[2009] HCA 41
Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439
[2015] WASC 320
Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391
[1967] HCA 48
Director of Public Prosecutions (Cth) v Kamal (2011) 248 FLR 64
[2011] WASCA 55
Director of Public Prosecutions (Cth) v Tan [2003] NSWSC 717
George v Rockett (1990) 170 CLR 104
Source
Original judgment source is linked above.
Catchwords
[2009] HCA 41
Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439[2015] WASC 320
Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391[1967] HCA 48
Director of Public Prosecutions (Cth) v Kamal (2011) 248 FLR 64[2011] WASCA 55
Director of Public Prosecutions (Cth) v Tan [2003] NSWSC 717
George v Rockett (1990) 170 CLR 104[1990] HCA 26
Hussien v Chong Fook Kam [1970] AC 942
International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319[2009] HCA 49
N Joachimson (A Firm Name) v Swiss Bank Corporation [1921] 3 KB 110
NAB v Norman (2009) 180 FCR 243[2009] FCAFC 152
Pereira v The Queen (1988) 35 A Crim R 382[1988] HCA 57
Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355[1998] HCA 28
R v Crabbe (1985) 156 CLR 464[1985] HCA 22
Russell v Scott (1936) 55 CLR 440[1936] HCA 34
Studman v Commonwealth Director of Public Prosecutions [2007] 177 A Crim R 34[2007] NSWCA 285
Sutherland ReFrench Caledonia Travel Service Pty Ltd (In liq) (2003) 59 NSWLR 361
Judgment (13 paragraphs)
[1]
The applicant's submissions
The applicant relied upon three separate arguments in support of his application that the restraining orders be revoked. He primarily relied upon s 42(5)(a) of the Act which provides that, if a restraining order is made ex parte, a court may later revoke it if satisfied that there were "no grounds" to make the order at the time it was made. The applicant relied upon s 330(4)(a) of the Act which provides that property ceases to be proceeds or an instrument of an offence if it is acquired for sufficient consideration without the purchaser knowing it is tainted "and in circumstances that would not arouse a reasonable suspicion" that the property was the proceeds of an offence or an instrument of an offence. The applicant's second argument was that it was in the interests of justice to revoke the orders: s 42(5)(b) of the Act. His third argument was that the order should be revoked because s 22(1) of the Act had not been complied with.
In addition to the oral submissions made by counsel for the applicant at the hearing of this application, the applicant relied upon four sets of written submissions dated 8 February, 8 June, 13 October and 8 December 2017.
As for the application of s 330(4)(a) of the Act, it was submitted that the applicant was a third party in relation to the funds in his Westpac account and he had the right to call on the repayment of those funds at will. The applicant acquired an interest in those funds for a sufficient consideration because Wisman, an authorised and licensed money-changer in Indonesia, earned commission on the money remittance as well as profit on the exchange rate given to the applicant.
It was not disputed that there was at least one intermediate transaction or agreement between those involved in the money laundering that occurred between the time the applicant deposited the funds with Wisman and the time at which the funds were paid into the applicant's Westpac account. Despite this, it was submitted that the circumstances in which he acquired the interest in those funds were not such that they would arouse suspicion because the applicant was not aware that the transfers of funds into his Westpac account were structured. The applicant had internet access to his Westpac account, however did not check the account beyond the 'balance' screen. One had to go to a further 'transaction' page that contained details of the transactions in order to identify how the deposits were made, and he never did that. It was submitted that once the funds were paid into the account they ceased to be proceeds or an instrument of crime.
It was submitted that money-changers are widely used in Indonesia for both currency conversion and money transfers, both domestically and internationally. They are popular because they offer attractive rates and reduced fees. The applicant used a legitimate money exchange company.
Addressing the "interests of justice" ground, it was submitted that the primary purpose of the Act is directed against those actively engaged in criminal activity and that its application against blameless individuals would be contrary to that purpose and would result in manifest injustice and unfairness. A number of submissions were advanced to show the absence of criminal complicity on the part of the applicant: the prior transfers with Wisman were without incident; money-changers offer competitive rates and are commonplace in Asia; there was nothing to put him on notice that he was taking any risk by using Wisman services; the purpose of the transfers was to invest in Australia and provide his daughters with accommodation and he had no way of knowing that he would become involved in a possible breach of Australian law or that there was a possibility of moneys being restrained or forfeited. It was thus submitted that it is in the interests of justice that the restraining order be revoked.
Counsel for the applicant conceded that it is possible that the applicant's legitimately earned money got mixed with the funds that could not be properly traced but that the applicant was not aware of the existence of any activity of the intermediaries or the nature of their transactions.
In supplementary submissions following the decision in Kalimuthu, counsel for the applicant submitted that this court should follow that decision as it was factually similar. Following the decisions of Simpson J in Fernandez and Lordianto, it was submitted on behalf of the applicant that Fernandez should not be followed but the result in Lordianto ought to be followed. Following the decision of Wilson J in Jieying Sun, it was submitted that her Honour should be followed at [130] to the extent that her Honour did not follow Simpson J's decisions but that otherwise Jieying Sun had no application.
I consider the applicant's submissions regarding these four recent decisions in more detail below.
[2]
The Commissioner's submissions
On behalf of the Commissioner it was submitted that the threshold to be satisfied in an application under s 42(5) of the Act is different from and substantially higher than an application for an exclusion order or any application that a final forfeiture order not be made. It was submitted that, in those circumstances, there was no need to cross-examine the applicant in order to determine whether there was any basis at all for the initial restraining order. An examination order has been made and in due course, the applicant will be examined. Should the applicant make an application for exclusion from any restraining order the court "must not hear" such an application until the Commissioner has had a reasonable opportunity to conduct examinations in relation to such an application: see s 32 of the Act.
Senior counsel for the Commissioner submitted that, with respect to the present application, there is no need to consider what the applicant must or might have known as the examination under the Act has not been conducted yet. Despite this, the fact that the applicant has not been examined does not present a bar to the making of this revocation application.
It was submitted that, even though the law enforcement agency has not identified an offence that the applicant has been engaged in, there is no need to identify that an offence was committed by an individual because the restraining orders are directed to the property. He relied upon the decision of Beech-Jones J in Commissioner of the Australian Federal Police v Minh Duc Pham [2015] NSWSC 1383 ("AFP v Pham") which involved "cuckoo smurfing" practices, as authority for the proposition that the focus is on the property and that the court should not be looking at the individual's guilt or innocence.
Senior counsel for the Commissioner relied upon the applicant's concession that, even though the money he gave to the money-changer in Indonesia was lawful, some of the moneys that flowed into his bank account may have been mixed with the proceeds crime. It was submitted that this concession is "the start and finish of this case".
As for the application of s 330(4)(a) of the Act, the Commissioner submitted that it cannot be said that the applicant is a "third party" because the structured deposits were paid directly into his bank account and the applicant accepted that some of the funds in his bank account must have been proceeds of crime at some stage. Consequently, his accounts hold proceeds of crime. Even if the applicant was a third party, it was submitted that no consideration was given for the property that ended up in his account. There is no evidence to support that the moneys given to the money-remitter in Indonesia are the moneys being deposited into his bank account. It was submitted that all of the money in the applicant's account is proceeds of crime because it was deposited by way of structured deposits.
[3]
Consideration
Although the applicant's property is currently restrained, what the Commissioner ultimately seeks is the forfeiture of the applicant's property. Before a court makes any forfeiture order under the Act in relation to property either suspected of being the proceeds of an offence or the instrument of a serious offence, there are a number of interlocutory stages through which the proceedings might pass. The first stage is that the Commissioner seeks that the relevant property be restrained. Those proceedings are usually heard and determined ex parte.
If the restraint proceedings have been heard ex parte and orders restraining the property made, then the owner of the property is entitled to have the orders revoked under s 42 or the Act, presuming the application is brought within 28 days. As stated above, in the present matter, there was no issue taken that the restraining orders were made ex parte and that the applicant brought these revocation proceedings within the statutory time limit in s 42(2) of the Act.
Proceedings brought under s 42 of the Act are effectively "strike-out" proceedings heard after the restraining orders are first made and before the matter proceeds any further.
Presuming that a revocation application is unsuccessful, the next stage is usually that the owner of the property will be examined under s 180 of the Act. Davies J made an examination order in relation to the applicant at the same time that his Honour made the restraining orders in this matter.
After he or she has been examined, the property owner can seek that an interest held in the restrained property be excluded from the restraining order. Section 29 provides that an exclusion order can be made in relation to a restraining order if the court is satisfied that the relevant interest is neither the proceeds of a relevant indictable offence or an instrument of any serious offence. Section 32 provides that such an order cannot be made until after the property owner has been examined under the Act.
Presuming that no exclusion order has been made, the next stage is that the Commissioner will seek a forfeiture order under ss 47 or 49 of the Act. Section 49(4) confers a discretion upon the court to refuse to make a forfeiture order if, although satisfied that the property is an instrument of a serious offence, it is not satisfied that it is the proceeds of an offence and it is also satisfied that it is "not in the public interest to make the order". Section 73 provides that the court is to make an order excluding specified property from a forfeiture order if satisfied that it is neither the proceeds of unlawful activity nor the instrument of a serious offence.
[4]
"No grounds" for the orders: s 42(5)(a) of the Act
In order for the application under s 42(5)(a) of the Act to succeed I must be satisfied that there are "no grounds" on which to make the order. The test has been described as a "tough one" and the onus is on the applicant to demonstrate that there are "literally no grounds for the foundation of the order for it to be revoked": Director of Public Prosecutions (Cth) v Tan [2003] NSWSC 717 at [14].
