are the proceeds of the indictable offences constituted by those acts. 13I 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, or from the subsequent offence of operating that account in a false name. 14Counsel relied upon a decision of the Court of Appeal to support his argument: see Studman v Director of Public Prosecutions (Cth) [2007] NSWCA 285; 177 A Crim R 34. There are indeed passages in that judgment that appear to support the argument. Some matters about the circumstances of Studman, however, should be noted. 15First, Studman did not involve an application for a restraining order. Such an order (under s 18) had previously been made and was in force. It must be taken, then, that the judge who made the restraining order was satisfied that a serious offence had been committed. (Section 18 does not require proof of a reasonable suspicion that the property the subject of the restraining order was the proceeds of the serious offence. Under s 18 a restraining order must be made where the Court is satisfied that there are reasonable grounds to suspect that a person has committed a serious offence (as defined).) 16Second, the appellant in Studman had pleaded guilty to a number of offences of stealing property from the Commonwealth, and of defrauding the Commonwealth. 17Third, the application before the Supreme Court (the subject of the appeal) was an application under s 31 of the PoC Act, for exclusion of specified property from the restraining order that had already been made. By s 29(2)(c) such an order may be made where the interest in property claimed is not the proceeds of unlawful activity, nor an instrument of any serious offence. A question concerning the meaning of "proceeds of unlawful activity", similar to the present question concerning the meaning of "proceeds of crime", thus arose. The property in question was funds in a bank account, and various shares. 18This Court at first instance refused the application for exclusion. The proceedings before the Court of Appeal were an appeal against that refusal. The Court held ([13]-[21]) that the appeal was a futility, by reason of the lapse of time since the restraining order had been made, and the consequence of certain forfeiture provisions in the PoC Act. Although McClellan CJ at CL proceeded to state his reasons for concluding that the appeal should, in any event, be dismissed, (reasons with which Spigelman CJ and Handley AJA agreed) those reasons must be regarded as obiter. Moreover, for the reasons I have already given, they do not deal with the precise point which has now arisen. 19Nevertheless, as I have indicated, there are passages in the judgment that support the approach taken on behalf of the Commissioner: see especially [39], [41] and [43]. McClellan CJ at CL appears to have rejected an argument (set out at [40]) that "the origin of the appellant's rights to the monies was his original ownership of them and did not stem from his opening of the relevant account". 20These features of Studman distinguish that case from the present. 21I was not satisfied that there were reasonable grounds to conclude that the funds in the bank account the subject of the present proceedings were, within s 329, the "proceeds" of an indictable offence or offences: they were, in reality, the subject of the indictable offence(s). 22Accordingly, I declined to make an order on the basis on which it was sought. 23However, it was plain that the Commissioner had available to him an alternative route to achieving the same result. 24Section 19 also requires that an order be made where there are reasonable grounds to suspect that the property is an instrument of a serious offence (s 19(1)(d)(ii)). A "serious offence" includes an offence against s 24 of the FTR Act if transactions on the relevant account total at least $50,000 in value during any six month period (see PoC Act, s 329). The single deposit to which I have referred is sufficient to bring the operation of the account in question within that definition. There were other transactions that also amounted to $50,000 over the relevant period. There were therefore reasonable grounds to suspect that the operation of the account constituted a serious offence. 25By 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. 26On being satisfied by the further affidavit of Mr Spano that he held the relevant suspicion (s 19(1)(e)(ii)) I was satisfied of the matters necessary to found an order under s 19. Accordingly, I made the following orders: Upon the plaintiff giving the usual undertaking as to damages, the court orders that: (i)Pursuant to rule 6.15 of the Uniform Civil Procedure Rules (NSW), the summons be made returnable immediately. (ii)Pursuant to section 19 of the Proceeds of Crime Act 2002 (Cth) (the Act) the funds standing to the credit of Commonwealth Bank of Australia account number 5100 0030089 must not be disposed of or dealt with by any person, except in the manner and circumstances specified in these orders. (iii)Pursuant to section 38 of the Act, the Official Trustee in Bankruptcy (Official Trustee) is to take custody and control of the funds in Commonwealth Bank of Australia account number 5100 0030089.