The Commissioner of Australian Federal Police v Cole

The issues

1. Section 19(1) of the Proceeds of Crime Act requires the Court to make restraining orders 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 a *terrorism offence or any other *indictable offence, a *foreign indictable offence or an *indictable offence of Commonwealth concern (whether or not the identity of the person who committed the offence is known); 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."
2. There was no issue between the parties as to: 1. the Court's power to make the orders the Commissioner seeks, the Commissioner being a "proceeds of crime authority" under ss 335 and 338 of the Proceeds of Crime Act; 2. what the Commissioner must establish in relation to the seized cash under s 19 of that Act, given the definitions of the terms "proceeds of an offence" and "instrument of an offence" in ss 329 and 338; or 3. the nature of the onus which falls on the Commissioner under s 19.
3. While the onus to establish the existence of the required "reasonable grounds" for the suspicion which Mr Lee deposes holding falls on the Commissioner, s 19(4) provides that such reasonable grounds "need not be based on a finding as to the commission of a particular offence" and s 19(5) that the order must be made, "even if there is no risk of the property being disposed of or otherwise dealt with".
4. What the Commissioner must thus establish on the evidence, is the existence of facts which are sufficient to induce suspicion in the mind of a reasonable person: George v Rockett (1990) 170 CLR 104 at 112; [1990] HCA 26. Further, in assessing whether such facts exist, the evidence must be approached in the way discussed by Hely J in Williams v Keelty (2001) 111 FCR 175; [2001] FCA 1301 at [166]: "166 It is the issuing officer who is required to be satisfied that there are reasonable grounds for suspecting the relevant matters. The notion of reasonable grounds for a suspicion imports an objective test, but "reasonable" involves a value or normative judgment (Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 167), and there may well be legitimate differences of opinion as to what falls within the term, particularly when it is used in relation to a nebulous expression such as "suspicion". A Court is not entitled to substitute its own opinion on that question for the opinion of the issuing officer. That does not mean that the issuing officer has an unexaminable discretion; it does mean, however, that the issuing officer's decision is only impeachable if the decision was one which the officer could not lawfully reach on the materials before him: Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275-276."
5. As Hely J also explained at [172], such reasonable grounds may be based on materials "falling well short of making out a prima facie case".
6. While there was also no issue that Mr Cole might have an interest in the seized cash, given the definition of "interest" in s 338 of the Proceeds of Crime Act, he led no evidence to establish the nature of his interest, or how the seized cash came into his possession.
7. What thus arises for determination is not whether, on the evidence now before the Court, there are reasonable grounds for concluding that Mr Cole is at risk of conviction of the charges which he faces at his upcoming trial, where the Crown's case will have to be proven beyond reasonable doubt. Rather, it is whether the Commissioner has established, on the balance of probabilities, that there are reasonable grounds for the suspicions Mr Lee has deposed he holds.

The parties' case

1. The Commissioner's case was that the evidence established that the facts Mr Lee had relied on, in forming his suspicions, were sufficient to induce the suspicion which he held, in the mind of a reasonable person.
2. Mr Cole resisted the Commissioner's case, having cross-examined Mr Lee as to his awareness of evidence which the officer in charge of the police investigation, Federal Agent Bellis, had given in cross-examination during Mr Cole's committal, as to possible sources of the cash.
3. The case advanced for Mr Cole was thus that limited weight could be placed on certain matters to which Mr Lee deposed and that consideration had to be given to whether there was another reasonable explanation for the seized cash, namely, the sale of Blackberry mobile phones for cash on behalf of a company incorporated in Canada, Phantom Secure, as part of a cash business which was conducted on the basis that records of purchasers are not obtained, in accordance with a "model and point of difference" of Phantom Secure Blackberry mobile phones, which is anonymity and end-to-end security. Further, that when persons involved in the supply of such phones come to the attention of authorities, "it is not unusual to find them in possession of cash, often unsupported by documentary evidence concerning the source of the cash".