The statutory basis to make a restraining order under s 19 of the Act is a low one. A restraining order "must" be made by the court if it is satisfied that there are "reasonable grounds to suspect" that the property is either the proceeds of an indictable offence or an instrument of a serious offence. Thus, if the court is satisfied there is a basis for the relevant "suspicion", there is no discretion; the order must be made. The meaning of "suspicion" in this context is well established. In George v Rockett (1990) 170 CLR 104; [1990] HCA 26, the High Court approved the definition of "suspicion" given by Lord Devine in Hussien v Chong Fook Kam [1970] AC 942 at 948-949 as follows:
"Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking: "I suspect but I cannot prove." Suspicion arises at or near the starting point of an investigation of which the obtaining of prima facie proof is the end. When such proof has been obtained, the police case is complete; it is ready for trial and passes on to its next stage. It is indeed desirable as a general rule that an arrest should not be made until the case is complete. But if arrest before that were forbidden, it would seriously hamper the police….
Their Lordships have not found any English authority in which reasonable suspicion has been equated with prima facie proof.
Suspicion can take into account matters that could not be put in evidence at all... Suspicion can take into account also matters which, though admissible, could not form part of a prima facie case."
Thus, in order to establish that there are "no grounds" to base the orders, the applicant must establish that there are no grounds at all for the relevant suspicion in s 19 of the Act.
The applicant does not contend that there were insufficient grounds for Davies J to make the relevant ex parte restraining order in reliance upon the affidavit of Mr Roberts. Rather, the applicant's position was that, but for the operation of s 330(4)(a) of the Act, there are reasonable grounds to suspect that the funds standing in the applicant's Australian bank accounts are the proceeds of an offence.
[5]
Was there any acquisition of property in this matter?
The first question to consider is whether the cash deposited into the applicant's Westpac account by unknown persons involved any "acquisition" of "property" by him. The word "acquired" is not defined in the Act and should be given its everyday meaning. I have proceeded on the basis that it means "to come into possession of". There is no dispute on the facts that large amounts of cash were deposited into the applicant's bank account. Had the applicant been handed this cash physically, then it is to be accepted that he would have acquired property, being the physical cash itself. The question is whether the same conclusion can be arrived at in circumstances where the applicant was not provided with cash but, rather, funds were deposited into his bank account.
It is well settled that funds in a bank account constitute a chose in action rather than a chose in possession. When the applicant opened his Westpac eSaver Account, he brought into existence a banker-customer relationship founded in contract. In Russell v Scott (1936) 55 CLR 440; [1936] HCA 34 ("Russell v Scott"), a decision relied upon by Simpson J in Lordianto and Fernandez, Dixon and Evatt JJ observed at 450-451 that a "bank account" is nothing more or less than a chose in action, consisting "in the contractual right against the bank, ie in a debt, but a debt fluctuating in amount as moneys might be deposited and withdrawn." Russell v Scott concerned the entitlement of one of two joint account holders of a bank account at the time of the death of the other. Russell v Scott thus stands as authority for the proposition that, at any single point in time (such as, in that case, a death), there exists only one chose in action enforceable against the bank. The parties took no issue with this well established principle.
As Barwick CJ later noted in Croton v The Queen (1967) 117 CLR 326 at 330; [1967] HCA 48 at [12]:
"….though in a popular sense it may be said that a depositor with a bank has "money in the bank", in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases: see generally Nussbaum, Money in the Law: s. 8, p. 103."
[6]
Did the applicant acquire the property as a third party?
The concept of a third party is usually someone at arm's length. The applicant relied upon the definition of third party in the Macquarie Dictionary (6th Ed, 2013) as:
"any person other than the principal to some transaction, proceeding or agreement".
It was submitted by the applicant that, in the period between the applicant's deposit of the funds with Wisman and the payment of funds into his account, there was at least one intermediate transaction between those involved in the money laundering activity as detailed in Mr Robert's affidavit. It was accepted on behalf of the applicant at the hearing that the more common example is when a person buys a car or a house without knowledge that the property was the proceeds of crime.
The Commissioner submitted that Kalimuthu is wrongly decided on this point and should not be followed and that I would follow the findings of Simpson J in Lordianto and Fernando. The applicant submitted that I would prefer the findings of Allanson J to those of Simpson J and Wilson J and that in any event, the facts in Jieying Sun were distinguishable.
In Kalimuthu, Allanson J considered the element of "third party" at [117]-[121]. His Honour was satisfied that the term "third-party" does not simply refer to someone not a party to the offence and was satisfied the applicants in that matter were third parties for three reasons. First, the applicants were not in any legal relationship with anyone involved in the money remitting transaction that would make it a transaction between related parties. Second, neither Mr Ganesh nor his wife had any interest in the physical Australian currency before it was deposited into his account. Third, his Honour concluded at [121]:
"…Mr Ganesh's position is relevantly no different from that of a person who sells property to a stranger and is paid by direct debit into his bank account. His position is analogous to that of a seller of Malaysian ringgit who is to be paid by the deposit of a corresponding amount of Australian currency into his account in Australia. The existing contractual relationship with the bank does not alter that he is a third party acquiring property through that transaction".
In Lordianto Simpson J reached a different conclusion. Her Honour observed at [101] that:
"A third party is a person to whom property passes - a third party to the ownership of the property. It is the party by whom the property is acquired. The paragraph is concerned with the transfer of property. A person is not a third party only because he or she had no connection with the offence that causes the property to be tainted".
[7]
Was the property acquired for sufficient consideration?
The third element in s 330(4)(a) the applicant needs to establish is that he acquired the funds for "sufficient consideration," a term defined in s 338 (see [22] above).
At the hearing it was submitted that the "consideration" was either the fees the applicant paid to Wisman to transfer the funds to Australia or the funds he deposited with Wisman for the purposes of that transfer. Reliance was also placed on the fact that the Commissioner did not suggest otherwise than that Wisman was an authorised and licensed money-changer in Indonesia. It was submitted that Wisman was in business to make a profit and offered a business model which was competitive with any commercial bank.
The applicant relied upon the finding of Allanson J in Kalimuthu that the property in that matter was acquired for sufficient consideration where his Honour stated at [124]):
"I am satisfied that Mr Ganesh has proved that the amount he paid, through Mr Zamri, was sufficient consideration for what he acquired. The fact that the Malaysian ringgit passed through the hands of one or more intermediaries does not affect that Mr Ganesh gave consideration to someone. While the Commissioner did not accept the respondents' interest had been acquired for sufficient consideration, he did not challenge that the Malaysian ringgit were exchanged for Australian dollars at a commercial rate. And the Commissioner did not challenge the evidence of Mr Ganesh and Mr Zamri that the money remitter was chosen because the rates offered were better than those offered by the banks".
In Lordianto, Simpson J observed at [107]-[108] that there was something of a paradox for the applicants to rely on being the innocent victim of cuckoo smurfing and at the same time to claim that the funds had been acquired for sufficient consideration. If the deposits were made in the course of a cuckoo smurfing operation, they were deposited without any consideration passing from the applicant to the depositors and, in the context of the present case, the applicant maintains whatever rights exist under Indonesian law against Wisman to whom he paid the money. That is, the consideration was paid to Wisman for transfers that did not eventuate. If, on the other hand, the deposits were made for sufficient consideration in accordance with the applicant's directions then the practice of cuckoo smurfing is irrelevant.
[8]
Did the applicant know that the property was the proceeds of a criminal offence
The fourth element to be established is that the applicant did not know that the property was the proceeds of a criminal offence.
As stated above at [118], unlike the previous three elements, the consideration of this fourth element turns on whether the evidence of the applicant is to be accepted in the context of this revocation application. This fourth element does not require me to be satisfied of whether or not the applicant committed an offence, but it does require me to be satisfied that he did not know that the funds were the proceeds of an offence.
I note that the findings on this element in Kalimuthu, Fernandez, Lordianto and Jieying Sun all turned on their own facts and are of no direct assistance to my determination of this element. Despite this, the Commissioner submitted that the findings of Simpson J in Fernandez and Lordianto regarding the inapplicability of s 330(4)(a) to the facts in those matters applied a fortiori here. The applicant, on the other hand, submitted that I would reach the same conclusion as Allanson J did in Kalimuthu given the factual similarity to the present case.
Although the onus is on the applicant to establish this element on the balance of probabilities, it is to be noted that the Commissioner did not adduce any evidence to the effect that the applicant knew the money was the proceeds of crime. The un-contradicted evidence before me is that the applicant did not know that the funds in his account were the proceeds of criminal activity.
In both Fernandez and Lordianto, Simpson J considered and rejected the Commissioner's submission that knowledge could be imputed by reliance upon principles of wilful blindness: R v Crabbe (1985) 156 CLR 464 at 470; [1985] HCA 22 at 12 and Pereira v The Queen (1988) 35 A Crim R 383; [1988] HCA 57. In Fernandez, her Honour accepted that the defendant did not know that the property was either the proceeds of an offence or the instrument of an offence. In Lordianto, her Honour was not so satisfied on the basis that the evidence disclosed that the applicants had been "well aware," over a period of years, of the unorthodox manner in which deposits were being made in to their account. In circumstances in which the onus lay on the applicants to prove that they did not possess knowledge, they had not discharged that onus (at [120]). In Jieying Sun, a similar conclusion was reached. Obviously each matter turns on its own facts.
[9]
Should the circumstances have aroused a reasonable suspicion?
