The Commissioner of the Australian Federal Police v Tjongosutiono

The applicant's submissions

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. I consider the applicant's submissions regarding these four recent decisions in more detail below.

The Commissioner's submissions

1. 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.
2. 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.
3. 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.
4. 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".
5. 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.

Consideration

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.

"No grounds" for the orders: s 42(5)(a) of the Act

1. 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].
2. 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."
3. 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.
4. 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.

Was there any acquisition of property in this matter?

1. 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.
2. 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.
3. 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."

Did the applicant acquire the property as a third party?

1. 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".
2. 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.
3. 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.
4. 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".
5. 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".

Was the property acquired for sufficient consideration?

1. 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).
2. 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.
3. 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".
4. 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.

Did the applicant know that the property was the proceeds of a criminal offence

1. The fourth element to be established is that the applicant did not know that the property was the proceeds of a criminal offence.
2. 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.
3. 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.
4. 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.
5. 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.

Should the circumstances have aroused a reasonable suspicion?

1. 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)."
2. 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.
3. 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.

Conclusion: No grounds

1. 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.
2. 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.

Interests of Justice

1. 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.
2. 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".
3. 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.

ORDERS

1. 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.

[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