The basis for Mr Lee's suspicions

1. Mr Lee is a member of the Australian Federal Police performing duties in the Criminal Assets Confiscation Taskforce, which his affidavit discloses was established as a multi-agency task force led by the Australian Federal Police and involving the Australian Tax Office and the Australian Criminal Intelligence Commission, in order to combat serious and organised crime and to identify and remove profits derived from criminal activity. He is the officer currently assigned to Mr Cole's matter.
2. In his affidavit Mr Lee explained the circumstances in which he came to suspect that the cash the subject of this application was wholly or partly the proceeds and/or instrument of an offence contrary to s 400.9 of the Criminal Code.
3. Mr Lee summarised the basis for his suspicions as being that: "(a) Mr Cole was observed to have been active in conducting handovers suspected to be of large amounts of cash to unidentified persons prior to the Cash being seized. This included: i) on 7 September 2015, Mr Cole was observed by ACC (as it then was) surveillance officers to enter the Honda Vehicle with a brown backpack and then depart the Honda Vehicle without the brown backpack. A subsequent search of the Honda Vehicle located the Honda Cash, totalling AUD399,460, secreted within 2 grey backpacks; ii) on 23 September 2015, Mr Cole was observed by ACC (as it then was) surveillance officers to: 1. conduct a handover of a grey backpack to an unknown person; and 2. subsequently attend the Storage Unit C029 and retrieve a blue Nike branded backpack; iii) on 25 September 2015, Mr Cole made arrangements to meet with two unidentified persons the following day; and iv) on 26 September 2015, Mr Cole was observed leaving the Newland Street Property with a green backpack. Later that day, police intercepted and searched the Rav4 Vehicle where the Cash was located within the green backpack which contained two smaller backpacks, one grey coloured and one tan or beige in colour; (b) Mr Cole was found to be in possession of the White Card when he was searched by police. The White Card: i) exhibited a number of partially erased handwritten alphanumeric sequences. One of the handwritten alphanumeric sequences corresponded to an Australian banknote and one to a Vietnamese banknote that were located in the glove box of Mr Cole's Vehicle; ii) displayed a legible alphanumeric sequence which corresponds with an AUD5 banknote issued in 2005 that is suspected of being used as a token for the exchange of cash; and iii) contained the contact details for his solicitor; (c) the Glove Box Cash consisted of Australian banknotes and Vietnamese banknotes that I suspect were used as tokens for exchanging large amounts of cash. I suspect that the use of tokens in this manner was to facilitate Mr Cole and other persons to launder the proceeds of crime; (d) a search of Storage Unit C029 on 26 September 2015, resulted in the seizure of 389 Blackberry mobile phones; (e) the ATO has not received an income tax return from Mr Cole for the financial years 2013 to 2015; (f) Mr Cole is the beneficiary of a trust which has not lodged a tax return since financial year 2011; (g) the value of the Cash located in the Rav4 Vehicle was grossly disproportionate to the declared income and the expenditure of Mr Cole; and (h) Mr Cole has been criminally charged pursuant to section 400.9(1) of the Criminal Code with 2 counts of dealing with money that is reasonably suspected of being proceeds of crime and at the time of dealing the value of the money is $100,000 or more in respect of conduct that respectively occurred: i) on 7 September 2015; and ii) between 5:25pm to 5:30pm on 26 September 2015."