I turn now to consider the fifth and final element under s 330(4)(a) of the Act. The parties accepted that this is an objective test. In Kalimuthu, Allanson J explained the test as follows at [125]:
"The question posed by the section is objective: would the circumstances arouse that reasonable suspicion in a person in the position of the respondents, knowing what they knew: see Director of Public Prosecutions v Le [2007 ] VSCA 18; (2007) 15 VR 352 [24]. The decision was overturned in the High Court, but the approach of the Court of Appeal to 'reasonable suspicion' was approved: see Director of Public Prosecutions (Vic) v Le [20 07] HCA 52; (20 07) 232 CLR 562 [1] (Gleeson CJ), [127] (Kirby and Crennan JJ)."
The resolution of this fifth element obviously turns on the facts of the particular matter before the Court. Despite this, the applicant again submitted that I would adopt the approach of Allanson J in Kalimuthu on this issue. In that matter, the money was transferred from Malaysia to Australia using a friend of the applicants as an intermediary. He understood that someone would be depositing the money into his account in Australia. He gave evidence that he noticed the money going into his account in small amounts under $10,000. He asked the intermediary about it and was told that this was how money is transferred to Australia. He accepted that explanation. He stated that he was not concerned so long as to the total amount received was consistent with what he had given to the intermediary. It turns out that the intermediary had used a money remitter named Hameed. Hameed gave him no receipts. The intermediary has since tried to find Hameed with no success. There was other evidence before Allanson J that Hameed's business was raided in 2015 and closed down because it was suspected of conducting an illegal money services business. In Kalimuthu, Allanson J was satisfied that no reasonable suspicion would be aroused in the circumstances based on eight matters (at [130]-[138]). Each decision clearly turns on its own facts.
The focus of this element is on the objective facts in the context of an assertion that there are "no grounds" to make the restraining orders. The objective facts disclose that the manner and form of the funds being deposited into the applicant's eSaver Account with Westpac were structured and indicative of money laundering. Hundreds of cash deposits of less than $10,000 were made directly into his bank account in person at different branches in NSW and Victoria, either on the same day or within a short time. That this was the case is obvious from the applicant's bank statements which cover the period from October 2013 until May 2015.
[10]
Conclusion: No grounds
The applicant has not discharged his onus of establishing that there were "no grounds" to suspect that the funds standing in his bank accounts (and the Ryde property purchased with some of those proceeds) were either the proceeds of an offence or an instrument of a serious offence.
In so concluding, I am satisfied that there was no evidence to suggest that the applicant is guilty of any offence nor, at this preliminary stage of the proceedings, that he actually knew that the funds in his Westpac account were the proceeds of any criminal activity. The difficulty is, as was conceded on behalf of the applicant at the hearing of this matter, unless the applicant can establish the five elements in s 330(4)(a) of the Act, there is no other basis in the Act to argue that there are "no grounds" for the relevant restraining orders.
[11]
Interests of Justice
I turn finally to consider the alternative basis upon which the applicant seeks the revocation of the restraining orders. Section 42(5)(b) of the Act provides that the Court may revoke the restraining order if satisfied that "it is otherwise in the interests of justice to do so". The question is thus whether the applicant has established that it is in the interests of justice, at this early stage of the proceedings and prior to him being examined under s 180 of the Act, to revoke the restraining order on the material currently before the court.
Section 42(5)(b) of the Act was introduced by parliament after the High Court decision in International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 ; [2009] HCA 49;. As Martin CJ observed in Director of Public Prosecutions (Cth) v Kamal (2011) 248 FLR 64; [2011] WASCA 55 at [44]:
"The Act was also amended by the Crimes Legisla tion Amendment (Serious and Organised Crime) Act 2010 (Cth), the relevant portions of which also came into effect on 20 February 2010. That Act amended s 42(5) so as to provide an additional ground upon which a court might revoke a restraining order by providing that a court may do so 'if satisfied that it is... in the interests of justice'. Given that these amendments were made following the decision in International Finance, it is reasonable to infer that the amendment to s 42 was made in response to that decision and, in particular, to address concerns expressed by some of the majority justices in that case relating to the lack of any facility to enforce the obligation to make full disclosure when proceeding ex parte in the CAR Act. The breadth of the power of revocation provided by the amendment would be sufficient to empower a court to revoke a restraining order because of the DPP's failure to comply with the obligation of full disclosure".
Neither of the parties was able to identify any other instance in which a court has been satisfied that there were reasonable grounds to make a restraining order but revoked it nonetheless in "the interests of justice." Nor have I been able to locate any such decision in which a restraining order has been revoked under s 42(5)(b) of the Act. It is to be accepted that the statutory language of s 42(5)(b) of the Act does not limit the scope of the subsection to circumstances in which there has been non-disclosure, but the lack of any case in which it has ever been applied means there is little guidance as to in what other circumstances it could be applied beyond the terms of the provision in its statutory context, having regard to the Act's objects.
[12]
ORDERS
I make the following orders
1. The defendant's notice of motion dated 4 November 2015 is dismissed.
2. The defendant is to pay the plaintiff's costs of the motion.
[13]
[29] fifth sentence - "s 143 of the AML Act" amended to "s 142 of the AML Act"
[33] third sentence - "before Davies J" deleted
[217] second sentence -"cross-examined before her" amended to "examined by the Registrar"
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: 23 February 2018
Parties
Applicant/Plaintiff:
The Commissioner of the Australian Federal Police
Respondent/Defendant:
Tjongosutiono
Legislation Cited (7)
Anti-Money Laundering and Counter Terrorism Financing Act 2006(Cth)
Amendment (Serious and Organised Crime) Act 2010(Cth)
These interlocutory proceedings concern the operation of ss 42(5) and 330(4) of the Proceeds of Crime Act 2002 (Cth) ("the Act"), specifically, the application of those provisions to the restraint of funds held in Australian bank accounts suspected to have been involved in a particular species of money laundering known as "cuckoo smurfing".
On 8 October 2015, on application by the Commissioner of the Australian Federal Police ("the Commissioner"), Davies J made a number of ex parte orders, including orders under s 19 of the Act, restraining specified property ("the property") in the name of the applicant. The property comprised real property (a home unit) in Ryde as well as funds held in six bank accounts. Two of the accounts were with the Westpac Banking Corporation ("Westpac"), being a "Choice Offset Account" and a "Rocket Investment Loan Account". The other four accounts were with the Commonwealth Bank of Australia ("CBA"), comprised of three "Term Deposit" accounts and a "Netbank Saver" account. The funds in each of these accounts were identified as standing to the credit of the applicant.
On 4 November 2015, the applicant filed a notice of motion seeking, inter alia, that the restraining orders be revoked under s 42(5) of the Act. He is the applicant in these proceedings.
On 17 March 2017, the applicant's motion to set aside the restraining orders came before me for hearing. I reserved my decision at the conclusion of the hearing.
On 19 April 2017, the decision of Allanson J of the Supreme Court of Western Australia in Commissioner of the Australian Federal Police v Kalimuthu (No.3) [2017] WASC 108 ("Kalimuthu") was handed down. On 1 May 2017, the parties sought and were granted leave to provide supplementary written submissions addressing the findings in Kalimuthu. Written submissions were subsequently filed by the applicant on 18 May 2017 and by the Commissioner on 8 June 2017.
On 7 September 2017, Simpson J, sitting as a single judge in the Common Law Division of this Court, delivered her judgments in Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196 ("Lordianto") and Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197 ("Fernandez"). I shall refer to her Honour as Simpson J in this judgment (as her Honour describes herself in those judgments). On 21 September 2017, the parties were again granted leave to provide further supplementary written submissions addressing the findings in those decisions. Written submissions were subsequently filed by both parties on 13 October 2017.
On 30 October 2017, Wilson J delivered her decision in Commissioner of Police v Jieying Sun [2017] NSWSC 1476 ("Jieying Sun"). On 21 November 2017, the parties were again granted leave to provide further supplementary written submissions addressing the findings in that decision. Written submissions were subsequently filed by both parties on 8 December 2017.
With respect to the question of whether the circumstances would arouse a reasonable suspicion, the Commissioner submitted that the test is an objective one, however, that there is no need to go to that point given the fact that the funds in the applicant's account are proceeds of crime and that he is not a third party because he received proceeds of crime.
With respect to the "interests of justice" ground, the Commissioner submitted that the construction of s 49(5)(b) is to be looked at by reference to the Act as a whole and that the operation of that subsection cannot override the objects of the Act as a whole. He relied upon the decision of Martin CJ in Director of Public Prosecutions (Cth) v Kamal (2011) 248 FLR 64; [2011] WASCA 55. It was submitted that the orders should not be revoked under s 42(5)(b) of the Act at a time before any examination of the applicant under s 180 of the Act, an exclusion application or a final forfeiture hearing. That is, it cannot be in the interests of justice to release moneys to an individual where there is a prima facie case that the moneys in the account are the proceeds of crime.
It was submitted that the applicant may bring an application for exclusion orders under s 29 of the Act to deal with any perceived unfairness and that such application would be dealt with before the forfeiture application.
In relation to the Commissioner's supplementary submissions, the Commissioner's primary position was that the decision of Allanson J in Kalimuthu was not relevant because it was not concerned with a revocation application. Given the high test for the applicant to discharge in a revocation application, the consideration of s 330(4)(a) of the Act in a different statutory context does not assist the applicant. In the alternative, it was submitted that Kalimuthu was wrongly decided in two respects and is currently the subject of an appeal to the Western Australian Court of Appeal.
It was also submitted that Simpson J erred in both Fernandez and Lordianto in finding that the deposit of funds into the applicant's bank accounts did not amount to any "acquisition". In all other respects the Commissioner accepted her Honour's findings regarding the proper construction of s 330(4)(a) of the Act in those two decisions. The Commissioner also submitted that Wilson J's findings in Jieying Sun at [132] are correct and should be followed.
I consider the Commissioner's submissions regarding these four recent decisions in more detail below.
It is in this statutory context that this application under s 42 of the Act is to be considered.
The applicant relied upon three arguments in support of this revocation application. The primary position is that there are "no grounds" under s 42(5)(a) of the Act for the restraining order to be made having regard to s 330(4)(a) of the Act. The second argument is that it is in "the interests of justice" to revoke the order under s 42(5)(b) of the Act. The third argument is that the order should be revoked because s 22(1) of the Act had not been complied with.
The applicant's third argument can be disposed of briefly. Section 22(1) of the Act provides that a restraining order "must only relate to one suspect". It was submitted that the affidavit of Mr Roberts identified two individuals and one corporate entity as suspected offenders in this matter. The difficulty with this submission is that the restraining order was made under s 19 of the Act. As stated above at [10], whereas ss 17, 18, 20 and 20A of the Act all pertain to the restraint of property of a person who has committed an offence or is reasonably suspected of having committed an offence, a restraining order made under s 19 of the Act focusses on the property rather than the suspect. Although it is to be accepted, as was submitted on behalf of the applicant, that s 22 in its terms does not state that it only applies to proceedings brought other than under s 19 of the Act, given the nature of an application brought under s 19 of the Act I am satisfied that s 22 can have no application to such proceedings.
I propose to first deal with the applicant's primary argument that there are "no grounds" for the order under s 42(5)(a) of the Act based on s 330(4) of the Act and then turn, finally, to consider the question of the "interests of justice" test in s 42(5)(b).
I have extracted s 330(4)(a) of the Act above at [20] but will extract it again here for ease of reference. It provides that:
"(4) Property only ceases to be proceeds of an offence or an instrument of an offence:
(a) if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires)"
As Simpson J observed in Fernandez at [53], there are five elements an applicant must establish before a court can be satisfied that property which is the proceeds of crime (or the instrument thereof) is no longer the proceeds of an offence under s 330(4)(a) of the Act:
1. that the property was acquired;
2. by a third party;
3. for sufficient consideration;
4. without knowledge that the property was the proceeds or an instrument of a relevant offence; and
5. in circumstances that would not arouse a reasonable suspicion that the property was the proceeds or an instrument of a relevant offence.
The "property" in question is described in the restraining order as the funds standing to the credit of the applicant in his bank accounts, funds "held in and available for withdrawal" in the Westpac Investment Loan Account and the Ryde property. The Ryde property was purchased with the proceeds of the structuring offences and thus is also the proceeds of crime: see s 330(1) of the Act. My consideration of s 330(4)(a) will focus on its application to the funds in the bank accounts. If the applicant can establish that that property is no longer the proceeds or instrument of an offence then it follows that the Ryde property would not be either.
It goes without saying that in order for property to cease being the proceeds of crime, it must first be found to be the proceeds of an offence (or the instrument of a serious offence) in the first place. This is consistent with the Explanatory Memorandum to the Act. In relation to cl 330 generally, the Explanatory Memorandum states that:
"This clause establishes that money or other property which is "proceeds of an offence" or an "instrument of an offence" does not lose its nature as such merely because it is exchanged for another item or is otherwise dealt with (for example by the sale of property which is proceeds or an instrument, or by placing cash which is proceeds in your bank account, or using cash which is proceeds to purchase property)."
As Simpson J observed Lordianto at [104], s 330(4) on its face may be seen to have been intended to protect a person who innocently acquires property (for sufficient consideration) unaware of the circumstances in which it became tainted. It is thus a statutory enactment of the equitable notion of a purchaser for value without notice. An obvious example of its application would be, for example, where a person purchased a motor vehicle which had initially been purchased with the proceeds of criminal activity and then on-sold. In that scenario, the second purchaser would be a third party who acquired the motor vehicle for sufficient consideration without knowledge of any offence and in circumstances that would not arouse a reasonable suspicion that the property was the proceeds or an instrument of a relevant offence. That this is so is consistent with the Explanatory Memorandum, where in relation to 330(4) specifically it is stated that:
"Subclause 330(4) protects the rights of innocent third parties who acquire the proceeds or instrument of an offence in certain circumstances."
In addition to s 330(4)(a), there are a number of other circumstances in which the Act provides that tainted property may cease to be so: s 330(4)(b)-(g). These subsections are informative as to the proper construction of s 330(4)(a) of the Act. These other circumstances include: if the property is inherited from someone who in turn inherited it from someone else; if it was distributed in accordance with a court order under the Family Law Act 1975 (Cth) and six years have elapsed since that distribution; if the property is acquired by a person as payment for reasonable legal expenses incurred in connection with an application under this Act or defending a criminal charge; if a forfeiture order in respect of the property is satisfied; if the property is forfeited etc under a corresponding law; if the property is otherwise sold or disposed of under this Act; and in any other circumstances specified in the regulations.
It is to be noted that the other sub-subsections in s 330(4) of the Act all share the common characteristic that there is some effluxion of time between the property becoming the proceeds of crime and then ceasing to have that character as a result of an intervening act. The factual scenario in the present matter is very different. At the time of the hearing of this application, the parties could not identify any decision in which an application under s 330(4)(a) had ever been considered. Since I reserved my decision, four decisions have been delivered in which s 330(4)(a) has been considered: Kalimuthu, Fernandez, Lordianto and Jieying Sun.
It was the Commissioner's primary position that none of these decisions are directly applicable as none of them concerned a revocation application under s 42 of the Act. Kalimuthu, Lordianto and Jieying Sun all concerned applications for s 29 exclusion orders whereas Fernandez concerned a s 49 forfeiture application. That is, it was contended that those decisions concerned an adjudication of competing evidence on the balance of probabilities, whereas this revocation application involves an assessment of whether there is any basis justifying the original order. It was submitted that the threshold is different from and substantially higher than in those cases.
I have considered the Commissioner's submission on this issue but it seems to me that in circumstances in which the Commissioner did not suggest that s 330(4)(a) of the Act has no bearing on an application for a revocation order under s 42 of the Act, any judicial consideration of the provision is of assistance so long as regard is had to the different statutory context in which s 330(4)(a) is to be considered. I thus propose to consider each of the five elements in s 330(4)(a) of the Act mindful of the fact that a revocation application is analogous to a strike out application and the applicant faces a high bar. As will be seen, the first three elements turn on the construction of s 330(4)(a) and its application to unchallenged facts. Only the fourth and fifth elements involve a consideration of whether the evidence of the applicant should be accepted unconditionally.
In circumstances where a significant proportion of the supplementary submissions of both parties concerned what aspects of each of the four recent decisions concerning s 330(4) of the Act I should follow and which aspects I should not, it is necessary to have regard to the facts in those matters as well as the findings made on each of the five elements in s 330(4)(a) in order to properly address the detailed submissions made by each of the parties.
If it is to be accepted that the applicant's bank accounts each consist of a debt owed to him by the bank of a fluctuating value, the question is whether, when the value of that debt is increased by way of funds being deposited into an account, it can be said that property has been "acquired" by the account holder within the meaning of s 330(4)(a). The first decision to consider this question was Kalimuthu in which Allanson J considered another "cuckoo smurfing" case with similar facts to the present case.
In Kalimuthu, the Commissioner had obtained a restraining order under s 19 of the Act in relation to various bank accounts. It was alleged that structured deposits had been made into the accounts in contravention of s 142(1) of the AML Act. The applicants in Kalimuthu ran a business in Malaysia and Allanson J was satisfied that the business was making sufficient money to transfer the large amounts to Australia claimed.
Based on similar facts to the present case, Allanson J concluded that there had been an acquisition of property within the meaning of s 330(4)(a) of the Act observing at [116]:
"Property includes rights in connection with property: s 338. Mr Ganesh held existing contractual rights against the bank with regard to the current balance of his account. When a deposit was made into his account, his interest then included rights in relation to the additional credit balance, or to the new total credit balance. That is an acquisition of property".
Following the decision in Kalimuthu, Simpson J delivered two decisions on the same day in which her Honour considered s 330(4)(a) of the Act in the context of cuckoo smurfing. Her Honour arrived at a different conclusion to that of Allanson J in Kalimuthu.
In the first of the two decisions, Lordianto, her Honour considered an application under s 29 of the Act for certain specified interests in property to be excluded from a restraining order made under s 19 of the Act. The applicants swore affidavits and gave oral evidence through an interpreter. As her Honour noted, much of the evidence was not in dispute.
The applicants in Lordianto were a husband and wife who are Indonesian citizens living in Jakarta. They had both been granted permanent residency in Australia and spent a considerable amount of time here. They have a daughter who resides in Melbourne and they planned to eventually retire in Australia. Mr Lordianto is a member of a wealthy Indonesian family and in order to maintain his entitlement to Australian permanent residency he had transferred large sums of money to accounts held in he and his wife's name in the CBA. In order to make those transfers of funds to the CBA accounts from Indonesia, Mr Lordianto used the services of "money-changers". $4.5 million was transferred to Australia through a money remitter in Indonesia. The money-remitter would instruct the applicant's agent to deposit funds into the accounts of various persons in Indonesia who were unknown to her and she complied.
Over a period of time, multiple cash deposits were made into the CBA accounts in circumstances that gave rise to a suspicion that structuring activity was taking place contrary to s 142 of the AML Act. Her Honour identified by way of example that, on 23 October 2013, 35 cash deposits were made into one of the applicant's CBA accounts all in amounts less than the $10,000 threshold for mandatory reporting prescribed by s 43 of the AML Act. The deposits were made at a variety of branches across Sydney and two in Victoria. On that day, $271,800 was deposited into the account in that manner. As her Honour found, there was a strong foundation for an inference that the accounts were being used for offences of structuring as prescribed by s 142 of the AML Act.