4. It is not in issue that the evidence established that Mr Cole came to police attention as the result of the 2013 joint task force investigation into criminal syndicates involved in money laundering of the proceeds of crime, to which Mr Lee referred, or that he was then identified as one of those actively involved in handovers of large sums of Australian currency, then suspected to be the proceeds of crime, to unknown persons. Attached to Mr Lee's affidavit are statements made by surveillance and police officers involved in the ensuing investigation, as to what Mr Cole was observed to have done; what the investigation uncovered as to his activities; and what is known by the taskforce about how money laundering operations are conducted and how they are sought to be monitored by law enforcement agencies.
5. There was thus no issue that on 7 September 2015 Mr Cole was observed entering a vehicle with a brown backpack and that later search of the vehicle located cash totalling $399,460 in two grey backpacks, secured with black cable ties around the zippers. Further, that on 23 September Mr Cole was observed handing one grey backpack over to an unknown person and then attending a storage unit registered in his name, where he retrieved a blue Nike branded backpack.
6. Nor was it in issue that on 25 September Mr Cole arranged to meet two other unidentified people the following day, by text message, or that on 26 September he was observed leaving an address at Bondi Junction with Mr Haddleton, with a green backpack, later placing it on the backseat of a vehicle which he entered with Mr Haddleton, or police later intercepting that vehicle and finding two other backpacks in the green backpack, also both sealed with black zip ties through their zippers, which contained bundles of notes.
7. Mr Cole was then also found in possession of two mobile phones and a white card, which had writing on it, including partial alphanumeric sequences corresponding to an Australian $5 note and a Vietnamese 500 Dong note, which were later found in the glove box of a second vehicle searched during this investigation. That they were suspected to be "tokens" used by criminal money laundering syndicates to facilitate the exchange of large amounts of currency, by persons not known to each other, was also not in issue. Nor was the process Mr Lee described, by which such tokens are used for this purpose.
8. It was also not in issue that on search of Mr Coles storage unit 389 Blackberry mobile phones were found and on search of his home, three additional mobile phones and 80 unused sim cards. Or that Mr Cole had minimal declared taxable income in the 2010 to 2012 financial years and had not lodged returns from 2013 to 2015, averaging $32,628 per year. Or that he is also the beneficiary of the HR Cole Family Trust, which has not lodged a tax return since 2011 and that from May to November 2015 there had only been minor debts and credits to his bank account.
9. Mr Lee considered that the seized cash was thus grossly disproportionate to Mr Cole's declared income and expenditure and that he had not offered a reasonable explanation for his dealings with such a large amount of cash, with the result that he had been charged with offences under s 400.9 of the Criminal Code.
10. Mr Lee was cross-examined about his knowledge of what Federal Agent Bellis had said in his cross-examination on Mr Cole's committal and the account which he had taken of his answers. His evidence was that while aware of that cross-examination, Federal Agent Bellis' answers had not altered the suspicions which he held.