The applicants in Lordianto relied upon s 330(4)(a) of the Act to support a finding that the money suspected of being the proceeds of crime which was deposited into their bank account was no longer the proceeds of an offence.
Her Honour was not satisfied that there had been any acquisition of property within the meaning of s 330(4)(a) of the Act. Her Honour cited the relevant authorities concerning the nature of funds held in a bank account. These included Russell v Scott at 450-451; Croton v The Queen (1967) at 330-331; Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391; [2012] NSWCA 381 at [41]; Sutherland Re; French Caledonia Travel Service Pty Ltd (In liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at [32] ("French Caledonia Travel Service") and N Joachimson (A Firm Name) v Swiss Bank Corporation [1921] 3 KB 110 at 127. After citing these passages her Honour observed (at [78]):
"As both parties in the present case agreed, the property in question was the applicants' interests in the bank accounts. Both parties also agreed that the correct characterisation of their interests in the bank accounts was that of a chose in action. That, as the cases cited above show, gave the applicants an entitlement to require CBA to pay to them all or part of whatever amount was credited to the accounts at a time of their choosing. Correctly identified, their property interests were an intangible right to require payment by the CBA on demand. The value of the right varied, depending upon what deposits had been made into the accounts, or what withdrawals had been made. But the interest in the property did not vary: it remained a right to require payment by CBA. The property remained the contractual right to receive from the CBA whatever funds were, at any time, credited to their accounts."
Her Honour went on to conclude at [81]:
"The property - that is, the choses in action - was acquired when the applicants opened the CBA accounts. So far as the First and Second Investment Accounts are concerned, that was necessarily at a time prior to the commission of the offences. There is no suggestion of any criminality or impropriety at that time. There was no acquisition of property by the applicants at any time after the criminality that tainted the property. Their property in those accounts remained precisely what it had originally been, although of "fluctuating" (Russell v Scott) value. It follows that there was no acquisition of property at a time after the property became tainted, such as to engage s 330(4)(a)".
In relation to the decision in Kalimuthu at [116], her Honour observed (at [83]) that she was unable to adopt that reasoning because the property of the applicants remained what it had always been: a chose in action, a contractual right. Her Honour noted:
"It's value rose and fell with deposits and withdrawals. The deposits represented an increment in the value of the property, but did not change its nature, and did not constitute an acquisition of property. There was no fresh or additional loan constituted by the deposits. The applicants had no property in the money deposited. The money was the property of the CBA."
At [89] her Honour stated:
"Some glimmer of support for the approach I have taken may be gained from s 77(1)(c) of the Act. Section 77 is the provision entitling an applicant, in specified circumstances, to compensation where a forfeiture order has been made. Paragraph (1)(c) appears to be a recognition that an applicant might have an interest, less than the whole, in the value of indivisible property. As I have suggested, the value of a chose in action may vary from time to time."
Her Honour reached the same conclusion in Fernandez. That matter concerned an application by the Commissioner for forfeiture orders under s 49 of the Act and an application by the Commissioner for compensation under s 77 of the Act. In that case, an application for exclusion under s 29(2)(d) was withdrawn yet s 330(4) of the Act was relied upon.
As her Honour noted at [38] of Fernandez, she was not concerned in that matter to determine whether or not the property in question was either the proceeds or an instrument of a relevant offence because the application for a s 29 exclusion order was withdrawn. Section 49(3)(b) of the Act provides that, when an application for a s 29 exclusion order has been made and withdrawn, that part of s 49(1) that would have required such a determination is inapplicable. Although s 330(4) is necessarily predicated upon the property having had that character, her Honour nonetheless considered for the purposes of s 49(4) whether the defendant's interest in the property was either the proceeds of an offence or an instrument of a serious offence in order to consider ss 49 and 77 of the Act.
No witnesses were required for cross-examination before her Honour. The evidence of the authorised officer included a transcript of the defendant's s 180 examination. As a result, her Honour concluded that there was no reason to doubt the veracity of the evidence before her by way of affidavit.
The defendant in Fernandez is an Indonesian citizen residing in Australia whose father is a wealthy Indonesian businessman. In May 2015 (in Indonesia), the defendant's father gave him approximately $500,000 (Australian) to be deposited into an Australian bank account. He opened an account with the CBA and then contacted a money-changer in Jakarta. On various dates his father then purchased Australian dollars through a money-changer to be deposited into one of his CBA accounts. Deposits were made $40,000 at a time. Sometimes he would check the accounts to ensure the funds had been deposited and noticed that it had been deposited in "partial amounts". He raised this with his father out of concern but was reassured that the money-changer could be trusted. The defendant had a practice of monitoring the accounts regularly, usually on a daily basis.
The s 180 examination transcript disclosed that the money-changer in Jakarta would direct the defendant's father to pay money into Indonesian accounts nominated by her but he was not provided with any documentation by the money-changer in relation to those transactions.
In that matter, the CBA bank records showed significant evidence of structured transactions. Her Honour was satisfied that the defendant's account was used in structuring transactions and was therefore an instrument of the structuring offence. Two persons were in fact arrested and found in possession of more than $1 million in cash, including deposit books with references to these accounts. Those persons pleaded guilty to offences of money-laundering and structuring.
The Commissioner did not suggest that the defendant was in any way involved in any illegality and accepted that the defendant was an innocent victim of a sophisticated criminal organisation. Her Honour noted at [49] that it was implicit in the Commissioner's case that the money-changer in Jakarta had failed to remit the money provided to her by the applicant's father and that the cash deposited by others into the CBA accounts was the proceeds of criminal activity in Australia.
Her Honour noted that s 330(4) of the Act played no apparent part in the defendant's case until the close of submissions. Her Honour then proceeded to examine the five elements of s 330(4)(a).
In relation to the requirement that the property be "acquired", her Honour referred to what she had found in Lordianto and noted that that decision should be read in conjunction with Fernandez. Her Honour observed at [57]:
"An acquisition of property, for the purposes of s 330(4)(a), must occur after the criminality that renders the property tainted. The nature of the property in a bank account is a chose in action, a contract between the bank and the account holder, pursuant to which the account holder is entitled to require the bank to pay an amount equal to the balance in the account at any time. It is acquired at the time the account is opened. The value of the right that the account holder has fluctuates according to the balance in the account. But deposits in the account do not give rise to new contracts, or to any new rights; they merely increase the value of the right that already exists. The chose in action, or the right of the account holder, is acquired when the account is opened. Increases in the balance do not constitute new rights or new choses in action".
On that basis, as in Lordianto, her Honour observed at [58] that she was not satisfied that there had been any acquisition of property for the purposes of s 330(4)(a) and that that aspect of the defendant's case must fail for that reason alone.
Both the applicant and the Commissioner submitted that Simpson J's findings in Fernandez and Lordianto on this issue are wrong and should not be followed. Neither party takes any issue with the principles set out in the decisions relied upon by her Honour referred to above at [131], only the application of them by her Honour to the consideration of s 330(4)(a) of the Act. I am not bound to follow the decisions of Simpson J in either Lordianto or Fernandez as her Honour was sitting as a judge of this Division when she heard those matters. The three reasons why it was contended that I would not follow Simpson J are, broadly, that there are a number of decisions to the contrary, that her Honour's conclusion fails to have regard to a number of statutory definitions in the Act and that her Honour's finding would defeat the objects and purpose of the Act. I will consider these three arguments in turn.
First, it was submitted that there are a number of decisions contrary to those of her Honour and they are to be preferred. In addition to the decision of Allanson J in Kalimuthu. The parties also relied upon the decisions in AFP v Pham, Studman v Commonwealth Director of Public Prosecutions (2007) 177 A Crim R 34 [2007] NSWCA 285; (Studman v DPP) and French Caledonia Travel Service.
In AFP v Pham, Beech-Jones J considered an ex parte application by the Commissioner under s 49 of the Act that specified property be forfeited. That matter involved another cuckoo smurfing case contrary to s 142 of the AML Act. The defendants did not appear at the hearing and his Honour was not invited to consider s 330(4)(a) of the Act. He was, however, required to consider whether the structured deposits were the proceeds of an offence. In that decision, the monies were apparently lawfully earned in Vietnam and then transferred to Australia via "some form of gold or cash merchant operating out of Vietnam". His Honour, in an ex tempore judgment, held that, even if the defendants may not have contravened s 142 of the AML Act, they were nonetheless a party to two or more non-reportable transactions within the meaning of the AML Act. His Honour observed at [37]-[38]:
"There is no doubt that the relevant property that is the subject of this application is of the intangible kind that I referred to earlier; namely, the chose in action represented by the rights that each of the three defendants have against the CBA and the ANZ concerning the amounts standing to their credit in those bank accounts (Studman at [41]). The question raised by this matter is whether those rights are the proceeds of a contravention of s 142(1) of the AMLCTFA.
As I stated earlier, the essence of the contravention of s 142(1) was the causing of the banks to become a party to two or more non-reportable "transactions", specifically the deposits of less than $10,000 that occurred in the manner I stated earlier. In my view, when the criminality is understood in those terms it follows that the amount standing in a bank account as a consequence of the giving effect to the non-reportable transactions referred to in s 142(1) is clearly property that is either wholly or partly realised or derived, whether directly or indirectly, from the commission of that offence. The connection between that form of property and the commission of the offence is, in my view, much more direct than the circumstances addressed in Studman. The relevant property is in a very direct way the consequence of those transactions having been engaged in."
In so concluding, his Honour took into account the definition of "proceeds" in the Act. It is defined in s 329(1) of the Act to include property which is "partly derived or realised, whether directly or indirectly" from the commission of an offence. The funds standing to the credit of an account holder in a bank account as a consequence of structured deposits made contrary to s 142(1) of the AML Act are either wholly or partly realised or derived, whether directly to indirectly from the commission of that offence. It is to be noted his Honour was only dealing with the question of whether the funds were the proceeds of an offence and not whether the deposited funds constituted an acquisition of property for the purposes of s 330(4)(a) of the Act. Justice Simpson J considered the approach taken by Beech-Jones J in AFP v Pham at [37] in Lordianto but declined to follow it.
The restraining orders made by Davies J describe the "property" to be restrained as "funds standing to the credit of" the applicant. This is a reference to the amount owed to the applicant by the bank at the relevant time. That is, the property is the debt owed by the bank to the applicant. Each time further moneys were deposited into the account, the balance was increased. It seems to me that the increased balance in the account was "partly derived or realised, whether directly or indirectly" from the structured deposits made contrary to s 142(1) of the AML Act. I accept, as Simpson J found, that the deposit of the funds into the bank account does not change the intrinsic nature of the property; it remains a chose in action. Despite this, the value of the chose in action is at least "partly derived," "indirectly" from the structured deposits made contrary to s 142(1) of the AML Act. This conclusion accords with the finding of Beech-Jones in AFP v Pham who in turn relied upon the decision of the Court of Appeal in Studman v DPP.
In Studman v DPP, McClellan CJ at CL, with whom Spigelman CJ and Handley AJA agreed, considered an appeal from the judgment of Hulme J refusing an exclusion order under the Act. The restraining order in that matter had been made under s 18 of the Act (rather than s 19) on the basis that there were reasonable grounds to suspect that Mr Studman had committed a serious offence. The relevant offences were s 24(1) of the Financial Transaction Reports Act 1988 (Cth), which provides that "a person shall not open an account with a cash dealer in a false name", and s 8U of the Taxation Administration Act 1953 (Cth), which provides that it is an offence to engage in conduct which results in the falsification of the identity or address or location of a person.
Mr Studman had opened a bank account in a false name and the Commissioner restrained funds which were later deposited into it. On appeal, Mr Studman submitted that there was no causal link between the offence and the property because the funds deposited in his account were lawfully obtained and it is lawful to open a bank account. The fact that the account was opened in a false name was merely incidental. He submitted that the relevant property was the chose in action obtained when the relevant account was opened. The court rejected this argument finding (at [39], [41] and [43]) that:
"An account with a cash dealer creates rights and obligations in both the cash dealer and the customer. The customer obtains the right to deposit and withdraw monies together with, in many cases, a right to interest on the monies deposited. Those rights are comprised in a chose in action which is the property obtained by the customer upon opening the account.
..
In the present case the relevant property was the chose in action obtained when the relevant account was opened. Pursuant to the arrangement with the bank or the stockbroker the appellant could deposit and withdraw monies or direct that a payment be made to a third party. The fact that the money which the appellant deposited may have been lawfully acquired by him is not to the point. Once deposited the monies become the property of the receiving party.
..
It is true that the opening of a cash account is not an offence. However, it is an offence to do so in a false name. The appellant committed that offence when opening the accounts with the bank and the stockbroker. Accordingly, the right to the monies in the accounts was derived directly from the commission of the offence. Because the shares were obtained from funds deposited with the stockbroker in an account which was opened in breach of the Financial Transaction Reports Act, s 330(1) and s 330(6) of the Act make the shares the proceeds of an unlawful activity."
[emphasis added]
Thus the Court of Appeal concluded that the funds standing in the credit of an account opened and operated in a false name constituted "proceeds" of that unlawful activity irrespective of whether or not the money deposited into it had been lawfully acquired by the appellant prior to the making of the deposits. It was acknowledged in Studman v DPP that an account holder has many rights; not only to deposit but also to withdraw. It seems to me that, by applying the principles in that decision to the present case, the result is that, although the nature of the chose in action remains the same, in that it is a debt, the account holder has the right to have a larger debt paid to him or her by the bank after each deposit. Justice Simpson considered Studman in Lordianto but concluded it was distinguishable on its facts because in that case, the account had been opened in a false name which was the relevant offence.
Another decision relied upon by the parties is Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320 ("AFP v Fitzroy") in which Mitchell J considered an application by the Commissioner under s 19 of the Act in another case concerning structured deposits. His Honour was satisfied that an offence against s 142(1) of the AML Act had occurred and went on to consider whether the debt owed by the bank to the applicant in the amount standing to the credit of the account was the "proceeds" of an offence. His Honour observed at [43]:
"The fact that not all of the debt is derived from deposits which are suspected of being made in contravention of s 142(1) does not prevent an order being made under s 19 of the POC Act in relation to the whole debt. The definition of 'proceeds' in s 329 of the POC Act makes it sufficient that the debt is partly derived or realised from the commission of an offence. The debt owed by NAB to Fitzroy was partly derived from the suspected offence which involved in making the series of cash deposits between 21 and 30 April 2015. Since this debt was partly derived from the commission of an offence the whole of the debt is the 'proceeds' of an indictable offence".
As with Beech-Jones J in AFP v Pham, Mitchell J was not asked to consider whether there had been any "acquisition" of property in AFP v Fitzroy within the meaning of s 330(4)(a) of the Act. His Honour was only asked to consider whether the structured deposits were the "proceeds" of a crime within the meaning of the Act. Mitchell J was satisfied that the chose in action, that is, the debt owed, had been "partly" derived from the relevant offence and thus the whole debt was the proceeds of an indictable offence. Justice Simpson considered this decision in Lordianto and did not adopt the reasoning of Mitchell J for the same reason that her Honour did not accept Allanson J's conclusion in Kalimuthu.
In Jieying Sun, Wilson J declined to follow Simpson J on the meaning of "acquisition" for the purposes of s 330(4)(a) of the Act. In that matter, Wilson J considered an application under ss 29 and 31(1) of the Act for exclusion from a restraining order. The grounds in relation to which exclusion was sought included that the property had ceased to be the proceeds or an instrument of an offence under s 330(4)(a) of the Act. Jieying Sun is not a decision involving cuckoo smurfing but Wilson J was invited to consider s 330(4)(a) of the Act in a different factual scenario. In doing so her Honour briefly considered the decisions of Simpson J in Fernandez and Lordianto at [132]-[137]. Her Honour observed at [137] that the decisions were helpful but had not caused her to change any conclusions she had arrived at noting that "this matter turns on its own facts and evidence." Despite this, Wilson J did conclude (at [134]) that she was unable to agree with Simpson J's interpretation of the word "acquisition" in s 330(4) of the Act. Rather, Wilson J relied upon the decisions in Studman v DPP and AFP v Pham to conclude that when the deposits were made, further property was "acquired" within the meaning of s 330(4)(a) of the Act. The parties submitted that I would take the same approach in the present matter.
Finally, both parties relied upon the observations of Campbell J in French Caledonia Travel Service where, in a different context, his Honour observed at [61]:
"At one level of legal analysis, there is a vast difference between a credit in a bank account, and money in a bag. The first is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on), while the second is a chose in possession. Coins in a bag are each separate and individually identifiable things, even though coins of the one denomination are for most practical purposes interchangeable, and adding more coins to a bag is simply adding an additional number of things of that type to the bag. In contrast, a debt owed by a banker to a customer is a single thing - an obligation to pay X dollars - and the client's paying more money into a bank account results in the creation of a different thing - an obligation to pay some larger number than X dollars."
It is to be noted that in Lordianto, Simpson J relied upon the earlier observations of Campbell J in French Caledonia Travel Service at [32] in support of her conclusion that the relevant "property" is the single chose in action rather than the individual deposits. His Honour stated at [32]:
"... when a customer sues the bank to recover money in its current account, the customer is suing on the banker-customer contract, not suing for repayment of a loan or set of loans constituted by deposits."
The decision of Campbell J was followed by the Full Court of the Federal Court in NAB v Norman (2009) 180 FCR 243; [2009] FCAFC 152, where Graham J (with whom Spender J agreed) observed at [53]:
"A credit in a bank account is not a chose in possession. Rather it is an inchoate chose in action (inchoate because of the need to make demand before there is a cause of action that can be sued on). A debt owed by a banker to a customer is a single thing - an obligation to pay $X - and the client's paying more money into a bank account results in the creation of a different thing - an obligation to pay some larger amount than $X (see per Campbell J in the Travel Service case at [61])."
Although the decisions in French Caledonia Travel Service and NAB v Norman concern proceedings of a different nature, they nonetheless stand as authority for the proposition that, although there is only one contract between the bank and an account holder, a different tangible thing is created each time funds are deposited into that account namely, the increased amount of the debt as recorded in the account. In a similar way, a withdrawal of funds from the account creates a different obligation, namely, an obligation to pay a smaller amount. That this is so can be seen by the fact that, if the account balance is zero or falls below zero, there is no chose in action enforceable as against the bank even though the contract is still in existence. Thus, applying the findings of Campbell J in French Caledonia Travel Service to the present case, although there is only one contract with the bank, I am not satisfied that that means that there is only ever one fixed chose in action. Rather, there is a series of choses in action each enforceable at different times. At each time there is a deposit or withdrawal a new chose in action is created and the previous one no longer exists. It seems to me that this conclusion is consistent with the decision in Russell v Scott.