Are there reasonable grounds for Mr Lee's suspicions?

1. The difficulty with the case advanced for Mr Cole, that the evidence did not establish that there are reasonable grounds for the suspicions Mr Lee has deposed he holds, is not only what the evidence establishes as to the basis of those suspicions. That includes the evidence as to the circumstances in which Mr Cole came under investigation; what was discovered about the activities which he was then pursuing; how that resulted in the discovery of the cash which was seized and the laying of the serious criminal charges which Mr Cole now faces; what else was then found in his possession; and how the way in which Mr Cole had acted, accorded with the way in which criminal organisations are known to act, when engaged in money laundering.
2. All of that evidence of itself provides, I am well satisfied, a sound basis for the conclusion that the Commissioner has met the onus which falls upon him, to establish the existence of facts sufficient to induce the suspicions which Mr Lee holds, in the mind of a reasonable person.
3. Mr Cole contended that Mr Lee also had to take account of answers given by Federal Agent Bellis in cross-examination at committal, about the possibility that the seized cash had come into his hands as the result of the sale of Blackberry mobile phones in Australia to persons who wanted to remain anonymous and wanted to use them with a T-Mobile Sim card, for an annual subscription fee in the vicinity of $2,400, in order to gain access here to the Phantom Secure Network, promoted by that company on its website.
4. Those answers, however, could not reasonably have cast doubts on the suspicions to which Mr Lee deposed.
5. It was put to Federal Agent Bellis, for example, that the value of 500 of such phones with network subscriptions would be some $1.2million, which would include a substantial profit margin. Federal Agent Bellis agreed that the police investigation had not excluded the possibility that the seized cash had come from such a business, but his opinion was that the sale of 100 such phones did not "add up" with the amount of cash which had been seized. Further, that in his experience, that it was organised crime groups across New South Wales, Australia and sometimes transnational organised crime groups, which constituted the market for such secure communications devices.
6. Also necessary now to consider is that in these proceedings, neither Mr Cole nor anyone else, has led evidence to show that the seized cash came from the conduct of some legitimate business.
7. In submissions reference was made to Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 inferences. The operation of that principle was considered in RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56 at [75] - [96]. It is concerned with the drawing of inferences when a party fails to lead evidence reasonably expected to be led, in the absence of explanation.
8. It may be conceivable, given the Blackberry mobile phones found at Mr Cole's storage unit and the receipt there found for 500 Blackberry mobile phones, that one hundred of them had earlier been sold, thereby generating cash, as part of some lawfully conducted business. There is no suggestion, however, that the police investigation revealed that Mr Cole had been involved in such a business, either on his own account, or on behalf of anyone else, including the Canadian company Phantom Secure, to which reference was made in Mr Woolf's affidavit. Nor is there evidence that the seized cash was generated by sales made in the course of such a business.
9. If that was the case, it would undoubtedly have been of assistance to Mr Cole to advance such an explanation, by way of evidence. He chose not to do so, it was explained, because he did not wish to prejudice his criminal trial. That was a forensic decision for him to make, even though it is difficult to see how any lawful explanation for possession of the seized cash could have disadvantaged his defence of the criminal charges which he faces.
10. Had Phantom Secure and/or Mr Cole been conducting a business in Australia involving the sale of Blackberry mobile phones, that would appear to have attracted various obligations in relation to record keeping and taxation. There is no evidence to suggest that such obligations, if they came into existence, were observed by either Mr Cole or Phantom Secure. Nor has Phantom Secure, or anyone other than Mr Cole appeared to make any claim that it had any interest in the seized cash.
11. Mr Cole having decided not to lead evidence which would have assisted his case, by revealing the source of the seized cash, even if no adverse inferences are drawn, given the explanation advanced, the result is still that there is no evidence which casts doubt on Mr Lee's suspicions.
12. The mere possibility that the cash came into Mr Cole's hands by some lawful means does not provide a basis for the conclusion that the Commissioner has not met the onus of establishing that there were reasonable grounds for the suspicion which the evidence establishes Mr Lee does hold, given the basis which he explained his suspicions rested on.
13. Reliance was also placed by Mr Cole on evidence given in cross-examination at the committal by Federal Agent Bellis, in relation to other items found on search at Mr Cole's storage unit, such as bank cards issued by two Hong Kong Banks, as well as his overseas travel and the possible existence of overseas assets. Federal Agent Bellis agreed that he was aware that Mr Cole had travelled extensively overseas and that he had no knowledge of Mr Cole's overseas assets, or tax affairs.
14. Despite this evidence, Mr Cole was committed for trial on the charges which he faces in respect of the seized cash. Understandably, it also did not cause Mr Lee to alter the suspicions which he holds.