I am satisfied, having regard to the principles derived from these decisions, that there is no inconsistency between a conclusion that there is only one chose in action at any point in time, being the debt owed by the bank to the account holder, and a conclusion that when the amount owed by the bank increases the account holder has acquired additional property because the debt has increased and the funds standing in the account have been wholly or partly realised or derived, whether directly to indirectly from the commission of an offence.
The second basis upon which it was contended by both parties that I would not follow Simpson J in Lordianto and Fernandez were submissions that her Honour failed to have regard to how broadly the concepts of "proceeds", "property" and "interest" are defined in the Act. I have already considered the definition of "proceeds" above at [148].
"Property" is defined in s 338 of the Act so as to include "an interest in any such real or personal property" and "interest" is defined so as to include "a right, power or privilege in connection with the property or thing". It was submitted that this leads to the result that, where what outside the operation of the Act may constitute a single item of legal or equitable property, under the Act is capable of division into separate interests and each of those separate interests is connected with a separate identifiable "right, power or privilege."
The argument proceeds as follows: because of the definitions of "property" and "interest" in the Act, an account holder's right to withdraw funds standing to the credit of an account is an "interest" in or in connection with that property. That right or power to withdraw or deal with the credit balance after the structured deposits are made is a different right or power which existed before the making of the deposit. There was no right or power to withdraw or otherwise deal with the increased credit balance until the structured deposits were made. At any point in time thereafter the right or power is to withdraw or deal with the newly deposited funds. This was the statutory basis for Mitchel J's finding in AFP v Fitzroy which I have already stated I agreed with above.
Finally, reliance was placed by the parties on the objects of the Act. There is no doubt that the provisions of the Act should be read in the context of the objects of the Act, which are set out above at [9]. As the Commissioner pointed out in his written submissions filed on 13 October 2017, if the approach of Simpson J to this element of s 330(4)(a) is correct, then it has an additional implication beyond the operation of that subsection, namely, that it leads to a conclusion that although a bank account which contains structured deposits is the instrument of a relevant offence, the funds therein are not the proceeds of an offence for the purposes of the Act. That is, whenever structured deposits are made into a bank account, those funds are not the proceeds of an offence, although the bank account is an instrument of an offence. It was submitted that such a result would be contrary to the objects of the Act and substantially impair the operation of s 330 of the Act.
I have considered all of the decisions discussed above as well as the statutory language and broad definitions of "property", "interest" and "proceeds" in the Act. I have had regard to the principle that statutory provisions are to be construed in their context, taking into account the purpose of the statute: Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355; HCA 28 at [78] and Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41. As the plurality observed in Alcan at [47] (footnotes omitted): "The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy".
I am satisfied than an increase in the value of funds standing to the credit of a person in a bank account amounts to an acquisition of property for the purposes of the Act. The account holder's "interest" in the account is a right to require payment of a particular amount. The value of that chose in action changes after each deposit or withdrawal. There is still only one contract and one debt and the deposit of the structured deposits does not change the intrinsic nature of the property but it is now a different debt owed by the bank of a higher value. In this way property has been acquired. I am satisfied that the funds standing to the credit of the applicant are at least "partly derived," "indirectly," from the structured deposits made contrary to s 142 of the AML Act.
I am satisfied that there has been an acquisition of property by the applicant as a result of the cash being deposited into his account.
Her Honour referred to the explanatory memorandum extracted above at [113] and concluded at [104] -[105]:
"The ordinary meaning of the words "third party" and the ascertainable legislative intention of the provision, dictate that a "third party" within s 330(4)(a) is a party who is, at the time of the criminal conduct, wholly removed from the property constituting the proceeds or instrument; it is not an owner of property who is wholly removed from the criminality that causes the property to be tainted.
I reject the construction placed upon "third party" on behalf of the applicants. The application fails on that basis also."
In Fernandez, Simpson J held, for the same reasons as she gave in Lordianto, that a person claiming the benefit of s 330(4)(a) must establish that he or she is a third party to the property dealing, noting at [59]:
"…that is, that he or she has acquired the interest in the property subsequent to the commission of the offence or offences that caused it to be tainted. The person is a third party in the ownership of the property. Since there has been no acquisition, the defendant is not a third party."
In Jieying Sun, Wilson J was not satisfied that either the applicant or her father in that matter was a third party on the facts of that matter. Her Honour observed the following in relation to the need for the applicant to be a third party generally at [124]:
"The provision seeks to protect persons in a category referred to in the Explanatory Memorandum to the introduction of the Proceeds of Crime Bill 2002 as an "innocent third party". It is difficult to see how either the respondent or her father have a sufficient degree of distance from transactions connected with the movement of the relevant funds to be a third party; each has a significant role in the events, and one which I am not able to conclude is necessarily innocent."
I have had regard to these decisions. I am, respectfully, unable to adopt the reasoning of Allanson J in Kalimuthu on this issue. It seems to me that, in order to be a third party, the property must be acquired after the funds become either the proceeds or an instrument of an offence. As counsel for the applicant pointed out during the hearing, the applicant was involved in the first step of the process in Jakarta and was also involved in the final step in Australia when the deposits were made. Just because the applicant was not directly involved in the criminal activity of money laundering, it does not follow that he was a "third party" for the purposes of s 330(4)(a) of the Act.
I have had regard to the context in which the words "third party" appear in s 330(4)(a) of the Act. I am not satisfied that a third party to a transaction extends to include a person who is a party to part of the transaction in question. The situation may be different if the structured deposits had been made into somebody else's account and then transferred to the applicant's account after the offence was complete. I am satisfied that a "third party" in the context of s 330(4)(a) of the Act is someone who becomes involved with the property for the first time after it has become the proceeds or an instrument of an offence.
I am thus not satisfied that the applicant is a third party within the meaning of s 330(4)(a) of the Act.
In circumstances where the applicant needs to establish all five elements in s 330(4)(a) of the Act in order to establish that there are "no grounds" for the property to be restrained under s 42(5)(a) of the Act, this aspect of the application fails at this second hurdle. I propose, however, to consider the remaining three elements of that provision.
In Jieying Sun, Wilson J was not satisfied that the transfer was for sufficient consideration, albeit the facts were different to those presently under consideration: see at [125]-[126].
The difficulty I have with the applicant's approach is that identified by Simpson J in Lordianto: it is contradictory for the applicant to say that he played no part in the structured deposits and then to submit that he provided consideration for that to occur. It was accepted by the applicant that there is an evidentiary vacuum as to whether Andy was directly involved in the transactions or whether there were other intermediaries involved.
It was submitted on behalf of the applicant that I would favour the approach taken by Allanson J in Kalimuthu. I am respectfully unable to accept those findings. I cannot accept that the applicant paid to have the structured amounts deposited into his account thus I am not satisfied that sufficient consideration was provided in exchange for the structured deposits into the applicant's accounts.
On behalf of the Commissioner, it was submitted that the Commissioner anticipates exploring in some detail at a later time the applicant's denials that he ever went beyond the "home screen" on his internet banking and also the fact that a very large number of the structured deposits were made directly into his account. It was submitted that there is a sufficient basis at this early stage of the proceedings to conclude that the Court might ultimately find that the applicant either knew of or was suspicious about the structured deposits or ought reasonably to have done so.
In circumstances where the applicant bears the onus of establishing, on the balance of probabilities, that he did not know the funds were the proceeds of criminal activity, it seems to me that, having regard to the preliminary stage of the proceedings and the absence of any evidence to the contrary, I am prepared to accept that the state of the evidence is such that the applicant has established that he did not know that the funds in his account were the proceeds or an instrument of a relevant offence. Although the circumstances are highly suspicious, a factor I will consider below under the fifth element, there is a difference between whether the circumstances were objectively suspicious and whether the applicant actually knew the funds were the proceeds of criminal activity.
I have reached this conclusion in the absence of any cross-examination of the applicant. Obviously, a different conclusion may well be open to any judge invited to consider this issue at a later stage of these proceedings by which time the applicant will have been examined under s 180 of the Act.
The applicant must establish that these circumstances were not such as would have aroused a reasonable suspicion that the funds were the proceeds or instrument of an offence. Putting his affidavit evidence to one side, on these objective facts, I am not satisfied that he has discharged his onus on this element. The question is whether that conclusion changes once regard is had to his explanation that he never looked at his bank statements. I make the following observations in relation to that evidence.
First it is difficult to accept that the applicant would not have even glanced at any of these bank records beyond the home screen on his computer during the 19 month period that he was transferring large sums of money to Australia.
Second, the applicant states that when he first used Andy, he waited to see if the first transactions went through properly before agreeing to use him again. This suggests that he would have been examining the whole procedure very closely. It is unclear from his affidavit whether the applicant used Andy for other overseas transactions before his transfers to Australia. He states that he started investing in real estate in 2009 and approached Andy at that time, yet no transfers were sought to be made to Australia until 2013 when he decided to buy the Ryde property. In any event, it is difficult to accept that he would not have carefully examined his bank statements the first time he made a transfer to Australia. It is also difficult to accept that he did not look at any of his bank accounts at the time of the purchase of the Ryde property to ensure that the transfers had all taken place. It seems to me that this would require going beyond the home screen.
Third, the applicant was forced to close his bank account with Westpac because the bank did not want his money at their bank any more. He did so without ever obtaining any explanation as to why the bank no longer wished him to bank with them. It is a somewhat extraordinary proposition that the applicant transferred well in excess of $2 million from his Westpac accounts to the CBA without even contemplating the possibility that there was some problem with his bank records. Moreover, the inference to be drawn from the applicant's evidence is that not even in those circumstances did he ever look at any of his bank records (beyond the home screen on his computer) to see if any explanation could be found in them for the bank's position.
Fourth, there was no evidence put before the court as to what other funds the applicant holds in Indonesia or elsewhere outside Australia but given his expressed desire to migrate to Australia under the Business Innovation and Investment Visa (which requires a minimum capital investment of AUD$5 million), the applicant no doubt would have been keen to ensure that he was successfully working towards that goal. This is a further reason which makes it difficult to accept that he was never interested to look at any of his Australian banking records beyond the home screen page of his computer.
Finally, it is to be noted that the applicant is a sophisticated bank customer, albeit from a country outside Australia. He is a stockbroker earning significant amounts of money in Indonesia and states in his affidavit that he started investing in property outside Indonesia since 2009 and in Australia from 2013.
The test is an objective one. Would the circumstances arouse the relevant reasonable suspicion in a person in the position of the applicant. The fact that the applicant maintains that he never looked at his bank accounts does not mean that the objective circumstances can be disregarded.
Applying these findings to the facts, and taking his evidence at its highest, the applicant has failed to establish that the circumstances of the deposits would not have aroused suspicion that the property was the proceeds or an instrument of an offence. I am thus not satisfied of this fifth element either.
As has been noted above, there is no discretion in s 19 of the Act as to the making of an initial restraining order once certain preconditions are established. Similarly, there is no discretion as to the making of either an exclusion order or a forfeiture order once certain findings are made. Despite this, there is a limited power to decline to make a final forfeiture order under s 49(4) of the Act. Before doing so the court must first be satisfied that the property is only an instrument of a serious offence (other than a terrorism offence) and not the proceeds of an offence, and also that it is satisfied "that it is not in the public interest to make the order".
Justice Simpson considered s 49(4) of the Act in Fernandez. As stated above, her Honour was not satisfied that the funds deposited into the applicant's bank account by way of structured deposits were the proceeds of an offence in that matter but was satisfied that the funds were an instrument of a serious offence and thus the applicants could rely upon s 49(4) of the Act. In that statutory context, her Honour observed at [78] that the concept of "the public interest" is a familiar one in statutes conferring discretionary powers upon courts and that, although it is not defined in the Act, some guidance as to what considerations are relevant is to be found in the objects of the Act. Her Honour considered the relevant principles guiding what the concept of "the public interest" entails at [78]-[82] of Fernandez. In applying those principles to the facts before the court, her Honour noted that, as with the present case, it was no part of the Commissioner's case that the defendant was a party to any of the money laundering offences or structuring transactions. Her Honour noted that the structured transactions took place over a relatively short period of time and observed that had they proceeded for longer, a stronger adverse inference might have been drawn that "the defendant closed his eyes to the manner in which his accounts were being used".
Her Honour noted that the Commissioner accepted that its position may raise issues of "perceived unfairness" and that there is no doubt that the Act "operates harshly" and was intended to do so. Her Honour then noted (at [87]) that: "whether it was intended to penalise the innocent victim of criminal offences may be doubted". Her Honour went on to address the Commissioner's submission that, if the court refused the forfeiture orders in the circumstances of this case, it would allow a "loophole" to remain open within the Australian financial system that would permit a "known money-laundering methodology". Her Honour went on to state the following:
"… it is wrong to assert that s 49(4) provides a "loophole". The legislature has conferred a discretion on the court: that is not a "loophole". It is more wrong to assert that for this Court to apply the legislation as it has been enacted would be to allow a loophole to remain open. And it is even more wrong to suggest, as the submission does, that this Court should close a loophole that the legislature has created. The role of this Court is to apply the law as it has been enacted. Although, as I have said, there is no "loophole", if there were one, the defendant would be entitled to take advantage of it.
I appreciate the gravity of offences of money laundering and structuring, and that they protect the profits of criminal activity; I fully appreciate the need for the confiscation system to operate to short circuit the use of those means of criminal profit protection. Forfeiture of the property of an innocent victim does not achieve that, and does not in any way operate as deterrent to those who use the property of innocent victims to achieve their criminal ends.
It is not the role of this Court to ameliorate the harshness of legislation properly enacted. It is, however, the role of this Court to apply that legislation, including by exercising the discretion conferred by s 49(4), by making the value judgment inherent in that discretion".
Her Honour went on to conclude that the public interest is not served by ordering forfeiture of the defendant's interest in the property and thus the Commissioner's application for the forfeiture order was refused.
I have given careful consideration to her Honour's observations in Fernandez. Although it is of some assistance on this issue generally, that decision does not address the question of what circumstances might give rise to the court's discretion under s 42(5)(b) of the Act to revoke a restraining order "in the interests of justice" at an early stage of the proceedings. In addition to the textual difference between the phrase "in the interests of justice" and "the public interest", it seems to me that the circumstances relevant to the exercise of the discretion under s 49(4) of the Act differs to those relevant under s 42(5)(b) for two reasons.
First, s 49(4) of the Act only applies when the property is the instrument of a serious offence (other than a terrorist offence) rather than the proceeds of an offence, whereas the power conferred on the court under s 42(5)(b) applies in both circumstances. Thus, the discretion in s 49(4) applies in more limited circumstances. I am satisfied that there are reasonable grounds to suspect the funds standing to the credit of the applicant's accounts are the proceeds of an indictable offence.
Second, s 49(4) of the Act provides the court with the discretion before making final forfeiture orders at a time after which the owner of the property will invariably have already been examined. Simpson J had before her a great deal of evidence in Fernandez, including explanations by the applicant who was examined by the Registrar. That statutory context is to be contrasted with the question of what is in the "interests of justice" in an application to revoke a restraining order under s 42(5) of the Act at this early stage of the proceedings.
It is to be accepted that the fact that the applicant was not criminally complicit in the offending is a relevant matter but not conclusive. On the other hand, it was submitted on behalf of the Commissioner that the scheme of the legislation recognises that the provisions have the potential to apply to innocent third-parties and accordingly provide for affirmative steps to be available as a safeguard for such persons.
The applicant submitted that it is one thing to target those engaged in criminal activity and forfeit the proceeds of their offending but the deployment of the Act against an individual who is blameless cannot be a purpose which advances the objects of the Act. Rather, it was submitted that to do so results in manifest injustice and unfairness. I have had regard to this submission and to the objects of the Act set out in s 5. I have also had regard to the purpose of the Act as explained by the then Attorney General, the Honourable Daryl Williams MP, in the Second Reading speech of the Bill on 13 March 2002. The applicant relied upon the following passage from that speech:
"This money is derived at the expense of the rest of the community. It is earned through the harm, suffering, and human misery of others. It is used to finance future criminal activity including terrorism. It is tax free. Criminals have no legal or moral entitlement to the proceeds of their crimes."
The difficulty with reliance upon statements such as this is that it is not possible to exclude the possibility that the funds deposited into the applicant's account were indeed earned through the "harm, suffering and… misery" of others. The fact that the applicant might not have been the direct cause of that harm does not detract from this circumstance. If, as has been contended, the applicant has been the innocent victim of a cuckoo smurfing operation via an authorised money-changer, then his recourse is with the company who has taken his money and not transferred it to the applicant's account as it was contracted to do.
I have given consideration to the submission made on behalf of the applicant that the legislation was not intended to take the funds of innocent victims. The difficulty with its application in the present matter, however, is that the Commissioner does not seek to take the applicant's money; that money presumably remains in Indonesia and was diverted by either Andy or someone else at Wisman. It was that unknown person who took the applicant's money. Submitting that it is unfair that the applicant may ultimately forfeit those funds is simply to submit that it is unfair that some unscrupulous money lender in Indonesia took his money from him and instead the proceeds of crime were deposited into his account. His grievance is against the person who took his money and unwittingly involved him in a money laundering operation. In making this observation I have not overlooked the fact that money is fungible. I simply wish to highlight the fact, as was conceded by the applicant's counsel at the hearing of this matter, that the funds deposited into the applicant's account may well be the proceeds of criminal activity.
I have had regard to the fact that if I do not revoke the restraining orders under s 42(5)(b) of the Act, the applicant might not have the benefit of any further judicial discretion in these proceedings unless the judge hearing the Commissioner's final forfeiture application is of the view, consistent with Simpson J, that the funds standing in his bank account are not the proceeds of a crime but merely the instrument of a serious crime. It is somewhat curious that the forfeiture scheme in the Act provides for a discretion to revoke an otherwise properly made restraining order over property suspected to the proceeds of crime near the commencement of the proceedings, prior to any examination of the property owner, but no corresponding power to do so at the time of the final hearing by which time the court will invariably have a much clearer picture of the true circumstances of the background to the matter. Despite this, I am concerned with whether the interests of justice require that on the material before me otherwise properly made restraining orders should be revoked.
In applying the test in s 42(5)(b), I have had regard to all of the matters put before me including the matters I have set out above at [199]-[203]. Even taking the applicant's evidence at its highest, some aspects of it raise questions as to his awareness of what was happening with his bank accounts. Just because he was not cross-examined does not mean that I am bound to accept all of his evidence if, on its face, it raises unanswered questions.
The legislation aimed at curtailing money laundering is harsh. If the applicant's contentions are ultimately accepted and his property is forfeited nonetheless, the legislation will have acted harshly in his case. The difficulty is that, at this stage of the proceedings, in what is effectively a strike out application, I am not satisfied on the material before me that it is in the interests of justice to revoke the orders which were otherwise properly made.
In order to understand the relevant provisions of the Act under consideration, it is unavoidable but to extract a large number of lengthy provisions in the Act.