15. While Mr Cole appears to have travelled extensively overseas, the evidence suggests that he did not have the means to do so, having not filed income tax returns for some years in Australia, where he lives and in preceding years, having filed returns which do not disclose income which would have permitted him to afford such travel. His Australian bank account records also do not reflect him having paid for such travel.
16. That this also does not provide any foundation for the conclusion that the grounds on which Mr Lee's suspicions rest, are not reasonable, must be accepted. These were also matters within Mr Cole's knowledge, but he led no evidence about them in these proceedings, to advance his resistance of the orders which the Commissioner seeks. The result is that such an explanation having not been advanced, it cannot be taken into account. The mere possibility that some explanation exists, which has not been given, does not provide a basis for concluding that reasonable grounds for Mr Lee's suspicions do not exist.
17. In the result, the conclusion that the Commissioner has met the onus of establishing that there were reasonable grounds for the suspicion which the evidence establishes Mr Lee does hold, I am satisfied, is in all of the circumstances unavoidable.
18. For Mr Cole it was also contended that in coming to a conclusion about this question, the approach discussed in McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423; [2006] HCA 45 should be borne in mind. There it was observed by Gleeson CJ and Kirby J at [12] that: "Where a claim, or an argument, or a conclusion or some other state of mind (such as suspicion, or belief, or satisfaction) involves an interplay of observation (of objective facts and circumstances), opinion, and judgment (which may involve an evaluation of matters such as reasonableness of conduct, or of the public interest), the question whether there are reasonable grounds for such a claim, or argument, or state of mind requires a consideration of all relevant matters and an assessment of the reasonableness of the claim, or argument, or state of mind having regard to all relevant considerations. Suppose the question is whether there are reasonable grounds for suspecting that A killed B. Suppose that A is a person of violent propensity, who had a motive to kill B, and had declared an intention to do so. Let it be assumed that those three facts are incontestable. In the absence of any other facts they may lead to a conclusion that there are reasonable grounds for suspecting that A killed B. Suppose, however, that A has an undisputed alibi. The first three facts then cease to constitute reasonable grounds for the suspicion. The question cannot be answered without considering all four facts. It is not a hypothetical question. It is a question to be answered in the light of all the known circumstances. This applies to all relevant considerations whether they be matters of objective fact (as in the example given), or of opinion, or of argument. Until all relevant considerations, that is, all (known) considerations that could have a rational bearing upon the claim, or state of mind, or decision under review, are taken into account, it is impossible to form a just and fair judgment whether, objectively considered, there are reasonable grounds for the claim that the disclosure of the document would be contrary to the public interest. It is not enough for the Tribunal to ask whether there are facts, or opinions, or arguments that rationally bear upon that topic. All relevant matters must be taken into account; not for the purpose of deciding whether the Tribunal agrees with the Minister, but for the more limited purpose of deciding whether there are reasonable grounds for the claim which the Minister accepted."
19. The difficulty with the analogy sought to be drawn for Mr Cole, is that in this case there is no equivalent to an "undisputed alibi" in respect of the seized cash. The matters about which Federal Agent Bellis was cross-examined do not establish that there was any lawful source for the seized cash, let alone how it came into Mr Cole's hands. There are no doubt relevant circumstances about the cash which are known to him, but he has chosen not to lead evidence about them and accordingly, they cannot be taken into account, as a relevant consideration on what here arises to be determined.
20. In the result, on what is established by the evidence, I am satisfied that it must be concluded that the onus which falls on the Commissioner has been met.

Orders

1. It follows that the orders which the Commissioner seeks must be made.
2. The usual order under the Uniform Civil Procedure Rules (2005) as to costs is that they follow the event, which in this case is an order against Mr Cole and in favour of the Commissioner, for costs as agreed or assessed. Unless the parties approach to be heard within seven days, that will be the Court's order.
3. Accordingly I order that: 1. Pursuant to s 19 of the Proceeds of Crime Act 2002 (Cth), the cash amount of $AUD 399,950 seized by the Australian Federal Police on 26 September 2015 (recorded on AFP Property Seizure Records M337410) together with any interest earned on that amount must not be disposed of or otherwise dealt with by any person, except in the manner and circumstances specified in these orders. 2. Pursuant to s 38 of the Proceeds of Crime Act 2002 (Cth), the Official Trustee in Bankruptcy is to take custody and control of the cash amount of $AUD 399,950 seized by the Australian Federal Police on 26 September 2015 (recorded on AFP Property Seizure Records M337410) together with any interest earned on that amount. 3. Unless the parties approach to be heard within seven days, Mr Cole is to pay the Commissioner's costs, as agreed or assessed.

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: 25 June 2018